Underwriters Laboratories, or UL, is a global safety science certification company that is headquartered in Northbrook, Illinois. Underwriters Laboratories is the largest independent testing laboratory in the United States.
Underwriter laboratories make their money from contributions and grants, servicing and other fees, and investment income. When you view their tax returns, you can see that they make money primarily through their servicing and fee structure.
Table of Contents
- How Underwriters Laboratories Makes Money
- UL As a Non-Profit Company
- UL and US Safety Measures
- Related Content
How Underwriters Laboratories Makes Money
There are many ways that Underwriter Laboratories make money. On their US tax return, you can discover how they make their money. The latest tax return was for 2018, that I was able to find on the Nonprofit Explorer website.
- Contributions and Grants – They make about 2,147,864 USD from contributions and grants in 2018. I assume this would include some government and other grants. This is an increase from the previous year.
- Program Service Revenue – Their program service revenue is 18,515,526. This would be for things like testing fees, inspection fees, and annual fees. No doubt, this is their largest income earner. This amount saw a slight decrease from the following year.
- Investment Income – The investment income is 7,000,000 USD. This has remained the same year-to-year.
When you add all this up, Underwriter’s Laboratories’ revenue in 2018 was 29,251,539 USD. There is no doubt this is a billion-dollar company.
Where it can get confusing is that UL has a Non-profit company and a recently organized For-Profit company.
UL As a Non-Profit Company
Underwriters Laboratories is considered a global not-for-profit safety science company based in the United States. It is the largest and oldest testing laboratory, founded in 1894.
Grants, document licensing, and fees fund Underwriter Laboratories. Manufacturers of products submit their products to Underwriter’s Laboratories for UL certification. They are charged fees such as testing fees, yearly certification charges, and inspection fees.
Even though UL is a non-profit organization, it is mainly funded by its fee structure. What makes it a not-for-profit is that the profit is filtered back into the business, and profit is not stated as one of the company’s goals.
Here is how UL describes itself on its website:
“As the global safety science leader, UL provides the expertise, insights and services necessary to solve critical business challenges. We help our customers achieve their safety, security and sustainability goals, meet quality and performance expectations, manage risk and achieve regulatory compliance…To fulfill our mission, UL delivers business solutions and our nonprofit affiliate conducts independent research and shares scientific knowledge broadly. “
UL
That is where it gets confusing. Even though Underwriters Laboratories is a not-for-profit company, they have set up a subsidiary for testing and certification for profit.
UL’s For-Profit Subsidiary
UL has a For-Profit company operating under the umbrella of a not-for-profit company. They can call themselves a Not-For-Proft company while having a subsidiary, a For-Profit Company.
On January 1st, 2012, Underwriters Laboratories set up UL LLC as a For-Profit company in the United States. UL LLC has taken over Underwriter’s Laboratories product testing and certification business – undoubtedly the most profitable part of the Underwriters Laboratories business.
If all of this sounds confusing, that is because it is. UL is a Not-For-Profit company under the umbrella of a For-Profit company. In 2020, they estimated their revenue was about 25 billion US dollars.
In Talking Pointz, Colin Berkshire points out the irony in his article ” The Dirty Secrets ” behind the UL logo. He said:
“Sitting atop $850 Million in investments, with an annual income of about $25 Million, this organization is flush with cash. The trustees work an average of 1.5 hours a week and earn $150,000 a year. (Yes, that is one and a half hours a week, per government filings.) The CEO makes seven figures, and various vice presidents earn in the upper six figures. The executive suite of dozens of execs is stocked with million dollar people.”
Colin Berkshire
I have seen the UL tax returns for 2018, and many people listed on the returns report less than 6 hours of work per week and are still earning six-figure incomes. Some are reporting zero hours.
Colin Berkshire discusses the problem in the rules and laws that UL controls electrical products in the United States. You need UL or an ETL certification to sell any electrical product in the United States.
To find out more about UL vs. ETL, you can read our blog by clicking this link.
I know this from my experience with having a UL-certified factory in Vietnam; UL is very expensive. I know many factories in China that are now switching to ETL certification as it is cheaper than UL certification.
The truth is without a UL or ETL certification, it is almost impossible to sell any lamps in the United States, even if those lamps all have UL-approved parts. The lamp needs to have a UL certification, sticker, and testing with a UL-certified lamp.
I also know firsthand how expensive the UL certification can be. Not just to get the UL certification but also to maintain it each year. Not only do you pay a hefty yearly fee, but you must also pay for yearly inspections even if you don’t have any goods that need to be inspected.
Every part and piece of that lamp that you produce must have the UL inspection and certification. You must keep records, buy stickers, and only purchase UL-approved parts with the proper documentation.
That is also costly for anyone in the UL global supply chain. A supplier in China can sell me the same cord cheaper if it does not have the UL certification attached. But we must always buy the higher-cost parts and products to pass our UL inspection.
Producing a UL-certified product cost money throughout the entire global supply chain. It cost more to produce a UL-certified lamp than it can be to produce a CE-certified lamp.
UL and US Safety Measures
UL feels its safety measures are helping make the United States and the world safer through their testing science and technology. They see themselves as being in the risk management and scientific research business.
Underwriters Laboratories was founded after the World’s Fair in Chicago in 1894. Underwriter’s Laboratories published its first product category, Tin Clad Firedoors, in 1903. Undoubtedly, many of these doors helped save many people’s lives.
The reality is that UL certification is expensive, and all this is done in the name of keeping the public safe. But the truth is that other countries don’t have the same UL standards, and their citizens remain safe.
You do not hear of many electrical fires or electrocutions in other parts of the world due to products that have not passed a test or are unsafe.
Colin Berkshire, in his article, talks about the UL certification standard, writes:
“So if you want to make an electrical product you are required by state laws to pass UL tests. To know what those are you need to purchase copies of the UL standards. (And, they aren’t cheap, often costing $300 each.) Then, you need to pay UL to test your product (Kiss $30,000 goodby) and then pay ongoing royalties to UL for factory inspections. It’s a slow and arduous process. And, the states have no control over what tests UL requires, or what standards UL chooses to impose.
Colin Berkshire
Ostensibly, this is to keep the American public safe.
But the funny thing is that other countries don’t have this hugely profitable scheme and their citizens are not being electrocuted to death.”
That is why you can see that the most profitable part of Underwriters Laboratories is their servicing fee structures. That shows on their tax returns as being the number one way that they make their profit. Any electrical product sold in the United States usually bears a UL Mark. Each time the UL mark is put on a product, UL makes money.
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You can discover more by reading Lampshades And Maximum Wattage Requirements by clicking here.
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