Powerhouse Points

  • Consumers want truthful labeling – particularly as it relates to "Made in U.S.A."
  • Proposed FTC rule could expand "labeling" to include certain forms of advertising.
  • Expect an increase in enforcement relating to "Made in U.S.A." claims – make sure you're following the rule!

Many consumers prefer to purchase items that are "Made in U.S.A." They will actively seek out those products and even pay a premium for them. As such, marketing a product as "Made in U.S.A." can have significant benefits for a company. It can garner good will, it can provide a competitive advantage, and it can even in some instances justify a higher sale price. But "Made in U.S.A." claims must be truthful, and a company must follow the FTC's Enforcement Policy Statement (or state policy) providing guidance surrounding when a product can or cannot be labeled as "Made in U.S.A." Companies that do not follow the guidance and make untruthful claims their products are "Made in U.S.A." risk opening themselves up to false-advertising litigation from competitors, class-action litigations from mislead consumers, and/or litigation with FTC – all of which can result in significant damages awards.

Current Guidance

FTC's current standard requires unqualified "Made In U.S.A." claims for a product must, at the time of the representation, have a reasonable basis for asserting that "all or virtually all" of the product are made in the United States.

For violations of this standard, FTC has pushed for significant penalties. FTC has imposed monetary penalties as high as $1 million in the past two years.

Many states also have rules relating to "Made in U.S.A." claims (California, for example), and can impose more stringent requirements to protect consumers from false or misleading advertising.

Proposed Rule

Last fall, FTC held a public workshop (the "Workshop") and collected comments regarding FTC's "Made in U.S.A." program. The topics discussed included consumer perception of "Made in U.S.A." claims, FTC's current enforcement approach regarding "Made in U.S.A." claims, and potential changes to FTC's program. FTC noted there was "nearly universal support" for an official rule addressing "Made in U.S.A." claims.

In June 2020, in response to the Workshop, FTC proposed a rule addressing "Made in U.S.A." claims, essentially codifying the guidance already in place. Under the proposed rule, "Made in U.S.A." is defined as: "any unqualified representation, express or implied, that a product or service, or a specified component thereof, is of US origin, including, but not limited to, a representation that such product or service is 'made,' 'manufactured,' 'built,' 'produced,' 'created,' or 'crafted' in the United States or in America, or any other unqualified US-origin claim." The proposed rule would prohibit marketers from making unqualified "Made in U.S.A." claims on labels unless:

  • Final assembly or processing of the product occurs in the United States;
  • All significant processing that goes into the product occurs in the United States; and
  • All or virtually all ingredients or components of the product are made and sourced in the United States.

Going further than current guidance, the proposed rule would expand the scope of covered "labeling" to include direct advertising like mail order catalogs and online advertising. However, two commissioners expressed concern that this aspect of the proposed rule is outside the scope of FTC's authority relating to "Made in U.S.A." claims.

The proposed rule also authorizes FTC to seek civil penalties of $43,280 per violation. Allowing the Commission to potentially assess such significant monetary penalties could result in an increase in the volume of attempted enforcement and also the amount of the penalties assessed. FTC routinely receives trade complaints regarding allegedly unsupported "Made in U.S.A." claims. The complaints are usually settled with consent agreements and closing letters.

Public Comments on the Proposed Rule

Currently, just over 700 public comments are available at Regulations.gov relating to all aspects of the proposed rule. Overall, the comments relating to an official rule relating to "Made in U.S.A." claims are positive. A significant number of comments are from individuals or companies in the American Beef Industry and express the need for specific "Made in U.S.A." standards and enforcement for the same. There are also a number of consumer comments generally supportive of regulations surrounding "Made in U.S.A." claims which note that buying products "Made in U.S.A." is important to a consumer's decision to purchase products. Some comments go so far as to want FTC to require "Country of Origin" information in all labeling and advertising. From my review of the comments, I would argue that consumers expect a "Made in U.S.A." product to be completely made up of components from the U.S.A. and manufactured in the U.S.A.

In the end, consumers and business support transparency. Consumers want to know where their products are coming from and want to support domestic businesses. And businesses want to be able to advertise the fact they ensure their products are "Made in U.S.A."

Next Steps

It is expected, if the Proposed Rule is codified (in any form), FTC will likely increase its efforts to identify and assess penalties on unqualified "Made in U.S.A." claims. Companies should consider reviewing their labeling and advertising for any product that is currently or may in the future be marketed as "Made in U.S.A." to ensure such claims are compliant with the framework set out by FTC.

Companies should expect a higher level of scrutiny of their claims of being "Made in U.S.A." If a company has always followed the guidance and their products are "all or virtually all" made in the U.S.A., this codification will likely have little or no effect, or it at least will not increase the company's risk. If a company is not sure or has made claims without support, they should be aware that this issue is on the radar of consumers, competitors, and most definitely the FTC.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.