Since we're headed into July 4th weekend, I thought I'd kick things off with a post about the Federal Trade Commission's “Made in USA” standards. 

“All or Virtually All” 

The FTC's Enforcement Policy Statement on U.S. Origin Claims says that, in order for an advertiser to make an unqualified claim that a product is made in the United States, the advertiser must be able to substantiate that the product was “all or virtually all” made here.  That means that all significant parts and processing that go into the product should be of U.S.-origin, that the product should only include a “negligible” amount of foreign content, and that the product should have been last substantially transformed in the United States.  While there's no bright line test to determine whether a product is made in the United States, other factors that the FTC will consider include what portion of the product's total manufacturing costs are attributable to U.S. parts and processing and how far removed from the finished product any foreign content is. 

In 2021, the FTC adopted a new Made in USA Labeling Rule, which codifies these standards.  Under the new rule, marketers are prohibited from labeling any product as being made in the United States unless the final assembly or processing 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 are made or sourced in the United States.  The rule applies not only to product labeling, but to any "mail order catalog" or "mail order promotional material" that includes a seal, mark, tag, or stamp that labels a product as having been made in the United States.  The FTC defines mail order catalogs and promotional material as "any materials, used in the direct sale or direct offering for sale of any product or service, that are disseminated in print or by electronic means, and that solicit the purchase of such product or service by mail, telephone, electronic mail, or some other method without examining the actual product purchased."  And, unlike when the FTC brings enforcement actions based on a violation of its Enforcement Policy Statement, violations of the Rule can come with civil penalties. 

Enforcement

The FTC aggressively enforces its “Made in USA” standards, regularly bringing both formal and informal enforcement actions.  

Earlier this year, for example, the FTC obtained its largest-ever “Made in USA” settlement in an action against Kubota North America Corporation.  Kubota agreed to pay $2,000,000 to settle charges that it falsely labeled some of its replacement parts as being made here.   The FTC also recently settled with Old Southern Brass ("All of our products are made right here in the United States of America"), Chaucer Accessories ("Made in USA from Global Materials"), Lithionics Battery ("Proudly designed and built in USA"), and Chemence ("Made in USA"). 

The FTC also regularly brings informal investigations that are resolved through closing letters.  These cases involve a wide range of products, including eyewear, sporting goods, power equipment, bikes, and truck parts, to name a few. 

Lubrication Specialties

Most recently, the FTC looked into advertising by Lubrication Specialties that promoted that the company's fuel and oil additives, lubricants, and other branded products are made in the United States.  The FTC had concerns that the company was overstating the extent to which its products are made here in light of the fact that the company's products “incorporate significant imported ingredients or materials."  In a letter closing the investigation, the FTC told the company that, although “it is appropriate for the Company to promote its commitment to American jobs and highlight U.S. processes,” the company's marketing materials should not state or imply that its products are wholly or partially made in the United States unless the company can substantiate those claims.  

Noting that the company also sells a line of imported clothing, the FTC also told the company that, for apparel products, the company is required to comply with the FTC's textile labeling rules, which use a different “Made in USA” standard. 

As part of the resolution of the FTC's investigation, the company agreed to take significant remedial action, including:  (1) removing unqualified claims from general marketing materials; (2) introducing qualified claims where appropriate; (3) confirming compliance with the Textile Act and Rules; (4) updating product labels, including by placing stickers over outdated claims until new packaging is available; (5) updating marketing videos, tradeshow displays, and other images; (6) communicating changes to its distribution network, including by providing updated dealer displays and detailed information on required changes, and (7) carefully monitoring dealer and distributor compliance. 

Have a great 4th!