Made in the USA Tag

‘Made in the USA’ Claims: Handle With Care

FTC has increased enforcement of its “Made in the USA” standards, which states “all or virtually all” of a product must be made/produced in the U.S.

Despite the relaxation of U.S. enforcement of many federal regulations since the start of the Donald Trump Administration, one area where we continue to see continued (or even stepped up) regulatory activity relates to claims that products are “Made in the USA.” Three enforcement actions were announced in the first four months of 2018 against companies misleading consumers with this claim.

According to the Office of Information and Regulatory Affairs at the Office of Management and Budget (OMB), more than 1,500 proposed or not yet implemented Barack Obama-era regulations that were in the pipeline were withdrawn or delayed in the first 12 months of the Trump Administration, with plans to withdraw two regulations for every new one adopted in 2018. The Competitive Enterprise Institute estimated the savings to impacted businesses at approximately US$600 million annually. One area stands out in contrast to this tsunami of deregulation—FTC’s increased activity in the enforcement of its “Made in the USA” standards. This should not come as a surprise though, as the Administration stated its intent to promote products that are actually “Made in America.”

‘Made in the USA’ Standards

Under the Standards first set out by FTC in 1997, “all or virtually all” of a product must be made/produced in the United States to legally bare an unqualified claim. In other words, such a product must have all its important components originating from United States sources, and final assembly or processing must take place in the United States. A “negligible” amount of foreign content is nevertheless permitted. U.S. content must be declared on automobiles and furs. No other law or regulation requires products sold in the United States to be labeled “Made in the USA” or have any other disclosure.

Exactly how FTC looks at these issues is discussed in a guidance document explaining compliance standards. A review of this document is strongly recommended prior to making any “Made in America” claims.

The guidance stated:

  • Claims can be express: “Our products are produced only in America.”
  • They can be implied: “Our products are produced with true American workmanship,” or use an American flag on a product advertisement or label.
  • The claim can be in a company or brand name: “Made in America Inc.” A company known to have its headquarters in the United States is not a representation that it will sell only goods of U.S. origin.

Once it determines a claim has been made, FTC will consider whether the claim is unqualified or qualified. If unqualified, the product must be comprised of “all or virtually all” components produced and assembled in the 50 states, the District of Columbia, and the U.S. territories and possessions. A “negligible” amount of foreign material is, however, permitted. As with other product claims, “Made in the USA” must be substantiated with “competent and reliable” evidence supporting the proposition. This can include an analysis of the manufacturer’s cost to produce the product, as well as good faith reliance on suppliers’ representations that components used in production are U.S. sourced. However, it would be wise to identify a specific representation, such as a statement like, “We certify that the material we are supplying to you has at least ___ percent U.S. content.”

Qualified “Made in the USA” claims are permitted so long as they are truthful and nonmisleading. “Made of U.S. and imported parts” is a perfectly acceptable claim where appropriate, as is “Assembled in the USA” and “Designed in America, produced in India.” As with unqualified claims, it is essential to have competent and reliable evidence. Comparative claims such as, “We use more ingredients sourced in the United States than any other vitamin manufacturer,” are also permitted, so long as they can be substantiated.

Recent Enforcement Actions

FTC announced the resolution of a “Made in the USA” enforcement action in each of the first three months of 2018.

Bollman Hat Co. (January): According to the complaint in this case, the company blatantly misrepresented the origin of over 70 percent of the hats sold by it and subsidiaries. Many other hats that were represented as “USA products” contained significant amounts of imported material. The false claims were made with a seal stating, “Made in America Matters,” which was affixed to its products and licensed to third parties selling through Bollman-controlled websites. In a court ordered settlement, Bollman and its subsidiaries “are prohibited from making unqualified U.S.-origin claims for their products unless they can show that the products’ final assembly or processing—and all significant processing—take place in the United States, and that all or virtually all ingredients or components of the product are made and sourced in the United States. Under the order, any qualified ‘Made in USA’ claims must include a clear and conspicuous disclosure about the extent to which the product contains foreign parts, ingredients, and/or processing.” The company is also required to disclose any material connection between itself and the certification/seal program used to support or convey “Made in the USA” claims.

iSpring Water Systems LLC (February): The complaint in this case alleged the maker of water filtration systems deceived consumers with false, misleading or unsupported claims that its products were “Built in USA,” “Built in USA Legendary brand of water filter,” and “Proudly Built in the USA” when, they were wholly imported or were made using a significant amount of inputs from overseas. Under the settlement agreement and injunction entered in the case, the company is barred from making unqualified “Made in USA” claims for any product unless it can show that the product’s final assembly or processing—and all significant processing—take place in the United States, and that all or virtually all ingredients or components of the product are made and sourced in the United States.

Block Division Inc. (March): In this case, FTC alleged that, over a number of years, Block Division’s pulleys featured imported steel plates that entered the United States from overseas already stamped “Made in USA” and that Block Division used unqualified “Made in USA” claims in advertising on its website, in stores, through trade shows and authorized dealers, on social media, and through flyers and pamphlets to represent that these pulley blocks, other products and the parts used to make them were all or virtually all made in the United States. Under the court-ordered consent injunction settling the case, the company is prohibited from making unqualified “Made in USA” claims for any product unless it can show the product’s final assembly or processing—and all significant processing—take place in the United States, and that all or virtually all ingredients or components of the product are made and sourced in the United States. Under the order, any qualified “Made in USA” claims must include a clear and conspicuous disclosure about the extent to which the product contains foreign parts, ingredients and/or processing. Finally, the company must be able to substantiate any “Made in America” related claims at the time they are made.

Given the priorities established by the Trump Administration, we can expect to see continued efforts by FTC in these types of claims. While none of these cases involved monetary penalties, future violation almost certainly will, and will also potentially result in a contempt of court finding. If past practice at FTC gives any clues, we can expect these types of enforcement actions will involve the disgorgement of “ill-gotten gains” soon.

Marc S. Ullman, of counsel, Rivkin Radler, represents clients in matters relating to all aspects of FDA and DEA matters, regulatory issues, FTC proceedings and litigation. He practiced with one of New York’s leading white collar criminal defense firms for 10 years, where he represented clients in both federal and state prosecutions, as well as numerous related civil matters and other litigations

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish