An Introduction to “Made in USA”
The Federal Trade Commission (FTC) has a responsibility to prevent deception and unfairness in the marketplace to help consumers spot, stop, and avoid any products that fall under these negative business practices. This power is derived from Section 5 of the FTC Act, specifically in a general provision that provides, “…unfair or deceptive acts or practices in or affecting commerce… are… declared unlawful.” Claims that suggest a product is made or derived from the United States, or U.S. territories and possessions, fall under this regulation.
What Does This Mean for Businesses?
If a business decides to put a “Made in USA” claim on a product, it must be substantiated and truthful. However, unless it is an automobile or an item made from textile or wool, there is no actual law requiring that a business put a “Made in USA” claim on a product. If the product does not fall under one of the previously mentioned exceptions, it is completely up to the business whether or not they want to claim that their product is of domestic origin.
Is This Requirement Only for the Product Label?
No. This “Made in USA” requirement applies to U.S. origin claims that appear on products as well as any labeling, advertising, and promotional materials for said products (including their electronic counterparts). In other words, a “Made in USA” claim must comply with the FTC Act in any and all places where the claim can be seen by consumers.
How Do Businesses Ensure Compliance?
An Overview
Historically, even before the FTC made a comment on the standard, the FTC has required that a product advertised as “Made in USA” be “all or virtually all” made in the United States. In December 1997, after a review of “Made in USA” and other U.S. origin claims in product advertising and labelling, the FTC commented that it would retain the “all or virtually all” standard that it had been using previously. In addition, the FTC provided guidance to businesses who were looking to make either a qualified or unqualified “Made in USA” claim, hoping to ensure compliance.
What Is an Unqualified Claim?
An unqualified “Made in USA” claim, or a claim without qualifications or limits, would fall directly under the “all or virtually all” standard. This standard means that all significant parts and processing that goes into the product must be of U.S. origin. In other words, the product must not contain any (or at most, a negligible amount) foreign content. When a business makes an unqualified claim that a product is made in the United States, it must have a “reasonable basis” to support the claim at the time it is made. This means that the business needs evidence to back up the claim that its product is “all or virtually all” of domestic origin.
What Is a Qualified Claim?
A qualified “Made in USA” claim describes the extent, amount or type of a product’s domestic content or processing – indicating that the product isn’t entirely of domestic origin. This type of claim is appropriate for products that include U.S. content or processing but do not meet the criteria for making an unqualified “Made in USA” claim. For example, a qualified claim could be “Made in USA with US/Global Components.” However, businesses must exercise care when making these claims, as they could easily imply more domestic content than actually exists.
What Words Can I Use?
The FTC believes that claims can be both expressed or implied. An express “Made in USA” claim is exactly that, stating that a product is made in the United States through exact words such as: “Made in USA”; “Our Products are American-made”; or “USA”. However, some businesses also depend on a more implied claim to get their “Made in USA” claim across to consumers. This could consist of using U.S. symbols, geographic references, or certain suggestive phrases to convey a claim of U.S. Origin. In cases of implied claims, the FTC focuses on the overall impression of the advertising, label, or promotion material to decide whether or not the material is likely to convey to consumers that the product is of U.S. origin.
What About How the Product is Made?
The FTC also looks at the manufacturing process of a product in determining whether a “Made in USA” claim is truthful. The product’s final assembly or processing must take place in the U.S. If you are a business owner, ask yourself two things: (1) how much of your product’s total manufacturing costs can be assigned to U.S. parts and processing; and (2) how far removed any foreign content is from the finished product?
Are Certain States Different?
National businesses, or merely businesses with a chance of selling products to consumers in multiple states, need to be wary of competing state laws – as some state laws may not be as friendly to the business owner as their federal equivalent. If your business sells any products to Californian consumers, be aware of California’s stricter “Made in USA” standard. Prior to January 2006, products sold in California claiming to be “Made in USA” were required to be 100 percent domestically made. An amendment was then passed, lowering the threshold to, in most cases, a 95 percent domestic content requirement. Litigation is still pending on how this change will ultimately play out.
Made in USA and the Future
The FTC has increased its review and enforcement of unqualified “Made in USA” claims as of late, both on product labels, as well as internet and print advertising. Outside of civil penalties, businesses who are violation of the FTC’s requirement could be subject to costly private litigation and possibly class-action law suits. Furthermore, labeling, advertising and marketing a product is expensive. If it turns out that a claim is in violation of the FTC Act, imagine how expensive redoing it all would be? Under our current administration, the scrutiny surrounding “Made in USA” claims will only increase. Be careful.
Source List:
FTC Act | 15 U.S.C. §45(a)(1)
https://www.ftc.gov/public-statements/1997/12/enforcement-policy-statement-us-origin-claims
https://www.ftc.gov/tips-advice/business-center/guidance/complying-made-usa-standard
http://www.ftclaw.com/2016/05/made-in-usa-claims-and-the-ftc/
https://madeinusanews.com/2015/11/09/made-in-the-usa-or-not/
Hi Cameron!
I really like the organization of your blog and that you included pictures relevant to your topic. This is a very interesting topic and I was not aware of the guidelines businesses had to follow in order to put that label on their goods. I like that you mention California’s law and how other state laws may be different than what the federal requirements are. Not only does this blog help businesses, but it also helps the general public in knowing how to spot false “Made in the USA” claims by companies or when to question the claim. You mention how this will all play out under our current administration, which is interesting to note since there has been mention of more domestic production.
Great job!
Hey Cameron,
I echo your sentiment that this topic is especially timely. I think that “Made in the USA” is going to be more heavily commoditized in the future, given the fact that more and more items are manufactured overseas. I also liked the organizational structure that separated the requirements of the federal law from the disclaimer about stricter state laws. I think you have sufficiently put the reader on notice that they need to do additional research.
I also thought your warning about fines and civil penalties was really helpful. You didn’t just warn the reader about the dollars and cents, you went farther and really looked at the total cost of the initial marketing as well. I think this is one of the better “don’t do this because…” sections that I have read. Great job!
Cameron,
This is a very “catchy” topic. Before I dig into the content, I wanted to let you know that the Q&A style was perfect for this topic. You did a great job of asking the questions in a way that flowed logically.
As far as content, I enjoyed learning about the difference between a qualified and unqualified claim. This area of the law seems to be somewhat subjective – your blog does a great job of placing the issue in a realistic context and offering suggestions about specific language that can be used.
Lastly, the part about some state laws possibly being more strict on the business owner than their federal equivalent is extremely important. If I were a business owner selling product in multiple states, I would want to spend a few extra dollars up front to have an attorney review the various state laws in order to ensure I will not be subject to any penalties down the road.
Again, great topic!
Cameron,
This post is particularly interesting because the nominee to lead the FTC was confirmed this week, and he is an unit-trust attorney which I think will bring an interesting perspective to the position. They are currently dealing with a lot of hot-button issues including some of the recent data leak scandals. I am curious as to what type of cost benefit analysis goes through a business owner’s head when they are considering this type of labeling. For those that are on the margins of compliance, are their times and ways in which it makes sense to expend the extra cost to fall within the definitions set by the FTC? From your description of the FTC standard for the amount of an item that needs to be made in the United States versus that of the California standard, and its use of a percentage, it makes it seem like the FTC standard has more room for non-USA materials.