The Federal Trade Commission (FTC) has finalized the Made in USA Labeling Rule, which codifies its long-standing enforcement policy requiring that marketers making unqualified Made in USA claims on labels be able to prove that their products are “all or virtually all” made in the United States. The FTC stated that the rule is intended “to deter rampant Made in USA fraud.”
The rule provides for a broad range of remedies by the FTC, including the ability to seek redress, damages, penalties and other relief from marketers that make deceptive Made in USA claims on labels. The rule enables the FTC for the first time to seek civil penalties of up to $43,280 per violation of the rule. The rule is effective August 13, 2021.
The rule prohibits marketers from making unqualified Made in USA claims on labels unless (1) final assembly or processing of the product occurs in the United States; (2) all significant processing that goes into the product occurs in the United States; and (3) all or virtually all ingredients or components of the product are made and sourced in the United States.
In its public notice, the FTC stated that consistent with the FTC’s past Made in USA decisions since the 1940s, the rule recognizes “the established principle that unqualified U.S.-origin claims imply to consumers no more than a de minimis amount of the product is of foreign origin.”
The FTC stated that the rule only applies to labeling claims. The FTC announced that it will continue to bring enforcement actions against marketers that make deceptive U.S.-origin claims falling outside the rule under Section 5 of the Federal Trade Commission Act. The rule does not supersede, alter or affect any other federal statute or regulation relating to country-of-origin labels.
The rule, codified at 16 CFR Part 323, states that the term “Made in the United States” means “any unqualified representation, express or implied, that a product or service, or a specified component thereof, is of U.S. 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 U.S.-origin claim.”
The FTC approved the rule by a 3-2 vote of the commissioners. Commissioner Rohit Chopra was joined by Chair Lina Khan and Commissioner Rebecca Kelly Slaughter in a statement that noted the rule will especially benefit small businesses that rely on the Made in USA label but lack the resources to defend themselves from imitators. “The final rule provides substantial benefits to the public by protecting businesses from losing sales to dishonest competitors and protecting purchasers seeking to purchase American-made goods,” Commissioner Chopra stated. “More broadly, this long-overdue rule is an important reminder that the Commission must do more to use the authorities explicitly authorized by Congress to protect market participants from fraud and abuse.”
Commissioners Christine Wilson and Noah Phillips voted against the rule. They stated that they supported strong enforcement against deceptive Made in USA labels but that the rule would exceed the FTC’s statutory authority because the rule could be read to cover all advertising, not just labeling. The FTC’s authority to publish the rule is derived from 15 U.S.C. 45a, which applies to “a product with a ‘Made in the U.S.A.’ or ‘Made in America’ label, or the equivalent thereto.” The rule construes the term “label” to include “mail order catalog” and “mail order promotional material,” which the rule states means “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.”
Commissioner Chopra stated that the rule does not cover all advertising but that “the definition of label does extend beyond labels that are physically affixed to a product. As described in the rule, other depictions of labels are also covered; in some circumstances, labels appearing online may also be subject to the rule.”
Some commenters to the proposed rule requested an explicit carve-out for businesses that act in good faith. The FTC declined, but clarified that “it will continue to: (1) Advise marketers that, if provided in good faith, marketers can rely on information from suppliers about the domestic content in the parts, components, and other elements they produce; (2) generally conserve enforcement resources for intentional, repeated, or egregious offenders; and (3) provide informal staff counseling where appropriate.”
Why It Matters
Although the new FTC Made in USA Labeling Rule codifies the FTC’s long-standing enforcement policy regarding U.S. origin claims and does not impose any new requirements on businesses, it is particularly important now for marketers to meet the FTC’s requirements for Made in USA claims. Otherwise, marketers run the risk of incurring civil penalties and other substantial monetary remedies.