United States: FTC Issues Record-Breaking Civil Penalty In "Made In USA" Case

Tractor maker Kubota North America Corporation will pay a $2 million civil penalty for falsely labeling its replacement parts as "Made in USA," the largest civil penalty ever in a Federal Trade Commission (FTC) Made in USA case.

In its complaint, released last week, the FTC alleges that since at least 2021, Kubota has labeled thousands of replacement parts as Made in USA when, in fact, they were wholly imported. After shifting production of some of its products overseas, the company failed to update its package designs that included the Made in USA labels, resulting in the sale of millions of replacement parts with the false label. Making matters worse, at least in the FTC's eyes, Kubota was previously sued by the FTC in 1999 for falsely claiming that a line of lawn tractors it manufactured was Made in USA and was subject to an FTC order in that case that expired in 2019.

Unqualified vs. Qualified Made in USA Claims

Kubota entered into a Stipulated Order and agreed to cease making unqualified Made in USA claims unless it can show that the product's final assembly or processing—and all significant processing—takes place in the United States and that all or virtually all components of the product are made and sourced in the United States. If Kubota wishes to make future qualified Made in USA claims, it must include a clear and conspicuous disclosure about the extent to which the product contains foreign parts, components, or processing.

Last, the order requires the company to ensure that any product asserting an "assembled in USA" claim is substantially transformed in the U.S., its principal assembly takes place in the U.S., and U.S. assembly operations are substantial.

Best Practices for Companies Wanting to Make Made in USA Claims

The FTC's Enforcement Policy Statement on U.S. Origin Claims provides guidance on making non-deceptive "Made in USA" claims, and the FTC's Made in USA Labeling Rule went into effect in 2021. The FTC regularly enforces the rule across multiple industries. The FTC takes a broad view of what is covered by the Labeling Rule, and by doing so can seek civil penalties for Made in USA claims. Read about another recent enforcement action here and a primer on the FTC's Labeling Rule here.

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