United States: Alleging Misleading "Made In USA" Claims, FTC Sues Glue Manufacturer

In the latest of regulatory and private actions attacking alleged misleading "Made in USA" claims, the Federal Trade Commission (FTC) has sued a manufacturer of fast-acting glues, alleging that its advertising contained misleading "Made in the USA" claims.

Background

In its "Enforcement Policy Statement on U.S. Origin Claims," the FTC set forth its position that unqualified U.S. origin claims such as "Made in the USA" in labeling, advertising, other promotional materials, and other forms of marketing – including marketing through digital or electronic means – must be substantiated by evidence that the product is "all or virtually all" made in the United States.

Moreover, the FTC has determined, when a marketer makes an unqualified claim that a product is "Made in USA," it should, at the time that the representation is made, possess and rely on a reasonable basis that the product is in fact all or virtually all made in the United States.

A product that is all or virtually all made in the United States ordinarily is one in which all significant parts and processing that go into the product are of U.S. origin. In other words, where a product is labeled or otherwise advertised with an unqualified "Made in the USA" claim, it should contain only a de minimis, or negligible, amount of foreign content.

The FTC acknowledged in its policy statement that there is no single "bright line" to establish when a product is or is not "all or virtually all" made in the United States. It said, however, that there are a number of factors that it looks to in making this determination – including that the final assembly or processing of the product must take place in the United States. Beyond this minimum threshold, the FTC said that other factors include the portion of the product's total manufacturing costs that are attributable to U.S. parts and processing and how far removed from the finished product any foreign content is.

Chemence Case

The FTC filed its "Made in the USA" complaint earlier this month in the U.S. District Court for the Northern District of Ohio against Chemence, Inc., the Ohio-based manufacturer of Kwik Frame, Kwik Fix, and Krylex glues.

According to the complaint, Chemence's unqualified "made in the USA" or "proudly made in the USA" claims told consumers that its cyanoacrylate glue products were all, or virtually all, made in the United States.

The FTC alleged, however, that a significant proportion of the costs of the chemical inputs to Chemence's glues – approximately 55% – was attributable to imported chemicals that were essential to the glues' function. Therefore, the FTC's complaint alleged, Chemence's unqualified claims were deceptive because its products actually were made in the United States with domestic and imported materials. The FTC also alleged that Chemence assisted others in deceiving consumers by distributing its "Made in the USA" marketing materials to private-label sellers and other retailers who promoted these glues.

The FTC is seeking an injunction barring Chemence from making claims that violate the FTC Act – and an unspecified amount of monetary damages.

Bottom Line

This latest action by the FTC is on the forefront of a recent trend by both regulators and private parties attacking "Made in USA" claims, and we expect this trend to continue. Given this renewed attention and increased practical risk, it's critical that companies promoting products as "Made in the USA" or with similar statements ensure that they comply with FTC rules, as well as any applicable state rules (to see a previous D&G Alert on "Made in USA" claims, click here). Qualified U.S. origin claims, such as "Made in USA of U.S. and imported parts" or "60% U.S. content," also must comply with applicable legal requirements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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