Two recent closing letters from the Federal Trade Commission highlight the fact that marketers sometimes have to apply different legal standards when determining whether they can promote their product as having been made in the United States.
"Made in USA" Standard vs. Textile Act
Last week, the FTC closed an investigation into marketing by Smoke Guard, a company that makes fire and smoke protection products. The FTC was concerned that Smoke Guard may have overstated the extent to which its products are made in the United States, since some of them incorporate "significant imported materials." According to Smoke Guard's website, the company makes curtain systems that provide fire and smoke protection.
The FTC's Enforcement Policy Statement on U.S. Origin Claims says that in order to make an unqualified U.S.-origin claim about a product, marketers must be able to substantiate that the product is "all or virtually all" made in the United States. That means that the product will ordinarily be one in which all significant parts and processing that go into the product are of U.S. origin and that the product only contains a negligible amount of foreign content. (Last year, this standard was also codified in the FTC's Made in USA Labeling Rule.)
If you sell textiles that are subject to the Textile Products Identification Act, however, you're generally subject to a different set of rules. While the marketers of most products aren't required to disclose where their products are made, under the Textile Act, marketers of clothing, towels, and many other textile products are required to disclose on the product label, and in certain types of advertising, whether the product is made in the United States or imported. And while the marketers of most products are required to apply the "all or virtually all" standard, under the Textile Act's rules, "a manufacturer needs to consider the origin of only those materials that are covered under the Act and that are one step removed from that manufacturing process." For example, if you're making a sweater, you need to consider where the yarn itself was manufactured, but it doesn't matter if the sheep live abroad.
Here, Smoke Guard agreed to remove unqualified U.S.-origin claims from its marketing materials and to take a series of other steps to avoid deceiving consumers, including conducting staff training and creating and distributing a written policy regarding the making of U.S.-origin claims.
"Made in USA" Standard vs. Buy American Act
Last month, the FTC closed an investigation into marketing by Liberty Pumps, a company that makes sump, sewage, and effluent pumps. The FTC was concerned that Liberty Pumps overstated the extent to which its products are made in the United States. Even though many of the company's products are assembled in the United States, the FTC said that they generally include "more than a de minimis amount of imported content."
Liberty Pumps faces a different type of issue than the textile makers. For Liberty Pumps, the type of U.S.-origin claim the company is permitted to make depends on the audience to whom the claim is directed. For its regular marketing to businesses and consumers, Liberty Pumps would be subject to the FTC's "all or virtually all" standard. When marketing to the U.S. government, however, the company's claims are subject to the Buy American Act, which requires lower percentages of U.S. content than FTC standards do in order to make a U.S.-origin claim.
Here, the FTC told Liberty Pumps that it is appropriate for the company to promote that its products meet the Buy American Act's requirements, so long as as those claims are either "limited to marketing materials available only to government purchasers" or "qualified to avoid consumer deception."
Liberty Pumps also agreed to take remedial action to avoid deceiving consumers, which includes, for example, updating its claims, conducting training, and providing updated marketing materials to its sales representatives and distributors.
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