The Bottom Line
- Companies must understand where product components are sourced from, and where all steps of the manufacturing process occur. Failure to do so could result in meaningful regulatory and litigation risk.
- Companies have a continuing obligation to monitor and adjust “Made in the USA” claims. This means that companies should be especially careful when manufacturing or ingredient sourcing moves from the United States to a foreign country.
- The FTC is paying attention to “Made in USA” claims and is likely looking to bring enforcement actions in this space.
FTC Chairman Ferguson has declared July as “Made in the USA” month, in honor of Independence Day. This is a clear indication that these claims are currently a top enforcement priority. The FTC noted that “Americans want to support their nation's workers, manufacturers, and communities.” In fact, the FTC referenced a recent poll in which 61% of Americans stated that whether a product was Made in the USA played a factor in their purchasing decisions.
“All or Virtually All” Standard
Companies are not required to disclose the amount of U.S. content in most consumer products (with the exception of automobiles, textiles, wool and fur products). But, if a company elects to make express or implied claims about the amount of U.S. content or processing in a product, they must comply with the FTC's rigorous standard for “Made in USA” claims.
In order to make an unqualified “Made in USA” claim, the FTC generally requires that:
- the product's final assembly or processing must occur in the USA;
- all significant processing that goes into the product must occur in the USA; and
- all or virtually all ingredients or components of the product must be made and sourced in the USA.
If a product does not meet these criteria but contains a significant amount of U.S. content or U.S. processing, a company may be able to make a qualified “Made in USA” claim (such as “Made in USA from globally sourced ingredients”).
Note that the FTC considers general terms – like “crafted,” “produced,” “created,” or “manufactured” – as akin to “made” in the United States. Words like these are unlikely to convey a message limited to a particular process and additional qualification is necessary to describe a product that is not “all or virtually all” made in the United States. In addition, images (such as the American flag or the use of stars and stripes) as well as color choices (like red, white and blue font) can imply a “Made in USA” claim.
Enforcement
Historically, the FTC has aggressively brought enforcement actions against companies making deceptive “Made in USA” claims. In 2021, the FTC codified this standard in order to easily obtain civil penalties of over $53,000 per violation (adjusted annually for inflation) for deceptive “Made in the USA” claims. There have been many significant FTC actions regarding unsupported “Made in USA” claims, including a $3.17 million settlement with Williams Sonoma and $2 million settlement with Kubota North America.
“Made in USA” claims are also the target of consumer class action lawsuits. Given the prevalence of class action claims and increasingly high dollar settlements, this is a meaningful risk to a business. For example, a court recently awarded a class of consumers $2.36 million in a lawsuit against Bigelow Tea, alleging that the company falsely represents that its teas are “Manufactured in the USA” when the tea leaves are actually grown and processed abroad. While Bigelow Tea argued that the claim was in reference to the tea bags (rather than the tea leaves), the court rejected this argument, given the importance of tea leaves to a consumer's purchasing decision.
Don't forget that State Attorneys General – from both red and blue states – may challenge deceptive “Made in USA” claims. The National Advertising Division (“NAD,” a self-regulatory adjudicative body for the advertising industry) may bring monitoring challenges or hear consumer challenges regarding country-of-origin claims. The states and NAD are typically quick to take action in this area, and we fully anticipate “Made in USA” related challenges.
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.
