When Federal Trade Commission Chairman Andrew Ferguson designated July as "Made in USA" Month, he acknowledged the problems consumers and producers face when they want to buy and make products domestically. Although many Americans prefer to purchase products made at home, many companies that could label their products as "Made in USA" don't do that, presumably because the requirements to support that type of claim can be complex.
Ferguson pointed to guidance that the FTC has issued to help companies understand the legal requirements for making "Made in USA" claims. He also noted that the FTC will enforce the law against companies that don't comply so consumers can have confidence that when they buy something advertised as "Made in the USA," that's what they get.
Warning Letters
Shortly after the announcement, the FTC sent warning letters to four manufacturers reminding them about the requirements for making "Made in USA" claims. Although the recipients make those claims for certain products, the letters state the FTC has received information and complaints suggesting the products may be imported or contain significant imported content. The recipients were asked to respond or face potential consequences, including civil penalties of up to $53,088 per violation.
The FTC also sent letters to two retailers explaining how the FTC's "Made in USA" requirements apply to online marketplaces. The letters identify third-party sellers who may be making deceptive "Made in USA" claims on those marketplaces. The FTC states it hasn't determined the retailers themselves have violated the law, but it wants the retailers to "monitor, identify, and take corrective action against third-party sellers who make false or misleading 'Made in USA' claims" on their online marketplaces.
These letters reaffirm the FTC's commitment to ensure manufacturers comply with the law. They also suggest the FTC expects retailers to play a role in trying to prevent sellers from making misleading claims on their platforms—not an easy task as retailers won't typically have the information to determine whether a seller can support a claim.
Other Challenges
In addition to the increased threat of enforcement from the FTC, companies making "Made in USA" claims face increased risks of class actions. There was an increase in those lawsuits this year, many of which have been brought by a California firm that saw President Donald Trump's focus on American-made goods and figured there was money to be made in these lawsuits.
For example, a California jury recently awarded tea drinkers a $2.36 million verdict in a case against Bigelow Tea, awarded in which plaintiffs alleged the company falsely represents its teas are made in the US when the tea leaves are grown and processed abroad. Both the plaintiffs and the court leaned on FTC guidance throughout the case.
In addition to lawsuits, we've recently seen competitors challenge each other's "Made in USA" claims before the National Advertising Division, or NAD, a self-regulatory body that hears advertising disputes. Although losing an NAD challenge doesn't carry financial penalties, the resulting press release can catch the attention of class action attorneys and failure to comply with an NAD decision can lead to FTC scrutiny.
Avoiding Scrutiny
To comply with the FTC's standards, companies shouldn't make unqualified "Made in USA" claims—or otherwise imply that a product is made in this country—unless "all or virtually all" of a product is made in the US. This generally means that:
- The final assembly or processing of the product must take place in the US
- All significant processing that goes into the product must take place in the US
- All or virtually all ingredients or components must be made and sourced in the US, so that the product contains no—or negligible—foreign content
It isn't always easy to figure out whether a product meets the FTC's standard. There are several factors to determine whether a company has complied with the standard, including:
- The proportion of total manufacturing costs attributable to US parts and processing
- How far removed any foreign content is from the finished product
- The importance of foreign content to the product's form or function
Companies that can't make unqualified claims may qualify them by providing more context. For example, a company may advertise that a product is "Made in USA of US and imported parts." Of course, the claim shouldn't mislead consumers about the amount of US content or processing. For example, a claim that a product includes "US parts" could be misleading if the value of those parts is negligible.
Companies should remember that substantiating these claims isn't just a one-time exercise—instead, they must review and update their claims as circumstances change. In 2023, the FTC announced a settlement with a company over "Made in USA" claims for its kitchen products. It appears that although the company could substantiate those claims at one time, it shifted the production of some products to China for about 10 months and continued to make those claims.
"Made in USA" Month is over, but these rules apply all year, and the FTC, plaintiffs' attorneys, and competitors are going to continue monitoring these types of claims. If you haven't considered whether you can substantiate your "Made in USA" claims recently, now may be the time to do so.
Originally published by Bloomberg Law.
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