In this era of "America First," there is a major push to increase the amount of manufacturing that happens in the United States, and buying American-made goods is viewed by many to be an act of patriotism. As a result, the promotion of a product as being "Made in USA" or "Made in America" can create a real marketing advantage that helps to boost the sales of the product. But when can a marketer properly label or promote a product as "Made in USA"?
Under U.S. laws and regulations, as a general rule, if a product undergoes its last substantial transformation1 in the United States, a marketer is not required to identify the country of origin for its products.2 However, if a marketer chooses to make a country of origin claim in the promotion or labeling of its products, such claim must be truthful and there must be a reasonable basis for substantiating the claim.
A marketer can make claims about the origin of its products in several ways. First, it can label its product as "Made in USA" or state in an advertisement that a product is "Made in America." This type of representation is an express U.S. origin claim.
Second, a marketer can make an implied claim of U.S. origin for its products. An implied claim of U.S. origin occurs when the overall net impression of an advertisement, label, or other promotional material is likely to cause customers to believe that the product is of U.S. origin even if there is no express "Made in USA" on the label or in the promotional material. For example, the marketer could include pictures of a U.S. flag and other U.S. references on product packaging in such a manner that would create the overall impression that the marketer is really claiming that the product is of U.S. origin.
The Federal Trade Commission ("FTC") has authority over both express and implied claims of U.S. origin. Under the FTC's Enforcement Policy Statement on U.S. Origin Claims, a marketer can only make an unqualified claim that a product is of U.S. origin if such product is "all or virtually all made in the United States." Federal Trade Commission, "Made in USA" and Other U.S. Origin Claims, 62 Fed. Reg. 63755, at 63768 (Dec. 2, 1997). A product that is all or virtually all made in the United States is a product "in which all significant parts and processing that go into the product are of U.S. origin," and the product should contain only a negligible amount of foreign content. Id. The marketer making a claim of U.S. origin must also have a reasonable basis for such claim and have competent and reliable evidence to support the claim. Id.
In determining whether the "all or virtually all" standard is met, the FTC considers several factors. First, the FTC considers whether the final assembly or processing of such product has occurred in the United States. Thus, for example, even if a product is primarily manufactured in the United States of U.S. content, if the final assembly of a product occurs outside of the United States (such as in Mexico or Canada), an unqualified "Made in USA" claim would likely be inappropriate. Instead, the marketer should qualify its "Made in USA" with a disclosure of where the final assembly of the product occurred. Id.
Second, the FTC considers the percentage of the total cost of manufacturing the product that is attributable to U.S. parts and processing costs and to foreign costs. There is no fixed percentage that must be attributable to U.S. costs. However, the lower the percentage of foreign content, the more likely that the FTC would consider the product to be all or virtually all made in the United States. Id. at 63768-68.
Third, in weighing the amount of foreign content in a product, the FTC will also consider how far removed the foreign content is from the finished product. For example, if the gold used to make a gold ring or the ceramic used to make a ceramic tile was imported from a foreign country, an unqualified "Made in USA" claim is likely inappropriate. The gold and ceramic make up a significant part of the final product and are only one step removed from the finished product. In contrast, if the plastic used to make the case of a clock radio was made from imported petroleum, but the radio was otherwise all or virtually all made in the United States, the imported petroleum is far enough removed and insignificant enough to the final value of the product to support an unqualified "Made in USA" claim. Id. at 63769.
Where an unqualified U.S. origin claim is not appropriate, a marketer may make a "qualified" claim. Qualified claims describe the extent, amount, or type of a product's domestic content or processing, and may be general or specific. For example, a general qualified claim about product content could simply indicate the existence of unspecified foreign content, as in "Made in USA of U.S. and imported parts." A specific qualified claim could indicate the percentage of U.S. content, as in "60% U.S. content," or identify the specific country from which the imported content comes, as in "Made in USA from French components." However, the FTC believes that all U.S. origin claims with qualifying information about foreign content should only be used if the last assembly, processing or finishing of the product occurred in the United States. Id. at 63769-70.
A marketer may also claim that a particular manufacturing or other process was performed in the United States or that a particular component was manufactured in the United States. Examples of this practice are claims that a product was "designed" or "painted" or "assembled" in the United States or that the picture tube of a television was made in the USA. Id. at 63770.
Marketers who are considering the use of a U.S. origin claim to promote a product should exercise care in making claims that their products are of U.S. origin, and ensure that they have competent and reliable evidence to support such claims. In fact, failure to comply with FTC requirements can be very costly. The FTC could bring an enforcement action against the marketer, and impose civil penalties, fines, consumer-redress proceedings, and a permanent injunction on the offending marketer. In addition, a competitor or consumer could also bring an action for false advertising and unfair competition under the Lanham Act, 15 U.S.C. § 1125, and/or applicable state law against the marketer, and obtain damages, injunctive relief, and attorney's fees and costs. As a result, we recommend that a marketer seek the advice of IP counsel before using any "U.S. origin claim."
1 A "substantial transformation" is "a manufacturing or other process that results in a new and different article of commerce, having a new name, character and use that is different from that which existed prior to the processing." Federal Trade Commission, "Made in USA" and Other U.S. Origin Claims, 62 Fed. Reg. 63755, at 63757 n. 6 (Dec. 2, 1997).
2 There are specific country-of-origin labeling requirements for automobiles, textiles, wool and fur products that are the exception to this general rule.
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