Is “Made in the USA” Really Made in the USA?

Which Federal Agency Regulates the “Made in the USA” Claim?

The Federal Trade Commission (“FTC” or “the Commission”) “is charged with preventing deception and unfairness in the marketplace. The FTC created an Act that would allow the Commission to bring legal action “against false or misleading claims that a product is of U.S. origin”.

When Can I Say Made in the USA?

• For a product to be considered as “Made in the USA” without qualification, that product must be “all or virtually all” made in the U.S. How the Commission determines whether a product is “all or virtually all” made in the U.S., by looking at whether there was “a ‘reasonable basis’ to support the claim at the time it is made”. To prove the “reasonable basis” standard, a manufacturer or marketer must provide “competent and reliable evidence” to the FTC.
• A qualified Made in the USA claim must describe “the extent, amount or type of [its] domestic content or processing”. This allows the consumer to know “that the product isn’t entirely of domestic origin”. The FTC warns that qualified claims can be tricky, so it is best to “avoid qualified claims unless the product has a significant amount of U.S. content or U.S. processing”.
• Ex: “60% U.S. content. Made in USA of U.S. and imported parts. Couch assembled in USA from Italian Leather and Mexican Frame.
• For a complete understanding of the FTC’s Made in the USA standard, take a look at “Complying with the MADE IN USA STANDARD”.

What Does it Mean to be “All or Virtually All” Made in the USA?

The FTC requires that “the product’s final assembly or processing must take place in the U.S.”. If any of the product contains any foreign content within the final product, then it would be inappropriate to label as “Made in the USA”.

The FTC also looks at other factors to determine the “all or virtually all” claim. Those factors are:

• “How much of the product’s total manufacturing costs can be assigned to U.S. parts and processing; AND

• How far removed any foreign content is from the finished product”.

Two Recent FTC Claims Against Companies Improperly Using the “Made in the USA” Claim

The FTC brought a claim against Block Division, Inc., a distributor of pulley block systems, for “making misleading unqualified claims that its products are made in the United States”. The FTC filed a complaint that alleged for a couple of years, Block Division falsely misled consumers into believing that its products were “Made in the USA”. The complaint also alleged that, Block Division “imported steel plates that entered the United States from overseas already stamped with ‘Made in USA’”; and “used unqualified ‘Made in USA’ claims in advertising…its pulley blocks, other products, and the parts used to make them”.

In a 2-0 decision, the FTC issued a stipulated final order that prohibits Block Division, Inc. from continuing to make unqualified ‘Made in USA’ claims. The stipulated final order also required that if Block Division wants to make qualified claims, then they must “include a clear and conspicuous disclosure about the extent to which the product contains foreign parts, ingredients, and/or processing”.  Note, the order states “Proposed Respondent understands that it may be liable for civil penalties and other relief for each violation of the Decision and Order after it becomes final.”

The FTC brought another claim against a company based out of Georgia, iSpring Water Systems, LLC., for falsely misleading their clients that its water filtration system was built in the USA. In actuality, iSpring’s filtration system was “wholly imported or [was] made using a significant amount of inputs from overseas”. In a 3-0 decision, the Commission handed down the same stipulated final order as Block Division, by prohibiting iSpring from continuing to make unqualified Made in USA claims; and if they make qualified claims, they must “include a clear and conspicuous disclosure about the extent to which the product contains foreign parts, ingredients, and/or processing”.  Note, each violation of such an order may result in a civil penalty of up to $40,654 for iSpring.

What is the Potential Liability?

It is important to note that if a company violates the FTC’s rule on “Made in the U.S.A.”, then that company could be handed down “a civil penalty of up to $40,654” per violation.

How Can You Ensure You Comply with the FTC Standard?

 If you want to avoid civil penalties for non-compliance, contact info@diaztradelaw.com and let us assist you in ensuring you comply with the Made in the USA standard.