Made in USA Marketing and Labeling Claims - The FTC Should Implement Measurable Criteria

Studies reveal that millions of Americans prefer to purchase American made goods. This preference is driven by a perception that U.S. goods offer better quality. Plus, many consumers care about American jobs.   In an era of global supply chains, it has been difficult for consumers to know if goods displayed on store shelves and the internet are really made in America.

The U.S. Federal Trade Commission (“FTC”) is charged with protecting consumers from fraud, deception and misrepresentation. Consequently, it regulates “Made in USA” claims. On December 1st, 1997, the FTC laid out its “Enforcement Policy Statement on U.S. Origin Claims.” The statement allows two types of U.S. origin claims, qualified and unqualified.

A qualified claim is where a manufacturer, importer or retailer offers a product that contains significant foreign made components, parts or materials. Then claims may be stated like this: “Assembled in the USA with domestic and foreign components” or “Made in USA from imported silk.” These claims, when true, do not deceive or confuse the customer.

Deception or confusion often arises with unqualified claims, such as “Made in USA.” The FTC believes that the average consumer understands such unqualified claims to mean that the product is “all or virtually all” made in the United States.

In the 1997 Statement, this “all or virtually all” standard required all significant parts and processing that go into the product to be of U.S. origin. The word “all” is clear and means 100% of a product. But “significant” and “virtually” are vague and not objectively measurable. The result being that sellers would take advantage of this regulatory vagueness to label their products “Made in USA” when that claim should not have been made ethically or even legally.  This unfair competition disadvantaged honest sellers whose products were 100% American made and sourced.

Since many sellers and consumers were not happy about this situation, the FTC held  a public workshop in D.C. in September 2019 to revisit its regulation of “Made in USA” claims. After the workshop, on June 22, 2020, the  FTC sought public comment on a proposed  new set of rules for unqualified claims, prohibiting them unless: “Final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States.”

In our view, this proposed new rule is still unclear. The wording is too similar to the 1997 policy statement, opting for phrases like “all significant processing” and “all or virtually all ingredients.” The fact of the matter is that these phrases are not measurable and will be interpreted by different sellers in different ways.

Consider two sellers in the same market. Seller A, a small company, does not want any trouble with the FTC but it is unsure if its product with a very small amount of imported parts would satisfy the proposed rule. It therefore opts to make a qualified claim, which is less attractive to consumers. Seller B, knowing its product contains foreign components, goes ahead and markets it with a “Made in USA” claim, in order to drive sales. It’s not concerned about the FTC since it has deep pockets and lots of attorneys to defend it. Seller B benefits from the vagueness of the rule.

The state of California has passed its own law concerning U.S. origin claims for products sold in California. It is not vague because it provides a safe harbor for products where no more than 5% (or, in certain defined cases, 10%) of the final wholesale value of the manufactured product is attributable to foreign articles, units, or parts. Cal. Bus. & Prof. Code § 17533.7.

Instead of having vague rulemaking that does not protect consumers and rewards companies which take unfair advantage of this vagueness, the FTC should act like California did and establish measurable standards. If “all or virtually all” were replaced with criteria like “95% of the parts by weight” or “95% of the product by volume”, this would be illuminating for both sellers and consumers. Regardless of the percentage that is required or whether it is measured in weight or volume or cost, this would clear up all confusion on unqualified claims.

Not only would this facilitate fair competition between sellers but it would benefit American consumers. Being able to know which products are truly made in the United States and not needing to think about vague standards set by a federal agency allows them to make informed choices. Especially considering the increased importance of American jobs in the current political discourse, this would be a marked improvement over the proposed FTC rule.

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This article was co-authored by attorney Susan L. (“Susie”) Hoeller (www.hoellerlaw.com) and Louis Cohen. Louis is a junior at Sunlake High School in Land O’ Lakes FL. Louis serves as the current president of the Junior State of America debate and civic activism chapter at Sunlake. He is also the Lieutenant Governor for Florida, Alabama, Mississippi, South Carolina, and Georgia.

Copyright (c) 2020 Susan L. (“Susie”) Hoeller and Louis Cohen