On July 2, 2024, the Federal Trade Commission (FTC) announced in a blog post that it was releasing a refreshed version of its guidance on “Complying with the Made in USA Standard.” The guidance had not been updated since 1998, despite the enactment of a Made in USA Labeling Rule in 2021 that has allowed the FTC to obtain significant civil penalties related to improper Made in USA claims. The substance of the new guidance does not deviate far from the old—most notably, it maintains the standard that “all or virtually all” of a product must be made in the U.S. to support an unqualified Made in USA claim.
The blog post and refreshed guidance signal that the FTC does not plan on slowing down its enforcement actions for violations of the Made in USA Labeling Rule or for Made in USA claims that violate Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices in or affecting commerce.
While the new guidance does not change substantively from the previous version, it emphasizes a number of key points for businesses seeking to advertise or label their products as Made in USA.
- Violations of the Made in USA Labeling Rule can lead to significant civil penalties for companies that make unqualified Made in USA claims that are not supported. Civil judgments have been increasing in the past three years since the Labeling Rule was enacted, and in recent months the FTC has issued penalties in the millions.
- To make an unqualified claim of Made in USA, the product must be “all or virtually all” made in the U.S.
- “All or virtually all” requires the following:
1. The final assembly or processing of the product occurs in the U.S.;
2. All significant processing that goes into the product occurs in the U.S; and
3. All or virtually all ingredients or components of the product are made and sourced in the U.S.
- Though the FTC does not have a bright-line rule for amount of foreign content, the guidance says the product should contain no, or “negligible,” foreign content.
- “All or virtually all” requires the following:
- Companies must have a “reasonable basis” to support an unqualified claim, including “competent and reliable evidence” that the product is “all or virtually all” Made in the U.S.
- The FTC considers words like “manufactured” and “built” to be synonymous with “made.”
- Where companies cannot meet the standard for an unqualified claim, they may be able to make a qualified Made in USA claim. Companies can qualify:
- The amount of domestic content (e.g., 60% U.S. content);
- The number of products made in the U.S. (e.g., “Many of our products are Made in USA”);
- What components of the products are made in the U.S. (e.g., “Couch assembled in USA from Italian Leather and Mexican Frame”); or
- What work is performed in the U.S. (e.g., “Designed in USA” or “Assembled in USA”).
- Companies especially must be careful when making claims about an entire product line to ensure that the claim is true for every product in that line. Violations can occur when some manufacturing within a product line moves from the U.S. to a foreign country, if claims are not revised properly.
- The FTC maintains an email account to receive complaints about noncompliance related to Made in USA claims. The FTC also directs complainants to other avenues, such as state attorneys general, the National Advertising Division of the Better Business Bureau and even the Lanham Act for filing a private right of action. The FTC also has brought enforcement actions stemming from referrals from U.S. Customs and Border Protection.
Whether specific claims may run afoul of the FTC guidance and rules can be difficult to discern. McGuireWoods attorneys have extensive experience counseling companies related to Made in USA claims and defending clients in investigations related to Made in USA labeling and marketing. The authors encourage companies making or looking to make such claims to reach out to ensure compliance with the FTC guidance and Labeling Rule.