US Proposed Rulemaking on “Made in USA” Labeling

For most products, unless they are automobiles or items made from textile or wool, there is no law requiring manufacturers and marketers to make a Made in USA claim. But if a business chooses to make the claim, the Federal Trade Commission Made in USA standard applies. The FTC is tasked to enforce Section 5 of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. An act or practice is deceptive if it is likely to mislead consumers acting reasonably under the circumstances and is material – that is, likely to affect a consumer’s decision to purchase or use the advertised product or service.

Under Section 5 of the FTC Act ("FTC Act"), 15 U.S.C. § 45, which prohibits "unfair or deceptive acts or practices," The Commission derives its oversight regarding Made in USA (MUSA) claims. As set out in the Deception Policy Statement, the Commission will find an advertisement or label deceptive under Section 5, and therefore unlawful, if it contains a representation or omission of fact that is likely to mislead consumers acting reasonably under the circumstances, and that representation or omission is material.

In addition, objective claims carry with them the implication that they are supported by valid evidence. It is deceptive, therefore, to make a claim unless, at the time the claim is made, the marketer possesses and relies upon a reasonable basis substantiating the claim. Thus, a Made in USA claim, like any other objective advertising claim, must be truthful and substantiated.

The draft definition of “Made in USA” means “any unqualified representation, express or implied, that a product or service, or a specified component thereof, is of U.S. origin, including, but not limited to, a representation that such product or service is ‘made,’ ‘manufactured,’ ‘built,’ ‘produced,’ ‘created,’ or ‘crafted’ in the United States or in America, or any other unqualified US-origin claim.”

Following a MUSA workshop held last year on such claims, on June 22, 2020, the FTC posted a Notice of Proposed Rulemaking that would enunciate the Enforcement Policy Statement principles.

The proposed rule explicitly covers unqualified Made in USA claims appearing in seals, marks, tags, or stamps in mail order catalogs or mail order promotional materials, defined in the proposed rule as “any materials, used in the direct sale or direct offering for sale of any product or service, that are disseminated in print or by electronic means, and that solicit the purchase of such product or service by mail, telephone, electronic mail, or some other method without examining the actual product purchased.”

The proposed Rule would bar marketers from making unqualified Made in USA claims unless the advertised product satisfies the following three criteria:

• 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

The proposed Rule would not be subject to pre-emption by any existing federal or state statutes or regulations relating to country-of-origin labels, except and to the extent such laws or regulations are inconsistent with the Rule.

States whose protections are greater than the proposed Rule’s provisions would not be considered inconsistent.

Businesses that violate the Rule’s requirements would face civil penalties.

Currently the Commission is gathering public comments on the proposed rule. Comments must be received by September 14, 2020.

Reference Source:

• https://www.ftc.gov/public-statements/1997/12/enforcement-policy-statement-us-origin-claims
• https://www.ftc.gov/news-events/press-releases/2020/06/ftc-issues-staff-report-on-made-in-usa-workshop
• https://www.federalregister.gov/documents/2020/07/16/2020-13902/made-in-usa-labeling-rule

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