On July 1, 2021, the Federal Trade Commission’s (FTC) finalized a new Made in USA labeling rule that becomes effective August 13, 2021. The new rule codifies the FTC’s “all or virtually all” standard for unqualified “Made in USA” claims. The rule is intended to “crack down on marketers who make false, unqualified claims that their products are Made in the USA.” Until now, the FTC has primarily enforced Made in USA claims under its Section 5 authority, issuing hundreds of closing letters. In recent years, the FTC has pursued penalties, for example obtaining a $1.2 million settlement in a follow-on action against a glue manufacturer and a consent decree resolving allegations the company falsely claimed novelty products were “Made in USA.”
The FTC conducted this rulemaking under Section 45a of the FTC Act, which authorizes the Commission to issue rules governing ‘‘Made in the U.S.A.” claims on “labels,” which the FTC defines as including advertisements disseminated electronically, including by e-mail and on websites. The new rule applies not only to product labeling, but to any “mail order catalog” or “mail order promotional material” that includes a seal, mark, tag, or stamp that labels a product as having been made in the United States. The FTC defines mail order catalogs and promotional material 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 final Rule provides that “labels” may not contain unqualified “Made in USA” claims unless:
(1) Final assembly or processing of the product occurs in the United States;
(2) all significant processing that goes into the product occurs in the United States; and
(3) all or virtually all ingredients or components of the product are made and sourced in the United States.
The Rule does not cover qualified claims, which will remain subject to the FTC’s general authority to police deceptive and unfair claims under Section 5 of the FTC Act. The FTC has said that, even if certain components of a product cannot be sourced from the U.S., and must be imported, they still must be included in the analysis of whether a product was made in the United States.
The Rule outlines a procedure for partial or full exemption where an advertiser can sufficiently demonstrate that their Made in USA claims are not deceptive. The rule also allows the agency to seek civil penalties of up to $43,280 per violation and expands the FTC’s remedial options.
One of the FTC Commissioners, Rohit Chopra, explained that this is a restatement rule that is intended to affirm past FTC guidance and legal precedent. Apparently, the final Rule does not significantly deviate from the one proposed nor from the FTC’s 1997 Enforcement Policy on U.S. Origin Claims, and, more importantly, the Rule does not appear to impose additional requirements on advertisers.
Following the issuance of FTC’s Made in USA Rule, Agriculture Secretary Tom Vilsack released the following statement “the Federal Trade Commission took important steps to enhance its ability to enforce the Made in USA standard….USDA will complement the FTC’s efforts with our own initiative on labeling for products regulated by FSIS, an area of consumer labeling where USDA has a long tradition of protecting consumers from false and misleading labels.”