Made in USA Claims: Three Cheers for The Said Right and True
November 2, 2015 Leave a comment
Two products sit side by side on the store shelf, but only one says “Made in USA.” For many consumers, that’s an important consideration in deciding what to buy. That’s why the FTC wants to make sure companies’ Made in USA claims – like all objective product representations – are true and backed by appropriate evidence. We asked FTC attorney Julia Ensor some of the questions we’ve heard from businesses about Made in USA claims.
Does my company have to disclose U.S. content on products we sell in the United States?
JULIA: It depends on the product. Under specific laws, U.S. content must be disclosed on automobiles and textile, wool, and fur products. Aside from that, there is no general legal requirement that companies must disclose the extent to which their products are made in the United States. That said, Section 5 of the FTC Act – the general prohibition on unfair or deceptive acts or practices – applies. Therefore, if you say your products are Made in USA, that has to be true. In 1997, the FTC issued an Enforcement Policy Statement on U.S. Origin Claims to provide guidance to marketers. We also have a brochure, Complying with the Made in USA Standard, explaining it in more detail.
So when can a company say a product is Made in USA?
JULIA: To make an unqualified Made in USA claim, your product must be “all or virtually all” made in the U.S. and you must have proof to support that claim before saying it on products, on packaging, or in advertising. According to the Enforcement Policy Statement, “all or virtually all” means that all significant parts and processing that go into the product must be of U.S. origin. The product should contain no – or negligible – foreign content. (A side note to explain what we mean by “unqualified” claims. In FTC parlance, an unqualified claim is a representation made without caveats or limitations.)
What proof do I need before I can make a Made in US claim?
JULIA: Before making any objective representation, including a Made in USA claim, manufacturers or marketers must have a “reasonable basis” to support the claim. In the Made in USA context, that means you need competent and reliable evidence that all or virtually all of the product is made in the United States. Another important consideration is that advertisers can convey claims to consumers expressly and by implication. Depending on the context, U.S. symbols or geographic references (for example, U.S. flags, outlines of U.S. maps, or references to U.S. locations of headquarters or factories) may convey a Made in USA claim either by themselves or in conjunction with other phrases or images. Implying a false Made in USA claim is just as illegal as making a false claim flat-out, so exercise caution.
Our product contains a lot of component parts. In that circumstance, how does the FTC apply the “all or virtually all” standard?
JULIA: First, to say your product is Made in USA, the final assembly or processing must take place in the United States. In addition, in keeping with U.S. Customs Service regulations, you need proof that your product was last substantially transformed in the United States. But that’s not all we look at. We’ll also consider factors like how much of the product’s total manufacturing costs can be assigned to U.S. parts and processing, how far removed any foreign content is from the finished product, and the importance of the foreign content or processing to the overall function of the product. Here are two contrasting fact patterns from Complying with the Made in USA Standard that may help explain that point:
Example. A company produces propane barbecue grills at a plant in Nevada. The product’s major components include the gas valve, burner and aluminum housing, each of which is made in the U.S. The grill’s knobs and tubing are imported from Mexico. An unqualified Made in USA claim is not likely to be deceptive because the knobs and tubing make up a negligible portion of the product’s total manufacturing costs and are insignificant parts of the final product.
Example. A table lamp is assembled in the U.S. from American-made brass, an American-made Tiffany-style lampshade, and an imported base. The base accounts for a small percent of the total cost of making the lamp. An unqualified Made in USA claim is deceptive for two reasons: The base is not far enough removed in the manufacturing process from the finished product to be of little consequence and it is a significant part of the final product.
What about raw materials? How does the FTC factor them into the “all or virtually all” evaluation?
JULIA: We look at how much of the product’s cost the raw materials make up and how far removed from the finished product they are. As the FTC has noted, “even where a raw material is nonindigenous to the United States, if that imported material constitutes the whole or essence of the finished product . . . , it would likely mislead consumers to label the final product with an unqualified ‘Made in USA’ claim.” Here’s an example from Complying with the Made in USA Standard:
Example. If the gold in a gold ring is imported, an unqualified Made in USA claim for the ring is deceptive. That’s because of the significant value the gold is likely to represent relative to the finished product, and because the gold – an integral component – is only one step back from the finished article. By contrast, consider the plastic in the plastic case of a clock radio otherwise made in the U.S. of U.S.-made components. If the plastic case was made from imported petroleum, a Made in USA claim is likely to be appropriate because the petroleum is far enough removed from the finished product, and is an insignificant part of it as well.
Our product doesn’t meet the “all or virtually all” standard. Even so, is there any way we can highlight how much of it is Made in the USA?
JULIA: If your product was last substantially transformed in the United States without further processing abroad, there may be a “qualified” – or limited – Made in USA claim you can make to highlight the work you’re doing in the United States without deceiving consumers. In appropriate circumstances, companies might be able to make claims like “60% U.S. content,” “Made in USA of U.S. and imported parts,” or “Couch assembled in USA from Italian Leather and Mexican Frame.” But manufacturers and marketers should use care when making claims like that. Avoid qualified claims unless the product has a significant amount of U.S. content or U.S. processing. And remember that like any other representation, a qualified Made in USA claim must be truthful and substantiated.
What can I do if a competitor is violating the Made in USA standard?
JULIA: Email us at MUSA@ftc.gov (link sends e-mail) or call us at 202-326-2996. We can’t tell you about ongoing investigations, but information from competitors can help law enforcers focus on companies whose practices warrant scrutiny. If you suspect import or export fraud – for example, removing a required foreign origin label before a product gets to the consumer – file an online complaint with the U.S. Customs Service. Another option is to contact your state Attorney General or to file a challenge with the National Advertising Division of the Council of Better Business Bureaus. In addition, in certain instances, the Lanham Act may give a company the right to sue a competitor.
Consult the Business Center’s Made in USA page for more resources.