FTC Finalizes Made in USA Labeling Rule With Civil Penalties for False Claims

The Federal Trade Commission voted 3-2 on July 1, 2021, to finalize a rule that lets it seek civil penalties against companies that put false Made in USA claims on product labels.

Chair Lina Khan and Commissioners Rohit Chopra and Rebecca Kelly Slaughter voted yes. Commissioners Noah Joshua Phillips and Christine S. Wilson voted no.

What the rule requires

An unqualified Made in USA claim on a label is allowed only when:

• Final assembly or processing of the product happens in the USA.
• All significant processing that goes into the product happens in the USA.
• All or virtually all of its ingredients or components are made and sourced in the USA.

These standards come from the FTC’s 1997 Enforcement Policy Statement on U.S. origin claims. The rule turns them into a binding rule for labels. Claims that appear only in advertising remain covered by the FTC Act and the policy statement.

Key details

• Violators can face civil penalties of up to $43,280 per violation.
• The FTC proposed the rule in June 2020 and received more than 700 public comments.
• Companies may petition the FTC for an exemption.
• Congress gave the FTC authority to issue such a rule in 1994, after NAFTA took effect.
• The rule takes effect 30 days after it is published in the Federal Register.

The same day, Agriculture Secretary Tom Vilsack said the USDA would launch its own review of the “Product of USA” label on meat.

FAQ

When did the FTC vote?

July 1, 2021. The vote was 3-2.

What is the maximum penalty?

Up to $43,280 per violation.

Does the rule cover ads?

The rule covers labels. Ad claims are still governed by the FTC Act and the 1997 policy statement.