(Maybe) Made in the USA

On June 22, 2020, the Federal Trade Commission (“FTC”) published a summary of findings from the Commission’s 2019 “Made in the USA” workshop. The workshop report offers experiential, anecdotal, and statistical insights into consumer perceptions created by the use of unqualified “Made in the USA” claims. Importantly, the conclusions drawn from the workshop encouraged the FTC to pursue a formal rulemaking that will govern all “Made in USA” labeling and advertising claims (the “Proposed Rule”).

Until now, the FTC’s regulatory guidance and actions relating to country of origin claims were rooted in the FTC Act and the Commission’s 1997 “Enforcement Policy Statement On U.S. Origin Claims” (the “1997 Policy”). The 1997 Policy provides that a marketer may not employ an unqualified “Made in USA” claim unless she has a reasonable basis for asserting that “all or virtually all” of the product is actually made in the United States. As a result of the informational findings of the workshop, the FTC decided that the risk of consumer confusion necessitates the adoption of a definitive rule governing such claims. To this end, the Proposed Rule formally incorporates existing guidance from recent FTC decisions and orders in efforts to color the generalized and unspecific standards established by the 1997 Policy. The FTC also indicated that the reach of the Proposed Rule will apply to “Made in the USA” and other unqualified labeling claims, along with any advertising statements and materials used in connection with the sale of products, including print, digital and internet media.

What Might the New Regulation Require?

Specifically, the Proposed Rule would prohibit supply chain participants from making unqualified claims on labels or related statements 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 or sourced in United States.

What Remains Unclear from the Proposed Rule?

The current language is ambiguous as it relates to what constitutes “significant processing” and “virtually all” for the purpose of satisfying the rule’s requirements. Perhaps these matters will be addressed during the comment period and the FTC will provide concrete guidance as to what these phrases mean. At this point, any manufacturer, distributor, retailer or marketer that employs unqualified “Made in the USA” (or similar) statements concerning a product must be certain that the origin standards articulated above are fully satisfied without exception. In the absence of further clarification, anything more than a minor deviation may prove fatal. For example, a Texas-based manufacturer of cosmetics that sources unessential ingredients from Singapore or a Boston-based medical device company that imports a minor component from Mexico may not be able to legally advertise that their respective products are “Made in USA.”

AGG Observations

The FTC confirms that the Proposed Rule would not supersede, alter or affect any existing federal or state laws or regulations that govern product labeling except to the extent that such law or regulation is inconsistent with the Proposed Rule. Furthermore, the Proposed Rules clarifies that the FTC is authorized to seek civil penalties for rule violations. Accordingly, with new attention being directed towards country of origin claims, it will be imperative for businesses that make such claims to carefully consider the new regulatory landscape before engaging in any marketing activities.