/>iOn Tuesday, July 1, FTC Chair Andrew N. Ferguson, issued a statement designating July as “Made in the USA” month. In his statement, Chair Ferguson referenced the FTC’s responsibility for enforcing laws that prohibit unfair and deceptive use of “Made in USA” labeling on products. He stressed the importance of protecting consumer expectations and confidence when purchasing products so labeled, referencing a recent poll in which a majority of respondents indicated that the Made in USA label was material to their purchasing decisions.
Citing the FTC’s July 2024 Plain Language Guidance concerning the Made in USA labeling, Chair Ferguson indicated that the FTC enforcement policy would foster companies legitimately using Made in USA labels and eradicate improper usage. All seemingly noble goals which, frankly, should come as no surprise after a July 2024 FTC blog post previewing the agency’s renewed interest on the issue. So, what does this mean if your business uses the Made in USA labeling to promote its products?
The “Made in USA Labeling” Rule
The FTC finalized a Made in USA Labeling Rule in 2021 that prescribes when it is appropriate to use the Made in USA label in connection with the sale of a product. The regulation has three core elements:
(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 first two elements mirror the requirements of the “Marking” statute applicable to products of foreign origin imported into the U.S. It is the third element –the “all or virtually all” requirement – that can cause a stir. The FTC’s Guidance referenced by the Commissioner articulates what this phrase means: “the product should contain no – or negligible – foreign content.” The Guidance specifies that in evaluating the materiality of any foreign content, the Commission considers total manufacturing costs assigned to the US parts (i.e., COGS), the remoteness of any foreign content from the finished product, and the importance of foreign content to the final product.
The FTC’s commentary published with the final Regulation recognizes that the standard isn’t a “bright line” rule, and acknowledges the “flexibility inherent” in the regulation. But where a product doesn’t meet all three elements, the Made in USA label cannot be used without qualification. The Guidance explains that where a product is not entirely of domestic origin, it is permissible to make a Made in USA claim so long as it is appropriately qualified, such as “Made in USA with imported materials.”
Is the FTC Coming After You?
Maybe, on its own volition, or after a referral from the Better Business Bureau’s National Advertising Divisions. The maximum civil penalty as of January 17, 2025, is $53,088 per violation. Historically, the FTC has been reasonable and collaborative in reaching resolutions on complaints for violations of the Labeling Rule, reserving more aggressive enforcement for repeat, intentional violators. As of the date of this article, the FTC’s website has links to 254 proceedings involving the Rule, with the most recent Closing Letter dated February 21, 2025.
From our perspectives as commercial litigators, businesses can also expect to start seeing demand letters from Plaintiff firms threatening consumer class actions alleging deceptive use of the Made in USA label. How to address such a demand letter turns on a number of factors, including where the subject product falls on the spectrum of domestic versus foreign origin, whether the use of the Made in USA label is unqualified, and any applicable consumer protection statutes.
