On My Mind Blog

The Federal Trade Commission ("FTC") has primary responsibility for regulating "MADE IN U.S.A." claims pursuant to Section 5 of the Federal Trade Commission Act.   This statute prohibits misrepresentations that deceive consumers regarding the geographic origin of goods in an advertisement, label or other promotional material, including marketing on the Internet or by email.

The FTC regulates all products advertised or sold in the United States except for products specifically subject to the country-of-origin labeling requirements of the Textile Fiber Products Identification Act, the Wool Products Labeling Act, the Fur Products Labeling Act, and the American Automobile Labeling Act.

State labeling and other laws generally mirror the FTC standards for "MADE IN USA" claims, but the California standard is more stringent.

The "All or Virtually All" Standard

The FTC does not require domestic goods to be marked "MADE IN U.S.A."

If you choose to make an unqualified "MADE IN U.S.A." claim, you must be able to support it with competent and reliable evidence that the product is "all or virtually all" made in the United States.

As a threshold matter, for such labeling, the FTC requires that a product's "last substantial transformation" have occurred in the United States.  However, if the product is thereafter assembled or processed outside the United States, the FTC may conclude that the product is not "all or virtually all" made in the United States.

The FTC considers the following factors:

the percentage of the total cost of manufacturing attributable to U.S. and to non-U.S. costs. Manufacturing costs include the total cost of all manufacturing materials, direct manufacturing labor and manufacturing overhead. 

how far removed non-U.S. content is from a finished product.

how much of the total value of a finished product is attributable to non-U.S. content.

A manufacturer should look back far enough in the manufacturing process to be reasonably sure that any significant content from suppliers has been included in the assessment.  Content originating outside the U.S. that is incorporated into a product early in the manufacturing process is less likely to be significant to consumers than content that is a direct part of the finished product or its components.

In some situations, failure to indicate origin may lead consumers to conclude erroneously that the goods are of U.S. origin. For example, the FTC has found that the absence of a country of origin marking was unfair and deceptive for watch bands made of metal purchased in the United States, exported to Hong Kong to be fabricated into watch bands, and finished in the Virgin Islands.

Types of Claims

A claim of U.S. origin, which must be truthful, substantiated, clear and specific enough so as not to be deceptive to consumers. may be:

 an express claim such as "MADE IN U.S.A." or "OUR PRODUCTS ARE AMERICAN MADE.'"

 an implied claim created by the overall impression, which includes the juxtaposition of phrases and images, and the nature of the transaction. For example, U.S. symbols or geographic references, such as U.S. flags, U.S. maps, or references to U.S. locations of headquarters or factories, may convey a claim of U.S. origin.

 a qualified claim such as "MADE IN U.S.A. OF U.S. AND IMPORTED PARTS," "MADE IN U.S.A. OF 65% U.S. CONTENT" or "MADE IN U.S.A. FROM IMPORTED LEATHER." 

a manufacturing process claim such as "ASSEMBLED IN THE U.S.A." or comparative claims such as "CONTAINS MORE U.S. CONTENT THAN ANY OF OUR COMPETITORS' PRODUCTS."

Monitoring 

The FTC actively monitors "MADE IN U.S.A." claims made in print, broadcast, and Internet advertising, and on product labels, packaging and products.

The FTC coordinates with state Attorneys General and with U.S. Customs and Border Protection.

Competitors may report noncompliance directly to the FTC by calling (202) FTC-HELP or by contacting the FTC by mail or email.

State Statutes

In addition to the federal statutes requiring country of origin markings on specific products--Fur Products, Textile Fiber Products, Wool Products and  Automobiles--a false designation of origin may also violate state law. Notably, a 1961 California statute provides a very restrictive state law claim against manufacturers who use words such as "MADE IN U.S.A."  or "MADE IN AMERICA" when the product or "any article, unit, or part thereof" has been entirely or substantially made outside the U.S.

Conclusion

Generally, as long as a  "MADE IN U.S.A." claim is supported by reliable evidence and clearly stated so as to avoid deception to consumers, it will be found to comply with the law.   However, manufacturers in California must be especially vigilant to comply with that state's rigid labeling law.

For further information, please contact Jeffrey H. Epstein.

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© 2014 by Cowan, Liebowitz & Latman, P.C., New York, NY. 

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