Podcast - Made in the USA Claims
In the sixth episode of his "Clearly Conspicuous" podcast series, "Made in the USA Claims," consumer protection attorney Anthony DiResta discusses the Federal Trade Commission's (FTC) enforcement of deceptive "Made in the USA" claims and the new "Made in USA" Labeling Rule. The FTC has been cracking down on companies that make false or misleading claims about the origin of their products in order to deceive consumers into thinking they are buying American-made goods. Mr. DiResta discusses the role of the FTC in enforcing these rules and how businesses can ensure they comply with the new labeling requirements.
This is Tony DiResta, welcome to our sixth podcast of "Clearly Conspicuous." As we've noted in the previous sessions, our goal in these podcasts is to make you succeed in this environment, make you aware of what's going on with the regulators and then give you practical tips for success. It's a privilege to be with you today. Today we talk about another FTC enforcement priority. The topic is: Made in the USA claims.
"Made in USA" Labeling Rule
The Federal Trade Commission has increasingly prosecuted more deceptive U.S. origin claims under Section 5 of the FTC Act since the start of the COVID-19 pandemic than in the previous decade. This uptick in administrative enforcement increases the cost of compliance surrounding "Made in USA" claims, and companies should take notice regarding any origin claims they intend to make. In addition, in 2021, the FTC adopted the "Made in USA" Labeling Rule, which codifies and clarifies the FTC's longstanding position and guidance on U.S. origin claims. The rule establishes the FTC's ability to pursue potentially strict punishment for those who violate the rule's mandates related to product labeling. The FTC regulates U.S. origin claims under its general authority to act against deceptive acts and practices. Simply put, a "Made in USA" claim must be truthful and substantiated prior to being made/p>
How to Comply
For a marketer to substantiate an unqualified claim that a product is made in the United States, the marketer must – at the time they make the representation – rely upon a reasonable basis that the product is "all or virtually all" made in the United States. There is no hard-and-fast rule to prove compliance with the FTC's "all or virtually all" standard, but the product should contain no (or negligible) foreign content. As codified in the rule, a marketer must satisfy three prongs to label the product as "made," "manufactured," "built," "produced," "created" or "crafted" in the United States. First, final assembly or processing of the product occurs in the United States. Second, all significant processing that goes into the product occurs in the United States. Third, "all or virtually all" ingredients or components of the product are made and sourced in the United States. The FTC considers a number of factors when determining whether a product meets this standard. The FTC will likewise examine the percentage of a product's total manufacturing costs that are attributable to United States-related costs on a case-by-case basis. The FTC will consider the "remoteness of foreign content," including the percentage of the product's foreign material cost in addition to the degree to which foreign content is removed from the finished product. The FTC has released business guidance to assist companies in complying with the "all or virtually all" standard. Remember, companies have a continuing obligation to ensure that their claims are truthful and substantiated, including when temporarily changing a supply chain to outside the United States. For a company to make a lawful, unqualified U.S. origin claim, the final assembly of the product must occur within the United States, all significant processing that goes into the product must occur in the United States, and all or virtually all of the product's parts, ingredients or components, and processing must be made or sourced in the United States. For a company to make a lawful, qualified U.S. origin claim, the company must include a clear and conspicuous qualification that 1) appears immediately adjacent to the representation and 2) accurately conveys the extent to which the product contains foreign parts, ingredients or components, and/or processing. For a company to make a lawful claim that a product was assembled in the United States, the product must be last substantially transformed in the United States, the product's principal assembly must take place in the United States, and the U.S. assembly operations must be substantial. Some of the key requirements – which all advertisers should keep in mind when they are thinking about their disclosures – include, when the claim is made in a television commercial or other audio-visual advertising, the disclosure should be presented simultaneously in both the audio and the video. Disclosures in interactive electronic mediums must be unavoidable. On product labels, the disclosure must be presented on the principle display panel. Finally, when qualifying a U.S. origin claim, the disclosure must appear "immediately adjacent to the representation," and it must accurately convey "the extent to which the product contains foreign parts, ingredients or components, and/or processing."
Here is the key takeaway: If you make claims expressing "Made in the USA," pay strict attention to the FTC's guidance and actions. Stay tuned to further programs as we identify and address the key issues and developments, and provide strategies for success. I wish you continued success and a meaningful day.