President Trump rode to victory on a platform that included a promise to “Make America Great Again.”
That idea can lead manufacturers and other companies to proudly proclaim their products are “Made in USA.” But a company can’t simply make that or similar claims without substantiation. Recently, the Federal Trade Commission (FTC) reached settlements within weeks in two similar cases where it charged the companies with making unfounded claims about where their products were made or built.
What Does the FTC Require?
Historically, the FTC has required that a product advertised as “Made in USA” be “all or virtually all” made in the United States. The term “United States” here refers to the 50 states, the District of Columbia, and the U.S. territories and possessions.
The requirement applies to all products advertised or sold in the United States, unless they are subject to country-of-origin labeling by other legislation. It also applies to U.S. origin claims that appear on labeling and all other forms of promotion or marketing, including digital or electronic, such as on the Internet or in emails.
Similar Claims and Outcomes
The two recent cases before the FTC involved settlements containing consent orders where the companies agreed to stop claiming their products were either built or made in the United States.
Case #1: The FTC charged that a Georgia-based distributor of water filtration systems deceived consumers by presenting false, misleading or unsupported claims that the systems and parts were:
- “Built in USA,”
- “Built in USA Legendary brand of water filter (sic),” or
- “Proudly Built in the USA.”
The company marketed the water filtration products on its own and third-party websites.
The FTC maintained that the products were wholly or partially imported and a significant amount of the production occurred overseas.
“Supporting American manufacturing is important to many consumers. If a product is advertised or labeled as ‘made’ or ‘built’ in the USA, consumers rightly expect that to be the case when they part with their hard-earned money,” said Acting FTC Chairman Maureen Ohlhausen. “This is an important issue for American business and their customers, and the FTC will remain vigilant in this area.”
Case #2: Just five weeks after the water-filtration settlement, the FTC settled charges that a Texas-based distributor of pulley block systems deceived consumers with false, misleading and unsupported claims that the products and other items were “Made in USA.”
The FTC asserted that the company represented that its products and parts were completely or virtually all made in the United States in its advertising. The claims appeared in various places, including on its website, in stores, through trade shows and authorized dealers, and on social media, flyers and pamphlets.
The products actually included substantial imported parts that are essential to functionality. In addition, the pulleys featured steel plates imported and prestamped as being made in the United States.
U.S. Origins Claims Banned
As part of both final consent orders, the two companies are banned from making “Made in USA” or similar claims for any product unless they can show that:
- The final assembly or processing — and all significant processing —took place in the United States, and
- All or virtually all ingredients or components of the product were made and sourced in the United States.
They are prohibited from making any country-of-origin claims about their products unless the claims are true and not misleading and they have a reasonable basis for making them. The companies are allowed to make qualified “Made in USA” claims as long as they include a clear and conspicuous disclosure about the extent to which the product contains foreign parts, ingredients and/or processing.
The penalty for breaking a final consent order by the FTC is severe. Each violation can result in a civil penalty of up to $40,654.
Be Certain Ground Is Firm
If your manufacturing company says its products are made in the United States, be certain you are on firm ground. Not only can unsupported claims result in loss of revenue and sanctions, but they can irreparably harm a manufacturer’s reputation.
Is It Express or Implied?
A claim by a manufacturer of “Made in USA” may be express or implied.
Some examples of express claims are “Made in USA,” “Our products are American-made,” and “USA.” That’s easy to understand and identify.
But for implied claims, the FTC focuses on the overall impression of the advertising, label or promotional material. Depending on the context, U.S. symbols or geographic references (U.S. flags, outlines of U.S. maps or references to U.S. locations of headquarters or factories, etc.) may convey a claim of U.S. origin by themselves or in conjunction with other phrases or images.
Here’s a typical example from the FTC:
“A company promotes its product in an ad featuring a manager describing the ‘true American quality’ of the work produced at the company’s American factory. Although there is no express representation that the company’s product is made in the U.S., the overall impression likely conveyed by the ad to consumers is that the product is of U.S. origin. This implied claim could run afoul of the FTC policies.”
If you plan to advertise a product as made in the United States, consult with your advisors to ensure you have enough facts, statistics or other substantiation for the claim.