Leonard L. Gordon, advertising and marketing group leader with Venable LLP, explains the Federal Trade Commission’s recent action on verifying “Made in USA” claims for a wide range of manufactured products.
The staff of the FTC recently issued new guidance on how manufacturers should substantiate “Made in USA” claims. The action was intended to help businesses comply with FTC’s “all or virtually all” standard for domestic content, Gordon says. Penalties can exceed $50,000 per violation, with most cases settling before they’re imposed “because of the enormous hammer that FTC holds.”
The rule applies to a wide range of products, including appliances, hardware and apparel, but only in the case of the last category are manufacturers required to disclose origin. When they choose to do so for other products, however, they are held to the criteria of the Made in USA rule.
FTC has been active on the issue for nearly 20 years, but became more aggressive upon receiving authority from Congress to create its own Made in USA labeling requirement. Gordon says the commission adopted a broad definition of a “label,” to include product descriptions in catalogs and online shopping sites.
Even so, FTC has remained vague about what constitutes “virtually all” of a product’s contents, when verifying the amount of domestic versus foreign sourcing. In essence, Gordon says, the commission is taking an “I know if when I see it” attitude toward the issue. But it has said it considers both the cost and functional contribution of a particular part toward the making of a given product, in making a final determination.
Gordon says companies should avoid vague words such as “created” and “produced” when claiming domestic origin. “Assembled” might be an acceptable way of indicating that some components of a domestically manufactured product were sourced internationally, but even then there are guidelines to be followed. “It has to be more than just a turn of a screwdriver,” Gordon says. “There’s got to be some transformation of the product in the assembly.”
