U.S. – FTC Proposes 16 CFR 323 Made in USA Labeling

Vol. 1176 | 04 Aug 2020

The Federal Trade Commission (FTC) is tasked with protecting consumers from deceptive acts and practices under FTC Act. Section 5(a) of the FTC Act authorizes the FTC is to ensure that a ‘Made in USA’ claim, like any other claim, be truthful, non-deceptive and substantiated. The ‘Made in USA’ claims fall into two broad categories – those that meet the ‘all or virtually all’ standard and those that are ‘qualifying’ claims. The enforcement action by the FTC for Made in USA claims has been based on the Enforcement Policy Statement on U.S. Origin Claims, published by the FTC in 1997.

Expressly stated or implied claims such as ‘Made in USA’ or ‘American made’ will need to meet the ‘all or virtually all’ standard – where the marketer of such a product shall ensure that all significant parts of the product and processing are of US origin. Such products with unqualified claims are only allowed to contain a minimal amount of foreign content. Qualified claims, on the other hand, are those that provide clear and understandable disclosures about the presence and amounts of any foreign content in the product. Qualified claims may be general, stating for instance, ‘made in USA with imported parts’ or they may be specific with further details, e.g. ‘60% U.S. content’ or ‘made in USA with Italian leather’.

In September 2019, the FTC held a public workshop and collected comments on all aspects of the current Made in USA program including consumer perception of the Made in USA claims, the FTC’s enforcement activities, possibility of civil penalties and rulemaking. Stakeholder response to the FTC’s request, almost unanimously, favored rulemaking, arguing that a formal rule would be a stronger deterrent against untruthful Made in USA claims.

Following this, the FTC has published a Notice of Proposed Rulemaking for a new federal regulation, 16 CFR 323 Made in USA labeling. The proposed rule is intended to strengthen enforcement while making it easier for businesses to understand the requirements of made in USA labeling. It formalizes the commissions’ enforcement decisions by prohibiting unqualified made in USA labeling claims on product labels and on labels found in mail order catalogs, promotional brochures and ecommerce unless:

• final assembly or processing of the product occurs in the United States,
• all significant processing that goes into the product occurs in the United States, and
• all or virtually all ingredients or components of the product are made and sourced in the United States

The Rule will authorize the Commission to seek civil penalties consistent with 15 U.S.C. § 57a, which are currently set at $43,280 per violation.

Comments on the proposed rule can be submitted to the FTC until September 14, 2020.

The proposed rule can be viewed at: https://www.govinfo.gov/content/pkg/FR-2020-07-16/pdf/2020-13902.pdf

For questions, please contact Laxmi Ravikumar (laxmi.ravikumar@intertek.com, +1-630-209-9265) or Pratik Ichhaporia (pratik.ichhaporia@intertek.com, +1-847-212-8273).