In the era of globalization, American made products are few and far between, but they are almost always guaranteed to be of higher quality than imported goods. While many manufacturers wear the ‘Made in USA’ badge with pride, some companies aren’t truthful about where their raw materials and labor are actually coming from.
So, what happens when the ‘Made in USA’ claim is falsely made? Let’s take a look at what the Federal Trade Comission says about false claims.
The primary statute of the Federal Trade Commission is the FTC Act. Under this law, the commission is empowered to:
- Prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce.
- Seek monetary redress and other relief for conduct injurious to consumers.
- Prescribe rules defining with specificity acts or practices that are unfair or deceptive, and establishing requirements designed to prevent such acts or practices.
- Gather and compile information and conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce.
- Make reports and legislative recommendations to Congress and the public.
Simply stated, the Act gives the FTC power to punish manufacturers for Made in USA violations.
According to the FTC there are two types of claims, a qualified Made in USA claim and an unqualified Made in USA claim.
A qualified ‘Made in USA’ claim can be made when a brand includes that its product isn’t entirely American made and discloses the extent of its domestic parts and processing. For example, “Couch assembled in the USA from Italian Leather and Mexican Frame” is appropriate because it shows that the product isn’t claiming to be entirely American made. The manufacturer could also choose to include the percentage of the product that is American by making a statement like “60% U.S. Content”.
When a company imports a product, U.S. Customs considers where the product’s last major finishing assembly was to define its country of origin. When Customs decides that the item is a product of a foreign country, the brand is required to disclose that information to customers even if it contains some American made parts as well.
An unqualified “Made in USA” claim is when a product is “all or virtually all” made in the United States. The policy considers all 50 states, the District of Columbia, and all U.S. territories and possessions as part of this statement.
The term “all or virtually all” means that all parts and processing for the product are in the USA and the product can only contain foreign content if it is small enough to be insignificant. Most importantly, its final assembly must be in the U.S. Here is an example from the National Institute of Standards and Technology:
“A gas grill has knobs that are imported, but the rest of the grill components are of U.S. origin. An unqualified ‘Made in USA’ claim is not likely to be deceptive because the knobs make up a negligible portion of the product’s total manufacturing costs and are insignificant parts of the final product.”
In order for a company to back up its claims, they need reliable evidence that the product follows the “all or virtually all” rule. The commission mainly looks at total manufacturing costs and what percentage of that is attributed to overseas parts and processing. This includes the cost of manufacturing materials, direct manufacturing labor, and manufacturing overhead.
Companies should make sure to check with their suppliers on what percentage of their parts are truly ‘American made’. Products with foreign raw materials or other sourced parts may still be considered American made if the materials are far enough removed from the final product.
If a product follows all of these guidelines, the brand is safe to say their product is made in the USA without any restrictions.
Made in USA Labeling Act
The Commission recently proposed an act that would allow them to seek civil penalties (up to $43,280) against first-time offenders who, under the current regulations, are typically given a free pass regardless of the degree to which they misled consumers. Such civil penalties could be used for customer refunds, meaning more money for consumers who fall victim to deceptive ‘Made in USA’ marketing campaigns exposed by the FTC.
All in all, these rules and regulations are put in place by the FTC in order to prevent foreign manufacturers from taking advantage of the system with cheaply made products. When you buy an American made product, you should be assured that it is of the highest quality raw materials and labor.
So, what do you do if someone fraudulently claims ‘Made in USA’ and tries to defraud you through deceptive claims? You can start by contacting the FTC. Click here to fill out the submission form: https://www.ftccomplaintassistant.gov/Details#crnt