FTC U.S. ORIGIN (MADE IN USA) GUIDELINES
FTC Made in USA (MUSA) Defense Lawyer
The Federal Trade Commission is charged with preventing deception and unfairness in the marketplace. The FTC Act gives the FTC the power to initiate investigations and law enforcement actions against false or misleading claims that a product is of U.S. origin.
With increasing regularity, the FTC has aggressively pursued U.S. origin (“Made in USA”) claims. Marketers and manufacturers that promote their products as Made in USA must meet the “all or virtually all” standard.
Generally speaking, the FTC will find an advertisement or label deceptive under Section 5 of the FTC Act, and therefore unlawful, if it contains a representation or omission of fact that is likely to mislead consumers acting reasonably under the circumstances, and that representation or omission is material. Objective claims carry with them the implication that they are supported by valid evidence. It is therefore deceptive to make a claim unless, at the time the claim is made, the marketer possesses and relies upon a reasonable basis substantiating the claim. Thus, a “Made in USA” claim, like any other objective advertising claim, must be truthful and substantiated.
Consult with an experienced FTC Made in USA investigation and defense lawyer if your company has received an access letter or civil investigative demand.
Made in USA Law
In order comply with FTC Made in USA Guidelines and to advertise a product as MUSA, it must be “all or virtually all” made in the United States. Consult with an experienced Made in USA – U.S. origin claims attorney to discuss regulatory guidance regarding unqualified Made in USA claims under the “all or virtually all” standard and qualified Made in USA claims.
The Made in USA enforcement policy applies to U.S. origin claims that appear on products and labeling, advertising and other promotional materials. It also applies to all other forms of marketing, including marketing through digital or electronic mechanisms, such as Internet or email.
U.S. origin claims can be express (“Made in USA” or “Our products are American made”) or implied. When identifying implied claims, the FTC considers the overall next impression of the advertising, label or promotional material (e.g., U.S. symbols or geographic references).
The Commission is also keenly sensitive to overbroad representations about entire product lines. Manufacturers and marketers should not indicate, either expressly or implicitly, that a whole product line is of U.S. origin when only some products in the product line are made in the U.S. according to the “all or virtually all” standard.
Example: A company promotes its product in an advertisement that describes 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 — or net — impression the advertisement is likely to convey to consumers is that the product is of U.S. origin.
The FTC’s U.S. origin claims policy applies to all products advertised or sold in the U.S., except for those specifically subject to country-of-origin labeling by other laws. Other countries may have their own country-of-origin marking requirements. Exporters should determine whether the country to which they are exporting imposes such requirements.
Other than automobiles and textile, wool and fur products, there is no law that requires most other products sold in the U.S. to be marked and labeled “Made in USA” or have any other disclosure about their amount of U.S. content. However, manufacturers and marketers that choose to make claims about the amount of U.S. content in their products are required to comply with the FTC’s Made in USA policy.
FTC Made in USA Labeling Rule
The Federal Trade Commission finalized a rule that is intended to crack down on marketers that make false, unqualified claims that their products are Made in the USA. Under the rule, marketers making unqualified Made in USA claims (or claims to be of domestic origin without qualification or limits) on labels and/or any online or other mail order marketing materials that include a seal, mark, tag or stamp labeling a product as Made in USA must be able to prove that:
- "all or virtually all" ingredients or components of the product are made and sourced in the United States
- "all or virtually all" means that the final assembly or processing of the product occurs in the United States, and all significant processing that goes into the product occurs in the United States
- the product should contain no — or negligible — foreign content
The FTC issued a statement, noting that the rule is intended, in part, to benefit small businesses that rely on the Made in USA label, but lack the resources to defend themselves from imitators. The rule codifies a broader range of remedies by the FTC, including the ability to seek redress, damages, monetary penalties, and other relief from those who mislead about a Made in USA label. Notably, civil penalties of up to $51,744 per violation of the rule are now available to the FTC.
In 1994, after the North American Free Trade Agreement took effect, Congress enacted legislation authorizing the FTC to seek penalties and other relief for Made in USA fraud, but only after the Commission issued a rule. However, there had long been a bipartisan consensus at the FTC that Made in USA fraud should not be penalized. The final Made in USA Labeling Rule changes course on the Commission’s longtime approach.
The rule codifies the FTC’s longstanding Enforcement Policy Statement on U.S. Origin Claims. The Made in USA Policy Statement applies to express and implied U.S. origin claims that appear on products and labeling, advertising and other promotional materials. It also applies to all other forms of marketing, including marketing through digital or electronic mechanisms, such as Internet, email, or social media.
The final rule adds a provision allowing marketers to seek exemptions if they have evidence showing their unqualified Made-in-USA claims are not deceptive.
While the Made in USA Labeling Rule applies to labeling claims - interpreted quite broadly by the FTC - the agency will continue to bring enforcement action against marketers that make deceptive U.S.-origin claims falling outside of the rule under Section 5 of the Federal Trade Commission Act. Also, the rule does not supersede, alter or affect any other federal statute or regulation relating to country-of-origin labels.
Unqualified Made in USA Claims
Unqualified Made in USA claims must meet the “all or virtually all” made in the U.S. standard. “All or virtually all” means that all significant parts and processing that go into the product must be of U.S. origin. The product should contain no, or only negligible, foreign content. Manufacturers and marketers much possess a “reasonable basis” to substantiate claims that a product is “all or virtually all” made in the U.S.
Consumer perception evidence available to the FTC indicates that the country in which a product is put together or completed is highly significant to consumers in evaluating where the product is “made.” Regardless of the extent of a product's other U.S. parts or processing, in order to be considered “all or virtually all” made in the United States, it is a prerequisite that the product have been last “substantially transformed” in the United States, as that term is used by the U.S. Customs Service -- i.e., the product should not be required to be marked “made in [foreign country].”
Even where a product is last substantially transformed in the United States, if the product is thereafter assembled or processed (beyond de minimis finishing processes) outside the United States, the FTC is unlikely to consider that product to be “all or virtually all” made in the United States.
What Factors Does the FTC Consider When Determining Whether a Product is "All or Virtually All" Made in the USA?
The product’s final assembly or processing must take place in the United States. The FTC then considers a number of factors when determining whether a product is “all or virtually all” made in the U.S.
For example and without limitation:
- How much of the product’s total manufacturing costs can be assigned to U.S. parts and processing;
- How far removed any foreign content is from the finished product;
- Where the major components are produced;
- Whether imported parts make-up a negligible portion of the product’s total manufacturing costs; and
- Whether imported parts are insignificant parts of the final product's form or function
FTC guidance suggests that manufacturers and marketers should consider the cost of goods sold or inventory costs of finished goods when analyzing the percentage of domestic content in a particular product. Such costs generally are limited to the total cost of all manufacturing materials, direct manufacturing labor, and manufacturing overhead.
When assessing the percentage of U.S. content, manufacturers and marketers should also be sure to look back far enough in the manufacturing process to be reasonably sure that any significant foreign content has been included in their assessment of foreign costs. Foreign content incorporated early in the manufacturing process is often less significant than content that is a direct part of the finished product or the parts or components produced by the immediate supplier.
Raw materials may be included in the evaluation of whether a product is "all or virtually all" made in the U.S., depending upon how much of the product’s cost the raw materials make up and how far removed from the finished product they are.
What if a Product is Last "Substantially Transformed" in the USA but Contains More than De Minimis Imported Content?
In some instances when a product is last substantially transformed in the USA but contains more than de minimis imported content, a marketer or manufacturer may be able to make a qualified claim that conveys truthful information about U.S. processes or content without implying the product is “all or virtually all” made in the United States.
A marketer may make any qualified claim that is truthful and substantiated, including one that generally alerts consumers to the existence of foreign content in the product (e.g., “Made in USA of Imported Parts”), one that identifies the particular countries from which the parts came (“Made in USA from French and Korean Parts”), or one that specifies the proportion of the product that comes from the U.S. (e.g., “60% U.S. Content”).
Under What Circumstances Can Marketers Rely on Information from American Suppliers?
Manufacturers and marketers should be cautious when relying upon information from American suppliers about the amount of domestic content in the parts, components and other elements they buy and use for their final products. Just because components or ingredients are purchased from a U.S. supplier, those components are not necessarily made in the USA.
A safe approach is to request and obtain specific information about the percentages of U.S. content from suppliers, along with a certification, prior to making U.S. origin claims in order to ensure supplier-provided information is given in good faith.
What is the "Reasonable Basis" Standard?
When a manufacturer or marketer makes an unqualified claim that a product is "Made in USA," it must have — and must rely on — a “reasonable basis” to support the claim. This means a manufacturer or marketer needs "competent and reliable" evidence to back up the claim that its product is “all or virtually all” made in the U.S.
Companies have an ongoing obligation to review their claims and substantiation to make sure they remain accurate. If something changes and the company no longer has a reasonable basis to support its Made in USA claim (e.g., the company begins sourcing parts overseas), the company must update its marketing materials.
Refreshed FTC Made in USA Claim Guidance
On July 2, 2024, the Federal Trade Commission announced a “refreshed version” of the agency’s Complying with the Made in USA Standard guidance document. The refreshed guidance document includes, without limitation, updated information about how consumers understand "Made in USA" claims, how FTC counsel evaluate advertisements, and how the laws and rules the FTC enforces interact with those enforced by other agencies.
The updated "Made in USA" guidance also provides information about how to comply with the “all or virtually all” standard. Additionally, it also offers some general information about the U.S. Customs and Border Protection’s requirement that all products of foreign origin imported into the U.S. be marked with the name of the country of origin.
Consumer Expectations Control
The Federal Trade Commission’s job is to ensure that marketers’ claims align with consumer expectations. According to the FTC, when consumers see "Made in USA" claims, they expect advertised products to be “all, or virtually all,” made in the United States. All the way back to raw materials. If that is not accurate, or a marketer is uncertain, a different representation should be made as long as it can be lawfully substantiated.
Qualified U.S. Origin Claims
A qualified Made in USA claim describes the extent, amount or type of a product’s domestic content or processing. It indicates that the product is not entirely of domestic origin.
Example: “75% U.S. content.” “Made in USA of U.S. and imported parts.” "Sofa assembled in USA from Italian Leather and Mexican Frame.”
A qualified Made in USA claim may be appropriate for products that include U.S. content or processing but otherwise fail to satisfy the criteria for making an unqualified Made in USA claim. Qualified claims should be avoided unless the product has a significant amount of U.S. content or U.S. processing.
A qualified Made in USA claim indicates that the product is not entirely of domestic origin. Even qualified claims may imply more domestic content than was actually used to manufacture the product, so care should be exercised utilizing such claims. A qualified Made in USA claim must also be truthful and substantiated.
Both qualified Made in USA claims and unqualified U.S. origin claims must be truthful and substantiated. Claims that a particular manufacturing or other process was performed in the U.S. or that a particular part was manufactured in the U.S. must also be truthful, substantiated and clearly refer to the specific process or part, not to the general manufacture of the product, to avoid implying more U.S. content than exists. An FTC advertising compliance lawyer can assist manufactures and marketers to ensure that qualified claims do not imply more domestic content than exists.
The FTC also warns about using general terms, such as “produced,” “created” or “manufactured” in the U.S. because terms such as these are unlikely to convey a message limited to a particular process. Additional qualification may be necessary to describe a product that is not “all or virtually all” made in the U.S.
Additionally, if a product is of foreign origin - substantially transformed abroad – the FTC advises that manufacturers and marketers ensure they satisfy Customs’ markings statute and regulations that require such products to be marked with a foreign country of origin. Customs requires the foreign country of origin to be preceded by “Made in,” “Product of,” or words of similar meaning when any city or location that is not the country of origin appears on the product.
Assembled in USA Claims
A product that includes foreign components may be called “Assembled in USA” without qualification when its principal assembly takes place in the U.S. and the assembly is substantial. The product’s last “substantial transformation” also must have occurred in the United States. An experienced FTC defense attorney should be consulted when assessing the viability of making such representations.
U.S. Customs Service Jurisdiction
The FTC possesses jurisdiction over foreign origin claims on products and in packaging that are beyond the disclosures required by Customs. The FTC also has jurisdiction over foreign origin claims in advertising and other promotional materials. Unqualified U.S. origin claims in ads or other promotional materials for products that Customs requires a foreign country-of-origin mark may mislead or confuse consumers about the product’s origin. To avoid misleading consumers, marketers should clearly disclose the foreign manufacture of a product.
The Tariff Act gives Customs and the Secretary of the Treasury the power to administer the requirement that imported goods be marked with a foreign country of origin (e.g., “Made in Japan”). When an imported product incorporates materials and/or processing from more than one country, Customs considers the country of origin to be the last country in which a "substantial transformation" took place.
the Tariff Act imposes the requirement that imported goods be marked with a foreign country of origin (e.g., “Made in Japan”). When an imported product incorporates materials or processing from more than one country,
In some instances, CBP uses a “tariff shift” analysis, comparable to “substantial transformation,” to determine a product’s country of origin. Even if CBP determines that an imported product does not require a foreign country-of-origin mark, that does not necessarily mean that it is permissible to promote that product as Made in USA. The FTC considers additional factors in evaluating whether a product can be advertised or labeled as Made in USA without deceiving consumers. Manufacturers and marketers should check with CBP to see if they need to mark their products with the foreign country of origin. If they do not, they should look at the FTC’s standard to check if they can properly make a Made in USA claim. The FTC has jurisdiction over foreign origin claims on products and in packaging that are beyond the disclosures required by CBP (e.g., claims that supplement a required foreign origin marking to indicate where additional processing or finishing of a product occurred).
Customs defines “substantial transformation” as a manufacturing process that results in a new and different product with a new name, character, and use that is different from that which existed before the change. Customs makes country-of-origin determinations using the “substantial transformation” test on a case-by-case basis.
Customs and Border Protection considers the country of origin to be the last country in which a “substantial transformation” took place. CBP defines “substantial transformation” as a manufacturing process that results in a new and different product with a new name, character, and use that is different from that which existed before the change. CBP makes country-of-origin determinations using the “substantial transformation” test on a case-by-case basis.
Even if Customs determines that an imported product does not need a foreign country-of-origin mark, it is not necessarily permissible to promote that product as Made in USA. The FTC considers additional factors to decide whether a product can be advertised or labeled as Made in USA.
The FTC also has jurisdiction over foreign origin claims in advertising and other promotional materials, including online materials. Country-of-origin claims in ads or other promotional materials that differ from foreign country-of-origin mark that CBP requires on that product may mislead or confuse consumers about the product’s origin. To avoid misleading consumers, marketers should clearly disclose the foreign manufacture of a product.
Manufacturers and marketers should always check with Customs to determine whether they need to mark their products with the foreign country of origin. And of course, they should always refer to applicable FTC standards with respect to whether Made in USA claims can be properly made.
Imported products have different rules. If a product is imported, look to U.S. Customs and Border Protection for information on how to label it, and ensure that advertisements are consistent with the labels.
Other Federal Statutes
The Textile Products Identification Act and Wool Products Labeling Act require a Made in USA label on most clothing and other textile or wool household products if the final product is manufactured in the U.S. of fabric that is manufactured in the U.S., regardless of where materials earlier in the manufacturing process came from. Textile products that are imported must be labeled as required by the Customs Service. A textile or wool product partially manufactured in the U.S. and partially manufactured in another country must be labeled to show both foreign and domestic processing.
On a garment with a neck, the country of origin must be disclosed on the front of a label attached to the inside center of the neck — either midway between the shoulder seams or very near another label attached to the inside center of the neck. On a garment without a neck, and on other kinds of textile products, the country of origin must appear on a conspicuous and readily accessible label on the inside or outside of the product. Catalogs and other mail order promotional materials for textile and wool products, including those disseminated on the Internet, must disclose whether a product is made in the U.S., imported or both.
The Fur Products Labeling Act requires the country of origin of imported furs to be disclosed on all labels and in all advertising.
The American Automobile Labeling Act requires that each automobile manufactured on or after October 1, 1994, for sale in the U.S. bear a label disclosing where the car was assembled, the percentage of equipment that originated in the U.S. and Canada, and the country of origin of the engine and transmission.
Remedial Corrective Action Plans
While the FTC actively policies deceptive U.S. origin claims, the Division of Enforcement - Bureau of Consumer Protection often is often willing to work with manufactures and marketers in good faith to design and implement corrective action plans that address deceptive claims. Corrective actions plans often involve, notifying third-party distributors, updating websites and catalogues, revising contracts, placing stickers with appropriately qualified advertising claims over unqualified claims, placing stickers or advertising claims contained on the products themselves, ordering new packaging and implementing reasonable safeguards designed to minimize the chances of reoccurrence.
FTC Made in USA Defense Attorney
The Federal Trade Commission continues to crackdown on companies that make false or misleading claims about the domestic origin of their products in marketing, advertising, labeling and other promotional activities. If your company has received a voluntary access letter or a civil investigative demand seeking information about whether it is engaged in unfair or deceptive acts or practices in violation of Section 5 of the FTC Act or the MUSA Labeling Rule pursuant to the provisions of Sections 6, 9, and 10 of the FTC Act, 15 U.S.C. §§ 46, 49, and 50, promptly contact an FTC Made in USA defense attorney to ensure that your matter is handled properly, from the start.
Contact an experienced Made in USA advertising compliance lawyer to discuss how to make legal U.S. origin claims, including when and how claims must be qualified, or if you are the subject of an investigation or enforcement action.
Table of Contents
- FTC Made in USA (MUSA) Defense Lawyer
- Made in USA Law
- FTC Made in USA Labeling Rule
- Unqualified Made in USA Claims
- What Factors Does the FTC Consider When Determining Whether a Product is "All or Virtually All" Made in the USA?
- What if a Product is Last "Substantially Transformed" in the USA but Contains More than De Minimis Imported Content?
- Under What Circumstances Can Marketers Rely on Information from American Suppliers?
- What is the "Reasonable Basis" Standard?
- Refreshed FTC Made in USA Claim Guidance
- Consumer Expectations Control
- Qualified U.S. Origin Claims
- Assembled in USA Claims
- U.S. Customs Service Jurisdiction
- Other Federal Statutes
- Remedial Corrective Action Plans
- FTC Made in USA Defense Attorney