Companies that advertise their products as “Made in the USA” should be aware of the Federal Trade Commission’s (“FTC”) stance regarding such advertisements. The FTC regulates both express claims (e.g. advertising with the phrase “Made in the USA”) and implied claims (e.g. advertising with the phrase “true American quality” or with a U.S. flag symbol). Before a company decides to advertise in this manner, the FTC requires that the company have a reasonable basis to substantiate the claim at the time it is made.
So what is a “reasonable basis” for this type of claim? The FTC itself provides guidance to companies interested in advertising their products as “Made in the USA” in a lengthy Federal Registration Notice: 62 Fed. Reg. 63756. But even with this guidance, the issue is not black and white. The FTC explains that a product must be “wholly domestic” or be “all or virtually all” made in the United States in order for a “Made in USA” claim to be substantiated. But “all or virtually all”—defined by the FTC as meaning that all significant parts and processing that go into the product are of United States origin (i.e. there is only a de minimus amount of foreign content)—may be a difficult standard to apply in some circumstances.
The FTC finds a number of factors relevant to the issue—such as whether final assembly/processing occurs in the United States, the portion of total manufacturing costs attributable to parts and processing in the United States, and how far removed any foreign content is from the finished product. See 62 Fed. Reg. 63756 at 63765. In general, the more that occurs in the United States, the better the claim that the product is “Made in the USA.” In an attempt to provide clarity regarding the “all or virtually all” standard, the FTC’s staff has issued a separate publication meant to convey additional guidance.
Further complicating the issue though, certain states may also have specific prohibitions related to advertising products as “Made in the USA.” For example, Cal. Bus. & Prof. Code § 17533.7 makes it unlawful to mark products with that or similar phrases if the product, or any part of the product, is “entirely or substantially” made outside of the United States (though there are a couple exceptions).
Advertising products as “Made in the USA” can be tricky. Before advertising, make sure to consult an attorney to ensure compliance with the FTC’s guidance as well as any state-specific requirements.