Made in the USA

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In the last two months, the Federal Trade Commission (“FTC”) has reached two settlements related to complaints it initiated against companies regarding “Made in the USA” advertising claims.

First, in February, the FTC announced that it had reached a settlement with a Georgia-based water filtration systems company named iSpring Water Systems, LLC.  According to the FTC, iSpring advertised its water filtration systems on its website and through third parties as “Built in USA” (and other similar claims).  The FTC found such advertising false or misleading because the water filtration systems were either entirely imported or contained significant parts that had been imported, thus violating the FTC’s long-standing requirement that “all or virtually all” of the product be made in the USA in order to be advertised as such.  The settlement allows iSpring to make certain qualified claims, with a clear and conspicuous disclosure, but prohibits iSpring from advertising contrary to the FTC’s “all or virtually all” requirement.  More information regarding the settlement is available on the FTC’s blog.

Second, earlier this month, the FTC announced that it had reached a settlement with a Texas-based pulley company named Block Division, Inc.  According to the FTC, Block Division advertised its pulleys in various media using “Made in USA” text and graphics.  The FTC found such advertising misleading given that the pulleys had significant and essential parts that had been imported.  Further, some of the pulleys contained steel plates stamped as “Made in USA” before they were imported.  The settlement allows Block Division to make certain qualified claims, again with a clear and conspicuous disclosure, but prohibits Block Division from advertising contrary to the FTC’s “all or virtually all” requirement.  More information regarding the settlement is available on the FTC’s blog.

Both of these FTC actions and resulting settlements demonstrate that the FTC takes “Made in the USA” claims seriously and will enforce its requirements regarding such advertising.  A prior blog post outlines those requirements in more detail.

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.

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Copyright: lifeking / 123RF Stock Photo

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.