Federal Trade Commission Creates a “Made in USA” Regulation

Vol. 24, No. 27, July 8, 2021
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The Federal Trade Commission (FTC) has consolidated its longstanding policy on enforcing unqualified “Made in USA” claims within a new regulation, “Part 323—Made in USA Labeling.” The regulation does not impose any new requirements but is intended to make it easier for businesses to understand claim conditions and, for the first time, allow the FTC to seek civil penalties for violations.

Since at least 1940, the FTC has used its general legal authority to enforce against unfair or deceptive trade practices regarding unqualified Made in USA claims. It has provided broad guidance, most recently in December 1997, that requires a seller making an unqualified Made in USA claim to have a reasonable basis for asserting that “all or virtually all” of the product is made in the United States.

While recognizing that there is no single “bright line” to establish when a product meets the “all or virtually all” threshold, the FTC policy remains that an unqualified Made in USA claim implies no more than a de minimis amount of product is of foreign origin. The final assembly or processing of the product must occur in the United States. Beyond this minimum threshold, the FTC will consider other factors such as the portion of the product’s total manufacturing costs attributable to U.S. parts and processing; how far removed from the finished product any foreign content is; and the importance of the foreign content to the form or function of the product. The FTC’s 1997 guidance document also remains in effect and available for additional reference.

Companies may still make qualified Made in USA claims for products that include U.S. content or processing but do not meet the criteria for making an unqualified claim. Examples of qualified claims include: “Made in USA of U.S. and imported parts.” “75% U.S. content.” “Assembled in U.S.A.”

The FTC rule does not supersede or affect any other federal or state rule that is consistent or would provide greater protection. For example, California allows a “Made in U.S.A.” label for products sold in California if the product is made in the United States and all its subcomponents that are sourced from outside the U.S. constitute no more than 5% of the final value of the manufactured product. The labels may also be used if the subcomponents cannot be obtained in the U.S. and all subcomponents sourced from outside the U.S. make up no more than 10% of the final wholesale value of the manufactured product.

Click here for the FTC’s final rule.

For more information, contact Stuart Gosswein at stuartg@sema.org.