The U.S. Federal Trade Commission has been imposing increasingly more severe monetary penalties against company’s for falsely representing that products are “Made in USA” in violation of the FTC’s MUSA Labeling Rule.

The Rule enables the FTC to seek civil monetary penalties for deceptive and unsubstantiated unqualified U.S. origin claims.

Making unqualified U.S. origin claims, expressly or impliedly, is risky business.

Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, prohibits “unfair or deceptive acts or practices in or affecting commerce.” The FTC’s “Enforcement Policy Statement On U.S. Origin Claims” provides guidance on how the FTC applies Section 5 with respect to the use of U.S. origin claims in advertising and labeling.

The Policy Statement states that, for a marketer to promote a product as “Made in USA” or otherwise claim it is of domestic origin, the product must be all, or virtually all, made in the United States. “All or virtually all” means all the product’s significant parts and processing must be of U.S. origin.

In other words, the product should contain, at most, only negligible foreign content. If a product is not “all or virtually all” made in the United States, making a “Made in USA” claim or other unqualified domestic origin claim on labeling, packaging, or elsewhere may violate Section 5 of the FTC Act.

Additionally, as the FTC has explained, “marketers should not represent, either expressly or by implication, that a whole product line is of U.S. origin (e.g., ‘Our products are Made in USA’) when only some products in the product line are, in fact, made in the United States.”

Note that the Rule applies to more than just labels. It applies broadly to include, without limitation, advertising and marketing. FTC access letters routinely state that “marketing” includes, but is not limited to: any written or verbal statement, illustration, or depiction that is designed to effect a sale or create interest in the purchasing of goods or services, whether it appears in a brochure, newspaper, magazine, pamphlet, leaflet, circular, mailer, book insert, free-standing insert, letter, catalogue, poster, chart, billboard, public transit card, point of purchase material (including but not limited to a display or an item worn by salespeople), package insert, package label, fact sheet, film, slide, radio, broadcast or cable television, audio program transmitted over a telephone system, program-length commercial (“infomercial”), Internet advertising, e-mail, or in any other medium. “Internet advertising” shall include, but not be limited to, pages and information on websites, including but not limited to websites.

Effective August 13, 2021, the FTC codified the “all or virtually all” standard into the Made in USA Labeling Rule, 16 C.F.R. § 323. It is a violation of he MUSA Labeling Rule to label any covered product “Made in the United States,” as the MUSA Labeling Rule defines that term, unless the final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States.

Pursuant to 15 U.S.C. § 45(m)(1)(A), the FTC may seek civil penalties of up to $51,744 per MUSA Labeling Rule violation.

Takeaway: The FTC continues to aggressively investigate and enforce MUSA Labeling Rule violations on products themselves and in advertising. Marketers should consult with a seasoned FTC Made in USA compliance and defense lawyer to ensure that applicable legal regulatory requirements are satisfied. If you or your company have received an FTC access letter, a civil investigative demand or are the subject of an FTC enforcement action related to U.S. origin claims, contact the author of the article to discuss legal options and strategies.

Richard B. Newman is an FTC lawyer at Hinch Newman LLP.
Informational purposes only. Not legal advice. May be considered attorney advertising.