Kubota North America’s false claims for farm equipment replacement parts yield record-setting FTC Made in USA civil penalty

When companies sow deception, they often reap law enforcement. That’s the lesson of a $2 million civil penalty that Kubota North America Corporation will pay for allegedly violating the Made in USA Labeling Rule by falsely labeling replacement parts for its tractors and other agricultural equipment as “Made in USA.”

In addition to selling tractors and related farm machinery, Kubota sells replacement parts for its products. According to the FTC, since at least 2021, Kubota has labeled thousands of those parts as Made in USA when, in fact, they were imported from overseas. In addition, the FTC says that the company moved some its manufacturing to locations outside the United States and yet continued to label those products as Made in USA.

Count I of the complaint, which the Department of Justice filed on behalf of the FTC, charges Kubota with violating the FTC Act by falsely claiming that imported parts were made in the United States. Count II alleges that the company also violated the Made in USA Labeling Rule. The Rule, which took effect in 2021, prohibits marketers from labeling products as made in the United States unless: (1) “the final assembly or processing of the product occurs in the United States;” (2) “all significant processing that goes into the product occurs in the United States;” and (3) “all or virtually all ingredients or components of the product are made and sourced in the United States.”

The company can hardly claim to be surprised by the FTC’s long-standing Made in USA standard. In 1999, the FTC sued Kubota Tractor Corporation, alleging that the company falsely advertised that some of its tractors were “Made by Kubota in the U.S.A.” when certain models contained significant foreign parts. To settle that case, the company agreed not to promote products as Made in USA unless – among other things – “all, or virtually all, of the component parts of such product, or of all products in such product line, are made in the United States.” That order expired in 2019.

In addition to requiring Kubota North America to pay a $2 million civil penalty – the largest to date for a violation of the Made in USA Labeling Rule – the just-announced proposed settlement prohibits the company from making unqualified U.S.-origin claims for any product unless it can prove that the product’s final assembly or processing and all significant processing takes place in the United States and that all or virtually all components are made and sourced in the U.S. If the company chooses to make a qualified claim – a representation that includes limitations or caveats – that claim must include a clear and conspicuous disclosure about the extent to which the product is made with foreign parts, ingredients, components, or processing. The proposed order also specifies that if Kubota wants to say that a product is assembled in the United States, it must ensure that the item is last substantially transformed in the U.S., its principal assembly takes place here, and U.S. assembly operations are substantial.

The proposed settlement includes practical advice on cultivating truthful Made in USA claims for your products.

The Made in USA Labeling Rule has given the FTC an additional tool for plowing under deceptive representations. The FTC has been challenging misleading Made in USA claims for decades and will continue to use the FTC Act to protect consumers and honest businesses. But the civil penalty provision of the Made in USA Labeling Rule gives companies another reason – in Kubota’s case, two million more reasons – to comply with the law.

Made in USA claims require ongoing substantiation. According to the FTC, after Kubota moved its manufacturing for some replacement parts to other countries, it failed to update the labeling of those products to reflect that change. Companies’ manufacturing processes are rarely static. As you make modifications, make sure your advertising and labeling representations remain current.

The lessons of FTC law enforcement should last a lifetime. The 1999 order against Kubota was in place for 20 years, but the FTC says that it didn’t take long after the 2019 expiration of that order for the company to violate the law again. Even when an order is no longer in place, the wiser course of action is to build those compliance lessons into the DNA of your operations.

The FTC has more Made in USA resources for your business.