Agency Issues Enforcement Policy Statement to Provide Additional Guidance
The Federal Trade Commission has concluded that "Made in USA" advertising and labeling claims will continue to be held to the "all or virtually all" standard that traditionally has been applied by the Commission. Under this standard, voluntary, unqualified U.S. origin claims must be substantiated by evidence that a product is "all or virtually all" made in the United States. In order to provide further guidance with respect to its policy, the FTC today issued an Enforcement Policy Statement, which outlines the factors the Commission will consider in determining whether a U.S. origin claim is "deceptive."
The FTC has been engaged in a comprehensive review of "Made in USA" and other U.S. origin claims in product advertising and labeling for approximately two years. As part of its review, the Commission sought public comment and conducted a two-day public workshop. In May of this year, the Commission proposed for public comment a new, "substantially all" standard for evaluating "Made in USA" claims. The Commission had questioned whether in today's increasingly global economy consumers expect that a product claiming to be "Made in USA" could contain more than a small amount of foreign content. The response to that question was answered by more than one thousand written comments the agency received, the majority of which strongly supported the "all or virtually all" standard.
"Throughout the process of evaluating the Commission's interpretation of the use of 'Made in USA' claims, we have tried to understand what these claims mean to consumers," said Jodie Bernstein, Director of the Bureau of Consumer Protection. "The record, in particular, the overwhelming response to our request for public comment on the proposed "substantially all" standard, convinced us that when consumers see a 'Made in USA' label, they expect and want it to mean just that. The policy statement we are issuing today will provide additional guidance to companies seeking to make these claims. We believe the Commission's review is an example of how public process does inform and determine good public policy."
The Enforcement Policy Statement will be published in the Federal Register tomorrow, December 2. The statement is the culmination of the Commission's comprehensive review of "Made in USA" claims and is intended to elaborate on principles set out in specific examples and advisory opinions previously issued.
The policy statement states that when a "marketer makes an unqualified claim that a product is 'Made in USA,' it should, at the time the representation is made, possess and rely upon a reasonable basis that the product is in fact all or virtually all made in the United States."
The policy goes on to clarify that a "product that is all or virtually all made in the United States will ordinarily be one in which all significant parts and processing that go into the product are of U.S. origin. In other words, where a product is labeled with an unqualified 'Made in USA' claim, it should contain only a de minimis, or negligible, amount of foreign content."
The Commission said that although there is no "bright line" to establish when a product is or is not "all or virtually all" made in the United States, it will consider a number of factors in making this determination. First, "the final assembly or processing of the product must take place in the United States." Other factors the Commission will consider will be the portion of the product's total manufacturing costs that are attributable to U.S. parts and processing and how far removed from the finished product any foreign content is.
Marketers will continue to be able to make qualified U.S. origin claims, such as "Made in USA of US and imported parts" and "80% Made in USA," as well as claims about specific processes or parts and comparative claims. The Commission indicated that all such claims must be truthful and substantiated and that qualifications and disclosures should be clear, prominent, and understandable. An "Assembled in USA" claim could be made without further qualification "where a product has undergone its principal assembly in the United States, that assembly is substantial, and the product was last substantially transformed in the United States," the Commission said.
The Commission's "Made in USA" policy applies to all products advertised or sold in the United States except for those governed by specific legislation. For example, country of origin labeling of clothing is generally governed by the Textile Act.
The Commission vote to announce the Enforcement Policy Statement was 4-0 with Commissioner Roscoe B. Starek, III, issuing a concurring statement. In his concurring statement, Commissioner Starek said that the Commission's "action illustrates the value of seeking public comment when the Commission elects to fashion a compromise through an expansive review similar to a rulemaking, rather than base its findings of deception on evidence and interpretations tested during litigation and the pursuit of negotiated orders. . . . The Policy Statement . . . wisely confines the Commission's guidance to general principles and, as I clearly prefer, leaves for case-by-case resolution more complex issues that may turn on variations in claims and products. . . . With the issuance of this Policy Statement, I expect to see the traditional 'Made in USA' standard enforced, now that we no longer labor under the self-imposed moratorium that consumed several years while we explored various policy options."
Copies of the Federal Register notice, transcripts from the March workshops, all public comments, previous Federal Register notices and FTC news releases are available from the FTC's World Wide Web site at http://www.ftc.gov and from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC's NewsPhone at 202-326-2710.
(FTC File No. P894219)
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