It’s a common enough occurrence to be a running joke. Flags, banners, Fourth of July decorations, and other super-patriotic items often have a hidden label reading “Made in China” or “Hecho en Mexico.” That’s honest enough, at least. But when an ad or a sticker says the product is “Made in the USA” or “100% American Made,” that may not be so honest. It is not always easy to tell when an object was assembled from foreign components or simply dropshipped whole.
The Federal Trade Commission recently announced enforcement actions against three companies for falsely labeling merchandise as American-made. These companies offered a variety of consumer products (including American flags) manufactured offshore but marketed with U.S.-origin claims. This announcement follows a March executive order that called for tighter standards and increased enforcement of misleading country-of-origin labeling for foreign-made products.
Consumer Protection Law for “US-Made” Products
What does it mean to claim that a product is “made in the USA”? How much “making” is really required for a company to use that label or advertisement? This is actually a matter of law; the FTC regulates this question.
Under the Made in USA Labeling Rule (sometimes called the MUSA Labeling Rule), a product only qualifies if:
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.
If advertisements or labels falsely claim an exclusive U.S. origin, it can be treated as an “unfair or deceptive” trade practice under 15 USC § 45a. This can include implied claims, such as selling foreign-made products with advertisements showing American flags, statements about “real American value,” and so on. A company may make qualified claims, such as “made in the USA from imported parts,” but its statements must still meet exacting standards to avoid deceiving consumers. See the FTC’s guidance sheet for examples.
When a business violates this regulation, the FTC can sue to stop its actions and order repayment to customers, together with other appropriate remedies. It may also seek civil penalties of over $50,000 per violation.
Recent Enforcement Actions: “Handcrafted in the USA”
An April 14 press release from the FTC announced that it has reached agreements with three businesses facing litigation for deceptive labeling under the MUSA Labeling Rule. All three of them primarily used the internet to create an appearance and narrative of proud domestic manufacturing for their companies. These businesses were:
- TouchTunes Music Company, which allegedly assembled electronic dartboards with parts imported from Asia and the UK
- Oak Street Manufacturing Company, LLC, or Oak Street Bootmakers: the FTC alleges that many boots “handcrafted in the USA” were partly made in the Dominican Republic or Brazil
- Americana Liberty, LLC, and associated defendants, who (according to the FTC) sold numerous U.S. flags and accessories made entirely from Chinese parts or unknown sources, despite repeated claims like “handmade in the USA by one of our combat veteran craftsmen … a truly veteran flag!”
Each business will enter into a stipulated order with the federal district court. They must notify consumers of the judgment and pay a substantial amount of money to the FTC for a consumer redress fund. TouchTunes must pay $625,000, which the FTC says is the largest payment ever made for a MUSA violation.
The press release also announces “closing letters” between two companies and the FTC. Marketing Holders, LLC and Lamar Trailers both agreed to change their “Made in USA” claims and advertisements and to bring them in line with MUSA Labeling Rule regulations.
Future FTC Enforcements for U.S.-Origin Claims
On March 13, the President issued an executive order titled “Ensuring Truthful Advertising of Products Claiming to Be Made in America.” It directs the FTC to prioritize enforcement of MUSA Labeling Rule violations; further, it must “consider issuing proposed regulations” requiring online marketplaces to verify country-of-origin claims. Agencies must take further actions to review American-made products purchased under their own authority.
As the order says, “American citizens attempting to buy American products should have certainty as to what American-origin claims mean.” Whether they buy American for quality or on principle, the consumer should be able to trust their choice.
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