The FTC recently released Complying with the Made in USA Standard, which further interprets the 2021 Made in USA Labeling Rule and the FTC’s 1997 Enforcement Policy Statement on U.S. Origin Claims.
The new guidance reiterates the FTC’s position that unqualified “Made in the USA” claims require “all or virtually all” U.S. content and processing. In determining whether this standard is met, the FTC considers the percentage of a product’s total costs that come from domestic parts and processing, “how far removed any foreign content is from the finished product,” and “the importance of the foreign content to the product’s form or function.”
The Labeling Rule, which is specific to unqualified “Made in the USA” claims, never actually discusses that last part on “the importance of the foreign content.” However, that concept has long been part of enforcement and closing letters. This new addition to the guidance, thus, should be a welcome reminder to companies, making compliance a little easier.
As the new guidance reiterates, qualified claims like “Made in USA of U.S. and imported parts” may also be used as long as a few requirements are met. First, the product’s “last substantial transformation,” as defined by U.S. Customs standards, must have occurred in the United States. Second, any U.S.-claimed parts or processing must meet the “all or virtually all” standard. Finally, and this is where it gets a little tough, U.S.-claimed parts or processing must be at a level that is either more than “negligible” or, possibly, “significant.”
That last point is a bit unclear, given wording in the new guidance. A longstanding example from prior guidance discusses the parts of a treadmill to demonstrate that the U.S. content must be more than “negligible” – with negligible in that instance being “only three percent of the total cost of all the parts.” The new guidance substantially repeats the example, but with introductory language suggesting the example means that there must be a “significant amount of U.S. content or U.S. processing.” No further information is given on what “significant” might mean.
As with many guidance documents that the FTC has released in recent years, companies are well-advised to be aware of where the FTC appears to be increasing pressure, even if new, stricter stances do not always align well with case law or, as in this case, even the FTC’s own prior guidance.
Examples of guidance documents with similar new stances include the 2023 updated Endorsement Guides, with new stances on “clear and conspicuous,” and the 2022 Health Products Compliance Guidance. (For anyone interested in a deep dive into new, troubling stances in that last guidance, check out the Council for Responsible Nutrition’s petition to the FTC, which Keller and Heckman attorneys helped author.)
Keller and Heckman will continue to monitor developments on FTC guidance, including “Made in USA” standards.