By Shawna Karajic, Export Solutions Inc.

Do you slap “Made in USA” labels on your products or advertise in this way?  Can you, without a doubt, declare your products are – in fact – made in the USA?  This is one of the most overused (and misunderstood) proclamations companies make on the market today.  Ensuring accuracy is imperative because the consequences can be expensive.

Who regulates “Made in USA” claims?

The agency responsible isn’t one you would normally think of when it comes to import or export compliance.  While U.S Customs has their rules on country of origin marking for imports, the Federal Trade Commission is the agency who regulates “Made in USA” labeling requirements and advertising.  This regulation can be found in Section 5 of the FTC Act, which prohibits “unfair or deceptive acts or practices.”

Previously, the FTC focused on correcting the issue going forward but didn’t impose any civil penalties. Back in 2021, a Made in USA labeling rule came into effect. Since the labeling rule, there has been a noticeable shift in the agency’s focus.  The FTC will now impose penalties on false claims.  Since the rule came into effect, the FTC has only issued seven penalties against companies, but you can expect this trend to grow.

How can you make sure your “Made in USA” claim is valid?

For a manufacturer to make the “Made in USA” claim, all (or virtually all) of the significant parts and processing must be of U.S. origin. The goods shouldn’t contain any foreign content.  If the goods do contain foreign material, that portion must be very little and not a key component of the item.  Further, your product’s final assembly must take place in the United States.

Just as you would keep manufacturing records to determine country of origin for U.S. Customs purposes, you should also do the same for any “Made in USA” claims. One difference between U.S. Customs and FTC requirements is how your company presents the goods to U.S. consumers.  The FTC is strict on how you advertise the goods and if you are claiming they are “Made in USA.”

U.S. companies in the hot seat

Recently, the FTC issued its highest penalty for false “Made in USA” claims.  Kubota North America Corporation received a hefty penalty of $2 million for labeling replacement parts for tractors and other agricultural equipment as “Made in USA.”

Turns out this isn’t the first time Kubota has been in the hot seat with the FTC.  The company’s first run-in with the FTC goes all the way back to 1999, when they falsely advertised some of their tractors were “Made by Kubota in the USA.” That case was settled with no civil penalty and Kubota agreed they wouldn’t promote products as “Made in USA” unless “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.”  This order expired in 2019.  Kubota may not have learned their lesson, as evidenced by the most recent violations in 2021.

Another company to feel the heat is ExotoUSA, LLC (dba “Old Southern Brass”). ExotoUSA claimed that:  “All of our products are made right here in the United States of America.”  However, the FTC charged that the company’s products were wholly imported from China or contained a significant portion of imported content in the products they were selling.

In addition to their false origin claims, ExotoUSA also made claims that they had Veteran Affiliations and donated 10 percent of their sales to military service charities.  The FTC leveled a monetary judgement of $4,572,137, however, this amount was partially suspended due to the company’s inability to pay.

Our last example of a “hot seat” company is Resident Home, LLC.  The FTC charges included false, misleading or unsupported advertising claims that their imported DreamCloud mattresses were made from 100% USA-made materials.  It turns out these mattresses were finished overseas and (in most cases) were wholly imported or used a significant number of imported materials.  Either way, they were definitely not “made from 100% USA material.”  Resident Home paid $753,000 for these false claims.

Key takeaways for “Made in USA” compliance

Claiming your goods are “Made in USA” can be a great marketing tool and incentive for buyers who want to support U.S. businesses.  However, if you plan on making these claims, it’s important to have a documented process and backup material to support your company:

  • Keep good records of the material composition of your product, where it originates, and what percentages/values comprise the finished good.
  • Ensure your products originate and are produced wholly in the United States
  • Make sure final assembly occurs in the United States
  • If your product contains any foreign-origin content, the amount must be very small, and it would be wise to avoid making false claims about where they originate.

If your company receives a Notice of Penalty from the FTC for deceptive practices, don’t ignore it!  You could be facing a civil penalty of up to $50,120 per violation.  On top of the monetary fine, the case might become public knowledge, damaging your company’s reputation.  Finally, you could face additional oversight from the FTC going forward.

Shawna Karajic is a Senior Consultant for Export Solutions -- a full-service consulting firm specializing in U.S. import and export regulations.