The U.S. Federal Trade Commission (FTC) has proposed to prohibit companies from making “unqualified U.S.-origin claims for their products unless they can show that the products’ final assembly or processing – and all significant processing – take place in the United States, and that all or virtually all ingredients or components of the product are made and sourced in the U.S.”
The U.S. FTC issued a press release on 23 January 2018 on a proposed settlement on an enforcement proceeding (see FTC Matter/File Number 172 3197). An FTC complaint challenged the claim “American Made Matters – Choose American” made by a Pennsylvania-based headgear company. The claim was featured as a seal on the company's products and ads. Upon review, the Commission alleged that more than 70% of the headgear was wholly imported as finished products. Hence, the claim was challenged as false and deceptive.
The FTC has proposed a settlement that prohibits making “unqualified U.S.-origin claims for their products unless they can show that the products’ final assembly or processing – and all significant processing – take place in the United States, and that all or virtually all ingredients or components of the product are made and sourced in the U.S.” Prior to its finalization, the Commission seeks comments, which are due on 23 February 2018.
As background to the matter, the respondents to the challenge argued that the claim “American Made Matters – Choose American” was granted by an independent organization, i.e. American Made Matters, that reviewed and endorsed their products as made in the USA. The organization is membership-based and requires the following criteria to be met:
- “The company had to self-certify that at least 50% of the cost of at least one of their products was incurred in the United States, with final assembly or transformation in the U.S.; and
- “The company had to pay an annual licensing fee of $99.”
The FTC claimed that the endorsement was a “self-certification” or “selfie seal” exercised without substantiation of objective criteria. Furthermore, the Commission argued that the business did not take further actions to ensure no deceptive impressions are made on its consumers such as:
- “[T]he respondents will have to clearly disclose any connection they have to the seal;
- “[I]f they endorse another company’s products as US-made, they’ll have to clearly disclose any connection they have to that company; and
- “[I]f the respondents continue to award the seal based on self-certification, they must clearly disclose that fact on the seal and in marketing materials.”
The case reminds that products marketed with a “Made in USA” claim must be all or virtually all made in U.S., and that substantiation is duly mandated for U.S. origin claims.
Comments must be submitted by 23 February 2018, and may be submitted electronically via the Federal eRulemaking Portal, hand delivered or mailed to Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex D), Washington, DC 20580.
For more information, please refer to the Federal Register notice here