FTC Issues Updated "Made in USA" Business Guidance

Right before the July 4th holiday weekend, the Federal Trade Commission released an updated version of its business guidance, Complying with the Made in USA Standard.  

According to the FTC, in order to make an unqualified claim that a product is made in the United States, the product must be “all or virtually all” made here.  (Check out my blog post from earlier this month for more details.) 

In order to help businesses comply with the FTC's Enforcement Policy Statement on U.S. Origin Claims (issued in 1997) and the Made in USA Labeling Rule (promulgated in 2021), the FTC also developed business guidance, which has not been updated for quite some time.  The latest update incorporates information about the FTC's relatively new “Made in USA Labeling Rule” as well as the FTC's current thinking on various “Made in USA” issues.  Here are the highlights. 

The FTC emphasized that the “Made in USA” standard doesn't just apply to claims that use the word “made,” but also applies to other statements that communicate that a product is made here as well, such as “Manufactured in USA,” and “Built in USA.” 

The FTC also beefed up its explanation of what “all or virtually all” means, saying that the standard requires that “all significant parts and 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.”  And, although the FTC doesn't define what percentage of non-U.S. content is acceptable, the FTC gives a pretty good idea of its thinking here, saying that “the product should contain no – or negligible – foreign content." 

The FTC reminded marketers that they have an obligation to ensure that their substantiation remains up-to-date.  The FTC explained, “If something changes and the company no longer has a reasonable basis to support its Made in USA claim (for example the company begins sourcing parts overseas), the company must update its marketing materials.” 

When determining whether a product is “all or virtually all” made in the United States, the FTC considers a variety of factors, including how much of the product's total manufacturing costs can be assigned to U.S. parts and processing, how far removed any foreign content is from the finished product, and (newly added to the business guidance) “the importance of the foreign content to the product's form or function.”   Interestingly, the FTC deleted an example from the old guidance, which counseled that a grill could be promoted as being “Made in USA,” even if its knobs and tubing were imported, since the knobs and tubing made up a negligible portion of the product's total manufacturing costs and are insignificant parts of the final product.  The FTC replaced the example with a less forgiving one, which says that an advertiser shouldn't promote a watch as being “Made in USA” if the watch uses inexpensive Swiss movements in its watches, explaining, “Because movements are essential to the watches' function, an unqualified Made in USA claim is likely deceptive.” 

In a section of the guidance that discusses how far back in the manufacturing process marketers should look to determine whether a product is “all or virtually all" made in the United States, the FTC deleted the existing example, and replaced it with a new one.  The old example provided that it was proper to make a “Made in USA” claim for a computer, even if the steel used in the case of a computer's floppy drive was imported, since the steel is an early input in the manufacturing process and constitutes a very small portion of the product's total cost.  The old example also explained that that wouldn't be the case for the steel in a product such as a pipe or a wrench, since there the steel is a direct and significant input.  In the new example, the FTC explains that it would be acceptable to advertise a computer as being “Made in USA” if the silicon used in a microchip within the computer was imported, if the silicon was an “early input” into the computer's manufacture and constitutes a “very small portion” of the product's total cost.  The FTC then explains that it wouldn't be the case for a wood table, where the wood is imported. 

In its discussion about how to make qualified “Made in USA” claims, the FTC updated its example about a treadmill that is assembled in the United States, where all of the treadmill's major parts are imported.  Since only a few of the treadmill's incidental parts are made in the United States (such as the handlebar covers and the plastic on/off key), and they represent only 3% of the total cost of all of the parts, the FTC explained that it would not be acceptable to make a qualified claim that the product is “Made in USA of U.S. and Imported Parts.”  Instead, the FTC advised that a claim that the product is “Made in U.S. from Imported Parts” or “Assembled in USA” would be more appropriate.  Notably, although the old example says that the “treadmill mat” is an incidental part, the new guidance does not.  

The FTC also emphasized that if a qualified claim refers to “U.S. parts,” then the advertiser must be able to substantiate that those specific parts were “all or virtually all” made in the United States.