Arent Fox Alert: FTC Enforces "MADE IN USA" Standard Against Six Major Corporations


The Federal Trade Commission ("FTC") recently announced settlements with six companies to resolve allegations that the companies made false or misleading "Made in USA" claims. The announced settlements are with America Honda Corporation, Kubota Tractor Corporation, The Stanley Works, Johnson Worldwide Associates, Inc., USDrives Corporation, and Rand International Leisure Products, Ltd.

Background

The FTC requires that unqualified "Made in USA" claims in product advertising, labeling, and packaging be substantiated by proof that a product is "all or virtually all" made in the United States. In December 1997, the FTC issued a Policy Statement on U.S. Origin Claims ("Policy Statement") to provide businesses with guidance about the standard.

You are not required by the FTC to include country of origin markings in product advertising, labeling, and packaging. However, once you do, the FTC's "Made in USA" standard may apply to you.

The "Made in USA" Standard

The "Made in USA" standard applies to express and implied claims made in advertising, labeling, and packaging for products advertised or sold in the United States, except for those specifically subject to country-of-origin labeling by other laws. Even if the U.S. Customs Service determines that an imported product does not need to be marked with a foreign country of origin, the FTC imposes requirements on using a "Made in USA" claim.

If an advertiser makes an unqualified "Made in USA" claim, it must, at the time the representation is made, possess and rely upon a reasonable basis that the product is in fact "all or virtually all" made in the United States. "All or virtually all" means that the product's final assembly or processing takes place in the United States and all significant parts and processing that go into the product are of U.S. origin. Thus, the product should contain only a de minimis amount of foreign content.

An advertiser may use a qualified "Made in USA" claim for products that include U.S. content or processing but do not meet the criteria for making an unqualified origin claim. All qualified claims must be truthful and substantiated. Comparative origin claims (such as, "More U.S. Content than Our Competitor") must also be true and substantiated and presented in a way that makes the basis for the comparison clear. A marketer may state that a product is "Assembled in USA," even if the product includes foreign components, if the product's principal assembly takes place in the United States and the assembly is substantial. The last "substantial transformation" under the U.S. Customs Service's rules must have occurred in the United States.

FTC Enforcement

The FTC recently charged six major manufacturers with making false or misleading "Made in USA" claims. The FTC challenged advertisements for lawn mowers by the American Honda Motor Co., Inc., the domestic distributor for all Honda automobiles, motorcycles, and power products, that included the logo stating "Made in America by Honda." The FTC alleged that the lawn mowers were not "all or virtually all" made in the United States because a substantial portion of the components of the lawn mowers was of foreign origin. The proposed settlement prohibits American Honda from misrepresenting the extent to which any lawn mower is made in the United States.

In its complaint against Kubota Tractor Corporation, the FTC alleged that Kubota's advertisements that its T-Series and TG-Series Lawn Tractors were "Made by Kubota in the U.S.A." misrepresented that the entire lines of T-Series and TG-Series Lawn Tractors were "Made in USA." The FTC claimed that models within each tractor line contained significant foreign parts. In addition, the FTC alleged that Kubota misrepresented that the individual models were "Made in USA" because the models contained significant foreign parts. The proposed settlement prohibits Kubota from misrepresenting the extent to which any lawn tractor or lawn tractor product line is made in the United States.

The Stanley Works, a manufacturer and marketer of tools, hardware, doors, and home decor products, stamped many of its mechanics tools with a "USA" mark, advertised them as "Made in USA," and sold them in packages marked "Made in USA." The FTC alleged that certain models of Stanley's mechanics tools were not "all or virtually all" made in the United States -- significant portions of their content were of foreign origin. The proposed consent order requires Stanley to stop misrepresenting the extent to which its mechanics hand tools are made in the United States. The offices of the Connecticut and Missouri attorneys general participated in the investigation.

The FTC alleged that Johnson Worldwide Associates, Inc., a marketer of over 500 outdoor recreation-related consumer products, made false and misleading advertising claims that its Super Mono fishing line was "MADE IN THE USA" because the line was not "all or virtually all" made in the United States. The complaint also challenged packaging claims that the fishing line was "MADE IN THE USA of American and Japanese components" as being false or misleading because the line was totally made in Japan and only the packaging and incidental materials contain U.S. components or processing. The proposed settlement requires Johnson to cease and desist from misrepresenting the extent to which its fishing products are made in the United States.

The FTC also challenged claims made by USDrives Corporation, a manufacturer and marketer of CD-ROM drives that were assembled in the United States until May 1998, when it moved its assembly operations to Asia. Specifically, the FTC alleged that USDrives misrepresented on packages that its CD-ROM drives were "Made in the USA," although they were actually assembled in the United States of primarily imported parts. In addition, the FTC alleged that the company's labeling made implied claims by including a red, white, and blue flag logo, the American eagle, and the Statue of Liberty. On CD-ROM drives that were made in China, an inconspicuous statement "Made in China" on the bottom and side panels of product packages did not negate the representation that the products were made in the United States. The proposed settlement prohibits USDrives from misrepresenting the extent to which any CD-ROM drive is made in the United States.

In the complaint against Rand International Leisure Products, Ltd., a wholesaler of imported bicycles and accessories, the FTC alleged that packaging for Rand's "Signature Self-Sealing" bicycle tire tube misrepresented the origin of the product. The package stated "Made in the U.S.A.," but the FTC asserted that the tubes were not "all or virtually all" made in the United States because a substantial portion of the labor and components of Rand's tubes was of foreign origin. The settlement prohibits Rand from misrepresenting the extent to which any product is made in the United States.