Was it really made in the USA?

For years, businesses have dealt with Made in the USA fraud. Small businesses often find it difficult to defend themselves against brands that lie about their products being Made in the USA, and as a result have lost sales to dishonest competitors. Consumers also face a disadvantage as they struggle to purchase truly American-made-goods amongst a market of frauds.

To combat these issues, the Federal Trade Commission (FTC) has finalized the Made in USA Labeling rule. “Under the rule, marketers making unqualified Made in USA claims on labels should be able to prove that their products are ‘all or virtually all’ made in the United States.” Those who violate the rule can be penalized with “civil penalties of up to $43,280.” The rule does not introduce any new requirements businesses must follow, but rather “codifies the FTC’s longstanding enforcement policy statement regarding U.S.-origin claims.” Although the rule only applies to labeling claims, it did inspire the USDA to implement its own initiative on labeling products regulated by the Food and Safety and Inspection Service.

The following are reasons one might be exempt from the rule:

  • Final assembly or processing of the product occurs in the United States.
  • All significant processing that goes into the product occurs in the United States.
  • All or virtually all ingredients or components of the product are made and sourced in the United States.

As it was with the guidelines, the terms “virtually all” and “significant processing” have not been clearly defined. The issues surrounding the clarity of these terms may be settled in the future, as this new regulation is rolled out. In the meantime, the hope in implementing this rule is that it will protect market participants from fraud and abuse. If you have any questions about the regulations, please reach out to Mohawk Global Trade Advisors.