The Federal Trade Commission’s Made in USA labeling rule will take effect on August 13, 2021, giving the agency authority to seek civil penalties for violations. Published July 14, the final rule applies to unqualified U.S.-origin labels, including covered labels in online sales materials. For a small manufacturer or retailer, it changes the enforcement stakes without creating a new government approval process for the claim. [S1]
An unqualified claim says the product is American-made without limiting that statement to a particular process or portion of its content. The rule requires final assembly or processing in the United States, all significant processing in the United States, and all or virtually all ingredients or components to be made and sourced there. Those same conditions appeared in the FTC’s July 2020 proposal. The agency is putting its existing standard into a rule, not granting a fresh exemption to products merely assembled domestically. [S1][S2]
A purchasing spreadsheet cannot reduce that test to a fixed percentage of domestic costs. The FTC rejected a percentage-based safe harbor, explaining that a low-cost imported part can still matter greatly to what the buyer thinks is American-made. Its example is a watch movement: the movement can be inexpensive relative to the whole watch yet important to the purchasing decision. The agency also declined to adopt Customs’ substantial-transformation test. Meeting a different origin standard does not settle the consumer-label claim. [S1]
Supplier information remains useful. In the final-rule explanation, the FTC says marketers can rely on information provided in good faith by suppliers about the domestic content of their parts and components. It does not give businesses a blanket defense for acting in good faith. Supplier support is evidence for a claim, not immunity if the label misleads. [S1]
Online, the rule covers a seal, mark, tag or stamp labeling a product Made in the United States in covered mail-order materials, whose definition includes electronic materials soliciting purchases without examination of the actual product. The FTC says the rule does not cover all advertising. Commissioner Christine Wilson dissented, arguing that its reach exceeded the agency’s statutory authority. For sellers, the practical implication is to examine origin labels on sales pages as well as packaging, rather than assuming a label escapes the rule because it appears on a screen. [S1]
A narrower claim remains possible, but still has to be truthful. The FTC leaves qualified claims outside this particular rule and says it will continue policing deceptive ones under Section 5 of the FTC Act. Its examples include an identified percentage of U.S. content, a statement that leather is imported, or a claim limited to where a product was designed or painted. For a business with imported inputs, that distinction points toward describing the domestic work it can substantiate rather than stretching the claim to the whole product. [S1]
The rule adds no affirmative reporting or recordkeeping requirement and no new approval requirement. That is not a special exemption for small firms: the FTC declined to create one. Covered businesses can petition for a full or partial exemption, but the Commission must find the rule’s requirements unnecessary to prevent the practices at issue. Nor does this rule require an origin label on every product; other federal country-of-origin labeling requirements remain in place. [S1]
Source documents
- Made in USA Labeling Rule — final rule (86 FR 37022)https://www.govinfo.gov/content/pkg/FR-2021-07-14/html/2021-14610.htm
- Made in USA Labeling Rule — notice of proposed rulemaking (85 FR 43162)https://www.govinfo.gov/content/pkg/FR-2020-07-16/html/2020-13902.htm