Last Fourth of July we noted the proliferation of Made in USA claims and blogged a timely reminder on the FTC’s standard for Made in USA claims. If anything such a reminder seems even more timely this year. Indeed, the FTC continues to be active in this area and we just received a ticket solicitation for an upcoming Budweiser Made in America music festival which interestingly enough includes the most definitely not Made in America artist Deadmau5.
There has also been a proliferation of organizations promoting proprietary seals representing a product’s American origins. One such seal raises an interesting question. Made in USA Certified states on its website that it is the “nation’s leading independent “Made in USA” certification source.” And that “[a]ny company bearing one of our USA-C™ Seals has gone through a rigorous supply chain audit to ensure that the product, process and originates - in the United States of America.” In a series of FAQs the company provides its standard for an unqualified Made in USA claims. They state that “all or virtually all of the components need to be of U.S. origin, and a product needs to be substantially transformed or manufactured here in the U.S.”
This largely tracks the FTC’s general requirements but the FAQs go on to say that if 75% of a company’s components are of domestic origin then they can use the seal for an unqualified Made in USA claim. Now we’re not familiar with this organization or with any discussions it may or may not have had with the FTC but this specific criteria seems at odds with the views the FTC has expressed over the years. First, the FTC has traditionally looked at the cost of components and not just simply what percentage of components are of domestic origin. You could, for example, have a particularly critical and expensive component that is sourced overseas but yet have numerous smaller, less expensive domestic components and satisfy a percentage of components test. Second, in the 1990s when the FTC looked at revising its “all or virtually all” standard for Made in USA claims it suggested a 75% safe harbor for unqualified Made in USA claims. However, in the face of significant opposition the FTC withdrew that proposal and retained its presumably stricter “all or virtually” standard. For a discussion of the history of the Made in USA standard, click here.
The interesting question raised by Made in USA Certified is whether you can avoid misleading consumers by telling them how you are defining a claim. If the FTC is correct that consumers interpret Made in USA to mean that all or virtually all of the manufacturing costs are of domestic origin and that this represents a great deal more than 75% of costs, can a company or a certifying organization use the claim but tell consumers that they are defining it differently without running afoul of Section 5? Perhaps, although there would likely still be significant issues relating to the clarity and prominence of any such disclosure to consumers. In any case, don’t assume third party certification gets you a free pass at the FTC. Indeed, the revised Green Guides discuss at length the potential for seals to mislead consumers.