A rule update announced this month now means there will be legitimate fines for intentionally mislabeling a product as American-made.
The federal government is closin’ loopholes and uppin’ thresholds to tighten Buy America rules for some types of public procurement. That’s good! And we at AAM are into it. We wrote a whole blog detailing this announcement made on Wednesday by President Biden.
This, however, isn’t the only move the federales have recently made to promote domestic manufacturing. A few weeks ago, the Federal Trade Commission (FTC) announced a rule change: There will now be meaningful penalties for companies that purposefully mislabel an imported product as “Made in USA.”
This is a big deal. President Biden recently appointed a new chairperson at the FTC, and under her direction the agency is being much more proactive about antitrust investigations and rulemaking … like a rule on how you can fairly advertise the product you’re selling as Made in America.
“This new Rule will require companies to be hyper-vigilant about Made in USA claims, lest they trigger substantial civil penalties,” wrote the National Law Review:
The final Rule dictates that labels may not contain unqualified Made in USA claims unless: “(1) Final assembly or processing of the product occurs in the United States, (2) all significant processing that goes into the product occurs in the United States, and (3) all or virtually all ingredients or components of the product are made and sourced in the United States.” The Rule does not cover qualified claims, which will remain subject to the FTC’s general authority to police deceptive and unfair claims under Section 5 of the FTC Act. The Rule outlines a procedure for partial or full exemption where an advertiser can sufficiently demonstrate that their Made in USA claims are not deceptive. Importantly for FTC’s enforcement powers, the Rule enables the agency to seek civil penalties of up to $43,280 per violation and expands the FTC’s remedial options.
Emphasis added, because that’s right: Nearly $44,000 per violation. Now it’ll cost you if you run afoul of this rule.
This is an issue near and dear to our hearts at the Alliance for American Manufacturing (AAM). In 2014, in fact, AAM filed a petition with the FTC asking it to investigate the deceptive marketing of TVs sold with an “Assembled in USA” label and lots of red-white-and-blue packaging; the company altered its marketing in response. And in 2019, we participated in an FTC workshop on Made in USA labeling.
Suffice it to say, we’re very pleased the FTC has spelled out this Made in USA rule and added teeth to its enforcement. Here’s (some of) what AAM President Scott Paul had to say:
“When wrongdoers making fraudulent claims go unpunished, it robs consumers of their spending dollars, and it hurts U.S. manufacturers who have invested in our nation. The Made in USA label isn’t a PR tool. It is a way to recognize the hard work and dedication required of American manufacturers and their employees who make their products in our local communities.
“The FTC’s application of more meaningful penalties for this egregious behavior is a victory for American manufacturers. It is especially timely as our nation emerges from the COVID pandemic. Giving consumers confidence in the ‘Made in USA’ label will encourage more companies to make their products here in America.”
Read his full statement here. And read more about the FTC rule change here.