As previously reported by Home Textiles Today, the Federal Trade Commission (FTC) has announced a “record civil penalty” of $3.175 million against a retailer who failed to tell the truth about whether the products it sells were Made in the USA.  FTC Commission Chair Lina M. Khan said that the ruling “makes clear that firms committing Made-in-USA fraud will not get a free pass.”

The consent order requires Williams-Sonoma, Inc. (doing business as Williams Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Teens, PBTeen, West Elm, Rejuvenation, Outward, and Mark & Graham) to make accurate representations when they tell customers that the products they sell are made in the United States. The FTC acted against Williams Sonoma following a complaint by an advertising watchdog group that mattress pad branded as “Crafted in America from domestic and imported materials” were actually made in China.

The FTC further ordered annual reports on compliance with stated guidelines:

• Made in USA claims will not be allowed unless the retailer can show that the product’s final assembly or processing — and all significant processing — takes place in the U.S., and that all or virtually all ingredients or components of the product are made and sourced in the U.S.
• Qualified Made in USA claims are permitted only as far as there is a “clear and conspicuous” disclosure about the extent to which the product contains foreign parts, ingredients or components, or processing.
• Assembled in USA claims only permitted where product assembly is “last substantially transformed” in the U.S.

Companies who sell products that do not meet the “all or virtually all” requirement often adopt qualified claims.  Common examples include “Assembled in the USA of domestic and foreign components” or “Final assembly in USA of domestic parts and imported leather.”  The qualifications must be accurate and not misleading.  

The FTC seeks to help retailers and manufacturers by publishing a 42-page guideline – Complying with the MADE IN USA STANDARD.  While navigating "Made in USA” laws starts with FTC guidelines, circumstances often warrant checking with additional sources.  

For importers, an additional Federal agency that warrants close consideration is the Customs and Border Protection (“CBP”) Agency.  The improper marking of the country-of-origin of imported goods can lead to escalating consequences.  Where mis-marking occurs to avoid tariffs, stiff fines and penalties (in addition to any excess duties owed) can result.

States can also have “Made in USA” laws that could be more stringent than the FTC.  Historically, California had one of the strictest standards, where a product at one time could only be labeled "Made in USA" if 100 percent of the components were domestically sourced. However, the California law has been amended to be more in line (but not identical) with the FTC’s “all or virtually all” standard, allowing for a minimal amount of 5 or 10 percent of foreign parts depending upon supply chain circumstances.

Finally, certain industries have been subject to special legislation. Apparel manufacturers need to be aware of the restrictions imposed by the Wool Products Labeling Act and Textile Fiber Products Identification Act (TFPIA) pertaining to the disclosure of the percentage of a product’s content that was made in the United States.  The automotive industry has its American Automobile Labeling Act.  

Even after guidance is obtained from the various laws, compliance requires active monitoring.   Ever evolving product SKUs and supply chain sourcing highlight the importance for companies to audit, implement internal controls, and maintain effective, robust compliance programs within their organization to minimize their legal risks.