FTC Finalizes “Made in USA” Rule Amidst Inter-Commission Conflict

Ervin Cohen & Jessup LLP

Ervin Cohen & Jessup LLP

On July 1, 2021, the Federal Trade Commission (“FTC”) issued its final rule related to “Made in USA” and other unqualified U.S.-origin claims on product labels. The effective date of the rule is August 13, 2021.

The rule comes almost one year after the FTC issued its Notice of Proposed Rulemaking (“Notice”) seeking public comments on the rule on July 16, 2020.

The FTC stated that it had received over 700 comments from the public in response to the Notice. According to the FTC: “Commenters generally supported the rule, stating it provided much-needed clarity and would deter bad actors without imposing new burdens on marketers. Most commenters agreed the rule should incorporate the longstanding “all or virtually all” standard. Additionally, the majority of commenters addressing the issue agreed the proposed rule represented a proper exercise of the Commission's rulemaking authority under Section 45a.”

The rule defines the term Made in the United States to mean “any unqualified representation, express or implied, that a product or service, or a specified component thereof, is of U.S. origin, including, but not limited to, a representation that such product or service is “made,” “manufactured,” “built,” “produced,” “created” or “crafted” in the United States or in America, or any other unqualified U.S.-origin claim.”

The final rule states that it is an unfair or deceptive act or practice under the FTC Act to “label any product as Made in the United States unless [1] the 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.”

On July 9, 2021, multiple FTC Commissioners issued statements on the rule, which was adopted by a 3-2 vote. Dissenting Commissioners Noah Phillips and Christine Wilson issued a joint dissenting statement in which they stated that the rule was not an appropriate exercise of the rulemaking power of the FTC.  

The dissenting statement also criticized the majority of FTC commissioners for its revisions to the FTC Rules of Practice adopted by the majority of the Commission on July 1, 2021. They stated that the new FTC rules “undermine the goals of participation and transparency that Congress sought to advance when it enacted and amended Section 18. These changes will facilitate more rules, but not better ones.”

It will be interesting to see how the conflict within the FTC plays out in future regulations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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