While it may seem that “buying American” is being pushed even more these days, research shows that consumers have been keen on buying American-made products for some time. A Consumer Reports article from 2015 reported that eight in 10 American consumers would rather buy an American-made product than a foreign one and many would pay 10 percent more for it.
One easy way to advertise a product as American-made is to put a “Made in USA” or similar logo on marketing materials, websites and product packaging. For those employed in the manufacturing sector, who have considered whether to make a “Made in USA” claim regarding their product, the FTC provides advertising guidelines, including how to evaluate whether a claim of U.S. origin can be made for a product.
“Made in USA” claims
The Federal Trade Commission Act, 15 U.S.C. § 45, prohibits “unfair and deceptive acts or practices.” An advertisement or label is deceptive if it “contains a misrepresentation or omission of fact that is likely to mislead consumers acting reasonably under the circumstances, and that representation or omission is material.”
It is also deceptive to make a claim if, at the time the claim is made, the manufacturer does not have a reasonable basis for substantiating the claim. This applies to all marketing, including claims that products are of U.S. origin, such as “Made in USA” or “American Made.”
A manufacturer need not seek approval from the FTC before making a “Made in USA” claim, but it is prudent to perform the research necessary to ensure there exists competent and reliable evidence to substantiate the claim.
There are two types of claims. For an unqualified claim, manufacturers can use “Made in USA” without also having to qualify it with anything else, i.e. with 85 percent of U.S. materials. Unqualified claims are allowed if the product is last assembled in the USA and is made of “all or virtually all” U.S. materials. Manufacturers must make a qualified claim when the product is last assembled in the U.S. but does not meet the “all or virtually” all standard, i.e. if, say, 20 percent of the materials come from China.
To make an unqualified “Made in USA” or similar claim, a manufacturer must have a reasonable basis to claim that the product is “all or virtually all” made in the U.S. Generally, this means that “all significant parts and processing” that go into the product are of U.S. origin and should contain only a “de minimis or negligible” amount of foreign content.
FTC’s evaluation
In determining whether a U.S. origin claim is appropriate, the FTC will look at whether the final assembly or processing took place in the U.S. It will also consider other factors such as the “portion of the product’s total manufacturing costs that are attributable to U.S. parts and processing,” and how far removed any foreign content is from the finished product.
To make a claim of U.S. origin, the product must have been last “substantially transformed” in the U.S. A product substantially transformed in the U.S. that is then sent outside the U.S. for assembly or processing, beyond a de minimis amount, will not be considered to have its final assembly or processing in the U.S.
If a product is found to be last substantially transformed in the U.S., the FTC will then compare the “percentage of the total cost of manufacturing the product that is attributable to U.S. costs and to foreign costs.” A manufacturer should consider the cost of goods, which includes the total cost of all manufacturing materials,
direct manufacturing labor and manufacturing overhead.
If component parts are sourced from third parties, the analysis should include a good-faith inquiry to the component suppliers about the percentage of U.S. content in the part. A manufacturer should also look far enough back in the manufacturing process that a “reasonable manufacturer” would expect that it had accounted for any significant foreign material.
There is no set percentage for what is “all or virtually all.” Rather, the FTC looks at each on a case-by-case basis. It does, however, provide a number of examples to consider when evaluating whether a product meets the “all or virtually all” standard.
All or virtually all
Where the product does not meet the “all or virtually all” standard, or it is unclear whether the standard is met, the FTC permits qualified claims as long as the product has a significant amount of U.S. content or processing. A qualified claim should describe the extent, amount or type of product’s domestic content or processing. For instance, “Made in USA with 80 percent U.S. parts” or “American Made Windows with glass from Canada.”
A manufacturer may have to qualify the claim where not all products meet the “all or virtually all” standard. For example, “All Doors Made in USA” or “Series 100 Windows Made in USA.” Any qualifying language is acceptable as long as it is not deceptive.
Manufacturers can still claim a product that contains foreign content as “Assembled in USA” without qualification as long as the principal assembly occurred in the U.S. and the last substantial transformation occurred in the U.S.
Third-party certifications
There are companies that, for a fee, will provide third-party certification services for manufacturers who want to “certify” that their products are “Made in USA.” While these third-party certification companies may provide a sense of comfort to a manufacturer making a claim, it is important to vet the company before using its services.
In conclusion, unqualified and qualified “Made in USA” claims can make a manufacturer’s products more desirable to consumers, but it is critical to do the research necessary to confirm and substantiate the claim before you make it. Or, hire a credible certification company to do it for you. It is equally important to review the research periodically to make sure the claim is still accurate.
