With some exceptions, manufacturers and marketers are not required to disclose where products are made. But if they do and claim products are made in the USA, they better be telling the truth or the FTC will come calling.
The FTC issued a policy statement in 1997 outlining guidelines for making unqualified “Made in USA” or similar claims. In August 2021, it adopted the Made in USA Labeling Rule (MUSA) that codified its guidelines and added more enforcement authority, including the ability to impose fines.
The agency filed its first complaint using its new authority in April when it challenged claims made by Lithionics and its owner that the company’s lithium ion cells are made in the U.S. Lithionics designs and sells battery products for recreational vehicles, amusement park rides, marine applications, and low-speed electric vehicles. It claimed its products are all or virtually all made in the United States when in fact the lithium ion cells are imported from China and other components are also imported.
The FTC says the company “doubled down” on the misrepresentations:
Merchandise was labeled with an image of the flag surrounded by the words “Made in U.S.A.” Sometimes they added the phrase “Proudly Designed and Built in the USA.”
YouTube videos featured the owner putting Made in USA labels on products.
Marketing materials featured a chart comparing the advantages of the company’s products over imported competing products.
It appears the FTC was particularly unhappy about the deceptive claims regarding this product’s origin. Samuel Levine, the Director of the FTC’s Division of Consumer Protection, said “as our country works to onshore production of lithium ion batteries, it’s critical that honest businesses have a chance to compete, and that consumers can buy American.”
Lithionics settled the FTC charges by agreeing to comply with MUSA and paying a $105,000 civil penalty.
An unqualified “Made in USA” claim requires that all or virtually all of the product has been made in America. Significant parts, processing and assembly, and the labor that go into the product must be of U.S. origin. They should contain no or negligible foreign content.
Implied claims are also subject to MUSA. For example, describing the “true American quality” of the work produced at a company’s American factory could give the impression that the product is of U.S. origin. If that’s not the case, the statement could run afoul of the standards. And a manufacturer or marketer should not say “Our products are made in the USA” when only some are.
Qualified claims are permitted if they’re accurate. They might include “Made in U.S. from Imported Parts” or “Assembled in U.S.A.”
In bringing the action against Lithionics, the FTC also made it clear that its concerns about misleading Made in USA claims aren’t limited to labels on products. Companies should be prepared to substantiate claims made in advertising and marketing materials also.
Verifying the origin of most products would be almost impossible for most consumers.
If it’s important to you that a product is made in the U.S., do your best to verify the reputation of the manufacturer or marketer making the claim. Read labels carefully to pick up on any qualifications that might affect your decision to buy the product.
Randy Hutchinson is the president & CEO of the Better Business Bureau of the Mid-South.
This article originally appeared on Jackson Sun: Better Business Bureau: FTC enforces new Made in USA Labeling Rule