This summer, the Federal Trade Commission (FTC) published final rules codifying its long-running standard for “Made in USA” product labels.[i] The Commission also announced its 2022 timeline for rolling out a new version of the Green Guides that focus on environmental claims.[ii] But for legal advisors to advertisers, understanding how to stay out of hot water with the FTC and avoid the litigation bullseye of competitors is more fraught than merely following the latest FTC guidance.
Behind the backdrop and out of the spotlight of federal court, the Better Business Bureau’s National Advertising Division (NAD) and its National Advertising Review Board (NARB) wrestle with the FTC’s guidance through arguments that test the outer limits of advertising claim standards. Recent challenges between competitors through this self-regulation dispute resolution mechanism reveal that these latest rules from the FTC leave a great deal of gray area still to cover.
The test for an unqualified claim of US origin is—and has historically been—whether “all or virtually all” of the product comes from the United States.[iii]
This long-running standard emerged from FTC case law developed in the 1940s.[iv] In 1997 and 1998, the Commission issued guidance elaborating on what it means to be “all or virtually all” domestically made.[v] Through this guidance, the FTC insisted that no “bright line” rule existed to determine whether a product satisfied the standard. Instead, three factors should be considered to determine the validity of a claim: (1) whether the final assembly or processing of the product took place in the United States; (2) the portion of the total manufacturing cost of the product that is attributable to US parts and processing; and (3) how far removed any foreign content is from the finished product.[vi]
Though it might read like a straightforward, factor-balancing test, the first and third factors have more specific requirements. For final assembly, the 1997 guidance explained, “[A] product promoted as ‘Made in USA’ must have undergone its final assembly or processing in the United States. In particular, the product must at minimum, have been last substantially transformed in the United States.”[vii] Foreign content also has a pre-defined limit: a US-made product “should contain only a de minimis, or negligible, amount of foreign content.”[viii]
One complication is that these factors and requirements are conjunctive, not disjunctive. As one recent federal court had to explain to a litigant, simply having final assembly be in the United States is “a necessary but not sufficient condition to satisfy the ‘all or virtually all’ standard.”[ix]
