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No Penalty Assessed in Settlement of “Made in USA” Claims

Tuesday, March 21, 2017
Sandler, Travis & Rosenberg Trade Report

The Federal Trade Commission has announced a settlement under which a U.S. distributor of pulley block systems has agreed to stop making misleading unqualified claims that its products are made in the U.S. Each violation of this settlement could result in a civil penalty of up to $40,654. Comments are due by April 7.

According to an FTC press release, a complaint alleged that for several years the company’s pulleys featured imported steel plates that entered the U.S. from overseas already stamped “Made in USA.” The complaint also alleged that in advertising on its website, in stores, through trade shows and authorized dealers, on social media, and through flyers and pamphlets the company used unqualified claims to represent that its pulley blocks, other products, and the parts used to make them were all or virtually all made in the U.S. when in fact they included significant imported parts that were essential to their function.

The stipulated final consent order prohibits the company from making unqualified “Made in USA” claims for any product unless it can show that the product’s final assembly or processing, and all significant processing, take 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. In addition, any qualified “Made in USA” claims must include a clear and conspicuous disclosure about the extent to which the product contains foreign parts, ingredients, and/or processing. Finally, the company is prohibited from making any country-of-origin claims about its products unless the claims are true and not misleading and the company has a reasonable basis for making them.

The order also requires the company to submit a compliance report to the FTC in one year, submit additional compliance reports upon request, create certain records for 20 years, and retain each such record for five years.

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