$1 Million Penalty for Misleading “Made in USA” Claims
The Federal Trade Commission reports that a home products company has agreed to pay $1 million as part of a proposed settlement of charges that it made false, misleading, or unsubstantiated claims that certain of its products are all or virtually all made in the U.S.
The FTC states that in 2018 it received reports that the company claimed in ads and promotional materials that some of its products were “Crafted in America from local and imported materials” when in fact they were made in China. The company corrected the country-of-origin information for these items and agreed to undertake a larger review of its country-of-origin verification process.
However, the FTC alleges that the company subsequently made misleading claims that other products, including their raw materials and subcomponents, were all or virtually all made in the U.S. when in fact they are wholly imported or contain significant imported materials or components.
Under the terms of the proposed settlement, the company is prohibited from making unqualified U.S.-origin claims for any product unless it can show that (1) the product’s final assembly or processing, and all significant processing, takes place in the U.S. and (2) all or virtually all 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, components, and/or processing. To claim that a product is assembled in the U.S. the company must ensure that it is last substantially transformed in the U.S., its principal assembly takes place in the U.S., and U.S. assembly operations are substantial.
Each violation of the proposed order could result in a civil penalty of up to $43,280.