FTC Proposes New Made in USA Rules to Expand Enforcement Authority and to Eliminate Apparel Care Instruction Requirement

The proposed rule would codify the FTC’s current standard that unqualified MUSA claims for a product should, at the time of the representation, have a reasonable basis for asserting that “all or virtually all” of the product are made in the United States. It would also provide authority to FTC to assess monetary penalties on unsubstantiated claims. Controversially, the proposed rule would also extend the FTC’s enforcement authority to labels, mail order catalogs and online advertising. Comments on the proposed rule are due by September 14, 2020.

According to the FTC, the proposed rule would prohibit marketers from making unqualified MUSA claims on labels unless:

• Final assembly or processing of the product occurs in the United States;
• All significant processing that goes into the product occurs in the United States; and
• All or virtually all ingredients or components of the product are made and sourced in the United States.

The current standard is found in the FTC’s 1997 Enforcement Policy Statement on US-Origin Claims. The proposed rulemaking follows the publication of a staff report on the FTC’s Made in USA workshop.

FTC has pushed for significant penalties in recent years. In just the past two years, FTC has imposed monetary penalties as high as $1 million.

Proposed Rule Defines “Made in the United States”

The proposed rule defines “Made in the United States” to mean: “any unqualified representation, express or implied, that a product or service, or a specified component thereof, is of US origin, including, but not limited to, a representation that such product or service is ‘made,’ ‘manufactured,’ ‘built,’ ‘produced,’ ‘created,’ or ‘crafted’ in the United States or in America, or any other unqualified US-origin claim.”

According to the FTC, the proposed rule would not preempt federal or state statutes or regulations relating to country-of-origin labels, except and to the extent such laws or regulations are inconsistent with the rule. States whose protections are greater than the provisions of the proposed rule would not be considered inconsistent with the rule.

Proposed Rule Adds Clearer Authority to Assess Monetary Penalties

The FTC routinely receives trade complaints regarding allegedly unsupported MUSA claims. The complaints are usually settled with consent agreements and closing letters.

However, the proposed rule would authorize the FTC to seek civil penalties of $43,280 per violation. With this change, the FTC will be able to more quickly and easily obtain monetary penalties than it does today, which would likely lead to an increase in the volume and amount of penalties.

Proposed Rule Expands Media/Claims Covered by the Standard

The proposed rule also expands the definition of “labels” to include making unqualified MUSA claims appearing in mail-order catalogs or mail-order advertising.

The FTC proposes to include MUSA claims appearing in mail-order catalogs or mail-order advertising, which it defines to include online advertising within the scope of the rule. However, the Commissioners disagreed on this scope in the staff report. For example, Commissioners Noah Phillips issued a dissenting statement, and Commissioner Christine Wilson issued a statement dissenting in part, arguing that the proposed Rule exceeds the scope of the FTC’s authority because Section 45a references only “labels on products” rather than online advertising.

Public Comment Period

Advertisers currently making MUSA claims that have concerns about the proposed rule’s language or scope should consider filing public comments. Comments on the proposed Rule can be submitted through https://www.regulations.gov until September 14, 2020. Instructions are provided in the proposed rule.

FTC Also Proposes to Repeal the Apparel Care Labeling Rule

The FTC is also proposing to repeal its trade regulation on apparel care labeling. The proposed repeal was published on July 23, 2020. The FTC said the apparel care labeling may be unnecessary because manufacturers would likely continue to provide care information to consumers. The care labeling rule requires apparel manufacturers and importers to attach labels to their products that describe appropriate care for ordinary use of their product, including by use of approved care symbols instead of words. Comments on the proposal are due September 21, 2020 and may also be submitted via www.regulations.gov.