With few exceptions, manufacturers and distributors are not required to disclose where products were made. But if they do and claim the products are made in the USA, they better tell 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 passed the Made in USA (MUSA) labeling rule which 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 by Lithionics and its owner that the company’s lithium-ion cells are made in the United States. Lithionics designs and sells battery products for recreational vehicles, amusement park rides, marine applications, and low-speed electric vehicles. It claimed that its products are all or almost 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:
- The merchandise was tagged with an image of the flag surrounded by the words “Made in USA.” Sometimes they added the phrase “Proudly Designed and Built in the USA”.
- YouTube videos showed the owner affixing Made in USA labels to products.
- The marketing materials included a table comparing the advantages of the company’s products against imported competing products.
It seems that the FTC was particularly unhappy with the misleading claims regarding the origin of this product. Samuel Levine, Director of the FTC’s Consumer Protection Division, said, “As our country works toward onshore production of lithium-ion batteries, it’s critical that honest companies 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 civil penalty of $105,000.
An unqualified “Made in USA” claim requires that all or nearly all of the product was made in America. Major parts, processing and assembly, and labor that goes into the product must be of American origin. They must not contain any foreign content or negligible content.
Implied claims are also subject to MUSA. For example, describing the “true American quality” of work produced in a company’s US factory could give the impression that the product is of American origin. If this is not the case, the declaration could go against the standards. And a manufacturer or distributor shouldn’t say “Our products are made in the USA” when only some are.
Qualified claims are allowed if they are accurate. They may include “Made in US from Imported Parts” or “Assembled in USA”
In filing the lawsuit against Lithionics, the FTC also clarified that its concerns about misleading Made in USA claims are not limited to product labels. Companies must also be prepared to substantiate claims made in advertising and marketing materials.
Verifying the origin of most products would be nearly impossible for most consumers.
If it’s important to you that a product be made in the United States, do your best to check the reputation of the manufacturer or distributor making the claim. Read labels carefully for any qualifications that might affect your decision to purchase the product.
Randy Hutchinson is the president and CEO of the Better Business Bureau of the Mid-South.