Among other things, the Federal Trade Commission (“FTC”) is tasked with consumer protection, including pursuit and prosecution of false advertising. To that end, the FTC has long regulated the use of the phrase “Made in USA.” Effective August 13, 2021, however, a new rule will codify and clarify not only long-standing FTC positions and guidance on this issue, but also establish the FTC’s ability to pursue potentially strict punishments for those who violate the rule’s mandates related to product labelling.

The new rule, 16 CFR Part 323, “Made in USA Labeling Rule,” was enacted on July 1 2021, by a 3-2 vote of the FTC Commissioners. The rule will directly regulate manufacturers making unqualified statements that their products are “Made in USA” on their labels. The rule contemplates variations on the phrase “Made in USA,” including through phrases such as “manufactured,” “built”, “produced,” and so on. The rule specifically establishes that it is “an unfair or deceptive act or practice” to “label any product as Made in the United States unless the 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.” By requiring all three factors, the rule will solidify a strict definition of and limited use for the phrase “Made in USA,” though the rule does contemplate and permit petitions for exemptions on a case-by-case basis.

The rule, while intending to create a uniform federal benchmark, does explicitly allow state laws that “afford[] any consumer . . . greater . . . protection” than the rule itself (as determined by the Commission), meaning that manufacturers must be sure that their labels comply with any specific, independent, state-based regulatory mandates.

By codifying the “Made in USA” mandate and defining violations as “unfair or deceptive” the rule will also vest FTC with authority to seek civil penalties up to $43,280 for each violation.

Enactment of this rule suggests that long-anticipated FTC enforcement of and crackdowns related to the improper use of “Made in USA” are on the horizon. Manufacturers of products that intend to market their products as “Made in USA” are advised to verify compliance with the new mandates.