With tariffs creating an atmosphere where “imported” may soon come to mean “expensive,” American businesses might be tempted to use their advertising and packaging to emphasize the American origin of their product, no matter how little of the product originates in the USA. But, considering the regulations in place and the recent attention to challenges for false advertising, it’s a good time to review the rules for making Made in the USA claims. A recent jury verdict shows the potential consequences a company may suffer for not following the rules.
Earlier this month, a California jury found a popular tea company, R. C. Bigelow, liable for damages of $2.36 million in a class action lawsuit challenging the company’s Made in the USA claim. The plaintiffs relied on the standard set forth in the Federal Trade Commission’s (FTC) Made in USA labeling rule to show that Bigelow had violated the California Consumers Legal Remedies Act (CLRA), which makes it unlawful to misrepresent the “source, sponsorship, approval, or certification of goods or services.”
Although the company admitted its tea was sourced outside of the United States, Bigelow argued the claim was in reference to the tea bags and the assembly process, not the tea within. The court rejected this argument, stating the consumer purchased the product for the tea leaves, not for the bag. At trial, plaintiff’s attorneys presented the successful argument that not only was the claim false and misleading, but the defendants were aware of the misleading nature of the claim.
The Made in the USA labeling rule, and further guidance on this issue, says it’s unfair and deceptive to label or advertise a product as made in the United States unless the final assembly is performed in the United States, all significant processing occurs in the United States, and “all or virtually” of the components are made and sourced in the United States.
According to guidance issued in 2024, “all or virtually all” means that the product should not contain more than a negligible amount of foreign content. The guidance also notes a company’s continuing obligation to monitor their own claims and adjust as necessary, stating there must be a reasonable basis to support all Made in the USA claims. The FTC has taken a broad view of the applicability of the labeling rule, including to products sold online. Violations of the rule trigger civil penalties up to $51,744 per violation, and non-compliant Made in USA advertising claims also can be challenged under Section 5 of the FTC Act.
Apart from automobiles, textiles, wool, and fur products, marketers are not required to disclose the amount of U.S. content in their products. However, if marketers choose to make claims about the amount of U.S. content in their products, they must comply with the Made in USA labeling rule for both express and implied claims made on the product label.
Similarly, Made in USA claims made beyond the product label must not be deceptive about the product’s origin under Section 5 of the FTC Act. Express claims can vary from “Made in USA” to “Built/Manufactured in USA.” Implied claims depend on the overall impression of an advertisement, a label, or promotional materials. For example, U.S. symbols like the flag, maps, or other references to U.S. locations could convey a Made in USA claim.
The substantiation requirements for Made in USA claims have not changed. Marketers and manufacturers must still have an ongoing, reasonable basis that “all or virtually all” of the product is made in the United States. To satisfy this standard, the FTC will look at whether the product’s final assembly or processing took place in the United States, how much of the product’s total manufacturing costs occur in the United States, where the parts originate, how far removed any foreign content is from the finished product, and the importance of the foreign content to the product’s form or function.
If a manufacturer/marketer cannot meet the “all or virtually all” threshold, they can consider making a qualified Made in USA claim that discloses the product is not entirely of U.S. origin, such as advertising that a product is made of “70% U.S. content” or “Made in USA of U.S. and imported parts.”
These disclosures should be clear and avoid implying that the product is made of more domestic parts than it is. The guidance specifically warns against vague claims, such as “Created” or “Produced” in the USA, as these could mislead a consumer into believing a product has more U.S. content than it does. Additionally, any claim that references “U.S. parts” is subject to the “all or virtually all” substantiation standard.
Finally, to make “Assembled in USA” claims, the marketer must have a reasonable basis for claiming that the product was “substantially transformed” in the United States. Though the guidance does not provide much insight into this standard, it warns that a “simple screwdriver” transformation will not satisfy the requirement. For example, if all the product’s parts are shipped from all over the world, but it undergoes only a minimal transformation or requires only a screwdriver to assemble all the parts in the U.S., then the marketer should avoid making an “Assembled in USA” claim.
California has its own Made in the USA rule via the Business and Professions Code, setting a slightly different standard when compared to the FTC rule. The California rule makes it unlawful to label a product as “Made in the USA” if the product or any part thereof has been “entirely or substantially made, manufactured, or produced outside of the United States.” Similar to the FTC, the California rule permits Made in the USA claims when the final wholesale value is made up of no more than a small part (5%) of foreign materials (or, 10% where a company can show it cannot obtain the foreign-made materials or parts in the United States).
While the legal territory ahead regarding the enactment of tariffs and their impact is still unknown, it is nonetheless a certainty that any Made in the USA claims must continue to meet the legal standards set forth by the FTC and California law, regardless of how the products or manufacturing process are adjusted to comply with or address the impact of tariffs.
