If you decide to buy a product labeled “Made in USA”—possibly paying more for it—you expect that piece of clothing, or furniture, or bicycle to be made in America. Unfortunately, “Made in USA” claims are often meaningless and sometimes outright deceptive.

This month the Federal Trade Commission (FTC) finalized a new rule to crack down on marketers who use false or misleading “Made in the USA” claims to sell products.

Listen to audio highlights of the story below:

Under the new rule companies making unqualified “Made in USA” claims on their product labels should be able to prove that their products are “all or virtually all” made in the United States. Qualified claims, such as “60% U.S. content,” or “Made in USA with U.S. and imported parts,” will still be allowed, so long as they are not deceptive.

For the first time, the commission will be able to seek penalties of up to $43,782 per violation for first-time offenders. Until now, companies that engaged in such deception typically got free passes based on bipartisan consensus at the FTC that “Made in USA” fraud should not be prosecuted.

In a statement supporting the new rule, Commissioner Rohit Chopra (joined by Chair Lina Khan and Commissioner Rebecca Kelly Slaughter) called the longstanding policy “misguided” and welcomed the change.

“The final rule provides substantial benefits to the public by protecting businesses from losing sales to dishonest competitors and protecting purchasers seeking to purchase American-made goods,” Chopra said. “More broadly, this long-overdue rule is an important reminder that the commission must do more to use the authorities explicitly authorized by Congress to protect market participants from fraud and abuse.”

A Massive Problem

The consumer group Truth In Advertising (TINA) can take credit for getting the FTC to change its position on “Made in USA” labeling. In 2019, TINA.org petitioned the FTC to enact a rule that would fine companies that deceptively used “Made in America” marketing.

In its petition, TINA.org urged the FTC to “turn on the penalty switch” and punish flagrant violators. “Such a rule would provide a deterrent effect by changing the risk-benefit analysis of deceptive marketers, thereby increasing the commission’s positive impact on the marketplace,” the petition stated.

Bonnie Patten, executive director of TINA.org, is “very happy” with the commission’s action and she believes it will help clean up the marketplace.

“TINA.org has seen many companies that deceptively market their goods as made in the USA when they don't meet that definition—and we're not just talking about fly-by-night companies,” Patten told Checkbook. “Walmart, Mercedes-Benz, Gillette, Target, these are all companies that TINA.org has investigated, and found that they were deceptively marketing products as made in the USA when they just didn't fit that definition.”

Where’s the Beef Raised?

The new rule does not include agricultural products. The U.S. Department of Agriculture regulates those claims, and those rules are making the problem worse, Patten said. Under current USDA rules, imported beef (that comes from cattle raised and even slaughtered in another country) can be imported, packaged here, and then labeled as “Product of USA.”

“There was a huge push by local farmers and ranchers to try and reverse this real deception that's been going on,” Patten noted.

USDA has announced that it will conduct a “top-to-bottom review” of how the product of USA label is being used and what it means to consumers.

Agriculture Secretary Tom Vilsack acknowledged in a statement that the current rules for using the “Product of USA” label on meat may not provide the “accurate and transparent labels...to the detriment of consumers, producers, and fair and competitive markets.”

The Consumer Federation of America (CFA) criticized the USDA for expressing concern but not committing to any specific label reforms.

“Unfortunately, consumers will still have to grapple with unscrupulous origin claims on beef and pork harvested from animals of foreign origin,” said Thomas Gremillion, CFA’s director of Food Policy.

USDA did require country-of-origin labeling for fresh beef and pork products—indicating where the cow or pig was born, raised, and slaughtered, Gremillion noted. Congress repealed those requirements after Canada and Mexico successfully challenged the policy with the World Trade Organization.

The Bottom Line

It will take time for the FTC to start enforcing the new rule. So, it’s important for you to inspect the package whenever you see a “Made in USA” claim, especially if there’s an asterisk. See if that fine print modifies the big, bold claim, such as “Made in USA with parts from Mexico.”

“All too often we're seeing labels that say made in the USA, but then when you look at the fine print, we'll see that it's either a qualified claim, or that it's just outright deception, and the product is being made in a foreign country,” said TINA.org’s Patten.

 




Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He is also the consumer reporter for KOMO radio in Seattle. You can also find him on Facebook, Twitter, and at ConsumerMan.com.