There are often marketing or sales advantages to making a claim that a product is “Made in the USA," but companies wishing to make such a claim should make sure that not only is the product itself assembled in the United States, but also that all or virtually all of the components are also made in the United States.
The Federal Trade Commission (FTC) is responsible for preventing deception and unfairness in the marketplace. The FTC requires that any product bearing the “Made in the USA" claim must actually be “all or virtually all" made in the U.S.A. Such claims can be express (such as with the label “Made in the USA") or implied (through the use of an American flag on the label or in advertising, or by the use of statements such as “true American quality").
The “Made in the USA" policy applies to all products advertised or sold in the U.S., except for those specifically subject to country-of-origin labeling by other laws such as “Made in Taiwan" or “Made in China," etc... . The policy covers any claims of U.S. origin found on the products, labeling, advertising, marketing, or other promotional materials.
Unfortunately, the FTC will not pre-approve “Made in the USA" claims. It is therefore the responsibility of the company making the “Made in the USA" claim to only make truthful and substantiated claims regarding the origin of the product and to verify that “all or virtually all" of the product is actually made in the U.S.
“All or virtually all" means that all significant parts and processing that go into the final product must be of U.S. origin. That is, the product should contain no (or a negligible amount of) foreign content. This claim must be substantiated by competent and reliable evidence that the product is “all or virtually all" made in the U.S.
Although there is no bright line test to establish when a product is or is not “all or virtually all" made in the United States, there are a number of factors the FTC will look at in making this determination.
The final assembly or processing of the product must take place in the United States. The U.S. processing must be the last substantial transformation in the manufacturing process. For instance, if the product is assembled in another country and then sent to the U.S. for packaging, the FTC would consider this to be a deceptive use of the claim “Made in the U.S.A.").
The Proportion of the product’s total manufacturing costs that are attributable to U.S. parts and processing. Manufacturing costs include the total cost of all manufacturing materials, direct manufacturing labor, and manufacturing overhead. These costs must be de minimis or negligible in comparison to the total cost for the claim to stand.
How far removed from the finished product any foreign content is. The domestic content of the domestically sourced products must also be ascertained by contacting the individual manufacturers of each component that makes up the final product. The company seeking to make a claim must look back far enough in the manufacturing process to be reasonably sure that any significant foreign content is included in its assessment of foreign costs. Foreign content incorporated early in the manufacturing process is likely less significant than content that is a direct part of the finished product. This evaluation may include an evaluation of the raw materials used to make the domestically manufactured components.
An alternative to making a “Made in the USA" claim is to make a qualified “Made in the USA" claim by describing the extent, amount, or type of a product’s content or processing and by indicating that a product is not entirely of domestic origin. Examples would be: “80% U.S. Content", “Made in the USA of U.S. and imported parts", Etc…
A company may also use the phrase "Assembled in the USA" when the principle assembly takes place in the U.S. and the assembly is substantial and is the last substantial transformation in the manufacturing process. However, care must still be exercised to be truthful in making any such claim and the company must insure that the product has a significant amount of U.S. content or U.S. processing.
Further questions regarding whether your product can be claimed as "Made in the USA" should be directed to an attorney experienced in this area of law.
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