Federal Trade Commission issues rule to deter rampant USA-made fraud

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Made in USA labels will finally mean products were made in America

The Federal Trade Commission has finalized a new rule that will crack down on traders who falsely and wholeheartedly claim their products are made in the United States. (FTC image)

BREVARD COUNTY, FLORIDA – The Federal Trade Commission has finalized a new rule that will crack down on traders who falsely and unreservedly claim their products are made in the United States.

Under the rule, marketers making unqualified Made in USA claims on labels should be able to prove that their products are “all or virtually all” made in the United States.

Commissioner Rohit Chopra was joined by President Lina Khan and Commissioner Rebecca Kelly Slaughter in a statement, who noted that the rule would particularly benefit small businesses that rely on the Made in USA label, but lack the resources to defend against imitators.

The new rule codifies a wider range of remedies by the FTC, including the ability to seek redress, damages, penalties and other remedies from those who lie about a Made in USA label. This will allow the Commission for the first time to seek civil penalties of up to $ 43,280 per violation of the rule.

Although severe penalties are not appropriate in all cases, they send a strong signal to potential violators that they abuse the Made in USA label at their own risk.

“The final rule provides substantial benefits to the public by protecting businesses against lost sales to dishonest competitors and by protecting buyers seeking to purchase products made in the United States,” said Commissioner Chopra. “More broadly, this long overdue rule is an important reminder that the Commission must do more to use authorities explicitly authorized by Congress to protect market participants from fraud and abuse.” (FTC image)

“The final rule provides substantial benefits to the public by protecting businesses against lost sales to dishonest competitors and by protecting buyers seeking to purchase products made in the United States,” said Commissioner Chopra. “More broadly, this long overdue rule is an important reminder that the Commission must do more to use authorities explicitly authorized by Congress to protect market participants from fraud and abuse.”

In 1994, after the North American Free Trade Agreement went into effect, Congress passed a law allowing the FTC to seek sanctions and other remedies for Made in USA fraud, but only after that the Commission has published a rule.

However, there has long been a bipartisan consensus at the FTC that Made in USA fraud should not be penalized. The latest Made in USA labeling rule changes course on the Commission’s long-standing approach.

The rule does not impose any new requirements on businesses. Instead, it codifies the FTC’s long-standing enforcement policy statement regarding claims of US origin. By codifying these guidelines into a formal rule, the Commission can increase the deterrence of Made in USA fraud and seek redress for the victims.

During rule making, the FTC heard from hundreds of growers and shrimp fishers concerned about Made in USA labels misleading consumers.

The Commission is pleased that in conjunction with this announcement, USDA Secretary Tom Vilsack has announced that the USDA will complement the FTC’s efforts with its own initiative on the labeling of products such as beef and beef. ‘other agricultural products regulated by the Food Safety and Inspection Service.

The Commission is pleased that in conjunction with this announcement, USDA Secretary Tom Vilsack has announced that the USDA will complement the FTC’s efforts with its own initiative on the labeling of products such as beef and beef. ‘other agricultural products regulated by the Food Safety and Inspection Service. (USDA image)

The Commission published a notice of proposed regulation for this rule in June 2020. The Commission received over 700 comments on the proposed rule, most of which were in favor or requesting changes that were not legally permitted. The final rule adds a provision allowing traders to request exemptions if they have evidence showing that their unqualified Made in USA claims are not misleading. .

The Made in USA labeling rule, which will be published in the Federal Register, incorporates the guidelines set out in previous decisions and orders of the Commission and its 1997 Enforcement Policy Statement on US Origin Claims.

In accordance with this guideline, the rule will prohibit traders from including Made in USA claims on labels unless: 1) final assembly or processing of the product takes place in the United States; 2) all significant processing that goes into the product takes place in the United States; and 3) all or virtually all of the ingredients or components of the product are made and originate in the United States.

The rule only applies to labeling claims. The FTC will continue to take enforcement action against traders who make misleading claims of US origin that do not fall under the rule of Section 5 of the Federal Trade Commission Act. The FTC is authorized to seek penalties for violations of the rule. It does not replace, modify or affect any other federal law or regulation relating to country of origin labels.

The Commission vote approving the publication of the latest Made in USA labeling rule in the Federal Register was 3-2. Commissioner Christine Wilson also released a dissenting statement on the rule and another dissenting statement regarding the general meeting agenda.

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