The use of country of origin claims in advertising, and in particular “Made in USA” claims, has been around for a long time — many companies want to showcase products that have been made in the United States by marking them with the phrase or using the Stars and Stripes in advertising. Before making claims like “Made in America” or “Built in the USA,” though, sellers must understand the strict federal and state laws and standards for making such claims. In September 2019, the Federal Trade Commission held a public workshop “to consider ‘Made in USA’ and other types of U.S.-origin claims and in particular sought comments from the public on whether it should update its “Made in USA” Enforcement Policy.[1] While the Commission has not yet updated its Policy, it recently took action on two “Made in USA” cases, FTC v. Williams‑Sonoma and J-B Weld Company; moreover, J-B Weld is entangled in an ongoing class action in California, which has its own “Made in USA” standard. These cases show that the “Made in USA” regulation continues to be something sellers should pay close attention to when it comes to compliance.

“Made in USA” Background

Under Section 45a of the FTC Act, a product that is advertised or offered for sale with a “Made in USA,” “Made in America,” or an equivalent label must have domestic origins that are consistent with orders and decisions of the FTC. See 15 U.S.C. § 45a. The FTC’s Enforcement Policy provides that, to substantiate an unqualified “Made in USA” claim, a product must be wholly domestic or all or virtually all made in the United States. Specifically, “[a] product that is all or virtually all made in the United States will ordinarily be one in which all significant parts and processing that go into the product are of U.S. origin.”

Departing slightly from the “all or virtually all” standard, California law provides that companies cannot advertise Made in USA “if the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.” Cal. Bus. & Prof. Code § 17533.7. The statute also provides a 5% safe-harbor provision, providing that “[t]his section shall not apply to merchandise made, manufactured, or produced in the United States that has one or more articles, units, or parts from outside of the United States, if all of the articles, units, or parts of the merchandise obtained from outside the United States constitute not more than 5 percent of the final wholesale value of the manufactured product.”

FTC v. Williams-Sonoma, Inc.

On March 30, 2020, the FTC announced a settlement with Williams-Sonoma Inc., which of course is the provider of many of our aspirational kitchen gadgets. In the complaint, the FTC alleged that the company deceptively claimed on its website and in social media and other promotional materials that certain of its products, including raw materials and subcomponents, were “all or virtually all made in the United States.” Specifically, the complaint alleged that since June 2018, Williams-Sonoma induced consumers to purchase houseware products such as Goldtouch Bakeware, Rejuvenation products, and Pottery Barn Teen and Pottery Barn Kids furniture through ads that included “Made in America” or “Made in the USA” claims when the products were wholly imported, or contained a significant amount of imported materials or components. Thus, the FTC alleged, the company violated Section 5(a) of the FTC Act by making overly broad claims that certain branded products are “all or virtually all made in the United States.”

As part of the proposed consent order, Williams-Sonoma is required to pay $1 million to the FTC. In addition, the company, and its affiliates, are prohibited from making unqualified U.S.-origin claims for any product unless they can show that: (1) the product’s final assembly or processing occurs in the United States; (2) all or virtually all of the product’s processing takes place in the United States; and (3) all or virtually all of the product’s components or ingredients are sourced in the United States. Similarly, any qualified claims must include a clear and conspicuous disclosure that conveys the extent to which the product contains foreign parts, ingredients or components, and/or processing. If a product claims to be assembled in the United States, the company must ensure that it “is last substantially transformed in the United States, [its] principal assembly takes place in the United States, and [that] United States assembly operations are substantial.”

Notably, this is not the first time that the FTC has scrutinized Williams-Sonoma’s “Made in USA” claims. In 2018, the FTC was made aware that the company was claiming its Pottery Barn Teen organic mattress pads were “Crafted in America from local and imported materials.” However, consumers discovered “Made in China” labels on the mattress pads and complained. After the FTC contacted Williams-Sonoma, the company quickly updated its website to include correct country-of-origin information, and a closing letter was issued in June 2018.

Baum v. J-B Weld Company, LLC

Another recent case received attention both from the class action bar and from the FTC. On April 3, 2019, a class action lawsuit was filed against J-B Weld Company, LLC (“J-B Weld”), a leading manufacturer of cold weld products that makes a wide range of sealants, adhesives, and other products, alleging that J-B Weld’s “Made in USA” representations were false and misleading. The case, which was filed in the United States District Court for the Northern District of California, alleged violations of Cal. Bus. & Prof. Code § 17533.7. Notably, Plaintiff only alleged that the packaging, as opposed to the contents of the products, was not made in the United States. Defendants filed a motion to dismiss, arguing, inter alia, that the California statute does not require that packaging be made in the United States. The court ultimately found for the Plaintiff and refused to dismiss, holding that a jury should decide whether packaging should be considered in the “Made in USA” analysis under California law.

J-B Weld sells various products, including epoxy and other adhesive products. On the front of each product, the phrase “Made in U.S.A.” appears directly below a picture of the American flag. Plaintiff argued that various casings and containers, such as tubes, plastic bottles, and resealable caps, have either a foreign provenance or contain imported materials. Therefore, alleged the Plaintiff, J-B Weld violated Cal. Bus. & Prof. Code § 17533.7.

J-B Weld disagreed, arguing that “merchandise” and “any article, unit, or part thereof” does not encompass the bottles, tubes, and caps that encase the glues, adhesives, and sealants. In its opinion, the Court explained that “[w]hat constitutes ‘merchandise’. . . can be conceptualized as a continuum.” Specifically, the Court stated:

[a]t one end of the continuum, for instance, might be the can in which paint is contained; the container serves no purpose other than to hold the content. It serves no integral function in the delivery or as to the effectiveness of the paint (other than perhaps its re-sealability with the help of a mallet). Such a container looks very little like part of the ‘merchandise.’ At the other end of the continuum might be a soap-dispensing dish brush. Clearly, the brush—although it ‘contains’ soap used to wash dishes—performs a key role in delivering and administering the soap.

Baum v. J-B Weld Company, LLC., No. 19-cv-01718-EMC, 2019 WL 6841231 *7 (N.D. Cal. Dec. 16, 2019). However, where to draw the line along the continuum is not well defined, and, regardless, is a determination that involves the application of the law to particular facts and should be left for the jury. Right now, the case is being briefed for summary judgment.

J-B Weld’s “Made in USA” claims were also challenged at the National Advertising Division of the BBB, where J-B Weld lost. The NAD observed that while the FTC’s Enforcement Policy did not address items like tubes, caps, or packaging, there is nothing to indicate consumers would not think such items are included in a “Made in USA” claim. The matter was appealed up to the NARB, which upheld NAD’s decision and referred the matter to the FTC when J-B Weld refused to comply.

On March 19, 2020, the FTC sent a closing letter to J-B Weld. The FTC accepted some changes that J-B Weld made to its claims about its product line, which included adding qualifying claims, and clarified that it does not require manufacturers to account for the incidental, discarded packaging when analyzing product origin unless the claims expressly or by implication convey U.S. origin packaging. The Commission stated that it may analyze different factors to determine whether a product is “all or virtually all” made in the United States, including: (1) the proportion of the product’s total manufacturing costs attributable to U.S. parts and processing; and (2) how far removed any foreign content is from the finished product. In the J-B Weld case, the FTC found that it was unlikely that a reasonable consumer would interpret the U.S. origin claims on the packaging, which was typically discarded, to be part of the product analysis. With J-B Weld’s implementation of a remedial action plan and other factors, the FTC elected not to pursue the investigation further — having first provided key guidance on when packaging will be considered superfluous to the “Made in USA” analysis.

What This Means Going Forward

As illustrated above, the FTC and class action plaintiffs have been, and continue to be, active in the “Made in USA” space. The FTC has brought several “Made in USA” claims in recent years and has openly pushed for regulations seeking to provide tougher penalties for violations (in line with its actions in other areas). Given these recent trends, marketers seeking to make “Made in USA” claims should evaluate their manufacturing processes and products — and, if necessary, look up the supplier chain — to confirm whether the products they sell meet the “all or virtually all” standard or whether any claims about them need to be qualified (for example, “assembled in the USA of domestic and imported materials”). (For more guidance on how to qualify claims in compliance with federal and state standards, see our blogs here and here.) Otherwise, they might risk an inquiry from the FTC or a lawsuit from a class action plaintiff.

[1] “Made in USA” and Other U.S. Origin Claims, 62 Fed. Reg. 63,756 (December 2, 1997). A recording of the workshop can be found on the FTC’s website: https://www.ftc.gov/news-events/audio-video/video/made-usa-ftc-workshop