Thursday, July 16, 2020

FTC Proposes New Made in USA Rule

On July 16, 2020, the Federal Trade Commission published in the Federal Register (85 FR 43162) Made in USA Labeling Rule; Notice of proposed rulemaking.

Since at least 1940, the Commission has pursued enforcement actions to prevent unfair and deceptive "Made in USA" and other U.S.-origin claims (``MUSA claims''). Currently, the Commission's comprehensive MUSA program consists of compliance monitoring, counseling, and targeted enforcement pursuant to the FTC's general authority under Section 5 of the FTC Act, 15 U.S.C. 45. However, Congress has also granted the FTC authority to address MUSA labeling, including rulemaking authority, under a separate statute, 15 U.S.C. 45a. To date, the Commission has not exercised its rulemaking authority under that provision.

Recently, the FTC held a public workshop and collected public comments in support of a review of its MUSA program. Workshop participants and commenters discussed a variety of issues, including consumer perception of MUSA claims, concerns about the FTC's current enforcement approach, and potential changes to the FTC's MUSA program, including through rulemaking. During that proceeding, stakeholders expressed nearly universal support for the Commission to exercise authority pursuant to 15 U.S.C. 45a to issue a rule addressing MUSA claims. Commenters argued such a rule could have a strong deterrent effect against unlawful MUSA claims without imposing new burdens on law-abiding companies.

The proposed rule would continue the Commission's current requirement that in order to make a "Made in USA" claim, final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States. In general the proposed rule would codify existing FTC practices.

The rule would apply to advertising.

The rule states that violation shall be treated as a violation of a rule under section 18 of the Federal Trade Commission.

The rule does not supersede other federal country of origin labeling requirements, such as the Wool Rules and Textile Rules.

The proposed rule provides that states may adopt stronger rules. This provision may be controversial as it would allow a state to adopt a 100% USA requirement with no de minimis provision, resulting in an article legally marked "Made in USA" in 49 states but not so in one state.

Comments must be received by September 14, 2020.

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