As the FTC cracks down on bogus claims, this Q&A primer helps clarify what’s kosher and what’s not regarding domestic origin labeling and marketing of products.

Williams-Sonoma notched a record-breaker, but for all the wrong reasons.

In April, the Federal Trade Commission (FTC) slapped the retailer of kitchenware and home furnishings with what is reportedly the largest ever civil penalty related to alleged false Made-in-the-USA claims – $3.175 million.

The FTC determined that Williams-Sonoma had been advertising certain products as American-made when in fact they were manufactured in China and other countries, all in violation of a 2020 FTC order tied to earlier allegedly fraudulent U.S.-origin claims by the company.

The federal chastening followed fast after a case that had marked an all-time record for a civil penalty stemming from reportedly bogus USA-made labeling. In January 2024, Kubota North America Corporation agreed to pay a $2 million fine for labeling replacement parts for tractors and other agricultural equipment as Made in the USA, even though they were produced overseas.

The recent cases highlight that the FTC is pressing enforcement of rules regarding Made-in-the-USA assertions – a reality about which companies in the promotional products industry would be wise to take heed. Clearly, violating rules can result in sizable civil penalties and other headaches – such as having to submit annual compliance certifications to the FTC, as Williams-Sonoma must now do.

$3.175 million - The record-setting civil penalty Williams-Sonoma was ordered to pay for alleged false Made-in-the-USA claims on some of its products.

Some promo leaders ASI Media spoke with maintain that mislabeling or incorrectly advertising products as American-made, when in fact the items don’t meet the standard to be designated as such, is a problem in many industries, including the merch market.

“It’s an issue across our industry,” shares an executive at a Top 40 supplier who wished to remain anonymous.

Whether done as willful deception or out of ignorance, such false claims ultimately deceive would-be buyers and give the product purveyors an unfair advantage in a domestic marketplace in which end-clients often would prefer to purchase American-produced products, provided the price is right, critics say.

But just what does it mean to be Made in the USA? What standards must be met? What’s a qualified claim? And is there a difference between Made in the USA and Assembled in the USA? While not a substitute for legal advice, this ASI Media Q&A primer helps answer those questions.

Q: When can a product be labeled/marketed as“Made in the USA” under federal rules?

A: For a product to be called Made in the USA, or to claim tobe of domestic origin without qualifications or limits on theclaim, it must be “all or virtually all” made in the United States.This means the final assembly or processing of the productoccurs in the U.S., all significant processing that goes into theproduct happens here and all or virtually all ingredients orcomponents of the product are made and sourceddomestically. “The product should contain no – or negligible –foreign content,” says Mitchell J. Katz, a senior public affairsspecialist at the FTC.

Federal rules on Made in the USA apply to claims on productsthemselves and labeling, as well as in advertising andmarketing materials, including digital platforms like web-based ads, emails, social media and online productdescriptions.

Heads Up: The FTC says that manufacturers and marketersshould not indicate, either expressly or implicitly, that a wholeproduct line is of U.S. origin when only some products in thecollection are produced domestically.

Q: How does the FTC determine if the “all orvirtually all” standard is met when it comes toproduct parts?

A: Katz says there’s no “bright-line percentage” of a product’singredients/components that the FTC says must beproduced/sourced domestically for an item to be calledMade in the USA. Rather, the FTC considers elements like howmuch of a product’s total manufacturing costs can beassigned to U.S. parts and processing, how far removed anyforeign content is from the finished product and howimportant a role internationally produced components are toa product’s form or function.

Things can get tricky, and sometimes, the form or functionfactors supersede cost in relevance to the FTC assessment.

The FTC gives an example in which a watch is produced in theU.S. with American labor and mostly U.S. parts, but thecompany uses foreign-origin movement components in thewatches. The movements may not be a big percentage of theproduct’s production cost, but without them, the watcheswon’t work. “Because movements are essential to thewatches’ function, an unqualified Made in USA claim is likelydeceptive,” the FTC says.

$211,335 - The penalty a Utah-based apparel company, Lions Not Sheep, had to pay for allegedly removing clothing tags andreplacing them with phony Made-in-the-USAlabels, according to a 2022 order from theFederal Trade Commission.

Q: Is FTC approval required to market as Made inthe USA?

A: A company doesn’t need approval from the FTC beforemaking a Made-in-the-USA claim, and the FTC doesn’tpreapprove advertising or labeling claims. Still, thecommission advises manufacturers and marketers to beprepared to substantiate their U.S.-made assertions based onreasonable evidence that shows a product truly meets the“all or virtually all” standard.

The FTC says that, if given in good faith, manufacturers andmarketers can rely on information from vendor partnersabout the domestic content in the parts, components andother elements they produce and advertise. “Rather thanassume the input is 100% U.S.-made, however, manufacturersand marketers would be wise to ask the supplier for specificinformation about the percentage of U.S. content before theymake a U.S. origin claim,” the FTC states.

Q: What’s a qualified claim?

A: “Made in the USA From Chinese Parts.” “Designed in USA & Manufactured in Thailand.” “80% U.S. Content.”

These are examples of qualified claims – assertions onproducts, labels and in marketing/advertising/descriptionsthat share the extent, amount or type of a product’s domesticcontent or processing. They indicate a product isn’tcompletely of domestic origin, as would be the case with anunqualified claim of simply “Made in the USA.”

A qualified claim must feature a verifiable, clear andconspicuous disclosure about the extent to which the productcontains foreign parts, processing and/or ingredients orcomponents.

“Qualified USA claims are becoming more popular,” sharesSierra. “It’s because American customers want to see a USAconnection to the product, but companies don’t want toviolate the FTC’s guidelines.”

Even so, manufacturers and marketers can still run afoul ofregulators with qualified claims and must tread carefully toavoid stating or implying more domestic content orproduction than was actually used to produce a product.

“Avoid qualified claims unless the product has a significantamount of U.S. content or U.S. processing,” the FTC advises. “Aqualified Made in USA claim, like an unqualified claim, mustbe truthful and substantiated.”

Heads Up: It may be smart to avoid using a term like “Created inthe USA,” unless a product meets the criteria for an unqualifiedMade-in-the-USA assertion. Say, for instance, a new tote bag isdesigned in Colorado but then actually produced in India. Callingthis product “Created in the USA” would likely be considereddeceptive by the FTC, as commission officials may concludethere’s a high likelihood that consumers would equate “created”with “made,” which indicates domestic manufacturing fromlargely domestic components. A qualified claim like “Designed in USA & Manufactured in India” would probably be moreappropriate.

Q: Is there a difference between “Made in the USA” and “Assembled in the USA”?

A: Yes, though it’s often misunderstood, experts say. “A lot ofpeople think these claims mean the same thing, but they’rerelaying different information,” Sierra shares.

A product can be called Made in the USA without qualificationwhen it meets the domestic production and the “all orvirtually all” product component criteria. In laymen’s terms,Assembled in the USA means that a product contains ahigher degree of foreign components but that its primaryassembly occurs within the United States and that thisassembly is substantial.

Again, the devil is often in the details.

An FTC example: Say a lawn mower composed of mostlydomestic parts, except for the cable sheathing, flywheel,wheel rims and air filter, is built in the U.S. It’s copacetic to callthat product Assembled in the USA, the FTC says. However,take a computer in which all the major components aremade overseas but then cobbled together domestically –that’s a case in which an unqualified Assembled-in-the-USAclaim would likely be deceptive because the parts areprimarily foreign and because stateside assembly wasn’tsubstantial, according to the FTC.

“A simple ‘screwdriver’ assembly in the U.S. of foreigncomponents into a final product at the end of themanufacturing process doesn’t usually qualify for theAssembled in USA claim,” the FTC states.

Heads Up: Due to certain laws, U.S. content must be disclosed onproducts such as automobiles, textiles, wool and fur items. Still,there’s no law that requires most other products sold in the U.S. tobe marked or labeled Made in the USA or have any otherdisclosure about their amount of U.S. content. It’s up tocompanies if they want to share such information.

Q: How can promo get better on Made-in-the-USAclaims?

A: For starters, suppliers, distributors and end-buyers can digdeeper into educating themselves about the various types ofUSA-made claims, what they mean and where they can beapplied by studying the FTC guidelines.

Further, suppliers should have a dedicated compliancemanager/legal expert review Made-in-the-USA assertions,including qualified claims and “assembled-in” claims, beforeputting them on products, labels or in marketing/advertising.

Greater transparency, backed by good documentation, andimproved distributor due diligence could help, too.