The Federal Trade Commission (FTC) is intensifying its scrutiny of "Made in USA" (MUSA) claims, but the level of risk associated with these declarations is not uniform across all products and all assertions. A series of warning letters issued in July provides a potential glimpse into a sophisticated triage framework employed by the agency to determine which companies receive a cautionary notice and which face more severe penalties, according to analysis by Reed Smith attorneys John Feldman and Julia Solomon Ensor, who previously led the FTC’s Made in USA program.
For companies that advertise their products as "Made in USA" or make similar domestic-origin claims on labels, websites, social media, or any other advertising platform, the associated risk profile has been steadily escalating. This heightened enforcement activity stems directly from a White House executive order issued in March, which directed the FTC to significantly ramp up its efforts against misleading origin claims. Since the directive, the agency’s enforcement actions have demonstrably accelerated. The recent issuance of seven warning letters in July offers compliance practitioners a crucial insight into the FTC’s evolving priorities and enforcement strategy.
The message from the FTC is unequivocal: this is not a fleeting enforcement sweep, but rather a sustained campaign designed to address a growing concern about deceptive marketing practices, directly influenced by the White House’s mandate. Understanding this emerging framework and proactively aligning internal compliance programs with its principles could be the deciding factor between receiving a warning letter, facing a full-fledged law enforcement action, or avoiding agency contact altogether.
Unpacking the FTC’s Warning Letters: A Framework for Priorities
The initial reaction to the FTC’s intensified enforcement might be to view all MUSA claims as excessively risky in the current climate. The FTC’s Made in USA Labeling Rule grants the agency the authority to seek civil penalties, which can now exceed $53,000 per violation per day, against companies making MUSA claims on products that are not "all or virtually all" manufactured domestically. This "all or virtually all" standard is a stringent requirement, often challenging to meet in today’s interconnected global economy where supply chains are intricate and international components are commonplace.
However, completely abandoning US-origin claims, even for companies that genuinely perform significant manufacturing functions in the United States, could deprive consumers of valuable information and a company of a potent marketing advantage. A more nuanced approach is therefore necessary, one that carefully considers the insights gleaned from the FTC’s July warning letters regarding risk assessment and prioritization.
The July letters were distributed to a diverse array of companies, encompassing manufacturers of e-cigarettes, coordinate measuring machines, industrial laser machinery, and musical instruments. The challenged claims themselves varied widely, ranging from straightforward "Made in USA" and "Built in the USA" declarations to more specific assertions like "handmade in Austin, Texas," and even social media hashtags such as "#madeinUSA" and "#madeincali."
Despite this diversity, the recipients of these letters shared a critical commonality: they received warning letters, not immediate enforcement actions. This distinction is key to understanding how the FTC triages its targets and, consequently, how companies should approach their own risk assessment.
Bucket 1: Navigating Jurisdictional Complexities
A notable portion of the companies receiving warning letters – three out of the seven – were involved in the sale of vaping and e-cigarette products. The Food and Drug Administration (FDA), through its Center for Tobacco Products, holds federal jurisdiction over the labeling of electronic nicotine delivery systems, regulating their manufacture, packaging, and labeling. While the FTC retains authority over the advertising and marketing of these products, the FDA’s purview typically encompasses product labels. Critically, the FTC’s MUSA labeling rule explicitly excludes products where another federal agency already has authority over labeling.
The Federal Register notice announcing the final MUSA labeling rule specifically acknowledges this by stating, "USDA and FDA have primary jurisdiction over labeling issues for the food products within their purview." Attempting to enforce the MUSA labeling rule against an FDA-regulated product’s labeling would likely invite a jurisdictional defense from the company. Consequently, issuing a warning letter and resolving the matter through that channel is a significantly less complex and resource-intensive approach for the FTC compared to pursuing a penalty case in such a situation.
For companies whose product labeling falls under the jurisdiction of an agency other than the FTC – such as the FDA, the U.S. Department of Agriculture (USDA), or the Alcohol and Tobacco Tax and Trade Bureau (TTB) – the enforcement risk stemming directly from the MUSA labeling rule is generally lower. This does not grant a free pass; the FTC can still challenge misleading origin claims in advertising under its general authority to pursue unfair or deceptive acts or practices under Section 5 of the FTC Act. However, operating within a jurisdictional gray zone is not a sustainable compliance strategy. Nevertheless, the risk of substantial civil penalties or mandatory redress is considerably reduced when labeling authority rests with another agency.
Bucket 2: Claims Beyond the Label Rule’s Direct Reach
The remaining four companies that received warning letters had their challenged claims appearing on platforms other than product labels, including websites, social media, brochures, and trade show materials. This distinction is of paramount importance. The MUSA labeling rule was specifically authorized by legislation that targets product labels. The FTC’s authority to apply this rule to non-label claims is, at best, considered tenuous.
However, this does not render non-label claims risk-free. The FTC is empowered to challenge deceptive origin claims in advertising under its broad Section 5 authority. But, similar to claims subject to other agencies’ jurisdictions, the financial implications differ materially. A violation of the MUSA labeling rule on a product label can lead to substantial civil penalties running into six figures. In contrast, a Section 5 advertising case is more likely to result in an injunction, requiring corrective action, without the same level of direct monetary penalties.
Bucket 3: The Strategic Advantage of Qualified Claims
Notably absent from both the FTC’s warning letters and its recent enforcement actions are allegations against companies for making "qualified" MUSA claims. These include statements such as "Made in USA of Imported Components" or "Assembled in USA." This observation is intrinsically linked to the categories previously discussed. Much like claims subject to other regulatory regimes or non-label statements, qualified MUSA claims fall outside the direct purview of the MUSA labeling rule.
Furthermore, provided these claims do not reference foreign-sourced parts without appropriate qualification, the substantiation standard for marketers is significantly lower. Companies that can demonstrate a substantial transformation of their products within the United States, without subsequent overseas processing, can likely make these qualified claims with a reduced risk profile.
For businesses that are confident their manufacturing processes constitute a substantial transformation in the U.S. under the definitions used by U.S. Customs and Border Protection, but remain uncertain about whether non-U.S. content in their products is truly de minimis, a qualified claim presents a low-risk alternative. Marketers should carefully consider whether the marketing benefits derived from an unqualified claim truly outweigh the potential risks associated with it.
Building a Robust Compliance Program for MUSA Claims
Understanding the FTC’s enforcement logic is only valuable if it directly informs and shapes internal compliance processes. A defensible MUSA compliance program should encompass several key components.
A Comprehensive Claim Inventory
The foundational step in building a compliant program is to meticulously identify every single U.S.-origin claim your company makes, across all communication channels. This includes:
- Product packaging and labels
- Company websites and e-commerce platforms
- Social media posts and profiles
- Marketing collateral, including brochures, catalogs, and advertisements
- Press releases and public relations materials
- Sales presentations and scripts
- Customer service communications
It is crucial to extend this inventory beyond the literal phrase "Made in USA." The FTC’s July warning letters demonstrate a broad interpretation, flagging claims such as "Precision Built in the USA," "created by American workers, engineers, and innovators," as well as city- and state-specific claims like "handmade in Austin, Texas" and "Made in [state]." The agency has explicitly stated its intention to analyze these under the same "all or virtually all" standard applied to traditional "Made in USA" claims.
Building and Maintaining Substantiation Files
For every origin claim identified, a robust substantiation file must be developed and maintained. This documentation should clearly articulate:
- The specific claim being made.
- The product(s) to which the claim applies.
- Detailed evidence proving that the product meets the "all or virtually all" standard, including information on the origin of all components and manufacturing processes.
- A clear explanation of how the company’s internal processes ensure ongoing compliance with the "all or virtually all" standard.
This is not a static exercise; supply chains are dynamic and subject to change. Substantiation files must be kept current. If a file is older than 12 months, or if there have been any changes in suppliers or manufacturing locations, it is imperative to re-substantiate the claim or, if necessary, remove it.
Mapping the Regulatory Landscape
A critical component of a compliant program involves a thorough understanding of the regulatory landscape. Companies must determine which federal agencies have jurisdiction over their product labeling and marketing. This includes understanding the specific rules each agency enforces regarding origin claims and identifying any areas of overlapping jurisdiction that could create either additional exposure or potential defenses.
Differentiating Risk by Claim Placement
Leveraging the insights from the FTC’s revealed enforcement priorities, companies should assess their risk profile based on where their claims are placed. A generalized risk matrix can be constructed as follows:
| Claim Placement | Primary Authority | Penalty Exposure | Priority Level |
|---|---|---|---|
| Unqualified claims on product labels (FTC-jurisdictional products) | MUSA Labeling Rule | Civil penalties (~$53K/violation) | Highest |
| Unqualified claims on product labels (other-agency products) | Varies; jurisdictional | Depends on agency; overall likely lower than FTC | Moderate |
| Unqualified claims on website, social media, advertising | Section 5 | Injunction; limited monetary | Moderate |
| Qualified claims | Section 5 | Injunction; limited monetary | Lower |
This matrix does not suggest that non-label claims should be disregarded. The FTC’s warning letters clearly indicate that the agency is monitoring all advertising channels. However, this framework provides crucial guidance on where compliance resources should be allocated as a first priority.
Establishing a Review Cadence
MUSA compliance is not a one-time task; it requires ongoing diligence. Companies should build recurring processes into their compliance framework, including:
- Regular internal audits: Conduct periodic reviews of all MUSA claims and their substantiation to ensure continued accuracy and compliance.
- Supply chain monitoring: Implement systems to track changes in suppliers, components, and manufacturing processes that could affect the validity of MUSA claims.
- Training and education: Ensure that relevant personnel, including marketing, sales, and product development teams, are adequately trained on MUSA claim requirements and the company’s compliance policies.
Looking Ahead: The Persistent Focus on Domestic Manufacturing
"Made in USA" claims remain firmly in the FTC’s crosshairs as the agency continues to execute a key component of the administration’s domestic manufacturing agenda. Further enforcement actions are anticipated on the horizon.
For compliance practitioners, the path forward, while potentially complex in execution, is strategically straightforward: understand which agencies regulate your products, meticulously identify all origin claims being made, rigorously verify the truthfulness and substantiation of those claims, and establish robust internal processes to ensure ongoing adherence. Companies that invest in this proactive compliance work today are the ones most likely to avoid receiving a warning letter – or worse – in their inboxes tomorrow.
