Bogus ‘Made in USA’ Claims Flourish. The FTC Is Cracking Down
Old Southern Brass markets itself as a Florida-based glassware company that proudly honors and serves US veterans with specialty memorabilia such as shot glasses embedded with a copper bullet.
“Nothing says ‘Merica like making products right here at home,” the company once crowed on its American flag-adorned website.
Except it wasn’t practicing what it preached: Old Southern Brass’ glassware was made in China, according to the Federal Trade Commission.
The FTC has long been a watchdog against false “Made in USA” claims, but the agency has been ramping up enforcement. Since getting power three years ago to impose new financial penalties, it’s targeted violators as varied as tractor company
The trade commission hit homeware giant
The heightened focus on the misleading claims coincides with a broader Biden administration push to incentivize companies to expand their US-based manufacturing.
At the same time, American customers are looking to keep money in their communities with their purchases, and they’re willing to pay a premium to do it. Some have pushed back on their own against misleading marketing; shoppers proposed a class-action lawsuit against the maker of Reynolds aluminum foil over its Made in America claims.
In other cases, the FTC has arranged refunds for buyers of mislabeled products. Its ultimate goal is to even the marketing playing field for those whose products legitimately qualify as America-made.
“They should be rewarded in the marketplace for that,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection said in an interview with Bloomberg Law. “They can’t realize those rewards if they have to compete with those who cheat.”
Companies are eyeing the agency’s moves, and are turning to attorneys like Robert Freund, an LA-based advertising lawyer, for guidance. Many are still unprepared, he said.
“It’s something that, despite increased regulatory attention, isn’t on the radar of every brand and every marketer,” Freund said. “There are still a lot of blind spots.”
Enforcement Uptick
To be marketed as entirely Made in USA, a product must have negligible or no foreign parts, and its final assembly must take place in the US, the FTC says. Even using American flags or making references to US headquarters or factories in promotions could amount to a Made in USA claim, the agency says.
But its definitions leave wiggle room. A company could market barbecue grills made in Nevada as made in the US even if its knobs and tubing—insignificant parts of the overall product—are from Mexico, according to one example cited in FTC guidance. Businesses can also promote products as American-made with a caveat that distinguishes how much of it was made in the US and how much abroad.
“The standards can be difficult to interpret, and there can be some ambiguity,” said Daniel Kaufman, former FTC Bureau of Consumer Protection acting director, now a partner at BakerHostetler.
The FTC’s investigation against Old Southern Brass—which the agency publicly nicknamed “Uncle Sham”—determined that its $14.99 shot glasses and other products were made in China. The Florida business also misled customers by suggesting it was veteran-operated and would donate 10% of its sales to military service charities, regulators asserted.
The agency imposed a $4.6 million penalty on Old Southern Brass late last year, but later reduced it to $150,000 because of the “company’s inability to pay,” according to the FTC’s final order.
Representatives of Old Southern Brass declined to comment.
In January, the FTC ordered the US subsidiary of Japan-based tractor maker Kubota to pay $2 million for falsely labeling thousands of its tractor replacement parts and other agricultural equipment as Made in USA.
Kubota admitted the mislabeling, said it cooperated and that it “regrets that this matter has occurred.”
Many FTC investigations start with tips from competitors, or complaints from individuals left on the agency’s tip line, Levine said. Regulators then scour publicly available records to review a company’s imports and compare them to its marketing claims. Investigators can also subpoena companies for information.
An investigation into the motocross and ATV parts maker Cycra—which touts its products as “proudly designed, developed and manufactured in Lexington, North Carolina”—gained momentum when US Customs and Border Protection agents intercepted some of its shipments from Taiwan. Inside, they found assembled products sporting “Made in USA” labels.
The FTC imposed a $872,577 judgment in June 2023. Cycra ultimately couldn’t pay the whole amount, the FTC said, but the agency still collected about $221,000 and will send $180,000 in refunds to its customers.
Cycra didn’t respond to a request for comment.
Other violators have been spared a civil penalty and escape with what’s called a “closing letter” if they come clean and make amends. That was the case for eXtreme Dog Fence, an electric dog-fence business the FTC in October said had fixed potentially misleading assertions by removing some marketing statements and creating new advertising policies.
The website for the Reading, Pa.-based operation now says its fences are “made at home in the United States of America with imported parts. This means that jobs are created, here at home.”
Wilson Sporting Goods Co. got a closing letter, too, after it agreed to update its promotional materials following questions over whether some youth footballs it marketed as American-made were produced in Vietnam. “We are pleased to have resolved this matter in cooperation with the Federal Trade Commission,” the company said in a statement to Bloomberg Law.
The agency has issued at least 24 closing letters since 2022, its records show. FTC Chair Lina Khan cited its efforts on false Made in America claims during a House hearing this month.
The FTC will “use all available tools to ensure scammers who cheat consumers, honest businesses, and American workers face heavy consequences for their lawbreaking,” she said in written testimony.
Change in Advertising
Freund, the advertising lawyer, said he usually gets questions from clients after the FTC brings cases with record penalties like it has this year.
Businesses are generally ramping up their supply chain tracing to make sure they’re in compliance with the FTC and other regulators, said Clinton Yu, a partner at Barnes & Thornburg who advises businesses on customs and import rules.
They’re also checking their information from suppliers to back up their claims “if the FTC comes knocking,” Yu said.
It’s a message the agency has repeatedly preached.
“Why wait until the FTC or another law enforcer sends a subpoena before setting up an in-house compliance check?” said an April FTC website post about the Williams Sonoma case. “It doesn’t have to be fancy. Pertinent documents in a file folder or on your network are all you may need to back up your claims.”
But for some businesses, there’s far more work to be done, especially if American-made claims are a big part of their image. To be compliant with the FTC’s rules, “sometimes they have to rebrand themselves,” Yu said.
Others remain defiant.
Lions Not Sheep, the t-shirt maker, faced a $211,355 penalty after an investigation led regulators to an online video in which the company CEO said his business replaced the “Made in China” labels on his shirts with ones that said “Made in USA.” Using the money it collected, the FTC sent refunds to almost 12,000 customers.
The company did not reply to requests for comment. In a response posted online, CEO Sean Whalen said his company was targeted because it was selling anti-Biden apparel.
“They want to absolutely nuke and obliterate any conservative company they can,” he said.
The FTC declined to comment on his claim.
Consumer Sentiment
Getting caught in false Made in America claims also could be a “a publicity nightmare,” said Zlatko Hadzismajlovic, partner at McCarter & English and head of its global trade and export controls practice.
“No one who’s using the Made in USA wording as a competitive advantage wants to be known as someone who’s used it deceptively,” he said.
The backlash can be especially punishing from customers. Two-thirds of American consumers routinely seek out products made in the US, according to a 2023 report from business intelligence company Morning Consult, based on a survey of about 1,000 shoppers. Shoppers want American-made products for a myriad of reasons, whether that be safety, patriotism, labor rights or environmental concerns.
Sneaker maker New Balance settled a lawsuit in May with customers who alleged several of its shoes weren’t made in the US despite having names like “Made in USA 990v2.” Foil giant Reynolds Consumer Products LLC faces a similar claim from shoppers who contend they were duped into paying premium prices for foil wrap that boasted “Made in USA” on its box, but wasn’t.
Reynolds did not respond to a request for comment.
Online shopping can make it especially tough for consumers to notice when they’re being misled about a Made in USA claim, Levine said, because they can’t physically inspect the product or its labels. It “makes it easier and more tempting for companies to make deceptive claims,” he said.
Their bill—called the Country of Origin Labeling Requirement Act, or COOL Act—would require online marketplaces and importers to conspicuously show where the products they sell come from to match the requirements of brick-and-mortar stores. It would also broaden the FTC’s authority to penalize violators.
“It makes it easier once we require online retailers to label or to reveal where it’s made, and then it helps the fight against the fraudulent knockoffs,” Baldwin said in an interview.
The bill cleared the Senate Commerce committee in December. Baldwin said it’s likely to be added as a noncontroversial rider to must-pass legislation such as the annual defense spending bill.
Supply Chain Moves
Depending on the industry, there are a host of benefits to making products in the US: There’s no geopolitical risk and less forced labor risk, particularly for goods made in China. There are also fewer supply chain disruptions with US-made products, and companies typically have a better handle on inventory and quality control.
For some industries, making goods in America still tends to be more expensive than abroad, but reshoring is “the long game,” said Scott Paul, president of the Alliance for American Manufacturing, a partnership between US manufacturers and the United Steelworkers.
“There are still a lot of obstacles that stand in the way, but it’s more favorable than it has been for a very long time,” he said.
Companies are broadly more interested in reshoring and near-shoring now than in years past, said Lisa Anderson, a supply chain expert at LMA Consulting Group. Executives and board members see supply chain disruptions—from the pandemic uncertainty to the drought in the Panama Canal or disruptions in the Suez Canal—as headaches they’d rather avoid.
“It’s definitely getting to be in the back of executives’ minds,” Anderson said.
To contact the reporters on this story:
To contact the editors responsible for this story: