U.S. Origin Claims:

Enforcement and Compliance

Activities Since December 1997

A Report by the Federal Trade Commission

March 1999
U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997 i

 Executive Summary

In December 1997, the Commission completed its review of what legal

standard advertisers and marketers should be held to when they choose to make

"Made in USA" claims on products or packages or in advertising. After seeking

public input and analyzing consumer perception and other research, the

Commission concluded that the current standard, although more than 50 years old,

continued to be the correct standard for judging such claims. This standard

requires that products advertised or labeled as "Made in USA" be all or virtually

all made in the United States, and those making "Made in USA" claims have

support demonstrating that this standard is met. This standard basically requires

that products be entirely domestically made for a seller to claim truthfully that they

are of U.S. origin. However, it also recognizes that consumers believe the claim to

be truthful if some negligible part of the item or if some de minimis portion of the

labor involved in creating the product is not domestic. 

When the Commission announced its decision to retain the traditional

standard, it also issued an "Enforcement Policy Statement on U.S. Origin Claims"

to provide industry with additional guidance on how to ensure that any domestic

origin claims made are truthful and substantiated. The Commission also instituted

a vigorous enforcement and compliance program to ensure that domestic origin

claims are truthful and substantiated. At the same time, the Commission also

reviewed catalog advertising and marketing for textile and wool products to ensure

that they contained legally required domestic and foreign origin information. As a

result of extensive advertising and complaint monitoring, more than 40

investigations were initiated, resulting in formal law enforcement actions against

14 companies.

One company, for example, advertised entire product lines as "Made in

USA," when, in fact, some products contained significant foreign parts. Another

company packaged its Chinese-made product in packaging covered with an

American flag and eagle. The company incorrectly believed that it could

adequately qualify this implied "Made in USA" claim by including the statement

"Made in China" in small print on the bottom or side panels of its packaging. Still

another company touted its product as "Made in USA of Japanese and American

Components," even though the product itself was made overseas. Only the

packaging and labeling were made in the United States.

These combined efforts have led to a reinforced business awareness of the

"Made in USA" standard and greater public assurance that the standard is

meaningful. This report describes the initiatives of the past fifteen months,

including the law enforcement actions taken, investigations conducted but closed

and numerous outreach and guidance activities. Below we summarize key items
ii U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997

from the report.

Advertising and Complaint Monitoring

C Monitored "Made in USA" claims in print, broadcast, and Internet

advertising, and on product labels, packaging, and products.

C Monitored online and print catalogs selling textile and wool products to

assess compliance with the country-of-origin disclosure requirements of the

Textile Act and Wool Act Rules. 

Investigations

C Initiated over 40 investigations of companies making allegedly deceptive

"Made in USA" claims or failing to make required of country-of-origin

disclosures.

C Coordinated closely with state Attorneys General and the U.S. Customs

Service regarding possible law violations.

Enforcement Actions

C Obtained 6 consent agreements with companies that allegedly

misrepresented that their products were made in the United States.

C Obtained 7 consent agreements with companies that allegedly failed to

disclose country of origin in violation of the Textile Act and Wool Act

Rules.

C Obtained a consent agreement with a company that misrepresented its 

t-shirts as "Made in USA" in violation of the Textile Act and Rules.

Business Outreach

C Responded to more than 600 requests for guidance about how to comply

with the all or virtually all standard and presented speeches concerning the

standard at industry conferences.

C Disseminated a business guide on compliance with the all or virtually all

standard.

C Issued a business guide on compliance with the requirements of the Textile

Act and Wool Act Rules.
U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997

 Table of Contents

1 Introduction ............................................. . 1

2 Policy Statement Enforcement Program ........................ . 3

Advertising and Complaint Monitoring ................... . 3

Coordinating with State Attorneys General ................ . 3

Coordinating with U.S. Customs ....................... . 4

Investigations ...................................... . 4

Enforcement Actions ................................ . 4

3 Textile Act and Wool Act Enforcement Program ................. . 7

4 Education and Outreach .................................... . 9

Enforcement Policy Statement Dissemination .............. . 9

Business Guidance on Made in USA Claims .............. . 9

Business Guidance on Textile Act and Wool Act Requirements 10

5 Conclusion ............................................. . 11

Endnotes

Appendix
U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997 1

1

 Introduction

 Since at least the 1940's, the Commission has held that a product must be

wholly domestic or all or virtually all1 made in the United States to support a

"Made in USA" claim under section 5 of the FTC Act.2 To determine whether this

standard continued to be appropriate in light of the increasingly global nature of

the U.S. economy, from mid-1995 through the end of 1997, the Commission

conducted an extensive review and evaluation of what legal standard to apply

when evaluating whether "Made in USA" and other U.S. origin claims are truthful

and substantiated. During the review, the Commission examined consumer

research commissioned by staff and others, surveyed other U.S. governmental

standards for U.S. origin claims and international standards for country-of-origin

claims, solicited written comments on several occasions, and held a two-day public

workshop.

The review revealed that the Commission’s traditional standard accurately

reflects consumer perception of unqualified U.S. origin claims and that the all or

virtually all standard remains the correct standard for assessing the truthfulness of

such claims. Based on this comprehensive review, in December 1997, the

Commission announced it was retaining its traditional all or virtually all standard

and issuing an "Enforcement Policy Statement On U.S. Origin Claims." The

Enforcement Policy Statement provides general guidance on how the Commission

will apply the all or virtually all standard, as well as guidance on other issues

related to the interpretation and substantiation of both unqualified and qualified

U.S. origin claims. A copy of the Enforcement Policy Statement is attached to this

report in the Appendix.

 Chapter 2 of this report describes how the Commission investigated

domestic origin claims and summarizes the enforcement actions brought since the

Commission announced the Policy Statement. Chapter 3 describes the

Commission’s project to investigate compliance with the requirements in the

Textile Act and Wool Act Rules that sellers include origin disclosures in Internet

and print catalogs. It also summarizes the enforcement actions filed under those

Rules during the same time period. Chapter 4 describes the assistance the

Commission has provided industry, which included disseminating the Policy
2 U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997

Statement and preparing and disseminating business guides that advise sellers on

how they can comply with the Policy Statement and the Textile Act and Wool Act

Rules, and providing advice to individual sellers upon request. Last, the

Conclusion at Chapter 5 emphasizes the Commission’s dedication to maintaining a

strong enforcement presence in this area and providing guidance to assist sellers in

complying with these requirements.
U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997 3

2

 Policy Statement Enforcement

Program

After the Commission issued the Enforcement Policy Statement, staff

implemented a multi-faceted enforcement program to detect and investigate

possible deceptive or misleading "Made in USA" and other U.S. origin claims. 

This ongoing program has included actively monitoring what domestic origin

claims were being made in the marketplace and following up on complaints sent to

the Commission by competitors and consumers. This monitoring, and the

investigations subsequently initiated by staff, revealed a variety of compliance

problems in this area. As discussed below, six companies have entered into

consent agreements with the Commission settling allegations that they have

violated section 5 of the FTC Act by misrepresenting the U.S. origin of their

products.

Advertising and Complaint Monitoring

To identify advertising containing domestic origin claims, staff extensively

monitored broadcast, print, and Internet advertising. Staff obtained advertisements

containing U.S. origin claims through commercial print and broadcast services (to

supplement staff’s own monitoring of media advertising) and through searches on

the Internet. Virtually all advertising containing such claims was scrutinized. 

Consumer complaints also provided investigatory targets.3 For example, a number

of consumers advised staff that a product package was marked "Made in USA,"

but that the product itself was marked with a foreign country of origin. Several

companies also informed staff, based on knowledge of their particular industry, of

allegedly improper "Made in USA" claims made by competitors.

Coordinating with State Attorneys General

Staff also consulted and coordinated with state Attorneys General on an

ongoing basis.4 For example, FTC staff and the offices of the Connecticut and

Missouri Attorneys General conducted a joint investigation of The Stanley Works. 

This company entered into a consent agreement with the FTC settling allegations
4 U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997

that it violated section 5 of the FTC Act by misrepresenting the U.S. origin of its

products. The company also entered into consent decrees with Connecticut and

Missouri and has agreed to pay a monetary penalty of $50,000 to each state. FTC

staff is also conducting a joint investigation with Connecticut in one other matter.

Coordinating with U.S. Customs

Staff also has frequently consulted with the U.S. Customs Service

regarding marketers who are making allegedly improper "Made in USA" claims

and who may also be violating the Tariff Act by failing to mark their goods with a

foreign country of origin. Staff and Customs, for example, are simultaneously

investigating one company who has advertised and labeled its product "Made in

USA," even though Customs may not consider the product to be substantially

transformed in the United States and would therefore require that this product be

marked with a foreign country of origin.5

Investigations

After the issuance of the Enforcement Policy Statement, the Commission

approved an omnibus resolution authorizing the use of compulsory process in

"Made in USA" investigations. The resolution authorizes the use of Civil

Investigative Demands to compel the production of documents and information. 

Civil Investigative Demands can be enforced in federal court, if necessary. Thus

far, companies have voluntarily provided requested information and compulsory

process has not been used. The presence of the resolution, however, likely

encourages the voluntary submission of data. Staff has initiated 35 investigations

against companies who may have made improper "Made in USA" claims. At

present, 9 investigations are still pending.

Staff closed 20 investigations after determining that formal action was not

warranted. In some instances, a marketer substantiated that the product at issue

was all or virtually all made in the United States. In others, the violations were

inadvertent and quickly remedied. For these matters, staff prepared and placed

closing letters on the public record. These letters provide marketers with

additional guidance as to how the FTC enforces the all or virtually all standard.

Enforcement Actions

The Commission has issued for public comment agreements containing

consent orders settling allegations that the following six companies have violated

section 5 of the FTC Act by misrepresenting that their products were made in the

United States:6

C American Honda Motor Company -- The Commission’s complaint

charged that American Honda Motor Company misrepresented in

advertising and labeling that three lawn mower models were all or virtually
U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997 5

all made in the United States. The complaint alleged that a significant

portion of the components of the lawn mowers is, or has been, of foreign

origin. 

C Johnson Worldwide Associates -- The Commission’s complaint charged

that Johnson Worldwide Associates misrepresented on packaging and in

advertising that its Super Mono monofilament fishing line was made in the

United States of American and Japanese components. The complaint

alleged that the Super Mono fishing line was totally made in Japan with

Japanese labor and components, and only the spool on which the fishing

line was wrapped and the package, labeling, and package inserts contained

American labor or components. In addition, the complaint alleged that in

many advertisements, the qualifying language "of American and Japanese

components" was not visible at all, so consumers only saw a "Made in

USA" claim.

C Kubota Tractor Corporation -- The Commission’s complaint charged that

Kubota Tractor Corporation misrepresented in advertising and labeling that

certain of its lawn tractors and lawn and garden tractors were made in the

United States. The complaint alleged that these products actually

contained a significant percentage of foreign parts. In addition, the

complaint charged that Kubota misrepresented that entire product lines of

lawn tractors and lawn and garden tractors were made in the United States. 

The complaint alleged that in one product line, one of the three lawn

tractor models in the product line contained significant foreign parts; in a

second product line, both of the lawn and garden tractor models in that line

contained significant foreign parts.

C Rand International Leisure Products, Inc. -- The Commission’s

complaint charged that Rand International Leisure Products, Inc.

misrepresented on its packaging for its "self-sealing" bicycle tire tubes that

the tubes were made in the United States. The complaint alleged that the

tubes were finished in the United States from imported tubes that were

manufactured in Taiwan.

C The Stanley Works -- The Commission’s complaint charged that The

Stanley Works misrepresented that certain of its mechanics tools, such as

wrenches and ratchets, were made in the United States. The complaint

alleged that a significant percentage of their content was of foreign origin.

C USDrives Corporation -- The Commission’s complaint charged that

USDrives Corporation misrepresented that its CD-ROM drives were made

in the United States through express "Made in USA" claims and through the

depiction of the American eagle, the Statue of Liberty, and the American

flag. The complaint alleged that the drives were actually assembled in the

United States of almost all imported parts. In addition, USDrives packaged
6 U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997

its Chinese-made products in packages that featured the American eagle and

the American flag and included the statement "Made in China" only in small

print on side or bottom panels of the packages. The Commission’s

complaint also charged that USDrives misrepresented that CD-ROM drives

that were made in China of primarily non-U.S. parts were made in the United

States.

The consent orders issued for public comment by the Commission in these

matters prohibit the companies from misrepresenting the extent to which their

products are made in the United States. They also provide a safe harbor consistent

with the Enforcement Policy Statement that allows the companies to represent that

a product is made in the United States so long as all, or virtually all, of the

components or parts of the product are made in the United States and all, or

virtually all, of the labor in manufacturing the product is performed in the United

States.7
U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997 7

3

 Textile Act and Wool Act

Enforcement Program

The Textile Fiber Products Identification Act and Wool Products Labeling

Act, statutes enforced by the Federal Trade Commission, require country of origin

disclosure on the labels of most textile and wool products.8 In addition, these

statutes were amended in 1984 to require that mail order catalogs and other mail

order promotional materials offering textile and wool products for direct sale to

consumers disclose whether each item was made in the U.S., imported, or both.9

Accordingly, in 1985, the Commission implemented the Congressional mandate by

adding this requirement to its rules pursuant to the Textile and Wool Acts.10 Last

year when the Commission updated and streamlined its Textile and Wool Rules, it

revised the definitions of "mail order catalog" and "mail order promotional

material" to include catalogs disseminated electronically via the Internet.11 Thus,

the Commission sought to ensure continued fulfillment of the Congressional intent

to make origin information available to consumers who buy textile and wool

products in a manner that does not allow examination of the item prior to

purchase.

In August 1998, in order to assess compliance with the amended rules,

Commission staff conducted an Internet surf of websites offering textile and wool

products for direct sale to consumers. The surf, and other relevant information

examined by FTC staff, resulted in investigations of several online and print

catalog sellers of textile and wool products. The Commission has accepted for

public comment agreements containing consent orders with seven manufacturers

or retailers. Wal-Mart Stores, Burlington Coat Factory Warehouse Corporation,

Woolrich, Gottschalks, Delia’s, and Bugle Boy Industries all failed to make origin

disclosures in their online catalogs, thus violating the Textile Act Rules and, in

those instances where wool products were offered for sale, the Wool Act Rules. 

Delia’s and Abercrombie & Fitch also failed to make appropriate disclosures in

their print catalogs. All the consent agreements prohibit similar violations in the

future. Additional investigations of catalog sellers of textile and wool products are

ongoing. The Commission expects that announcement of these consent

agreements will draw significant attention to the requirement for origin disclosures

for textile and wool products, resulting in substantial voluntary compliance in the
8 U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997

future.

The Commission also actively enforces the requirement that textile

products be labeled with accurate country-of-origin information. For example, the

Commission’s recent complaint against Design Zone, Inc. charged this women’s

apparel manufacturer with violating the Textile Act and Rules by removing "Made

in China" labels from t-shirts and replacing them with "Made in USA" labels. The

consent order, agreed to by Design Zone, requires future compliance with the

Textile Act Rules, and prohibits misrepresentations regarding the country of origin

of any textile product.
U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997 9

4

 Education and Outreach

In addition to conducting investigations and pursuing enforcement actions,

to assist companies in adhering to the law, the Commission has provided

compliance guidance to companies in a number of ways.

Enforcement Policy Statement Dissemination

Since the Commission issued the Enforcement Policy Statement

on December 1, 1997, staff has sent out more than 1500 copies of the statement

and/or the press release announcing the Policy Statement. This distribution

included many trade associations which, in turn, disseminated information to their

members through their normal channels. The Policy Statement is also available on

the Commission’s webpage. More than 3,000 visitors have accessed the Policy

Statement since it was posted in December 1997.

Business Guidance on Made in USA Claims

Staff estimates it has responded to more than 600 requests for informal oral

advice about proposed labeling and advertising claims. Staff also has given a

number of speeches at industry conferences and indicated its willingness to do this

for other industries. 

In addition, in December 1998, the Commission issued a business guide on

the Policy Statement titled "Complying with the Made in USA Standard." The

guide supplements the Policy Statement by providing advertisers and marketers

with further guidance on how to properly make domestic origin claims. It reflects

the frequently asked questions staff received throughout 1998 about proposed

labeling and advertising claims. Many companies, for example, indicated that they

were not certain whether or not they could make a "Made in USA" claim or asked

for assistance in developing a qualified U.S. origin claim for a product that

includes U.S. content or processing but does not meet the criteria for an

unqualified "Made in USA" claim. The business education publication

incorporates many of these questions and the advice given by staff and provides

detailed examples to illustrate how marketers can properly make unqualified and
10 U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997

qualified "Made in USA" claims.

Because several businesses also asked staff to clarify how the FTC’s

Enforcement Policy Statement is related to U.S. Customs’ laws and regulations,

the business guide addresses the interaction between the FTC and Customs

regarding country-of-origin claims. The publication emphasizes that even if

Customs determines that an imported product does not need a foreign country-oforigin mark, it is not necessarily permissible to promote that product as "Made in

USA." The FTC considers additional factors to decide whether a product can be

advertised, labeled, or otherwise promoted as "Made in USA." These factors,

which are set forth in the Enforcement Policy Statement, are also explained in the

business guide with illustrative examples. The business guide also explains that the

FTC has jurisdiction over foreign origin claims on products and in packaging,

beyond the marking disclosures required by Customs, and over such claims in

advertising and other promotional materials. More than 2,300 visitors have

accessed the business guide since it was posted in December 1998.

Business Guidance on Textile Act and Wool

Act Requirements

The Commission recently published a new, plain-English business guide for

members of the textile industry: Threading Your Way Through the Labeling

Requirements Under the Textile and Wool Acts. This booklet provides a

comprehensive explanation of the three basic disclosure requirements of those

Acts, as implemented by the Commission’s rules: (1) fiber content; (2) identity of

the manufacturer, importer, or other seller; and (3) country of origin. This guide

was published and distributed in cooperation with the American Apparel

Manufacturers Association. In addition, the guide is available on the

Commission’s web page.
U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997 11

5

 Conclusion

Through its extensive review of "Made in USA" and other domestic origin

claims, the Commission has learned that consumers care deeply about the accuracy

of such claims and still expect that products promoted as "Made in USA" are all or

virtually all made in the United States. Since its re-affirmation of the traditional all

or virtually all standard, the Commission has vigorously enforced the standard. 

The Commission believes that, through the efforts described in this report, it has

sent a strong message to marketers that "Made in USA" claims must be truthful

and substantiated. The Commission will continue to maintain a strong

enforcement presence in this area, while also providing guidance to companies to

assist them in making accurate and substantiated country-of-origin claims.
U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997 1

1. See, e.g., Windsor Pen Corp., 64 F.T.C. 454 (1964); Vulcan Lamp Works, Inc., 32

F.T.C. 7 (1940). The all or virtually all language was first used in the cases of Hyde

Athletic Industries, Docket No. C-3695 (consent agreement accepted subject to public

comment Sept. 20, 1994) and New Balance Athletic Shoes, Inc., Docket No. 9268

(complaint issued Sept. 20, 1994). In light of its decision to review the standard for U.S.

origin claims, the Commission later modified the complaints in these cases to eliminate the

allegations based on the all or virtually all standard. Consent agreements based on the

remaining allegations in the revised complaints were issued on December 4, 1996 (Hyde),

122 F.T.C. 427 (1996), and December 2, 1996 (New Balance), 122 F.T.C. 544 (1996).

2. Section 5 of the FTC Act, 15 U.S.C. § 45, prohibits "unfair or deceptive acts or

practices." As set out in the Commission’s Deception Policy Statement (Letter from the

Commission to the Honorable John D. Dingell, Chairman, Committee on Energy and

Commerce, U.S. House of Representatives (Oct. 14, 1983); reprinted in Cliffdale

Associates, Inc., 103 F.T.C. 110, appendix (1984)), the Commission will find an

advertisement or label deceptive under section 5, and therefore unlawful, if it contains a

representation or omission of fact that is likely to mislead consumers acting reasonably

under the circumstances, and that representation or omission is material. In addition,

objective claims carry the implication that they are supported by a reasonable basis. It is

therefore deceptive to make a claim unless, at the time the claim is made, the marketer

possesses and relies upon a reasonable basis substantiating the claim. See FTC Policy

Statement Regarding Advertising Substantiation Doctrine, 49 Fed. Reg. 30,999 (1984);

reprinted in Thompson Medical Co., 104 F.T.C. 648, appendix (1984).

3. Many consumer complaints were found in the Commission’s Consumer Response

Center ("CRC") database, a central information network for law enforcement. In addition

to responding to consumer inquiries, the CRC enters data into the Consumer Information

System, the FTC’s electronic consumer protection database. It also provides statistics and

other information for public education and for targeting the problems causing the greatest

injury.

4. State Attorneys General actively participated in the Commission’s "Made in USA"

review proceeding and favored a high standard.

5. Section 304 of the Tariff Act, 19 U.S.C. § 1304, administered by the Secretary of the

Treasury and the Customs Service, requires that all products of foreign origin imported

into the United States be marked with the name of a foreign country of origin. Where an

imported product incorporates materials and/or processing from more than one country,

Customs considers the country of origin to be the last country in which a "substantial

transformation" took place. A substantial transformation is a manufacturing or other

process that results in a new and different article of commerce, having a new name,

character and use that is different from that which existed prior to the processing.

Endnotes
2 U.S. Origin Claims -- Enforcement and Compliance Activities Since December 1997

6. The Commission’s rules provide for placing consent orders on the public record for 60

days. When this comment period has ended, the Commission reviews any comments

received and makes a determination as to whether to issue a consent order as initially

accepted or to withdraw its acceptance and/or seek changes in the agreement. If the

Commission decides to issue a consent order, the consent order then becomes final.

7. Because the matters involve different circumstances, the complaints and consent

decrees include slightly different allegations and requirements.

8. Textile Fiber Products Identification Act, 15 U.S.C. § 70 et seq., and Wool Products

Labeling Act, 15 U.S.C. § 68 et seq. The FTC’s implementing regulations are found at 16

C.F.R. Parts 303 and 300, respectively. In addition to disclosure of country of origin,

these statutes and regulations require disclosure of fiber content and identity of the

manufacturer or another business in the chain of distribution of the product.

9. 15 U.S.C. § 70(b)(i) and 15 U.S.C. § 68b(e).

10. 16 C.F.R. §§ 303.34 and 300.25a. 

11. 16 C.F.R. §§ 303.1(u) and 300.1(h). 63 Fed. Reg. 7508 (Feb. 13, 1998). The

effective date of the amendments was March 16, 1998.