"Made in USA" Pulleys? FTC Says They Don’t Hold Up
The Federal Trade Commission just announced another significant "Made in USA" enforcement action on the heels of two very recent cases (see here and here), and it is clear that while other federal agencies may be trimming enforcement activities under the new Administration, the FTC will continue to devote resources to pursue deceptive "Made in USA" claims.
The announced settlement on March 8 involves Block Division, Inc., a major manufacturer in Texas of industrial-strength metal pulley blocks used for wire rope/cable or fibrous rope. Block Division had been labeling and marketing its pulleys with an unqualified "Made in USA" claim even though the pulleys were made with significant imported parts that were essential to the function of the pulleys. In fact, FTC alleges that one of the imported components was a steel plate that had been pre-stamped "Made in USA" prior to importation. FTC has alleged that the "Made in USA" claims were false, misleading, deceptive, and not substantiated, and therefore violate Section 5 of the Federal Trade Commission Act; however, the FTC has not imposed any penalties in this matter.
FTC has proposed a settlement and consent order that will prohibit Block Division from making any unqualified "Made in USA" claims unless it can show that (i) the product’s final assembly or processing takes place in the US; (ii) all significant processing occurs in the US; and (iii) all or virtually all components of the product are made and sourced in the US.
The FTC is also requiring Block Division to make clear and conspicuous disclosures relating to any qualified "Made in USA" claims revealing the extent to which the product contains foreign parts, ingredients, and/or processing. The consent order also addresses the FTC’s substantiation requirements in the context of any country of origin claims (presumably whether US origin or foreign origin), such that Block Division must have a reasonable basis for its origin claims and the claims must be true and not misleading.
In addition to the above requirements, Block Division will also be required to file periodic detailed compliance reports with the FTC that describe whether and how the company is in compliance with each provision of the consent order, including details on any changes the company may have made to comply with the order. As with most FTC consent orders, the company has agreed that for a period of 20 years, it will comply with the terms of the order, which means that it will be subject to significant penalties in the event that it violates any provisions of the order. The consent order will be published in the Federal Register for public comment and then will likely be approved and finalized by the Commission in April.
If you have any questions about the "Made in USA" enforcement trends, please contact Georgia Ravitz or Scott Cohn.