How the FTC Makes “Made in USA” Impossible

Many more companies might consider moving production back to America, if only they could legally put the Made in USA label on their products.

Problem #1

In order for a company to put the coveted “Made in USA” label on their product, “all or virtually all” of it must be manufactured in America, according to FTC rules.  That includes all of the parts and sub-assemblies which make up the product.  In a global economy, this becomes impossible for many product categories, as some industries simply do not exist in the USA anymore.  Details of the Made in USA standard can be found here.

Although the FTC clearly defines Made in USA and Assembled in USA qualifications, for some products it is simply not possible to meet the qualifications.  For example, it is impossible for any electronic product to be Made in USA anymore, because all basic electronics components (resistors, capacitors, diodes, IC’s, switches, connectors, etc.) are no longer made in America.  The electronic components industry has completely left these shores.  There are many reasons for this, some of which are detailed in other sections of this website.

The current rules do not even allow a product to bear an unqualified Assembled in USA label for simple “screwdriver assembly” of foreign sourced sub-assemblies into a finished product.  To bear an unqualified Assembled in USA label, electronic products companies would have to purchase very expensive equipment to handle auto-insertion of electronic components into circuit boards and more expensive equipment to handle automated soldering.  Then they have to add the expense of complying with EPA and OSHA, as they are dealing with “hazardous” materials and processes… all for the luxury of putting an unqualified “Assembled in USA” on their products.  That is why it is rare to see an Assembled in USA label, and never on electronic products.

Problem #2

Made in USA labeling is frequently abused by companies who would not even qualify for “Assembled in USA” labeling under the current rules.  This gives them an unfair advantage in the marketplace as many American consumers prefer to buy Made in USA products when given the option, especially if the retail price is not too much higher than imported goods.

Current enforcement by the FTC does not impose any financial penalty for companies who make false Made in USA claims.  The FTC merely sends them a letter, demanding that they stop.  There is no penalty imposed unless there was a previous FTC order against the company regarding the same products.  Even if a company has made false claims for years, they are not penalized unless a previous order exists.  (See this case for example.)

This practice does not seem to work and may actually encourage companies to follow bad examples of making false country of origin claims.  The end result is that American companies (who also employ American workers), but who honestly label their products as Made in China for example, are penalized by loss of sales to dishonest competitors.

Ironically, the FCC currently imposes penalties for infractions that hurt no one, while the FTC does not impose penalties for infractions that hurt many.  And according to the FTC’s charter, their mission is “Protecting America’s Consumers”.

Spirit of the Regulation

Encourage companies to make products in America, by giving them a significant marketing advantage.

Solution

To acknowledge the reality of the global economy, yet encourage companies to make their products in America, perhaps the qualifications for Made in USA labeling should only require 50% USA content.  For unqualified Assembled in USA labeling, “screwdriver assembly” of foreign sourced components or sub-assemblies should be allowed.

Even if this is not done, then at least the current rules should be enforced with stiff penalties for those who don’t play by the rules.