Made in USA Labeling Rule, 37022-37035 [2021-14610]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 86, Number 132 (Wednesday, July 14, 2021)]
[Rules and Regulations]
[Pages 37022-37035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-14610]


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FEDERAL TRADE COMMISSION

16 CFR Part 323

[3084-AB64]


Made in USA Labeling Rule

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') 
issues a final rule related to ``Made in USA'' and other unqualified 
U.S.-origin claims on product labels.

DATES: This final rule is effective August 13, 2021.

FOR FURTHER INFORMATION CONTACT: Julia Solomon Ensor (202-326-2377) or 
Hampton Newsome (202-326-2889), Attorneys, Division of Enforcement, 
Bureau of Consumer Protection, Federal Trade Commission, Room CC-9528, 
600 Pennsylvania Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

I. Background

    On July 16, 2020, the Commission published a Notice of Proposed 
Rulemaking (``NPRM'') (85 FR 43162) seeking comments on a new rule 
regarding unqualified U.S.-origin claims (``MUSA claims'') on product 
labels. The NPRM was preceded by a review of the Commission's 
longstanding program to prevent deceptive MUSA claims.\1\ The review 
included a 2019 public workshop and public comment period, where 
stakeholders expressed nearly universal support for a rule addressing 
MUSA labels.\2\
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    \1\ This program consisted of compliance monitoring, counseling, 
and targeted enforcement pursuant to the FTC's general authority 
under 15 U.S.C. 45 (``Section 5'' of the FTC Act). Section 5 
prohibits unfair or deceptive acts or practices in or affecting 
commerce. An act or practice is deceptive if it is likely to mislead 
consumers acting reasonably under the circumstances and is 
material--that is, likely to affect a consumer's decision to 
purchase or use the advertised product or service. A claim need not 
mislead all--or even most--consumers to be deceptive under the FTC 
Act. Rather, it need only be likely to deceive some consumers acting 
reasonably. See FTC Policy Statement on Deception, 103 F.T.C. 174 
(1984) (appended to Cliffdale Assocs., Inc., 103 F.T.C. 110, 177 
n.20 (1984) (``A material practice that misleads a significant 
minority of reasonable consumers is deceptive.''); see also FTC v. 
Stefanchik, 559 F.3d 924, 929 (9th Cir. 2009) (``The FTC was not 
required to show that all consumers were deceived . . . .'').
    \2\ Commenters argued such a rule could have a strong deterrent 
effect against unlawful MUSA claims without imposing new burdens on 
law-abiding companies. See generally Transcript of Made in USA: An 
FTC Workshop (Sept. 26, 2019) at 63-72, available at https://www.ftc.gov/news-events/events-calendar/made-usa-ftc-workshop; FTC 
Staff Report, Made in USA Workshop (June 2020) (``MUSA Report''), 
available at https://www.ftc.gov/system/files/documents/reports/made-usa-ftc-workshop/p074204_-_musa_workshop_report_-_final.pdf.
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    The Commission published a new rule in the NPRM pursuant to its 
authority under 15 U.S.C. 45a (``Section 45a''). Section 45a declares: 
``[t]o the extent any person introduces, delivers for introduction, 
sells, advertises, or offers for sale in commerce a product with a 
'Made in the U.S.A.' or `Made in America' label, or the equivalent 
thereof, in order to represent that such product was in whole or 
substantial part of domestic origin, such label shall be consistent 
with decisions and orders of the Federal Trade Commission.'' The 
statute authorizes the agency to issue rules to effectuate this mandate 
and prevent unfair or deceptive acts or practices relating to MUSA 
labeling.\3\ Specifically, under the statute, the Commission ``may from 
time to time issue rules pursuant to section 553 of title 5, United 
States Code'' requiring MUSA labeling to ``be consistent with decisions 
and orders of the Federal Trade Commission issued pursuant to [Section 
5 of the FTC Act].'' The statute authorizes the FTC to seek civil 
penalties for violations of such rules.\4\
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    \3\ See Section 320933 of the Violent Crime and Law Enforcement 
Act of 1994, Public Law 103-322, 108 Stat. 1796, 2135, codified in 
relevant part at 15 U.S.C. 45a. Section 45a also states: ``This 
section shall be effective upon publication in the Federal Register 
of a Notice of the provisions of this section.'' The Commission 
published such a notice in 1995 (60 FR 13158 (Mar. 10, 1995).
    \4\ Under the statute, violations of any rule promulgated 
pursuant to Section 45a ``shall be treated by the Commission as a 
violation of a rule under section 57a of this title regarding unfair 
or deceptive acts or practices.'' For violations of rules issued 
pursuant to 15 U.S.C. 57a, the Commission may commence civil actions 
to recover civil penalties. See 15 U.S.C. 45(m)(1)(A).
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    Consistent with these statutory provisions, the NPRM proposed a 
rule covering labels on products that make unqualified U.S.-origin 
claims. Consistent with the Commission's MUSA Decisions and Orders 
since the 1940s,\5\ the NPRM proposed to codify the established 
principle that unqualified U.S.-origin claims imply to consumers no 
more than a de minimis amount of the product is of foreign origin.\6\
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    \5\ See, e.g., Vulcan Lamp Works, Inc., 32 F.T.C. 7 (1940); 
Windsor Pen Corp., 64 F.T.C. 454 (1964) (articulating this standard 
as a ``wholly of domestic origin'' standard).
    \6\ This principle was incorporated into the Commission's 1997 
Enforcement Policy Statement on U.S. Origin Claims (the ``Policy 
Statement'') following consumer research and public comment, as the 
``all or virtually all'' principle. Specifically, the Policy 
Statement provides a marketer making an unqualified claim for its 
product should, at the time of the representation, have a reasonable 
basis for asserting ``all or virtually all'' of the product is made 
in the United States. FTC, Issuance of Enforcement Policy Statement 
on ``Made in USA'' and Other U.S. Origin Claims, 62 FR 63756, 63766 
(Dec. 2, 1997). The Commission first used the ``all or virtually 
all'' language in Hyde Athletic Industries, File No. 922-3236 
(consent agreement accepted subject to public comment Sept. 20, 
1994) and New Balance Athletic Shoes, Inc., Docket 9268 (complaint 
issued Sept. 20, 1994). In the 1997 Federal Register Notice 
requesting public comment on Proposed Guides for the Use of U.S. 
Origin Claims, the Commission explained the ``all or virtually all'' 
standard merely rearticulated longstanding principles governing MUSA 
claims. FTC, Request for Public Comment on Proposed Guides for the 
use of U.S. Origin Claims, 62 FR 25020 (May 7, 1997). The Commission 
has routinely applied this standard in its MUSA Decisions and Orders 
since 1997. See Compilation of cases at https://www.ftc.gov/tips-advice/business-center/legal-resources?type=case&field_consumer_protection_topics_tid=234.

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[[Page 37023]]

    The NPRM, consistent with the Commission's prior rulings and 
consumer perception surveys, proposed a rule prohibiting marketers from 
including unqualified U.S.-origin claims on labels unless: (1) Final 
assembly or processing of the product occurs in the United States; (2) 
all significant processing for the product occurs in the United States; 
and (3) all or virtually all of the product's ingredients or components 
are made and sourced in the United States. By codifying existing 
guidance, the proposed rule sought to impose no new obligations on 
market participants.
    To avoid confusion or perceived conflict with other country-of-
origin labeling laws and regulations, the NPRM contained a provision 
specifying the rule does not supersede, alter, or affect any other 
federal or state statute or regulation relating to country-of-origin 
labels, except to the extent a state country-of-origin statute, 
regulation, order, or interpretation is inconsistent with the proposed 
rule.\7\
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    \7\ See, e.g., Textile Fiber Products Identification Act (15 
U.S.C. 70b); Wool Products Labeling Act (15 U.S.C. 68); American 
Automobile Labeling Act (49 U.S.C. 32304); Agricultural Marketing 
Act (7 U.S.C. 1638a); Buy American Act (41 U.S.C. 10a-10c); and 
implementing rules.
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    In response to the NPRM, the Commission received hundreds of 
comments, discussed infra Section II. Although some raised concerns or 
recommended changes to the Commission's proposal, the majority 
supported finalizing the rule as drafted. Accordingly, the Commission 
adopts the proposed rule with limited modifications as discussed 
below.\8\ The rule will take effect August 13, 2021.
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    \8\ As discussed in Section III of this Notice, the Commission 
has added a provision (section 323.6) in the final Rule related to 
petitions for exemption.
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II. Response to Comments

    The Commission received more than 700 comments \9\ in response to 
the NPRM from individuals, industry groups, consumer organizations, and 
members of Congress. Commenters generally supported the rule,\10\ 
stating it provided much-needed clarity \11\ and would deter bad actors 
\12\ without imposing new burdens on marketers.\13\ Most commenters 
agreed the rule should incorporate the longstanding ``all or virtually 
all'' standard.\14\ Additionally, the majority of commenters addressing 
the issue agreed the proposed rule represented a proper exercise of the 
Commission's rulemaking authority under Section 45a.
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    \9\ Comments appear on FTC Docket FTC-2020-0056 and are 
available at www.regulations.gov. For purposes of this Notice, all 
comments are referred to by their short docket number (e.g., ``1''), 
rather than long docket number (e.g., ``FTC-2020-0056-0001'').
    \10\ See, e.g., Senators Sherrod Brown, Tammy Baldwin, 
Christopher Murphy, and Richard Blumenthal (``Senators'') (373); 
North American Insulation Manufacturers (631); see also Letter from 
Representative Frank Pallone, Jr., Chairman, and Representative Jan 
Schakowsky, Chair, Subcommittee on Consumer Protection and Commerce, 
U.S. House of Representatives (Oct. 15, 2020). But see Retail 
Industry Leaders Association (``RILA'') (570) (arguing low levels of 
enforcement activity suggest codifying the guidance into a rule is 
unnecessary).
    \11\ UIUC Accounting Group A13 (5); Delphine MUREKATETE, iMSA 
Program, University of Illinois at Urbana Champaign (21); Anonymous 
Anonymous (24); UIUC-BADM 403-A02 (25); Nirma Ramirez (26); Jaymee 
Westover (358); Joy Winzerling (419); United Steelworkers (526); 
Anonymous Anonymous (533); R-CALF USA (588).
    \12\ Chris Jay Hoofnagle (613) (advocating use of civil 
penalties to deter MUSA fraud).
    \13\ UIUC Accounting Group A13 (5); Chris Posey (7); Family Farm 
Action Alliance (543).
    \14\ See, e.g., United Steelworkers (526); Alliance for American 
Manufacturing (``AAM'') (611).
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    Although the Commission received mostly supportive comments, some 
commenters raised concerns with the Commission's proposal to codify the 
``all or virtually all'' guidance through rulemaking, suggesting the 
standard may not reflect current consumer perception. Others proposed 
specific additions to the rule, including additional definitions, 
guidance on implied claims, and an effective date. Members of the beef 
and shrimp industries requested specific guidance for their industries. 
A few stakeholders proposed changes outside the scope of the FTC's 
Section 45a rulemaking authority. For example, some commenters proposed 
making country-of-origin labeling mandatory in all instances. Finally, 
some raised miscellaneous concerns about particular businesses' 
practices or claims.\15\ As discussed below, these comments do not 
provide a compelling basis to change the substantive requirements of 
the rule proposed in the NPRM.
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    \15\ Honey Boynton (32); Holly Mastromatto (33); Doug Thompson 
(123); Lucilla Rinehimer (702).
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A. Rulemaking Authority Regarding Mail Order Advertising

    Eleven stakeholders filed comments addressing the FTC's rulemaking 
authority under Section 45a, with the majority agreeing the proposed 
rule is consistent with that grant of authority.\16\ As described in 
Section I, Section 45a authorizes the Commission ``[to] issue rules 
pursuant to section 553 of title 5 [of the U.S.C.]'' to govern the use 
of `` `Made in the U.S.A.' or `Made in America' label[s], or the 
equivalent thereof'' when a person ``introduces, delivers for 
introduction, sells, advertises, or offers for sale [a product] in 
commerce.'' The statute provides such labels must be ``consistent with 
decisions and orders of the Federal Trade Commission issued pursuant to 
[Section 5 of the FTC Act].'' \17\
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    \16\ UIUC Accounting Group A13 (5); UIUC Group A06 Anonymous 
(22); Truth in Advertising, Inc. (``TINA.org'') (369); Senators 
(373); Southern Shrimp Alliance (380); Council for Responsible 
Nutrition (``CRN'') (569); Personal Care Products Council (``PCPC'') 
(587); Anonymous Anonymous (592); Alliance for AAM (611); National 
Association of Manufacturers (``NAM'') (623); Coalition for a 
Prosperous America (625).
    \17\ 15 U.S.C. 45a.
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1. Comments
    Eleven commenters addressed the Commission's authority under 
Section 45a. The majority asserted the proposed rule was within the 
scope of Section 45a's grant of rulemaking authority, and the proposed 
rule appropriately covered labels in mail order (electronic) 
advertising.\18\ For example, TINA.org argued the Commission properly 
interpreted Section 45a as authorizing coverage of electronic labels 
because Section 45a does not limit the term ``labels'' to physical 
labels, and physical and digital labels are ``functionally equivalent'' 
in terms of providing product information to consumers.\19\ TINA.org 
further noted ``[w]hen Congress seeks to limit `labels' to the 
physical, it knows how . . . [and here] the statute makes no attempt to 
restrict the definition or distinguish physical labels from digital 
labels.'' \20\ Moreover, TINA.org explained, limiting the proposed rule 
to physical labels without addressing electronic labels

[[Page 37024]]

would ``leave American consumers unprotected.'' \21\ Accordingly, 
TINA.org concluded, ``[a]s a matter of statutory interpretation, the 
Commission can regulate digital MUSA labels. As a matter of consumer 
protection, the Commission ought to regulate digital MUSA labels.'' 
\22\
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    \18\ UIUC Accounting Group A13 (50); UIUC Group A06 (22); 
TINA.org (369); Senators (373); Southern Shrimp Alliance (380); AAM 
(611); Coalition for a Prosperous America (625).
    \19\ TINA.org (369) (emphasis in original) (also arguing the 
Commission may draw support from the dictionary definition of 
``labels,'' which includes digital labels).
    \20\ Id. at 2. TINA.org also suggested ``courts regularly 
interpret laws expansively in the face of technological 
innovation,'' and the ``possibility that Congress may not have 
anticipated the application of the term label to apply online does 
not change [the] outcome.''
    \21\ Id. at 5.
    \22\ Id. at 3 (emphasis in original).
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    The Southern Shrimp Alliance (``SSA'') and AAM agreed, arguing 
Congress made an affirmative decision to defer to the FTC when it 
removed a definition of ``labels'' that appeared in initial drafts of 
the legislation.\23\ Moreover, AAM argued the text of Section 45a 
specifically authorizes coverage of electronic labels because of the 
words ``the equivalent thereof'' in the phrase authorizing coverage of 
products introduced into commerce ``with a `Made in the U.S.A.' or 
`Made in America' label, or the equivalent thereof.'' \24\ AAM argued 
the phrase refers to the ``equivalent'' of introducing a product into 
commerce with a label, i.e., making a claim on a website.\25\
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    \23\ Southern Shrimp Alliance (380); AAM (611).
    \24\ AAM (611). Coalition for a Prosperous America (625) agreed 
Section 45a's plain language permits coverage of electronic claims 
(arguing coverage is authorized where a ``substantial part'' of the 
product is of domestic origin) (citing Section 45a (``To the extent 
any person introduces, delivers for introduction, sells, advertises, 
or offers for sale in commerce a product with a `Made in the U.S.A.' 
or `Made in America' label, or the equivalent thereof, in order to 
represent that such product was in whole or substantial part of 
domestic origin, such label shall be consistent with decisions and 
orders of the Federal Trade Commission issued pursuant to section 45 
of this title (emphasis added).'')).
    \25\ AAM (611).
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    In contrast, four commenters asserted the proposed rule exceeds the 
scope of the Commission's rulemaking authority under Section 45a.\26\ 
CRN and PCPC argued Section 45a's consistent use of the term ``label'' 
demonstrates Congress's intent to authorize a rule limited to labels on 
products, not one that would cover advertising generally.\27\ An 
anonymous commenter argued Section 45a does not provide authority to 
regulate claims in mail order advertising materials as proposed in 
Section 323.3, so the proposed rule ``should be revised to only cover 
labels on products.'' \28\ Should the FTC finalize a rule that purports 
to cover more than labels on products, NAM warned, the result could be 
``lengthy litigation [, which would leave] manufacturers and consumers 
alike . . . without clear guidance at a time when manufacturers need as 
much regulatory certainty as possible.'' \29\ Given these concerns over 
the scope of the Commission's rulemaking authority, Shirley Boyd stated 
the Commission should proceed pursuant to the Magnuson Moss Warranty-
Federal Trade Commission Improvements Act to issue a broader rule 
covering MUSA advertising generally.\30\
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    \26\ CRN (569); PCPC (587); Anonymous Anonymous (592); NAM 
(623).
    \27\ PCPC (587); CRN (569).
    \28\ Anonymous Anonymous (56).
    \29\ NAM (623) at 5.
    \30\ Shirley Boyd (6).
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2. Analysis
    After reviewing the comments, the Commission has concluded proposed 
Section 323.3 falls within the scope of its authority under Section 
45a. As described above, Section 45a authorizes the Commission to issue 
rules to govern labeling of products as ``Made in the U.S.A.'' or 
``Made in America,'' or the equivalent thereof. Section 45a specifies: 
``[t]o the extent any person introduces, delivers for introduction, 
sells, advertises, or offers for sale in commerce a product with a 
`Made in the U.S.A.' or 'Made in America' label, or the equivalent 
thereof, in order to represent that such product was in whole or 
substantial part of domestic origin, such label shall be consistent 
with decisions and orders of the Federal Trade Commission.'' The 
Commission is empowered to ensure such labels are consistent with 
decisions and orders of the Federal Trade Commission defining unfair or 
deceptive acts or practices under Section 5. The Commission agrees with 
SSA and AAM that Congress's removal of a definition of ``label'' from 
Section 45a before its passage strongly suggests Congress deliberately 
chose to defer to the FTC's interpretation of the term in the context 
of MUSA claims.\31\ Moreover, the Commission agrees with TINA.org that 
digital and physical labels are functionally equivalent, especially 
with the growth of e-commerce, and a failure to cover labels in print 
or electronic mail order catalogs or promotional materials would leave 
consumers without much-needed protection.\32\
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    \31\ Southern Shrimp Alliance (380); AAM (611).
    \32\ See TINA.org (369).
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    The final rule does not cover MUSA claims in all advertising. 
Instead, as Section 323.3 explains, the rule covers labels appearing in 
all contexts, whether, for example, they appear on product packaging or 
online. With this clarification, the Commission adopts Section 323.3 as 
proposed.

B. ``All or Virtually All'' Standard

    As described in Section I above, the NPRM proposed to codify the 
Commission's longstanding interpretation of Section 5's requirements 
governing substantiation of unqualified MUSA claims. This 
interpretation was first articulated in Commission cases dating back to 
the 1940s \33\ and was formalized in the 1997 Policy Statement. 
Specifically, the NPRM proposed to prohibit unqualified MUSA claims on 
labels unless: (1) Final assembly or processing of the product occurs 
in the United States, (2) all significant processing that goes into the 
product occurs in the United States, and (3) all or virtually all 
ingredients or components of the product are made and sourced in the 
United States.
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    \33\ See, e.g., In re Vulcan Lamp Works, Inc., 32 F.T.C. 7 
(1940).
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    Although many commenters, particularly those with interest in food 
products, supported the decision to incorporate the ``all or virtually 
all'' guidance, others raised concerns. In particular, commenters 
questioned whether the ``all or virtually all'' standard represents 
current consumer understanding of MUSA claims. Some proposed 
alternative standards for consideration.
    After analyzing these comments, as discussed below in Section 
II.B.3., the Commission has determined it has a reasonable basis to 
adopt the longstanding ``all or virtually all'' standard, and the rule 
provides appropriate and clear guidance to marketers.
1. Consumer Perception Testing
    Six commenters argued the FTC should conduct new consumer 
perception testing before codifying the ``all or virtually all'' 
guidance into a rule.\34\ They noted the Commission has not conducted 
comprehensive testing since the 1990s. CRN explained ``codifying a 
standard for unqualified U.S.-origin claims that is based on consumer 
perception data that has not been reanalyzed by the Commission in over 
20 years'' is potentially problematic because ``[g]iven significant 
changes to the global economy, consumer perceptions of U.S.-origin 
claims are very likely to have changed over time and consumer 
perception in 1997, and even 2013, could be very different from how 
consumers perceive U.S.-origin claims today.'' \35\ CTA agreed and 
asserted that proposing to codify the ``all or virtually standard'' 
without conducting new consumer perception

[[Page 37025]]

testing ``put the cart before the horse.'' \36\ NAM also encouraged the 
FTC to undertake a comprehensive review similar to the Commission's 
process in the 1990s before promulgating any rule.\37\
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    \34\ CRN (569); Consumer Technology Association (``CTA'') (579); 
Global Organization for EPA and DHA Omega-3s (604); American 
Association of Exporters and Importers (``AAEI'') (605); NAM (623); 
Pharmavite LLC (695).
    \35\ CRN (569).
    \36\ CTA (579).
    \37\ NAM (623).
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2. Alternative Standards
    In addition to requesting the FTC conduct new perception testing, 
numerous commenters proposed alternatives to the ``all or virtually 
all'' standard. These proposals, which were based on policy arguments 
and were not accompanied by supporting consumer perception evidence, 
fell into two groups. On one hand, more than twenty commenters, mostly 
individual consumers, suggested unqualified MUSA claims should be 
limited to products 100% made in the United States. On the other hand, 
other commenters, mostly manufacturers, argued ``all or virtually all'' 
is too strict, and by incorporating it into a rule, the FTC could chill 
unqualified claims, discourage innovation, and harm industries where 
parts or ingredients are not available in the United States.\38\ To 
address these concerns, this second group of commenters suggested 
alternatives: (1) Introducing a percentage-of-costs standard; (2) 
adopting a standard that makes allowances for imported parts or 
materials not available in the United States; (3) aligning with U.S. 
Customs and Border Protection's (``CBP'') substantial transformation 
standard; or (4) adding a safe harbor for ``good faith'' efforts to 
comply.
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    \38\ See, e.g., CTA (579) (arguing the ``all or virtually all'' 
guidance deters innovation because many electronic product 
components are only made internationally); Personal Care Products 
Council (587) (guidance deters manufacturers from using maximum 
levels of U.S. parts and materials); AAEI (605) (guidance negatively 
impacts U.S. companies that will not risk making the claim).
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i. Percentage-Based Standards
    Several commenters argued the Commission should provide marketers 
greater certainty by promulgating a ``bright line'' rule outlining a 
specific percentage of manufacturing costs that must be attributable to 
U.S. costs to substantiate an unqualified claim.\39\ For example, NFI 
suggested the FTC could align the rule with California state law,\40\ 
which permits manufacturers to make unqualified MUSA claims for 
products with up to 5% of the final wholesale value of the product 
attributable to articles, units, or parts of the merchandise obtained 
from outside the USA.\41\
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    \39\ National Fisheries Institute (``NFI'') (628); RILA (570); 
TRAVIS HEDSTROM (600); Acuity Brands (609); NAM (623); American 
Coatings Association (``ACA'') (666) (stating marketers need 
guidance on percentage values or other guidance on how to deal with 
trace components of foreign/unknown origin).
    \40\ NFI (628).
    \41\ See Cal. Bus. & Prof. Code Sec.  17533.7 (as revised in 
2015).
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    RILA agreed a rule providing a bright-line percentage would help 
marketers comply, and suggested the FTC consider ``analogous federal 
regulations that incentivize U.S. manufacturing,'' and incorporate a 
70% threshold for unqualified claims.\42\ Alternatively, one commenter 
suggested a rule that would permit an unqualified claim for a product 
assembled in the United States where more than 50% of its value is 
based on components of U.S.-origin.\43\
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    \42\ RILA (570).
    \43\ TRAVIS HEDSTROM (660).
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    Two representatives of the dietary supplement industry, the Global 
Organization for EPA and DHA Omega-3s (``GOED'') and Pharmavite LLC, 
made an alternative percentage-based proposal with different standards 
for active and inactive ingredients. Specifically, they argued 
consumers likely interpret an unqualified MUSA claim to mean 100% of a 
dietary supplement's active ingredients are made and sourced in the 
United States. They claimed, however, consumers care less about the 
origin of inactive ingredients. Accordingly, they contended the rule 
should incorporate a 10% tolerance for foreign-made or sourced inactive 
ingredients.\44\
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    \44\ GOED (604); Pharmavite LLC (695).
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ii. Unavailability Exemption
    Other commenters argued the rule should allow marketers to make 
unqualified MUSA claims for products that include imported content only 
if the imported components are not available in the United States.\45\ 
Some argued there should be a blanket exemption for such content. For 
example, Bradford White Corporation (``BWC'') suggested the rule 
broadly allow marketers to exclude foreign parts from the analysis if 
those parts cannot be ``reasonably sourced'' from a domestic 
manufacturer.\46\ Others agreed the rule should permit unqualified 
claims for products that contain foreign content that cannot be sourced 
in the United States, but argued this exemption should be capped at a 
certain percentage of manufacturing costs. In NAM's view, a rule 
permitting marketers to incorporate an appropriate percentage of 
imported components or labor, not otherwise unavailable domestically, 
``would give manufacturers clear and predictable rules and play a 
significant role in helping to encourage manufacturers to increase 
domestic investments in order to meet an attainable standard.'' \47\
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    \45\ The California law makes such an allowance, although it is 
not unlimited. Specifically, California permits up to 10% (instead 
of 5%) of costs to be attributable to imported content if that 
content cannot be made or obtained in the USA for reasons other than 
cost. Cal. Bus. & Prof. Code Sec.  17533.7.
    \46\ BWC (622). Indeed, BWC argued, given consumer expectations 
and current supply chains, rather than analyzing the percentage of 
costs attributable to U.S. versus foreign costs, it might be more 
appropriate to analyze the proportion of an entity's overall 
manufacturing workforce in the U.S. Id.
    \47\ NAM (623). See also Glenda Smith (612) (requesting more 
detail on how to handle raw materials not capable of being sourced 
in the USA).
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iii. Substantial Transformation Analysis
    Several commenters suggested the FTC adopt a ``substantial 
transformation'' standard for unqualified claims.\48\ Three commenters 
from U.S. trade associations \49\ explained harmonizing the FTC's rule 
with the CBP standard for determining foreign country of origin 
pursuant to the Tariff Act, 19 U.S.C. 1304, would provide clarity and 
alleviate the burden on U.S. companies that ``must navigate a number of 
different country of origin requirements.'' \50\ AAFA explained 
adopting the ``substantial transformation'' standard would result in a 
``clear, simple, and easy-to-understand rule.'' \51\ The People's 
Republic of China (``China'') also argued, to avoid uncertainties and 
bias, the FTC should incorporate CBP's ``change in Tariff 
Classification'' analysis, as suggested in Article 9 of the World Trade 
Organization's (``WTO'') Agreement on Rules of Origin.\52\
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    \48\ CBP defines ``substantial transformation'' as a 
manufacturing process that results in a new and different product 
with a new name, character, and use different from that which 
existed before. This standard does not take into account the origin 
of materials or parts. See 19 CFR part 134; Energizer Battery, Inc. 
v. United States, 190 F. Supp. 3d 1308 (Ct. Int'l Tr. 2016) (holding 
a substantial transformation occurs when a product emerges from a 
manufacturing process with a new name, character, and use, and the 
``simple assembly'' of a limited number of components does not 
constitute a substantial transformation).
    \49\ International Precious Metals Institute, Inc. (``IPMI'') 
(520); AAEI (605); American Apparel and Footwear Association 
(``AAFA'') (675).
    \50\ AAEI (605). See also BWC (622) (raising concerns about 
increased regulatory burden).
    \51\ AAFA (675) (also suggesting the FTC ``eliminate'' qualified 
claims for any products that do not meet the ``substantial 
transformation'' threshold).
    \52\ China (699).
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iv. Good Faith Efforts To Comply
    PCPC and RILA recommended the Commission provide safe harbors for 
two types of good-faith efforts to comply. PCPC, a trade association

[[Page 37026]]

representing manufacturers, distributors, and suppliers of personal 
care products, suggested incorporating a safe harbor for ``good actors 
who are trying to overcome the difficulties in sourcing domestic 
components and materials.'' \53\ PCPC explained, ``[a] safe harbor 
provision for unqualified claims would not dilute the purpose of the 
FTC's goal with this proposed rule--to deter bad actors from making 
false claims. Rather, such a provision would provide businesses who in 
good faith make every reasonable effort to make as much of their 
product as possible in the U.S. the flexibility to comply with any new 
regulations.'' \54\
---------------------------------------------------------------------------

    \53\ PCPC (587). Although not specifically advocating for a 
good-faith claim safe harbor, the Family Farm Action Alliance 
similarly argued the FTC should continue its practice of counseling 
inadvertent offenders into compliance (543).
    \54\ PCPC (587) at 3.
---------------------------------------------------------------------------

    Alternatively, RILA suggested that to avoid deterring retailers and 
marketplaces from offering products with MUSA labels the final rule 
should ``include an express statement . . . that allows retailers and 
marketplaces that have exercised reasonable due diligence to rely on 
documented supplier and vendor certifications to substantiate MUSA 
labeling claims.'' \55\
---------------------------------------------------------------------------

    \55\ RILA (570).
---------------------------------------------------------------------------

3. Analysis
    The Commission has concluded it is not necessary to undertake 
additional consumer perception testing before adopting the proposed 
Rule. Accordingly, the Commission adopts the ``all or virtually all 
standard'' to govern unqualified claims as proposed in the NPRM. 
Although some commenters speculated consumer perception may have 
shifted over time, or argued the Commission should adopt a new standard 
for unqualified claims, there is no evidence on the record disputing 
the Commission's past findings that at least a significant minority of 
consumers expect a MUSA-advertised product to be ``all or virtually 
all'' made in the United States. Nor is there evidence suggesting new 
perception testing would find otherwise.
    Indeed, the limited survey evidence submitted in conjunction with 
the 2019 workshop on MUSA claims suggested consumer perception has 
remained stable since the 1990s. Specifically, one panelist, Mark Hanna 
of Richline Group, Inc. submitted a survey, conducted in 2013, which 
found almost 3 in 5 Americans (57%) agree ``Made in America'' means all 
parts of a product, including any natural resources it contains, 
originated in the United States.\56\ Additionally, the survey found 33 
percent of consumers thought 100 percent of a product must originate in 
a country for that product to be labeled as ``Made'' in that 
country.\57\ These findings are consistent with the FTC's 1995 survey, 
which found roughly 30 percent of consumers would be deceived by an 
unqualified MUSA claim for a product where 70 percent of the cost was 
incurred in the United States.\58\ As Hanna explained during the 
workshop, ``at least 25% of the consumers were skeptical that if 
there's something introduced to that finished product other than 
something that originated in the US now, they didn't think it should be 
made in the USA.'' \59\ Accordingly, the Commission has a reasonable 
basis to conclude the ``all or virtually all'' standard accurately 
represents current consumer perception regarding unqualified MUSA 
claims. Should future consumer research clearly establish the ``all or 
virtually all'' standard is inapplicable to a specific class of 
products, entities may petition the Commission for an exemption from 
the Rule's requirements, as discussed in Section III of this document.
---------------------------------------------------------------------------

    \56\ Commission staff considered this study previously as part 
of a request for a staff advisory opinion on unqualified MUSA claims 
for recycled gold jewelry products. See Response to Request for FTC 
Staff Advisory Opinion (Sept. 9, 2014), https://www.ftc.gov/system/files/documents/closing_letters/made-usa/140909madeisusajvc.pdf 
(declining to provide an opinion stating MUSA claims for recycled 
jewelry do not deceive consumers based on perception evidence 
provided by Richline Group).
    \57\ See also Hanna, Transcript of Made in USA: An FTC Workshop 
(Sept. 26, 2019) (hereinafter, ``MUSA Tr.'') at 14 (study showed 
``25% or 30% of [American consumers] really did feel that 
everything, including the natural resource, including the gold, had 
to be part of the final product in order to say it was made in the 
USA'').
    \58\ 62 FR 25020, 25036.
    \59\ Hanna, MUSA Tr. at 15.
---------------------------------------------------------------------------

    While commenters proposed alternative standards that might promote 
certain policy goals, the Commission declines to adopt these 
alternative proposals for the reasons discussed below. Section 45a 
authorizes the Commission to issue rules to ensure products labeled as 
``Made in the U.S.A.,'' or the equivalent thereof, comport with the 
requirements of Section 5 of the FTC Act that prohibit unfairness or 
deception. The ``all or virtually all'' standard is designed to prevent 
consumer deception and, therefore, the Commission declines to: (1) 
Adopt a bright-line, percentage-based standard; (2) include a broad 
carve-out for inputs not available in the United States; (3) 
incorporate CBP's ``substantial transformation'' standard; or (4) 
provide a safe harbor for good-faith efforts to comply.
    First, percentage-based, bright-line rules could allow deceptive 
unqualified claims in circumstances where the low cost of the foreign 
input does not correlate to the importance of that input to consumers. 
For example, the Commission's enforcement experience has established 
unqualified U.S.-origin claims for watches that incorporate imported 
movements may mislead consumers because, although the cost of an 
imported movement is often low relative to the overall cost to 
manufacture a watch, consumers may place a premium on the origin and 
quality of a watch movement and consider the failure to disclose the 
foreign origin of this component to be material to their purchasing 
decision. Under those circumstances, the foreign movement likely is not 
a de minimis consideration for consumers, and an unqualified U.S.-
origin claim for a watch containing an imported movement would likely 
deceive consumers.\60\ The Policy Statement has instructed marketers 
since the 1990s that the cost of foreign versus U.S. parts and labor is 
only one factor to consider in determining how material a part may be 
to consumers.\61\ Accordingly, the Commission declines to adopt a 
percentage-based standard because the ``all or virtually all'' standard 
is better tailored to prevent unqualified U.S.-origin claims that will 
mislead consumers in making purchasing decisions. By maintaining this 
precedent, the rule accounts for the likelihood consumers interpret 
MUSA claims somewhat differently for different product categories.
---------------------------------------------------------------------------

    \60\ See, e.g., FTC Staff Closing Letter to Niall Luxury Goods, 
LLC (Nov. 20, 2015), available at https://www.ftc.gov/system/files/documents/closing_letters/nid/151120niall_letter.pdf.
    \61\ See Policy Statement, 62 FR 63756, 63768.
---------------------------------------------------------------------------

    Second, the record similarly does not support excluding foreign 
content unavailable in the United States from the ``all or virtually 
all'' analysis. Specifically, as described above, consumer perception 
testing has consistently shown consumers expect products labeled as 
MUSA to contain no more than a de minimis amount of foreign content. 
There is no evidence this takeaway varies in scenarios where some parts 
or inputs are not available in the United States. Indeed, the Policy 
Statement explains unqualified claims for such products could be 
deceptive, for example, ``if the [nonindigenous] imported material 
constitutes the whole or essence of the finished product (e.g., the 
rubber in a rubber ball or the coffee

[[Page 37027]]

beans in ground coffee).'' \62\ However, the flexibility inherent in 
the ``all or virtually all'' analysis accounts for the possibility a 
marketer could substantiate an unqualified claim for a product 
containing nonindigenous raw materials if the manufacturer has evidence 
demonstrating the specific claim in context does not deceive 
consumers.\63\
---------------------------------------------------------------------------

    \62\ Id. at 63769 n.117.
    \63\ The Policy Statement explains in some cases ``where [a raw] 
material is not found or grown in the United States [and that raw 
material does not constitute the whole or essence of the finished 
product], consumers are likely to understand that a `Made in USA' 
claim on a product that incorporates such materials (e.g., vanilla 
ice cream that uses vanilla beans, which, the Commission 
understands, are not grown in the United States) means that all or 
virtually all of the product, except for those materials not 
available here, originated in the United States.'' Id. The Policy 
Statement provides that this guidance applies only to raw materials, 
not manufactured inputs.
---------------------------------------------------------------------------

    Third, the record also does not support adopting government 
standards developed for other purposes (e.g., the CBP substantial 
transformation standard developed for the imposition of tariffs) as 
part of the rule. Based on its enforcement experience, the Commission 
is concerned the standards adopted by CBP for purposes of calculating 
tariffs are not an appropriate fit for the Commission's regulation of 
MUSA claims on product labels for purposes of consumer disclosure. For 
example, there is ample evidence consumers care deeply about the source 
of the components used to manufacture drywall for construction 
projects. Under a substantial transformation analysis, drywall made 
wholly of materials from one nation, but substantially transformed in a 
different country, would be labeled as originating from the country 
where those materials were ultimately transformed into a final product. 
Marketers would not need to disclose the origin of the inputs other 
than labor (information highly material to many consumers). Thus, 
employing such a standard would in some cases conflict with the Rule's 
purpose of ensuring consumers have the material information necessary 
to make informed purchasing decisions.
    Finally, the rule does not include an explicit carve-out for 
businesses that act in good faith. Courts have long held good faith is 
not a defense for a violation of Section 5 of the FTC Act,\64\ and the 
Commission intends to enforce the rule consistent with this precedent. 
Violative claims made in good faith can still deceive and cause 
significant harm to consumers. However, the FTC clarifies it will 
continue to: (1) Advise marketers that, if provided in good faith, 
marketers can rely on information from suppliers about the domestic 
content in the parts, components, and other elements they produce; \65\ 
(2) generally conserve enforcement resources for intentional, repeated, 
or egregious offenders; and (3) provide informal staff counseling where 
appropriate.
---------------------------------------------------------------------------

    \64\ See, e.g., FTC v. World Travel Vacation Brokers, Inc., 861 
F.2d 1020, 1029 (7th Cir. 1988).
    \65\ See FTC, ``Complying with the Made in USA Standard,'' at 7-
8 (Dec. 1998), available at https://www.ftc.gov/system/files/documents/plain-language/bus03-complying-made-usa-standard.pdf (also 
providing an example of a certification a marketer could request 
from a supplier that generally would constitute an acceptable basis 
for determining the appropriate country-of-origin designation for a 
product).
---------------------------------------------------------------------------

C. Requests for Additional Definitions and Other Clarifications

    The Commission received several comments arguing the proposed Rule 
was unclear or provided insufficient guidance for marketers. To remedy 
these asserted problems, several commenters urged the FTC to add 
definitions for particular terms, including ``all or virtually all'' 
and ``significant processing.'' Other commenters expressed concern the 
Rule was not sufficiently clear about the range of claims it would 
cover, suggesting the FTC list additional synonyms for ``Made in USA'' 
to which the rule would apply. Finally, others requested a delayed 
effective date to allow marketers to update materials and come into 
compliance.
1. Definitions
    More than twenty commenters recommended adding definitions or 
providing more information to clarify the rule. Without definitions, 
the commenters feared marketers would ``lack clear guidance for 
verifying MUSA claims'' and thus ``may be deterred from'' making them 
altogether.\66\ Some of these commenters offered clarifying edits or 
proposed definitions, often as fallback positions to their main 
arguments advocating alternative standards entirely.\67\
---------------------------------------------------------------------------

    \66\ RILA (570).
    \67\ E.g., AAEI (605) (advocating adoption of the ``substantial 
transformation'' standard).
---------------------------------------------------------------------------

    In particular, in addition to commenters who recommended specifying 
percentage thresholds for ``all or virtually all,'' several commenters 
requested the Commission generally define the phrase, without providing 
specific information on what that definition should include (e.g., 
factors considered, etc.).\68\ As AAEI elaborated: ``One of the FTC's 
stated reasons for this proposed rulemaking is to `provide more 
certainty to marketers about the standard for making unqualified claims 
on product labels.' Yet, the proposed `all or virtually all' standard 
does not provide that certainty . . . It simply codifies the FTC's 
already existing ambiguous standards.'' \69\ Two commenters 
specifically asked the Commission to incorporate information on whether 
marketers should consider the origin of product packaging into such a 
definition.\70\
---------------------------------------------------------------------------

    \68\ See, e.g., Shirley Boyd (6); Pacific Coast Producers (27); 
RILA (570); Vietnam (577); AAEI (605); NFI (628); ACA (666); AAFA 
(675).
    \69\ AAEI (605).
    \70\ Deontae Lafayette (20); Jaymee Westover (358).
---------------------------------------------------------------------------

    Similarly, three commenters requested the Commission define 
``significant processing.'' \71\ As Pacific Coast Producers explained, 
the ``significant processing'' and ``all or virtually all'' ``terms 
have always been ambiguous, and the proposed rule does not help to 
remove the ambiguity or provide any meaningful guidance to industry.'' 
\72\
---------------------------------------------------------------------------

    \71\ Shirley Boyd (6); Pacific Coast Producers (27); RILA (570).
    \72\ Pacific Coast Producers (27).
---------------------------------------------------------------------------

    Finally, more than thirty commenters, primarily representing the 
domestic shrimp industry, argued the Commission should clarify that the 
definitions of ``mail order catalog'' and ``mail order promotional 
material'' include restaurant menus. As the Louisiana Shrimp 
Association (``LSA'') explained, ``inappropriate practices by some 
restaurants in offering menu items that falsely indicate to customers 
that imported shrimp is domestic, such as `Gulf Shrimp'. . . not only 
confuse consumers, but fatally undermine the marketing efforts of 
restaurants that do carry domestic shrimp.'' \73\ To solve this 
problem, SSA urged the Commission to ``exercise jurisdiction over `Made 
in U.S.A.' statements on restaurant menus, as a form of `Mail order 
promotional material' or `mail order catalog.' '' \74\
---------------------------------------------------------------------------

    \73\ LSA (404).
    \74\ SSA (380) (further explaining menus should fall under this 
definition because they are used in the direct sale or offer for 
sale of a product, are disseminated in print or can be delivered by 
electronic means, and are solely disseminated to solicit the 
purchase of a product).
---------------------------------------------------------------------------

2. Covered Claims
    Several commenters suggested the Rule was not sufficiently clear 
about which U.S.-origin claims it covers. In particular, commenters 
requested a longer list of claims the Commission considers equivalent 
to ``Made in USA,'' as well as a specific statement that the Rule 
covers implied claims.
    One commenter suggested adding ``constructed,'' ``fabricated,'' and 
``assembled'' to the list.\75\ Another

[[Page 37028]]

proposed ``processed,'' ``fabricated,'' and ``packaged.'' \76\ Finally, 
one commenter suggested, to deter unscrupulous marketers effectively, 
the list should include claims that products are ``Distributed by:'' a 
company name followed by a U.S. address.\77\
---------------------------------------------------------------------------

    \75\ Frost Brown Todd LLC (522).
    \76\ R-CALF USA (588).
    \77\ Salvatore J. Versaggi (496).
---------------------------------------------------------------------------

    Several commenters also asked the Commission to clarify that the 
Rule covers implied claims.\78\ As AAM explained, ``the use of 
iconography, such as the American flag, used in the promotion of 
products should also be considered for its potential to evoke the 
positive qualities consumers associate with 'Made in USA,' as well as 
the prospect of such iconography being used in a deceptive manner.'' 
\79\
---------------------------------------------------------------------------

    \78\ See, e.g., Shirley Boyd (6); Power Planter Inc. (325); AAM 
(611); American Shrimp Processors Association (``ASPA'') (633).
    \79\ AAM (611).
---------------------------------------------------------------------------

3. Effective Date
    Finally, two commenters requested the FTC provide an extended 
compliance period before the rule's effective date. Specifically, ACA 
and McKenna Walsh argued companies would need time to come into 
compliance with the Rule. In their view, the FTC should delay 
implementation to give companies the opportunity to generate new 
marketing materials and run out old stock.\80\
---------------------------------------------------------------------------

    \80\ ACA (666); McKenna Walsh (581).
---------------------------------------------------------------------------

4. Analysis
    After analyzing the comments, the Commission finds the rule and its 
coverage clear on its face, with sufficient flexibility to address a 
changing marketplace. Therefore, as discussed further below, the 
Commission issues the rule without additional definitions or 
clarifications, or a delayed effective date.\81\
---------------------------------------------------------------------------

    \81\ As discussed in Section III, the Final Rule contains a 
provision clarifying that, in appropriate circumstances, covered 
entities may petition the Commission for an exemption from the 
Rule's requirements.
---------------------------------------------------------------------------

i. Definitions
    The Commission declines to adopt definitions of ``all or virtually 
all'' and ``significant processing,'' or to expand the existing 
definition of ``mail order catalog'' or ``mail order promotional 
material.'' The Commission has issued extensive guidance to help 
marketers understand the ``all or virtually all'' standard. As the 
Policy Statement explains, ``A product that is all or virtually all 
made in the United States will ordinarily be one in which all 
significant parts and processing that go into the product are of U.S. 
origin.'' In other words, where a product is labeled or otherwise 
advertised with an unqualified claim, it should contain only a de 
minimis, or negligible, amount of foreign content. Although there is no 
single ``bright line'' to establish when a product is or is not ``all 
or virtually all'' made in the United States, there are a number of 
factors to consider in making this determination. First, in order for a 
product to be considered ``all or virtually all'' made in the United 
States, the final assembly or processing of the product must take place 
in the United States. Beyond this minimum threshold, the Commission 
will consider other factors, including but not limited to the portion 
of the product's total manufacturing costs attributable to U.S. parts 
and processing; how far removed from the finished product any foreign 
content is; and the importance of the foreign content to the form or 
function of the product. Accordingly, the Commission's existing 
guidance and enforcement documents, including the Policy Statement, 
decisions and orders enforcing the ``all or virtually all'' standard, 
and staff closing letters, together provide ample guidance to 
marketers.
    As discussed above in Section II.B.3., ``all or virtually all'' and 
``significant processing'' intentionally incorporate flexibility to 
allow marketers to substantiate their claims consistent with consumer 
perception of their particular products. The Commission's enforcement 
program has long recognized the need for such flexibility as described 
in the Policy Statement, which was based on the Commission's decisions 
and orders. The Commission has continued to follow this flexible 
approach, and incorporated it into its post-Policy Statement decisions 
and orders. Adding specific definitions for these terms may increase 
clarity for marketers in the short term because the rule covers so many 
product categories across a range of circumstances, but the Commission 
has determined adding further specificity also increases the risk the 
rule would chill certain non-deceptive claims. Marketers seeking 
additional guidance may look to the Policy Statement, decisions and 
orders, and other Commission guidance to understand how the FTC has 
analyzed ``all or virtually all'' and ``significant processing.'' \82\
---------------------------------------------------------------------------

    \82\ See Policy Statement, 62 FR 63756, 63768 (Dec. 2, 1997).
---------------------------------------------------------------------------

    The Commission also declines to adopt a definition of ``mail order 
catalog'' or ``mail order promotional material'' that specifically 
incorporates restaurant menus. The Commission has not reviewed 
perception evidence regarding consumer understanding of MUSA claims on 
restaurant menus, and therefore declines to define such claims as 
covered ``labels'' for purposes of Section 45a.
ii. Covered Claims
    The Commission also concludes it is unnecessary to revise the 
definitions to provide an expanded list of synonyms for the term ``Made 
in U.S.A.,'' or provide further clarification the rule covers implied 
claims. Section 323.1 as proposed already defines ``Made in U.S.A.'' as 
``any unqualified representation, express or implied, that a product or 
service, or a specified component thereof, is of U.S. origin, 
including, but not limited to, a representation that such product or 
service is `made,' 'manufactured,' 'built,' 'produced,' 'created,' or 
'crafted' in the United States or in America, or any other unqualified 
U.S.-origin claim'' (emphasis added).\83\
---------------------------------------------------------------------------

    \83\ 16 CFR 323.1.
---------------------------------------------------------------------------

    The list of equivalents to ``Made in USA'' set forth in Section 
323.1 is not exhaustive because the means of communicating U.S. origin 
are too numerous to list. The Commission believes the non-exhaustive 
list of examples given provide sufficient guidance on the scope of 
covered express and implied claims. These examples are based on the 
Commission's decades of enforcement experience addressing MUSA claims. 
For other claims, the Commission will analyze them in context, 
including the terms used, their prominence, and their proximity to 
images and other text.
iii. Effective Date
    Lastly, the Commission declines to delay the rule's effective date. 
As discussed above in Section I, the rule codifies the FTC's 
longstanding guidance on MUSA claims. The FTC has incorporated the 
``all or virtually all'' standard into decisions and orders and 
guidance for industry and the public since the 1990s.\84\ Because the 
rule merely codifies these longstanding enforcement principles and 
imposes no new requirements on marketers, the Commission concludes a 
delayed effective date is unnecessary.
---------------------------------------------------------------------------

    \84\ See generally https://www.ftc.gov/tips-advice/business-center/advertising-and-marketing/made-in-usa. The Commission has 
explained that prior to the 1990s, this standard was described as 
the ``wholly domestic'' standard, and both ``wholly domestic'' and 
``all or virtually all'' refer to the concept that ``unqualified 
claims of domestic origin have been treated as claims that the 
product was in all but de minimis amounts made in the United 
States.'' 62 FR 63756 (Dec. 2, 1997).

---------------------------------------------------------------------------

[[Page 37029]]

D. Guidance for Specific Industries

    Some commenters requested tailored guidance for specific 
industries. Specifically, representatives of the beef and shrimp 
industries requested guidance on whether the Rule would apply to their 
products, and specific guidance on how to apply ``all or virtually 
all'' in these contexts.
1. Beef
    The Commission received more than 450 comments urging the 
Commission to clarify that the rule applies to beef products. These 
stakeholders, primarily U.S. ranchers and industry groups representing 
domestic ranchers, generally supported the rule and argued it should 
supersede United States Department of Agriculture (``USDA'') guidance 
on using ``Product of USA'' claims on beef product labels. Although 
they acknowledged the USDA's longstanding authority over beef labeling, 
they expressed concern USDA's Food Safety Inspection Service (``FSIS'') 
Food Standards and Labeling Policy Book currently authorizes producers 
to place ``Product of USA'' labels on beef products processed in the 
USA but comprised of cattle born, raised, and slaughtered overseas. 
These commenters argued such labels deceive consumers, and ``put U.S. 
family farmers and ranchers at an unfair disadvantage in the 
marketplace, because they are not able to differentiate their 
domestically produced meat and meat products from foreign produced meat 
and meat products.'' \85\ Accordingly, they argued the ``all or 
virtually all'' standard should apply to beef products, and beef 
products should only bear a ``Product of USA'' label if they derive 
from animals born, raised, slaughtered, and processed in the United 
States.\86\
---------------------------------------------------------------------------

    \85\ North Dakota Farmers Union (412).
    \86\ The Commission also received more than 150 comments stating 
country-of-origin labeling should be mandatory for beef products.
---------------------------------------------------------------------------

    In contrast, five commenters argued Congress granted the USDA 
generally, and the FSIS specifically, authority to address country-of-
origin labeling for meat and meat food products. Therefore, they 
argued, the FTC should defer to the USDA on this issue.\87\ The North 
American Meat Institute and the Meat Importers' Council of America 
submitted a joint comment stating beef commenters' concerns ``are 
misplaced because they fail to recognize that the [USDA's FSIS] has 
primary jurisdiction over the meat and poultry labeling through the 
authority provided in the Federal Meat Inspection Act (FMIA) and the 
Poultry Products Inspection Act (PPIA).'' \88\ The Montana Stockgrowers 
Association agreed, explaining that even though it ``supports USA beef 
as being defined as born, raised, harvested, and processed in the USA . 
. . [its members] think the [USDA] should be the lead agency to address 
enforcement of labels that include all meat products.'' \89\ Moreover, 
some commenters raised concerns applying the FTC's rule to beef 
products could lead to challenges in, or even sanctions by, the WTO, 
given past proceedings relating to beef labeling.\90\
---------------------------------------------------------------------------

    \87\ See, e.g., Mexico's National Confederation of Livestock 
Organizations (431); North American Meat Institute and Meat 
Importers' Council of America (508); National Cattlemen's Beef 
Association (589); Montana Stockgrowers Association (635); Embassy 
of Canada (637). Some of these stakeholders argued the FTC should 
specifically exempt meat labeling from the Rule's coverage.
    \88\ North American Meat Institute and the Meat Importers' 
Council of America (508). See also National Cattlemen's Beef 
Association (589) (``remind[ing] FTC that the Federal Meat 
Inspection Act of 1906 (21 U.S.C. 601 et seq.) grants the U.S. 
Department of Agriculture (USDA) primary jurisdiction over all meat 
food product oversight activities, including the approval and 
verification of geographic and origin labeling claims.'').
    \89\ Montana Stockgrowers Association (635).
    \90\ Mexico's National Confederation of Livestock Organizations 
(431); National Cattlemen's Beef Association (589); see also Embassy 
of Canada (637) (stating, in light of 2015 WTO proceedings, the 
Government of Canada ``will continue to closely monitor the 
development of the proposed'' Rule).
---------------------------------------------------------------------------

2. Shrimp
    The Commission also received dozens of comments from 
representatives of the domestic shrimp industry. Most of these 
expressed general support for the proposed rule, and recommended the 
FTC allow MUSA labels only for shrimp caught, harvested, and processed 
in the United States.
    Although they expressed enthusiasm for the potential application of 
the proposed MUSA rule's ``all or virtually all'' standard in shrimp 
labeling, commenters acknowledged that USDA's Country of Origin 
Labeling (``COOL'') regulations \91\ have primary authority in this 
space. The COOL regulations require ``retail establishments'' to 
provide country-of-origin information for wild and farm-raised fish and 
shellfish,\92\ and incorporate specific standards under which marketers 
can label shrimp as MUSA.\93\ However, commenters identified a possible 
gap in regulatory coverage, explaining that, pursuant to USDA 
Agricultural Marketing Service (``AMS'') regulations governing country-
of-origin labeling for fish and shellfish, COOL does not apply to 
processed shrimp products, including breaded or marinated shrimp.\94\ 
In addition, as described above in Section II.C.1., these commenters 
noted that USDA COOL regulations do not apply to claims regarding 
shrimp or shrimp products on restaurant menus.\95\ Thus, these 
commenters urged the FTC to ``us[e] its authority to enforce the MUSA 
rule [with respect to these categories of shrimp products, thereby] . . 
. filling a void in federal labeling accountability and providing 
certainty to the seafood market during this time of widespread economic 
instability.'' \96\
---------------------------------------------------------------------------

    \91\ 7 CFR part 60.
    \92\ 7 U.S.C. 1638(1).
    \93\ 7 CFR 60.128.
    \94\ ASPA (633) (citing 7 CFR 60.119).
    \95\ See, e.g., Southern Shrimp Alliance (380).
    \96\ ASPA (633), at 2.
---------------------------------------------------------------------------

3. Analysis
    The FTC shares jurisdiction over country-of-origin claims for 
agricultural products with the USDA and, in some instances, the Food 
and Drug Administration (``FDA''). USDA and FDA have primary 
jurisdiction over labeling issues for the food products within their 
purview.\97\ Section 45a specifically provides that ``Nothing in this 
section shall preclude the application of other provisions of law 
relating to labeling.'' \98\ Accordingly, Section 323.5(a) of this rule 
makes clear that the rule does not supersede, alter, or affect the 
application of any other federal statute or regulation relating to 
country-of-origin labeling requirements, including but not limited to 
regulations issued under the FMIA, 21 U.S.C. 601 et seq.; the Poultry 
Products Inspection Act, 21 U.S.C. 451 et seq.; or the Egg Products 
Inspection Act, 21 U.S.C. 1031 et seq.
---------------------------------------------------------------------------

    \97\ See Memorandum of Understanding between Federal Trade 
Commission and the Food and Drug Administration, 36 FR 18539 (Sept. 
16, 1971).
    \98\ 15 U.S.C. 45a.
---------------------------------------------------------------------------

    Congress has granted the USDA's FSIS specific authority to regulate 
agricultural products, including, among others, beef and chicken 
products. The USDA regulates labels on meat products sold at retail 
pursuant to the FMIA, which prohibits misleading labels.\99\ Although 
FSIS's Policy Book has permitted voluntary claims of ``Product of USA'' 
for imported products under FSIS's jurisdiction, including beef 
products, processed in the USA, FSIS recently explained this guidance 
``may be misleading to consumers and may not meet consumer expectations 
of what `Product of USA' signifies.'' \100\ Accordingly, the USDA 
announced plans to initiate a rulemaking to alleviate any potential 
confusion in the

[[Page 37030]]

marketplace.\101\ As that proceeding unfolds, the Commission remains 
committed to engaging with the USDA to ensure American consumers 
receive truthful and accurate information about the beef products they 
buy.
---------------------------------------------------------------------------

    \99\ 21 U.S.C. 601(n)(1); 9 CFR 317.8(a) (prohibiting labels 
that convey ``any false indication of origin'').
    \100\ See R. Edelstein Letter to E. Drake (Mar. 26, 2020).
    \101\ Id.
---------------------------------------------------------------------------

    Under its COOL regulations, USDA's AMS has primary authority over 
country-of-origin labels for most fish and shellfish products.\102\ 
Because Section 45a's general grant of rulemaking authority does not 
authorize the Commission to issue regulations that would preclude the 
application of existing statutes and regulations addressing 
agricultural product labeling, the FTC defers to AMS's regulatory 
scheme for COOL for fish and shellfish. Section 323.5 makes clear the 
rule does not supersede, alter, or affect any other federal statute or 
regulation relating to country-of-origin labeling requirements. 
However, to the extent certain, limited categories of agricultural 
products fall outside USDA's jurisdiction, the Commission will analyze 
claims on a case-by-case basis and consult with other agencies as 
appropriate.\103\
---------------------------------------------------------------------------

    \102\ 7 U.S.C. 1638(1); 7 CFR 60.128.
    \103\ The FTC notes deceptive claims on restaurant menus appear 
to be largely a regional issue, and therefore are being addressed 
through state legislation. See, e.g., La. R.S. Sec.  40:5.5.4 
(requiring food service establishments to provide notice to 
consumers if crawfish or shrimp is imported); La. R.S. Sec.  
56:578.14 (``No owner or manager of a restaurant that sells imported 
crawfish or shrimp shall misrepresent to the public, either 
verbally, on a menu, or on signs displayed on the premises, that the 
crawfish or shrimp is domestic.''). FTC staff will continue to 
monitor this issue.
---------------------------------------------------------------------------

E. Other Proposals

    Some commenters proposed a series of other amendments, arguing 
variously that the Rule should preempt state law entirely; \104\ cover 
MUSA advertising generally; \105\ make country-of-origin labeling 
mandatory for all products; \106\ incorporate provisions relating to 
qualified U.S.-origin claims; \107\ and include language specifically 
correlating penalties to firm sizes.\108\ The Commission declines to 
adopt these changes, which are inconsistent with its rulemaking mandate 
under Section 45a. As discussed above, Section 45a grants the 
Commission authority to issue rules to prevent unfair or deceptive acts 
or practices relating to MUSA labeling. Specifically, Section 45a 
authorizes the Commission to issue rules to require MUSA labeling to 
``be consistent with decisions and orders of the Federal Trade 
Commission issued pursuant to [Section 5 of the FTC Act].'' The FTC may 
seek civil penalties for violations of such rules.
---------------------------------------------------------------------------

    \104\ BWC (622); AAFA (675). Additionally, PCPC (589) argued the 
Rule should specifically preempt a private right of action. However, 
two commenters agreed with the section as drafted as a means to 
``ensure regulatory certainty and consistency of product U.S. origin 
labels nationwide.'' RILA (570). See also NAM (623) (recognizing the 
``value of utilizing preemption to create a uniform MUSA 
standard'').
    \105\ UIUC Accounting Group A13 (5); Shirley Boyd (6); UIUC--
BADM 40--A02 (22); Senators (373); United Steelworkers (526); Women 
Involved in Farm Economics/Pam Potthoff Beef Chairman (672).
    \106\ The Commission received 30 comments arguing country-of-
origin labeling should be mandatory for all products. See, e.g., J 
R. Brookshire (9). Additionally, six commenters argued specifically 
in favor of mandatory country-of-origin labeling for all products 
sold online. See, e.g., Made in USA Foundation (2).
    \107\ Twelve commenters requested coverage of qualified claims. 
See, e.g., Shirley Boyd (6); United Steelworkers (526); AAM (611); 
CPA (625).
    \108\ Six commenters argued civil penalties should be linked to 
company size. See, e.g., Chris Posey (7).
---------------------------------------------------------------------------

1. Preemption
    The Commission intends to preempt state statutes or regulations 
that are inconsistent with the Commission's rules only to the extent of 
the inconsistency.\109\ When it enacted Section 45a, Congress declined 
to expressly preempt state regulation or otherwise demonstrate a clear 
intent for federal law to occupy the field of regulation in 
question.\110\ Accordingly, Section 323.5 of the Rule preempts a state 
statute, regulation, order, or interpretation ``to the extent that such 
statute, regulation, order, or interpretation is inconsistent with the 
provisions of this part, and then only to the extent of the 
inconsistency.'' Moreover, the rule makes clear that a state statute, 
regulation, order, or interpretation is not inconsistent with the rule 
if the protection such statute, regulation, order, or interpretation 
affords any consumer is greater than the protection provided by the 
rule.
---------------------------------------------------------------------------

    \109\ See City of New York v. FCC, 486 U.S. 57, 64 (1988) (``The 
statutorily authorized regulations of an agency will pre-empt any 
state or local law that conflicts with such regulations or 
frustrates the purposes thereof.'').
    \110\ See, e.g., Mozilla v. FCC, 940 F.3d 1, 74-75 (D.C. Cir. 
2019).
---------------------------------------------------------------------------

2. MUSA Advertising Generally
    Some commenters encouraged the Commission to expand the proposed 
rule to cover all advertising that includes any U.S.-origin claim, 
rather than focusing as proposed on MUSA labeling.\111\ Section 45a, 
however, is directed at labels on products declaring that a product is 
``in whole or substantial part of domestic origin'' and thus may be 
labeled ``Made in the U.S.A.,'' or the equivalent thereof. The statute 
does not explicitly address general advertising claims beyond the 
context of labeling. Accordingly, in enacting this rule, the Commission 
has not focused on advertising more generally, but retains the proposed 
rule's focus on MUSA claims on labels or in mail order or catalog 
advertising, including in online marketplaces, that depict a product 
label. However, the FTC's general authority under Sections 5 and 12 of 
the FTC Act covers advertising, including advertising of qualified and 
unqualified MUSA claims.\112\
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    \111\ See, e.g., Shirley Boyd (6) (``The FTC's final rules 
should apply to labeling, advertising and other promotional and 
marketing materials in addition to labels and mail order catalogs/
promotional materials.'').
    \112\ 15 U.S.C. 45(a), 52.
---------------------------------------------------------------------------

3. Mandatory Country-of-Origin Labeling
    Other commenters recommended the Commission make country-of-origin 
labeling mandatory. For example, the Made in USA Foundation proposed 
that the Rule should require that all advertisements for specified 
categories of products, including all products advertised for sale on 
the internet, disclose the country of origin of the products in a clear 
and prominent manner.\113\ While the Commission acknowledges that many 
consumers may find such information to be valuable in many 
circumstances, Section 45a does not authorize the Commission to 
establish a mandatory country-of-origin labeling scheme. The statute 
grants the Commission authority to issue rules to ensure that Made in 
USA claims are not deceptive and are consistent with the Commission's 
decisions and orders defining unfair or deceptive acts or practices 
under Section 5. Accordingly, the Commission lacks authority under 
Section 45a to enact this proposal.
---------------------------------------------------------------------------

    \113\ Made in USA Foundation (2).
---------------------------------------------------------------------------

4. Qualified U.S.-Origin Claims
    Some commenters also argued that the rule should also address 
qualified U.S.-origin claims. The United Steelworkers asserted that, 
``[a]s firms with global supply chains seek to benefit from the value 
consumers place in products with American content, we must ensure that 
qualified claims accurately represent the level of value creation in 
the United States.'' \114\ Section 45a, however, is directed to labels 
on products declaring that a product is ``in whole or substantial part 
of domestic origin,'' and therefore the Rule is directed to unqualified 
claims, rather than more varied qualified claims. Accordingly, the FTC 
will continue to address deceptive qualified U.S.-origin claims under 
its general

[[Page 37031]]

authority in Section 5 of the FTC Act.\115\ Marketers should continue 
to consult the Policy Statement for guidance on the application of the 
Commission's Section 5 analysis to such claims including, but not 
limited to, ``Assembled in USA,'' claims indicating the amount of U.S. 
content (e.g., ``60% U.S. Content''), claims indicating the parts or 
materials that are imported (e.g., ``Made in USA from imported 
leather''), or claims about specific processes or parts (e.g., claims a 
product is ``designed,'' ``painted,'' or ``written'' in the United 
States).
---------------------------------------------------------------------------

    \114\ United Steelworkers (526).
    \115\ 15 U.S.C. 45(a).
---------------------------------------------------------------------------

5. Civil Penalties
    Some commenters argued that larger businesses may not be 
sufficiently deterred by the current maximum civil penalty amounts for 
violations of Commission rules and recommended that civil penalties 
should be increased for larger firms.\116\ The Commission lacks 
authority, however, to establish civil penalty maximums that depart 
from the levels provided by statute. Civil penalty amounts for 
violations of the Commission's rules are established by the FTC 
Act.\117\ Nonetheless, the Commission believes that its civil penalty 
authority generally provides an effective deterrent against rule 
violations, and notes that civil penalties for violations of a rule are 
assessed per violation. Moreover, the FTC Act establishes a series of 
factors for courts to consider in assessing appropriate civil penalty 
amounts in individual enforcement matters, including ``the degree of 
culpability, any history of prior such conduct, ability to pay, effect 
on ability to continue to do business, and such other matters as 
justice may require.'' \118\ To the extent firm size is an appropriate 
consideration within one or more of these factors, the Commission will 
take that factor into account in seeking civil penalties.
---------------------------------------------------------------------------

    \116\ Chris Posey (7).
    \117\ See 15 U.S.C. 45(m)(1)(A) (establishing civil penalties 
for violations of Commission rules); see also 16 CFR 1.98 (stating 
currently applicable maximum civil penalty amounts).
    \118\ 15 U.S.C. 45(m)(1)(C).
---------------------------------------------------------------------------

III. Final Rule

    For the reasons described above, the Commission has determined to 
adopt the substantive provisions of the rule as initially proposed. 
Specifically, the rule covers labels on products that make unqualified 
MUSA claims. It codifies the Commission's previous MUSA Decisions and 
Orders and prohibits marketers from making unqualified MUSA claims on 
labels unless: (1) Final assembly or processing of the product occurs 
in the United States, (2) all significant processing that goes into the 
product occurs in the United States, and (3) all or virtually all 
ingredients or components of the product are made and sourced in the 
United States. The rule also covers labels making unqualified MUSA 
claims appearing in mail order catalogs or mail order advertising.
    To avoid confusion or perceived conflict with other country-of-
origin labeling laws and regulations, the rule specifies that it does 
not supersede, alter, or affect any other federal or state statute or 
regulation relating to country-of-origin labels, except to the extent 
that a state country-of-origin statute, regulation, order, or 
interpretation is inconsistent with the rule.
    Finally, the Commission has adopted a new Section, 323.6, to 
address commenter concerns about the applicability of the ``all or 
virtually all'' standard across product categories. This provision 
allows marketers and other covered persons to seek full or partial 
exemptions if they can demonstrate application of the rule's 
requirements to a particular product or class of product is not 
necessary to prevent the acts or practices to which the rule relates. 
The Commission's rules of practice governing petitions for rulemaking 
provide the procedures for submitting such petitions.\119\ Pursuant to 
this process, interested persons may file relevant consumer perception 
evidence and data with the Commission. If the Commission deems the 
petition sufficient to warrant further consideration, it will follow 
the procedures outlined in Section 1.25 of its rules.
---------------------------------------------------------------------------

    \119\ See 16 CFR 1.25.
---------------------------------------------------------------------------

IV. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501 et seq., 
requires federal agencies to seek and obtain Office of Management and 
Budget (``OMB'') approval before undertaking a collection of 
information directed to ten or more persons. The Commission has 
determined that there are no new requirements for information 
collection associated with this final rule.

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires that the 
Commission provide an Initial Regulatory Flexibility Analysis with a 
proposed rule, and a Final Regulatory Flexibility Analysis with the 
final Rule, unless the Commission certifies that the proposed Rule will 
not have a significant impact on a substantial number of small 
entities.\120\
---------------------------------------------------------------------------

    \120\ 5 U.S.C. 603-605.
---------------------------------------------------------------------------

    The Commission recognizes some affected entities may qualify as 
small businesses under the relevant thresholds. However, the Commission 
anticipates that the final Rule will not have the threshold impact on 
small entities. First, the rule includes no new barriers to making 
claims, such as reporting or approval requirements. Second, the rule 
merely codifies standards established in FTC enforcement Decisions and 
Orders for decades. Therefore, the Rule imposes no new burdens on law-
abiding businesses.
    Accordingly, the Commission certifies that the final rule will not 
have a significant economic impact on a substantial number of small 
businesses. Although the Commission certifies under the RFA that the 
amendment will not have a significant impact on a substantial number of 
small entities, the Commission has determined, nonetheless, that it is 
appropriate to publish a Final Regulatory Flexibility Analysis in order 
to explain the impact of the amendments on small entities as follows:

A. Description of the Need for and Objectives of the Rule

    The Commission proposed the MUSA Labeling Rule for two primary 
reasons: To strengthen its enforcement program and make it easier for 
businesses to understand and comply with the law. Specifically, by 
codifying the existing standards applicable to MUSA claims in a rule as 
authorized by Congress, the FTC will be able to provide more certainty 
to marketers about the standard for making unqualified claims on 
product labels, without imposing any new obligations on market 
participants. In addition, enactment of the Rule will enhance 
deterrence by authorizing civil penalties against those making unlawful 
MUSA claims on product labels.

B. Issues Raised by Comments in Response to the IRFA

    The Commission received six comments specifically related to the 
impact of the Rule on small businesses.\121\ Of those six, all

[[Page 37032]]

anticipated the rule would benefit small businesses, with the exception 
of the Natural Products Association, which argued that the Rule would 
impose costs on dietary supplement manufacturers that would have to 
relabel products.\122\ The FTC notes that the rule imposes no new 
requirements on dietary supplement manufacturers, and that products 
requiring relabeling as a result of the FTC's rule were likely 
deceptively labeled prior to the Rule's publication. The Chief Counsel 
for Advocacy of the Small Business Administration did not submit 
comments.
---------------------------------------------------------------------------

    \121\ Anonymous (24) (commenter is unaware of small entities 
affected by the NPRM); UIUC--BADM 403--A02 (25) (commenter is 
unaware of small entities affected by the NPRM); Family Farm Action 
Alliance (543) (anticipating positive economic outcomes for small 
business entities as a result of the rule); Leo McDonnell (578) 
(anticipating benefits for small businesses, including ranchers and 
feeders); McKenna Walsh (581) (stating the Rule will be helpful for 
small businesses lacking resources to engage in MUSA litigation); 
Natural Products Association (618) (stating the rule would require 
small dietary supplement businesses to relabel products).
    \122\ Natural Products Association (618).
---------------------------------------------------------------------------

C. Estimate of Number of Small Entities to Which the Rule Will Apply

    The Small Business Administration estimates that in 2018 there were 
30.2 million small businesses in the United States. The rule will apply 
to small businesses that make MUSA claims on product labels. The 
Commission estimates the rule will not have a significant impact on 
these small businesses because it does not impose any new obligations 
on law-abiding businesses; rather, it merely codifies standards 
established in FTC enforcement Decisions and Orders for decades.

D. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements, Including Classes of Covered Small Entities and 
Professional Skills Needed To Comply

    The rule imposes no affirmative reporting or recordkeeping 
requirements. The rule's compliance requirements, consistent with the 
Policy Statement and longstanding Commission case law, require that 
marketers may not make unqualified U.S.-origin claims on product labels 
unless final assembly or processing of the product occurs in the United 
States, all significant processing that goes into the product occurs in 
the United States, and all or virtually all ingredients or components 
of the product are made and sourced in the United States. The small 
entities potentially covered by the rule will include all such entities 
that make MUSA claims on product labels. The rule codifies the standard 
for MUSA claims established in Commission Decisions and Orders, and no 
new obligations are anticipated.

E. Description of Steps Taken To Minimize Significant Economic Impact, 
if Any, on Small Entities, Including Alternatives

    The Commission sought comment and information on the need, if any, 
for alternative compliance methods that would reduce the economic 
impact of the rule on such small entities. Several commenters proposed 
alternatives to the proposed rule including: (1) Introducing a 
percentage-of-costs standard; (2) adopting a standard that makes 
allowances for imported parts or materials not available in the United 
States; (3) aligning with CBP's substantial transformation standard; or 
(4) adding a safe harbor for ``good faith'' efforts to comply. Other 
commenters proposed that the Commission provide for a delayed effective 
date to allow businesses additional time to comply. As discussed above, 
the Commission has declined to adopt these alternatives because it 
believes they would undermine the effectiveness of the rule. In 
addition, the Natural Products Association recommended the FTC 
incorporate an example specific to dietary supplements.\123\ The 
Commission has declined to include examples specific to any particular 
industry in the Rule. The rule codifies the standards articulated in 
Commission enforcement decisions that have been applicable to MUSA 
claims for decades. FTC guidance and enforcement decisions provide 
numerous examples demonstrating how to apply the ``all or virtually 
all'' standard in a variety of industries. Accordingly, the Commission 
has concluded that it is unnecessary to provide industry-specific 
examples in the Rule.
---------------------------------------------------------------------------

    \123\ Id.
---------------------------------------------------------------------------

    As described previously, the rule merely codifies standards already 
established in FTC enforcement Decisions and Orders. It does not impose 
new substantive obligations on businesses that have already been 
complying with their obligations to avoid deceptive claims under 
Section 5 of the FTC Act. Under these circumstances, the Commission 
does not believe a special exemption for small entities or significant 
compliance alternatives are necessary or appropriate to minimize the 
compliance burden, if any, on small entities while achieving the 
intended purposes of the rule. Nonetheless, the Commission has adopted 
a provision allowing covered persons to petition the Commission for an 
exemption from the Rule if application of the rule's requirements is 
not necessary to prevent the acts or practices to which the rule 
relates.

VI. Other Matters

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs has designated this 
rule as not a ``major rule,'' as defined by 5 U.S.C. 804(2).

VII. Final Rule Language

List of Subjects in 16 CFR Part 323

    Labeling, U.S. origin.

0
For the reasons stated in the preamble, the Federal Trade Commission 
adds part 323 to subchapter C of title 16 of the Code of Federal 
Regulations as follows:

PART 323--MADE IN USA LABELING

Sec.
323.1 Definitions.
323.2 Prohibited acts.
323.3 Applicability to mail order advertising.
323.4 Enforcement.
323.5 Relation to Federal and State laws.
323.6 Exemptions.

    Authority: 15 U.S.C. 45a.


Sec.  323.1  Definitions.

    As used in this part:
    (a) The term Made in the United States means any unqualified 
representation, express or implied, that a product or service, or a 
specified component thereof, is of U.S. origin, including, but not 
limited to, a representation that such product or service is ``made,'' 
``manufactured,'' ``built,'' ``produced,'' ``created,'' or ``crafted'' 
in the United States or in America, or any other unqualified U.S.-
origin claim.
    (b) The terms mail order catalog and mail order promotional 
material mean any materials, used in the direct sale or direct offering 
for sale of any product or service, that are disseminated in print or 
by electronic means, and that solicit the purchase of such product or 
service by mail, telephone, electronic mail, or some other method 
without examining the actual product purchased.


Sec.  323.2  Prohibited acts.

    In connection with promoting or offering for sale any good or 
service, in or affecting commerce as ``commerce'' is defined in section 
4 of the Federal Trade Commission Act, 15 U.S.C. 44, it is an unfair or 
deceptive act or practice within the meaning of section 5(a)(1) of the 
Federal Trade Commission Act, 15 U.S.C. 45(a)(1), to label any product 
as Made in the United States unless the final assembly or processing of 
the product occurs in the United States, all significant processing 
that goes into the product occurs in the United States, and

[[Page 37033]]

all or virtually all ingredients or components of the product are made 
and sourced in the United States.


Sec.  323.3  Applicability to mail order advertising.

    To the extent that any mail order catalog or mail order promotional 
material includes a seal, mark, tag, or stamp labeling a product Made 
in the United States, such label must comply with Sec.  323.2.


Sec.  323.4  Enforcement.

    Any violation of this part shall be treated as a violation of a 
rule under section 18 of the Federal Trade Commission Act, 15 U.S.C. 
57a, regarding unfair or deceptive acts or practices.


Sec.  323.5  Relation to Federal and State laws.

    (a) In general. This part shall not be construed as superseding, 
altering, or affecting the application of any other federal law or 
regulation relating to country-of-origin labeling requirements, 
including but not limited to the Federal Meat Inspection Act, 21 U.S.C. 
601 et seq., the Poultry Products Inspection Act, 21 U.S.C. 451 et 
seq., and the Egg Products Inspection Act, 21 U.S.C. 1031 et seq. In 
addition, this part shall not be construed as superseding, altering, or 
affecting any other State statute, regulation, order, or interpretation 
relating to country-of-origin labeling requirements, except to the 
extent that such statute, regulation, order, or interpretation is 
inconsistent with the provisions of this part, and then only to the 
extent of the inconsistency.
    (b) Greater protection under State law. For purposes of this 
section, a State statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this part, as determined by 
the Commission on its own motion or upon the petition of any interested 
party.


Sec.  323.6  Exemptions.

    Any person to whom this Rule applies may petition the Commission 
for a partial or full exemption. The Commission may, in response to 
petitions or on its own authority, issue partial or full exemptions 
from this part if the Commission finds application of the Rule's 
requirements is not necessary to prevent the acts or practices to which 
the Rule relates. The Commission shall resolve petitions using the 
procedures provided in Sec.  1.25 of this chapter. If appropriate, the 
Commission may condition such exemptions on compliance with alternative 
standards or requirements to be prescribed by the Commission.

    By direction of the Commission.
April J. Tabor,
Secretary.
    The following Appendices will not Appear in the Code of Federal 
Regulations.

Appendix I: Statement of Commissioner Rohit Chopra Joined by Chair Lina 
Khan and Commissioner Rebecca Kelly Slaughter

    Today, the Commission has voted to adopt a final Made in USA 
rule. The final rule reflects a substantial number of comments from 
the public, which overwhelmingly supported this policy change by the 
Commission. By formally codifying this rule, the Commission has 
activated a broader range of remedies, including the ability to seek 
redress, damages, penalties, and other relief from those who lie 
about a Made in USA label. The rule will especially benefit small 
businesses that rely on the Made in USA label, but lack the 
resources to defend themselves from imitators.
    Absent this rule, the Commission would be unable to seek this 
full set of sanctions. Importantly, this is a ``restatement rule,'' 
which affirms longstanding guidance and legal precedent with respect 
to Made in USA labels--thereby imposing no new obligations on 
manufacturers and sellers. Because of the stricter sanctions they 
trigger, restatement rules such as this one will increase fraud 
deterrence and ensure that victims can be made whole.

Background on the FTC's Permissive Policy on Made in USA Fraud

    For decades, there has been a bipartisan consensus among 
Commissioners that Made in USA fraud should not be penalized. In my 
view, this policy posture was in direct contravention of both the 
letter and spirit of the law Congress enacted.
    In 1994, shortly after the North American Free Trade Agreement 
took effect, Congress enacted legislation to protect the integrity 
of our national brand by explicitly authorizing the FTC to trigger 
penalties and other relief for Made in USA fraud, but only after 
formally codifying a rule.\1\ However, the Commission never even 
proposed one.\2\
---------------------------------------------------------------------------

    \1\ See 15 U.S.C. 45a.
    \2\ See generally Statement of Commissioner Rohit Chopra 
Regarding Activating Civil Penalties for Made in USA Fraud (Apr. 17, 
2019), https://www.ftc.gov/public-statements/2019/04/statement-commissioner-rohit-chopra-regarding-activating-civil-penalties.
---------------------------------------------------------------------------

    Instead, over the past quarter century, Commissioners 
implemented a highly permissive Made in USA fraud policy, where 
violators faced essentially no consequences whatsoever. Even in 
cases of blatant abuse of the Made in USA label, Commissioners 
routinely voted to allow wrongdoers to settle for no restitution, no 
forfeiture of ill-gotten gains, no admission or findings of 
liability, and no notice to victims.\3\ In adopting this rule, the 
Commission acknowledges that this longstanding policy was misguided 
and agrees that the codification of today's final rule is long 
overdue.
---------------------------------------------------------------------------

    \3\ Even without a final rule, Commissioners could have sought 
more in administrative settlements, given that much of the Made in 
USA fraud detected by Commission staff met the definition of 
``dishonest or fraudulent'' in Section 19 of the FTC Act. 15 U.S.C. 
57b. Instead, Commissioners routinely accepted settlements with no 
meaningful relief at all.
---------------------------------------------------------------------------

Noteworthy Provisions of the Final Rule

    In 2019, TINA.org filed a petition with the Commission to 
promulgate a rule, given the rampant Made in USA fraud across 
sectors of the economy. In 2020, the Commission issued a Notice of 
Proposed Rulemaking and then analyzed a substantial number of 
comments from producers, consumers, foreign governments, and 
others.\4\ After considering these comments, the Commission has 
adopted a rule consistent with the authority granted by Congress in 
1994. There are several aspects worthy of brief discussion.
---------------------------------------------------------------------------

    \4\ The Commission received over 700 comments in response to its 
Notice of Proposed Rulemaking on Made in USA labeling. See FTC Seeks 
Comments on MUSA Rulemaking, Matter No. P074204, Docket ID FTC-2020-
0056 (July 16, 2020), https://www.regulations.gov/docket/FTC-2020-0056.
---------------------------------------------------------------------------

    First, the Commission has codified the ``all or virtually all'' 
standard, consistent with the FTC's longstanding Enforcement Policy 
Statement on U.S. Origin Claims.\5\ This standard covers unqualified 
claims. The Commission must protect the public from deception, and 
the agency declines to adopt alternative approaches, as explained in 
the final rule.
---------------------------------------------------------------------------

    \5\ See ``Made in USA'' and Other U.S. Origin Claims, 62 FR 
63756 (Dec. 2, 1997).
---------------------------------------------------------------------------

    Second, the Commission has outlined a definition of ``label'' 
consistent with the Commission's expertise on labeling. While the 
Commission declines to adopt a definition that includes a list of 
specific examples, such as restaurant menus, the definition of label 
does extend beyond labels physically affixed to a product. As 
described in the rule, other depictions of labels are also covered; 
in some circumstances, labels appearing online may also be subject 
to the rule.\6\ The Commission declines to cover advertising more 
broadly, as this is inconsistent with the authority granted by 
Congress.
---------------------------------------------------------------------------

    \6\ See 16 CFR 323.3.
---------------------------------------------------------------------------

    Third, there was considerable interest in the rulemaking from 
farmers, ranchers, and others in the meat and agricultural industry, 
with the majority of comments arguing in favor of stricter 
standards. The rule declines to grant an exemption sought by the 
meatpacking industry, as this would be inconsistent with the 
Commission's authority prescribed by Congress under the Packers and 
Stockyards Act.\7\ However, contemporaneous with the FTC's vote 
today, the U.S. Department of Agriculture has announced that it will 
be conducting a top-to-bottom review of its labeling standard. USDA 
has previously acknowledged that its

[[Page 37034]]

``Product of USA'' designation may be deceptive. I am extremely 
grateful to Secretary Tom Vilsack and USDA staff for the action they 
are taking.
---------------------------------------------------------------------------

    \7\ See 7 U.S.C. 227.
---------------------------------------------------------------------------

    I hope the USDA will study the FTC's rulemaking record carefully 
and come to the same conclusion I have: The USDA's Product of USA 
standard is misleading and distorts competition in the retail market 
for beef and other products. I also believe that unqualified 
``Product of USA'' claims for meat products are only appropriate 
when the animal was born, raised, and slaughtered in the United 
States. Given our shared jurisdiction, I expect that the Commission 
will deepen its partnership with the USDA and closely coordinate on 
any enforcement proceeding with respect to retail sales of meat and 
other products.

Conclusion

    The Commission appreciates the substantial public interest in 
protecting the Made in USA brand. The final rule provides 
substantial benefits to the public by protecting businesses from 
losing sales to dishonest competitors, and protecting families 
seeking to purchase American-made goods. More broadly, this long-
overdue rule is an important reminder that the Commission must do 
more to use the authorities explicitly authorized by Congress to 
protect market participants from fraud and abuse. I thank my fellow 
Commissioners and members of the Commission staff who contributed to 
the development of this final rule, as well as members of the public 
for their thoughtful contributions.

Appendix II: Dissenting Statement of Commissioner Christine S. Wilson

    Today the Commission announces a Final Rule with respect to 
``Made in USA'' (MUSA) labels. I support the FTC's prosecution of 
MUSA fraud \1\ and supported its consideration of a rule that 
addresses deceptive MUSA claims on labels, consistent with the 
authority granted to the FTC by Congress in Section 45a. The Rule 
announced today, however, exceeds that authority.
---------------------------------------------------------------------------

    \1\ I have voted to support every MUSA enforcement action 
recommended to the Commission by staff since joining the Commission. 
See In the Matter of Gennex Media, LLC No. C-4741 (Apr. 2021), 
https://www.ftc.gov/system/files/documents/cases/2023122gennexmediafinalorder.pdf; In the Matter of Chemence, Inc., 
et al., No. 4738 (Feb. 2021), https://www.ftc.gov/system/files/documents/cases/2021-02-10_chemence_admin_order.pdf; In the Matter 
of Williams-Sonoma, Inc., No. C-4724 (July 2020), https://www.ftc.gov/system/files/documents/cases/2023025c4724williamssonomaorder.pdf; U.S. v. iSpring Water Systems, 
LLC, et al., No. 1:16-cv-1620-AT (N.D. Ga. 2019); https://www.ftc.gov/system/files/documents/cases/172_3033_ispring_water_systems_-_stipulated_order.pdf; In the Matter 
of Sandpiper Gear of California, Inc. et al., No. 182-3095, https://www.ftc.gov/enforcement/cases-proceedings/182-3095/sandpiper-california-inc-et-al-matter; Underground Sports d/b/a Patriot Puck, 
et al., No. 182-3113 (April 2019), https://www.ftc.gov/enforcement/cases-proceedings/182-3113/underground-sports-inc-doing-business-patriot-puck-et-al; In the Matter of Nectar Sleep, LLC, No.182-3038 
(Sept. 2018), https://www.ftc.gov/enforcement/cases-proceedings/182-3038/nectar-brand-llc.
---------------------------------------------------------------------------

    Section 45a of the FTC Act--the provision pursuant to which we 
advance this Rule--authorizes the Commission to issue rules 
governing MUSA claims on products ``with a `Made in the U.S.A.' or 
`Made in America' label, or the equivalent thereof.'' The provision 
is titled ``Labels on products'' and repeatedly references 
``labels.'' The Commission nonetheless has chosen to promulgate a 
rule that could be read to cover all advertising, not just labeling.
    This Rule is not supported by the plain language of 45a. It is 
clear Congress intended to extend rulemaking authority over the many 
potential variations (or ``equivalents'') of ``Made in the U.S.A.'' 
or ``Made in America'' claims that may be found on labels, not 
labels and claims made in advertising or marketing. The legislative 
history for Section 45a supports this interpretation. Specifically, 
the Conference Report on H.R. 3355 discusses any label 
characterizing ``a product as `Made in the U.S.A.' or the equivalent 
thereof,'' signaling Congress' intent that the statute should cover 
not just literal invocations of ``Made in the U.S.A.,'' but also 
equivalents to that claim (i.e., Made in America, American Made, and 
so on).\2\
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    \2\ Conf. Rep. on H.R. 3355 (filed in House (8/21/1994)).
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    The Commission's Rule defines the term far more broadly than any 
FTC precedent, and in a way that, in my view, exceeds our statutory 
grant of rulemaking authority.\3\ The Rule we issue today will cover 
not just labels, but all:
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    \3\ Several commenters echoed the concerns I raised in my 
statement when the Commission sought comment on this proposed Rule 
and those raised by Commissioner Phillips. See Council for 
Responsible Nutrition Comment; Personal Care Products Council 
Comment; National Association of Manufacturers Comment; Anonymous 
Comment 592.

    ``materials, used in the direct sale or direct offering for sale 
of any product or service, that are disseminated in print or by 
electronic means, and that solicit the purchase of such product or 
service by mail, telephone, electronic mail, or some other method 
without examining the actual product purchased'' \4\ that include 
``a seal, mark, tag, or stamp labeling a product Made in the United 
States.'' \5\
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    \4\ See Part 323.1(b).
    \5\ See Part 323.3.

    This language could bring within the scope of the Rule stylized 
marks in online advertising or paper catalogs and potentially other 
advertising marks, such as hashtags, that contain MUSA claims.\6\
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    \6\ Guidance on the definition of ``label'' can be found in 
analogous FTC rules and guides in a variety of contexts. There, 
``labels'' repeatedly have been defined as a distinct subcategory of 
advertising (in other words, not coterminous with advertising)1 and 
have been described as objects attached to a product or its 
packaging.1 Given both the statutory guidance Congress provided when 
it drafted this statute, and precedent concerning the term ``label'' 
in FTC rules and guides, the Commission has ample landmarks to draft 
a Rule that falls within its jurisdictional boundaries.
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    In the statement I issued when the Commission sought comment on 
this proposed Rule, I noted that were Congress drafting this statute 
now, it might choose language to encompass those broader contexts, 
including online advertising.\7\ But there was no plausible argument 
to be made that the ordinary meaning of the text when enacted in 
1994 encompassed online advertising--a period when online shopping 
was largely unfamiliar to most consumers.\8\ As it happens, the 
Senate recently passed the Country of Origin Labeling Online Act 
(COOL Act), which prohibits deceptive country-of-origin 
representations. There Congress did, in fact, specify its 
application to labeling as well as other forms of online 
advertising:
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    \7\ Statement of Commissioner Christine S. Wilson Concurring in 
Part, Dissenting in Part, Notice of Proposed Rulemaking related to 
Made in USA Claims (June 22, 2020), https://www.ftc.gov/system/files/documents/public_statements/1577099/p074204musawilsonstatementrev.pdf.
    \8\ Report: Americans Going Online . . . Explosive Growth, 
Uncertain Destinations, Pew Research Center (Oct. 16, 1995) (noting 
``most consumers are still feeling their way through cyberspace . . 
. [and] have yet to begin purchasing goods and services online''), 
available at: https://www.people-press.org/1995/10/16/americans-going-online-explosive-growth-uncertain-destinations/.

    it shall be unlawful to make any false or deceptive 
representation that a product or its parts or processing are of 
United States origin in any labeling, advertising, or other 
promotional materials, or any other form of marketing, including 
marketing through digital or electronic means in the United 
States.\9\
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    \9\ U.S. Innovation and Competition Act, S. 1260, Section 2510, 
117th Cong. (June 8, 2021), https://www.democrats.senate.gov/imo/media/doc/DAV21A48.pdf.

    This language, in contrast to Section 45a, leaves no doubt it 
applies to labeling and advertising and confirms Congress views 
``labeling'' as distinct from ``advertising or other promotional 
materials,'' including in an online context.
    To the extent the Commission seeks to issue a broader 
prohibition on Made in USA fraud, as Commissioner Chopra asserted 
when the Commission sought comment on this Rule, it has other 
options. The Commission can institute a rulemaking proceeding 
pursuant to Section 18 of the FTC Act. Several commenters suggested 
that rather than promulgate a limited rule for labeling claims, the 
Commission should conduct a full proceeding to address all 
advertising claims.\10\ The Commission has not taken this action. 
The Commission alternatively could work with Congress to effectuate 
the passage of the COOL Act, which would appear to moot this Rule if 
enacted.
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    \10\ See UIUC Accounting Group Comment; Shirley Boyd Comment; 
UIUC--BADM Comment; Senators Comment; United Steelworkers Comment; 
Women Involved in Farm Economics/Pam Potthoff Beef Chairman Comment.
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    Accordingly, because this Rule exceeds the scope of authority 
granted by Congress to the FTC, I dissent. I do not support 
creatively and expansively interpreting the agency's jurisdiction 
with respect to rulemaking authority.
    The Commission, for more than 80 years, built a comprehensive 
program to ensure

[[Page 37035]]

consumers can trust ``Made in the USA'' claims.\11\ My colleagues 
believe the Commission's 80 year MUSA enforcement program was a 
failure and only a rule and the imposition of penalties will deter 
false MUSA claims. I believe administrative consents, which were an 
integral part of this program, can be an appropriate remedy to 
address deceptive MUSA claims, consistent with the views of 
bipartisan Commissions during the last 25 years. I support seeking 
monetary relief where appropriate but cannot support acting outside 
the constraints of our legislative authority.\12\
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    \11\ The FTC has issued over 150 closing letters to companies 
making misleading U.S.-origin claims. Made in USA Workshop Report at 
3 (June 2020). Companies only receive closing letters if they 
demonstrate to staff they will come into compliance with the FTC's 
Enforcement Policy Statement on ``Made in the USA.'' The staff's 
workshop report explains ``companies often produce substantiation 
for updated claims to the FTC staff, and then present a plan that 
includes training staff, updating online marketing materials (e.g., 
company websites and social media platforms), updating hardcopy 
marketing materials (e.g., product packaging, advertisements, 
tradeshow materials), and working with dealers, distributors, and 
third-party retailers to ensure downstream claims are in 
compliance.'' Id. at 3 n.7. The FTC has also settled over 25 
enforcement actions, charging that companies refused to come into 
compliance or engaged in outright fraud. Id.
    \12\ I would note as well that seeking civil penalties for 
deceptive MUSA claims, as defined under the Commission's Rule, could 
have adverse market effects. Excessive penalties, divorced from 
harm, can result in over-deterrence. Importantly, the costs 
associated with over-deterrence are likely to increase with the 
expansiveness of the definition of labelling.
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    I fear as well this Commission's desire to promulgate or utilize 
our regulatory authority in ways that exceed the boundaries of 
underlying statutes and corresponding Congressional intent will 
continue. The Supreme Court's recent decision in AMG \13\ has 
eliminated the FTC's ability to seek equitable monetary relief under 
Section 13(b) of the FTC Act to compensate consumers. Thus, the 
temptation to test the limits of our remaining sources of authority 
is strong. I urge my colleagues to pause. Previous FTC forays into 
areas outside its jurisdictional authority have resulted in swift 
condemnation from the courts and Congress.\14\ Expansive 
interpretations of our rulemaking authority will not engender 
confidence among members of Congress who have in the past expressed 
qualms about the FTC's history of frolics and detours.\15\
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    \13\ AMG v. FTC, slip op No. 19-508 (Apr. 22, 2021), https://www.supremecourt.gov/opinions/20pdf/19-508_l6gn.pdf.
    \14\ See Federal Trade Commission Improvements Act of 1980, 
Public Law 96-252, 94 Stat. 374 (1980) (reforming the ability of the 
FTC to promulgate rules by requiring a multi-step process with 
public comment and subject to Congressional review). This Act also 
authorized $255 million in funding for the Commission and was the 
first time since 1977 the agency was funded through the traditional 
funding process after the backlash from Congress over its rulemaking 
activities. See Kintner, Earl, et al., ``The Effect of the Federal 
Trade Commission Improvements Act of 1980 on the FTC's Rulemaking 
and Enforcement Authority,'' 58 Wash. U. Law Rev. 847 (1980); see 
also J. Howard Beagles III and Timothy J. Muris, FTC Consumer 
Protection at 100: 1970s Redux or Protecting Markets to Protect 
Consumers?, 83 Geo. Wash. L. Rev. 2157 (2015) (describing the 
``disastrous failures'' of the FTC in the 1970s and the 1980s from 
enforcement and regulatory overreach and quoting Jean Carper, The 
Backlash at the FTC, Wash. Post, C1 (Feb. 6, 1977) (describing the 
backlash from Congress at the FTC, after a period of intense 
rulemaking activity culminating in the agency's being dubbed the 
``National Nanny'')); see also Alex Propes, Privacy and FTC 
Rulemaking: A Historical Context, IAB (Nov. 6, 2018) (discussing how 
the FTC's rulemaking history could be influencing Congressional 
comfort with vesting the FTC with additional privacy authority), 
https://www.iab.com/news/privacy-ftc-rulemaking-authority-a-historical-context/.
    \15\ See Transcript: Oversight of the Federal Trade Commission: 
Strengthening Protections for Americans' Privacy and Data Security 
(May 8, 2019), available at: https://docs.house.gov/meetings/IF/IF17/20190508/109415/HHRG-116-IF17-Transcript-20190508.pdf. At this 
Hearing, Rep. McMorris Rogers stated: ``In various proposals, some 
groups have called for the FTC to have additional resources and 
authorities. I remain skeptical of Congress delegating broad 
authority to the FTC or any agency. However, we must be mindful of 
the complexities of this issue as well as the lessons learned from 
previous grants of rulemaking authority to the Commission.'' 
Transcript at 8-9. Rep. Walden similarly stated: ``it has been a few 
decades, but there was a time when the FTC, as we heard, was given 
broad rulemaking authority but stepped past the bounds of what 
Congress and the public supported. This required further 
congressional action and new restrictions on the Commission.'' 
Transcript at 62.

[FR Doc. 2021-14610 Filed 7-13-21; 8:45 am]
BILLING CODE 6750-01-P