Personal Finance

New Rule Targets Fake ‘Made in USA’ Products

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Just in time for the Fourth of July, the federal government has made it a little easier to be a patriot when you shop.

The Federal Trade Commission has issued a new ruling designed to crack down on marketers who falsely claim their products are made in the U.S. Under the new guidelines, marketers must be able to prove that products with such labels are “all or virtually all” made in the U.S.

According to the FTC, products cannot carry the label unless all of the following situations apply:

  • Final assembly or processing of the product occurs in the United States
  • All significant processing for the product occurs in the United States
  • All or virtually all ingredients or components of the product are made and sourced in the United States

The FTC says the rule, known as the Made in USA Labeling Rule, will especially benefit small businesses that rely on the “Made in USA” label but do not have the resources to defend themselves from imitators. For the first time, the FTC will have the power to seek civil penalties of up to $43,280 per violation of the rule.

In a press release, FTC Commissioner Rohit Chopra says:

“The final rule provides substantial benefits to the public by protecting businesses from losing sales to dishonest competitors and protecting purchasers 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.”

According to the FTC, after the North American Free Trade Agreement took effect in 1994, Congress enacted legislation that allowed the FTC to seek penalties and other relief for fraud connected to “Made in USA” claims. However, such powers were contingent on the FTC issuing a rule.

For a long time, there was a bipartisan consensus at the FTC that such fraud should not be penalized. As the FTC notes, “the final Made in USA Labeling Rule changes course on the commission’s longtime approach.”

The Made in USA Labeling Rule will take effect 30 days after it is published in the Federal Register.

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