By Sourcing Journal
This article was published in Sourcing Journal February 7, 2022.
Promoting U.S. Exports
In August, the Commerce Department launched a modernized Made in USA sourcing products directory, Paul Morris, the department’s executive director and acting deputy assistant secretary of commerce for textiles, consumer goods and materials, said in a recent webinar. The directory facilitates business to business matchmaking for the textiles, apparel, footwear and travel goods sectors, with more than 500 registrants listing available products.
“Registrants receive over 5,000 hits a month through our website,” Morris said. “We have found that by building and maintaining strong working relationships with all of you who represent private sector companies and industry trade associations, our team can work across the entire U.S. government to support a public policy environment that advances U.S. competitiveness and supports the global economic environment in which U.S. companies can be successful, both at home and abroad.”
Kristin Houston, senior international trade specialist at the International Trade Administration’s U.S. Commercial Service, said the agency has 160 offices in more than 80 countries. The agency has about 270 training specialists in the U.S. in six cities and about 254 officers and 750 locally engaged staff abroad.
“As a federal agency, we are uniquely positioned to address typical barriers to entry,” Houston said. “Many CEOs have dubbed us their company’s GPS. The reason they say that is because we’re able to guide them into the right market with the right partners as smooth as possible.”
The U.S. Commercial Service’s support functions help companies develop an export strategy, perform patent background checks, host matchmaking trips abroad, counsel overseas staff, promote product for export, explain export regulations and compliance, and choose promising trade shows to attend.
“The most frequently requested is our…gold key matching service,” Houston said. “For this service, we work with our clients and find out what type of partner they’re looking for overseas, whether it’s distributors or sales agents, and end users or access to e-marketplaces.”
Made in USA Rules
Julia Solomon Ensor, an attorney with the Federal Trade Commission’s (FTC) Division of Enforcement at the Bureau of Consumer Protection, described the agency as “the nation’s truth and advertising agency,” with a “very broad jurisdiction over almost every sector of the economy.”
“The main law that we enforce at the Federal Trade Commission…declares unfair or deceptive acts or practices as unlawful. Although the mission is pretty broad, you can think about three general principles that underlie the FTC act, and if you follow these three principles, you’re going to be well on your way toward compliance across all of your marketing claims.”
“First and foremost, I tell people ‘you need to be thinking about telling the truth or the claims that I’m making are true.’ If you’re telling the truth, you are a large part of the way [toward] complying with FTC,” Ensor said. “The first step to making sure that you’re telling the truth is ensuring that you understand the messages that your marketing conveys to consumers. At the FTC, we look at every marketing claim from the perspective of a reasonable consumer. We look at the ad, we look at the label and say what express or implied claims are made to the reasonable consumer.”
She said how consumers understand the claims matters more than a company’s intent behind the message. She advised companies to be specific with claims so that they don’t leave room for misinterpretation and don’t overstate a product’s benefits. In addition, make good use of clear and prominent qualifications or simple explanatory statements that tell consumers what is meant by the claims, Ensor said.
“They should be understandable and in language people can understand,” she said. “They need to be big enough that people can actually read them and they need to be clear on the product,” not through a link to website, for example.
“Once you’re sure you’re telling the truth, you need to understand how consumers are interpreting your claims and make sure that you have appropriate substantiation for consumer takeaway.” Ensor said. “If you can’t substantiate your claim, you shouldn’t make it.”
She said the standard for making claims that applies to the vast majority of products on the market is that “if no specific statute applies to your product that outlines how you need to be making origin claims, then the fallback position is that your claims are governed by the FTC Act, by that very general ‘don’t lie’ statute.”
The main guidance document in this area is “the enforcement policy statement on U.S. origin claims,” Ensor said, which “provides marketers details on how to make U.S.-origin claims for most products in the market.
“This is a document that is guidance, it is not a rule,” she said. “It is not independently enforceable. It tells marketers that if you make the meeting USA claim, this is the way the FTC is likely to enforce the Federal Trade Commission Act. The enforcement policy statement applies to all forms of marketing. So here we’re talking labels, advertisements, emails, social media, everything, and it applies to every product that’s advertised or sold in the United States, unless that product is subject to a different labeling,” such as textiles and wool products that are specifically covered under a different labeling regime.
The policy statement also covers expressed and implied U.S.-origin claims and qualified and unqualified claims. Express claims are literally presented, while an implied claim is more a message told to consumers through images or some other means.
Using the words Made in USA or Made in America without additional information represents an unqualified claim, while qualified claims are for products that are less substantially transformed in the USA, but may incorporate important content such as Assembled in the USA.
“Whenever we analyze a claim, we’re going to be looking at the net impression that you’re portraying.” Ensor said. “Note here that pictures, symbols, flags, things like that, can convey U.S.-origin claim and context and will be subject to the same substantiation requirements, as the words would be. However, just because you have an American brand name or trademark, or an address in the U.S., by itself does not likely convey a claim of origin for the product.”
Companies should be prepared to substantiate that a product is all or virtually all made in the USA, first by demonstrating that the final assembly and substantial transformation of the product takes place in the U.S. This is important because if a product is not “last substantially transformed” in the U.S. under Customs regulations, “you likely need to label your product as product of whatever foreign country your product just last substantially transformed it. So first, you need to get past this initial threshold that your product is less substantially transformed in the USA.”
She noted that the FTC has never articulated a particular percentage threshold, so even in if a product has a high proportion of U.S. manufacturing costs, it still may be deceptive to make an unqualified claim if, for example, the foreign content is essential to how a product functions.
What is allowed is acclaim that highlights a product is “Assembled in the USA,” which is specifically called out in the policy statement as a safe harbor if a product is substantially transformed in the U.S. without further processing overseas.
The Textile Act and Wool Act stipulates that products must contain labels identifying the country where those products are processed or manufactured. To determine proper country of origin under these rules, a “one step removed tool” standard governs the final manufacturing process. This means a shirt made of cloth from fiber imported into the United States to be woven into cloth and cut and sewn into a shirt qualifies under the Textile Act for a Made in the USA label because the fabric came into existence on U.S. shores. Products made in the U.S. of imported materials must be labeled to indicate processing or manufacturing that occurs abroad.
Ensor also discussed an FTC Made in USA labeling rule finalized in August that made companies liable for civil penalties if they violate the USA labeling rule as it applies to labels on products or depictions of those labels in mail or advertising.