AGENCY:

Federal Trade Commission.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Federal Trade Commission (“FTC” or “Commission”) seeks comment on this Notice of Proposed Rulemaking (“NPRM”) related to “Made in USA” and other unqualified U.S.-origin claims on product labels.

DATES:

Comments must be received by September 14, 2020.

ADDRESSES:

Interested parties may file a comment online or on paper by following the instructions in the Request for Comments part of the SUPPLEMENTARY INFORMATION section below. Write “MUSA Rulemaking, Matter No. P074204” on your comment, and file your comment online through https://www.regulations.gov by following the instructions on the web-based form. If you prefer to file your comment on paper, write “MUSA Rulemaking, Matter No. P074204” on your comment and on the envelope and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex C), Washington, DC 20580, or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex C), Washington, DC 20024.

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

Since at least 1940,^[1] the Commission has pursued enforcement actions to prevent unfair and deceptive “Made in USA” and other U.S.-origin claims (“MUSA claims”). Currently, the Commission's comprehensive MUSA program consists of compliance monitoring, counseling, and targeted enforcement pursuant to the FTC's general authority under Section 5 of the FTC Act, 15 U.S.C. 45.^[2] However, Congress has also granted the FTC authority to address MUSA labeling, including rulemaking authority, under a separate statute, 15 U.S.C. 45a.^[3] To date, the Commission has not exercised its rulemaking authority under that provision.

Recently, the FTC held a public workshop and collected public comments in support of a review of its MUSA program.^[4] Workshop participants and commenters discussed a variety of issues, including consumer perception of MUSA claims, concerns about the FTC's current enforcement approach, and potential changes to the FTC's MUSA program, including through rulemaking. During that proceeding, stakeholders expressed nearly universal support for the Commission to exercise authority pursuant to 15 U.S.C. 45a to issue a rule addressing MUSA claims. Commenters argued such a rule could have a strong deterrent effect against unlawful MUSA claims without imposing new burdens on law-abiding companies.^[5]

For 80 years, the Commission has pursued enforcement actions that have established the principle that unqualified MUSA claims imply no more than a de minimis amount of the product is of foreign origin.^[6] In 1997, following consumer research and public comments, the Commission published its Enforcement Policy Statement on U.S. Origin Claims (“Policy Statement”), elaborating that a marketer making an unqualified claim for its product should, at the time of the representation, have a reasonable basis for asserting that “all or virtually all” ^[7] of the product is made in the United States.^[8] The Commission has routinely applied this standard in its MUSA Decisions and Orders since 1997. Specifically, during that time the Commission issued 24 administrative Decisions and Orders, and entered into four federal court settlements ^[9] enforcing the “all or virtually all” standard.^[10] Therefore, to deter deceptive claims, enhance the Commission's ability to obtain appropriate relief for consumers, and provide additional certainty to marketers on the Commission's enforcement approach, the Commission now proposes a MUSA Labeling Rule incorporating this established standard pursuant to its rulemaking authority under 15 U.S.C. 45a.

II. Proposed Rule

Section 45a grants the Commission authority to issue rules to prevent unfair or deceptive acts or practices relating to MUSA labeling.^[11] Specifically, 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 FTC may seek civil penalties for violations of such rules.^[12]

Consistent with these statutory provisions, the NPRM covers labels on products that make unqualified MUSA claims. It tracks the Commission's previous MUSA Decisions and Orders by prohibiting marketers from including 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 NPRM 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 NPRM 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 NPRM. The Commission invites comment on whether the NPRM conflicts with any state country-of-origin labeling requirements.

III. Request for Comment

The Commission seeks comments on any aspect of the NPRM. You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before September 14, 2020. Write “MUSA Rulemaking, Matter No. P074204” on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including, to the extent practicable, on the https://www.regulations.gov website.

Due to the public health emergency in response to the COVID-19 outbreak and the agency's heightened security screening, postal mail addressed to the Commission will be subject to delay. We strongly encourage you to submit your comments online through the https://www.regulations.gov website, by following the instruction on the web-based form provided.

If you file your comment on paper, write “MUSA Rulemaking, Matter No. P074204” on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex C), Washington, DC 20580, or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex C), Washington, DC 20024. If possible, submit your paper comment to the Commission by courier or overnight service.

Because your comment will be placed on the public record, you are solely responsible for making sure that your comment does not include any sensitive or confidential information. In particular, your comment should not include any sensitive personal information, such as your or anyone else's Social Security number; date of birth; driver's license number or other state identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. You are also solely responsible for making sure that your comment does not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, your comment should not include any “trade secret or any commercial or financial information which . . . is privileged or confidential”—as provided by Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)—including in particular competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names.

Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with FTC Rule 4.9(c). In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. See FTC Rule 4.9(c). Your comment will be kept confidential only if the General Counsel grants your request in accordance with the law and the public interest. Once your comment has been posted publicly at www.regulations.gov—as legally required by FTC Rule 4.9(b)—we cannot redact or remove your comment, unless you submit a confidentiality request that meets the requirements for such treatment under FTC Rule 4.9(c), and the General Counsel grants that request.

Visit the FTC website to read this Notice of Proposed Rulemaking and the news release describing it. The FTC Act and other laws that the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives on or before September 14, 2020. For information on the Commission's privacy policy, including routine uses permitted by the Privacy Act, see https://www.ftc.gov/​site-information/​privacy-policy.

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 NPRM does not contain information collection requirements that the OMB must approve under the PRA.

V. Regulatory Flexibility Act

The Regulatory Flexibility Act (“RFA”), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, requires an agency to either provide an Initial Regulatory Flexibility Analysis (“IRFA”) with a proposed rule, or certify that the proposed rule will not have a significant impact on a substantial number of small entities.^[13] The Commission recognizes some affected entities may qualify as small businesses under the relevant thresholds. However, the Commission does not expect that this NPRM, if adopted, would have the threshold impact on small entities for two reasons. First, the NPRM includes no new barriers to making claims, such as reporting or approval requirements. Second, the proposed Rule merely codifies standards established in FTC enforcement Decisions and Orders for more than 20 years. Therefore, the NPRM imposes no new burdens on law-abiding businesses.

This document serves as notification to the Small Business Administration of the agency's certification of no effect. Although the Commission certifies under the RFA that the NPRM would not, if promulgated, have a significant impact on a substantial number of small entities, the Commission has determined it is appropriate to publish an IRFA to inquire into the impact of the NPRM on small entities. The Commission invites comment on the burden on any small entities that would be covered and has prepared the following analysis:

1. Reasons for the NPRM

The Commission proposes the Made in USA 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. In addition, enactment of the NPRM will enhance deterrence by authorizing civil penalties against those making unlawful MUSA claims on product labels.

2. Statement of Objectives and Legal Basis

The objective of the NPRM is to prevent deceptive MUSA claims on product labels. The legal basis for the Rule is the Made in USA provisions of the Violent Crime Control and Law Enforcement Act of 1994, codified in relevant part at 15 U.S.C. 45a.^[14]

3. Description and Estimated 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 NPRM will apply to small businesses that make MUSA claims on product labels. The Commission seeks comment and information regarding the estimated number or nature of small business entities for which the NPRM would have a significant economic impact.

4. Projected Reporting, Recordkeeping, and Other Compliance Requirements

The NPRM imposes no affirmative reporting or recordkeeping requirements. The NPRM's compliance requirements, consistent with the Policy Statement and longstanding Commission case law, require that marketers may not use 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 NPRM codifies the standard for MUSA claims established in Commission Decisions and Orders, and no new obligations are anticipated.

5. Identification of Duplicative, Overlapping, or Conflicting Federal Rules

Although there are other federal statutes, rules, or policies relating to country of origin labeling, the Commission has not identified any duplication, overlap, or conflict with the NPRM. The Commission invites comment and information on this issue.

6. Discussion of Significant Alternatives

The Commission seeks comment and information on the need, if any, for alternative compliance methods that would, consistent with the statutory requirements, reduce the economic impact of the NPRM on small entities. For example, the Commission is currently unaware of the need to adopt any special provisions for small entities. However, if such issues are identified, the Commission could consider alternative approaches. Nonetheless, if the comments filed in response to this notice identify small entities that are affected by the NPRM, as well as alternative methods of compliance that would reduce the economic impact of the NPRM on such entities, the Commission will consider the feasibility of such alternatives and determine whether they should be incorporated into the final rule.

VI. Communications by Outside Parties to the Commissioners or Their Advisors

Written communications and summaries or transcripts of oral communications respecting the merits of this proceeding, from any outside party to any Commissioner or Commissioner's advisor, will be placed on the public record. See 16 CFR 1.26(b)(5).

VII. Proposed Rule Language

List of Subjects in 16 CFR Part 323

• Labeling
• US origin

For the reasons stated in the preamble, the Federal Trade Commission proposes to add part 323 to subchapter C, title 16 CFR as set forth below:

PART 323—MADE IN USA LABELING

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

Footnotes