Dive Brief:

• Three clothing accessory companies and their owner were fined $191,481 for saying their products were made in the United States when most of the work and materials were from outside the country, the Federal Trade Commission says.
• In settling with the agency, the companies agreed to notify customers that the products they bought didn’t meet the “Made in USA” definition. Going forward, they can make the claim if the products meet the definition in the FTC’s labeling rule, published in 2021, and if they don’t, to qualify the claim with an explanation. 
• “‘Made in USA’ means what it says,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement. “Falsely labeling products as ‘Made in USA’ hurts consumers and competition, and the FTC will continue to aggressively enforce the law to stop deceptive claims and hold violators accountable.”

Dive Insight:

The settlement is between the FTC and Thomas Bates and three companies he owns: Chaucer Accessories, Bates Accessories and Bates Retail Group.

The companies make and sell accessories like belts, bags, wallets and shoes. 

The FTC filed a complaint in March accusing the companies of promoting products to retailers and consumers as Made in USA when the labeling didn’t apply to the materials or assembly. 

In one instance, the companies imported belt straps from Taiwan, affixed buckles to the straps in the United States and then labeled and advertised the finished products as “Made in USA from Global Materials.”

“Attaching a buckle to a belt strap is a minimal assembly operation that does not change the name, character, or use of an imported belt strap,” the FTC said in the complaint. 

A product can be labeled “Made in USA” if it meets the definition in the agency’s 2021 Made in USA labeling rule. The agency also has a non-binding 1997 enforcement statement on labeling. 

In the key criteria, for a product to be considered made in the United States, the final assembly or processing must occur in the United States and all significant processing that goes into the product must occur in the United States and all or virtually all ingredients or components must be made and sourced in the United States.

Anything less than that requires a qualification adjacent to a “Made in USA” claim that describes the extent to which the product contains foreign parts, ingredients, components or processing.

The labeling rule isn’t without controversy. At the time it was approved, then-commissioner Christine Wilson, a frequent critic of aggressive agency action who resigned earlier this year, took issue with extending enforcement to advertising when the authorizing statute just references labeling. 

“The Commission … has chosen to promulgate a rule that could be read to cover all advertising, not just labeling,” Wilson said at the time. “This rule is not supported by the plain language of [the statute].”

In the notice requirement in the clothing accessory settlement, the companies must include a passage to customers that says, in part, “We’re writing to tell you that the Federal Trade Commission, the nation’s consumer protection agency, has sued us for making false claims. To settle the FTC’s lawsuit, we’re contacting you to tell you that the products you bought were not all or virtually all Made in the USA. In fact, those products were imported.”

The companies will also have to meet recordkeeping and reporting requirements for several years, among other things. 

Bates Accessories didn’t respond immediately to a request for comment.