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Patriot Games: The Great ‘Made in USA’ Illusion (cont.)

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FTC’s biggest cases in the past 5 years support the argument that companies that exaggerate “Made in USA” claims rarely face a serious penalty. As of press time, FTCissued administrative orders to only two companies since 2009 as a result of investigations of “Made in USA” labels. In the first instance, FTCsettled with a California company that makes magnifiers for TVs and computers. The company couldn’t label its products as “Made in USA,” because some had what FTCdescribed as “a significant portion”—the agency didn’t specify the amount—of foreign parts.

In 2013, a marketer of Apple iPhone accessories, dog collars and other items settled FTC charges that it falsely claimed that some products were made in the United States or “Truly Made in the USA.” In fact, what FTC described only as “many”—again, no amount was specified—of its products were imported.

In both cases, FTC required the companies to change their product labels and marketing materials, but neither company admitted any wrongdoing or faced any further FTC penalty.

Most FTC investigations are resolved with “closing letters” that outline corrective actions that a company must take to comply with FTC rules. Between August 2010 and March 2014, FTC issued 28 public closing letters, Solomon Ensor says.

LESS AMERICAN. Some companies, marketing organizations and business groups set their own definitions of what “Made in USA” means. The definitions can be even less stringent than FTC’s definition but just as confusing to consumers who look for products that are made in the United States.

Made in the USA Foundation, which is a pro-business group that notes on its website that it’s funded by corporate donations, says its mission is to “strengthen and uphold labeling laws and standards.” However, it supports changing the California law to permit companies to place a “Made in USA” label on products if they can’t find a U.S. supplier for some parts.

Joel Joseph, who is the group’s founder and chairman, is highly critical of FTC’s efforts to uphold the “Made in USA” labeling standard. He says the agency “does virtually nothing in terms of enforcement.” Notably, Joseph, who also is an attorney, says he helped to write the current FTC standard.

Joseph says his group for years has complained to FTC about false or misleading “Made in USA” claims. In 2012, the group complained to FTC about Chrysler Group’s use of its “Imported from Detroit” ads in connection with some automobiles that it made in Canada, Joseph says. He says FTC did nothing in that case.

Nevertheless, Joseph says most consumers understand that few products can be made entirely with U.S. parts. “Virtually nothing is 100 percent made in USA anymore, except something like a candle or a bar of soap,” he says. Still, he adds that it’s reasonable for consumers to expect that products that have a “Made in USA” label predominantly are made in the United States. He says he favors a 75 percent standard in place of the current “all or virtually all” labeling rule.

Another marketing group, American Made Matters, allows its 250-plus member companies to use its copyrighted phrase “American Made Matters” and a red, white and blue logo that includes the phrase “Choose American” on packaging and marketing materials. However, American Made Matters allows its member companies to use the patriotic logo even if their products don’t meet FTC’s “all or virtually all” standard for “Made in USA” labels. According to the organization’s website, it allows members to use the “American Made Matters” logo if at least 50 percent of a product’s manufacturing cost—labor, materials and overhead—are incurred in the United States. FTC declined to comment on the organization.

In response to our questions about the use of its logo on products that contain imported parts, American Made Matters defended its 50 percent threshold by saying it’s “much clearer and easier to understand” than is FTC’s standard. That might be true, but it also means that consumers might be buying products that they believe are made in the United States but that contain 50 percent foreign parts.

The problem for consumers is, as always, that you seemingly never can tell just how much of a product actually is U.S. made. Hasler says companies can manipulate numbers to get “Made in USA” or similar labels, and it gives consumers a false impression that products are more U.S. made than they actually are. “I’m a little cynical about how that all comes together,” he says of manufacturers’ capability to fudge numbers and put “Made in USA” labels on their products.

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