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FTC to Issue Final Rule to Combat “Made in USA” Fraud

On July 1st, the Federal Trade Commission voted 3-2 to publish the final Made in USA Labeling Rule in the Federal Register.  The rule is consistent with – and essentially codifies – its prior 1997 Enforcement Policy Statement on U.S. Origin Claims, and provides the agency with enforcement tools to combat fraudulent claims.   The rule allows FTC to seek redress, damages, penalties, and other relief from marketers of fraudulent Made in USA labels.  Under the new rule, FTC can seek civil penalties of up to $43,280 per violation.

The enforcement tools are a result of the North American Free Trade Agreement, which went into effect in 1994, whereby Congress authorized FTC to seek penalties and other relief for Made-in-America fraud, but only after if the agency issued a rule.   The rule also contains a provision allowing marketers to seek exemptions if they can show that their unqualified “made in the USA” claims are not deceptive.

Although the Food and Drug Administration (FDA) regulates such statements in food labeling under its general statutory prohibition against labeling that is “false or misleading,” the FDA looks to FTC policy in this area when regulating such claims in food labeling. 

The U.S. Department of Agriculture’s (USDA) Food Safety Inspection Service (FSIS), however, has its own authority over such claims.  Secretary Tom Vilsack released a statement hailing the final rule and acknowledged that the current “Product of USA” label on meat products may no longer serve consumers, producers, and fair and competitive markets.  Currently, meat only needs to be processed or repackaged in the United States to be labeled “Product of USA,” but the agency is looking to overhaul those requirements.  National Cattlemen’s Beef Association President Jerry Bohn hailed Secretary Vilsack’s statement, arguing that the current label is not tied to food safety standards, lacks source verification, and does not deliver value to cattle producers.  Bohn also recommended that USDA consider a “Processed in the USA” label as an alternative.

FSIS is planning to publish a proposed rule entitled “Voluntary Labeling of Meat Products With “Product of USA” and Similar Statements” in November 2021.  USDA will review the current label to determine what it means to consumers and solicit questions, data, and comments from meat industry stakeholders including trading partners   Secretary Vilsack will also have to consider the proposed rule’s compliance with World Trade Organization rules and whether it could trigger retaliatory tariffs.  The new labeling rules also have the potential to affect other food products including pork or poultry.

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