New FTC rule will penalize companies making false 'Made in USA' claims on their products

On July 1st, the Federal Trade Commission (FTC) issued a new rule that will penalize companies making false or misleading claims about where their products are manufactured. As a result, marketing departments slapping the 'Made in USA' label on their products, and advertising them as so, will need to prove that they are 'all or virtually all' made in the United States.

This change could affect certain brands in the photography world, including drone manufacturer Autel, who proudly claims certain drones of theirs are 'Made in the USA, with foreign and domestic parts and labor' – many of those components being manufactured in Shenzen, China, the same region where DJI, who has received criticism and even been blacklisted for its ties to the Chinese government, produces its popular UAVs.

Even if this new ruling prevents Autel from saying its products are 'Made in the USA' on any level, their CEO Randall Warnas told us 'this has not been something that [Autel has] needed for [its] success, and will be fine however the ruling turns out.'

Autel’s Evo II Dual drone, which it claims is ‘Made in the USA, with foreign and domestic parts and labor.’

There's an important distinction to be made when labeling a product 'assembled in America' as opposed to 'made in America,' as this thorough article written by Jeremiah Karpowicz of Commercial UAV Expo explains. Historically, the FTC has struggled to uphold its standards, without being able to dole out consequences. But this latest ruling could change that.

In light of the ruling, we contacted both Autel and DJI for comment. DJI chose not to comment on the matter, but Warnas said:

'The FTC is doing the right thing by making "Made in USA" mean something, and more clarity on how this can be accomplished is appreciated. Globalization over the past few decades has been accelerated with the Internet and cell phones that keep information at our fingertips at all times. As the world shrinks, we will surely encounter more blurring of these lines that the FTC is trying to address.'

The North American Free Trade Agreement (NAFTA) initially took effect in 1994. Congress had given the FTC authority to penalize fraudulent 'Made in the USA' claims but it would take effect after the Commission issued an official rule. That last part never came to fruition as it turned out to be a bipartisan issue – some in Congress thought those making these fraudulent claims shouldn't be fined.

'The final rule provides substantial benefits to the public by protecting businesses from losing sales to dishonest competitors and protecting purchasers seeking to purchase American-made goods,' said Commissioner Chopra.

The FTC released a notice of proposed rulemaking on June 20th and received over 700 comments—most of them in favor of of the FTC enforcing their 'Made in the USA' standards. Commissioners Rohit Chopra and Rebecca Kelly Slaughter, joined by Chair Lina Khan, issued a statement outlining the implications of this new rule. Small businesses, who otherwise may not be able to afford legal recourse from imitators who manufacture products outside the U.S., but claim that they're 'Made in the USA,' will have an advantage now that the Commission can seek civil penalties up to $43,280 per violation.

'The final rule provides substantial benefits to the public by protecting businesses from losing sales to dishonest competitors and protecting purchasers seeking to purchase American-made goods,' said Commissioner Chopra. 'More broadly, this long-overdue rule is an important reminder that the Commission must do more to use the authorities explicitly authorized by Congress to protect market participants from fraud and abuse.'

In order to legally display a 'Made in the USA' label on a product, businesses must adhere to the following three components:

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.

It's unclear whether these new guidelines would prevent Autel from continuing to claim its products are 'Made in the USA.' Autel didn't confirm whether or not this will change any of its plans going forward, but it will undoubtedly make Autel and others think more critically about applying the 'Made in USA' label going forward when global parts are used to manufacture the hardware, considering there's now a financial penalty hanging over their heads.

The Made in the USA Labeling Rule, which will be published in the Federal Register, can be viewed here.

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