Federal Contractors and Online Marketplaces to Face Increased Scrutiny of “Made in America” Claims Under New Executive Order

By Brett W. Johnson, T. Troy Galan, Carrie Schaffer, Lilly M. Geiler, and Thomas Williams

Earlier this month, President Donald Trump issued the Executive Order, “Ensuring Truthful Advertising of Products Claiming to Be Made in America” (the E.O.),¹ which seeks to ensure individual consumers and federal procurement officers can rely on companies’ American-origin claims for their products.

The E.O. directs the focus of current enforcement priorities as well as potential future rulemakings on the veracity of “Made in the U.S.A.” claims. In practice, the E.O. serves as a reminder to international manufacturers and government contractors to verify the accuracy of their country-of-origin claims against the various federal requirements to avoid the risk of penalties or criminal prosecution under the Federal Trade Commission Act (FTCA) and False Claims Act (FCA).

I. Background of Made in America Standards

“Made in America” claims are subject to different standards depending on the context. For consumer advertising, the Federal Trade Commission (FTC) generally requires that products labeled as “Made in America” or “Made in the U.S.A.” be “all or virtually all” made in the United States, meaning there is little to no foreign content.²

For sales to the federal government, a different standard applies under the Federal Acquisition Regulations (FAR). Under the applicable FAR, a product is typically considered domestic if it is manufactured in the United States and at least 65% of its component costs come from U.S.-based sources.³

II. The Executive Order

The E.O. directs the following four key actions:

1. The FTC to prioritize enforcement actions where sellers misrepresent that a product is made in the United States.

2. The FTC to consider proposing regulations under the FTCA under which an online marketplace’s failure to establish verification procedures for country-of-origin claims may constitute an unfair or deceptive act.

3. Relevant agencies to consider proposing regulations to promote voluntary country-of-origin labeling for products made in the United States.

4. Agencies overseeing government-wide acquisition contracts to periodically review and verify American-origin claims for procured goods, remove misrepresented products from procurement availability, and refer vendors who make American-origin misrepresentations to the Department of Justice for prosecution under the FCA.

III. The Impact

Although the E.O. does not change the legal framework for when a company can represent that their product is “Made in the U.S.A.,” international manufacturers and government contractors should pay close attention to any proposed rules related to country-of-origin claims. Those affected can and should seek to protect their interests by participating in the notice-and-comment process for agency rulemakings to influence future regulations and eventual review of those regulations by the courts.

Compliance efforts are also critical as violations of the FTCA and FCA are punishable by significant civil and criminal penalties, including treble damages under the FCA. This is in addition to state laws, that can be even more onerous as to what can be claimed as “Made in the U.S.A.”

In sum, the E.O. signals that increased enforcement efforts related to American-origin claims are on the horizon. Impacted companies should take action now to review their supply chain agreements, compliance certifications, and policies against the legal standard applicable to their line of business.

As companies shift global supply chains to address tariffs and other international trade uncertainties, product bills of material should be updated to reflect content and country of origin. In addition to complying with the Buy American Act requirements, such shifts may also change tariff rates.

***Opinions expressed are those of the authors and not necessarily the firm’s or their colleagues’.