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The Complications of Using “Made in the USA” on Your Spirit

TheFederal Trade Commission (“FTC”) — the agency responsible for, among other things, regulating marketing to consumers — has long regulated business usage of the phrase “Made in the USA” on product packaging.1 To further that effort, about two years ago the FTC issued a final rule governing the use of “Made in the USA.”2 As discussed below, rather than issue a bright line rule3 on when businesses can list their products as “Made in the USA,” the FTC elected to create a less than definite standard. Much like the classic description for obscenity rendered by United States Supreme Court Justice Potter Stewart, the FTC’s standard boils down to: you’ll know it when you see it. Specifically, under the rule you cannot use “Made in the USA” on your product (without a qualifier) unless:

(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.

In so doing, the FTC has set the floor for what it takes to label your product as Made in the USA. The rule expressly allows states

1 This article focuses on use of “Made in the USA” in products sold to United States consumers. The terms use outside of the United States requires additional considerations, including the law of the country in which the product is purchased and relevant trade agreements.

2 https://www.federalregister.gov/documents/2021/07/14/2021-14610/madein-usa-labeling-rule to issue more draconian standards.

3 For example, California’s Business and Professions Code section Section 17533.7 allows a product to be labeled “Made in the USA” when up to 5 to 10 percent (depending on the circumstances) of a product comes from a foreign country. The FTC was asked to simply adopt that clear cut standard, and decided against doing so. Accordingly, it is possible to have a product that is allowed to be labeled “Made in the USA” under California law, but deemed to violate the FTC.

While the FTC has a lengthy guide on pitfalls of making “Made in the USA” claims,4 this new rule has opened the door for consumer-plaintiffs to bring suits alleging a business’s use of “Made in the USA” is deceptive. Those suits are typically filed under state law and have a range of penalties from monetary damages to having to pay the consumer’s legal fees. As a result, though those cases are often frivolous in nature, businesses should carefully evaluate any source designation claims on their products, including “Made in the USA.”

The first step in that risk assessment, and the focus of this brief article, is determining if the FTC’s rule governs your product. In its rulemaking the regulator did not address the alcohol industry. Though relevant for our purposes, it specifically analyzed the effect of the new rule on beef and shrimp. The FTC explained in its rulemaking, that “Section 323.5(a) of this rule makes clear that the rule does not supersede, alter, or affect the application of any other federal statute or regulation relating to country-of-origin labeling requirements, including but not limited to regulations issued under the FMIA, 21 U.S.C. 601 et seq.; the Poultry Products Inspection Act, 21 U.S.C. 451 et seq.; or the Egg Products Inspection Act, 21 U.S.C. 1031 et seq.” In simple English, the FTC’s new rule does not change any existing federal statute passed through congress, or regulation issued by another federal agency that requires listing country-of-origin on product labels. The FTC specifically identified the USDA and the FDA as two entities with primary jurisdiction of labeling issues for certain food products, and that the new rule did not supersede their jurisdiction. Accordingly, the FTC explained that the new rule does not apply to Beef or Shrimp, as both fall under specific regulations of the USDA. It follows that the same should be true about the TTB and certain alcohol products.

4 https://www.ftc.gov/business-guidance/advertising-marketing/made-in-usa

But there’s the rub. While there are very particular regulations relating to appellations of origin, what certain spirits can be called, and terms relating to where and how the spirit got into the bottle (i.e. “bottled in,” “blended in,” “distilled in”), the TTB does not have an express rule on the use of “Made in the USA” for spirits. Common sense would dictate that if the TTB allows you to write on the label, for example, that your gin is distilled in California, that you could say it is “Made in the USA.” Many legal principles support such a conclusion too. But the lack of an express governing regulation suggests careful evaluation of claims like “Made in the USA” before you put them on the bottle or in your advertisements.

In conclusion, you should carefully consider whether the juice is worth the squeeze when it comes to listing “Made in the USA” on your product. When in doubt, leave it out (or consult an attorney).

The COVID-19 pandemic officially ended in the U.S. on May 11, although most of society moved past it much earlier. Now is a good time to check the pulse of craft distilling in a postpandemic world, from the people making the juice to the organizations and communities supporting their efforts. In this third and final part of our series, we look at the craft distilling industry from the perspective of the wider community built around it.