In 2007, perhaps the most notorious ongoing news story was the steady stream of contaminated imported food items reaching American ports, and the risk this poses to the American consumer. As a result, much political action has ensued to safeguard our imported food supplies, most notably with respect to our relationship with China. However, another result has been increased consumer interest in country of origin labeling, which has in turn resulted in the filing of lawsuits alleging deceptive or false country of origin labeling on food products.
Current examples
At least two lawsuits that arose out of the pet food recalls in early 2007 have advanced the claim that pet food manufactured in the United States was improperly labeled as “Made in the U.S.A.” The Federal Trade Commission (FTC) maintains exclusive federal enforcement authority of “Made in the U.S.A.” claims pursuant to the FTC Act. The FTC is charged with ensuring that these claims, considered advertisements, are not deceptive and has set strict standards in this regard. However, private consumers cannot initiate a lawsuit under the FTC Act if they believe a “Made in the U.S.A.” claim is deceptive, since the FTC has exclusive enforcement authority of the Act’s provisions. Rather, consumers must initiate lawsuits under the many state consumer-protection statutes that generally prohibit false or misleading advertising.
A point of interest arises when a state consumer-protection statute is vague as to the standards by which a “Made in the U.S.A.” claim is to be judged. In these instances, plaintiff attorneys have asked state and federal courts to use the FTC’s strict standards as “guidance” when deciding whether state consumer-protection statutes have been violated. The concern for food manufacturers, retailers and others responsible for country of origin labeling is this practice, for all intents and purposes, allows consumers to sue under the FTC Act.
While this litigation tactic is novel and has only been embraced by one court to date, it emphasizes the need for food manufacturers, retailers and others involved with country of origin labeling to ensure compliance with not only the FTC Act, but all federal country of origin labeling regulations.
All or virtually all
The FTC utilizes a test of “all or virtually all” to determine whether an unqualified “Made in the U.S.A.” statement is deceptive. This means that all significant ingredients and processing involved with the manufacturing of the product must be of U.S. origin.
FTC has enumerated one requirement and two factors as a guide to help determine whether this standard has been met. The first requirement is that the product’s final manufacture must take place within the United States. If this requirement is met, the FTC will then look at how much of the product’s total manufacturing costs can be assigned to U.S. ingredients and processing, and how far removed any foreign content is from the finished product. The FTC’s enforcement policy states that this determination will be made on a case-by-case basis.
It should be emphasized that final manufacture within the United States does not automatically render a food product appropriate for “Made in the U.S.A.” labeling. This may seem contrary to the popular perception that a food item labeled as “Made in the U.S.A.” need only be manufactured in the United States. However, as far as the FTC is concerned, final manufacture in the United States is only an initial requirement. The inquiry is much more involved.
Assuming that the final manufacture occurs within the United States, one must then look at the percentage of foreign content in the final food product. While the FTC has not elucidated a bright-line amount of allowable foreign content, food manufacturers should proceed with caution. Often, in food manufacturing, minor ingredients add up to significant amounts. Another problem is the unavailability of some vitamins and other ingredients domestically. To date, the FTC has not made any concessions for ingredients not available domestically.
This strict approach is tempered somewhat because the FTC takes into account the costs of processing foreign ingredients, and the foreign ingredients’ significance to the final food product. If the ingredient is minor and accounts for only a small amount of the manufacturing costs, a “Made in the U.S.A.” label may be appropriate in the presence of a questionable amount of foreign content.
Unfortunately, the FTC does not provide advance opinions regarding compliance with its standard. Therefore, it is worth re-emphasizing that food manufacturers should be very conservative when labeling a food product as “Made in the U.S.A.”
U.S. Customs standards
The U.S. Customs and Border Protection (CBP) regulates the labeling of imported goods with a country of foreign origin marking. CBP’s general rule requires every article of foreign origin entering the United States to be legibly marked in a manner that indicates the article’s country of origin to the ultimate purchaser--defined as the last person within the United States that receives the food item in the form in which it was imported. The country of origin of a food item is the country of manufacture, production or growth of the food item, or the last country in which the item was substantially transformed.
There are, of course, exceptions to this rule, and slight variations of CBP’s analysis, depending on the type of item being imported and its originating country. For example, the North American Free Trade Agreement (NAFTA) is implicated when food items are imported from Mexico or Canada, and CBP’s country of origin labeling analysis will change accordingly.
