‘Built in Detroit’ – Does it Fall Under the FTC’s ‘Made in USA’ Requirements?

By John DiGiacomo

made_in_usaIs Shinola “Made in USA,” or do they fall outside the FTC’s scope? Shinola has publicly claimed that despite risking possible contradiction of Federal Trade Commission (“FTC”) regulations, they will continue to use “Built in Detroit” as their tagline on watches. The FTC requires that when a product claims that it is “Made in USA” or something similar, that “all, or virtually all” of the product has to fit that description. This policy is intended to prevent companies from misleading or deceiving consumers.

The FTC’s regulations state that a “Made in USA” claim can be done either expressly or by implied means. To expressly advertise their products, a company will use statements such as “Made in USA” or “Our products are American-made.” However, implied claims can include references to the United States flag, outlines of US maps, or reference to US locations of factories or headquarters. Essentially, the FTC is targeting any brand or tagline that could convey to consumers that the product is of US origin. Based on this metric, Shinola may fit under the ‘implied claims’ category of the regulations by referring to Detroit, their headquarters and manufacturing location in the United States.

The FTC’s “all, or virtually all” requirement means that all significant parts and processing elements involved in the creation of a product must be of US origin. In other words, any parts or processing completed outside of the United States must be negligible to the overall product made. The FTC goes on to say that final assembly and processing of the good must take place in the United States. Additionally, the Commission will consider manufacturing costs assigned to the US portions and foreign portions of the product and how far removed the foreign product is from the final item.

In Shinola’s case, the watch movements, dials, hands and crystals are all foreign products. While the cost of these parts may be minimal in comparison to the manufacturing costs in the United States, these are key components to a watch. After all, without a watch movement and hands, you don’t have much of a watch.

According to a recent Detroit Free Press article, the FTC recently opened an investigation into a Kansas City-based watchmaking company called Niall Luxury Goods. Niall also advertised that their watches were “USA Made;” however, their watch movements came from Switzerland. The FTC closed its investigation when Niall agreed to include “with Swiss movements” in their “USA Made” label.

Things could get difficult for Shinola in the near future unless they choose to update their tagline. An FTC representative quoted in the Detroit Free Press suggested that “Built in” could be viewed as equivalent to “Made in,” and that the biggest concern was consumer perception. If a consumer would perceive “Built in” to mean that the product is of US origin, then the FTC could look at enforcing compliance to the “Made in USA” regulations.

For more information about the FTC regulations around “Made in USA” and whether or not you should be concerned, contact Revision Legal’s Corporate attorneys here or call 855-473-8474.

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