Steering clear of misleading Made in USA claims

Using their own colorful vocabulary, motocross devotees do their best to distance themselves from flat landing, roosting, and whiskey throttle. Something else many motocross, motorcycle, and all-terrain vehicle fans want to avoid: parts and equipment made in other countries, but imported into the United States already packaged with false “Made in USA” labels. That’s what the FTC alleges that North Carolina-based Cycra did, in violation of the FTC Act and the Made in USA Labeling Rule.

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Cycra went full throttle on its Made in USA claims. For example, the company’s website described products as “Proudly designed, developed and manufactured in Lexington, North Carolina.” Cycra’s Instagram and Facebook pages referred to items as “proudly made in the USA” and “Made in the USA.” And Cycra labeled more than 150 products with the words “Made in the USA,” often accompanied by an image of the American flag.

But according to the FTC, many of the items Cycra promoted as Made in the USA weren’t all or virtually all made in the United States, which the FTC Act and the Made in USA Labeling Rule require if companies want to represent their products as American-made. For example, between March 2019 and August 2022, Cycra imported at least 30 shipments of parts or accessories from Asia and Europe. In some instances, Cycra allegedly imported finished products packaged for sale with Made in USA labels. And the complaint charges that in at least two instances, Cycra imported shipments of finished products from Taiwan that were already packaged with those false labels after receiving direct notice from the U.S. Customs and Border Protection that those origin labels were false.

The complaint, which names both Cycra and COO Steven Chadwick James, alleges violations of the FTC Act and the Made in USA Labeling Rule. Unclear what the Rule requires? In effect since August 13, 2021, the Rule prohibits marketers from labeling products as “Made in USA” unless – and we’re quoting here – (1) “the 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.”

To settle the case, the company has agreed to injunctive provisions to protect consumers in the future and a $872,577 monetary judgment, which will be partially suspended based on the company’s financial condition. Cycra also must notify customers that products those people bought with the understanding they were made in the United States were actually imported from Taiwan. Once the proposed settlement runs in the Federal Register, the FTC will accept public comments for 30 days.

In addition to the FTC’s ongoing commitment to challenging false Made in USA claims, another key takeaway from the case is a reminder of the work of Customs and Border Protection in ensuring that products entering the United States are legibly and accurately marked with the country of origin.

Looking for more about complying with the FTC’s Made in USA standard? Consult these resources for businesses.