Digging Deeper: “American Made” Claims From the Tenth Circuit’s Decision in I DIG Texas v. Kerry Creager Diverge from FTC Guidance

On April 12, 2024, the Tenth Circuit issued a decision in I DIG Texas LLC v. Kerry Creager, which analyzed country-of-origin claims in a manner that diverged from the well-established Federal Trade Commission’s “Made in USA” policy.

The plaintiff counterclaimant, I DIG Texas LLC, a company specializing in the manufacture and sale of excavation and construction equipment, sued defendant counterclaimant, Kerry Creager, a manufacturer of skid steer attachments, for alleged violations of the U.S. Copyright Act and the Lanham Act. In connection with the Lanham Act claims, Creager claimed false advertising and false designation of origin. Creager argued that the United States origin claims in question, which included phrases like “100% American Made” and “American-Made”, rendered the equipment’s advertisements false in part because the product’s component parts came from non-United States sources.

One issue the Court addressed was the characterization of products as American-made; is a boast about American-made products literally false when the business assembles products in the United States, but uses foreign components? The court answered “no” because the advertisement was ambiguous. According to the Court, to “make” something in the United States could refer either to the origin of the components or to the assembly of the product itself. The Court also found that the use of patriotic symbols, such as American flags, was also ambiguous and couldn’t objectively be verified as true or false.

The FTC is no stranger to this subject, having issued a Made in USA Labeling Rule and an enforcement policy statement on U.S. origin claims. Put simply, the FTC’s policy states that for a product to be advertised or labeled as “Made in USA,” it must be “all or virtually all” made in the United States. This means that all significant parts and processing that go into the product must be of United States origin, and the product’s final assembly or processing must take place in the United States. Under this policy, the fact that I DIG Texas used non-U.S. origin component parts for their equipment may have been enough to disqualify them from making valid United States origin claims. Had the non-United States origin parts been a de minimis part of the machinery, say ink used to print a label, then the FTC’s hypothetical result here may have been different.

The Court was not persuaded by the FTC’s views on U.S. origin claims. Creager invoked the FTC’s policy statement in its summary judgment briefing as a way to evaluate the validity of the U.S. origin claims made by I DIG Texas. In a footnote, the Court noted that “[e]ven if the FTC policy were otherwise instructive, it would not bind [it] when addressing false advertising under the Lanham Act.”[1] The Court went on to explain that even if it were to consider the FTC policy, the policy itself acknowledges the absence of a “single ‘bright line’ to establish when a product is or is not . . . made in the United States.”[2] And since the FTC does not have a bright line rule but rather considers multiple factors, such as the place of the final assembly and the nature of any foreign components, the Court found that the FTC policy does not remove the ambiguity of phrases like “made in the United States” or “American-made”.[3]

Even though the FTC’s policy statement is not law and therefore not binding on courts, it is important to note that violations of the Made in USA Labeling Rule, which regulates unqualified United States origin claims on product labels, has the force of law and can lead to civil penalties of up to $51,744 per violation or per day, for ongoing violations.[4]

Only time will tell if this case will be an outlier or if other courts will follow suit. But litigants in the Tenth Circuit should be aware of the deviation from FTC policy.  Our team will continue to stay apprised of developments in this area. If you have any questions regarding the Made in USA Labeling Rule, the Creager decision, or appeals in the Tenth Circuit, please contact the attorneys below.