For people who prefer to buy products made in the USA, products from Lithionics Battery LLC seemed like an attractive option. According to the FTC, Lithionics and Chief Executive Steven Tartaglia used phrases and images of American flags to convey a Made in USA marketing message for their battery, battery module and battery management system products. But don’t wave Old Glory just yet. As the FTC’s first action under the new Made in USA Labeling Rule alleges that the lithium-ion cells used by Lithionics were actually made in China. The proposed settlement includes a civil penalty of $105,319.56 and requires changes to how the company makes Made in USA claims.
Lithionics sells battery products for recreational vehicles, marine applications, and similar uses. Defendants labeled their merchandise with an image of the flag image surrounded by the words “Made in USA.” Sometimes they added the phrase “Proudly Designed and Built in USA”. The defendants dubbed these depictions on the Lithionics website, in mail-order catalogs and on social media. For example, the complaint cites YouTube videos featuring Tartaglia and company employees affixing Made in USA labels to Lithionics products. Other marketing materials included a table comparing “the benefit[s] Lithionics battery systems” to what are described as “imports”.
Under the Made in USA Labeling Rule, merchants are prohibited from labeling products as “Made in the USA” unless all or substantially all of the ingredients or components are made and sourced in the United States. Additionally, final assembly or processing—and all major processing that goes into the product—must take place in the United States.
But according to the FTC, Lithionics battery and battery module products incorporated lithium-ion cells made in China, and Lithionics battery management systems included significant imported components. That’s why the FTC says the defendants’ “Made in USA” claims were misleading.
The complaint, which names both Lithionics and Tartaglia, alleges violations of the Made in USA rule and FTC Section 5. In addition to a civil penalty of $105,319.56 allowed under the new rule, the proposed settlement includes injunctive relief provisions that will change the way defendants do business going forward. For example, the ordinance prohibits them from doing without reservation Claims of US origin unless they have proof that the final assembly or processing of the product – and any significant processing – takes place in the United States and that all or substantially all of the ingredients or components are manufactured and originate here.
The ordinance further requires that any qualified Made in the United States claims include clear information about the extent to which the product contains foreign parts, ingredients, or components, or involves foreign processing. Finally, if defendants state that a product is assembled in the United States, they must ensure that it was last substantially processed in the United States, that its major assembly took place here, and that assembly operations in the United States are substantial.
If your company makes Made in the USA claims, the case offers two important compliance ratings.
- Review the ruler to keep your representations red, white, and true. If you make Made in USA claims, do they comply with Made in USA Labeling Rule? The new civil penalty remedy can make non-compliance costly.
- If necessary, be sure to qualify your claims. IIf you make Made in USA statements that are “unqualified” — in FTC parlance, that means statements that are not modified or limited — you must meet the “all or substantially all” standard. If you have made “qualified claims” – claims that include caveats or explanations – the legal responsibility lies with you to ensure that these qualifications are clearly understood by consumers. FTCs U.S. Origin Claims Enforcement Policy Statement provides more guidance on Made in USA claims.