Kubota To Pay US$2 Million in Civil Penalty, the Largest Ever in Made in USA Cases
Tractor maker Kubota North America Corporation (Kubota) will pay a US$2 million civil penalty under a stipulated order with the FTC, which is the largest ever penalty for a violation of the Made in USA Labeling Rule. As stated by the Director of the Bureau of Consumer Protection, this order demonstrates the FTC’s dedication to “continue cracking down on deceptive Made in USA claims that cheat consumers and honest businesses.”
Consistent with the FTC’s Made in USA Decisions and Orders since the 1940s, the Made in USA Labeling Rule codifies the established principle that unqualified U.S. origin claims imply to consumers no more than a de minimis amount of the product is of foreign origin and that it is an unfair or deceptive act or practice to label a product as Made in the USA “unless the final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States.”
The FTC’s complaint against Kubota alleges that since at least 2021, Kubota has labeled replacement parts for its tractors and agricultural equipment that were made entirely overseas as “Made in USA.” This is not the first time that Kubota has been sued by the FTC for false Made in USA claims; it was sued in 1999 and subject to an FTC order that expired in 2019. On January 25, 2024, the U.S. District Court for the Northern District of Texas entered judgment granting a stipulated court order between Kubota and the FTC regarding violations of the Made in USA Labeling Rule. Under the order, Kubota must pay the above-mentioned US$2 million civil penalty and comply with requirements with regards to its Made in USA claims. Specifically:
- Kubota is prohibited from making unqualified claims about U.S. origin, unless it can show that final assembly and processing occur in the U.S. and all or virtually all components are made and sourced in the U.S;
- For any qualified Made in USA claims, Kubota must include a disclosure regarding the extent to which the product contains foreign parts or processing; and
- Kubota can only claim that a product is assembled in the U.S. if the product is last substantially transformed in the U.S. and is principally assembled in the U.S.
This order and related civil penalty is a reminder of the FTC’s enforcement of the Made in USA Labeling Rule, and how costly non-compliance with this rule can be. While Kubota’s case involved the sale of products made entirely overseas, the FTC has also pursued enforcement against companies where only parts of the products were sourced from overseas, citing its position that consumers understand “Made in the USA” to mean “all or virtually all” of the product was made in the USA, including the product’s components. For example, clothing companies were required to pay over $190,000 for claiming that their belts were “Made in USA from Global Materials” when the only assembly in the USA was affixing buckles to straps. Companies interested in touting that their products are made in the USA (or qualified claims, such as “assembled in the USA”) should carefully consider the Made in USA Labeling Rule and related guidance including the FTC’s “Complying with the Made in USA Standard” business guidance (as well as consult with counsel with experience in this area).
© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.