The Federal Trade Commission says it wants to help American manufacturers. In fact, FTC Chair Andrew Ferguson recently declared July as “Made in America Month,” highlighting the agency’s commitment to promoting U.S. manufacturing and cracking down on fraudulent labeling.
But as Market Institute Senior Fellow Norm Singleton explains in his recent RealClearMarkets column, the FTC’s own rules are standing in the way of the very businesses it claims to support.
“Section 5 of the Federal Trade Commission Act, which forbids ‘false or deceptive’ advertising, is the statutory justification for the 2021 Made in the USA rule,” Singleton writes.
“Under the rule, the FTC uses a three-pronged test… [requiring that] the product be made from ‘all or virtually all’ U.S.-sourced components.”
That last requirement is where the problems start. It effectively disqualifies thousands of small, American businesses from calling their products “Made in the USA”—even if they’re built in America, by American workers, in American factories.
Take Bunch Bikes, for example. This small electric cargo bike company operates out of Denton, Texas, employing just eight people. They assemble their bikes here in the U.S.—but rely on imported parts because there are no domestic suppliers for many of the 120 components they need.
“While it might be possible for Bunch Bikes to get these products from other sources, there is no guarantee another supplier would be as reliable or meet the same standard of craftsmanship,” Singleton explains.
“Besides, Bunch Bikes’ eight-person staff does not have the time or resources to locate alternative suppliers.”
The FTC’s answer? Too bad. Under the current rule, Bunch Bikes can’t say their bikes are “Made in the USA”—despite the fact that almost any consumer would reasonably believe they are.
And that’s the heart of the problem.
“When most consumers see the phrase ‘Made in the USA,’ they think that the manufacturing takes place in an American plant by American workers, even if some of the parts used are imported,” Singleton notes.
“If the use of foreign parts disqualifies a product from being made in the USA, then why should the same standard not apply to the use of foreign-made tools? A consistent application of this logic would mean that virtually no product could carry the Made in the USA label.”
That kind of rigidity might sound good on paper, but in practice, it punishes the small businesses that are doing exactly what the FTC claims to champion: building real products in America.
Nearly half of U.S. imports are intermediate goods—parts, tools, or materials used in other products. If the FTC’s goal is to protect consumers, it should align its standards with common sense. A product built in the U.S. by American workers is American-made, even if it includes some foreign components.
Instead, the current rule threatens small firms with fines of over $50,000 per violation. For startups and growing businesses, that’s not regulation—it’s a death sentence.
As Singleton concludes:
“Consumers looking to support American business do not want the FTC to make it harder for small and new companies. The FTC needs to modify its Made in America rule so as not to exclude smaller businesses from being able to say that their goods are Made in America.”
It’s time for the FTC to stop turning patriotic marketing into a regulatory trap—and start supporting the American makers they claim to represent.
