Last month the Federal Trade Commission (“FTC”) took enforcement action against an ATV and motocross parts maker, Cycra, and one of its officers for falsely claiming the company’s products were manufactured in the United States. FTC’s complaint alleged Cycra made false or misleading Made in the United States (MUSA”) advertising claims in violation of the Made in USA Labeling Rule. The rule strictly prohibits marketers from labeling products as “Made in USA” unless (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.
Between 2019 and 2022, Cycra advertised and sold motocross and ATV products, which it claimed were all or virtually all made in the United States. More than 150 of the company’s products displayed labels containing the wording “Made in the USA” (what FTC refers to as a “MUSA Label”) along with images of American flags. Additionally, the company’s website and social media made numerous Made in the USA claims, including that products were “[p]roudly designed, developed and manufactured in Lexington, North Carolina” and “[p]roudly made in the USA.”
Cyrca products were, in actuality, not being produced in the United States. Cycra imported at least 30 shipments of parts or accessories from Asia and Europe and additionally imported shipments of finished products already packaged, some already including MUSA Labels.
FTC’s order details a variety of requirements limiting the claims Cycra can make regarding its products going forward. First, there will be restrictions on unqualified claims; the company will be prohibited from making unqualified MUSA claims for any product unless it can show that the final assembly and all significant processing of the product take place in the United States and that all, or virtually all, ingredients or components of the product are made and sourced in the United States. Additionally, FTC has ordered requirements for qualified claims, requiring that for any qualified MUSA claims, there must be clear disclosure about the extent to which the product contains foreign parts, ingredients, components, or processing. Lastly, FTC has ordered requirements for assembly claims which require the company to ensure that when a product is claiming to be assembled in the United States, its principal assembly takes place in the United States and that those assembly operations are substantial.
The order also included a monetary judgment of $872,577. The monetary judgment has been partially suspended based on the company’s inability to pay. However, the company has been required to pay $221,358.66 of the penalty.