The Federal Trade Commission is taking action against motocross and ATV parts maker Cycra and its owner, Chad James, for falsely claiming that the company’s products were manufactured in the U.S. The FTC’s proposed order would stop Cycra and James from making deceptive claims about products being “Made in USA” and require them to pay a monetary judgment.
“False ‘Made in USA’ claims hurt consumers and honest businesses,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “We will continue to work with our colleagues at U.S. Customs and Border Protection and across the federal government to hold bad actors accountable.”
According to the FTC’s complaint, Cycra has made claims that its products are made in the U.S. on its website, social media, and product packaging from 2019 until at least May, 2022. The claims included a web banner saying “Proudly designed, developed and manufactured in Lexington, North Carolina,” and product labels featuring the American flag.
In fact, the complaint charges, Cycra regularly imported parts from Asia and Europe for its products, and in two separate instances, U.S. Customs and Border Protection officers discovered, in shipments from Taiwan, assembled products that were already labeled or ready to be labeled as being “Made in USA” in shipments from Taiwan.
The FTC’s order against Cycra and James, which the defendants have agreed to, includes a number of requirements about the claims they make:
- Restriction on unqualified claims: Cycra and James will be prohibited from making unqualified U.S.-origin claims for any product, unless it can show that the product’s final assembly or processing—and all significant processing—takes place in the U.S., and that all or virtually all ingredients or components of the product are made and sourced in the U.S.
- Requirement for qualified claims: Cycra and James are required to include in any qualified Made in USA claims a clear and conspicuous disclosure about the extent to which the product contains foreign parts, ingredients or components, or processing.
- Requirement for assembly claims: Cycra and James must also to ensure, when claiming a product is assembled in the U.S., that it is last substantially transformed in the U.S., its principal assembly takes place in the U.S., and U.S. assembly operations are substantial.
- Monetary judgment: The order includes a monetary judgment of $872,577, which is partially suspended based on an inability to pay. Cycra and James will be required to pay $ 221,385.66.
The FTC is committed to ensuring that “Made in USA” claims are truthful. The FTC’s Enforcement Policy Statement on U.S. Origin Claims provides guidance on making non-deceptive “Made in USA” claims. In addition, the FTC’s Made in USA Labeling Rule went into effect on Aug. 13, 2021. Companies that violate the Rule from that date forward may be subject to civil penalties.
The Commission vote to issue the administrative complaint and to accept the consent agreement was 3-0. The lead staff attorney on this matter was Julia Solomon Ensor in the Bureau of Consumer Protection.
The FTC will publish a description of the consent agreement package in the Federal Register soon. The agreement will be subject to public comment, after which the Commission will decide whether to make the proposed consent order final. Instructions for filing comments appear in the published notice on regulations.gov.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $50,120.