Compliance with FTC regulations is essential to avoid enforcement actions, litigation and penalties.
By Julia Solomon Ensor
For companies in the textile or wool products business, time invested in a compliance check today could save time, money and hassle associated with a regulatory inquiry in the future. After all, the last time the Federal Trade Commission (FTC) publicly investigated companies for allegedly mislabeling textile products, those companies ended up having to pay millions of dollars in penalties.
When it comes to textile and wool labels, the FTC is the primary federal regulator. Pursuant to the Textile Fiber Products Identification Act, 15 U.S.C. § 70 et seq. (Textile Act), and implementing rules, 16 C.F.R. Part 303,1 and the Wool Products Labeling Act, 15 U.S.C. § 68 et seq. (Wool Act), and implementing rules, 16 C.F.R. Part 300,2 the FTC requires every covered product’s label to include three key pieces of information:
- fiber content;
- country of origin; and
- manufacturer identity.
Labels can contain additional, non-required information if it is not misleading, but if a marketer’s label does not address these three categories of information, it is noncompliant.
Fiber Content
Historically, most of the FTC’s textile-related litigation has focused on fiber disclosures, with most cases alleging companies misled consumers by using the wrong generic fiber names. For example, the FTC has repeatedly sued companies selling textiles made from rayon or viscose derived from bamboo pulp for labeling their products as “bamboo” when the labels should have said rayon or viscose.
Most recently, in 2022, the FTC blanketed the marketplace with notices to retailers reminding them that Commission decisions have determined it is an unfair or deceptive act or practice to misidentify a product’s fiber content. The notices included a synopsis of FTC cases reaching this conclusion. When the targeted retailers failed to clean up allegedly deceptive claims within a reasonable amount of time of receiving the letters, the FTC initiated enforcement actions. And, once the FTC initiated the cases on fiber content disclosures, the threshold alleged Textile Act violations opened the door for the FTC to investigate other marketing claims on the retailer sites, ultimately arguing that these retailers further violated the law because they also misled consumers as to the environmental benefits of their bamboo-derived products. So, in those cases, litigation triggered by specific issues with fiber content identification evolved into large-scale matters involving other marketing claims. The FTC ultimately settled the cases for penalties of $2.5 million and $3 million, respectively.
Five Percent Matters
With this frame in mind, textile marketers should always begin compliance reviews with a careful check of fiber content disclosures. First, marketers should determine each constituent fiber in each product that accounts for 5 percent or more of the product by weight. For those fibers, companies should ensure they are using correct generic names listed in either 16 C.F.R. § 303.73 or ISO Standard 2076: 2010(E). Marketers should list the names on the label in descending order of predominance. For fibers other than wool that comprise less than 5 percent of the product by weight, companies can generally disclose them as “other fiber[s].”
Allowances & Tolerances
There are a few allowances in the regulations that make disclosures easier. First, the FTC permits a 3 percent tolerance on claims to account for slight variability across product lines.
Litigation triggered by specific issues with fiber content identification evolved into large-scale matters involving other marketing claims. The FTC ultimately settled the cases for penalties of $2.5 million and$3 million, respectively.
So, as long as companies are doing their best to be accurate, error within that 3 percent range is generally low risk. Second, there is no requirement to disclose fiber content for things like collars and cuffs, trim, linings — unless used for warmth — small amounts of ornamentation, or threads that hold a product together. And, finally, if a product includes using clippings or textile waste materials of indeterminant fiber content, it is generally low risk to disclose those materials as unknown fiber content.
Country Of Origin
Country of origin is next on the compliance checklist. The Textile Act and Wool Act require companies to disclose origin for all products, whether they are imported or made in the United States. For imported products, this is easy. The tag should simply reflect the product’s country of origin as disclosed at time of importation. If the product is not imported, things get a little more complicated. Specifically, when it comes to figuring out whether a textile or wool product that underwent final processing in the United States can be labeled as “Made in USA” or “Made in USA of Imported Materials,” the FTC uses the “one step removed” rule.
One Step Removed
The “one step removed” rule requires companies to look at the origin of the materials one step removed from the product’s final manufacturing process. If those materials are imported, the marketer must disclose that on the label. If those materials are U.S. materials, the marketer can label the product as “Made in USA.”
For example, a company selling a woven shirt should look at where the fabric was made, because that step is one step removed from the final step in shirt production — cut-and-sew. If that step happened in the United States, the marketer could label the shirt as “Made in the USA.” But, if the company imported fabric and then cut and sewed it into a shirt in the United States, the marketer would have to label the shirt as “Made in USA of Imported Fabric.” And, if the product the marketer sells happens to be a flat product like a sheet or a towel, just saying “imported fabric” is insufficient. For those products, companies must identify the county the product came from such as “Made in USA of fabric made in China,” for example.
The ”one step removed” rule requires companies to look at the origin of the materials one step removed from the product’s final manufacturing process. If those materials are imported, the marketer must disclose that on the label.
The FTC has pursued enforcement action against textile manufacturers for incorrect country-of-origin claims on labels. However, those cases have mostly involved egregious conduct. For example, in 2022, the FTC sued a marketer for allegedly ripping tags out of apparel products that appropriately disclosed the products were made in China and replacing them with “Made in USA” claims. That company and its owner settled with the FTC for an injunction and monetary relief of $211,335.
Consumer Versus DoD
Although the “one step removed” analysis is the rule for most textile manufacturers seeking to label their products as “Made in USA” for sale to consumers, it is important to note that there is an additional wrinkle for marketers selling their products to the Department of Defense (DoD). Specifically, companies supplying products to the DoD should be aware that the Berry Amendment, 10 U.S.C. § 4862, and its implementing regulations in most cases prohibit the DoD from acquiring clothing or textile products unless those products are domestically sourced. In general, a covered product will not comply with this requirement unless its entire production process — from raw material sourcing through final assembly — is performed in the United States. In this context, if early-stage inputs to a product are foreign-sourced, evidence of compliance with the “one step removed” standard will be insufficient.
Manufacturer Identity
The final item on the label compliance checklist is the identity of the manufacturer, importer, or other dealer. Marketers must include this information because, when people buy a product, they need to be able to figure out who markets, distributes, or otherwise handles it. To comply, marketers can either print company names directly on labels, or, if saving space and facilitating record keeping are priorities, apply for and include an optional Registered Identification (RN)4 number on the tag.
Don’t Confuse Or Mislead
Compliance begins with ensuring all labels include these three disclosures, every time. Beyond that, to avoid a regulatory action, marketers should ensure labels are securely attached until products are delivered to customers — in the neck, if the products have one. And, as is true in all advertising, marketers should be careful not to include extra information that could confuse or mislead people.
References:
1 https://www.ecfr.gov/current/title-16/chapter-I/subchapter-C/part-303
2 https://www.ecfr.gov/current/title-16/chapter-I/subchapter-C/part-300
3 https://www.ecfr.gov/current/title-16/chapter-I/subchapter-C/part-303/section-303.7
4 https://rn.ftc.gov/rns
Editor’s Note: Julia Solomon Ensor is counsel in the Entertainment & Media Industry Group at the Washington-based office of Reed Smith where she helps clients navigate complex advertising and consumer protection challenges. She has 15 years of hands-on experience at the FTC where she served as the Made in USA and Green Guides program manager.
2025 Quarterly Issue IV
