‘Made in USA’ frauds to face $43K fine under new rule

Drone manufacturers, take notice. The Federal Trade Commission (FTC) has finalized a new rule that will crackdown on companies that make false, unqualified claims that their products are made in the USA.

To qualify to use the “Made in USA” label, businesses will have to prove that their products are primarily manufactured in the United States. What does it mean? It means a drone manufacturer cannot make “Made in USA” claims on labels unless:

  • 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 components of the product are made and sourced in the United States.

Civil penalties for “Made in USA” cheats

The FTC hopes that this new rule will benefit businesses that rely on the “Made in USA” label, but lack the resources to defend themselves from imitators. As such, the rule includes the ability to seek redress, damages, penalties, and other relief from those who lie about a “Made in USA” label.

For the first time, the FTC will be able to seek civil penalties of up to $43,280 per violation of the rule.

As FTC Commissioner Rohit Chopra explains:

The final rule provides substantial benefits to the public by protecting businesses from losing sales to dishonest competitors and protecting purchasers seeking to purchase American-made goods. More broadly, this long-overdue rule is an important reminder that the Commission must do more to use the authorities explicitly authorized by Congress to protect market participants from fraud and abuse.

Also read: No, DJI’s sub-250-gram, sub-$300 Mini SE is not coming to the US

It should be noted that the rule does not impose any new requirements on businesses. But it does send a strong signal to would-be violators that they should abuse the “Made in USA” label at their own risk.

Do American drones still rely on Chinese suppliers?

The answer to this question lies in the US Department of Defense’s 2020 Industrial Capabilities Report. The report assessed the bill of materials of four unnamed American drone platforms that meet the DoD requirements – aka Blue sUAS – and found a significant number of Chinese components in all of them.

According to the report, fuselage structures (such as carbon fiber or plastic frames), electric motors (Neodymium Iron Boron magnets), and printed circuit board (PCB) were the top three component categories that had the most reliance on parts from China.

Here’s a breakdown of the supply chain origin from the DoD report:

Source: US Department of Defense

Note that the dark blue color that matches France is a misprint and it should represent the US instead.

The DoD, in its report, is quick to acknowledge the need for mitigating supply chain risks. Meanwhile, research firm DroneAnalyst’s lead researcher David Benowitz hints in a blog post that a truly “Made in US” drone will take some time coming, especially at scale. He says:

These supply chain issues likely go deeper and we estimate that many of the selected manufacturers haven’t yet been able to steadily deliver units. This is speculation based on the Defense Innovation Unit’s Blue sUAS 2.0 solicitation, which looks for more modular platforms, and specifies a manufacturer needs to be able to make more than 10 units per month. All this goes to show that building up a domestic production capability that is commercially competitive is difficult, and is going to take time. As we can already see based on which parts are predominantly made in the US, there is intelligent prioritization happening.

Read more: Parrot Anafi Ai drone’s 4G connectivity feature: innovation or marketing stunt?

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