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Newsletter Article

New Rules for "Made in Canada" and "Product of Canada" Claims

Published: 03/09/2010

By Stephen I. Selznick

In continuing efforts to ensure truth in advertising and to provide manufacturers, importers and retailers with timely compliance guidance, the Competition Bureau¹ (the "Bureau") has introduced new Enforcement Guidelines relating to "Product of Canada" and "Made in Canada" Claims (the "Guidelines") applicable to non-food products. The Guidelines, which are effective July 1st, 2010, and supersede the former Guide to "Made in Canada" Claims (the "Former Guide"), describe the Bureau's approach to assessing claims under the false or misleading representation provisions of the Competition Act (Canada), the Consumer Packaging and Labelling Act (Canada) (with respect to non-food products only) and the Textile Labelling Act (Canada) (collectively, the "Acts"). The publication of the Guidelines in the Summer of 2009 with an effective date one year later, is a clear signal to industry that territorial source of origin claims should be revisited and re-examined with the Guidelines in mind well before the Summer of 2010 effective date, in order to avoid attracting scrutiny from the Bureau and in deflecting potential consumer complaints.

The Acts administered by the Bureau all prohibit the making of false or misleading representations.² As such, when a business chooses to make a "Made in Canada" or "Product of Canada" claim, it should do so in accordance with the Guidelines. The Bureau relies on the Guidelines when determining whether it should investigate a consumer claim or whether it should undertake appropriate enforcement action for non-compliance.

As a significant change from the past, the Guidelines create a clear distinction between "Product of Canada" and "Made in Canada" claims.

In order to be properly identified as a "Product of Canada," items will now have to meet two conditions. First, the last substantial transformation of the goods must have occurred in Canada.³ Second, at least 98% of the total direct costs of producing or manufacturing the goods must have been incurred in Canada.

The requirements for a "Made in Canada" claim are less stringent, and items will have to meet three conditions in order to carry that claim. First, like in a "Product of Canada" claim, the last substantial transformation of the goods must have occurred in Canada. Second, at least 51% of the total direct costs of producing or manufacturing the good must have been incurred in Canada. Finally, the "Made in Canada" representation must be accompanied by a qualifying statement, such as "Made in Canada with 60% Canadian content and 40% imported content."

If a product does not meet the above criteria, the Bureau recommends the use of more specific terms to reflect the activities that took place in Canada, such as "Assembled in Canada with foreign parts." General terms such as "produced" or "manufactured" are discouraged as they are likely to be understood by consumers as synonymous with "Made in Canada."

It is important to remember that in assessing misleading advertising claims substance over form is the important thing. When determining whether a "Product of Canada" or "Made in Canada" declaration has been made, even if those exact words are not used, the Bureau will look at the "general impression" conveyed by the representation. This will include any visual elements (i.e. flag representations and colour schemes, etc.), illustrations and implied claims that may alter the plain meaning of the words.

If the Bureau finds that a territorial source of origin representation is materially false or misleading, several avenues of enforcement are available ranging from the imposition of administrative monetary penalties, to restitution and prohibition orders, the publication corrective notices and ultimately criminal prosecution. The reader is also reminded that the enforcement of the misleading advertising provisions of the Competition Act (Canada) also give rise a civil right of action in certain circumstances, exposing manufacturers, importers, and retailers to direct consumer litigation and potential class action claims.

Those selling their products into Canada, as well as their advertising consultants, should use the first half of 2010 to revisit their packaging and marketing materials as well as inventories of their products and consider appropriate changes in order to comply with the Guidelines, including the over-stickering of inventory not already sold to the market.

For further information on the new Enforcement Guidelines relating to "Product of Canada" and "Made in Canada" Claims, please contact Stephen Selznick sselsznick@casselsbrock.com or Elizabeth Sinnott esinnott@casselsbrock.com.

¹The Competition Bureau is an independent enforcement agency that protects and promotes competitive markets in Canada. The Bureau is responsible for the administration and enforcement of four federal statues, the Competition Act, the Consumer Packaging and Labelling Act (with respect to non-food products only), the Textile Labelling Act and the Precious Metals Marketing Act.

²In addition, the Textile Labelling and Advertising Regulations require that if a label on a textile fibre product includes a representation that the product or any fibre in it is imported, the label on the product must name the country of origin. Other statutes and regulations may also require country of origin information to be provided in certain circumstances. These Guidelines only address the legislation enforced by the Bureau.

³A substantial transformation has occurred when goods undergo a fundamental change in form, appearance or nature such that the goods existing after the change are different goods from those existing before.