Three categories, not two
Updated
Everywhere else in this estate a product forks two ways. Soap forks three, and most handmade soap is in a different category from the one its maker believes.
One product, three regimes
The same bar, made the same way from the same oils, can be exempt soap, a cosmetic or an OTC drug.
Which one it is depends on its composition and on what you say about it, and the second matters more than the first.
Exempt soap
Soap meeting the definition in 21 CFR 701.20 is exempt from the FD&C Act's cosmetic provisions.
It falls instead to the Consumer Product Safety Commission, which is a lighter regime: consumer commodity labeling under the Fair Packaging and Labeling Act, and no cosmetic ingredient declaration.
No INCI list, no MoCRA registration, no cosmetic labeling requirements. It is the easiest position in this property and it is narrow.
A cosmetic
The moment the product fails either condition of the exemption, it is a cosmetic.
Which brings the full cosmetic regime: ingredient declaration by INCI in descending order, cosmetic labeling, MoCRA facility registration and product listing where applicable, and safety substantiation, which has no small-business exemption.
This is where most handmade soap actually sits, and most of it is labeled as though it were exempt.
A drug
A claim to treat or prevent a condition, or to affect the structure or function of the body, makes it an OTC drug.
Antibacterial. For acne. For eczema. Antifungal. Each of those is a drug claim, and a drug needs a monograph active at a monograph level, a Drug Facts panel, establishment registration, a drug listing and cGMP.
Which is the same wall lip care runs into, and it is reached from soap by a single word on a label.