Test Procedures and Labeling Standards for Recycled Oil

[[Page 44712]]

FEDERAL TRADE COMMISSION

16 CFR Part 311

Test Procedures and Labeling Standards for Recycled Oil

AGENCY: Federal Trade Commission.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: Section 383 of the Energy Policy and Conservation Act of 1975

(``EPCA'') directs the Federal Trade Commission (``FTC'' or

``Commission'') to promulgate a rule prescribing test procedures and

labeling standards applicable to recycled oil. The Commission is

required to prescribe the rule within 90 days after the National

Institute of Standards and Technology (``NIST'') reports to the

Commission the test procedures to determine the substantial equivalency

of processed used oil with new oil distributed for a particular end

use. Because NIST has reported the relevant test procedures to the

Commission, this notice announces the Commission's proposed rule

implementing the statutory directive. The Commission invites interested

persons to submit written comments addressing any issue they believe

may bear upon the proposed rule. After reviewing comments received in

response to this notice, the Commission will publish a final rule.

DATES: Written comments must be submitted on or before September 27,

1995. Due to the time constraints of this rulemaking proceeding, the

Commission does not contemplate any extensions to this comment period.

ADDRESSES: Written comments should be submitted to Office of the

Secretary, Federal Trade Commission, room 159, Sixth and Pennsylvania

Avenue, NW., Washington, DC 20580, telephone number 202-326-2506.

Comments should be identified as ``16 CFR Part 311 Comment-Recycled

Oil.'' If possible, submit comments both in writing and on a personal

computer diskette in Word Perfect or other word processing format (to

assist in processing, please identify the format used). Written

comments should be submitted, when feasible and not burdensome, in six

copies.

FOR FURTHER INFORMATION CONTACT: Neil J. Blickman, Attorney, or Laura

Koss, Attorney, Federal Trade Commission, Bureau of Consumer

Protection, Division of Enforcement, Room S-4631, Sixth and

Pennsylvania Ave., NW., Washington, DC 20580, telephone numbers 202/

326-3038, or 202/326-2890.

SUPPLEMENTARY INFORMATION:

I. Background

A. EPCA's Requirements

The purposes of the recycled oil section of EPCA are to encourage

the recycling of used oil, to promote the use of recycled oil, to

reduce consumption of new oil by promoting increased utilization of

recycled oil, and to reduce environmental hazards and wasteful

practices associated with the disposal of used oil.\1\ To achieve these

goals, section 383 of EPCA directs NIST to develop test procedures for

the determination of the substantial equivalency of re-refined or

otherwise processed used oil or blend of oil (consisting of such re-

refined or otherwise processed used oil and new oil or additives) with

new oil distributed for a particular end use and to report such test

procedures to the Commission.\2\ Within 90 days after receiving such

report from NIST, the Commission is required to prescribe, by rule, the

substantial equivalency test procedures, as well as labeling standards

applicable to containers of recycled oil.\3\ EPCA further requires that

the Commission's rule permit any container of processed used oil to

bear a label indicating any particular end use, such as for use as

engine lubricating oil, so long as a determination of ``substantial

equivalency'' with new oil has been made in accordance with the test

procedures prescribed by the Commission.\4\

\1\ 42 U.S.C. 6363(a).

\2\ 42 U.S.C. 6363(c). Although EPCA does not explicitly define

the term ``processed used oil,'' it is defined herein to mean re-

refined or otherwise processed used oil or any blend of such oil,

consistent with the definition of ``recycled oil'' at 42 U.S.C.

6363(b)(2)(A) and (B).

\3\ 42 U.S.C. 6363(d). Recycled oil, as defined in section

6363(b)(2) of EPCA is either (a) used oil from which physical and

chemical contaminants acquired through prior use of the oil have

been removed by refining or other processing, or (b) any blend of

re-refined or otherwise processed used oil and new oil or additives,

that, for either (a) or (b), the manufacturer has determined,

pursuant to the Commission's rule, is substantially equivalent to

new oil for a particular end use.

\4\ 42 U.S.C. 6363(d)(1)(B).

---------------------------------------------------------------------------

Once this proposed rule becomes final, no Commission order or rule,

and no law, regulation, or order of any State (or political subdivision

thereof), may remain in effect if it has labeling requirements with

respect to the comparative characteristics of recycled oil with new oil

that are not identical to the labels permitted by this rule.\5\ Also,

no rule or order of the Commission may require any container of

recycled oil to also bear a label containing any term, phrase, or

description connoting less than substantial equivalency of such

recycled oil with new oil.\6\

\5\ 42 U.S.C. 6363(e)(1).

\6\ 42 U.S.C. 6363(e)(2).

---------------------------------------------------------------------------

Section 383 of EPCA does not specify any particular rulemaking

procedures that must be followed. The Commission, therefore, is using

the notice and comment rulemaking procedures of the Administrative

Procedure Act (``APA'') to obtain the views of interested parties. 5

U.S.C. 553(b) and (c). Pursuant to section 553(b)(3) of the APA, the

Commission has elected to publish the specific terms of its proposed

rule. 5 U.S.C. 553(b)(3).

B. The FTC Used Oil Rule and the Used Oil Recycling Act

In 1964, prior to the enactment of EPCA, the Commission had

promulgated a trade regulation rule relating to the advertising and

labeling of previously used lubricating oil (``Used Oil Rule'').\7\ The

Rule was based on the Commission's finding that whether a lubricant has

been made from crude oil or from used oil is material to consumers, and

it was promulgated to prevent deception of those consumers who prefer

new and unused lubricating oil. Specifically, the Rule requires that

advertising, promotional material, and labels on containers of

lubricant made from used oil disclose that such used lubricating oil

has been previously used. The Rule further states that it is an unfair

method of competition and an unfair and deceptive act or practice to

represent in any manner that used lubricating oil is new or unused and

to use the term ``re-refined,'' or any other term of similar import, to

describe previously used lubricating oil unless the physical and

chemical contaminants acquired through previous use have been removed

by a refining process.\8\

\7\ 16 CFR 406.

\8\ 16 CFR 406.5.

On October 15, 1980, the Used Oil Recycling Act, which reiterated

Congress' policy favoring the recycling of used oil, suspended the

provision of the Used Oil Rule, as well as any similar provision in a

Commission order, requiring labels to disclose the origin of lubricants

made from used oil.\9\ The

[[Page 44713]]

legislative history of the Used Oil Recycling Act indicates that

Congress was concerned that the requirement in the FTC's Rule that

previously used oil be labeled as such was having an adverse impact on

consumer acceptance of recycled oil, provided no useful information to

consumers concerning the performance of the oil, and was inhibiting

recycling. The re-refining industry and environmental community

contended that such labeling gave consumers the incorrect impression

that the product is inferior, while providing no information relating

to its quality. According to Congress, the intent of section 383 of

EPCA was clear. ``Oil should be labeled on the basis of performance

characteristics and fitness for intended use, and not on the basis of

the origin of the oil.'' \10\ The legislative history also states that

the Commission, in response to a petition of the Association of

Petroleum Re-refiners, published a proposed Statement of Enforcement

Policy on August 19, 1980 announcing its intention to replace the term

``used'' with ``recycled'' on the belief that the term ``recycled''

connotes more accurately the origin and processing of the product.\11\

However, the Association of Petroleum Re-refiners expressed its concern

to Congress that even the term ``recycled'' was likely to inhibit sales

of re-refined oil because the label might suggest that the product is

in some way inferior. The Commission's proposed Statement of

Enforcement Policy would become effective on October 18, 1980. However,

the Used Oil Recycling Act, which was enacted just days before,

suspended any Commission labeling requirements until a final Commission

rule is issued under EPCA.

\9\ Used Oil Recycling Act of 1980, Pub. L. 96-463, 94 Stat.

2055 (codified as amended in scattered sections of 42 U.S.C.).

Section 4(c) of the Used Oil Recycling Act provides that before the

effective date of the FTC rule prescribed under section 383 of EPCA,

no requirement of any rule or order of the FTC could remain

applicable if it required that a container of recycled oil bear any

label referring to the fact that its contents were derived from

previously used oil. However, section 4(c) does not restrict the

ability of the FTC to regulate the labeling of oil on the basis of

performance characteristics or fitness for its intended use. See 42

U.S.C. 6363 note.

\10\ See Legislative History Pub. L. 96-463, U.S. Code Cong. and

Adm. News, pp. 4354-4356 (1980).

\11\ Id.

---------------------------------------------------------------------------

Accordingly, on April 8, 1981, the Commission published a notice

announcing the statutory suspension of the origin labeling requirements

of the Used Oil Rule and relevant orders. In the same notice, the

Commission announced a Statement of Enforcement Policy suspending

enforcement of those portions of the Used Oil Rule and Commission

orders requiring that advertising and promotional material disclose the

origin of lubricants made from used oil.\12\

\12\ 46 FR 20979. There are 12 Commission orders requiring oil

processors/manufacturers to cease advertising and selling their

products without disclosing that such products are refined,

reclaimed, or reprocessed. Dabrol Products Corp., 70 F.T.C. 1099

(1949); Pennsylvania Oil Terminal, Inc., 48 F.T.C. 356 (1951); High

Penn Oil Co., Inc., 53 F.T.C. 256 (1956); Supreme Petroleum Products

Inc., 54 F.T.C. 1129 (1956); Royal Oil Corp., 70 F.T.C. 629 (1957);

Acme Refining Corp., 54 F.T.C. 1126 (1958); Allied Petroleum Corp.,

54 F.T.C. 1132 (1958); Deep Rock Refining Co., 54 F.T.C. 1123

(1958); Double Eagle Refining Co., 54 F.T.C. 1035 (1958); Mohawk

Refining Corp., 54 F.T.C. 1071 (1958); Seaboard Oil Co., 54 F.T.C.

1135 (1958); Salyer Refining Co., 54 F.T.C. 1026 (1958).

C. Basis for this Proceeding

On July 27, 1995, NIST reported to the Commission the test

procedures for the determination of the substantial equivalency of

processed used engine oils with new engine oils.\13\ The test

procedures and performance standards reported by NIST for such

processed used engine lubricating oils are the same as those adopted by

the American Petroleum Institute (``API'') for engine lubricating oils

generally, irrespective of the origin of the oil. As required by EPCA,

the Commission is proposing in this notice a rule regarding the

labeling of containers of recycled engine oil.

\13\ NIST recently has been involved with the subject of re-

refined oil pursuant to a 1993 Executive Order, which, in part,

requires federal agencies to implement procurement guidelines for

re-refined lubricating oil, and requires NIST to establish a program

for testing the performance of products containing recovered

materials. See Exec. Order No. 12,873, 58 FR 54911 (1993).

---------------------------------------------------------------------------

D. The Used and Re-refined Oil Markets

According to the Environmental Protection Agency, approximately 1.5

billion gallons of used oil are made available for collection or

disposal each year. Of this 1.5 billion, some 900 million gallons are

collected; the remaining 600 million gallons are disposed of

improperly. Of the 900 million gallons that are collected,

approximately 100 million gallons are used as feedstock for re-

refineries. The primary use for used oil is as fuel for industrial

boilers and marine engines. Re-refined oil is used oil from which all

contaminants have been removed. Re-refiners use a sophisticated

process, including hydrotreating,\14\ to produce re-refined base oils

that pass the API tests and meet the International Lubricant

Standardization and Approval Committee requirements for motor oils.

\14\ Hydrotreating is a re-refining process in which oil is

first distilled and then reacted with hydrogen to eliminate

contaminants (such as chlorine and polynuclear aromatics) that an

ordinary distillation process would not eliminate.

---------------------------------------------------------------------------

The volume of re-refined base oil sold or used in the United States

is approximately 65 million gallons per year. This represents a

relatively small, but still significant, portion of the total U.S.

lubricating oil market of some 1.2 billion gallons per year. The

principal products made from re-refined based oils are: gear

lubricants, hydraulic oils, power transmission fluids, passenger car

motor oils, diesel engine oils, and railroad diesel engine oils. Virgin

oils are also used to produce all of these products.

The principal customers for re-refined base oils are lubricant

manufacturers who produce the various products mentioned above. These

products are sold in the same markets as lubricants made from virgin

base oil. For example, some re-refiners sell base oil to other

manufacturers for use in producing finished lubricant products, and

some directly produce finished products that may then be sold to

distributors, mass merchandisers, and large private end-users.

II. Scope of the Proposed Rule

As discussed above, EPCA directs the Commission to issue a rule

prescribing: (1) test procedures for determining the substantial

equivalency of processed used oil with new oil for a particular end

use; and (2) labeling standards applicable to containers of such

recycled oil.\15\ NIST has reported test procedures and performance

standards for determining the substantial equivalency of processed used

engine oils with new engine oils. Until NIST develops test procedures

for other end uses, the scope of the rule is limited to engine oil.

\15\ 42 U.S.C. 6363(d)(1)(A).

---------------------------------------------------------------------------

III. Section-by-Section Discussion of Proposed Rule

EPCA gives the Commission broad latitude to prescribe labeling

standards to effectuate the statute's purposes. EPCA, however, requires

that the Commission's rules permit any container of processed used oil

to bear a label indicating any particular end use for which a

determination of ``substantial equivalency'' with new oil has been made

in accordance with the test procedures prescribed by the

Commission.\16\ EPCA further states that the Commission's rule may not

require any container of recycled oil to also bear a label containing

any term, phrase, or description connoting less than substantial

equivalency of such recycled oil with new oil.\17\

\16\ 42 U.S.C. 6363(d)(1)(B).

\17\ 42 U.S.C. 6363(e)(2).

---------------------------------------------------------------------------

Section 311.1

Section 311.1 of the proposed rule defines the following terms,

which are used in the proposed regulation: ``manufacturer,'' ``new

oil,'' ``recycled oil,'' and ``used oil.'' These are the principal

terms defined in section 383(b) of EPCA.\18\ The proposed rule,

however, also adds definitions for ``re-refined oil'' and ``processed

used oil,''

[[Page 44714]]

and includes a revised, shorter definition for ``recycled oil.'' The

Commission seeks comment on whether additional terms should be included

and defined in section 311.1 of the final rule.

\18\ 42 U.S.C. 6363(b).

---------------------------------------------------------------------------

Section 311.2

Section 311.2 of the proposed rule is a general provision that

states if any part of the Commission's rule is stayed or held invalid,

the rest of the rule will remain in force.

Section 311.3

Section 311.3 of the proposed rule is a preemption provision that

tracks the preemption language contained in section 383(e)(1) of

EPCA.\19\ Section 383(e)(1) states that ``no rule or order of the

Commission, other than the rule required to be prescribed pursuant to

section 383(d) of EPCA, and no law, regulation, or order of any State

or political subdivision thereof may remain applicable to any container

of recycled oil, if the law, regulation, rule, or order requires that

containers of recycled oiled, which bear a label in accordance with the

terms of the Commission's rule prescribed under section 383(d) of EPCA,

bear any label with respect to the comparative characteristics of

recycled oil with new oil that is not identical to that permitted by

the Commission's rule respecting labeling standards prescribed under

section 383(d) of EPCA.'' \20\ The statute's preemptive effect is

limited to recycled oil that meets the definition of recycled oil in

EPCA (i.e., oil that is substantially equivalent to new oil pursuant to

FTC-specified test procedures).

\19\ 42 U.S.C. 6363(e)(1).

\20\ Id.

---------------------------------------------------------------------------

Section 383(e)(1) appears to intend that there be one uniform

labeling requirement regarding the comparative characteristics of

recycled oil (for a particular end use). If a container of recycled oil

is labeled in accordance with the FTC's EPCA rule, neither the FTC nor

any state or political subdivision can require any additional or

different disclosure. By preventing multiple labeling requirements,

this section furthers the Congressional purpose ``to promote the use of

recycled oil.''

The proposed rule permits manufacturers to choose how they convey

substantial equivalency (if they meet the specified test procedures for

substantial equivalency). State laws that require specific disclosures

(e.g., that the product is recycled) or have specific format

requirements (e.g., specific print size requirements for their

disclosures) would be preempted because they would require a label that

is not ``identical to that permitted by the (FTC's) rule. . . .''

States, however, may adopt labeling requirements identical to those

required by the FTC, if they wish, and prosecute violations under state

law.

Section 383(e)(2) of EPCA also restricts Commission rules and

orders, stating ``the Commission may [not] require any container of

recycled oil to also bear a label containing any term, phrase, or

description which connotes less than substantial equivalency. . . .''

To some extent this section overlaps with section 383(e)(1) of EPCA.

But, whereas section (e)(1) expresses Congressional intent that there

be a national uniform labeling standard, preempting non-identical state

laws, section (e)(2) is specifically aimed at prohibiting Commission

label requirements in addition to what the Commission prescribes under

section 383(d)(1) of EPCA if the additional requirements would create

the impression that the recycled oil is not substantially equivalent to

recycled oil.

For example, the Commission's Used Oil Rule requires disclosures in

advertising and on labeling that recycled oil is used.\21\ When the

Commission issues its final rule based on the equivalency determination

for engine oil, the Used Oil Rule's requirements for origin labeling

with respect to engine oil will be preempted pursuant to section 383(e)

of EPCA.\22\ Accordingly, the Commission need not take further action

to repeal those portions of the Used Oil Rule. Further, the relevant

labeling origin provisions of the Used Oil Rule and the twelve

Commission orders concerning recycled oil \23\ continue to be subject

to Congressional stay of enforcement as to non-engine oils.\24\ (The

Used Oil covers other lubricating oils as to which the EPCA preemption

does not apply.) The Commission also is continuing its 1981 stay of the

origin advertising provisions of the Used Oil Rule as to all oils.\25\

\21\ Specifically, the Used Oil Rule, in part, requires

manufacturers to disclose ``clearly and conspicuously that such used

lubricating oil has been previously used, in all advertising,

promotional material and on each front or face panel of the

container.'' 16 CFR 406.5(b)(2).

\22\ For example, the legislative history of the Used Oil

Recycling Act reveals Congress' concern that the requirement in the

FTC's rule was having an adverse impact on consumer acceptance of

recycled oil. The re-refining industry expressed dissatisfaction

with the Commission's proposal to substitute the term ``recycled''

for the term ``used'' in the Used Oil Rule, since it too might

suggest that the product is in some way inferior. Similarly, EPCA's

history indicates that Congress believed that disclosures conveying

the origin of oil (words like used, recycled, re-refined) did not

provide information that would be useful or relevant to consumers.

Congress made clear that disclosures should instead pertain to

performance characteristics and fitness for intended use.

\23\ These orders will be eliminated if the Commission adopts as

final its proposed rule for sunsetting administrative consumer

protection orders over twenty years old. Duration of Existing

Competition and Consumer Protection Orders, 60 FR 42,481 (1995).

\24\ 42 U.S.C. 6363 note.

\25\ 46 FR 20,979.

---------------------------------------------------------------------------

Section 311.4

In accordance with section 383(d)(1)(A)(i) of EPCA,\26\ section

311.4 of the proposed rule prescribes test procedures for determining

the substantial equivalency of processed used oil with new oil

distributed for use as engine oil. The test procedures, as reported to

the Commission by NIST, are found in American Petroleum Institute

Publication 1509, Thirteenth Edition, January 1995, entitled ``Engine

Oil Licensing and Certification System.'' \27\ In its letter

transmitting the test procedures to the Commission, NIST stated that

the engine test procedures described in API Publication 1509 combined

with the API Engine Oil Licensing and Certification System are accepted

for use with automotive engine oils by the Society of Automotive

Engineers, the American Society of Testing and Materials, and all major

automotive engine manufacturers.

\26\ 42 U.S.C. 6363(d)(1)(A)(i).

\27\ The Commission will be seeking approval from the Director

of the Federal Register to incorporate this document by reference

into section 311.4 of the final rule, as required by section 552(a)

of the APA, 5 U.S.C. 552(a), and by regulations issued by the Office

of the Federal Register, 1 CFR 51.

The American Petroleum Institute operates a voluntary licensing and

certification system that is designed to provide consumers with the

technical information needed to understand the performance, viscosity,

and accepted use of engine oils. Under this system, API licenses two

types of ``Marks'' which may appear on the labeling of qualified engine

oils: The API Service Symbol and the API Certification Mark. The

Service Symbol identifies the type of engine in which the oil should be

used, explains the oil's characteristics, and describes the oil's

ability to protect against wear, sludge, and corrosion. The symbol also

contains a rating of the oil's viscosity that is based on

specifications established by the Society of Automotive Engineers.

Finally, the symbol indicates whether the oil has any energy conserving

properties when compared to a standard reference oil.

The API Certification Mark identifies engine oils recommended for a

specified use. An engine oil is eligible to receive

[[Page 44715]]

the API Certification Mark only if it satisfies the minimum performance

standards established by the International Lubricant Standardization

and Approval Committee (``ILSAC''). To receive ILSAC approval and, in

turn, API certification, motor oils must pass a series of tests

designed to evaluate the following factors: (1) The oil's performance

and its effect on the engine at zero degrees Fahrenheit or lower; (2)

the extent to which the oil prevents engine rust and corrosion; (3) the

oil's fuel efficiency; (4) the capability of the oil to reduce friction

and to protect moving parts within the engine from fusing together; (5)

the oil's resistance to thickening under high temperatures up to three

hundred degrees Fahrenheit; (6) the level of detergents and dispersants

in the oil; and (7) the content of phosphorus in the oil. The current

standards for these factors, as well as the applicable test procedures,

are found in Appendices D, E, F, G, I, J, K, L, M, and N of API

Publication 1509.

Section 311.5

In accordance with section 383(d)(1)(A)(ii) of EPCA,\28\ section

311.5 of the proposed rule prescribes labeling standards applicable to

containers of recycled oil. Section 311.5 states that a manufacturer

may represent, on a label on a container of processed used oil, that

such oil is substantially equivalent to new oil for engine use, but

only if the manufacturer has determined the substantial equivalency of

the oil to new oil for that particular end use in accordance with the

test procedures prescribed by the Commission, and has based the

representation on that determination. For example, a manufacturer could

represent that its oil is substantially equivalent to new oil by

displaying the API Mark on its container. A manufacturer would not be

required to add any qualifiers to its label such as ``used'' or ``re-

refined.''

\28\ 42 U.S.C. 6363(d)(1)(A)(ii).

The Commission's proposal focuses on the performance of oil and its

fitness for an intended use rather than its origin, and thus should

encourage the recycling of used oil, encourage the use of recycled oil,

and reduce consumption of new oil by promoting increased utilization of

recycled oil. Because the proposed rule does not mandate the use of

specific disclosures, recycled oil manufacturers have flexibility to

promote the performance of their products and their ``substantial

equivalency'' with new oil and develop marketing strategies for various

markets. For example, the proposed rule does not restrain manufacturers

from voluntarily labeling recycled oil containers with terms or phrases

such as ``recycled'' to assist in the marketing of their products.\29\

\29\ Manufacturers should, of course, consider the Commission's

Guides For The Use Of Environmental Marketing Claims. See e.g., 16

CFR 260.7(e).

---------------------------------------------------------------------------

Section 311.6

Section 311.6 of the proposed rule tracks the language relating to

prohibited acts and enforcement of the Commission's rule contained in

sections 524 and 525 of EPCA.\30\ Pursuant to section 524 of EPCA, it

is a prohibited act to violate the Commission's final rule issued

pursuant to section 383 of EPCA.\31\ The proposed rule declares that it

is unlawful for any manufacturer to represent, on a label on a

container of processed used oil, that the processed used oil is

substantially equivalent to new oil for engine use unless the

manufacturer has based such representation on the manufacturer's

determination of the substantial equivalency of the processed used oil

to new oil for use as engine oil in accordance with the test procedures

prescribed under section 311.4 of the proposed rule.

\30\ 42 U.S.C. 6394(2) and 42 U.S.C. 6395.

\31\ 42 U.S.C. 6394(2).

---------------------------------------------------------------------------

The proposed rule also provides that violations will be subject to

enforcement in accordance with section 525 of EPCA. Section 525 of EPCA

provides that whoever violates the Commission's final rule is subject

to a civil penalty of not more than $5,000 for each violation.\32\

Whoever willfully violates the Commission's rule shall be fined not

more than $10,000 for each violation.\33\ Any person who knowingly and

willfully violates the Commission's rule after having been subjected to

a civil penalty for a prior violation of the rule, shall be fined not

more than $50,000, or imprisoned not more than six months, or both.\34\

Further, pursuant to section 525 of EPCA, whenever it appears to any

officer or agency of the United States (in whom is vested,or to whom is

delegated, authority under EPCA) that any person has engaged, is

engaged, or is about to engage in acts or practices constituting a

violation of the Commission's rule, such officer or agency may request

the Attorney General to bring an action in an appropriate district

court of the United States to enjoin such acts or practices, and upon a

proper showing, a temporary restraining order or a preliminary or

permanent injunction shall be granted without bond. Any such court also

may issue mandatory injunctions commanding any person to comply with

the Commission's rule.\35\

\32\ 42 U.S.C. 6395(a).

\33\ 42 U.S.C. 6395(b).

\34\ 42 U.S.C. 6395(c).

\35\ 42 U.S.C. 6395(d).

Because section 525 of EPCA does not explicitly authorize the

Commission to bring enforcement actions, this rule will be enforced by

the Department of Justice under 28 U.S.C. 516, a provision that

authorizes the Department of Justice to enforce statutes that are not

specifically assigned to other agencies for enforcement. The

Commission, however, has the authority to investigate violations, and

make referrals to the Department of Justice pursuant to section 525(d)

of EPCA.\36\

\36\ 42 U.S.C. 6395(d).

---------------------------------------------------------------------------

IV. Effective Date

EPCA directs the Commission to ``prescribe'' the relevant test

procedures and pertinent labeling standards within 90 days after the

date on which NIST reports such test procedures to the Commission. It

does not, however, specify an effective date for the rule. The

Commission proposes that the rule become effective 30 days after

publication of a final rule in the Federal Register. The Commission

seeks comment on whether the proposed effective date will allow

affected interests sufficient time to comply with the proposed labeling

standards.

V. Invitation To Comment

The Commission invites interested persons to address any questions

of fact, law, or policy that they believe may bear upon the proposed

rule. The Commission particularly desires comment, however, on the

questions listed below. All comments should reference the aspect of the

proposed rule or question being discussed. Comments opposing the

proposed rule or specific provisions should, if possible, suggest a

specific alternative. Proposals for alternative regulations should

include reasons and data explaining why the alternative would better

serve the purposes of section 383 of EPCA.

Before adopting a final rule, consideration will be given to any

written comments timely submitted to the Commission. Comments submitted

will be available for public inspection in accordance with the Freedom

of Information Act \37\ and the Commission's Rule of Practice,\38\

during normal business days from 8:30 a.m. to 5 p.m., at the Public

Reference Room, Room 130, Federal Trade Commission,

[[Page 44716]]

6th and Pennsylvania Ave., NW., Washington, DC 20580.

\37\ 5 U.S.C. 552.

\38\ 16 CFR 4.11.

---------------------------------------------------------------------------

A. Proposed Labeling Rule

The Commission is proposing labeling standards applicable to

containers of recycled engine oil. The proposed rule also prescribes

test procedures, as reported to the Commission by NIST, for determining

the substantial equivalency of processed used engine oil to new oil,

and includes definition, preemption and prohibited acts sections that

track the language contained in sections 383, 524, and 525 of EPCA. The

Commission seeks comment on all aspects of its proposal. The questions

below also include those that are routinely asked in conducting FTC

regulatory reviews.\39\

\39\ The Commission has implemented a program to review all of

its current and proposed rules and guides. One purpose of the review

is to minimize the economic impact of new regulatory actions by

seeking comment on, for example, regulatory options.

(1) Is the Commission's proposal consistent with, and does it

promote, the purposes of section 383 of EPCA? If yes, why; if no, why

not?

(2) Should the Commission issue its proposal relating to the

labeling of recycled engine oil containers as a final rule? If yes,

why; if no, why not?

(3) What are the advantages of the Commission's proposal?

(4) What changes, if any, should be made to the proposed rule to

increase the benefits of the rule?

(a) How would these changes affect the costs the proposed rule

would impose on firms subject to its requirements?

(5) What significant burdens or costs, including costs of

compliance, will the proposed rule impose on firms subject to its

requirements?

(a) Will the proposed rule provide benefits to such firms?

(b) To what extent will consumers of recycled engine oils benefit

or be harmed by the Commission's proposal?

(c) How will the Commission's proposal affect the consumption of

recycled engine oil relative to new engine oil?

(6) What changes, if any, should be made to the proposed rule to

reduce the burdens or costs that would be imposed on firms subject to

its requirements?

(a) How would these changes affect the benefits provided by the

proposed rule?

(7) Should the Commission require or permit any additional or

alternative disclosures, or variations on the proposed labeling

standards? If yes, how should the Commission's proposal be modified,

and why; if no, why not?

(8) To what extent would any recycled oil container labeling

requirements specified by law (either federal, state, or local) be

affected by the Commission's proposal?

(9) Are there additional appropriate and meaningful definitions

that the Commission should include in section 311.1 of the final rule?

If yes, what should they be, and why; if no, why not?

B. Effective Date

The Commission proposes that its rule become effective 30 days

after publication of a final rule in the Federal Register.

(1) Does the proposed effective date allow affected interests

sufficient time to comply with the proposed rule? If yes, why; if no,

why not? How much extra time would be necessary to comply with the

proposed rule? Why is that extra time necessary?

C. Regulatory Flexibility Act

The Regulatory Flexibility Act (``RFA'') \40\ requires agencies to

prepare regulatory flexibility analyses when publishing proposed rules

\41\ unless the proposed rule, if promulgated, would not have a

``significant economic impact on a substantial number of small

entities.'' \42\ Here, the economic impact of the proposed labeling

standards appears to be de minimis. The Commission's proposed rule

permits, rather than requires, any container of recycled oil to bear a

label indicating that it is substantially equivalent to new engine oil,

if such determination has been made in accordance with the test

procedures prescribed in the proposed rule. Any economic costs incurred

by entities that choose to make a determination of substantial

equivalency are neither statutorily imposed nor imposed by the proposed

regulations. The Commission proposes no reporting or recordkeeping

requirements, and the proposed rule permits recycled oil containers to

be labeled with information that is basic and easily ascertainable.

\40\ 5 U.S.C. 601-612.

\41\ 5 U.S.C. 603(a).

\42\ 5 U.S.C. 605(b).

The Commission also tentatively concludes that the proposed rule

also will not affect a substantial number of small entities because

information the Commission currently possesses indicates that

relatively few companies currently manufacture and sell recycled oil as

engine oil. Of those that do, most are not ``small entit[ies]'' as that

term is defined either in section 601 of RFA\43\ or applicable

regulations of the Small Business Administration.\44\

\43\ 5 U.S.C. 601(6).

\44\ 13 CFR 121.

---------------------------------------------------------------------------

In light of the above, the Commission certifies, pursuant to

section 605 of RFA, 5 U.S.C. 605, that the proposed rule would not, if

promulgated, have a significant impact on a substantial number of small

entities and, therefore, that a regulatory analysis is not necessary.

The Commission requests comment on this certification, and whether the

proposed rule will have a significant impact on a substantial number of

small entities. After reviewing any comments received on this subject,

the Commission will decide whether the preparation of a final

regulatory-flexibility analysis is appropriate.

D. Paperwork Reduction Act

If promulgated, the Commission's proposed rule would not involve

the ``collection of information'' as defined by the regulations of the

Office of Management and Budget (``OMB'')\45\ implementing the

Paperwork Reduction Act (``PRA'').\46\ The Commission's proposed rule

contains no reporting, recordkeeping, labeling or other third-party

disclosure requirements, so there is no ``information collection'' in

this proceeding to submit to OMB for clearance. However, to ensure the

accuracy of its conclusion, the Commission solicits comment on any

paperwork burden that the public believes the proposed requirements may

impose.

\45\ 5 CFR 1320.7(c).

\46\ 44 U.S.C. 3501-3520.

---------------------------------------------------------------------------

VI. Additional Information for Interested Persons

A. Motions or Petitions

Any motions or petitions in connection with this proceeding must be

filed with the Secretary of the Commission.

B. Communications by Outside Parties to Commissioners or Their Advisors

Pursuant to Commission Rule of Practice 1.18(c),\47\ communications

with respect to the merits of this proceeding from any outside party to

any Commissioner or Commissioner advisor during the course of this

rulemaking shall be subject to the following treatment: Written

communications, including written communications from members of

Congress, shall be forwarded promptly to the Secretary for placement on

the public record. Oral communications, not including oral

communications from members of Congress, are permitted only when such

oral communications are transcribed verbatim or summarized at the

[[Page 44717]]

discretion of the Commissioner or Commissioner advisor to whom such

oral communications are made and are promptly placed on the public

record, together with any written communications and summaries of any

oral communications relating to such oral communications. Oral

communications from members of Congress shall be transcribed or

summarized at the discretion of the Commissioner or Commissioner

advisor to whom such oral communications are made and promptly placed

on the public record, together with any written communication and

summaries of any oral communications relating to such oral

communications.

\47\ 16 CFR 1.18(c).

---------------------------------------------------------------------------

List of Subjects in 16 CFR Part 311

Energy conservation, Incorporation by reference, Labeling, Recycled

oil, Trade practices.

Text of Proposed Rule

Accordingly, it is proposed that Chapter I of 16 CFR be amended by

adding a new part 311 to Subchapter C to read as follows:

PART 311--LABELING STANDARDS FOR RECYCLED OIL CONTAINERS

Sec.

311.1 Definitions.

311.2 Stayed or invalid parts.

311.3 Preemption.

311.4 Testing.

311.5 Labeling.

311.6 Prohibited acts.

Authority: 42 U.S.C. 6363(d)

Sec. 311.1 Definitions.

As used in this Part:

(a) Manufacturer means any person who re-refines or otherwise

processes used oil to remove physical or chemical impurities acquired

through use or who blends such re-refined or otherwise processed used

oil with new oil or additives.

(b) New oil means any oil which has been refined from crude oil and

has not been used, and which may or may not contain additives. Such

term does not include used oil or recycled oil.

(c) Processed used oil means re-refined or otherwise processed used

oil or blend of oil, consisting of such re-refined or otherwise

processed used oil and new oil or additives.

(d) Recycled oil means processed used oil with respect to which the

manufacturer has determined, pursuant to Sec. 311.4 of this part, is

substantially equivalent to new oil for use as engine oil.

(e) Used oil means any oil which has been refined from crude oil,

has been used, and as a result of such use has been contaminated by

physical or chemical impurities.

(f) Re-refined oil means used oil from which physical and chemical

contaminants acquired through use have been removed.

Sec. 311.2 Stayed or invalid parts.

If any part of this rule is stayed or held invalid, the rest of it

will remain in force.

Sec. 311.3 Preemption.

No law, regulation, or order of any State or political subdivision

thereof may apply, or remain applicable, to any container of recycled

oil, if such law, regulation, or order requires any container of

recycled oil, which container bears a label in accordance with the

terms of Sec. 311.5 of this Part, to bear any label with respect to the

comparative characteristics of such recycled oil with new oil that is

not identical to that permitted by Sec. 311.5 of this Part.

Sec. 311.4 Testing.

To determine the substantial equivalency of processed used oil with

new oil for use as engine oil, manufacturers must use the test

procedures that were reported to the Commission by the National

Institute of Standards and Technology (``NIST'') on July 27, 1995,

entitled ``Engine Oil Licensing and Certification System,'' and found

in Publication 1509 of the American Petroleum Institute (``API''),

Thirteenth Edition, January, 1995.

Sec. 311.5 Labeling.

A manufacturer may represent, on a label on a container of

processed used oil, that such oil is substantially equivalent to new

oil for use as engine oil only if the manufacturer has determined that

the oil is substantially equivalent to new oil for use as engine oil in

accordance with the NIST test procedures prescribed under Sec. 311.4 of

this Part, and has based the representation on that determination.

Sec. 311.6 Prohibited acts.

It is unlawful for any manufacturer to represent, on a label on a

container of processed used oil, that such oil is substantially

equivalent to new oil for use as engine oil unless the manufacturer has

based such representation on the manufacturer's determination that the

processed used oil is substantially equivalent to new oil for use as

engine oil in accordance with the NIST test procedures prescribed under

Sec. 311.4 of this Part. Violations will be subject to enforcement

through civil penalties, imprisonment, and/or injunctive relief in

accordance with the enforcement provisions of Section 6395 of the

Energy Policy and Conservation Act (42 U.S.C. 6395).

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 95-21447 Filed 8-25-95; 8:45 am]

BILLING CODE 6750-01-M