Test Procedures and Labeling Standards for Recycled Oil

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 for 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 test

procedures to determine the substantial equivalency of processed used

oil with new oil distributed for a particular end use. On July 27,

1995, NIST reported the relevant test procedures for engine oil, and on

August 28, 1995, the Commission published a notice of proposed

rulemaking seeking written comment on its proposed labeling standards.

In this notice, the Commission announces its final rule.

EFFECTIVE DATE: This rule is effective November 30, 1995. The

incorporation by reference of the publication listed in 16 CFR part 311

is approved by the Director of the Federal Register as of November 30,

1995.

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

Koss, Attorney, Federal Trade Commission, Bureau of Consumer

Protection, Division of Enforcement, Sixth Street and Pennsylvania Ave.

NW., Washington, DC 20580, telephone numbers 202/326-3038, or 202/326-

2890.

SUPPLEMENTARY INFORMATION:

Statement of Basis and Purpose

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 any blend of 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 a report from

NIST, the Commission is required to prescribe, by rule, the substantial

equivalency test procedures, as well as labeling standards for such

recycled oil.3 EPCA further requires that the Commission's rule

permit any container of processed used oil to bear a label indicating a

particular end use, such 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).

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

The final rule preempts any other Commission rule or order, and any

law, regulation, or order of any State (or political subdivision

thereof), 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 that any container of recycled oil

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).

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

B. The Rulemaking Proceeding

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

for the determination of substantial equivalency of processed used

engine oils with new engine oils. The NIST test procedures and

performance standards are the same as those adopted by the American

Petroleum Institute (``API'') for engine lubricating oils generally,

regardless of origin.

On August 28, 1995, the Commission announced for comment its

proposed Rule on Test Procedures and Labeling Standards for Recycled

Oil.7 The 30-day comment period closed on September 27. The

Commission received 20 written comments in response to its Notice of

Proposed Rulemaking (``NPR''). Comments were filed by nine oil

producers,8 five trade associations,9 the National

Association of Consumer Agency Administrators,10 Ford Motor

Company,11 the County of San Diego,12 the State of

Wisconsin,13 and two individuals.14 These comments, and other

relevant documents, were placed on the public record of this

proceeding,15 and have been considered by the Commission in

adopting a final rule.

\7\ 60 FR 44712 (Aug. 28, 1995).

\8\ Coastal Unilube, Inc. (Coastal), D-2; Enviropur West

Corporation (Enviropur), D-4; Exxon Company, U.S.A. (Exxon), D-5;

South Coast Terminals, Inc. (South Coast), D-6; Evergreen Holdings

Inc. (Evergreen), D-7; Quaker State Corporation (Quaker State), D-8;

Pennzoil Company (Pennzoil), D-14; Safety-Kleen Corp. (Safety-

Kleen), D-16; Chevron Corporation (Chevron), D-18.

\9\ Automotive Oil Change Association (AOCA), D-10; National Oil

Recyclers Association (NORA), D-12; American Petroleum Institute

(API), D-13; Independent Lubricant Manufacturers Association (ILMA),

D-15; Automotive Parts & Accessories Association (APAA), D-17.

\10\ NACAA, D-9.

\11\ Ford, D-11.

\12\ County of San Diego, Department of Agriculture, Weights and

Measures (San Diego), E-1.

\13\ Procurement Recycling Coordinator of the State of Wisconsin

(Wisconsin), E-2.

\14\ Robert C. Deitz, Environmentalist (``Deitz''), D-1; David

R. Zelnick, President, Zed Industries (``Zed''), D-3.

\15\ Commission Rulemaking Record No. R511036. Comments

submitted in response to the NPR are coded either ``D'' (indicating

that they were filed by nongovernmental parties) or ``E''

(indicating that they were filed by governmental agencies).

Information placed on the public record by Commission staff is coded

``B.'' In this notice, comments are cited by identifying the

commenter (by abbreviation), the comment number, and the relevant

page number(s), e.g., ``Deitz, D-1, 1.''

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

II. The Rule

A. Scope of the Rule

Section 383 of EPCA directs the FTC to promulgate 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. EPCA requires the Commission to prescribe the test

procedures transmitted to it by NIST. The Commission's proposed rule

was limited to automotive engine oil, because thus far NIST has

reported test procedures only for determining the substantial

equivalency of processed used engine oils with new engine oils.16

[[Page 55415]]

In addition, EPCA prohibits the Commission from requiring that any

container of recycled oil bear a label containing any term that

connotes less than substantial equivalency of recycled oil meeting the

NIST standards with new oil.17

\16\ The letter to the Commission from NIST stated that ``[t]he

API publication 1509 tests including the Engine Oil Licensing and

Certification System are the test procedures we are recommending to

you for the determination of substantial equivalency of re-refined

oils for the end use of engine lubricating oil.'' NIST letter, B-1,

1 (emphasis added). In September 1979, NIST forwarded to the

Commission test procedures for ``recycled oil used as burner fuel.''

The Commission, however, determined that it was not required to

promulgate a labeling rule with respect to burner fuel, because such

oil is sold in bulk, not in container form for consumer use as EPCA

contemplates.

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

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

Nineteen of the 20 comments received in response to the NPR

generally supported the Commission's proposed rule as consistent with

the policies and purposes of EPCA. One commenter opposed the proposed

rule, stating that a consumer has a right to know when oil has been

recycled, re-refined or used.18 However, the commenter suggests a

regulatory option that is contrary to the mandate of EPCA.

\18\ Zed, D-3, 1.

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

Seven commenters suggested that the Commission extend the scope of

the final rule to include additional end uses.19 According to

these commenters, the industry assumes that re-refined base oils

demonstrated to be substantially equivalent to virgin base oils for use

in an engine oil are substantially equivalent to virgin base oils for

use in any product.20 Three of these commenters stated that state

labeling laws encompass a broader category of automotive fluids (such

as automatic transmission fluid and automotive gear oils).21 As a

result, state labeling provisions with respect to these non-engine oils

would not be preempted by the Commission's rule, and there would be a

discriminatory impact on these other types of oils because they would

remain subject to a different regulatory scheme.22 This, according

to these commenters, could result in confusion in the

marketplace.23 It also might create disincentives for lubricant

manufacturers to purchase re-refined base oils for use in the blending

of automotive fluid products in states with labeling laws that include

all automotive fluid products.24

\19\ Evergreen, D-7, 2; Enviropur, D-4, 2; Quaker State, D-8, 2;

NORA, D-12, 3; ILMA, D-15, 3; Pennzoil, D-14, 2; APAA, D-17, 2.

\20\ NORA, D-12, 3-4; Evergreen, D-7, 2; APAA, D-17, 1-2 (``when

a company purchases re-refined base oil from a supplier, it could

very well be used in engine performance, gear lubricants, power

transmission fluids, hydraulic oils, or any combination of these

products'').

\21\ Enviropur, D-4, 2; see also Evergreen, D-7, 2; NORA, D-12,

3-4.

\22\ Id.

\23\ Enviropur, D-4, 2; Quaker State, D-8, 2 (limiting the scope

of the final rule to engine oils ``may create some confusion for

non-engine lubricant compounders and blenders desiring to use re-

refined base oils'').

\24\ See, e.g., Evergreen, D-7, 2 (citing Colorado as an

example).

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

Two commenters suggested that the Rule should apply to lubricants

for railroad engines, marine outboard engines, stationary diesels, and

natural gas engines and compressors.25 Another commenter suggested

that the Rule should also cover used oil sold as fuel, stating that the

market for such fuel is approximately 10 times greater than for re-

refined lubricants.26

\25\ South Coast, D-6, 1 (the proposed rule ``would not cover

many other industrial applications for which there are established

industry or original manufacturer standards''); ILMA, D-15, 3 (the

final rule should extend to such lubricants ``by allowing

manufacturers to provide test results that the recycled lubricants

meet the applicable specifications'').

\26\ NORA, D-12, 4. (See note 16, supra, regarding prior NIST

report regarding burner fuel.)

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

The Commission has concluded that until NIST develops test

procedures for other end uses, it must limit the scope of the rule to

the categories of engine oil that are covered by the API Engine Oil

Licensing and Certification System as prescribed in API Publication

1509 (passenger car motor oils and car and truck diesel engine oils).

Other end uses for re-refined oil, such as railroad diesel engine oil,

are not covered by the Rule because API Publication 1509 does not

contain test procedures applicable to them.27

\27\ According to one commenter, individual consumers are not

harmed by the exclusion of railroad diesel engine oil ``because

these oils are sold to railroads and other equally sophisticated

entities that are in a position to ensure that the re-refined oils

they purchase are suitable for their intended use.'' Safety-Kleen,

D-16, 12.

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

Seventeen of the 19 comments that generally supported the

Commission's proposed rule also addressed some specific aspects of the

proposal. Those comments, and the Commission's minor modifications to

the proposed rule in response to those comments, are discussed below.

B. Section 311.1 Definitions

In the proposed rule, the Commission defined the terms

``manufacturer,'' ``new oil,'' ``recycled oil,'' and ``used oil''--the

principal terms defined in section 383(b) of EPCA.28 The proposed

rule, however, also included definitions for ``re-refined oil'' and

``processed used oil.'' 29

\28\ 42 U.S.C. 6363(b).

\29\ 60 FR 44712, 44717.

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

Five comments addressed the Commission's proposed

definitions.30 Three commenters suggested changing the definition

of ``new oil'' to include synthetic oils.31 The proposed rule

referred only to ``oil which has been refined from crude oil.'' 32

Two of these commenters noted that synthetic oils are referenced in API

1509 as sources of raw materials for engine oil.33

\30\ Enviropur, D-4; South Coast, D-6; Evergreen, D-7; ILMA, D-

15; Safety-Kleen, D-16.

\31\ South Coast, D-6, 2; ILMA, D-15, 3; Safety-Kleen, D-16, 12-

13.

\32\ 60 FR 44712, 44717.

\33\ South Coast, D-6, 2; ILMA, D-15, 3.

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

The third commenter noted that ``existing re-refining technology is

capable of removing impurities from certain used synthetic oils as well

as from used refined crude oil, and used synthetic oils are presently

included as part of the input streams to re-refining processes.''

34 According to this commenter, some used synthetic oils, once

properly refined, ``serve to improve the fitness of recycled engine

oils for particular end uses.'' 35 This commenter suggested that

the definitions of ``new oil'' and ``used oil'' should refer to

synthetic oils.

\34\ Safety-Kleen, D-16, 12.

\35\ Id.

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

The Commission has concluded that including synthetic oils in the

definitions of ``new oil'' and ``used oil'' furthers the purposes of

EPCA in promoting the use of recycled oil, reducing consumption of new

oil, and reducing environmental hazards and wasteful practices

associated with the disposal of used oil.36 Accordingly, the

definitions of ``new oil'' and ``used oil'' in the final rule now

specifically refer to synthetic oils.

\36\ 42 U.S.C. 6363(a). Including synthetic oils in these

definitions is consistent with some state laws, which specifically

refer to synthetic oils in their definitions. See, e.g., Nev. Rev.

Stat. Ann. Sec. 590.020(7) (Michie 1995); La. Rev. Stat.

Sec. 51:821(B)(6) (1995); Colo. Rev. Stat. Sec. 8-20-213(2)(g)

(1995).

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

Another commenter suggested that the definition of ``re-refined

oil,'' which in the proposed rule was defined as ``used oil from which

physical and chemical contaminants acquired through use have been

removed,'' 37 should be changed to specify that ``re-refined oil''

is used oil that has been refined using hydrotreating

technology.38 According to this commenter, one of only two

companies in the United States that employ a hydrotreating process when

treating used oil, such a clarification would ensure that ``investments

in the hydrotreating process are adequately recognized and protected''

and that the ``high quality of re-refined (hydrotreated) products are

adequately

[[Page 55416]]

recognized for purposes of consumer protection and awareness.'' 39

\37\ 60 FR 44712, 44717.

\38\ Evergreen, D-7, 3.

\39\ Id.

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

In contrast, two commenters requested that the Commission not

specifically refer to any one processing treatment.40 Enviropur,

for example, stated that the FTC should not define ``recycled oil'' by

specifying any one treatment method because hydrotreating is not the

only method available.41

\40\ Enviropur, D-4, 2-3; Quaker State, D-8, 1-2.

\41\ Comment D-4, 2.

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

The Commission has determined that the final rule should not

specifically refer to hydrotreating or any other processing treatment.

The purpose of this rule is to promote the use of ``recycled'' oils

that are substantially equivalent to new oils according to the

prescribed standards. The Commission has no legal basis for requiring

manufacturers to use any one processing technique if there are several

techniques that can be used to make substantially equivalent oils.

Accordingly, the definition of ``re-refined oil'' has not been changed.

Another commenter suggested that the Commission change the

definition of ``recycled oil'' to state that ``[r]ecycled oil does not

include used oil which is blended or otherwise treated for energy

recovery or incineration.'' 42 The Commission believes such a

clarification is unnecessary because such oil is already excluded from

the rule. In the proposed rule, the Commission defined ``recycled oil''

as ``processed used oil with respect to which the manufacturer has

determined, pursuant to section 311.4 of this part, is substantially

equivalent to new oil for use as engine oil.'' 43 Section 311.4 of

this part prescribes test procedures only for engine oils.

\42\ Evergreen, D-7, 4.

\43\ 60 FR 44712, 44717 (emphasis added).

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

Accordingly, after considering the comments, the NIST report, and

its statutory mandate, the Commission has determined that the final

rule shall include all the definitions as proposed in the NPR, with the

terms ``new oil'' and ``used oil'' modified to include synthetic oil.

C. Section 311.3 Preemption

The preemption provision proposed in the NPR was based on the

language in Section 383(e)(1) of EPCA. The statute provides:

[N]o rule or order of the Commission, other than the rules required

to be prescribed pursuant to subsection (d)(1)(A) of this section, and

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, rule, or order requires any container of

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

terms of the rules prescribed under subsection (d)(1)(A) of this

section, to bear any label with respect to the comparative

characteristics of such recycled oil with new oil which is not

identical to that permitted by the rule respecting labeling standards

prescribed under subsection (d)(1)(A)(ii) of this section.44

\44\ 42 U.S.C. 6363(e)(1).

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

The Commission solicited comment on whether recycled oil labeling

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

affected by the Commission's proposal.45 Ten commenters directly

addressed this aspect of the Commission's proposal, with nine

expressing their support for the proposed preemption provision 46

and one opposing it.47 Two commenters, Safety-Kleen and Sun Coast,

listed 17 states they believed would be affected.48

\45\ 60 FR 44712, 44716.

\46\ South Coast, D-6; Evergreen, D-7; AOCA, D-10; NORA, D-12;

API, D-13; Pennzoil, D-13; Safety-Kleen, D-16; AAPA, D-17; Chevron,

D-18, 1.

\47\ NACAA, D-9.

\48\ Ala. Code Sec. 8-17-111 (1994); Colo. Rev. Stat. Sec. 8-20-

213 (1995) (requires manufacturers to label recycled oils as such,

but allows manufacturers to represent a product made ``wholly or

partly from re-refined oil to be equal to or better than a similar

product made from virgin oil if the product for sale conforms with

applicable API service classifications, API certification mark, and

SAE viscosity grades''); Conn. Gen. Stat. Sec. 14-342 (1994); Fla.

Stat. ch. 526.01 (1994) (previously used lubricating oil must be

labeled as such, but ``[p]reviously used lubricating oils which have

been re-refined by a refining process that has removed all the

physical and chemical contaminants acquired in previous use and

which meets the ASTM-SAE-API standards for fitness for its intended

use is not subject to the labeling requirements of this

subsection''); Ga. Code Ann. Sec. 10-1-162 (1995); Haw. Rev. Stat.

Secs. 342N-30, 31 (1994); Idaho Code Secs. 37-2514 to 37-2520

(1994); 815 Ill. Comp. Stat. 435/1, 435/2 (1995); Ind. Code Ann.

Sec. 16-44-1-1 (Burns 1994); La. Rev. Stat. Sec. 51:821 (1995)

(requires manufacturers to label oils ``re-refined'' but also

provides that ``a person may represent a product made in whole or in

part from re-refined oil to be substantially equivalent to a product

made from virgin oil for a particular end use if the product

conforms with the applicable API and SAE service classifications'');

Md. Code Ann., Bus. Reg. Sec. 10-501 (1995); Mass. Ann. Laws ch. 94

Sec. 295F (Law. Co-op. 1995); Miss. Code Ann. Sec. 75-55-13 (1995);

Mo. Rev. Stat. Sec. 414.112 (1994); Nev. Rev. Stat. Ann.

Sec. 590.060(4) (Michie 1995) (only recycled or used oil which has

not been re-refined must be labeled ``recycled'' or ``used''); N.H.

Rev. Stat. Ann. Sec. 339-B:2 (1994); Tex. Occ. Code Ann. Sec. 8606

(West 1995); Wis. Stat. Secs. 159.15, 168.14 (1994). The Commission

makes no determination at this time as to which, if any, of these

state requirements are preempted.

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

1. State Law

The commenters supporting the provision asserted that state

labeling requirements applicable to recycled oil impose burdensome and

sometimes inconsistent requirements on recycled oil

manufacturers.49 According to these commenters, consistent

nationwide labeling standards would reduce compliance costs for

manufacturers and distributors of recycled engine oil, eliminate

existing barriers to the distribution of such oil in certain geographic

areas and distribution channels, and minimize the stigma associated

with re-refined lubricants, thus leading to an increase in the use of

recycled oil products.50 Two commenters also suggested that the

final rule should preempt state laws that impose additional regulatory

requirements on recycled oil manufacturers, such as laws that require

such manufacturers to register or certify their products.51

\49\ South Coast, D-6, 3; Evergreen, D-7,1; AOCA, D-10, 2; NORA,

D-12, 3; API, D-13, 1; Pennzoil, D-14, 2; Safety-Kleen, D-16, 2-3;

APAA, D-17, 1.

\50\ See, e.g., South Coast, D-6, 3; AOCA, D-10, 2; NORA, D-12,

3; Pennzoil, D-14, 2; Safety-Kleen, D-16, 3; APAA, D-17, 1.

\51\ South Coast, D-6, 3; Safety-Kleen, D-16, 11 (citing Florida

and Hawaii statutes).

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

Only one commenter, NACAA, stated its opposition to the proposed

preemption provision, arguing that states must be able to respond to

their own constituencies, and that this provision would weaken many

state laws.52

\52\ Comment D-9, 1.

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

EPCA's language shows Congress intended to promote the use of

recycled oil by preventing multiple labeling requirements. Further, the

legislative history of the Used Oil Recycling Act 53 indicates

that Congress did not believe that consumers would be deprived of

meaningful information if sellers of recycled oil did not disclose the

origin of the oil on the containers. Congress stated that ``the

requirement that recycled oil be labeled in a manner indicating its

prior use provides no useful information to the consumer concerning the

performance of the oil * * * 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.'' 54

\53\ Used Oil Recycling Act of 1980, Pub. L. No. 96-463, 94

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

\54\ H.R. Rep. No. 96-1415, 96th Cong., 2d Sess. 6 (1980),

reproduced at 1980 U.S. Code Cong. & Ad. News 4354, 4356.

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

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) are preempted

because they require a label that is not ``identical to that permitted

by the [FTC's] rule * * * '' States also may not dictate how

manufacturers

[[Page 55417]]

convey substantial equivalency (if they meet the specified test

procedures for substantial equivalency).

States may adopt labeling requirements identical to those required

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

law.55

\55\ See, e.g., Ill. Stat. ch. 815 Secs. 435/1, 435/2 (1995)

(upon promulgation of the FTC's labeling standards applicable to

recycled oil, ``the labeling requirements provided in [the statute]

shall no longer be in effect and the State labeling standards shall

be those promulgated by the Federal Trade Commission'').

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

Because preemption is mandated by EPCA, the Commission has no

discretion on this issue. The Commission believes that section

383(e)(1) intends 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 rule, neither the FTC nor any state or

political subdivision may require any additional or different

disclosure.

EPCA's preemptive effect is limited to labeling requirements for

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). Accordingly, the rule preempts only state

labeling requirements for engine oils covered by the API Engine Oil

Licensing and Certification System as prescribed in API Publication

1509. The rule does not preempt state requirements that are not

labeling requirements, such as registration and certification

requirements.56

\56\ For example, Florida requires manufacturers of re-refined

oil to register their products with the Department of Environmental

Protection and to provide an affidavit of proof that the product

meets the required standards. Fla. Stat. ch. 526.01 (1994). Hawaii

prohibits persons from marking recycled oil as ``specification fuel

without an analysis or other written information documenting that

the used oil or recycled oil meets the standards for specification

fuel as set forth by the director.'' Haw. Rev. Stat. Sec. 342N-30

(1994). Hawaii also requires transporters, marketers, and recyclers

of used oil to obtain a permit. Haw. Rev. Stat. Sec. 342N-31 (1994).

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

2. The FTC's Used Oil Rule

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

new oil.

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

promulgated a trade regulation rule on the advertising and labeling of

previously used lubricating oil.57 Based on the Commission's

finding that the new or used status of a lubricant was material to

consumers, the Used Oil Rule was promulgated to prevent deception of

those who prefer new and unused lubricating oil. The Rule required that

advertising, promotional material, and labels for lubricant made from

used oil disclose such previous use. The Rule prohibited any

representation that used lubricating oil is new or unused. In addition,

it prohibited use of the term ``re-refined,'' or any similar term, to

describe previously used lubricating oil unless the physical and

chemical contaminants had been removed by a refining process.58

\57\ 16 CFR 406.

\58\ 16 CFR 406.5.

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

On October 15, 1980, the Used Oil Recycling Act 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.59 The legislative history indicates

congressional concern that the FTC Rule's labeling requirement had an

adverse impact on consumer acceptance of recycled oil, provided no

useful information to consumers concerning the performance of the oil,

and inhibited recycling. Moreover, the origin labeling requirements in

the Used Oil Rule may be inconsistent with the intent of section 383 of

EPCA, which is that ``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.'' 60

\59\ 42 U.S.C. 6363 note.

\60\ See Legislative History, Public Law 96-463, U.S. Code Cong.

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

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

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 suspended 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.61

The stay of the Used Oil Rule continues in effect. As part of its

regulatory review process, the Commission will consider, at some time

in the future, whether the Used Oil Rule should be rescinded in its

entirety or otherwise amended.

\61\ 46 FR 20979.

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

D. Section 311.4 Testing

The Commission proposed in the NPR that, to determine the

substantial equivalency of processed used oil with new oil for use as

engine oil, manufacturers use the test procedures that were reported to

the Commission by NIST on July 27, 1995, entitled ``Engine Oil

Licensing and Certification System,'' API Publication 1509, 13th

Edition, January, 1995.62 API 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 63 and the API Certification

Mark.64

\62\ 60 FR 44712, 44714.

\63\ 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.

\64\ The API Certification Mark identifies engine oils

recommended for a specified use. An engine oil is eligible to

receive 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.

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

Six commenters addressed the proposed testing standard. The

commenters agreed that substantial equivalency should be based on the

test procedures contained in API Publication 1509 as NIST recommended

to the Commission. However, since this publication is periodically

revised by API to reflect changes in test procedures and standards, the

commenters recommended that the final rule require use of test

procedures found in the

[[Page 55418]]

``latest'' or ``current'' version of API Publication 1509.65

\65\ South Coast, D-6, 2; AOCA, D-10, 2; Ford, D-11, 1; API, D-

13, 2; ILMA, D-15, 2; Safety-Kleen, D-16, 7.

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

The ``Document Drafting Handbook'' of the Office of the Federal

Register, National Archives and Records Administration, contains the

rules federal agencies must follow to incorporate materials by

reference into regulatory text.66 Each statement of incorporation

by reference in regulatory text must specifically identify the material

to be incorporated, including the title, date, edition, author,

publisher, and identification number of the publication. The

Commission, therefore, does not have discretion to refer generally to

the ``latest'' or ``current'' edition of API Publication 1509 in the

final rule. If API Publication 1509 is revised and a subsequent edition

is published, the Commission may update its incorporation by reference

of this document by publishing an amendment to the Code of Federal

Regulations in the Federal Register.

\66\ This Handbook is issued under the Federal Register Act (44

U.S.C. 1501-1511) and the regulations of the Administrative

Committee of the Federal Register (1 CFR 15.10).

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

Three of these commenters also recommended that the Commission

modify the proposed rule to permit third-party testing on behalf of the

manufacturer. According to the commenters, additive manufacturers and

suppliers or other third parties often perform API tests for lubricant

manufacturers. The commenters stated that the Commission's proposal

(i.e., that manufacturers use the NIST test procedures to determine

substantial equivalency), if left unchanged, would be extremely

burdensome on the industry.67 The Commission has determined that

manufacturers may rely on third-party testing conducted in accordance

with the procedures contained in API Publication 1509. This could be

important to some manufacturers who do not have testing equipment of

their own. Accordingly, the final rule states that to determine the

substantial equivalency of processed used oil with new oil,

manufacturers or their designees must use the test procedures found in

API Publication 1509. The allowance for third-party testing, however,

does not absolve manufacturers of their ultimate responsibility under

EPCA for making substantial equivalency determinations.68

\67\ South Coast, D-6, 3; ILMA, D-15, 2; Safety-Kleen, D-16, 6.

\68\ See final rule sections 311.4 and 311.5. Section 383(b)(2)

of EPCA (42 U.S.C. 6363(b)(2)) requires manufacturers to make

determinations of substantial equivalency. The final rule,

therefore, is consistent with EPCA.

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

In accordance with section 383(d)(1)(A)(i) of EPCA,69

therefore, section 311.4 of the final 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 API Publication 1509,

13th Edition, January 1995, entitled ``Engine Oil Licensing and

Certification System.'' 70 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.

\69\ 42 U.S.C. 6363(d)(1)(A)(i).

\70\ The Commission has obtained 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.

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

E. Section 311.5 Labeling

In accordance with section 383(d)(1)(A)(ii) of EPCA,71 in the

NPR the Commission proposed labeling standards for containers of

recycled oil. Section 311.5 of the proposed rule stated 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, in accordance with

the test procedures prescribed by the Commission, the substantial

equivalency of the oil to new oil for that particular end use, and has

based the representation on that determination.72 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.''

\71\ 42 U.S.C. 6363(d)(1)(A)(ii).

\72\ 60 FR 44712, 44715.

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

The Commission received seven comments on this aspect of its

proposal. Exxon stated that the Commission's proposed labeling

standards do not address the extent to which an engine oil may exceed

the minimum requirements for such oils in API Publication 1509, and do

not address a recycled oil's potential health effects on

consumers.73 With regard to Exxon's first point, the Commission

notes that its labeling standards are permissive in nature and do not

mandate any specific disclosures. If a recycled oil exceeds the minimum

requirements for substantial equivalency with new oil, a manufacturer

is free to make such representations on labels, in advertising, or

wherever appropriate.

\73\ Comment D-5, 1-2 (``Stating that recycled oils are

substantially equivalent to new oils without specifically confining

that equivalency to performance might imply equivalency in health

effects on humans. In contrast to new petroleum base oils, we are

not aware of an extensive database on the cancer potential and other

health effects to humans posed by recycled base oils * * *. While

[typical] contaminants have been rather extensively studied and

documented for new oils, the variability of source and effects of

re-refining have presented a major challenge for health equivalent

documentation for recycled oils. Some equivalency standards for

carcinogenic species, adverse health species (i.e., PCB) [and]

adverse environmental species (i.e., metals) should be put in place

to ensure health equivalence with new oils.''). In contrast, Safety-

Kleen stated that tests have shown its re-refined base oils to be

non-mutagenic and non-carcinogenic, and that ``although the FTC's

mandate to promulgate test procedures does not extend to health-

related issues * * * implementation of the proposed rule is

consistent with consumers' interest in encouraging the sale of safe

and healthful products.'' Comment D-16, 9.

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

With regard to Exxon's second point, the Commission believes that

consideration of the potential health effects of recycled oil is beyond

its statutory mandate in this proceeding. It is clear from the

legislative history of EPCA that Congress was concerned only with the

performance characteristics of recycled oil, not potential health

consequences. Section 383(d)(1)(A) of EPCA requires the Commission to

prescribe the substantial equivalency test procedures certified to the

Commission by NIST. The test procedures reported to the Commission by

NIST relate to the performance of oil distributed for use as engine

oil. The rule's labeling standards, therefore, are based on substantial

equivalency determinations made in accordance with those test

procedures. Although Exxon's concerns may be important, they cannot be

addressed in this proceeding. The Commission has no factual or legal

basis to address the health effects, or any other non-performance

qualities, of recycled oil in this rulemaking.

Three commenters suggested that the final rule include affirmative,

mandatory labeling requirements.74 As

[[Page 55419]]

discussed above, in suspending the labeling provision of the

Commission's Used Oil Rule, Congress stressed that the intent of

section 383 of EPCA was that ``[o]il should be labeled on the basis of

performance characteristics and fitness for the intended use, and not

on the basis of the origin of the oil.'' 75 Congress intended to

encourage the use of recycled oil that is substantially equivalent in

performance to new oil. Congress ensured this in section 383 of EPCA by

directing NIST to establish standards for determining substantial

equivalency and by prohibiting the Commission from requiring

manufacturers to label their products with any term, phrase, or

description connoting less than substantial equivalency. Accordingly,

the Commission does not believe it is necessary to establish

affirmative labeling requirements beyond the statutory requirement that

representations of substantial equivalency be based on the NIST

standards. If the NIST standards are met, the recycled oil is like new

oil sold for engine use in terms of minimum performance, and NACAA's

concerns, therefore, are implicitly addressed. Thus, the final rule

does not require manufacturers to display the API mark on containers or

to explicitly state that their engine oil is substantially equivalent

to new oil. The Commission believes that manufacturers and sellers will

have every incentive to do so, however.

\74\ NACAA, D-9, 1 (Recycled or re-refined oil must have an

equivalency on the label. The consumer will need to know how these

recycled or re-refined oils are equivalent to new oil, and they will

need to know its longevity and uses); ILMA, D-15, 3 (ILMA prefers a

mandatory labeling requirement because the Commission's proposed

rule allows a considerable range in quality of processed used oil);

San Diego, E-1, 1 (Used oil's definition and uses must be very clear

and stated on the label).

\75\ Legislative History Public Law 96-463, U.S. Code Cong. and

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

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

Ford Motor Company advised the Commission of the existence in the

marketplace of technically obsolete oils that may not meet modern

engine warranty requirements. Ford suggested that such oils should not

be permitted to be labeled as substantially equivalent to new engine

oil if they cannot be tested in accordance with the test procedures

prescribed by the Commission.76 The Commission agrees, but

believes that the rule as proposed already addresses this concern. A

representation of substantial equivalency can be based only upon a

determination made in accordance with the test procedures prescribed by

the Commission.

\76\ Comment D-11, 1.

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

Another commenter advised the Commission that in some instances, a

manufacturer of a recycled engine oil product will sell that finished

product in bulk to a distributor or retailer who in turn will label the

product with its own label and brand. The commenter recommended that

the proposed rule's labeling standards be modified to accommodate these

situations.77 To clarify that other sellers, including, for

example, distributors and retailers, may label containers of recycled

engine oil in accordance with the rule, the Commission has modified

section 311.5 of the rule to refer to such other sellers.

\77\ Safety-Kleen, D-16, 7.

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

Finally, the Procurement Recycling Coordinator of the State of

Wisconsin suggested that the proposed rule's labeling standards

conflict with some federal and state procurement guidelines and

Executive Order 12873, which require government procurement officials

to purchase re-refined oil instead of virgin oil.78 The commenter

stated that it will be difficult to favor re-refined oil, if it is

difficult to identify the product.79 The rule, however, does not

preclude manufacturers or other sellers from labeling re-refined oils

as such. The labels also could include the percentage of re-refined oil

in blended products. Marketers of re-refined engine oil have an

incentive to voluntarily label their products as such to attract

environmentally concerned or other specifically targeted consumers,

including federal or state government agencies.

\78\ A 1993 Executive Order 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. 12873,

58 FR 54911 (1993).

\79\ Wisconsin, E-2, 1-2.

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

Accordingly, after considering the comments on its NPR proposal,

the Commission has determined that a manufacturer or other seller 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 such substantial equivalency in

accordance with the test procedures prescribed by the Commission, and

has based the representation on that determination. Because the rule

does not mandate the use of specific disclosures, recycled oil

manufacturers or other sellers have flexibility to promote the

performance of their products and their ``substantial equivalency''

with new oil and to develop strategies for various markets.

Manufacturers can voluntarily label recycled oil with terms such as

``recycled'' to assist in the marketing of their products.80

\80\ Manufacturers using such terms should, of course, consider

the Commission's Guides for the Use of Environmental Marketing

Claims. See, e.g., 16 CFR 260.7(e).

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

F. Section 311.6 Prohibited Acts

Section 311.6 of the proposed rule tracked the statutory language

relating to prohibited acts and enforcement of the Commission's rule.

Section 524 of EPCA 81 prohibits violation of the Commission's

final rule issued pursuant to section 383 of EPCA.82 The proposed

rule declared that 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 engine use unless the

manufacturer has based such representation on the manufacturer's

determination of substantial equivalency in accordance with the test

procedures prescribed under section 311.4 of the proposed rule.83

\81\ 42 U.S.C. 6394(2) and 42 U.S.C. 6395.

\82\ 42 U.S.C. 6394(2).

\83\ 60 FR 44712, 44717.

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

The Commission has revised the proposed rule's prohibited acts

section to make it consistent with the change made to the labeling

section of the proposed rule. As discussed above, the labeling

provision in the final rule (section 311.5) differs from the proposed

rule in that it states that a ``manufacturer or other seller may

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

oil is substantially equivalent to new oil * * *'' (emphasis added).

Accordingly, section 311.6 of the final rule makes it ``unlawful

for any manufacturer or other seller 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 or

other seller 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 section 311.4 of this Part.'' (emphasis

added).

The final rule, like 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.84 Whoever willfully violates the

Commission's rule shall be fined not more than $10,000 for each

violation.85 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

[[Page 55420]]

six months, or both.86 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 a district

court action 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. A district court also may

issue mandatory injunctions commanding any person to comply with the

Commission's rule.87

\84\ 42 U.S.C. 6395(a).

\85\ 42 U.S.C. 6395(b).

\86\ 42 U.S.C. 6395(c).

\87\ 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, which 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.88 In

addition, the Commission has the authority to prosecute unfair or

deceptive acts or practices under Section 5 of the FTC Act, 15 U.S.C.

45, administratively or through Section 13(b) actions, 15 U.S.C. 53(b),

filed in federal district court. The Commission may obtain injunctive

relief, as well as equitable remedies, such as redress or disgorgement.

Therefore, if a manufacturer misrepresents that its oil is

substantially equivalent to new oil, the Commission can pursue remedies

under Section 5 of the FTC Act, if appropriate.

\88\ 42 U.S.C. 6395(d).

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

Four commenters addressed the issue of enforcement. Pennzoil

emphasized the importance of ``strict enforcement of the rule'' and

``imposing stiff penalties on manufacturers which misrepresent the

equivalency of processed used oil to new oils * * *.'' 89

\89\ Pennzoil, D-14, 3.

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

API commented that its licensing and certification standards

``assure motorists that API-licensed engine oils meet rigorous

requirements.'' 90 API also stated that, in addition to testing

oils before they can be marked with the API Service Symbol and

Certification Mark, it runs additional tests on engine parts, or

simulates engine operation to show how the oil performs in a variety of

driving and weather conditions. It also conducts an ``aftermarket audit

to monitor use of the license and the symbol it conveys.'' 91

\90\ API, D-13, 4.

\91\ Id.

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

The Procurement Recycling Coordinator of the State of Wisconsin

expressed concern that the API's auditing process might not be

adequate.92 According to this state official, API chooses the

brands it audits based on market share volume. Therefore, re-refined

brands are unlikely to be chosen because sales are relatively

low.93 This commenter further noted that API failed to provide him

with information he requested regarding the performance testing of re-

refined motor oil beyond ``the individual manufacturers' assertions

that they have met the API requirements.'' 94

\92\ Wisconsin, E-2, 2.

\93\ Id.

\94\ Id.

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

Ford stated that although meeting the requirements of API

Publication 1509 ``goes a long way in establishing substantial

equivalency, it does not ensure that a manufacturer's oil continuously

meets these requirements.'' 95 Ford accordingly suggested that the

FTC could adopt a random audit process to ensure continued

compliance.96

\95\ Ford, D-11, 2.

\96\ Id.

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

The Commission agrees with the commenters that enforcement of the

rule is critical to the protection of consumers, as well as those

manufacturers that are following the proper certification and labeling

standards, and to the maintenance of public confidence in the

performance of recycled oil. Accordingly, the Commission will take

whatever steps are necessary to ensure compliance with the rule.

Moreover, although the rule does not contain any recordkeeping or

reporting requirements, any manufacturer or seller labeling recycled

oil pursuant to this rule must be able to demonstrate that the

necessary testing has been performed and the determination of

substantial equivalency properly made.97 The Commission's

enforcement plan will vary depending on whether the Commission

determines that there is a compliance problem. The Commission welcomes

any information from persons who believe that the rule is being

violated.

\97\ In accordance with the Commission's advertising

substantiation doctrine, sellers must have a reasonable basis to

support material, objective claims. See Thompson Medical Co., 104

F.T.C. 648, 839 (1984) (Appendix), aff'd, 791 F.2d 189 (D.C. Cir.

1986), cert. denied, 479 U.S. 1086 (1987).

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

III. 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. In the NPR,

the Commission proposed that the rule become effective 30 days after

publication of a final rule in the Federal Register.98 The two

comments on this issue supported the proposed effective date.99

Therefore, the Commission has determined that the final rule will

become effective 30 days after it is published in the Federal Register.

This will provide sufficient time for affected parties to comply with

the rule's labeling standards or take notice of them.

\98\ 60 FR 44712, 44715.

\99\ South Coast, D-6, 4; Safety-Kleen, D-16, 13.

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

IV. Regulatory Flexibility Act

The Regulatory Flexibility Act (``RFA'') 100 requires agencies

to prepare regulatory flexibility analyses when publishing proposed

rules 101 unless the proposed rule, if promulgated, would not have

a ``significant economic impact on a substantial number of small

entities.'' 102 In the NPR, the Commission preliminarily concluded

that the economic impact of the proposed labeling standards appeared to

be de minimis.103 The rule proposed by the Commission, and now

made final, 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

prescribed test procedures. Any economic costs incurred by entities

that choose to make a determination of substantial equivalency are not

imposed by the rule. The rule contains no reporting or recordkeeping

requirements, and it permits recycled oil to be labeled with

information that is basic and easily ascertainable.

\100\ 5 U.S.C. 601-612.

\101\ 5 U.S.C. 603(a).

\102\ 5 U.S.C. 605(b).

\103\ 60 FR 44712, 44716.

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

In the NPR, the Commission also tentatively concluded that the

proposed rule would not affect a substantial number of small entities

because relatively few companies currently manufacture and sell

recycled oil as engine oil. Of those that do, the Commission stated

that most are not

[[Page 55421]]

``small entit[ies]'' as that term is defined either in section 601 of

RFA 104 or applicable regulations of the Small Business

Administration.105

\104\ 5 U.S.C. 601(6).

\105\ 13 CFR 121.

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

In light of these factors, the Commission certified under the RFA

that the rule proposed would not, if promulgated, have a significant

impact on a substantial number of small entities, and, therefore, a

regulatory analysis was not necessary.106 To ensure the accuracy

of this certification, however, the Commission requested comments on

whether the proposed rule would have a significant impact on a

substantial number of small entities.

\106\ 60 FR 44712, 44716.

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

Two commenters specifically addressed this aspect of the

Commission's proposal. Both stated that the rule would not have a

significant economic impact on a substantial number of small

entities.107 In adopting the final rule, the Commission recognizes

that although there may be some ``small entities'' among private-label

retail sellers or distributors of recycled engine oil, the rule's

labeling standards will have only a minimal impact on these small

entities. Any such impact will likely consist of retailers and

distributors voluntarily labeling recycled engine oil containers in

order to market their products. The impact on such small entities,

therefore, is de minimis and not significant. In addition, the rule

adopted by the Commission does not require recycled oil manufacturers

to conduct substantial equivalency tests themselves. They may use third

parties, thus obviating the need to have testing equipment of their

own. Thus, the rule minimizes burdens on even small businesses.

\107\ NORA, D-12, 5; Safety-Kleen, D-16, 13. Safety-Kleen stated

that it is not aware that a substantial number of small entities

manufacture processed used oil for sale as engine oil.

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

On the basis of all the information now before it, the Commission

determines that the rule will not have a significant impact on a

substantial number of small entities. Consequently, the Commission

concludes that a regulatory flexibility analysis is not required. In

light of the above, the Commission certifies, under section 605 of the

RFA,108 that the rule it has adopted will not have a significant

impact on a substantial number of small entities.

\108\ 5 U.S.C. 605(b).

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

V. Paperwork Reduction Act

In the NPR, the Commission noted that its proposed rule contained

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

requirements, so there was no ``information collection'' necessitating

clearance by the Office of Management and Budget (``OMB'').109

However, to ensure the accuracy of its conclusion, the Commission

solicited comments on any paperwork burden the proposed rule might

impose. The one comment on this issue supported the Commission's

conclusion.110 Accordingly, the Commission has determined that the

final rule does not involve the ``collection of information,'' as

defined by the regulations of OMB 111 implementing the Paperwork

Reduction Act,112 and, therefore, OMB clearance is not required.

\109\ 60 FR 44712, 44716.

\110\ Safety-Kleen, D-16, 13.

\111\ 5 CFR 1320.7(c).

\112\ 44 U.S.C. 3501-3520.

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

VI. Regulatory Review

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 adverse economic impact of new regulatory actions. As part

of that overall regulatory review, the Commission solicited comments in

the NPR on questions concerning benefits and significant burdens and

costs of the proposed rule and alternatives to the proposals that would

increase benefits to consumers of recycled engine oil and minimize the

costs and other burdens to firms subject to the rule's

requirements.113 Only two commenters specifically addressed these

issues, and they stated that the rule will impose no adverse economic

impact even on any small businesses that might be covered by the

rule.114 Accordingly, the Commission concludes that the rule it

has adopted will not impose any significant burdens and costs on firms

subject to the rule's requirements.

\113\ 60 FR 44712, 44716.

\114\ NORA, D-12, 5; Safety-Kleen, D-16, 13.

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

List of Subjects in 16 CFR Part 311

Energy conservation, Incorporation by reference, Labeling, Recycled

oil, Trade practices.

VII. Text of Rule

Accordingly, the Commission amends 16 CFR Chapter I by adding a new

part 311 to Subchapter C to read as follows:

PART 311--TEST PROCEDURES AND LABELING STANDARDS FOR RECYCLED OIL

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 synthetic oil or oil that has been refined

from crude oil and which has not been used and 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 that the manufacturer has

determined, pursuant to section 311.4 of this part, is substantially

equivalent to new oil for use as engine oil.

(e) Used oil means any synthetic oil or oil that has been refined

from crude oil, which 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 or their designees must

use the test procedures that were reported to the Commission by the

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

1995,

[[Page 55422]]

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

Petroleum Institute (``API'') Publication 1509, Thirteenth Edition,

January, 1995. This incorporation by reference was approved by the

Director of the Federal Register in accordance with 5 U.S.C. 552(a) and

1 CFR Part 51. Copies of API Publication 1509, ``Engine Oil Licensing

and Certification System,'' may be obtained from the American Petroleum

Institute, 1220 L Street, NW., Washington, DC 20005, or may be

inspected at the Federal Trade Commission, Public Reference Room, room

130, 600 Pennsylvania Avenue, NW., Washington, DC, or at the Office of

the Federal Register,, 800 North Capitol Street NW., suite 700,

Washington, DC.

Sec. 311.5 Labeling.

A manufacturer or other seller 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 or other seller 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 or other seller 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 525 of the Energy Policy and

Conservation Act (42 U.S.C. 6395).

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 95-26980 Filed 10-30-95; 8:45 am]

BILLING CODE 6750-01-P