Rule Concerning Disclosures Regarding Energy Consumption and Water use of Certain Home Appliances and Other Products Required Under the Energy Policy and Conservation Act (``Appliance Labeling Rule'')

FEDERAL TRADE COMMISSION

16 CFR Part 305

Rule Concerning Disclosures Regarding Energy Consumption and

Water use of Certain Home Appliances and Other Products Required Under

the Energy Policy and Conservation Act (``Appliance Labeling Rule'')

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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SUMMARY: The Federal Trade Commission (``Commission'') issues final

amendments to the Appliance Labeling Rule (``the Rule'') to permit the

placement of energy use labels required by the Canadian and Mexican

governments in a location ``directly adjoining'' the Rule's required

``EnergyGuide'' label. Previously the Rule prohibited the affixation of

non-required information ``on or directly adjoining'' the EnergyGuide.

The relaxation of this prohibition will further the goal of the North

American Free Trade Agreement (``NAFTA'') to make compatible the

standards-related measures of the signatories to facilitate trade in a

good or service among the parties. Moreover, the amendment will result

in considerable savings for the appliance manufacturing industry.

EFFECTIVE DATE: June 28, 1996.

FOR FURTHER INFORMATION CONTACT: James G. Mills, Attorney, Division of

Enforcement, Federal Trade Commission, Washington, D.C. 20580 (202-326-

3035).

SUPPLEMENTARY INFORMATION:

I. Background

A. The Request by Whirlpool

In July, 1995, the Whirlpool Corporation (``Whirlpool'') requested

permission to use hang tag EnergyGuide labels that have the

corresponding Canadian ``EnerGuide'' appliance energy use label printed

on the reverse side, and/or permission to use a single stick-on or hang

tag label consisting of the Commission's EnergyGuide immediately next

to (or above) the appropriately corresponding Canadian EnerGuide.

Whirlpool also asked for permission to label in the same manner using

the appliance energy use label required by Mexico, or using all three

labels.

In support of its request, Whirlpool stated that the continued

existence of separate appliance labeling requirements among the United

States, Canada, and Mexico represents an obstacle to free trade among

the signatories to NAFTA. Whirlpool contended that the ability to print

the labels required by the three countries next to each other on a

single piece of label stock would mitigate the impact of that obstacle.

Whirlpool also stated that using such labels would save Whirlpool

significant resources--by reducing the number of separate U.S. and

Canadian models of appliances that Whirlpool produces and by reducing

labeling expenses.

B. Applicable Sections of the Appliance Labeling Rule

Section 305.11(a)(5)(i)(K) of the Rule, 16 CFR 305.11(a)(5)(i)(K),

states that: No marks or information other than that specified in this

Part shall appear on or directly adjoining [the EnergyGuide] label

except for a part or publication number identification, as desired by

the manufacturer. * * * [emphasis added]

The language in this section pertains to labels for refrigerators,

refrigerator-freezers, freezers, dishwashers, clothes washers, water

heaters, and room air conditioners. Identical language appears in two

other sections relating to labels for furnaces and pool heaters (16 CFR

305.11(a)(5)(ii)(I)) and central air conditioners (16 CFR

305.11(a)(5)(iii)(H)(1)). The purpose of this prohibition was to avoid

having other information detract from the Energy Guide label.

C. The Notice of Proposed Rulemaking

The Commission agreed that permitting manufacturers to use side-by-

side or back-to-back labeling that included the energy use labels of

the three NAFTA signatories could further the goals of NAFTA and could

reduce the cost of compliance with the Rule. The Commission, therefore,

on February 22, 1996, issued a Notice of Proposed Rulemaking (``NPR'')

proposing amendments to the above-referenced sections of the Rule.\1\

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\1\ 61 FR 6801.

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In the NPR, the Commission addressed whether permitting this type

of labeling would result in consumer confusion. The Commission reasoned

that, because the EnergyGuide is the only one of the three labels that

is exclusively in English, and because there are two disclosures on it

stating that the information is derived from U.S. government tests and

utility costs, U.S. consumers may realize that only one label is

pertinent to them. Further, the United States and Canada, and, to a

slightly lesser extent, Mexico, use compatible test procedures for

identifying energy use, and require information to be reported in terms

of kilowatt-hour use per year. Thus, the Commission concluded

preliminarily that the similarity of the information being disclosed on

each country's label may make the possibility of confusion less likely.

Moreover, U.S. consumers are already seeing Canadian labels on some

appliances (especially in the northern states), and possibly Mexican

labels, although not directly adjoining the EnergyGuide. Finally, the

Commission pointed out that, on many

[[Page 33652]]

packages, instruction manuals, and labels that accompany products

destined for multiple countries, consumers are presented with

information in more than one language. Thus, the Commission tentatively

determined that consumers are not likely to be confused or misled by

the presence of multiple appliance energy use labels, as long as they

can clearly distinguish which is intended for the U.S. audience.

The Commission noted in the NPR that it has worked closely with

representatives of the Canadian EnerGuide program over the past two

years to explore regulatory harmonization under NAFTA. This work has

centered around each country's recent review of its respective

appliance labeling rule, with both considering each other's research

and proposed changes. More recently, representatives of the Mexican

government have joined in this dialogue. The Commission stated its

intention to continue this cooperative pursuit of tri-lateral

harmonization to determine whether a single label can be designed that

effectively fulfills the requirements of all three countries, and

characterized the proposed amendments as an interim measure to provide

manufacturers greater labeling flexibility to facilitate trade.

To obtain more information regarding its proposal, the Commission

posed the following questions in the NPR:

1. Would allowing energy use labels required by the Canadian or

Mexican governments to be placed next to the U.S. EnergyGuide be likely

to detract from the effectiveness of the EnergyGuide or cause consumer

confusion?

2. Should the Commission limit the information that the amendments

would permit to be placed ``directly adjoining'' the EnergyGuide only

to energy use disclosures required by the governments of Canada and

Mexico? For example, should the amendments permit additional

information required by the governments of Canada and Mexico, such as

environmental or safety-related information, also to be placed

``directly adjoining'' the EnergyGuide?

3. Should the Commission limit the amendments to apply to energy

use (or other) information required only by the governments of Canada

and Mexico, or should the amendments permit energy use (or other)

information required by the governments of all other nations?

II. Discussion of Comments

The Commission received four comments in response to the NPR.\2\

Three comments were from manufacturers of major household

appliances,\3\ and one was from a trade association representing

manufacturers.\4\ All the comments supported the proposed amendments.

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\2\ The comments are found on the Public Record at the Federal

Trade Commission in Washington, D.C., under Rulemaking Record Number

R611004 (Appliance Labeling Rule). They are numbered B19229500001-

B19229500004. The numerical prefix ``B192295'' identifies the

comments as being in response to the NPR. In this notice, the

comments are cited by an identification of the commentor, the last

two digits of the comment number, and the relevant page number(s),

e.g., ``Whirlpool, 02, 2-3.'' The four comments were from: The

Association of Home Appliance Manufacturers (``AHAM, 01''); The

Whirlpool Corporation (``Whirlpool, 02''); White Consolidated

Industries, Inc. (``White, 03''); and, W.C. Wood Company, Inc.

(``Wood, 04'').

\3\ Wood, 04; Whirlpool, 02; White, 03.

\4\ AHAM, 01.

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A. Amending the Rule To Permit Placement of Canadian and Mexican Energy

Use Labels in Close Proximity to the EnergyGuide

AHAM and Whirlpool agreed with the Commission that the proposed

amendments would promote the intend of NAFTA to facilitate the free

flow of commerce across North American international boundaries.\5\

AHAM, White, and Wood agreed that the proposed amendments would benefit

appliance manufacturers until the Commission's Rule could be harmonized

with the energy use regulations of Canada and Mexico.\6\ These comments

commended the Commission for its continuing efforts at harmonization

and its goal of developing a single energy use label that meets the

requirements of all three NAFTA signatories.\7\

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\5\ AHAM, 01, 2; Whirlpool, 02, 1.

\6\ AHAM, 01, 2; White, 03, 1; Wood, 04, 2.

\7\ Id.

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AHAM, Whirlpool, and Wood stated that the proposed amendments would

enable manufacturers to comply with the Rule more efficiently and

economically.\8\ Wood explained:

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\6\ AHAM, 01, 1-2; Whirlpool, 02, 1, 3; Wood, 04, 1.

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Allowing the placement of any two or all three of the energy

labels on applicable models side by side, above and below or on a

single label or hang tag will allow our company to reduce the number

of [stock-keeping units) required to be built and tracked. The

reason for this is that a great many of the appliances going to

Canada and Mexico are identical to that produced for the domestic

market, with the only difference being the energy' label. In order

to build this change on the production line and keep track of the

`energy' label through the warehouse and distribution chain, a

separate and unique model is built.

The appliance industry is a very competitive market and with

NAFTA it is a very competitive North American market. A relaxation

in the current labeling rules will provide our company with real

economic benefits.\9\

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\9\ Wood, 04, 1.

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B. Would the Proposed Amendments Be Likely To Result in Consumer

Confusion or Detraction From the EnergyGuide?

The comments unanimously concluded that placement of Canadian and/

or Mexican energy use labels next to the EnergyGuide would not detract

from the Commission's label and would not confuse consumers.\10\

Whirlpool's reasoning was representative of all the comments:

\10\ AHAM, 01, 3, 4; Whirlpool, 02, 2; White, 03, 1; Wood, 04,

2.

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The primary energy descriptors are identical for all three

nations and the U.S. label is the only one written entirely in

English. Also, the FTC label notes that energy consumption estimates

are based on U.S. government standard tests. Furthermore, we submit

that consumers are becoming more and more sophisticated in quickly

identifying the differences in instructional and point of purchase

labels since an increasing number of such materials are being

written in multilingual script to accommodate world marketing

trends.\11\

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\11\ Whirlpool, 02, 2.

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C. Should the Proposed Amendments Be Limited To Apply Only to Energy

Use Labels? Should the Proposed Amendments Be Limited To Apply Only to

Information Required by the Canadian and Mexican Governments?

All four comments agreed that the proposed amendments should apply

only to energy use disclosure labels.\12\ They reasoned that too many

unrelated labels next to the EnergyGuide would detract from its message

and cause information overload and confusion. As suggested by White,

other information may be more appropriate communicated in care and use

manuals:

\12\ AHAM, 01, 3-4; Whirlpool, 02, 1-2; White, 03, 1; Wood, 04,

2.

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[We] urge that the content remain energy information only,

consistent with the familiar Energy Guide. Diverse information

detracts from the important energy information and the industry

guards against the appliance becoming a ``billboard.'' Literature

included with the appliance and intended as a continuous guide for

safe use and maintenance is more appropriate for including other

information.\13\

\13\ White, 03, 1.

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Moreover, as AHAM pointed out, some safety and environmental

disclosures are voluntary in some of the

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countries, and mandatory in others, while energy use information is

required by law in all three.\14\

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\14\ AHAM, 01, 4.

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Whirlpool suggested that the proposed amendments be expanded to

apply to the energy use labels required by countries in Europe, Latin

America, and Asia, in addition to Canada and Mexico, even though total

harmonization of labels of all the countries in these areas may be

decades away. In support of this proposal, Whirlpool stated that the

Commission should take the lead in permitting multinational labeling to

avoid future conflicts as the appliance industry markets its produces

worldwide. Whirlpool provided regulatory language with its comment that

would accomplish this end.\15\

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\15\ Whirlpool, 02, 2.

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AHAM, advocated a more conservative approach, stating:

There will likely come a time when a common international

``energy use disclosure'' is appropriate and desired, as U.S.

product exports increase to countries throughout the world. However,

at this time, AHAM does not recommend other countries' information

be permitted in conjunction with the EnergyGuide label.\16\

\16\ AHAM, 01, 4.

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The Commission agrees with AHAM in this regard. While there may be

sufficient similarity between the Commission's Rule and the labeling

requirements of other nations at some future time to justify including

them in this section of the Rule, the present record does not contain

evidence to justify an expansion of the proposed amendments as

Whirlpool has suggested.

III. Conclusion

The record contains unanimous support for the proposed amendments.

Moreover, with the exception of Whirlpool's suggestion to allow the

placement of the energy use labels of other countries, in addition to

those of Canada and Mexico, ``on or directly adjoining'' the

EnergyGuide, the record also supports the form and language of the

proposed amendments as they appear in the NPR. The Commission,

therefore, amends the Appliance Labeling Rule as proposed in the NPR.

Manufacturers are still prohibited from placing other information on or

directly adjoining the EnergyGuide.

Section A--Regulatory Flexibility Act

In the NPR, the Commission concluded, on a preliminary basis, that

the provisions of the Regulatory Flexibility Act relating to an initial

Regulatory Flexibility Act analysis (5 U.S.C. 603-604) were not

applicable to this proceeding because the amendments, if promulgated,

would not have a ``significant economic impact on a substantial number

of small entities'' (5 U.S.C. 605). The Commission concluded,

therefore, that a regulatory flexibility analysis was not necessary.

To determine whether a final regulatory flexibility analysis would

be necessary, however, in the NPR the Commission requested information

on whether the proposed amendments would have a significant impact on a

substantial number of small entities. No comments were received on this

issue.

In light of the above, and because the amendments do not impose any

new obligations on entities regulated by the Appliance Labeling Rule,

the Commission certifies, under Section 605 of the Regulatory

Flexibility Act (5 U.S.C. 605(b)), that the amendments announced today

will not have a significant impact on a substantial number of small

entities.

Section B--Paperwork Reduction Act

In the NPR, the Commission stated that the amendments would not

expand the Appliance Labeling Rule's existing recordkeeping and

reporting requirements, and that the Commission, therefore, was not

requesting that the Office of Management and Budget adjust the existing

clearance for the Appliance Labeling Rule (OMB No. 3084-0069) under the

Paperwork Reduction Act (44 U.S.C. 3501 et seq.). To substantiate the

accuracy of its reporting burden estimate, however, the Commission

requested comment on the extent of the reporting and recordkeeping

burden associated with the amendments.

The Commission received one comment on this issue. Whirlpool agreed

with the Commission's conclusion that the amendments would not expand

existing recordkeeping and reporting requirements. Whirlpool stated,

``In fact, granting of this proposal would reduce recordkeeping and

reporting among the regulated community.'' \17\

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\17\ Whirlpool,02, 3.

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Accordingly, the Commission reaffirms its prior determination that

the amendments do not alter the Rule's recordkeeping or reporting

requirements and that they do not, therefore, require OMB clearance.

Text of Amendments

For the reasons discussed above, the Commission amends 16 CFR Part

305 to permit (but not require) appliance manufacturers to place the

energy use disclosure labels required by the governments of Canada and

Mexico in a location directly adjoining the Commission's EnergyGuide,

as follows below:

List of Subjects in 16 CFR Part 305

Advertising, Energy conservation, Household appliances, Labeling,

Reporting and recordkeeping requirements.

PART 305--[AMENDED]

1. The authority citation for Part 305 continues to read as

follows:

Authority: 42 U.S.C. 6294.

2. Section 305.11(a)(5)(i)(K), (a)(5)(ii) (I), and

(a)(5)(iii)(H)(1) are revised to read as follows:

Sec. 305.11 Labeling for covered products.

(a) * * *

(5) * * *

(i) * * *

(K) No marks or information other than that specified in this Part

shall appear on or directly adjoining this label, except a part or

publication number identification may be included on this label, as

desired by the manufacturer, and the energy use disclosure labels

required by the governments of Canada or Mexico may appear directly

adjoining this label, as desired by the manufacturer. If a manufacturer

elects to use a part or publication number, it must appear in the lower

right-hand corner of the label and be set in 6-point type or smaller.

(ii) * * *

(I) No marks or information other than that specified in this Part

shall appear on or directly adjoining this label, except a part or

publication number identification may be included on this label, as

desired by the manufacturer, and the energy use disclosure labels

required by the governments of Canada or Mexico may appear directly

adjoining this label, as desired by the manufacturer. If a manufacturer

elects to use a part or publication number, it must appear in the lower

right-hand corner of the label and be set in 6-point type or smaller.

* * * * *

(iii) * * *

(H) * * *

(1) No marks or information other than that specified in this Part

shall appear on or directly adjoining this label, except a part or

publication number identification may be included on this label, as

desired by the manufacturer, and the energy use disclosure labels

required by the governments of Canada or Mexico may appear directly

adjoining this label, as

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desired by the manufacturer. If a manufacturer elects to use a part or

publication number, it must appear in the lower right-hand corner of

the label and be set in 6-point type or smaller.

* * * * *

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 96-16476 Filed 6-27-96; 8:45 am]

BILLING CODE 6750-01-M