Country of Origin Marking Requirements for Frozen Imported Produce

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 134

RIN 1515-AB61

Country of Origin Marking Requirements for Frozen Imported

Produce

AGENCY: Customs Service, Treasury.

ACTION: Notice of proposed rulemaking; solicitation of comments.

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SUMMARY: In response to comments received concerning an Advance Notice

of Proposed Rulemaking published by Customs on February 2, 1995,

regarding the need for country of origin marking requirements for

frozen imported produce, and in further consideration of Customs duty

to prescribe marking rules for imported merchandise when necessary,

Customs proposes to amend its regulations to require that the country

of origin of imported produce be marked on the front panel of packages

of frozen produce in order for the marking to comply with the statutory

requirement that it be in a ``conspicuous place''. This amendment is

proposed to ensure a uniform standard for the country of origin marking

of frozen produce.

DATES: Comments must be received on or before September 23, 1996.

ADDRESSES: Written comments (preferably in triplicate) may be addressed

to the Regulations Branch, Office of Regulations and Rulings, U.S.

Customs Service, Franklin Court, 1301 Constitution Ave., NW.,

Washington, DC 20229. Comments submitted may be inspected at the

Regulations Branch, Office of Regulations and Rulings, U.S. Customs

Service, Franklin Court, 1099 14th Street, NW., Suite 4000, Washington,

DC.

FOR FURTHER INFORMATION CONTACT: David Cohen, Special Classification

and Marking Branch, Office of Regulations and Rulings (202-482-6980).

SUPPLEMENTARY INFORMATION:

Background

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304),

provides that, unless excepted, every article of foreign origin (or its

container) imported into the United States shall be marked in a

conspicuous place as legibly, indelibly, and permanently as the nature

of the article (or its container) will permit, in such a manner as to

indicate to the ultimate purchaser in the United States the English

name of the country of origin of the article. Failure to mark an

article in accordance with the requirements of 19 U.S.C. 1304 may

result in the levy of an additional duty of ten percent ad valorem.

Part 134, Customs Regulations (19 CFR Part 134), implements the country

of origin marking requirements and exceptions of 19 U.S.C. 1304. This

document concerns the correct country of origin marking for packages of

frozen imported produce pursuant to 19 U.S.C. 1304 and 19 CFR part 134.

Customs Ruling and Court Action

On May 9, 1988, Norcal/Crosetti Foods, Incorporated, and other

California packers of domestically-grown produce requested a ruling

from Customs concerning what constituted a

[[Page 38120]]

conspicuous place for country of origin marking on packages of frozen

produce, i.e., whether the marking should be located on the front or

some other panel of the package and in what type size and style it

should appear. The request asked Customs to determine whether packaged

frozen imported produce was considered marked in a conspicuous place if

the marking did not appear on the front panel of the package in

prominent lettering. Sample packages which were not marked on their

front panels were submitted with the ruling request. On November 21,

1988, Customs issued Headquarters Ruling Letter (HRL) 731830, and

stated that all of the samples that the domestic packers submitted

complied with the country of origin marking requirements. Customs found

that the country of origin marking on packages of frozen imported

produce was not required to appear on the front panel of the package,

be in lettering at least as prominent as the product description, and/

or appear in a color or typestyle vividly contrasting with the rest of

the front panel to be considered conspicuous.

The packers obtained judicial review of the Customs determination

in HRL 731830 by the Court of International Trade (CIT). Norcal/

Crosetti Foods, Inc. v. U.S. Customs Service, 15 CIT 60, 758 F.Supp.

729 (CIT 1991) (Norcal I). In Norcal I, the Court disagreed with the

ruling and held that frozen produce is not marked in a conspicuous

place unless it is marked on the front panel of the package.

Upon examination of the sample packages supplied to Customs, the

Court found that the only consistency in the country of origin marking

of frozen imported produce was the inconsistency of where manufacturers

chose to place the marking. The Court found that most often the marking

was lost among information denoted in various small typefaces which

appeared on the back or side panels of the package. The Court stated

that producers were reluctant to conspicuously display the source of

the food, and that the result of these inconsistencies was that

customers could not be assured of easily finding the country of origin

marking, even upon reasonable inspection of the package. The Court

stated that this was a situation at cross-purposes with Congress'

attempt to ensure that consumers know of the country of origin of

imported goods before they decide to purchase the particular product.

The court took judicial notice of the common method of displaying

the merchandise in shelved freezers or frozen food bins with the front

panel in view and the rear panel obscured. The Court found that frozen

vegetables were commonly marketed in long, low freezers with open tops,

or wall-mounted freezers with glass doors, and that access to frozen

produce is limited and sometimes awkward, given that the produce must

not defrost. The Court further found that packages are usually

displayed so that only the front panel is clearly visible. Further,

because the packages are frozen and cold to the touch, and because, at

least in upright freezers, the freezer door must be held open, the

Court found that customers are unable to scan the labels on frozen

produce as easily as those on dry goods or other produce that are not

frozen. All of these factors, according to the Court, prevent consumers

from having the opportunity to see the country of origin marking that

is secluded among the small print on the back of a package.

The Court found the analogy in the ruling to the placement of

nutritional information on packages unconvincing, because that

information was not required information at that time. In contrast, it

found a more persuasive analogy in the Food and Drug Administration

(FDA) requirement that packages disclose the weight of their contents

on the principal display panel. Such quantity of contents disclosure

must be a certain size and located on the front or most prominent panel

of the package.

The Court also observed that certain packages of frozen produce

listed the name and U.S. address of the manufacturer and failed to

indicate the country of origin in close proximity as required under the

Customs Regulations. Applying 19 CFR 134.46, the Court held that if the

words ``U.S.,'' or ``America,'' or a United States address appeared on

those labels, the article would have to be marked to indicate the

country of origin in lettering of at least a comparable size.

The Court concluded by finding that, although Customs had routinely

interpreted ``conspicuous'' through 19 CFR 134.41(b), Customs failed in

its issuance of HRL 731830 to follow the clear meaning of the statute

or the regulation. Section 134.41(b) of the Customs Regulations

provides, in part, that the country of origin marking should be easily

found by the ultimate purchaser and read without strain. For packages

of imported frozen produce, the Court found that the country of origin

marking requirements were not met by the present practice of indicating

the country of origin marking on the back or side panels.

The Court remanded the matter to Customs with directions to issue a

new ruling. Pursuant to the court's order in Norcal I, Customs issued

Treasury Decision (T.D.) 91-48 (56 FR 24115, May 28, 1991), which

required the country of origin marking for frozen produce to be placed

on the front panel of the package.

The government appealed the CIT's decision to the United States

Court of Appeals for the Federal Circuit (CAFC) on the ground that the

CIT lacked jurisdiction. Norcal/Crosetti Foods, Inc. v. U.S., (Appeal

No. 91-1295), 10 Fed.Cir. ____, 963 F.2d 356 (CAFC 1992) (Norcal II).

In Norcal II, the CAFC reversed the judgment of the CIT and remanded

the case with instructions to dismiss the complaint for lack of

jurisdiction; the Court held that since the packers had not exhausted

their administrative remedies, their claims were not properly before

the CIT. The CAFC indicated that a proper course would have been for

the packers to file a domestic interested party petition with Customs

under section 516 of the Tariff Act of 1930, as amended (19 U.S.C.

1516).

The Section 516 Petition and Agency Action (1993)

A Section 516 petition was initiated by letters dated January 13

and January 29, 1993, and filed with Customs pursuant to part 175,

Customs Regulations (19 CFR part 175). The petitioners were Norcal/

Crosetti Foods, Incorporated and Patterson Frozen Foods, Incorporated,

California packers of produce grown domestically. The International

Brotherhood of Teamsters, on behalf of its Local 912, also submitted a

petition by letter dated February 24, 1993, supporting the Norcal and

Patterson petition (hereinafter, the petitions are collectively

referred to as the Norcal petition). The Norcal petition asked Customs

to reconsider its position in HRL 731830, and to adopt the findings of

the CIT in Norcal I.

The petitioners contended that frozen imported produce is not

marked in accordance with the requirement of 19 U.S.C. 1304 that the

country of origin shall appear in a conspicuous place; under a correct

application of 19 U.S.C. 1304, the country of origin must appear on the

front panel of a package to be considered as marked in a conspicuous

place. These domestic producers argued further that Customs standards

for the size and prominence of such markings were not in conformity

with 19 U.S.C. 1304. Supporting materials for the petition included

samples of frozen produce packages. These samples were alleged to be

illustrative of labels that, for various reasons, were not in

compliance with the marking rules: e.g.,

[[Page 38121]]

missing markings, illegible markings, and markings that were not in a

``conspicuous place.'' The allegations closely mirrored the allegations

in the complaint [filed] and the CIT's findings in Norcal I.

Customs published a notice in the Federal Register on September 9,

1993 (58 FR 47413), advising the public of the petitioners' contentions

and soliciting public comments on the issues raised in the petition.

Also in this notice, Customs effectively suspended the effective date

of T.D. 91-48 by reinstating HRL 731830. Seventy-one comments were

submitted in response to the Norcal petition.

Approximately half of the public comments expressed support for the

Norcal petition to require the country of origin marking of frozen

imported produce to appear on the front panel of the packaging. These

commenters presented data and arguments concerning the nature of frozen

produce and the manner of its storage and presentation for sale,

contending mainly that the inherent coldness of frozen produce makes

the packaging more cumbersome to handle than other food products. These

commenters accordingly concluded that the ultimate purchaser is likely

to examine the produce in haste, and is not likely to see country of

origin marking which appears on the back or side panel of the

packaging.

Some respondents also expressed concern that frozen produce

packaging tends to accumulate frost while being stored in

refrigerators, such that the country of origin marking often becomes

obscured in a way that is unique to frozen produce. In view of these

factors, it was argued, country of origin marking which does not appear

on the front of these frozen produce packages cannot be considered in a

conspicuous place, and cannot meet the standard stated at 19 CFR

134.41(b) that marking must be easily found and read without strain.

Commenters opposed to the Norcal petition tended to dismiss these

contentions as unfounded. These commenters claimed that there was no

reason to establish a different marking location for frozen produce

packages as opposed to other imported articles. They did not see the

temperature of the package as a fundamental obstacle to handling a

frozen produce package and turning it over to find country of origin

marking. They assert that even the information appearing on the front

panel probably cannot be read without picking up the package.

The petitioners, as well as several subsequent commenters,

submitted for consideration samples of frozen produce packaging as

evidence of common marking practices which were said to be short of the

statutory standards for permanence, legibility, and conspicuousness.

All the markings shown on the sample packages appear on the back panel.

One major category of sample packages consisted of rectangular packages

on which all the printed information, except the country of origin

marking, is pre-printed. The country of origin instead is evidently

stamped after the package is filled with frozen produce. The quality of

this marking tends to be poor, and for the most part does not satisfy

existing standards for permanence and legibility. The location is quite

inconsistent between various packages in the same batch. Sometimes the

lettering is stamped over pre-printed information; sometimes it is

sideways or crooked; and sometimes it is smudged. These stamped-on

markings are insufficient under the current statutory criteria of 19

U.S.C. 1304, particularly as regards legibility, indelibility and

permanence.

Commenters opposed to the petition believe that these defects

should be remedied by enforcement under the regulations of current

standards governing legibility, permanence, indelibility and

conspicuous placement, and that there is no compelling evidence that

the current regulations are inadequate.

Other sample packages submitted by the petitioners and other

commenters, while marked permanently and legibly under current

standards (on the back panel), showed geographic markings or names

which could create confusion or be misleading as to the country of

origin of the frozen produce. Some such names or markings were part of

the distributors' trademarks, while others used generic names for

vegetable products in potentially confusing ways. The petitioners and

other commenters argue that the remedy for these potentially confusing

or misleading markings is country of origin marking which appears

uniformly on the front panel of the package. They believe the ultimate

purchaser is less likely to inspect frozen produce on its back panel to

ascertain its country of origin when the front panel of the packaging

indicates in print a reference to a locale in a country other than the

country of origin.

Commenters opposed to the petition do not believe that ultimate

purchasers are deceived by such references. One opponent indicated that

while in some cases marking on the front panel of the package may be

needed, it is not generally necessary if the current regulations were

enforced in all cases. One of the sample packages already has been the

subject of corrective action and a ruling by Customs. See, HRL 735085

(June 4, 1993) (Mixed frozen vegetables sold as ``American Mixtures''

required to have country of origin marking on front of package to be

considered conspicuously marked; Customs indicated at that time,

however, that marking on the back could be permissible in the absence

of potentially confusing words or marks).

In T.D. 94-5 (58 FR 68743, December 29, 1993), Customs issued a

final interpretive ruling based on the comments described above which

were received in response to the September 9, 1993, Federal Register

notice. T.D. 94-5 stated that back panel marking was insufficient and

front panel marking of country of origin was required in a specified

type size and style designed to match the net weight or quantity

marking of the product under the Food Labeling Regulations (21 CFR

101.105). In T.D. 94-5, Customs modified T.D. 91-48 by requiring that

conspicuous marking within the meaning of T.D. 91-48, shall be limited

to marking which complies with the additional specifications for type

size and style set forth in T.D. 94-5. The effective date initially

established for the decision in T.D. 94-5 was May 8, 1994, in order to

allow importers time to modify their packaging. On March 29, 1994,

however, Customs issued two Federal Register documents: One (59 FR

14458) suspending the compliance date of May 8, 1994, for parties

adversely affected by the country of origin marking requirements

specified in T.D. 94-5, and the other (59 FR 14579) giving notice of

its intention to adopt a new compliance date of January 1, 1995, and

soliciting comments on both the proposed compliance date and on the

specifications regarding type size and style.

In response to T.D. 94-5, however, an action was filed with the

Court of International Trade on behalf of American Frozen Food

Institute, Incorporated, and National Food Processors Association,

which challenged the Customs decision. In American Frozen Food

Institute, Inc.; et al. v. The United States, (Slip Op. 94-97), 18 CIT

______, 855 F.Supp. 388 (CIT 1994), the CIT ruled that because Customs

had chosen to promulgate front panel marking in combination with other

requirements needing APA (Administrative Procedure Act, 5 U.S.C. 553)

rulemaking procedures, the entirety of T.D. 94-5 could not stand. The

Court accepted the government's position that to the extent the front

panel marking portion of T.D. 94-5 was

[[Page 38122]]

separable from the other portions of the ruling it constituted an

interpretive ruling. However, the court found that the type size and

style portion of the ruling functioned as a legislative ruling, as

Customs had selected a narrow range of sizes and styles from a broad

spectrum of type sizes and styles that could be considered conspicuous.

Accordingly, the Court found that the selection of type size and style

requirements imposed additional requirements which were not promulgated

as a regulation in accordance with APA rulemaking procedures.

The court further concluded that because the full rulemaking

process had not been followed, it would not rule on whether T.D. 94-5

was acceptable substantively. Since the court declared T.D. 94-5, in

its entirety, null and void, there is no decision on the 1993 petitions

of the domestic interested parties. On September 8, 1995, Customs

received notice from Dean Foods Vegetable Company (Dean Foods) that it

had purchased the assets of Norcal/ Crosetti Foods, Incorporated. Dean

Foods stated that, as Norcal/ Crosetti's successor in interest, it no

longer supported the petition and it withdrew the comments submitted by

Norcal/ Crosetti Foods in response to Customs solicitation of comments.

However, the petitions of Patterson Frozen Foods, Incorporated, and the

International Brotherhood of Teamsters, on behalf of its Local 912, are

still pending.

Proposed Rulemaking

In view of the foregoing background, Customs is exercising its

authority under 19 U.S.C. 1304(a)(1) to prescribe by regulation

reasonable methods of marking and a conspicuous place on the article

(or container) where the marking must appear on packages of frozen

produce. As the foregoing history of the issue illustrates, the

question of marking of frozen imported produce has been embroiled in

eight years of procedural disputes and litigation. In an attempt to

disentangle the issue from this history, to provide complete regulatory

due process, and to facilitate a fresh examination of the substantive

issues involved, Customs chose to publish an advance notice of proposed

rulemaking (ANPRM). 60 FR 6464 (1995). Customs published the ANPRM on

February 2, 1995, and solicited comments with respect to the marking

requirements for frozen imported produce. The comments received are

summarized below.

In addition, Customs has considered and drawn upon evidence and

opinions in the record of this matter, including public comments

received since the first ruling request and the various court opinions.

These have been considered for whatever persuasive authority they may

have regardless of whether they were submitted in response to the ANPRM

or, in the case of judicial opinions, are legally binding.

Summary of Comments Received in Response to the ANPRM.

A total of fifty comments were submitted in response to the

February 2, 1995, ANPRM. The commenters included a number of trade

organizations, companies in the business of manufacturing, processing,

and distributing frozen produce, a non-profit organization, the

Canadian government, members and officials of the International

Brotherhood of Teamsters; the California Department of Justice, and a

U.S. manufacturer of semiconductors, personal computers, and

communications products. In addition to general comments, Customs

invited specific comments regarding several issues, many of which have

been incorporated into this document.

In response to the issues that Customs raised in the ANPRM as to

whether there are current abuses in the country of origin marking of

imported packages of frozen produce, the commenters in favor of front

panel marking claim that many importers, processors, and distributors

of frozen produce neglect to mark packages of frozen imported produce

at all. In support of this position, they submitted several samples of

what they believe to be non-complying labels. Some commenters also

indicated that the marking was not conspicuous because the marking was

in an inconspicuous place, the type size was too small, or the ink was

smeared. Commenters opposed to a proposed rulemaking contend that they

are unaware of any abuses with respect to the country of origin marking

of frozen produce and believe that there is no need to provide specific

marking requirements for frozen produce. They stated that any problems

with the country of origin marking of frozen produce can be addressed

through a case-by-case basis rather than additional rulemaking.

On the other hand, some of the commenters believe that the way

frozen produce is displayed in the supermarket is sufficient reason to

require special marking rules. The commenters in favor of front panel

marking believe that because of the difference between the way canned

produce and frozen produce are displayed in the supermarket, canned

produce is easier for the consumer to pick up and inspect than frozen

produce. Further, they contend that canned produce is displayed on a

shelf at room temperature which makes it easy for the consumer to pick

up and inspect the can. The cold conditions under which frozen produce

must be maintained in the retail store make it less likely that

consumers will examine the back or side panels of frozen produce

packages prior to purchase. Moreover, these commenters submit that the

consumer has a greater motivation to examine the back label of canned

vegetables than of frozen produce. They maintain that the majority of

frozen vegetables sold at retail are plain, blanched vegetables,

without additives of any kind.

These commenters further state that the ingredients of frozen

produce are generally named and pictured on the front panel of each

package, there is almost never any added salt or sugar, and the

consumer typically knows about the high nutritional content of

vegetables and their ease of preparation. As a result, these commenters

contend that the consumer typically has no particular need to examine

the ingredients list, the nutritional content or the cooking

instructions as part of the process involved in making a decision of

whether or not to purchase the frozen produce item. Canned produce,

they say, by contrast with frozen produce, usually contains ingredients

beyond the pure agricultural product; therefore, the buyer of canned

produce has more incentive to examine the contents, nutritional

statement and cooking instructions than the buyer of frozen produce.

Commenters opposed to the requirement for front panel country of

origin marking submit that there is no reason for frozen produce to be

treated any differently than any other packaged food product. They

argue that Customs has never imposed a general requirement that

packaged goods bear country of origin marking on any specific panel or

in any specific type size or type style. They submit that it would be

arbitrary and capricious for Customs to impose on frozen produce a

different and more burdensome labeling requirement than that which is

applied to all other food products and to all other packaged products

that are subject to the marking requirements.

These respondents dismiss the view that packages of frozen produce

should be the subject of special regulatory attention because they are

displayed in retail freezers and are ``cold to the touch.'' They

maintain that there is no evidence to show that a frozen produce

package is so cold as to prevent the purchaser from removing it from

the

[[Page 38123]]

freezer display, examining it, and carrying it to the check-out

counter. Moreover, they state that consumers are accustomed to picking

up frozen food packages to read the nutritional information contained

on the rear and side panel of the product. They point out that in

enacting its current regulations, the FDA recognizes that the

information panel which can be located on the back or side panel of a

package is a conspicuous location for ingredient and nutrition

information. Thus, these commenters believe that frozen produce should

not be treated any differently for marking purposes than any other

packaged food product.

In response to the issue of whether Customs should prescribe, by

regulation, certain type size and style specifications for the country

of origin marking of frozen produce, commenters who were in favor of

this proposed measure believe that the type size and style should vary

depending upon the size of the package. One commenter suggested that

the marking should be the same size and style as the net weight

declaration. Another commenter suggested that Customs follow the

specifications set forth in the Federal Food Labeling Regulations (21

CFR 101.1) for information appearing on the principal display panel for

the country of origin marking of packages of frozen produce.

The commenters opposed to the imposition of certain type size and

style specifications maintained that additional regulations that would

increase the prominence of country of origin markings would impose

undue burdens on importers and would almost certainly be inconsistent

with the government's interest in encouraging the consumption of

vegetables and discouraging false health concerns.

Moreover, the commenters opposed to requiring certain type size and

style specifications for country of origin marking claim that there is

a vast difference in the amount of space that would be occupied on a

package, depending upon whether one or ten countries are listed. They

state that the question posed as to whether type size should vary with

the size of the package emphasizes the impracticality of imposing

industry-wide blanket regulations. These commenters believe that

determinations of conspicuousness can and should be made on a case-by-

case basis.

Customs Analysis of the Regulatory Options

With regard to a basic issue raised in the ANPRM, that is, whether

rulemaking is needed, Customs determined that not to proceed with a

marking proposal would leave the country of origin marking situation no

better than it was prior to Norcal I. Manufacturers of frozen produce

would still be free to choose marking options that could make it

difficult for the average consumer to learn the origin of the produce

prior to purchase, contrary to clear Congressional intent in the law.

The weight of information and opinion submitted in response to the

ANPRM did not furnish any justification for denial of the Section 516

petition and termination of the rulemaking process at this stage.

In developing this proposed regulation, Customs weighed a number of

alternatives, one of which, front panel marking, was selected as the

most consistent with the statutory requirement for marking frozen

produce in a conspicuous place. Customs believes that a front panel

requirement would prevent many of the regulatory abuses brought to the

attention of Customs and the CIT and illustrated by the label samples

submitted to Customs.

Customs has concluded that, while it can continue on a case-by-case

basis to correct the types of marking problems identified in the record

of this issue, and will do so as necessary, nonetheless a more

comprehensive solution is needed to assure proper marking of frozen

produce for the reasons discussed below. As a result, Customs is

proposing a blanket requirement that country of origin marking appear

on the front panel of the package of frozen imported produce. This

should afford a definitive solution to a problem which has been

demonstrated to be extensive.

Much of the frozen imported produce sold in the United States is

packaged after importation. As such, the marking of the retail packages

is not subject to physical supervision by Customs, but is performed

under importers' certifications for the marking of repacked articles

tendered in accordance with 19 CFR 134.25. The administrative burden of

enforcing the marking of such repacked articles on a case-by-case basis

is an additional reason for establishing uniform specifications for the

marking of frozen produce. Such specifications should reduce ambiguity

and interpretive questions, thus facilitating broad-based compliance by

importers, packagers, and distributors.

Customs has concluded that the nature of frozen produce and its

typical retail presentation makes marking on the back or side panel

insufficient; that there are numerous examples of insufficient and

potentially misleading marking practices based on current marking which

is typically on the back panel; that marking appearing on the back

panels of frozen produce packages is not easily found and is frequently

obscured by competing text or graphics; and that consequently a uniform

standard for marking should be prescribed for frozen produce packages

in order to assure proper marking under 19 U.S.C. 1304.

In addition, in Customs judgment, a front panel marking requirement

actually represents economy in government regulatory activity in

contrast to the available alternatives. By its very nature, the front

panel is a ``conspicuous place''. Consequently Customs, in the proposed

regulation, has been able to minimize government-imposed requirements

and leave the details of type size and label graphics to the

manufacturer while reserving the right to proscribe abuses. Such

regulatory simplicity is possible because there is little incentive or

opportunity for the manufacturer to clutter up the front panel in a way

that would obscure the marking and, in fact, there is a strong

disincentive to do so.

In contrast, by its very nature, the back panel is not a

``conspicuous place''; it affords many opportunities to bury the origin

marking in other information or graphic devices. In order to interpret

back panel marking as marking in a ``conspicuous place'' within the

meaning of the statute, Customs would have an obligation to inject

itself into the micromanagement of label graphics in order to

circumscribe the current abuses. (NOTE: The ``back panel'' routinely

has been referred to in this discussion because it is the location

typically chosen by the manufacturer for marking under current

practice. While the side panel may contain, in some instances, less

competing information and graphics than the back panel, Customs

concludes that the side panel is even less likely than the back panel

to receive careful scrutiny by the consumer except after purchase when

it may be necessary to refer to it to find other information, such as

cooking time.)

Regulating country of origin marking on the back, or information,

panel thus could involve a fairly detailed set of rules on type sizes

and styles, background colors, margins, headers, etc. It could even

involve a complex exercise in regulating label graphics comparable to

the ``Nutrition Facts'' box prescribed by the Food and Drug

Administration. While a number of commenters have objected to front

panel marking, we have concluded that this alternative is less

burdensome to industry than the Government injecting

[[Page 38124]]

itself into the minutiae of label graphics on the back or information

panel. Absent such Government controls on marking on the back panel, we

believe that the current situation where the marking tends to disappear

in other text would not be remedied.

In this regard, Customs did carefully consider whether one or more

regulatory options that would regulate marking of country of origin on

other than the front panel would constitute compliance with the statute

as well as a workable alternative to front panel marking. In an effort

to elicit suggestions for such an alternative, the following question

was included in the ANPRM:

(5) Whether a specified location on another panel (e.g. the back

panel) where the country of origin marking is demarcated by, for

example, a box, a header, bold print, margins, a contrasting

background, or other graphic devices, would constitute a

``conspicuous place'' for purposes of the marking statute.

This question was intended in part to explore the potential for a

compromise solution that would comply with the statute, correct

existing marking problems, and be acceptable to the interested parties.

Customs was interested in whether, for example, a ``conspicuous place''

on the back panel could be constructed by regulatory fiat in a manner

analogous to the FDA-mandated ``Nutrition Facts'' box. Such a solution

might eventuate from government design, industry-government agreement,

or negotiated rulemaking in which Customs mediated between and among

interested parties. However, no commenter came forward with such a

solution. Also, while such an alternative would be a compromise

position, it would have the disadvantage of involving Customs in

developing a potentially elaborate set of guidelines for back panel

marking, suitable for different styles and sizes of produce packages,

thus injecting the government more deeply into labeling decisions.

Consideration was also given to providing the manufacturer with a

choice: (1) Provide a simple and legible marking on the front panel or

(2) submit to a more detailed set of guidelines for marking on the back

panel as in the foregoing option. While this option would offer the

regulated industry some flexibility, it was rejected in part because of

its potential for confusing the ultimate purchaser who would not have a

consistent place on the package to look for country of origin marking.

In sum, based on the results of the ANPRM and other information

available, Customs concludes that the back panel (as well as the side

panel), with its manifold distractions and without qualifications or

graphic highlighting, is not a ``conspicuous place''. In contrast, the

front panel, with its limited amount of clutter and its ready

visibility, does constitute a conspicuous place. The front panel thus

meets the statutory test of marking in a conspicuous place without

elaborate conditions or regulations specifying, e.g., type size or

other details of the marking. Country of origin marking on the front

panel is presumptively adequate so long as it is permanent, indelible

and legible and the ultimate purchaser can see it without strain.

In the interest of an open rulemaking process, Customs has the

following comments on a number of key issues highlighted by commenters

opposed to front panel marking:

Importance and Prominence of Origin Marking Relative to the Nutritional

Information

Commenters opposed to a front panel marking requirement argued that

country of origin information is not as ``important'' as the nutrition

and health information. Yet the latter, under current government

regulations, may be relegated to the back panel. In the opinion of such

commenters, if the back panel is conspicuous enough for the concededly

important nutritional information, it ought to be sufficiently

conspicuous for the origin marking.

Such a comparison, in Customs' view, contributes little to the

analysis of whether front panel marking of produce is necessary to

comply with the law and to produce the desired consumer recognition. A

number of items on the label, even discretionary information provided

by the manufacturer such as preparation instructions and serving

suggestions, may be considered ``important''.

However, the rationale behind the different mandatory label

elements such as net weight, brand name, product identity, nutrition

facts, and country of origin are different. They do not necessarily

lend themselves to comparative valuation as to their relative

``importance'' and must be considered on their individual merits. The

issue in each case is what placement enables the particular information

to be effectively communicated to the consumer in a manner that carries

out the intended statutory or regulatory purpose.

1. The ``Nutrition Facts'' Box, Without Regard to Location, Is

Intrinsically More Visible Than Current Origin Marking

The ``Nutrition Facts'' box, mandated by the Food and Drug

Administration after extensive rulemaking procedures, is now one of the

most visible things on any panel of a package of food. Its distinctive

graphics, required by regulation, are as instantly recognizable to the

American consumer today as major corporate logos and trademarks. It

contains its own eye-catching headline ``Nutrition Facts'' and is

graphically subdivided by three distinctive bold lines. It must be

large enough to accommodate a significant amount of required

information. Hence, the high visibility or ``conspicuousness'' of the

Nutrition Facts Box derives from its relative size and its unique

design characteristics, not from the panel on which it is located. The

term ``conspicuous'' in the marking statute, however, refers only to

the location of the marking.

In contrast to the nutritional information, under current industry

practice, the country of origin marking may consist of one or a few

words such as ``Mexico'' or ``Product of Mexico'' placed without any

attention-getting graphics in a place on the back panel where it is not

particularly likely to be noticed. An example is for the country of

origin to follow or to be merged with other geographical information,

such as ``PRODUCT FROM THE UNITED STATES AND MEXICO. PACKAGED IN THE

UNITED STATES''. Also, in the words of one of the petitioners in the

Section 516 proceeding, the origin information is frequently submerged

on the back panel in a ``sea of cooking instructions.'' The CIT

observed in Norcal I that most often the marking is lost among the

various small typeface information contained on the back or side panel

of the package. In sum, Customs is not persuaded by the comparison of

the relatively obscure placements accorded to country of origin marks

in current practice to the very prominent government-mandated

presentation of the nutritional data.

2. The ``Nutrition Facts'' Box May Not Lead the Consumer's Attention to

the Origin Marking

While the availability of nutritional data may provide a consumer

with a reason to consult the back or information panel of the package,

this may not draw his attention to the origin marking. As indicated

above, the ``Nutrition Facts'' box tends to dominate the panel on which

it appears and the origin marking does not appear within the box or

necessarily even in proximity to it. Furthermore, the origin marking

may be relegated by design to an inconspicuous spot on the label.

There also is a fundamental difference between the type of

information imparted by the ``Nutrition Facts'' box

[[Page 38125]]

and that imparted by the country of origin marking. The former

identifies a number of characteristics that the product possesses

which, in fact, it may share generically with the same type of product

from another manufacturer and/or with a different origin. As one

commenter suggested, consumers tend to purchase frozen vegetables as a

``commodity''. For common vegetables, the nutritional value of this

commodity is often a known quantity to the experienced, health-

conscious consumer. Furthermore, nutritional characteristics of frozen

produce will not be likely to vary greatly from purchase to purchase,

particularly if the consumer chooses brands consistently. This may

diminish the attention paid by the consumer to the nutritional

information once he is familiar with the produce and brand.

In this regard, it is believed that consumers reserve their closest

scrutiny of the nutritional information for ``suspect foods'', e.g.,

processed foods, foods known or suspected of containing high levels of

fat, sodium, sugar, or additives. In contrast, frozen fruits and

vegetables tend to be the ``good guys'' of the supermarket which

require little scrutiny. In fact, in response to a petition filed by

the American Frozen Food Institute, the Food and Drug Administration

recently has published a notice of proposed rulemaking that would

permit the use of the term ``healthy'' to describe frozen vegetables

based on arguments submitted by the industry that the nutrient profile

for frozen vegetables is essentially the same as that for fresh

vegetables. 61 FR 534 (February 12, 1996). The foregoing considerations

may result in the fine print on the information panel of frozen produce

packages, including both nutritional information and origin marking,

receiving less attention while the consumer is in the store than in the

case of other products, including canned produce.

3. Origin Marking Relates to the Identity of the Product and Is

Exclusively ``Point of Sale'' Information

Country of origin marking, in contrast to nutritional information,

furnishes information that is specific to the product in the individual

package that the consumer is examining. In fact, the origin information

can be considered part of the ``identity'' of the product. Other

information that describes, defines, or illustrates the identity of the

product, such as the brand name or the vignette; the product name,

e.g., cauliflower; and the net weight are on the front panel where they

can be instantly grasped by the consumer in making a purchasing

decision. All of this information is ``point of sale'' information. It

has little or no value (except perhaps in promoting brand loyalty) once

the consumer leaves the store. In contrast, nutritional information has

continuing educational value and may be consulted by the consumer at

home, particularly during food preparation (e.g., serving size).

Since country of origin marking is point of sale information, if

the consumer does not notice the information until he or she arrives at

home, it then is too late to assist in the purchasing decision. The

consumer cannot even adjust purchasing intentions based on experience

for when he or she returns to the store for the next purchase. By then,

the facts of country of origin may have shifted again even if the

consumer chooses the same product with the same brand name.

The foregoing factors, in conjunction with the factors cited by the

CIT in Norcal I, relating to the environment in the frozen food aisle,

may cause the country of origin marking of frozen imported produce not

to be noticed prior to purchase. This is precisely the type of outcome

that the section 1304 requirement that the marking be in a

``conspicuous place'' is designed to prevent.

Health and Safety Implications of Front Panel Marking

A number of the commenters who opposed further rulemaking expressed

concerns that requiring more conspicuous labeling of produce would

arouse false concerns about health and safety on the part of consumers.

In their view, this could lead to decreased purchases and consumption

of frozen produce with resulting negative impacts on the U.S. economy

and even on the health of consumers.

No information has been submitted to us and none suggests itself to

us that would validate this concern. Customs believes that it is

unlikely that a consumer will perceive an implied health warning in

label information that is in no way identified as a warning. Consumers

are presumably familiar with the health warning labels on tobacco

products and alcoholic beverages, which are clearly stated as such, as

well as poison warnings. Further, it is unlikely that the consumer will

conclude that information such as country of origin that does not

appear in the ``Nutrition Facts'' box is intended to convey a health

and safety advisory. We believe it would take a highly explicit warning

to overcome the consumer's belief in the presumptive healthfulness of

frozen vegetables and fruits.

Moreover, we believe that the economic motivation that lies behind

the marking statute is readily apparent to the informed consumer. Major

trade developments and bilateral trade disputes and sanctions have

received extensive publicity in the media and in public campaigns by

trade associations, labor unions and others urging consumers to ``Buy

American''. Thus, we see little likelihood that the consumer will

misunderstand the significance of the country of origin marking. While

the consumer, once informed of the country of origin, may choose a

domestic source product over a foreign source product or vice versa, we

do not see evidence that overall consumption of frozen produce is

likely to be affected by labeling rules.

Impact of Front Panel Marking on Cost and Price

Finally, a number of commenters argued that more detailed labeling

requirements would be costly to the manufacturers and that these costs

would be passed on to the consumer. This would particularly be true,

they state, if the product were sourced from many countries and if the

sources were constantly shifting. Some of these broadly stated

arguments seem aimed at the marking requirement itself, a statutory

mandate that Customs has no choice but to enforce. Implicit in the

marking statute is the effort and expense of adding information to a

label that might not otherwise be incurred. There is no exemption in

the statute, or in the Customs Regulations, for products sourced in a

number of countries.

On the other hand, it may be noted that frozen produce labels

already frequently are characterized by colorful, sophisticated, and

detailed graphics. These labels may include an array of totally

discretionary and promotional information offered by the manufacturer

such as recipes and advertisements for other products. Realistically

evaluating the proposed rule in this context, we have not received

convincing evidence that placing simple country of origin information

in a different or additional place on the label, if required after a

reasonable period of time for industry to adjust, will adversely impact

profit margins, be economically injurious to the consumer, or have an

inflationary impact.

Further, as a practical matter, we have not received to date

empirical evidence that sourcing from more than two or three countries

is widespread as an industry practice. In fact, we are not aware that

it is likely that more than a single source is typically involved in

the

[[Page 38126]]

case of a package containing a single product (e.g., broccoli or

cauliflower).

Other Issues

1. Type Size and Style Requirements

T.D. 94-5 contained fairly detailed type size requirements

applicable to its front panel marking requirement. Three different type

sizes were specified for different size packages of produce. However,

this proposed rule does not specify type sizes and styles, background

colors or other graphic stipulations applicable to front panel marking.

Customs believes that this is consistent with regulatory economy and

minimum regulatory burden to the industry. Moreover, Customs has

concluded that the front panel marking requirement, subject to the

other statutory criteria of legibility, indelibility, and permanence is

sufficient to provide an adequate opportunity for the reasonably

attentive consumer to notice the country of origin information at point

of sale. Customs reserves its right to take enforcement action in the

event that label graphics on a package obscure or destroy the requisite

legibility of the marking.

2. Overstamped Markings and Other Illegible Markings

The plaintiffs in Norcal I and various commenters have alleged that

packages of frozen produce contained stamped markings that are smeared

or otherwise illegible. In a number of cases, packages are apparently

ink stamped with the name of the country of origin after the packages

have been filled with product. Frequently the result is a stamp that is

smeared or all but wiped off due to condensation on the package. In

other cases, the stamping is upside down vis-a-vis the print on the

panel where the stamp appears, is turned sideways, or is placed over

other text or graphics. All of these practices violate statutory

standards.

No change in the marking requirements is proposed to address these

problems. Customs believes that current regulations and enforcement

powers are adequate. The importer is responsible for compliance with

the marking statute. If ink markings, stick-on labels and other

practices that importers use to avoid the cost or rigidity of

preprinted labels do not hold up until the product reaches the ultimate

consumer at the point of sale, then Customs reserves the right to take

appropriate action, as prescribed by statute and regulations, including

detention of the merchandise and imposition of marking duties.

3. Implementation Period

Suggestions received in response to the ANPRM regarding the length

of the period from the publication date of a final rule to the required

implementation date ranged from 6 to 12 months from commenters favoring

tightened marking rules to 17 months or more from commenters opposed to

a new rulemaking on marking of country of origin. Common sense as well

as evidence in the record of this matter indicates to Customs that the

incremental cost of relabeling to comply with new marking rules tends

to have dropped dramatically by 18 months after the promulgation of new

rules. Thus, Customs is proposing an 18-month implementation period to

allow for current stock of labels to be depleted prior to the effective

date of any final rule.

4. Consumer Surveys

Information submitted by commenters in response to the question in

the ANPRM regarding determination of consumer behavior through surveys

was divided and not conclusive. In general, there was opposition,

particularly by commenters opposed to rulemaking, to the government

conducting surveys at taxpayers' expense. In fact, Customs has

conducted no survey and does not contemplate conducting a survey.

Commenters basing opinions on existing surveys reached different

conclusions. Those favoring rulemaking argued that consumers were

interested in country of origin information and tended to modify their

behavior if such information were available. Some of the data relied on

by these commenters concerned products other than produce, e.g.,

apparel. Opponents of rulemaking argued, among other things, that

consumers had little interest in country of origin information. While

some consumers may value country of origin information as enabling them

to act on preferences they may have regarding imported versus domestic-

source products, other consumers may be relatively indifferent to the

information. In either event, the marking statute is not designed

solely for the individual benefit of the consumer, but serves a broader

purpose.

Opportunity for Public Comment

As the foregoing illustrates, several issues with respect to the

rulemaking procedure to promulgate country of origin marking

regulations for frozen imported produce remain and public comments are

once again being solicited prior to the issuance of a final rule.

Suggestions received in response to the ANPRM on the length of the

comment period for an NPRM ranged from 60 days to 120 days. Customs is

herein providing its customary 60-day period. Since no commenter

requested time in which to conduct a consumer survey, Customs believes

the 60-day period is adequate, particularly in view of the extensive

opportunity to comment already afforded, and it is not expected that

this period will be extended. In addition to comments received on this

proposal, all relevant material previously submitted will be taken into

account in deciding on a final rule.

Pending a decision on whether a final rule will be promulgated,

Customs continues to deliberate on what requirements are proper in the

case of multiple source countries and whether Customs should set forth

a de minimis level of foreign content that would trigger the country of

origin marking requirements. These issues are not within the scope of

this proposed rulemaking. Customs will consider the possible need for

rulemaking on these issues in the future.

Since this administrative rulemaking process affects the decision

to be made on the pending section 516 petition, the Customs Service has

decided to delay issuance of a final decision on the section 516

petition until a final determination regarding the proposed regulations

concerning the country of origin marking of packages of frozen produce

contained in this document is made.

Discussion of Proposed Amendment

Customs proposes to amend part 134 of the Customs Regulations (19

CFR part 134) by adding a new paragraph (f) to Sec. 134.43 to implement

the country of origin marking requirements for packages of frozen

imported produce. Section 134.43 sets forth the methods of marking for

specific articles, such as watches, clocks, timing apparatus, Native-

American-style jewelry, and Native American-style arts and crafts.

Proposed paragraph (f) will contain two subparagraphs: Paragraph (1)

will define frozen produce which is subject to the marking requirement,

and paragraph (2) will denote the method of marking that is deemed

acceptable.

Proposed Effective Date

Customs recognizes that manufacturers, distributors, and packers of

frozen imported produce will need to consider revisions in their

current packaging which may be needed to comply with these proposed

regulations. Thus, in order to minimize the impact of these new

requirements, it is also proposed that the regulations, if

[[Page 38127]]

adopted, not be effective until eighteen months from the date of the

Federal Register Notice of Final Rulemaking.

Comments

While Customs received a request for a public hearing on the issues

involved in this rulemaking from one commenter, the great majority of

the commenters did not favor a hearing. Under these circumstances,

Customs does not believe that a hearing would significantly enhance the

process of public participation in the rulemaking and does not plan to

hold a hearing. However, before adopting this proposed regulation as a

final rule, consideration will be given to any written comments that

are timely submitted in connection with this notice. Comments are

requested on both the substance of these proposals and the proposed

effective date, if the proposals are adopted. Members of the public

submitting comments based on current labeling practices are requested,

where possible, to submit sample labels illustrating the alleged

practices. The submission of duplicate sets of labels will expedite

evaluation of the comments and will be appreciated by the Customs

Service.

Comments submitted will be available for public inspection in

accordance with the Freedom of Information Act (5 U.S.C. 552),

Sec. 1.4, Treasury Regulations (31 CFR 1.4), and Sec. 103.11(b),

Customs Regulations (19 CFR 103.11(b)), on regular business days

between the hours of 9 a.m. and 4:30 p.m. at the Regulations Branch,

Office of Regulations and Rulings, U.S. Customs Service, 1099 14th

Street, NW., Suite 4000, Washington, DC.

Inapplicability of the Regulatory Flexibility Act, and Executive Order

12866

For the reasons set forth in the preamble, pursuant to the

provisions of the Regulatory Flexibility Act (5 U.S.C. 601, et seq.),

it is certified that the amendment, if adopted, will not have a

significant economic impact on a substantial number of small entities.

Accordingly, it is not subject to the regulatory analysis or other

requirements of 5 U.S.C. 603 and 604. Further, this proposed amendment

does not meet the criteria for a ``significant regulatory action'' as

specified in E.O. 12866.

List of Subjects in 19 CFR Part 134

Country of origin, Customs duties and inspection, Imports,

Labeling, Marking, Packaging and containers.

Proposed Amendments

It is proposed to amend part 134, Customs Regulations (19 CFR part

134), as set forth below:

PART 134--COUNTRY OF ORIGIN MARKING

1. The authority citation for part 134 continues to read as

follows:

Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 20,

Harmonized Tariff Schedule of the United States), 1304, 1624.

2. In Sec. 134.43, it is proposed to add a new paragraph (f) to

read as follows:

Sec. 134.43 Methods of marking specific articles.

* * * * *

(f) Frozen Produce--(1) Definition. Frozen produce means frozen

vegetables or mixtures of frozen vegetables provided for in Chapter 7,

Harmonized Tariff Schedule of the United States (HTSUS), or frozen

fruits or mixtures of frozen fruits provided for in Chapter 8, HTSUS.

(2) Method of Marking. (i) Unless otherwise excepted pursuant to 19

U.S.C. 1304(a)(3) and subpart D of this part, frozen produce must be

marked with the country of origin of the produce on the front panel of

its package for retail sale. The front panel is the part of a package

that is most likely to be displayed, presented, shown, or examined by

the ultimate purchaser under customary conditions of display for retail

sale.

(ii) The country of origin marking on the frozen produce required

by paragraph (f)(2)(i) of this section must appear in permanent,

indelible and legible print or type so that the consumer can easily

read it without strain. Condensed or compressed typefaces or

arrangements shall not be used.

Approved: July 9, 1996.

Michael H. Lane,

Acting Commissioner of Customs.

James E. Johnson,

Assistant Secretary of the Treasury (enforcement).

[FR Doc. 96-18544 Filed 7-22-96; 8:45 am]

BILLING CODE 4820-02-P