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: Proposed rule and request for comments.

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SUMMARY: The Federal Trade Commission (``Commission'') proposes to

amend its Appliance Labeling Rule (``the Rule''), 16 CFR Part 305

(1995), to permit the placement of energy use labels required by the

Canadian and Mexican governments in a local ``directly adjoining'' the

Rule's required ``EnergyGuide'' label. Currently, the Rule prohibits

the affixation of non-required information ``on or directly adjoining''

the EnergyGuide. The relaxation of this prohibition would 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 would result in considerable savings for the appliance

manufacturing industry. The Commission seeks written data, views, and

arguments concerning this proposal.

DATES: Written comments must be submitted on or before April 8, 1996.

ADDRESSES: Written comments should be submitted to the Office of the

Secretary, Federal Trade Commission, Room 159, Washington, D.C. 20580,

202-326-2506, and should be submitted, when feasible and not

burdensome, in five copies. Envelops and comments should be marked:

``Appliance Labeling Rule comment.''

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

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

3035).

SUPPLEMENTARY INFORMATION: In a letter to the Commission's staff, the

Whirlpool Corporation (``Whirlpool'') requested permission to use hang

tag EnergyGuide labels that have the corresponding ``EnerGuide''

appliance energy use label required by Canada printed on the reverse

side. Whirlpool also asked to use a ``same side'' approach, which a

Whirlpool representative clarified as meaning a single stick-on or hang

tag label consisting of the Commission's EnergyGuide immediately next

to (or above) the appropriately corresponding Canadian EnerGuide, or

the appliance energy use label required by Mexico, or both labels.

In support of its request, Whirlpool stated that the continued

existence of separate appliance labeling requirements among U.S.,

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

signatories to NAFTA. Whirlpool contended that the consolidation of the

labels required by the different countries onto a single piece of label

stock would eliminate 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.

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 conditions. 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 EnergyGuide label. The

prohibition was not specifically directed at labels required by other

countries.\1\

\1\ Although this language prohibits the types of labeling

practices that Whirlpool has asked permission to use, manufacturers,

of course, can place the appliance energy labels of other countries,

or any other labels, in locations on their products that are not

``on or directly adjoining'' the EnergyGuide.

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The Commission is considering whether permitting side-by-side or

back-to-back labeling would be confusing to consumers, and thereby

reduce the effectiveness of the EnergyGuide. For example, three labels

side by side might create information overload, resulting in consumers

ignoring the information. But, the Commission believes that consumers

may realize that only one label is pertinent to U.S. consumers (because

the Canadian label is in English and French, and the Mexican label is

in Spanish \2\). The Commission's label also says in two places that

the information on the label is derived from U.S. government standard

tests and utility costs. Further, unlike in the past, the U.S. and

Canada, and, to a slightly lesser extent, Mexico, now use compatible

test procedures for identifying energy use, and require information to

be reported in terms of kilowatt-hour use per year. Thus, the

information being disclosed on each country's label is similar and this

may make the possibility of confusion less likely.\3\ 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. And, on many packages,

instruction manuals, and labels, it is common to see information

presented in more than one language because the products are shipped to

multiple countries. The Commission believes that, in this increasingly

global marketplace, consumers may not be confused or misled by the

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

clearly distinguish

[[Page 6802]]

which one is intended for the U.S. audience.

\2\ To extent that U.S. residents speak and read only Spanish,

the Mexican labels may convey useful information about energy

consumption comparable to what is provided on the U.S. label.

\3\ As amended, the Commission's Rule now requires labels that

show a primary energy use disclosure of kilowatt-hour use per year

for all the products for which it formerly required the disclosure

of estimated annual operating cost (refrigerators, freezers, clothes

washers, dishwashers, and water heaters). And, the regulations of

the three countries require disclosure of an energy efficiency

number for room air conditioners. Thus, the appliance labeling

regulations of all three NAFTA signatories now require the same

primary descriptors of energy use. This reduces the possibility for

consumers confusion resulting from labels on the same product that

show energy use in different terms.

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Accordingly, the Commission believes that it may be beneficial to

permit appliance manufacturers to combine the appliance energy labels

required by the U.S., Canada, and Mexico. First, allowing the use of a

single label consisting of two (or three) labels printed on the same

label stock, would be consistent with the NAFTA goal of removing

unnecessary impediments to trade.\4\ Second, multi-national labels

could enable the appliance manufacturing industry to comply with the

Commission's Rule and the appliance labeling rules of Canada and Mexico

at considerably less expense. Therefore, the Commission proposes

amending the Rule to permit energy use labels required by the other

NAFTA signatories to adjoin the EnergyGuide directly. Manufacturers

would still be prohibited from placing other information on or directly

adjoining the EnergyGuide.

\4\ The Commission has worked closely with representatives of

the Canadian EnerGuide program over the past two years to explore

regulatory harmonization under NAFTA. Canada, like the Commission,

has been reviewing its appliance labeling rule, and each country has

considered the research and changes being considered by the other.

More recently, representatives of the Mexican government have joined

in this dialogue. Although the Commission intends 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, amending the Rule now to

provide manufacturers greater flexibility in labeling practices is

an interim step for facilitating trade.

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Section A--Regulatory Flexibility Act

The provisions of the Regulatory Flexibility Act relating to an

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

applicable to this document because the Commission presently believes

that the amendments, if promulgated, ``will not have a significant

economic impact on a substantial number of small entities'' (5 U.S.C.

605).

Because the amendments are not likely to have a significant impact

on a substantial number of small entities within the meaning of the

Regulatory Flexibility Act and the rules implementing it, the

Commission concludes, based on the information presently available,

that a regulatory analysis is not now necessary. The Commission

requests, however, information on whether the proposed amendments would

have a significant impact on a substantial number of small entities.

After reviewing any comments received on this subject, the Commission

will decide whether the preparation of a final regulatory flexibility

analysis is appropriate.

In light of the above, the Commission certifies, under Section 605

of the Regulatory Flexibility Act (5 U.S.C. 605(b)), that the

amendments proposed today would not, if promulgated, have a significant

impact on a substantial number of small entities.

Section B--Paperwork Reduction Act

The proposed amendments would not expand the Appliance Labeling

Rule's existing recordkeeping and reporting requirements. Because there

would be no increase in burden hours, the Commission is not requesting

that the Office of Management and Budget adjust the existing clearance

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

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

its reporting burden estimate, however, the Commission requests comment

on the extent of the reporting burden associated with these amendments.

Section C--Invitation To Comment

Interested persons are hereby notified that they may comment on any

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

amendments. Although the Commission welcomes comments on any aspect of

the proposed amendments, the Commission is particularly interested in

comments on the questions in Section D, below. All comments should be

referenced specifically to either the Commission's questions or the

section of the proposed rules being discussed.

The Commission requests the commenters provide representative

factual data. Individual firms' experiences are relevant to the extent

they typify industry experience, in general, or that of similar-sized

forms. Comments opposing the proposed amendments should, if possible,

suggest a specific alternative. Proposals for alternative regulations

should include reasons and data that indicate why the alternatives

would better serve the purposes of the proposed amendments. Comments

should be supported by a full discussion of all the relevant facts and/

or be based directly on firsthand knowledge, personal experience or

general understanding of the particular issues addressed by the

proposed rules.

Before adopting these proposed amendments as final, the Commission

will give consideration to any written comments timely submitted to the

Secretary. Comments submitted will be available for public inspection

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

Commission regulations, on normal business days between the hours of

8:30 a.m. and 5 p.m. at the Public Reference Room (Room 130), Federal

Trade Commission, 5th Street and Pennsylvania Ave., NW., Washington, DC

20580.

Section D--Questions and Issues

Interested persons are invited to address any questions of fact,

law or policy that they believe may bear upon the proposed amendments.

The questions concerning issues upon which the Commission particularly

desires comment, however, are listed below.

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?

Section E--Proposed Amendments

For the reasons discussed above, the Commission proposes the

amendments below to sections 305.11(a)(5)(i)(K) (16 CFR

305.11(a)(5)(i)(K)), 305.11(a)(5)(ii)(I) (16 CFR 305.11(a)(5)(ii)(I)),

and 305.11(a)(5)(iii)(H)(1) (16 CFR 305.11(a)(5)(iii)(H)(1)) of the

Rule 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 Energy Guide.

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:

[[Page 6803]]

Authority: 42 U.S.C. 6294.

2. It is proposed that section 305.11(a)(5)(i)(K) be 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.

* * * * *

3. It is proposed that section 305.11(a)(5)(ii)(I) be revised to

read as follows:

Sec. 305.11 Labeling for covered products.

(a) * * *

(5) * * *

(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.

* * * * *

4. It is proposed that section 305.11(a)(5)(iii)(H)(1) be revised

to read as follows:

Sec. 305.11 Labeling for covered products.

(a) * * *

(5) * * *

(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 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. 96-4004 Filed 2-21-96; 8:45 am]

BILLING CODE 6750-01-M