[Federal Register Volume 60, Number 166 (Monday, August 28, 1995)]
[Proposed Rules]
[Pages 44712-44717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21447]




[[Page 44711]]

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Part X





Federal Trade Commission





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16 CFR Part 311



Test Procedures and Labeling Standards for Recycled Oil; Proposed Rule

  Federal Register / Vol. 60, No. 166 / Monday, August 28, 1995 / 
Proposed Rules  
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[[Page 44712]]


FEDERAL TRADE COMMISSION

16 CFR Part 311


Test Procedures and Labeling Standards for Recycled Oil

AGENCY: Federal Trade Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: Section 383 of the Energy Policy and Conservation Act of 1975 
(``EPCA'') directs the Federal Trade Commission (``FTC'' or 
``Commission'') to promulgate a rule prescribing test procedures and 
labeling standards applicable to recycled oil. The Commission is 
required to prescribe the rule within 90 days after the National 
Institute of Standards and Technology (``NIST'') reports to the 
Commission the test procedures to determine the substantial equivalency 
of processed used oil with new oil distributed for a particular end 
use. Because NIST has reported the relevant test procedures to the 
Commission, this notice announces the Commission's proposed rule 
implementing the statutory directive. The Commission invites interested 
persons to submit written comments addressing any issue they believe 
may bear upon the proposed rule. After reviewing comments received in 
response to this notice, the Commission will publish a final rule.

DATES: Written comments must be submitted on or before September 27, 
1995. Due to the time constraints of this rulemaking proceeding, the 
Commission does not contemplate any extensions to this comment period.

ADDRESSES: Written comments should be submitted to Office of the 
Secretary, Federal Trade Commission, room 159, Sixth and Pennsylvania 
Avenue, NW., Washington, DC 20580, telephone number 202-326-2506. 
Comments should be identified as ``16 CFR Part 311 Comment-Recycled 
Oil.'' If possible, submit comments both in writing and on a personal 
computer diskette in Word Perfect or other word processing format (to 
assist in processing, please identify the format used). Written 
comments should be submitted, when feasible and not burdensome, in six 
copies.

FOR FURTHER INFORMATION CONTACT: Neil J. Blickman, Attorney, or Laura 
Koss, Attorney, Federal Trade Commission, Bureau of Consumer 
Protection, Division of Enforcement, Room S-4631, Sixth and 
Pennsylvania Ave., NW., Washington, DC 20580, telephone numbers 202/
326-3038, or 202/326-2890.
SUPPLEMENTARY INFORMATION:

I. Background

A. EPCA's Requirements

    The purposes of the recycled oil section of EPCA are to encourage 
the recycling of used oil, to promote the use of recycled oil, to 
reduce consumption of new oil by promoting increased utilization of 
recycled oil, and to reduce environmental hazards and wasteful 
practices associated with the disposal of used oil.\1\ To achieve these 
goals, section 383 of EPCA directs NIST to develop test procedures for 
the determination of the substantial equivalency of re-refined or 
otherwise processed used oil or blend of oil (consisting of such re-
refined or otherwise processed used oil and new oil or additives) with 
new oil distributed for a particular end use and to report such test 
procedures to the Commission.\2\ Within 90 days after receiving such 
report from NIST, the Commission is required to prescribe, by rule, the 
substantial equivalency test procedures, as well as labeling standards 
applicable to containers of recycled oil.\3\ EPCA further requires that 
the Commission's rule permit any container of processed used oil to 
bear a label indicating any particular end use, such as for use as 
engine lubricating oil, so long as a determination of ``substantial 
equivalency'' with new oil has been made in accordance with the test 
procedures prescribed by the Commission.\4\

    \1\ 42 U.S.C. 6363(a).
    \2\ 42 U.S.C. 6363(c). Although EPCA does not explicitly define 
the term ``processed used oil,'' it is defined herein to mean re-
refined or otherwise processed used oil or any blend of such oil, 
consistent with the definition of ``recycled oil'' at 42 U.S.C. 
6363(b)(2)(A) and (B).
    \3\ 42 U.S.C. 6363(d). Recycled oil, as defined in section 
6363(b)(2) of EPCA is either (a) used oil from which physical and 
chemical contaminants acquired through prior use of the oil have 
been removed by refining or other processing, or (b) any blend of 
re-refined or otherwise processed used oil and new oil or additives, 
that, for either (a) or (b), the manufacturer has determined, 
pursuant to the Commission's rule, is substantially equivalent to 
new oil for a particular end use.
    \4\ 42 U.S.C. 6363(d)(1)(B).
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    Once this proposed rule becomes final, no Commission order or rule, 
and no law, regulation, or order of any State (or political subdivision 
thereof), may remain in effect if it has labeling requirements with 
respect to the comparative characteristics of recycled oil with new oil 
that are not identical to the labels permitted by this rule.\5\ Also, 
no rule or order of the Commission may require any container of 
recycled oil to also bear a label containing any term, phrase, or 
description connoting less than substantial equivalency of such 
recycled oil with new oil.\6\

    \5\ 42 U.S.C. 6363(e)(1).
    \6\ 42 U.S.C. 6363(e)(2).
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    Section 383 of EPCA does not specify any particular rulemaking 
procedures that must be followed. The Commission, therefore, is using 
the notice and comment rulemaking procedures of the Administrative 
Procedure Act (``APA'') to obtain the views of interested parties. 5 
U.S.C. 553(b) and (c). Pursuant to section 553(b)(3) of the APA, the 
Commission has elected to publish the specific terms of its proposed 
rule. 5 U.S.C. 553(b)(3).

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

    In 1964, prior to the enactment of EPCA, the Commission had 
promulgated a trade regulation rule relating to the advertising and 
labeling of previously used lubricating oil (``Used Oil Rule'').\7\ The 
Rule was based on the Commission's finding that whether a lubricant has 
been made from crude oil or from used oil is material to consumers, and 
it was promulgated to prevent deception of those consumers who prefer 
new and unused lubricating oil. Specifically, the Rule requires that 
advertising, promotional material, and labels on containers of 
lubricant made from used oil disclose that such used lubricating oil 
has been previously used. The Rule further states that it is an unfair 
method of competition and an unfair and deceptive act or practice to 
represent in any manner that used lubricating oil is new or unused and 
to use the term ``re-refined,'' or any other term of similar import, to 
describe previously used lubricating oil unless the physical and 
chemical contaminants acquired through previous use have been removed 
by a refining process.\8\

    \7\ 16 CFR 406.
    \8\ 16 CFR 406.5.
    On October 15, 1980, the Used Oil Recycling Act, which reiterated 
Congress' policy favoring the recycling of used oil, suspended the 
provision of the Used Oil Rule, as well as any similar provision in a 
Commission order, requiring labels to disclose the origin of lubricants 
made from used oil.\9\ The 

[[Page 44713]]
legislative history of the Used Oil Recycling Act indicates that 
Congress was concerned that the requirement in the FTC's Rule that 
previously used oil be labeled as such was having an adverse impact on 
consumer acceptance of recycled oil, provided no useful information to 
consumers concerning the performance of the oil, and was inhibiting 
recycling. The re-refining industry and environmental community 
contended that such labeling gave consumers the incorrect impression 
that the product is inferior, while providing no information relating 
to its quality. According to Congress, the intent of section 383 of 
EPCA was clear. ``Oil should be labeled on the basis of performance 
characteristics and fitness for intended use, and not on the basis of 
the origin of the oil.'' \10\ The legislative history also states that 
the Commission, in response to a petition of the Association of 
Petroleum Re-refiners, published a proposed Statement of Enforcement 
Policy on August 19, 1980 announcing its intention to replace the term 
``used'' with ``recycled'' on the belief that the term ``recycled'' 
connotes more accurately the origin and processing of the product.\11\ 
However, the Association of Petroleum Re-refiners expressed its concern 
to Congress that even the term ``recycled'' was likely to inhibit sales 
of re-refined oil because the label might suggest that the product is 
in some way inferior. The Commission's proposed Statement of 
Enforcement Policy would become effective on October 18, 1980. However, 
the Used Oil Recycling Act, which was enacted just days before, 
suspended any Commission labeling requirements until a final Commission 
rule is issued under EPCA.

    \9\ Used Oil Recycling Act of 1980, Pub. L. 96-463, 94 Stat. 
2055 (codified as amended in scattered sections of 42 U.S.C.). 
Section 4(c) of the Used Oil Recycling Act provides that before the 
effective date of the FTC rule prescribed under section 383 of EPCA, 
no requirement of any rule or order of the FTC could remain 
applicable if it required that a container of recycled oil bear any 
label referring to the fact that its contents were derived from 
previously used oil. However, section 4(c) does not restrict the 
ability of the FTC to regulate the labeling of oil on the basis of 
performance characteristics or fitness for its intended use. See 42 
U.S.C. 6363 note.
    \10\ See Legislative History Pub. L. 96-463, U.S. Code Cong. and 
Adm. News, pp. 4354-4356 (1980).
    \11\ Id.
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    Accordingly, on April 8, 1981, the Commission published a notice 
announcing the statutory suspension of the origin labeling requirements 
of the Used Oil Rule and relevant orders. In the same notice, the 
Commission announced a Statement of Enforcement Policy suspending 
enforcement of those portions of the Used Oil Rule and Commission 
orders requiring that advertising and promotional material disclose the 
origin of lubricants made from used oil.\12\

    \12\ 46 FR 20979. There are 12 Commission orders requiring oil 
processors/manufacturers to cease advertising and selling their 
products without disclosing that such products are refined, 
reclaimed, or reprocessed. Dabrol Products Corp., 70 F.T.C. 1099 
(1949); Pennsylvania Oil Terminal, Inc., 48 F.T.C. 356 (1951); High 
Penn Oil Co., Inc., 53 F.T.C. 256 (1956); Supreme Petroleum Products 
Inc., 54 F.T.C. 1129 (1956); Royal Oil Corp., 70 F.T.C. 629 (1957); 
Acme Refining Corp., 54 F.T.C. 1126 (1958); Allied Petroleum Corp., 
54 F.T.C. 1132 (1958); Deep Rock Refining Co., 54 F.T.C. 1123 
(1958); Double Eagle Refining Co., 54 F.T.C. 1035 (1958); Mohawk 
Refining Corp., 54 F.T.C. 1071 (1958); Seaboard Oil Co., 54 F.T.C. 
1135 (1958); Salyer Refining Co., 54 F.T.C. 1026 (1958).
C. Basis for this Proceeding

    On July 27, 1995, NIST reported to the Commission the test 
procedures for the determination of the substantial equivalency of 
processed used engine oils with new engine oils.\13\ The test 
procedures and performance standards reported by NIST for such 
processed used engine lubricating oils are the same as those adopted by 
the American Petroleum Institute (``API'') for engine lubricating oils 
generally, irrespective of the origin of the oil. As required by EPCA, 
the Commission is proposing in this notice a rule regarding the 
labeling of containers of recycled engine oil.

    \13\ NIST recently has been involved with the subject of re-
refined oil pursuant to a 1993 Executive Order, which, in part, 
requires federal agencies to implement procurement guidelines for 
re-refined lubricating oil, and requires NIST to establish a program 
for testing the performance of products containing recovered 
materials. See Exec. Order No. 12,873, 58 FR 54911 (1993).
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D. The Used and Re-refined Oil Markets

    According to the Environmental Protection Agency, approximately 1.5 
billion gallons of used oil are made available for collection or 
disposal each year. Of this 1.5 billion, some 900 million gallons are 
collected; the remaining 600 million gallons are disposed of 
improperly. Of the 900 million gallons that are collected, 
approximately 100 million gallons are used as feedstock for re-
refineries. The primary use for used oil is as fuel for industrial 
boilers and marine engines. Re-refined oil is used oil from which all 
contaminants have been removed. Re-refiners use a sophisticated 
process, including hydrotreating,\14\ to produce re-refined base oils 
that pass the API tests and meet the International Lubricant 
Standardization and Approval Committee requirements for motor oils.

    \14\ Hydrotreating is a re-refining process in which oil is 
first distilled and then reacted with hydrogen to eliminate 
contaminants (such as chlorine and polynuclear aromatics) that an 
ordinary distillation process would not eliminate.
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    The volume of re-refined base oil sold or used in the United States 
is approximately 65 million gallons per year. This represents a 
relatively small, but still significant, portion of the total U.S. 
lubricating oil market of some 1.2 billion gallons per year. The 
principal products made from re-refined based oils are: gear 
lubricants, hydraulic oils, power transmission fluids, passenger car 
motor oils, diesel engine oils, and railroad diesel engine oils. Virgin 
oils are also used to produce all of these products.
    The principal customers for re-refined base oils are lubricant 
manufacturers who produce the various products mentioned above. These 
products are sold in the same markets as lubricants made from virgin 
base oil. For example, some re-refiners sell base oil to other 
manufacturers for use in producing finished lubricant products, and 
some directly produce finished products that may then be sold to 
distributors, mass merchandisers, and large private end-users.
II. Scope of the Proposed Rule

    As discussed above, EPCA directs the Commission to issue a rule 
prescribing: (1) test procedures for determining the substantial 
equivalency of processed used oil with new oil for a particular end 
use; and (2) labeling standards applicable to containers of such 
recycled oil.\15\ NIST has reported test procedures and performance 
standards for determining the substantial equivalency of processed used 
engine oils with new engine oils. Until NIST develops test procedures 
for other end uses, the scope of the rule is limited to engine oil.

    \15\ 42 U.S.C. 6363(d)(1)(A).
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III. Section-by-Section Discussion of Proposed Rule

    EPCA gives the Commission broad latitude to prescribe labeling 
standards to effectuate the statute's purposes. EPCA, however, requires 
that the Commission's rules permit any container of processed used oil 
to bear a label indicating any particular end use for which a 
determination of ``substantial equivalency'' with new oil has been made 
in accordance with the test procedures prescribed by the 
Commission.\16\ EPCA further states that the Commission's rule may not 
require any container of recycled oil to also bear a label containing 
any term, phrase, or description connoting less than substantial 
equivalency of such recycled oil with new oil.\17\

    \16\ 42 U.S.C. 6363(d)(1)(B).
    \17\ 42 U.S.C. 6363(e)(2).
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Section 311.1

    Section 311.1 of the proposed rule defines the following terms, 
which are used in the proposed regulation: ``manufacturer,'' ``new 
oil,'' ``recycled oil,'' and ``used oil.'' These are the principal 
terms defined in section 383(b) of EPCA.\18\ The proposed rule, 
however, also adds definitions for ``re-refined oil'' and ``processed 
used oil,'' 

[[Page 44714]]
and includes a revised, shorter definition for ``recycled oil.'' The 
Commission seeks comment on whether additional terms should be included 
and defined in section 311.1 of the final rule.

    \18\ 42 U.S.C. 6363(b).
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Section 311.2

    Section 311.2 of the proposed rule is a general provision that 
states if any part of the Commission's rule is stayed or held invalid, 
the rest of the rule will remain in force.
Section 311.3

    Section 311.3 of the proposed rule is a preemption provision that 
tracks the preemption language contained in section 383(e)(1) of 
EPCA.\19\ Section 383(e)(1) states that ``no rule or order of the 
Commission, other than the rule required to be prescribed pursuant to 
section 383(d) of EPCA, and no law, regulation, or order of any State 
or political subdivision thereof may remain applicable to any container 
of recycled oil, if the law, regulation, rule, or order requires that 
containers of recycled oiled, which bear a label in accordance with the 
terms of the Commission's rule prescribed under section 383(d) of EPCA, 
bear any label with respect to the comparative characteristics of 
recycled oil with new oil that is not identical to that permitted by 
the Commission's rule respecting labeling standards prescribed under 
section 383(d) of EPCA.'' \20\ The statute's preemptive effect is 
limited to recycled oil that meets the definition of recycled oil in 
EPCA (i.e., oil that is substantially equivalent to new oil pursuant to 
FTC-specified test procedures).

    \19\ 42 U.S.C. 6363(e)(1).
    \20\ Id.
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    Section 383(e)(1) appears to intend that there be one uniform 
labeling requirement regarding the comparative characteristics of 
recycled oil (for a particular end use). If a container of recycled oil 
is labeled in accordance with the FTC's EPCA rule, neither the FTC nor 
any state or political subdivision can require any additional or 
different disclosure. By preventing multiple labeling requirements, 
this section furthers the Congressional purpose ``to promote the use of 
recycled oil.''
    The proposed rule permits manufacturers to choose how they convey 
substantial equivalency (if they meet the specified test procedures for 
substantial equivalency). State laws that require specific disclosures 
(e.g., that the product is recycled) or have specific format 
requirements (e.g., specific print size requirements for their 
disclosures) would be preempted because they would require a label that 
is not ``identical to that permitted by the (FTC's) rule. . . .'' 
States, however, may adopt labeling requirements identical to those 
required by the FTC, if they wish, and prosecute violations under state 
law.
    Section 383(e)(2) of EPCA also restricts Commission rules and 
orders, stating ``the Commission may [not] require any container of 
recycled oil to also bear a label containing any term, phrase, or 
description which connotes less than substantial equivalency. . . .'' 
To some extent this section overlaps with section 383(e)(1) of EPCA. 
But, whereas section (e)(1) expresses Congressional intent that there 
be a national uniform labeling standard, preempting non-identical state 
laws, section (e)(2) is specifically aimed at prohibiting Commission 
label requirements in addition to what the Commission prescribes under 
section 383(d)(1) of EPCA if the additional requirements would create 
the impression that the recycled oil is not substantially equivalent to 
recycled oil.
    For example, the Commission's Used Oil Rule requires disclosures in 
advertising and on labeling that recycled oil is used.\21\ When the 
Commission issues its final rule based on the equivalency determination 
for engine oil, the Used Oil Rule's requirements for origin labeling 
with respect to engine oil will be preempted pursuant to section 383(e) 
of EPCA.\22\ Accordingly, the Commission need not take further action 
to repeal those portions of the Used Oil Rule. Further, the relevant 
labeling origin provisions of the Used Oil Rule and the twelve 
Commission orders concerning recycled oil \23\ continue to be subject 
to Congressional stay of enforcement as to non-engine oils.\24\ (The 
Used Oil covers other lubricating oils as to which the EPCA preemption 
does not apply.) The Commission also is continuing its 1981 stay of the 
origin advertising provisions of the Used Oil Rule as to all oils.\25\

    \21\ Specifically, the Used Oil Rule, in part, requires 
manufacturers to disclose ``clearly and conspicuously that such used 
lubricating oil has been previously used, in all advertising, 
promotional material and on each front or face panel of the 
container.'' 16 CFR 406.5(b)(2).
    \22\ For example, the legislative history of the Used Oil 
Recycling Act reveals Congress' concern that the requirement in the 
FTC's rule was having an adverse impact on consumer acceptance of 
recycled oil. The re-refining industry expressed dissatisfaction 
with the Commission's proposal to substitute the term ``recycled'' 
for the term ``used'' in the Used Oil Rule, since it too might 
suggest that the product is in some way inferior. Similarly, EPCA's 
history indicates that Congress believed that disclosures conveying 
the origin of oil (words like used, recycled, re-refined) did not 
provide information that would be useful or relevant to consumers. 
Congress made clear that disclosures should instead pertain to 
performance characteristics and fitness for intended use.
    \23\ These orders will be eliminated if the Commission adopts as 
final its proposed rule for sunsetting administrative consumer 
protection orders over twenty years old. Duration of Existing 
Competition and Consumer Protection Orders, 60 FR 42,481 (1995).
    \24\ 42 U.S.C. 6363 note.
    \25\ 46 FR 20,979.
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Section 311.4

    In accordance with section 383(d)(1)(A)(i) of EPCA,\26\ section 
311.4 of the proposed rule prescribes test procedures for determining 
the substantial equivalency of processed used oil with new oil 
distributed for use as engine oil. The test procedures, as reported to 
the Commission by NIST, are found in American Petroleum Institute 
Publication 1509, Thirteenth Edition, January 1995, entitled ``Engine 
Oil Licensing and Certification System.'' \27\ In its letter 
transmitting the test procedures to the Commission, NIST stated that 
the engine test procedures described in API Publication 1509 combined 
with the API Engine Oil Licensing and Certification System are accepted 
for use with automotive engine oils by the Society of Automotive 
Engineers, the American Society of Testing and Materials, and all major 
automotive engine manufacturers.

    \26\ 42 U.S.C. 6363(d)(1)(A)(i).
    \27\ The Commission will be seeking approval from the Director 
of the Federal Register to incorporate this document by reference 
into section 311.4 of the final rule, as required by section 552(a) 
of the APA, 5 U.S.C. 552(a), and by regulations issued by the Office 
of the Federal Register, 1 CFR 51.
    The American Petroleum Institute operates a voluntary licensing and 
certification system that is designed to provide consumers with the 
technical information needed to understand the performance, viscosity, 
and accepted use of engine oils. Under this system, API licenses two 
types of ``Marks'' which may appear on the labeling of qualified engine 
oils: The API Service Symbol and the API Certification Mark. The 
Service Symbol identifies the type of engine in which the oil should be 
used, explains the oil's characteristics, and describes the oil's 
ability to protect against wear, sludge, and corrosion. The symbol also 
contains a rating of the oil's viscosity that is based on 
specifications established by the Society of Automotive Engineers. 
Finally, the symbol indicates whether the oil has any energy conserving 
properties when compared to a standard reference oil.
    The API Certification Mark identifies engine oils recommended for a 
specified use. An engine oil is eligible to receive 

[[Page 44715]]
the API Certification Mark only if it satisfies the minimum performance 
standards established by the International Lubricant Standardization 
and Approval Committee (``ILSAC''). To receive ILSAC approval and, in 
turn, API certification, motor oils must pass a series of tests 
designed to evaluate the following factors: (1) The oil's performance 
and its effect on the engine at zero degrees Fahrenheit or lower; (2) 
the extent to which the oil prevents engine rust and corrosion; (3) the 
oil's fuel efficiency; (4) the capability of the oil to reduce friction 
and to protect moving parts within the engine from fusing together; (5) 
the oil's resistance to thickening under high temperatures up to three 
hundred degrees Fahrenheit; (6) the level of detergents and dispersants 
in the oil; and (7) the content of phosphorus in the oil. The current 
standards for these factors, as well as the applicable test procedures, 
are found in Appendices D, E, F, G, I, J, K, L, M, and N of API 
Publication 1509.

Section 311.5

    In accordance with section 383(d)(1)(A)(ii) of EPCA,\28\ section 
311.5 of the proposed rule prescribes labeling standards applicable to 
containers of recycled oil. Section 311.5 states that a manufacturer 
may represent, on a label on a container of processed used oil, that 
such oil is substantially equivalent to new oil for engine use, but 
only if the manufacturer has determined the substantial equivalency of 
the oil to new oil for that particular end use in accordance with the 
test procedures prescribed by the Commission, and has based the 
representation on that determination. For example, a manufacturer could 
represent that its oil is substantially equivalent to new oil by 
displaying the API Mark on its container. A manufacturer would not be 
required to add any qualifiers to its label such as ``used'' or ``re-
refined.''

    \28\ 42 U.S.C. 6363(d)(1)(A)(ii).
    The Commission's proposal focuses on the performance of oil and its 
fitness for an intended use rather than its origin, and thus should 
encourage the recycling of used oil, encourage the use of recycled oil, 
and reduce consumption of new oil by promoting increased utilization of 
recycled oil. Because the proposed rule does not mandate the use of 
specific disclosures, recycled oil manufacturers have flexibility to 
promote the performance of their products and their ``substantial 
equivalency'' with new oil and develop marketing strategies for various 
markets. For example, the proposed rule does not restrain manufacturers 
from voluntarily labeling recycled oil containers with terms or phrases 
such as ``recycled'' to assist in the marketing of their products.\29\

    \29\ Manufacturers should, of course, consider the Commission's 
Guides For The Use Of Environmental Marketing Claims. See e.g., 16 
CFR 260.7(e).
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Section 311.6

    Section 311.6 of the proposed rule tracks the language relating to 
prohibited acts and enforcement of the Commission's rule contained in 
sections 524 and 525 of EPCA.\30\ Pursuant to section 524 of EPCA, it 
is a prohibited act to violate the Commission's final rule issued 
pursuant to section 383 of EPCA.\31\ The proposed rule declares that it 
is unlawful for any manufacturer to represent, on a label on a 
container of processed used oil, that the processed used oil is 
substantially equivalent to new oil for engine use unless the 
manufacturer has based such representation on the manufacturer's 
determination of the substantial equivalency of the processed used oil 
to new oil for use as engine oil in accordance with the test procedures 
prescribed under section 311.4 of the proposed rule.

    \30\ 42 U.S.C. 6394(2) and 42 U.S.C. 6395.
    \31\ 42 U.S.C. 6394(2).
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    The proposed rule also provides that violations will be subject to 
enforcement in accordance with section 525 of EPCA. Section 525 of EPCA 
provides that whoever violates the Commission's final rule is subject 
to a civil penalty of not more than $5,000 for each violation.\32\ 
Whoever willfully violates the Commission's rule shall be fined not 
more than $10,000 for each violation.\33\ Any person who knowingly and 
willfully violates the Commission's rule after having been subjected to 
a civil penalty for a prior violation of the rule, shall be fined not 
more than $50,000, or imprisoned not more than six months, or both.\34\ 
Further, pursuant to section 525 of EPCA, whenever it appears to any 
officer or agency of the United States (in whom is vested,or to whom is 
delegated, authority under EPCA) that any person has engaged, is 
engaged, or is about to engage in acts or practices constituting a 
violation of the Commission's rule, such officer or agency may request 
the Attorney General to bring an action in an appropriate district 
court of the United States to enjoin such acts or practices, and upon a 
proper showing, a temporary restraining order or a preliminary or 
permanent injunction shall be granted without bond. Any such court also 
may issue mandatory injunctions commanding any person to comply with 
the Commission's rule.\35\

    \32\ 42 U.S.C. 6395(a).
    \33\ 42 U.S.C. 6395(b).
    \34\ 42 U.S.C. 6395(c).
    \35\ 42 U.S.C. 6395(d).
    Because section 525 of EPCA does not explicitly authorize the 
Commission to bring enforcement actions, this rule will be enforced by 
the Department of Justice under 28 U.S.C. 516, a provision that 
authorizes the Department of Justice to enforce statutes that are not 
specifically assigned to other agencies for enforcement. The 
Commission, however, has the authority to investigate violations, and 
make referrals to the Department of Justice pursuant to section 525(d) 
of EPCA.\36\

    \36\ 42 U.S.C. 6395(d).
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IV. Effective Date

    EPCA directs the Commission to ``prescribe'' the relevant test 
procedures and pertinent labeling standards within 90 days after the 
date on which NIST reports such test procedures to the Commission. It 
does not, however, specify an effective date for the rule. The 
Commission proposes that the rule become effective 30 days after 
publication of a final rule in the Federal Register. The Commission 
seeks comment on whether the proposed effective date will allow 
affected interests sufficient time to comply with the proposed labeling 
standards.

V. Invitation To Comment

    The Commission invites interested persons to address any questions 
of fact, law, or policy that they believe may bear upon the proposed 
rule. The Commission particularly desires comment, however, on the 
questions listed below. All comments should reference the aspect of the 
proposed rule or question being discussed. Comments opposing the 
proposed rule or specific provisions should, if possible, suggest a 
specific alternative. Proposals for alternative regulations should 
include reasons and data explaining why the alternative would better 
serve the purposes of section 383 of EPCA.
    Before adopting a final rule, consideration will be given to any 
written comments timely submitted to the Commission. Comments submitted 
will be available for public inspection in accordance with the Freedom 
of Information Act \37\ and the Commission's Rule of Practice,\38\ 
during normal business days from 8:30 a.m. to 5 p.m., at the Public 
Reference Room, Room 130, Federal Trade Commission, 

[[Page 44716]]
6th and Pennsylvania Ave., NW., Washington, DC 20580.

    \37\ 5 U.S.C. 552.
    \38\ 16 CFR 4.11.
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A. Proposed Labeling Rule

    The Commission is proposing labeling standards applicable to 
containers of recycled engine oil. The proposed rule also prescribes 
test procedures, as reported to the Commission by NIST, for determining 
the substantial equivalency of processed used engine oil to new oil, 
and includes definition, preemption and prohibited acts sections that 
track the language contained in sections 383, 524, and 525 of EPCA. The 
Commission seeks comment on all aspects of its proposal. The questions 
below also include those that are routinely asked in conducting FTC 
regulatory reviews.\39\

    \39\ The Commission has implemented a program to review all of 
its current and proposed rules and guides. One purpose of the review 
is to minimize the economic impact of new regulatory actions by 
seeking comment on, for example, regulatory options.
    (1) Is the Commission's proposal consistent with, and does it 
promote, the purposes of section 383 of EPCA? If yes, why; if no, why 
not?
    (2) Should the Commission issue its proposal relating to the 
labeling of recycled engine oil containers as a final rule? If yes, 
why; if no, why not?
    (3) What are the advantages of the Commission's proposal?
    (4) What changes, if any, should be made to the proposed rule to 
increase the benefits of the rule?
    (a) How would these changes affect the costs the proposed rule 
would impose on firms subject to its requirements?
    (5) What significant burdens or costs, including costs of 
compliance, will the proposed rule impose on firms subject to its 
requirements?
    (a) Will the proposed rule provide benefits to such firms?
    (b) To what extent will consumers of recycled engine oils benefit 
or be harmed by the Commission's proposal?
    (c) How will the Commission's proposal affect the consumption of 
recycled engine oil relative to new engine oil?
    (6) What changes, if any, should be made to the proposed rule to 
reduce the burdens or costs that would be imposed on firms subject to 
its requirements?
    (a) How would these changes affect the benefits provided by the 
proposed rule?
    (7) Should the Commission require or permit any additional or 
alternative disclosures, or variations on the proposed labeling 
standards? If yes, how should the Commission's proposal be modified, 
and why; if no, why not?
    (8) To what extent would any recycled oil container labeling 
requirements specified by law (either federal, state, or local) be 
affected by the Commission's proposal?
    (9) Are there additional appropriate and meaningful definitions 
that the Commission should include in section 311.1 of the final rule? 
If yes, what should they be, and why; if no, why not?

B. Effective Date

    The Commission proposes that its rule become effective 30 days 
after publication of a final rule in the Federal Register.
    (1) Does the proposed effective date allow affected interests 
sufficient time to comply with the proposed rule? If yes, why; if no, 
why not? How much extra time would be necessary to comply with the 
proposed rule? Why is that extra time necessary?

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \40\ requires agencies to 
prepare regulatory flexibility analyses when publishing proposed rules 
\41\ unless the proposed rule, if promulgated, would not have a 
``significant economic impact on a substantial number of small 
entities.'' \42\ Here, the economic impact of the proposed labeling 
standards appears to be de minimis. The Commission's proposed rule 
permits, rather than requires, any container of recycled oil to bear a 
label indicating that it is substantially equivalent to new engine oil, 
if such determination has been made in accordance with the test 
procedures prescribed in the proposed rule. Any economic costs incurred 
by entities that choose to make a determination of substantial 
equivalency are neither statutorily imposed nor imposed by the proposed 
regulations. The Commission proposes no reporting or recordkeeping 
requirements, and the proposed rule permits recycled oil containers to 
be labeled with information that is basic and easily ascertainable.

    \40\ 5 U.S.C. 601-612.
    \41\ 5 U.S.C. 603(a).
    \42\ 5 U.S.C. 605(b).
    The Commission also tentatively concludes that the proposed rule 
also will not affect a substantial number of small entities because 
information the Commission currently possesses indicates that 
relatively few companies currently manufacture and sell recycled oil as 
engine oil. Of those that do, most are not ``small entit[ies]'' as that 
term is defined either in section 601 of RFA\43\ or applicable 
regulations of the Small Business Administration.\44\

    \43\ 5 U.S.C. 601(6).
    \44\ 13 CFR 121.
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    In light of the above, the Commission certifies, pursuant to 
section 605 of RFA, 5 U.S.C. 605, that the proposed rule would not, if 
promulgated, have a significant impact on a substantial number of small 
entities and, therefore, that a regulatory analysis is not necessary. 
The Commission requests comment on this certification, and whether the 
proposed rule will have a significant impact on a substantial number of 
small entities. After reviewing any comments received on this subject, 
the Commission will decide whether the preparation of a final 
regulatory-flexibility analysis is appropriate.

D. Paperwork Reduction Act

    If promulgated, the Commission's proposed rule would not involve 
the ``collection of information'' as defined by the regulations of the 
Office of Management and Budget (``OMB'')\45\ implementing the 
Paperwork Reduction Act (``PRA'').\46\ The Commission's proposed rule 
contains no reporting, recordkeeping, labeling or other third-party 
disclosure requirements, so there is no ``information collection'' in 
this proceeding to submit to OMB for clearance. However, to ensure the 
accuracy of its conclusion, the Commission solicits comment on any 
paperwork burden that the public believes the proposed requirements may 
impose.

    \45\ 5 CFR 1320.7(c).
    \46\ 44 U.S.C. 3501-3520.
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VI. Additional Information for Interested Persons

A. Motions or Petitions

    Any motions or petitions in connection with this proceeding must be 
filed with the Secretary of the Commission.

B. Communications by Outside Parties to Commissioners or Their Advisors
    Pursuant to Commission Rule of Practice 1.18(c),\47\ communications 
with respect to the merits of this proceeding from any outside party to 
any Commissioner or Commissioner advisor during the course of this 
rulemaking shall be subject to the following treatment: Written 
communications, including written communications from members of 
Congress, shall be forwarded promptly to the Secretary for placement on 
the public record. Oral communications, not including oral 
communications from members of Congress, are permitted only when such 
oral communications are transcribed verbatim or summarized at the 

[[Page 44717]]
discretion of the Commissioner or Commissioner advisor to whom such 
oral communications are made and are promptly placed on the public 
record, together with any written communications and summaries of any 
oral communications relating to such oral communications. Oral 
communications from members of Congress shall be transcribed or 
summarized at the discretion of the Commissioner or Commissioner 
advisor to whom such oral communications are made and promptly placed 
on the public record, together with any written communication and 
summaries of any oral communications relating to such oral 
communications.

    \47\ 16 CFR 1.18(c).
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List of Subjects in 16 CFR Part 311

    Energy conservation, Incorporation by reference, Labeling, Recycled 
oil, Trade practices.

Text of Proposed Rule

    Accordingly, it is proposed that Chapter I of 16 CFR be amended by 
adding a new part 311 to Subchapter C to read as follows:

PART 311--LABELING STANDARDS FOR RECYCLED OIL CONTAINERS

Sec.
311.1 Definitions.
311.2 Stayed or invalid parts.
311.3 Preemption.
311.4 Testing.
311.5 Labeling.
311.6 Prohibited acts.

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


Sec. 311.1  Definitions.

    As used in this Part:
    (a) Manufacturer means any person who re-refines or otherwise 
processes used oil to remove physical or chemical impurities acquired 
through use or who blends such re-refined or otherwise processed used 
oil with new oil or additives.
    (b) New oil means any oil which has been refined from crude oil and 
has not been used, and which may or may not contain additives. Such 
term does not include used oil or recycled oil.
    (c) Processed used oil means re-refined or otherwise processed used 
oil or blend of oil, consisting of such re-refined or otherwise 
processed used oil and new oil or additives.
    (d) Recycled oil means processed used oil with respect to which the 
manufacturer has determined, pursuant to Sec. 311.4 of this part, is 
substantially equivalent to new oil for use as engine oil.
    (e) Used oil means any oil which has been refined from crude oil, 
has been used, and as a result of such use has been contaminated by 
physical or chemical impurities.
    (f) Re-refined oil means used oil from which physical and chemical 
contaminants acquired through use have been removed.


Sec. 311.2  Stayed or invalid parts.

    If any part of this rule is stayed or held invalid, the rest of it 
will remain in force.


Sec. 311.3  Preemption.

    No law, regulation, or order of any State or political subdivision 
thereof may apply, or remain applicable, to any container of recycled 
oil, if such law, regulation, or order requires any container of 
recycled oil, which container bears a label in accordance with the 
terms of Sec. 311.5 of this Part, to bear any label with respect to the 
comparative characteristics of such recycled oil with new oil that is 
not identical to that permitted by Sec. 311.5 of this Part.


Sec. 311.4  Testing.

    To determine the substantial equivalency of processed used oil with 
new oil for use as engine oil, manufacturers must use the test 
procedures that were reported to the Commission by the National 
Institute of Standards and Technology (``NIST'') on July 27, 1995, 
entitled ``Engine Oil Licensing and Certification System,'' and found 
in Publication 1509 of the American Petroleum Institute (``API''), 
Thirteenth Edition, January, 1995.


Sec. 311.5  Labeling.

    A manufacturer may represent, on a label on a container of 
processed used oil, that such oil is substantially equivalent to new 
oil for use as engine oil only if the manufacturer has determined that 
the oil is substantially equivalent to new oil for use as engine oil in 
accordance with the NIST test procedures prescribed under Sec. 311.4 of 
this Part, and has based the representation on that determination.


Sec. 311.6  Prohibited acts.

    It is unlawful for any manufacturer to represent, on a label on a 
container of processed used oil, that such oil is substantially 
equivalent to new oil for use as engine oil unless the manufacturer has 
based such representation on the manufacturer's determination that the 
processed used oil is substantially equivalent to new oil for use as 
engine oil in accordance with the NIST test procedures prescribed under 
Sec. 311.4 of this Part. Violations will be subject to enforcement 
through civil penalties, imprisonment, and/or injunctive relief in 
accordance with the enforcement provisions of Section 6395 of the 
Energy Policy and Conservation Act (42 U.S.C. 6395).

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 95-21447 Filed 8-25-95; 8:45 am]
BILLING CODE 6750-01-M