[Federal Register Volume 60, Number 210 (Tuesday, October 31, 1995)]
[Rules and Regulations]
[Pages 55414-55422]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26980]




[[Page 55413]]

_______________________________________________________________________

Part II





Federal Trade Commission





_______________________________________________________________________



16 CFR Part 311



Test Procedures and Labeling Standards for Recycled Oil; Final Rule

  Federal Register / Vol. 60, No. 210 / Tuesday, October 31, 1995 / 
Rules and Regulations   

[[Page 55414]]


FEDERAL TRADE COMMISSION

16 CFR Part 311


Test Procedures and Labeling Standards for Recycled Oil

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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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 for recycled oil. The Commission is required to 
prescribe the rule within 90 days after the National Institute of 
Standards and Technology (``NIST'') reports to the Commission test 
procedures to determine the substantial equivalency of processed used 
oil with new oil distributed for a particular end use. On July 27, 
1995, NIST reported the relevant test procedures for engine oil, and on 
August 28, 1995, the Commission published a notice of proposed 
rulemaking seeking written comment on its proposed labeling standards. 
In this notice, the Commission announces its final rule.

EFFECTIVE DATE: This rule is effective November 30, 1995. The 
incorporation by reference of the publication listed in 16 CFR part 311 
is approved by the Director of the Federal Register as of November 30, 
1995.

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

SUPPLEMENTARY INFORMATION:

Statement of Basis and Purpose

I. Background

A. EPCA's Requirements

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

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

    \5\ 42 U.S.C. 6363(e)(1).
    \6\ 42 U.S.C. 6363(e)(2).
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B. The Rulemaking Proceeding

    On July 27, 1995, NIST reported to the Commission test procedures 
for the determination of substantial equivalency of processed used 
engine oils with new engine oils. The NIST test procedures and 
performance standards are the same as those adopted by the American 
Petroleum Institute (``API'') for engine lubricating oils generally, 
regardless of origin.
    On August 28, 1995, the Commission announced for comment its 
proposed Rule on Test Procedures and Labeling Standards for Recycled 
Oil.7 The 30-day comment period closed on September 27. The 
Commission received 20 written comments in response to its Notice of 
Proposed Rulemaking (``NPR''). Comments were filed by nine oil 
producers,8 five trade associations,9 the National 
Association of Consumer Agency Administrators,10 Ford Motor 
Company,11 the County of San Diego,12 the State of 
Wisconsin,13 and two individuals.14 These comments, and other 
relevant documents, were placed on the public record of this 
proceeding,15 and have been considered by the Commission in 
adopting a final rule.

    \7\ 60 FR 44712 (Aug. 28, 1995).
    \8\ Coastal Unilube, Inc. (Coastal), D-2; Enviropur West 
Corporation (Enviropur), D-4; Exxon Company, U.S.A. (Exxon), D-5; 
South Coast Terminals, Inc. (South Coast), D-6; Evergreen Holdings 
Inc. (Evergreen), D-7; Quaker State Corporation (Quaker State), D-8; 
Pennzoil Company (Pennzoil), D-14; Safety-Kleen Corp. (Safety-
Kleen), D-16; Chevron Corporation (Chevron), D-18.
    \9\ Automotive Oil Change Association (AOCA), D-10; National Oil 
Recyclers Association (NORA), D-12; American Petroleum Institute 
(API), D-13; Independent Lubricant Manufacturers Association (ILMA), 
D-15; Automotive Parts & Accessories Association (APAA), D-17.
    \10\ NACAA, D-9.
    \11\ Ford, D-11.
    \12\ County of San Diego, Department of Agriculture, Weights and 
Measures (San Diego), E-1.
    \13\ Procurement Recycling Coordinator of the State of Wisconsin 
(Wisconsin), E-2.
    \14\ Robert C. Deitz, Environmentalist (``Deitz''), D-1; David 
R. Zelnick, President, Zed Industries (``Zed''), D-3.
    \15\ Commission Rulemaking Record No. R511036. Comments 
submitted in response to the NPR are coded either ``D'' (indicating 
that they were filed by nongovernmental parties) or ``E'' 
(indicating that they were filed by governmental agencies). 
Information placed on the public record by Commission staff is coded 
``B.'' In this notice, comments are cited by identifying the 
commenter (by abbreviation), the comment number, and the relevant 
page number(s), e.g., ``Deitz, D-1, 1.''
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II. The Rule

A. Scope of the Rule

    Section 383 of EPCA directs the FTC to promulgate a rule 
prescribing: (1) Test procedures for determining the substantial 
equivalency of processed used oil with new oil for a particular end 
use; and (2) labeling standards applicable to containers of such 
recycled oil. EPCA requires the Commission to prescribe the test 
procedures transmitted to it by NIST. The Commission's proposed rule 
was limited to automotive engine oil, because thus far NIST has 
reported test procedures only for determining the substantial 
equivalency of processed used engine oils with new engine oils.16 

[[Page 55415]]
In addition, EPCA prohibits the Commission from requiring that any 
container of recycled oil bear a label containing any term that 
connotes less than substantial equivalency of recycled oil meeting the 
NIST standards with new oil.17

    \16\ The letter to the Commission from NIST stated that ``[t]he 
API publication 1509 tests including the Engine Oil Licensing and 
Certification System are the test procedures we are recommending to 
you for the determination of substantial equivalency of re-refined 
oils for the end use of engine lubricating oil.'' NIST letter, B-1, 
1 (emphasis added). In September 1979, NIST forwarded to the 
Commission test procedures for ``recycled oil used as burner fuel.'' 
The Commission, however, determined that it was not required to 
promulgate a labeling rule with respect to burner fuel, because such 
oil is sold in bulk, not in container form for consumer use as EPCA 
contemplates.
    \17\ 42 U.S.C. 6363(e)(2).
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    Nineteen of the 20 comments received in response to the NPR 
generally supported the Commission's proposed rule as consistent with 
the policies and purposes of EPCA. One commenter opposed the proposed 
rule, stating that a consumer has a right to know when oil has been 
recycled, re-refined or used.18 However, the commenter suggests a 
regulatory option that is contrary to the mandate of EPCA.

    \18\ Zed, D-3, 1.
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    Seven commenters suggested that the Commission extend the scope of 
the final rule to include additional end uses.19 According to 
these commenters, the industry assumes that re-refined base oils 
demonstrated to be substantially equivalent to virgin base oils for use 
in an engine oil are substantially equivalent to virgin base oils for 
use in any product.20 Three of these commenters stated that state 
labeling laws encompass a broader category of automotive fluids (such 
as automatic transmission fluid and automotive gear oils).21 As a 
result, state labeling provisions with respect to these non-engine oils 
would not be preempted by the Commission's rule, and there would be a 
discriminatory impact on these other types of oils because they would 
remain subject to a different regulatory scheme.22 This, according 
to these commenters, could result in confusion in the 
marketplace.23 It also might create disincentives for lubricant 
manufacturers to purchase re-refined base oils for use in the blending 
of automotive fluid products in states with labeling laws that include 
all automotive fluid products.24

    \19\ Evergreen, D-7, 2; Enviropur, D-4, 2; Quaker State, D-8, 2; 
NORA, D-12, 3; ILMA, D-15, 3; Pennzoil, D-14, 2; APAA, D-17, 2.
    \20\ NORA, D-12, 3-4; Evergreen, D-7, 2; APAA, D-17, 1-2 (``when 
a company purchases re-refined base oil from a supplier, it could 
very well be used in engine performance, gear lubricants, power 
transmission fluids, hydraulic oils, or any combination of these 
products'').
    \21\ Enviropur, D-4, 2; see also Evergreen, D-7, 2; NORA, D-12, 
3-4.
    \22\ Id.
    \23\ Enviropur, D-4, 2; Quaker State, D-8, 2 (limiting the scope 
of the final rule to engine oils ``may create some confusion for 
non-engine lubricant compounders and blenders desiring to use re-
refined base oils'').
    \24\ See, e.g., Evergreen, D-7, 2 (citing Colorado as an 
example).
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    Two commenters suggested that the Rule should apply to lubricants 
for railroad engines, marine outboard engines, stationary diesels, and 
natural gas engines and compressors.25 Another commenter suggested 
that the Rule should also cover used oil sold as fuel, stating that the 
market for such fuel is approximately 10 times greater than for re-
refined lubricants.26

    \25\ South Coast, D-6, 1 (the proposed rule ``would not cover 
many other industrial applications for which there are established 
industry or original manufacturer standards''); ILMA, D-15, 3 (the 
final rule should extend to such lubricants ``by allowing 
manufacturers to provide test results that the recycled lubricants 
meet the applicable specifications'').
    \26\ NORA, D-12, 4. (See note 16, supra, regarding prior NIST 
report regarding burner fuel.)
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    The Commission has concluded that until NIST develops test 
procedures for other end uses, it must limit the scope of the rule to 
the categories of engine oil that are covered by the API Engine Oil 
Licensing and Certification System as prescribed in API Publication 
1509 (passenger car motor oils and car and truck diesel engine oils). 
Other end uses for re-refined oil, such as railroad diesel engine oil, 
are not covered by the Rule because API Publication 1509 does not 
contain test procedures applicable to them.27

    \27\ According to one commenter, individual consumers are not 
harmed by the exclusion of railroad diesel engine oil ``because 
these oils are sold to railroads and other equally sophisticated 
entities that are in a position to ensure that the re-refined oils 
they purchase are suitable for their intended use.'' Safety-Kleen, 
D-16, 12.
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    Seventeen of the 19 comments that generally supported the 
Commission's proposed rule also addressed some specific aspects of the 
proposal. Those comments, and the Commission's minor modifications to 
the proposed rule in response to those comments, are discussed below.

B. Section 311.1 Definitions

    In the proposed rule, the Commission defined the terms 
``manufacturer,'' ``new oil,'' ``recycled oil,'' and ``used oil''--the 
principal terms defined in section 383(b) of EPCA.28 The proposed 
rule, however, also included definitions for ``re-refined oil'' and 
``processed used oil.'' 29

    \28\ 42 U.S.C. 6363(b).
    \29\ 60 FR 44712, 44717.
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    Five comments addressed the Commission's proposed 
definitions.30 Three commenters suggested changing the definition 
of ``new oil'' to include synthetic oils.31 The proposed rule 
referred only to ``oil which has been refined from crude oil.'' 32 
Two of these commenters noted that synthetic oils are referenced in API 
1509 as sources of raw materials for engine oil.33

    \30\ Enviropur, D-4; South Coast, D-6; Evergreen, D-7; ILMA, D-
15; Safety-Kleen, D-16.
    \31\ South Coast, D-6, 2; ILMA, D-15, 3; Safety-Kleen, D-16, 12-
13.
    \32\ 60 FR 44712, 44717.
    \33\ South Coast, D-6, 2; ILMA, D-15, 3.
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    The third commenter noted that ``existing re-refining technology is 
capable of removing impurities from certain used synthetic oils as well 
as from used refined crude oil, and used synthetic oils are presently 
included as part of the input streams to re-refining processes.'' 
34 According to this commenter, some used synthetic oils, once 
properly refined, ``serve to improve the fitness of recycled engine 
oils for particular end uses.'' 35 This commenter suggested that 
the definitions of ``new oil'' and ``used oil'' should refer to 
synthetic oils.

    \34\ Safety-Kleen, D-16, 12.
    \35\ Id.
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    The Commission has concluded that including synthetic oils in the 
definitions of ``new oil'' and ``used oil'' furthers the purposes of 
EPCA in promoting the use of recycled oil, reducing consumption of new 
oil, and reducing environmental hazards and wasteful practices 
associated with the disposal of used oil.36 Accordingly, the 
definitions of ``new oil'' and ``used oil'' in the final rule now 
specifically refer to synthetic oils.

    \36\ 42 U.S.C. 6363(a). Including synthetic oils in these 
definitions is consistent with some state laws, which specifically 
refer to synthetic oils in their definitions. See, e.g., Nev. Rev. 
Stat. Ann. Sec. 590.020(7) (Michie 1995); La. Rev. Stat. 
Sec. 51:821(B)(6) (1995); Colo. Rev. Stat. Sec. 8-20-213(2)(g) 
(1995).
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    Another commenter suggested that the definition of ``re-refined 
oil,'' which in the proposed rule was defined as ``used oil from which 
physical and chemical contaminants acquired through use have been 
removed,'' 37 should be changed to specify that ``re-refined oil'' 
is used oil that has been refined using hydrotreating 
technology.38 According to this commenter, one of only two 
companies in the United States that employ a hydrotreating process when 
treating used oil, such a clarification would ensure that ``investments 
in the hydrotreating process are adequately recognized and protected'' 
and that the ``high quality of re-refined (hydrotreated) products are 
adequately 

[[Page 55416]]
recognized for purposes of consumer protection and awareness.'' 39

    \37\ 60 FR 44712, 44717.
    \38\ Evergreen, D-7, 3.
    \39\ Id.
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    In contrast, two commenters requested that the Commission not 
specifically refer to any one processing treatment.40 Enviropur, 
for example, stated that the FTC should not define ``recycled oil'' by 
specifying any one treatment method because hydrotreating is not the 
only method available.41

    \40\ Enviropur, D-4, 2-3; Quaker State, D-8, 1-2.
    \41\ Comment D-4, 2.
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    The Commission has determined that the final rule should not 
specifically refer to hydrotreating or any other processing treatment. 
The purpose of this rule is to promote the use of ``recycled'' oils 
that are substantially equivalent to new oils according to the 
prescribed standards. The Commission has no legal basis for requiring 
manufacturers to use any one processing technique if there are several 
techniques that can be used to make substantially equivalent oils. 
Accordingly, the definition of ``re-refined oil'' has not been changed.
    Another commenter suggested that the Commission change the 
definition of ``recycled oil'' to state that ``[r]ecycled oil does not 
include used oil which is blended or otherwise treated for energy 
recovery or incineration.'' 42 The Commission believes such a 
clarification is unnecessary because such oil is already excluded from 
the rule. In the proposed rule, the Commission defined ``recycled oil'' 
as ``processed used oil with respect to which the manufacturer has 
determined, pursuant to section 311.4 of this part, is substantially 
equivalent to new oil for use as engine oil.'' 43 Section 311.4 of 
this part prescribes test procedures only for engine oils.

    \42\ Evergreen, D-7, 4.
    \43\ 60 FR 44712, 44717 (emphasis added).
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    Accordingly, after considering the comments, the NIST report, and 
its statutory mandate, the Commission has determined that the final 
rule shall include all the definitions as proposed in the NPR, with the 
terms ``new oil'' and ``used oil'' modified to include synthetic oil.

C. Section 311.3 Preemption
    The preemption provision proposed in the NPR was based on the 
language in Section 383(e)(1) of EPCA. The statute provides:
    [N]o rule or order of the Commission, other than the rules required 
to be prescribed pursuant to subsection (d)(1)(A) of this section, and 
no law, regulation, or order of any State or political subdivision 
thereof may apply or remain applicable, to any container of recycled 
oil, if such law, regulation, rule, or order requires any container of 
recycled oil, which container bears a label in accordance with the 
terms of the rules prescribed under subsection (d)(1)(A) of this 
section, to bear any label with respect to the comparative 
characteristics of such recycled oil with new oil which is not 
identical to that permitted by the rule respecting labeling standards 
prescribed under subsection (d)(1)(A)(ii) of this section.44

    \44\  42 U.S.C. 6363(e)(1).
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    The Commission solicited comment on whether recycled oil labeling 
requirements specified by law (federal, state, or local) would be 
affected by the Commission's proposal.45 Ten commenters directly 
addressed this aspect of the Commission's proposal, with nine 
expressing their support for the proposed preemption provision 46 
and one opposing it.47 Two commenters, Safety-Kleen and Sun Coast, 
listed 17 states they believed would be affected.48
    \45\ 60 FR 44712, 44716.
    \46\ South Coast, D-6; Evergreen, D-7; AOCA, D-10; NORA, D-12; 
API, D-13; Pennzoil, D-13; Safety-Kleen, D-16; AAPA, D-17; Chevron, 
D-18, 1.
    \47\ NACAA, D-9.
    \48\ Ala. Code Sec. 8-17-111 (1994); Colo. Rev. Stat. Sec. 8-20-
213 (1995) (requires manufacturers to label recycled oils as such, 
but allows manufacturers to represent a product made ``wholly or 
partly from re-refined oil to be equal to or better than a similar 
product made from virgin oil if the product for sale conforms with 
applicable API service classifications, API certification mark, and 
SAE viscosity grades''); Conn. Gen. Stat. Sec. 14-342 (1994); Fla. 
Stat. ch. 526.01 (1994) (previously used lubricating oil must be 
labeled as such, but ``[p]reviously used lubricating oils which have 
been re-refined by a refining process that has removed all the 
physical and chemical contaminants acquired in previous use and 
which meets the ASTM-SAE-API standards for fitness for its intended 
use is not subject to the labeling requirements of this 
subsection''); Ga. Code Ann. Sec. 10-1-162 (1995); Haw. Rev. Stat. 
Secs. 342N-30, 31 (1994); Idaho Code Secs. 37-2514 to 37-2520 
(1994); 815 Ill. Comp. Stat. 435/1, 435/2 (1995); Ind. Code Ann. 
Sec. 16-44-1-1 (Burns 1994); La. Rev. Stat. Sec. 51:821 (1995) 
(requires manufacturers to label oils ``re-refined'' but also 
provides that ``a person may represent a product made in whole or in 
part from re-refined oil to be substantially equivalent to a product 
made from virgin oil for a particular end use if the product 
conforms with the applicable API and SAE service classifications''); 
Md. Code Ann., Bus. Reg. Sec. 10-501 (1995); Mass. Ann. Laws ch. 94 
Sec. 295F (Law. Co-op. 1995); Miss. Code Ann. Sec. 75-55-13 (1995); 
Mo. Rev. Stat. Sec. 414.112 (1994); Nev. Rev. Stat. Ann. 
Sec. 590.060(4) (Michie 1995) (only recycled or used oil which has 
not been re-refined must be labeled ``recycled'' or ``used''); N.H. 
Rev. Stat. Ann. Sec. 339-B:2 (1994); Tex. Occ. Code Ann. Sec. 8606 
(West 1995); Wis. Stat. Secs. 159.15, 168.14 (1994). The Commission 
makes no determination at this time as to which, if any, of these 
state requirements are preempted.
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1. State Law
    The commenters supporting the provision asserted that state 
labeling requirements applicable to recycled oil impose burdensome and 
sometimes inconsistent requirements on recycled oil 
manufacturers.49 According to these commenters, consistent 
nationwide labeling standards would reduce compliance costs for 
manufacturers and distributors of recycled engine oil, eliminate 
existing barriers to the distribution of such oil in certain geographic 
areas and distribution channels, and minimize the stigma associated 
with re-refined lubricants, thus leading to an increase in the use of 
recycled oil products.50 Two commenters also suggested that the 
final rule should preempt state laws that impose additional regulatory 
requirements on recycled oil manufacturers, such as laws that require 
such manufacturers to register or certify their products.51

    \49\ South Coast, D-6, 3; Evergreen, D-7,1; AOCA, D-10, 2; NORA, 
D-12, 3; API, D-13, 1; Pennzoil, D-14, 2; Safety-Kleen, D-16, 2-3; 
APAA, D-17, 1.
    \50\ See, e.g., South Coast, D-6, 3; AOCA, D-10, 2; NORA, D-12, 
3; Pennzoil, D-14, 2; Safety-Kleen, D-16, 3; APAA, D-17, 1.
    \51\ South Coast, D-6, 3; Safety-Kleen, D-16, 11 (citing Florida 
and Hawaii statutes).
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    Only one commenter, NACAA, stated its opposition to the proposed 
preemption provision, arguing that states must be able to respond to 
their own constituencies, and that this provision would weaken many 
state laws.52

    \52\ Comment D-9, 1.
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    EPCA's language shows Congress intended to promote the use of 
recycled oil by preventing multiple labeling requirements. Further, the 
legislative history of the Used Oil Recycling Act 53 indicates 
that Congress did not believe that consumers would be deprived of 
meaningful information if sellers of recycled oil did not disclose the 
origin of the oil on the containers. Congress stated that ``the 
requirement that recycled oil be labeled in a manner indicating its 
prior use provides no useful information to the consumer concerning the 
performance of the oil * * * oil should be labeled on the basis of 
performance characteristics and fitness for intended use, and not on 
the basis of the origin of the oil.'' 54

    \53\ Used Oil Recycling Act of 1980, Pub. L. No. 96-463, 94 
Stat. 2055 (codified as amended in scattered sections of 42 U.S.C.).
    \54\ H.R. Rep. No. 96-1415, 96th Cong., 2d Sess. 6 (1980), 
reproduced at 1980 U.S. Code Cong. & Ad. News 4354, 4356.
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    State laws that require specific disclosures (e.g., that the 
product is recycled) or have specific format requirements (e.g., 
specific print size requirements for their disclosures) are preempted 
because they require a label that is not ``identical to that permitted 
by the [FTC's] rule * * * '' States also may not dictate how 
manufacturers 

[[Page 55417]]
convey substantial equivalency (if they meet the specified test 
procedures for substantial equivalency).
    States may adopt labeling requirements identical to those required 
by the FTC, if they wish, and prosecute violations under state 
law.55

    \55\ See, e.g., Ill. Stat. ch. 815 Secs. 435/1, 435/2 (1995) 
(upon promulgation of the FTC's labeling standards applicable to 
recycled oil, ``the labeling requirements provided in [the statute] 
shall no longer be in effect and the State labeling standards shall 
be those promulgated by the Federal Trade Commission'').
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    Because preemption is mandated by EPCA, the Commission has no 
discretion on this issue. The Commission believes that section 
383(e)(1) intends that there be one, uniform labeling requirement 
regarding the comparative characteristics of recycled oil (for a 
particular end use). If a container of recycled oil is labeled in 
accordance with the FTC's rule, neither the FTC nor any state or 
political subdivision may require any additional or different 
disclosure.
    EPCA's preemptive effect is limited to labeling requirements for 
recycled oil that meets the definition of recycled oil in EPCA (i.e., 
oil that is substantially equivalent to new oil pursuant to FTC-
specified test procedures). Accordingly, the rule preempts only state 
labeling requirements for engine oils covered by the API Engine Oil 
Licensing and Certification System as prescribed in API Publication 
1509. The rule does not preempt state requirements that are not 
labeling requirements, such as registration and certification 
requirements.56

    \56\ For example, Florida requires manufacturers of re-refined 
oil to register their products with the Department of Environmental 
Protection and to provide an affidavit of proof that the product 
meets the required standards. Fla. Stat. ch. 526.01 (1994). Hawaii 
prohibits persons from marking recycled oil as ``specification fuel 
without an analysis or other written information documenting that 
the used oil or recycled oil meets the standards for specification 
fuel as set forth by the director.'' Haw. Rev. Stat. Sec. 342N-30 
(1994). Hawaii also requires transporters, marketers, and recyclers 
of used oil to obtain a permit. Haw. Rev. Stat. Sec. 342N-31 (1994).
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2. The FTC's Used Oil Rule
    Section 383(e)(2) of EPCA also restricts Commission rules and 
orders, stating ``the Commission may [not] require any container of 
recycled oil to also bear a label containing any term, phrase, or 
description which connotes less than substantial equivalency * * *.'' 
To some extent this section overlaps with section 383(e)(1) of EPCA. 
But, whereas section (e)(1) expresses congressional intent that there 
be a national uniform labeling standard, preempting non-identical state 
laws, section (e)(2) is specifically aimed at prohibiting Commission 
label requirements in addition to what the Commission prescribes under 
section 383(d)(1) of EPCA, if the additional requirements would create 
the impression that the recycled oil is not substantially equivalent to 
new oil.
    In 1964, prior to the enactment of EPCA, the Commission had 
promulgated a trade regulation rule on the advertising and labeling of 
previously used lubricating oil.57 Based on the Commission's 
finding that the new or used status of a lubricant was material to 
consumers, the Used Oil Rule was promulgated to prevent deception of 
those who prefer new and unused lubricating oil. The Rule required that 
advertising, promotional material, and labels for lubricant made from 
used oil disclose such previous use. The Rule prohibited any 
representation that used lubricating oil is new or unused. In addition, 
it prohibited use of the term ``re-refined,'' or any similar term, to 
describe previously used lubricating oil unless the physical and 
chemical contaminants had been removed by a refining process.58

    \57\ 16 CFR 406.
    \58\ 16 CFR 406.5.
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    On October 15, 1980, the Used Oil Recycling Act suspended the 
provision of the Used Oil Rule, as well as any similar provision in a 
Commission order, requiring labels to disclose the origin of lubricants 
made from used oil.59 The legislative history indicates 
congressional concern that the FTC Rule's labeling requirement had an 
adverse impact on consumer acceptance of recycled oil, provided no 
useful information to consumers concerning the performance of the oil, 
and inhibited recycling. Moreover, the origin labeling requirements in 
the Used Oil Rule may be inconsistent with the intent of section 383 of 
EPCA, which is that ``oil should be labeled on the basis of performance 
characteristics and fitness for intended use, and not on the basis of 
the origin of the oil.'' 60

    \59\ 42 U.S.C. 6363 note.
    \60\ See Legislative History, Public Law 96-463, U.S. Code Cong. 
and Adm. News, pp. 4354-4356 (1980).
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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 suspended enforcement of those portions of the Used Oil Rule 
and Commission orders requiring that advertising and promotional 
material disclose the origin of lubricants made from used oil.61 
The stay of the Used Oil Rule continues in effect. As part of its 
regulatory review process, the Commission will consider, at some time 
in the future, whether the Used Oil Rule should be rescinded in its 
entirety or otherwise amended.

    \61\ 46 FR 20979.
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D. Section 311.4 Testing

    The Commission proposed in the NPR that, to determine the 
substantial equivalency of processed used oil with new oil for use as 
engine oil, manufacturers use the test procedures that were reported to 
the Commission by NIST on July 27, 1995, entitled ``Engine Oil 
Licensing and Certification System,'' API Publication 1509, 13th 
Edition, January, 1995.62 API operates a voluntary licensing and 
certification system that is designed to provide consumers with the 
technical information needed to understand the performance, viscosity, 
and accepted use of engine oils. Under this system, API licenses two 
types of ``Marks'' which may appear on the labeling of qualified engine 
oils: the API Service Symbol 63 and the API Certification 
Mark.64

    \62\  60 FR 44712, 44714.
    \63\  The Service Symbol identifies the type of engine in which 
the oil should be used, explains the oil's characteristics, and 
describes the oil's ability to protect against wear, sludge, and 
corrosion. The symbol also contains a rating of the oil's viscosity 
that is based on specifications established by the Society of 
Automotive Engineers. Finally, the symbol indicates whether the oil 
has any energy conserving properties when compared to a standard 
reference oil.
    \64\  The API Certification Mark identifies engine oils 
recommended for a specified use. An engine oil is eligible to 
receive the API Certification Mark only if it satisfies the minimum 
performance standards established by the International Lubricant 
Standardization and Approval Committee (``ILSAC''). To receive ILSAC 
approval and, in turn, API certification, motor oils must pass a 
series of tests designed to evaluate the following factors: (1) The 
oil's performance and its effect on the engine at zero degrees 
Fahrenheit or lower; (2) the extent to which the oil prevents engine 
rust and corrosion; (3) the oil's fuel efficiency; (4) the 
capability of the oil to reduce friction and to protect moving parts 
within the engine from fusing together; (5) the oil's resistance to 
thickening under high temperatures up to three hundred degrees 
Fahrenheit; (6) the level of detergents and dispersants in the oil; 
and (7) the content of phosphorus in the oil.
---------------------------------------------------------------------------

    Six commenters addressed the proposed testing standard. The 
commenters agreed that substantial equivalency should be based on the 
test procedures contained in API Publication 1509 as NIST recommended 
to the Commission. However, since this publication is periodically 
revised by API to reflect changes in test procedures and standards, the 
commenters recommended that the final rule require use of test 
procedures found in the 

[[Page 55418]]
``latest'' or ``current'' version of API Publication 1509.65

    \65\  South Coast, D-6, 2; AOCA, D-10, 2; Ford, D-11, 1; API, D-
13, 2; ILMA, D-15, 2; Safety-Kleen, D-16, 7.
---------------------------------------------------------------------------

    The ``Document Drafting Handbook'' of the Office of the Federal 
Register, National Archives and Records Administration, contains the 
rules federal agencies must follow to incorporate materials by 
reference into regulatory text.66 Each statement of incorporation 
by reference in regulatory text must specifically identify the material 
to be incorporated, including the title, date, edition, author, 
publisher, and identification number of the publication. The 
Commission, therefore, does not have discretion to refer generally to 
the ``latest'' or ``current'' edition of API Publication 1509 in the 
final rule. If API Publication 1509 is revised and a subsequent edition 
is published, the Commission may update its incorporation by reference 
of this document by publishing an amendment to the Code of Federal 
Regulations in the Federal Register.
    \66\  This Handbook is issued under the Federal Register Act (44 
U.S.C. 1501-1511) and the regulations of the Administrative 
Committee of the Federal Register (1 CFR 15.10).
---------------------------------------------------------------------------

    Three of these commenters also recommended that the Commission 
modify the proposed rule to permit third-party testing on behalf of the 
manufacturer. According to the commenters, additive manufacturers and 
suppliers or other third parties often perform API tests for lubricant 
manufacturers. The commenters stated that the Commission's proposal 
(i.e., that manufacturers use the NIST test procedures to determine 
substantial equivalency), if left unchanged, would be extremely 
burdensome on the industry.67 The Commission has determined that 
manufacturers may rely on third-party testing conducted in accordance 
with the procedures contained in API Publication 1509. This could be 
important to some manufacturers who do not have testing equipment of 
their own. Accordingly, the final rule states that to determine the 
substantial equivalency of processed used oil with new oil, 
manufacturers or their designees must use the test procedures found in 
API Publication 1509. The allowance for third-party testing, however, 
does not absolve manufacturers of their ultimate responsibility under 
EPCA for making substantial equivalency determinations.68

    \67\  South Coast, D-6, 3; ILMA, D-15, 2; Safety-Kleen, D-16, 6.
    \68\  See final rule sections 311.4 and 311.5. Section 383(b)(2) 
of EPCA (42 U.S.C. 6363(b)(2)) requires manufacturers to make 
determinations of substantial equivalency. The final rule, 
therefore, is consistent with EPCA.
---------------------------------------------------------------------------

    In accordance with section 383(d)(1)(A)(i) of EPCA,69 
therefore, section 311.4 of the final rule prescribes test procedures 
for determining the substantial equivalency of processed used oil with 
new oil distributed for use as engine oil. The test procedures, as 
reported to the Commission by NIST, are found in API Publication 1509, 
13th Edition, January 1995, entitled ``Engine Oil Licensing and 
Certification System.'' 70 In its letter transmitting the test 
procedures to the Commission, NIST stated that the engine test 
procedures described in API Publication 1509, combined with the API 
Engine Oil Licensing and Certification System, are accepted for use 
with automotive engine oils by the Society of Automotive Engineers, the 
American Society of Testing and Materials, and all major automotive 
engine manufacturers.

    \69\  42 U.S.C. 6363(d)(1)(A)(i).
    \70\  The Commission has obtained approval from the Director of 
the Federal Register to incorporate this document by reference into 
section 311.4 of the final rule, as required by section 552(a) of 
the APA, 5 U.S.C. 552(a), and by regulations issued by the Office of 
the Federal Register, 1 CFR 51.
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E. Section 311.5 Labeling

    In accordance with section 383(d)(1)(A)(ii) of EPCA,71 in the 
NPR the Commission proposed labeling standards for containers of 
recycled oil. Section 311.5 of the proposed rule stated that a 
manufacturer may represent, on a label on a container of processed used 
oil, that such oil is substantially equivalent to new oil for engine 
use, but only if the manufacturer has determined, in accordance with 
the test procedures prescribed by the Commission, the substantial 
equivalency of the oil to new oil for that particular end use, and has 
based the representation on that determination.72 For example, a 
manufacturer could represent that its oil is substantially equivalent 
to new oil by displaying the API Mark on its container. A manufacturer 
would not be required to add any qualifiers to its label, such as 
``used'' or ``re-refined.''

    \71\  42 U.S.C. 6363(d)(1)(A)(ii).
    \72\  60 FR 44712, 44715.
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    The Commission received seven comments on this aspect of its 
proposal. Exxon stated that the Commission's proposed labeling 
standards do not address the extent to which an engine oil may exceed 
the minimum requirements for such oils in API Publication 1509, and do 
not address a recycled oil's potential health effects on 
consumers.73 With regard to Exxon's first point, the Commission 
notes that its labeling standards are permissive in nature and do not 
mandate any specific disclosures. If a recycled oil exceeds the minimum 
requirements for substantial equivalency with new oil, a manufacturer 
is free to make such representations on labels, in advertising, or 
wherever appropriate.

    \73\  Comment D-5, 1-2 (``Stating that recycled oils are 
substantially equivalent to new oils without specifically confining 
that equivalency to performance might imply equivalency in health 
effects on humans. In contrast to new petroleum base oils, we are 
not aware of an extensive database on the cancer potential and other 
health effects to humans posed by recycled base oils * * *. While 
[typical] contaminants have been rather extensively studied and 
documented for new oils, the variability of source and effects of 
re-refining have presented a major challenge for health equivalent 
documentation for recycled oils. Some equivalency standards for 
carcinogenic species, adverse health species (i.e., PCB) [and] 
adverse environmental species (i.e., metals) should be put in place 
to ensure health equivalence with new oils.''). In contrast, Safety-
Kleen stated that tests have shown its re-refined base oils to be 
non-mutagenic and non-carcinogenic, and that ``although the FTC's 
mandate to promulgate test procedures does not extend to health-
related issues * * * implementation of the proposed rule is 
consistent with consumers' interest in encouraging the sale of safe 
and healthful products.'' Comment D-16, 9.
---------------------------------------------------------------------------

    With regard to Exxon's second point, the Commission believes that 
consideration of the potential health effects of recycled oil is beyond 
its statutory mandate in this proceeding. It is clear from the 
legislative history of EPCA that Congress was concerned only with the 
performance characteristics of recycled oil, not potential health 
consequences. Section 383(d)(1)(A) of EPCA requires the Commission to 
prescribe the substantial equivalency test procedures certified to the 
Commission by NIST. The test procedures reported to the Commission by 
NIST relate to the performance of oil distributed for use as engine 
oil. The rule's labeling standards, therefore, are based on substantial 
equivalency determinations made in accordance with those test 
procedures. Although Exxon's concerns may be important, they cannot be 
addressed in this proceeding. The Commission has no factual or legal 
basis to address the health effects, or any other non-performance 
qualities, of recycled oil in this rulemaking.
    Three commenters suggested that the final rule include affirmative, 
mandatory labeling requirements.74 As 

[[Page 55419]]
discussed above, in suspending the labeling provision of the 
Commission's Used Oil Rule, Congress stressed that the intent of 
section 383 of EPCA was that ``[o]il should be labeled on the basis of 
performance characteristics and fitness for the intended use, and not 
on the basis of the origin of the oil.'' 75 Congress intended to 
encourage the use of recycled oil that is substantially equivalent in 
performance to new oil. Congress ensured this in section 383 of EPCA by 
directing NIST to establish standards for determining substantial 
equivalency and by prohibiting the Commission from requiring 
manufacturers to label their products with any term, phrase, or 
description connoting less than substantial equivalency. Accordingly, 
the Commission does not believe it is necessary to establish 
affirmative labeling requirements beyond the statutory requirement that 
representations of substantial equivalency be based on the NIST 
standards. If the NIST standards are met, the recycled oil is like new 
oil sold for engine use in terms of minimum performance, and NACAA's 
concerns, therefore, are implicitly addressed. Thus, the final rule 
does not require manufacturers to display the API mark on containers or 
to explicitly state that their engine oil is substantially equivalent 
to new oil. The Commission believes that manufacturers and sellers will 
have every incentive to do so, however.

    \74\ NACAA, D-9, 1 (Recycled or re-refined oil must have an 
equivalency on the label. The consumer will need to know how these 
recycled or re-refined oils are equivalent to new oil, and they will 
need to know its longevity and uses); ILMA, D-15, 3 (ILMA prefers a 
mandatory labeling requirement because the Commission's proposed 
rule allows a considerable range in quality of processed used oil); 
San Diego, E-1, 1 (Used oil's definition and uses must be very clear 
and stated on the label).
    \75\ Legislative History Public Law 96-463, U.S. Code Cong. and 
Adm. News, pp. 4354-4356 (1980).
---------------------------------------------------------------------------

    Ford Motor Company advised the Commission of the existence in the 
marketplace of technically obsolete oils that may not meet modern 
engine warranty requirements. Ford suggested that such oils should not 
be permitted to be labeled as substantially equivalent to new engine 
oil if they cannot be tested in accordance with the test procedures 
prescribed by the Commission.76 The Commission agrees, but 
believes that the rule as proposed already addresses this concern. A 
representation of substantial equivalency can be based only upon a 
determination made in accordance with the test procedures prescribed by 
the Commission.

    \76\ Comment D-11, 1.
---------------------------------------------------------------------------

    Another commenter advised the Commission that in some instances, a 
manufacturer of a recycled engine oil product will sell that finished 
product in bulk to a distributor or retailer who in turn will label the 
product with its own label and brand. The commenter recommended that 
the proposed rule's labeling standards be modified to accommodate these 
situations.77 To clarify that other sellers, including, for 
example, distributors and retailers, may label containers of recycled 
engine oil in accordance with the rule, the Commission has modified 
section 311.5 of the rule to refer to such other sellers.

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

    Finally, the Procurement Recycling Coordinator of the State of 
Wisconsin suggested that the proposed rule's labeling standards 
conflict with some federal and state procurement guidelines and 
Executive Order 12873, which require government procurement officials 
to purchase re-refined oil instead of virgin oil.78 The commenter 
stated that it will be difficult to favor re-refined oil, if it is 
difficult to identify the product.79 The rule, however, does not 
preclude manufacturers or other sellers from labeling re-refined oils 
as such. The labels also could include the percentage of re-refined oil 
in blended products. Marketers of re-refined engine oil have an 
incentive to voluntarily label their products as such to attract 
environmentally concerned or other specifically targeted consumers, 
including federal or state government agencies.

    \78\  A 1993 Executive Order requires federal agencies to 
implement procurement guidelines for re-refined lubricating oil and 
requires NIST to establish a program for testing the performance of 
products containing recovered materials. See Exec. Order No. 12873, 
58 FR 54911 (1993).
    \79\  Wisconsin, E-2, 1-2.
---------------------------------------------------------------------------

    Accordingly, after considering the comments on its NPR proposal, 
the Commission has determined that a manufacturer or other seller may 
represent, on a label on a container of processed used oil, that such 
oil is substantially equivalent to new oil for use as engine oil only 
if the manufacturer has determined such substantial equivalency in 
accordance with the test procedures prescribed by the Commission, and 
has based the representation on that determination. Because the rule 
does not mandate the use of specific disclosures, recycled oil 
manufacturers or other sellers have flexibility to promote the 
performance of their products and their ``substantial equivalency'' 
with new oil and to develop strategies for various markets. 
Manufacturers can voluntarily label recycled oil with terms such as 
``recycled'' to assist in the marketing of their products.80

    \80\ Manufacturers using such terms should, of course, consider 
the Commission's Guides for the Use of Environmental Marketing 
Claims. See, e.g., 16 CFR 260.7(e).
---------------------------------------------------------------------------

F. Section 311.6 Prohibited Acts

    Section 311.6 of the proposed rule tracked the statutory language 
relating to prohibited acts and enforcement of the Commission's rule. 
Section 524 of EPCA 81 prohibits violation of the Commission's 
final rule issued pursuant to section 383 of EPCA.82 The proposed 
rule declared that it is unlawful for any manufacturer to represent, on 
a label on a container of processed used oil, that such oil is 
substantially equivalent to new oil for engine use unless the 
manufacturer has based such representation on the manufacturer's 
determination of substantial equivalency in accordance with the test 
procedures prescribed under section 311.4 of the proposed rule.83

    \81\ 42 U.S.C. 6394(2) and 42 U.S.C. 6395.
    \82\ 42 U.S.C. 6394(2).
    \83\ 60 FR 44712, 44717.
---------------------------------------------------------------------------

    The Commission has revised the proposed rule's prohibited acts 
section to make it consistent with the change made to the labeling 
section of the proposed rule. As discussed above, the labeling 
provision in the final rule (section 311.5) differs from the proposed 
rule in that it states that a ``manufacturer or other seller may 
represent, on a label on a container of processed used oil, that such 
oil is substantially equivalent to new oil * * *'' (emphasis added).
    Accordingly, section 311.6 of the final rule makes it ``unlawful 
for any manufacturer or other seller to represent, on a label on a 
container of processed used oil, that such oil is substantially 
equivalent to new oil for use as engine oil unless the manufacturer or 
other seller has based such representation on the manufacturer's 
determination that the processed used oil is substantially equivalent 
to new oil for use as engine oil in accordance with the NIST test 
procedures prescribed under section 311.4 of this Part.'' (emphasis 
added).
    The final rule, like the proposed rule, also provides that 
violations will be subject to enforcement in accordance with section 
525 of EPCA. Section 525 of EPCA provides that whoever violates the 
Commission's final rule is subject to a civil penalty of not more than 
$5,000 for each violation.84 Whoever willfully violates the 
Commission's rule shall be fined not more than $10,000 for each 
violation.85 Any person who knowingly and willfully violates the 
Commission's rule, after having been subjected to a civil penalty for a 
prior violation of the rule, shall be fined not more than $50,000, or 
imprisoned not more than 

[[Page 55420]]
six months, or both.86 Further, pursuant to section 525 of EPCA, 
whenever it appears to any officer or agency of the United States (in 
whom is vested, or to whom is delegated, authority under EPCA) that any 
person has engaged, is engaged, or is about to engage in acts or 
practices constituting a violation of the Commission's rule, such 
officer or agency may request the Attorney General to bring a district 
court action to enjoin such acts or practices, and upon a proper 
showing, a temporary restraining order or a preliminary or permanent 
injunction shall be granted without bond. A district court also may 
issue mandatory injunctions commanding any person to comply with the 
Commission's rule.87

    \84\ 42 U.S.C. 6395(a).
    \85\ 42 U.S.C. 6395(b).
    \86\ 42 U.S.C. 6395(c).
    \87\ 42 U.S.C. 6395(d).
---------------------------------------------------------------------------

    Because section 525 of EPCA does not explicitly authorize the 
Commission to bring enforcement actions, this rule will be enforced by 
the Department of Justice under 28 U.S.C. 516, which authorizes the 
Department of Justice to enforce statutes that are not specifically 
assigned to other agencies for enforcement. The Commission, however, 
has the authority to investigate violations and make referrals to the 
Department of Justice pursuant to section 525(d) of EPCA.88 In 
addition, the Commission has the authority to prosecute unfair or 
deceptive acts or practices under Section 5 of the FTC Act, 15 U.S.C. 
45, administratively or through Section 13(b) actions, 15 U.S.C. 53(b), 
filed in federal district court. The Commission may obtain injunctive 
relief, as well as equitable remedies, such as redress or disgorgement. 
Therefore, if a manufacturer misrepresents that its oil is 
substantially equivalent to new oil, the Commission can pursue remedies 
under Section 5 of the FTC Act, if appropriate.

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

    Four commenters addressed the issue of enforcement. Pennzoil 
emphasized the importance of ``strict enforcement of the rule'' and 
``imposing stiff penalties on manufacturers which misrepresent the 
equivalency of processed used oil to new oils * * *.'' 89

    \89\ Pennzoil, D-14, 3.
---------------------------------------------------------------------------

    API commented that its licensing and certification standards 
``assure motorists that API-licensed engine oils meet rigorous 
requirements.'' 90 API also stated that, in addition to testing 
oils before they can be marked with the API Service Symbol and 
Certification Mark, it runs additional tests on engine parts, or 
simulates engine operation to show how the oil performs in a variety of 
driving and weather conditions. It also conducts an ``aftermarket audit 
to monitor use of the license and the symbol it conveys.'' 91

    \90\ API, D-13, 4.
    \91\ Id.
---------------------------------------------------------------------------

    The Procurement Recycling Coordinator of the State of Wisconsin 
expressed concern that the API's auditing process might not be 
adequate.92 According to this state official, API chooses the 
brands it audits based on market share volume. Therefore, re-refined 
brands are unlikely to be chosen because sales are relatively 
low.93 This commenter further noted that API failed to provide him 
with information he requested regarding the performance testing of re-
refined motor oil beyond ``the individual manufacturers' assertions 
that they have met the API requirements.'' 94

    \92\ Wisconsin, E-2, 2.
    \93\ Id.
    \94\ Id.
---------------------------------------------------------------------------

    Ford stated that although meeting the requirements of API 
Publication 1509 ``goes a long way in establishing substantial 
equivalency, it does not ensure that a manufacturer's oil continuously 
meets these requirements.'' 95 Ford accordingly suggested that the 
FTC could adopt a random audit process to ensure continued 
compliance.96

    \95\ Ford, D-11, 2.
    \96\ Id.
---------------------------------------------------------------------------

    The Commission agrees with the commenters that enforcement of the 
rule is critical to the protection of consumers, as well as those 
manufacturers that are following the proper certification and labeling 
standards, and to the maintenance of public confidence in the 
performance of recycled oil. Accordingly, the Commission will take 
whatever steps are necessary to ensure compliance with the rule. 
Moreover, although the rule does not contain any recordkeeping or 
reporting requirements, any manufacturer or seller labeling recycled 
oil pursuant to this rule must be able to demonstrate that the 
necessary testing has been performed and the determination of 
substantial equivalency properly made.97 The Commission's 
enforcement plan will vary depending on whether the Commission 
determines that there is a compliance problem. The Commission welcomes 
any information from persons who believe that the rule is being 
violated.

    \97\ In accordance with the Commission's advertising 
substantiation doctrine, sellers must have a reasonable basis to 
support material, objective claims. See Thompson Medical Co., 104 
F.T.C. 648, 839 (1984) (Appendix), aff'd, 791 F.2d 189 (D.C. Cir. 
1986), cert. denied, 479 U.S. 1086 (1987).
---------------------------------------------------------------------------

III. Effective Date

    EPCA directs the Commission to ``prescribe'' the relevant test 
procedures and pertinent labeling standards within 90 days after the 
date on which NIST reports such test procedures to the Commission. It 
does not, however, specify an effective date for the rule. In the NPR, 
the Commission proposed that the rule become effective 30 days after 
publication of a final rule in the Federal Register.98 The two 
comments on this issue supported the proposed effective date.99 
Therefore, the Commission has determined that the final rule will 
become effective 30 days after it is published in the Federal Register. 
This will provide sufficient time for affected parties to comply with 
the rule's labeling standards or take notice of them.

    \98\ 60 FR 44712, 44715.
    \99\ South Coast, D-6, 4; Safety-Kleen, D-16, 13.
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IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') 100 requires agencies 
to prepare regulatory flexibility analyses when publishing proposed 
rules 101 unless the proposed rule, if promulgated, would not have 
a ``significant economic impact on a substantial number of small 
entities.'' 102 In the NPR, the Commission preliminarily concluded 
that the economic impact of the proposed labeling standards appeared to 
be de minimis.103 The rule proposed by the Commission, and now 
made final, permits, rather than requires any container of recycled oil 
to bear a label indicating that it is substantially equivalent to new 
engine oil, if such determination has been made in accordance with the 
prescribed test procedures. Any economic costs incurred by entities 
that choose to make a determination of substantial equivalency are not 
imposed by the rule. The rule contains no reporting or recordkeeping 
requirements, and it permits recycled oil to be labeled with 
information that is basic and easily ascertainable.

    \100\ 5 U.S.C. 601-612.
    \101\ 5 U.S.C. 603(a).
    \102\ 5 U.S.C. 605(b).
    \103\ 60 FR 44712, 44716.
---------------------------------------------------------------------------

    In the NPR, the Commission also tentatively concluded that the 
proposed rule would not affect a substantial number of small entities 
because relatively few companies currently manufacture and sell 
recycled oil as engine oil. Of those that do, the Commission stated 
that most are not 

[[Page 55421]]
``small entit[ies]'' as that term is defined either in section 601 of 
RFA 104 or applicable regulations of the Small Business 
Administration.105

    \104\ 5 U.S.C. 601(6).
    \105\ 13 CFR 121.
---------------------------------------------------------------------------

    In light of these factors, the Commission certified under the RFA 
that the rule proposed would not, if promulgated, have a significant 
impact on a substantial number of small entities, and, therefore, a 
regulatory analysis was not necessary.106 To ensure the accuracy 
of this certification, however, the Commission requested comments on 
whether the proposed rule would have a significant impact on a 
substantial number of small entities.

    \106\ 60 FR 44712, 44716.
---------------------------------------------------------------------------

    Two commenters specifically addressed this aspect of the 
Commission's proposal. Both stated that the rule would not have a 
significant economic impact on a substantial number of small 
entities.107 In adopting the final rule, the Commission recognizes 
that although there may be some ``small entities'' among private-label 
retail sellers or distributors of recycled engine oil, the rule's 
labeling standards will have only a minimal impact on these small 
entities. Any such impact will likely consist of retailers and 
distributors voluntarily labeling recycled engine oil containers in 
order to market their products. The impact on such small entities, 
therefore, is de minimis and not significant. In addition, the rule 
adopted by the Commission does not require recycled oil manufacturers 
to conduct substantial equivalency tests themselves. They may use third 
parties, thus obviating the need to have testing equipment of their 
own. Thus, the rule minimizes burdens on even small businesses.

    \107\ NORA, D-12, 5; Safety-Kleen, D-16, 13. Safety-Kleen stated 
that it is not aware that a substantial number of small entities 
manufacture processed used oil for sale as engine oil.
---------------------------------------------------------------------------

    On the basis of all the information now before it, the Commission 
determines that the rule will not have a significant impact on a 
substantial number of small entities. Consequently, the Commission 
concludes that a regulatory flexibility analysis is not required. In 
light of the above, the Commission certifies, under section 605 of the 
RFA,108 that the rule it has adopted will not have a significant 
impact on a substantial number of small entities.

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

V. Paperwork Reduction Act

    In the NPR, the Commission noted that its proposed rule contained 
no reporting, recordkeeping, labeling or other third-party disclosure 
requirements, so there was no ``information collection'' necessitating 
clearance by the Office of Management and Budget (``OMB'').109 
However, to ensure the accuracy of its conclusion, the Commission 
solicited comments on any paperwork burden the proposed rule might 
impose. The one comment on this issue supported the Commission's 
conclusion.110 Accordingly, the Commission has determined that the 
final rule does not involve the ``collection of information,'' as 
defined by the regulations of OMB 111 implementing the Paperwork 
Reduction Act,112 and, therefore, OMB clearance is not required.

    \109\ 60 FR 44712, 44716.
    \110\ Safety-Kleen, D-16, 13.
    \111\ 5 CFR 1320.7(c).
    \112\ 44 U.S.C. 3501-3520.
---------------------------------------------------------------------------

VI. Regulatory Review

    The Commission has implemented a program to review all of its 
current and proposed rules and guides. One purpose of the review is to 
minimize the adverse economic impact of new regulatory actions. As part 
of that overall regulatory review, the Commission solicited comments in 
the NPR on questions concerning benefits and significant burdens and 
costs of the proposed rule and alternatives to the proposals that would 
increase benefits to consumers of recycled engine oil and minimize the 
costs and other burdens to firms subject to the rule's 
requirements.113 Only two commenters specifically addressed these 
issues, and they stated that the rule will impose no adverse economic 
impact even on any small businesses that might be covered by the 
rule.114 Accordingly, the Commission concludes that the rule it 
has adopted will not impose any significant burdens and costs on firms 
subject to the rule's requirements.

    \113\ 60 FR 44712, 44716.
    \114\ NORA, D-12, 5; Safety-Kleen, D-16, 13.
---------------------------------------------------------------------------

List of Subjects in 16 CFR Part 311

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

VII. Text of Rule

    Accordingly, the Commission amends 16 CFR Chapter I by adding a new 
part 311 to Subchapter C to read as follows:

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

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

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


Sec. 311.1  Definitions.

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


Sec. 311.2  Stayed or invalid parts.

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


Sec. 311.3  Preemption.

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


Sec. 311.4  Testing.

    To determine the substantial equivalency of processed used oil with 
new oil for use as engine oil, manufacturers or their designees must 
use the test procedures that were reported to the Commission by the 
National Institute of Standards and Technology (``NIST'') on July 27, 
1995, 

[[Page 55422]]
entitled ``Engine Oil Licensing and Certification System,'' American 
Petroleum Institute (``API'') Publication 1509, Thirteenth Edition, 
January, 1995. This incorporation by reference was approved by the 
Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 
1 CFR Part 51. Copies of API Publication 1509, ``Engine Oil Licensing 
and Certification System,'' may be obtained from the American Petroleum 
Institute, 1220 L Street, NW., Washington, DC 20005, or may be 
inspected at the Federal Trade Commission, Public Reference Room, room 
130, 600 Pennsylvania Avenue, NW., Washington, DC, or at the Office of 
the Federal Register,, 800 North Capitol Street NW., suite 700, 
Washington, DC.


Sec. 311.5  Labeling.

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


Sec. 311.6  Prohibited acts.

    It is unlawful for any manufacturer or other seller to represent, 
on a label on a container of processed used oil, that such oil is 
substantially equivalent to new oil for use as engine oil unless the 
manufacturer or other seller has based such representation on the 
manufacturer's determination that the processed used oil is 
substantially equivalent to new oil for use as engine oil in accordance 
with the NIST test procedures prescribed under Sec. 311.4 of this Part. 
Violations will be subject to enforcement through civil penalties, 
imprisonment, and/or injunctive relief in accordance with the 
enforcement provisions of Section 525 of the Energy Policy and 
Conservation Act (42 U.S.C. 6395).

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 95-26980 Filed 10-30-95; 8:45 am]
BILLING CODE 6750-01-P