[Federal Register Volume 61, Number 142 (Tuesday, July 23, 1996)]
[Proposed Rules]
[Pages 38119-38127]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18544]


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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 134

RIN 1515-AB61


Country of Origin Marking Requirements for Frozen Imported 
Produce

AGENCY: Customs Service, Treasury.

ACTION: Notice of proposed rulemaking; solicitation of comments.

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SUMMARY: In response to comments received concerning an Advance Notice 
of Proposed Rulemaking published by Customs on February 2, 1995, 
regarding the need for country of origin marking requirements for 
frozen imported produce, and in further consideration of Customs duty 
to prescribe marking rules for imported merchandise when necessary, 
Customs proposes to amend its regulations to require that the country 
of origin of imported produce be marked on the front panel of packages 
of frozen produce in order for the marking to comply with the statutory 
requirement that it be in a ``conspicuous place''. This amendment is 
proposed to ensure a uniform standard for the country of origin marking 
of frozen produce.

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

ADDRESSES: Written comments (preferably in triplicate) may be addressed 
to the Regulations Branch, Office of Regulations and Rulings, U.S. 
Customs Service, Franklin Court, 1301 Constitution Ave., NW., 
Washington, DC 20229. Comments submitted may be inspected at the 
Regulations Branch, Office of Regulations and Rulings, U.S. Customs 
Service, Franklin Court, 1099 14th Street, NW., Suite 4000, Washington, 
DC.

FOR FURTHER INFORMATION CONTACT: David Cohen, Special Classification 
and Marking Branch, Office of Regulations and Rulings (202-482-6980).

SUPPLEMENTARY INFORMATION:

Background

    Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), 
provides that, unless excepted, every article of foreign origin (or its 
container) imported into the United States shall be marked in a 
conspicuous place as legibly, indelibly, and permanently as the nature 
of the article (or its container) will permit, in such a manner as to 
indicate to the ultimate purchaser in the United States the English 
name of the country of origin of the article. Failure to mark an 
article in accordance with the requirements of 19 U.S.C. 1304 may 
result in the levy of an additional duty of ten percent ad valorem. 
Part 134, Customs Regulations (19 CFR Part 134), implements the country 
of origin marking requirements and exceptions of 19 U.S.C. 1304. This 
document concerns the correct country of origin marking for packages of 
frozen imported produce pursuant to 19 U.S.C. 1304 and 19 CFR part 134.

Customs Ruling and Court Action

    On May 9, 1988, Norcal/Crosetti Foods, Incorporated, and other 
California packers of domestically-grown produce requested a ruling 
from Customs concerning what constituted a

[[Page 38120]]

conspicuous place for country of origin marking on packages of frozen 
produce, i.e., whether the marking should be located on the front or 
some other panel of the package and in what type size and style it 
should appear. The request asked Customs to determine whether packaged 
frozen imported produce was considered marked in a conspicuous place if 
the marking did not appear on the front panel of the package in 
prominent lettering. Sample packages which were not marked on their 
front panels were submitted with the ruling request. On November 21, 
1988, Customs issued Headquarters Ruling Letter (HRL) 731830, and 
stated that all of the samples that the domestic packers submitted 
complied with the country of origin marking requirements. Customs found 
that the country of origin marking on packages of frozen imported 
produce was not required to appear on the front panel of the package, 
be in lettering at least as prominent as the product description, and/
or appear in a color or typestyle vividly contrasting with the rest of 
the front panel to be considered conspicuous.
    The packers obtained judicial review of the Customs determination 
in HRL 731830 by the Court of International Trade (CIT). Norcal/
Crosetti Foods, Inc. v. U.S. Customs Service, 15 CIT 60, 758 F.Supp. 
729 (CIT 1991) (Norcal I). In Norcal I, the Court disagreed with the 
ruling and held that frozen produce is not marked in a conspicuous 
place unless it is marked on the front panel of the package.
    Upon examination of the sample packages supplied to Customs, the 
Court found that the only consistency in the country of origin marking 
of frozen imported produce was the inconsistency of where manufacturers 
chose to place the marking. The Court found that most often the marking 
was lost among information denoted in various small typefaces which 
appeared on the back or side panels of the package. The Court stated 
that producers were reluctant to conspicuously display the source of 
the food, and that the result of these inconsistencies was that 
customers could not be assured of easily finding the country of origin 
marking, even upon reasonable inspection of the package. The Court 
stated that this was a situation at cross-purposes with Congress' 
attempt to ensure that consumers know of the country of origin of 
imported goods before they decide to purchase the particular product.
    The court took judicial notice of the common method of displaying 
the merchandise in shelved freezers or frozen food bins with the front 
panel in view and the rear panel obscured. The Court found that frozen 
vegetables were commonly marketed in long, low freezers with open tops, 
or wall-mounted freezers with glass doors, and that access to frozen 
produce is limited and sometimes awkward, given that the produce must 
not defrost. The Court further found that packages are usually 
displayed so that only the front panel is clearly visible. Further, 
because the packages are frozen and cold to the touch, and because, at 
least in upright freezers, the freezer door must be held open, the 
Court found that customers are unable to scan the labels on frozen 
produce as easily as those on dry goods or other produce that are not 
frozen. All of these factors, according to the Court, prevent consumers 
from having the opportunity to see the country of origin marking that 
is secluded among the small print on the back of a package.
    The Court found the analogy in the ruling to the placement of 
nutritional information on packages unconvincing, because that 
information was not required information at that time. In contrast, it 
found a more persuasive analogy in the Food and Drug Administration 
(FDA) requirement that packages disclose the weight of their contents 
on the principal display panel. Such quantity of contents disclosure 
must be a certain size and located on the front or most prominent panel 
of the package.
    The Court also observed that certain packages of frozen produce 
listed the name and U.S. address of the manufacturer and failed to 
indicate the country of origin in close proximity as required under the 
Customs Regulations. Applying 19 CFR 134.46, the Court held that if the 
words ``U.S.,'' or ``America,'' or a United States address appeared on 
those labels, the article would have to be marked to indicate the 
country of origin in lettering of at least a comparable size.
    The Court concluded by finding that, although Customs had routinely 
interpreted ``conspicuous'' through 19 CFR 134.41(b), Customs failed in 
its issuance of HRL 731830 to follow the clear meaning of the statute 
or the regulation. Section 134.41(b) of the Customs Regulations 
provides, in part, that the country of origin marking should be easily 
found by the ultimate purchaser and read without strain. For packages 
of imported frozen produce, the Court found that the country of origin 
marking requirements were not met by the present practice of indicating 
the country of origin marking on the back or side panels.
    The Court remanded the matter to Customs with directions to issue a 
new ruling. Pursuant to the court's order in Norcal I, Customs issued 
Treasury Decision (T.D.) 91-48 (56 FR 24115, May 28, 1991), which 
required the country of origin marking for frozen produce to be placed 
on the front panel of the package.
    The government appealed the CIT's decision to the United States 
Court of Appeals for the Federal Circuit (CAFC) on the ground that the 
CIT lacked jurisdiction. Norcal/Crosetti Foods, Inc. v. U.S., (Appeal 
No. 91-1295), 10 Fed.Cir. ____, 963 F.2d 356 (CAFC 1992) (Norcal II). 
In Norcal II, the CAFC reversed the judgment of the CIT and remanded 
the case with instructions to dismiss the complaint for lack of 
jurisdiction; the Court held that since the packers had not exhausted 
their administrative remedies, their claims were not properly before 
the CIT. The CAFC indicated that a proper course would have been for 
the packers to file a domestic interested party petition with Customs 
under section 516 of the Tariff Act of 1930, as amended (19 U.S.C. 
1516).

The Section 516 Petition and Agency Action (1993)

    A Section 516 petition was initiated by letters dated January 13 
and January 29, 1993, and filed with Customs pursuant to part 175, 
Customs Regulations (19 CFR part 175). The petitioners were Norcal/
Crosetti Foods, Incorporated and Patterson Frozen Foods, Incorporated, 
California packers of produce grown domestically. The International 
Brotherhood of Teamsters, on behalf of its Local 912, also submitted a 
petition by letter dated February 24, 1993, supporting the Norcal and 
Patterson petition (hereinafter, the petitions are collectively 
referred to as the Norcal petition). The Norcal petition asked Customs 
to reconsider its position in HRL 731830, and to adopt the findings of 
the CIT in Norcal I.
    The petitioners contended that frozen imported produce is not 
marked in accordance with the requirement of 19 U.S.C. 1304 that the 
country of origin shall appear in a conspicuous place; under a correct 
application of 19 U.S.C. 1304, the country of origin must appear on the 
front panel of a package to be considered as marked in a conspicuous 
place. These domestic producers argued further that Customs standards 
for the size and prominence of such markings were not in conformity 
with 19 U.S.C. 1304. Supporting materials for the petition included 
samples of frozen produce packages. These samples were alleged to be 
illustrative of labels that, for various reasons, were not in 
compliance with the marking rules: e.g.,

[[Page 38121]]

missing markings, illegible markings, and markings that were not in a 
``conspicuous place.'' The allegations closely mirrored the allegations 
in the complaint [filed] and the CIT's findings in Norcal I.
    Customs published a notice in the Federal Register on September 9, 
1993 (58 FR 47413), advising the public of the petitioners' contentions 
and soliciting public comments on the issues raised in the petition. 
Also in this notice, Customs effectively suspended the effective date 
of T.D. 91-48 by reinstating HRL 731830. Seventy-one comments were 
submitted in response to the Norcal petition.
    Approximately half of the public comments expressed support for the 
Norcal petition to require the country of origin marking of frozen 
imported produce to appear on the front panel of the packaging. These 
commenters presented data and arguments concerning the nature of frozen 
produce and the manner of its storage and presentation for sale, 
contending mainly that the inherent coldness of frozen produce makes 
the packaging more cumbersome to handle than other food products. These 
commenters accordingly concluded that the ultimate purchaser is likely 
to examine the produce in haste, and is not likely to see country of 
origin marking which appears on the back or side panel of the 
packaging.
    Some respondents also expressed concern that frozen produce 
packaging tends to accumulate frost while being stored in 
refrigerators, such that the country of origin marking often becomes 
obscured in a way that is unique to frozen produce. In view of these 
factors, it was argued, country of origin marking which does not appear 
on the front of these frozen produce packages cannot be considered in a 
conspicuous place, and cannot meet the standard stated at 19 CFR 
134.41(b) that marking must be easily found and read without strain.
    Commenters opposed to the Norcal petition tended to dismiss these 
contentions as unfounded. These commenters claimed that there was no 
reason to establish a different marking location for frozen produce 
packages as opposed to other imported articles. They did not see the 
temperature of the package as a fundamental obstacle to handling a 
frozen produce package and turning it over to find country of origin 
marking. They assert that even the information appearing on the front 
panel probably cannot be read without picking up the package.
    The petitioners, as well as several subsequent commenters, 
submitted for consideration samples of frozen produce packaging as 
evidence of common marking practices which were said to be short of the 
statutory standards for permanence, legibility, and conspicuousness. 
All the markings shown on the sample packages appear on the back panel. 
One major category of sample packages consisted of rectangular packages 
on which all the printed information, except the country of origin 
marking, is pre-printed. The country of origin instead is evidently 
stamped after the package is filled with frozen produce. The quality of 
this marking tends to be poor, and for the most part does not satisfy 
existing standards for permanence and legibility. The location is quite 
inconsistent between various packages in the same batch. Sometimes the 
lettering is stamped over pre-printed information; sometimes it is 
sideways or crooked; and sometimes it is smudged. These stamped-on 
markings are insufficient under the current statutory criteria of 19 
U.S.C. 1304, particularly as regards legibility, indelibility and 
permanence.
    Commenters opposed to the petition believe that these defects 
should be remedied by enforcement under the regulations of current 
standards governing legibility, permanence, indelibility and 
conspicuous placement, and that there is no compelling evidence that 
the current regulations are inadequate.
    Other sample packages submitted by the petitioners and other 
commenters, while marked permanently and legibly under current 
standards (on the back panel), showed geographic markings or names 
which could create confusion or be misleading as to the country of 
origin of the frozen produce. Some such names or markings were part of 
the distributors' trademarks, while others used generic names for 
vegetable products in potentially confusing ways. The petitioners and 
other commenters argue that the remedy for these potentially confusing 
or misleading markings is country of origin marking which appears 
uniformly on the front panel of the package. They believe the ultimate 
purchaser is less likely to inspect frozen produce on its back panel to 
ascertain its country of origin when the front panel of the packaging 
indicates in print a reference to a locale in a country other than the 
country of origin.
    Commenters opposed to the petition do not believe that ultimate 
purchasers are deceived by such references. One opponent indicated that 
while in some cases marking on the front panel of the package may be 
needed, it is not generally necessary if the current regulations were 
enforced in all cases. One of the sample packages already has been the 
subject of corrective action and a ruling by Customs. See, HRL 735085 
(June 4, 1993) (Mixed frozen vegetables sold as ``American Mixtures'' 
required to have country of origin marking on front of package to be 
considered conspicuously marked; Customs indicated at that time, 
however, that marking on the back could be permissible in the absence 
of potentially confusing words or marks).
    In T.D. 94-5 (58 FR 68743, December 29, 1993), Customs issued a 
final interpretive ruling based on the comments described above which 
were received in response to the September 9, 1993, Federal Register 
notice. T.D. 94-5 stated that back panel marking was insufficient and 
front panel marking of country of origin was required in a specified 
type size and style designed to match the net weight or quantity 
marking of the product under the Food Labeling Regulations (21 CFR 
101.105). In T.D. 94-5, Customs modified T.D. 91-48 by requiring that 
conspicuous marking within the meaning of T.D. 91-48, shall be limited 
to marking which complies with the additional specifications for type 
size and style set forth in T.D. 94-5. The effective date initially 
established for the decision in T.D. 94-5 was May 8, 1994, in order to 
allow importers time to modify their packaging. On March 29, 1994, 
however, Customs issued two Federal Register documents: One (59 FR 
14458) suspending the compliance date of May 8, 1994, for parties 
adversely affected by the country of origin marking requirements 
specified in T.D. 94-5, and the other (59 FR 14579) giving notice of 
its intention to adopt a new compliance date of January 1, 1995, and 
soliciting comments on both the proposed compliance date and on the 
specifications regarding type size and style.
    In response to T.D. 94-5, however, an action was filed with the 
Court of International Trade on behalf of American Frozen Food 
Institute, Incorporated, and National Food Processors Association, 
which challenged the Customs decision. In American Frozen Food 
Institute, Inc.; et al. v. The United States, (Slip Op. 94-97), 18 CIT 
______, 855 F.Supp. 388 (CIT 1994), the CIT ruled that because Customs 
had chosen to promulgate front panel marking in combination with other 
requirements needing APA (Administrative Procedure Act, 5 U.S.C. 553) 
rulemaking procedures, the entirety of T.D. 94-5 could not stand. The 
Court accepted the government's position that to the extent the front 
panel marking portion of T.D. 94-5 was

[[Page 38122]]

separable from the other portions of the ruling it constituted an 
interpretive ruling. However, the court found that the type size and 
style portion of the ruling functioned as a legislative ruling, as 
Customs had selected a narrow range of sizes and styles from a broad 
spectrum of type sizes and styles that could be considered conspicuous. 
Accordingly, the Court found that the selection of type size and style 
requirements imposed additional requirements which were not promulgated 
as a regulation in accordance with APA rulemaking procedures.
    The court further concluded that because the full rulemaking 
process had not been followed, it would not rule on whether T.D. 94-5 
was acceptable substantively. Since the court declared T.D. 94-5, in 
its entirety, null and void, there is no decision on the 1993 petitions 
of the domestic interested parties. On September 8, 1995, Customs 
received notice from Dean Foods Vegetable Company (Dean Foods) that it 
had purchased the assets of Norcal/ Crosetti Foods, Incorporated. Dean 
Foods stated that, as Norcal/ Crosetti's successor in interest, it no 
longer supported the petition and it withdrew the comments submitted by 
Norcal/ Crosetti Foods in response to Customs solicitation of comments. 
However, the petitions of Patterson Frozen Foods, Incorporated, and the 
International Brotherhood of Teamsters, on behalf of its Local 912, are 
still pending.

Proposed Rulemaking

    In view of the foregoing background, Customs is exercising its 
authority under 19 U.S.C. 1304(a)(1) to prescribe by regulation 
reasonable methods of marking and a conspicuous place on the article 
(or container) where the marking must appear on packages of frozen 
produce. As the foregoing history of the issue illustrates, the 
question of marking of frozen imported produce has been embroiled in 
eight years of procedural disputes and litigation. In an attempt to 
disentangle the issue from this history, to provide complete regulatory 
due process, and to facilitate a fresh examination of the substantive 
issues involved, Customs chose to publish an advance notice of proposed 
rulemaking (ANPRM). 60 FR 6464 (1995). Customs published the ANPRM on 
February 2, 1995, and solicited comments with respect to the marking 
requirements for frozen imported produce. The comments received are 
summarized below.
    In addition, Customs has considered and drawn upon evidence and 
opinions in the record of this matter, including public comments 
received since the first ruling request and the various court opinions. 
These have been considered for whatever persuasive authority they may 
have regardless of whether they were submitted in response to the ANPRM 
or, in the case of judicial opinions, are legally binding.

Summary of Comments Received in Response to the ANPRM.

    A total of fifty comments were submitted in response to the 
February 2, 1995, ANPRM. The commenters included a number of trade 
organizations, companies in the business of manufacturing, processing, 
and distributing frozen produce, a non-profit organization, the 
Canadian government, members and officials of the International 
Brotherhood of Teamsters; the California Department of Justice, and a 
U.S. manufacturer of semiconductors, personal computers, and 
communications products. In addition to general comments, Customs 
invited specific comments regarding several issues, many of which have 
been incorporated into this document.
    In response to the issues that Customs raised in the ANPRM as to 
whether there are current abuses in the country of origin marking of 
imported packages of frozen produce, the commenters in favor of front 
panel marking claim that many importers, processors, and distributors 
of frozen produce neglect to mark packages of frozen imported produce 
at all. In support of this position, they submitted several samples of 
what they believe to be non-complying labels. Some commenters also 
indicated that the marking was not conspicuous because the marking was 
in an inconspicuous place, the type size was too small, or the ink was 
smeared. Commenters opposed to a proposed rulemaking contend that they 
are unaware of any abuses with respect to the country of origin marking 
of frozen produce and believe that there is no need to provide specific 
marking requirements for frozen produce. They stated that any problems 
with the country of origin marking of frozen produce can be addressed 
through a case-by-case basis rather than additional rulemaking.
    On the other hand, some of the commenters believe that the way 
frozen produce is displayed in the supermarket is sufficient reason to 
require special marking rules. The commenters in favor of front panel 
marking believe that because of the difference between the way canned 
produce and frozen produce are displayed in the supermarket, canned 
produce is easier for the consumer to pick up and inspect than frozen 
produce. Further, they contend that canned produce is displayed on a 
shelf at room temperature which makes it easy for the consumer to pick 
up and inspect the can. The cold conditions under which frozen produce 
must be maintained in the retail store make it less likely that 
consumers will examine the back or side panels of frozen produce 
packages prior to purchase. Moreover, these commenters submit that the 
consumer has a greater motivation to examine the back label of canned 
vegetables than of frozen produce. They maintain that the majority of 
frozen vegetables sold at retail are plain, blanched vegetables, 
without additives of any kind.
    These commenters further state that the ingredients of frozen 
produce are generally named and pictured on the front panel of each 
package, there is almost never any added salt or sugar, and the 
consumer typically knows about the high nutritional content of 
vegetables and their ease of preparation. As a result, these commenters 
contend that the consumer typically has no particular need to examine 
the ingredients list, the nutritional content or the cooking 
instructions as part of the process involved in making a decision of 
whether or not to purchase the frozen produce item. Canned produce, 
they say, by contrast with frozen produce, usually contains ingredients 
beyond the pure agricultural product; therefore, the buyer of canned 
produce has more incentive to examine the contents, nutritional 
statement and cooking instructions than the buyer of frozen produce.
    Commenters opposed to the requirement for front panel country of 
origin marking submit that there is no reason for frozen produce to be 
treated any differently than any other packaged food product. They 
argue that Customs has never imposed a general requirement that 
packaged goods bear country of origin marking on any specific panel or 
in any specific type size or type style. They submit that it would be 
arbitrary and capricious for Customs to impose on frozen produce a 
different and more burdensome labeling requirement than that which is 
applied to all other food products and to all other packaged products 
that are subject to the marking requirements.
    These respondents dismiss the view that packages of frozen produce 
should be the subject of special regulatory attention because they are 
displayed in retail freezers and are ``cold to the touch.'' They 
maintain that there is no evidence to show that a frozen produce 
package is so cold as to prevent the purchaser from removing it from 
the

[[Page 38123]]

freezer display, examining it, and carrying it to the check-out 
counter. Moreover, they state that consumers are accustomed to picking 
up frozen food packages to read the nutritional information contained 
on the rear and side panel of the product. They point out that in 
enacting its current regulations, the FDA recognizes that the 
information panel which can be located on the back or side panel of a 
package is a conspicuous location for ingredient and nutrition 
information. Thus, these commenters believe that frozen produce should 
not be treated any differently for marking purposes than any other 
packaged food product.
    In response to the issue of whether Customs should prescribe, by 
regulation, certain type size and style specifications for the country 
of origin marking of frozen produce, commenters who were in favor of 
this proposed measure believe that the type size and style should vary 
depending upon the size of the package. One commenter suggested that 
the marking should be the same size and style as the net weight 
declaration. Another commenter suggested that Customs follow the 
specifications set forth in the Federal Food Labeling Regulations (21 
CFR 101.1) for information appearing on the principal display panel for 
the country of origin marking of packages of frozen produce.
    The commenters opposed to the imposition of certain type size and 
style specifications maintained that additional regulations that would 
increase the prominence of country of origin markings would impose 
undue burdens on importers and would almost certainly be inconsistent 
with the government's interest in encouraging the consumption of 
vegetables and discouraging false health concerns.
    Moreover, the commenters opposed to requiring certain type size and 
style specifications for country of origin marking claim that there is 
a vast difference in the amount of space that would be occupied on a 
package, depending upon whether one or ten countries are listed. They 
state that the question posed as to whether type size should vary with 
the size of the package emphasizes the impracticality of imposing 
industry-wide blanket regulations. These commenters believe that 
determinations of conspicuousness can and should be made on a case-by-
case basis.

Customs Analysis of the Regulatory Options

    With regard to a basic issue raised in the ANPRM, that is, whether 
rulemaking is needed, Customs determined that not to proceed with a 
marking proposal would leave the country of origin marking situation no 
better than it was prior to Norcal I. Manufacturers of frozen produce 
would still be free to choose marking options that could make it 
difficult for the average consumer to learn the origin of the produce 
prior to purchase, contrary to clear Congressional intent in the law. 
The weight of information and opinion submitted in response to the 
ANPRM did not furnish any justification for denial of the Section 516 
petition and termination of the rulemaking process at this stage.
    In developing this proposed regulation, Customs weighed a number of 
alternatives, one of which, front panel marking, was selected as the 
most consistent with the statutory requirement for marking frozen 
produce in a conspicuous place. Customs believes that a front panel 
requirement would prevent many of the regulatory abuses brought to the 
attention of Customs and the CIT and illustrated by the label samples 
submitted to Customs.
    Customs has concluded that, while it can continue on a case-by-case 
basis to correct the types of marking problems identified in the record 
of this issue, and will do so as necessary, nonetheless a more 
comprehensive solution is needed to assure proper marking of frozen 
produce for the reasons discussed below. As a result, Customs is 
proposing a blanket requirement that country of origin marking appear 
on the front panel of the package of frozen imported produce. This 
should afford a definitive solution to a problem which has been 
demonstrated to be extensive.
    Much of the frozen imported produce sold in the United States is 
packaged after importation. As such, the marking of the retail packages 
is not subject to physical supervision by Customs, but is performed 
under importers' certifications for the marking of repacked articles 
tendered in accordance with 19 CFR 134.25. The administrative burden of 
enforcing the marking of such repacked articles on a case-by-case basis 
is an additional reason for establishing uniform specifications for the 
marking of frozen produce. Such specifications should reduce ambiguity 
and interpretive questions, thus facilitating broad-based compliance by 
importers, packagers, and distributors.
    Customs has concluded that the nature of frozen produce and its 
typical retail presentation makes marking on the back or side panel 
insufficient; that there are numerous examples of insufficient and 
potentially misleading marking practices based on current marking which 
is typically on the back panel; that marking appearing on the back 
panels of frozen produce packages is not easily found and is frequently 
obscured by competing text or graphics; and that consequently a uniform 
standard for marking should be prescribed for frozen produce packages 
in order to assure proper marking under 19 U.S.C. 1304.
    In addition, in Customs judgment, a front panel marking requirement 
actually represents economy in government regulatory activity in 
contrast to the available alternatives. By its very nature, the front 
panel is a ``conspicuous place''. Consequently Customs, in the proposed 
regulation, has been able to minimize government-imposed requirements 
and leave the details of type size and label graphics to the 
manufacturer while reserving the right to proscribe abuses. Such 
regulatory simplicity is possible because there is little incentive or 
opportunity for the manufacturer to clutter up the front panel in a way 
that would obscure the marking and, in fact, there is a strong 
disincentive to do so.
    In contrast, by its very nature, the back panel is not a 
``conspicuous place''; it affords many opportunities to bury the origin 
marking in other information or graphic devices. In order to interpret 
back panel marking as marking in a ``conspicuous place'' within the 
meaning of the statute, Customs would have an obligation to inject 
itself into the micromanagement of label graphics in order to 
circumscribe the current abuses. (NOTE: The ``back panel'' routinely 
has been referred to in this discussion because it is the location 
typically chosen by the manufacturer for marking under current 
practice. While the side panel may contain, in some instances, less 
competing information and graphics than the back panel, Customs 
concludes that the side panel is even less likely than the back panel 
to receive careful scrutiny by the consumer except after purchase when 
it may be necessary to refer to it to find other information, such as 
cooking time.)
    Regulating country of origin marking on the back, or information, 
panel thus could involve a fairly detailed set of rules on type sizes 
and styles, background colors, margins, headers, etc. It could even 
involve a complex exercise in regulating label graphics comparable to 
the ``Nutrition Facts'' box prescribed by the Food and Drug 
Administration. While a number of commenters have objected to front 
panel marking, we have concluded that this alternative is less 
burdensome to industry than the Government injecting

[[Page 38124]]

itself into the minutiae of label graphics on the back or information 
panel. Absent such Government controls on marking on the back panel, we 
believe that the current situation where the marking tends to disappear 
in other text would not be remedied.
    In this regard, Customs did carefully consider whether one or more 
regulatory options that would regulate marking of country of origin on 
other than the front panel would constitute compliance with the statute 
as well as a workable alternative to front panel marking. In an effort 
to elicit suggestions for such an alternative, the following question 
was included in the ANPRM:

    (5) Whether a specified location on another panel (e.g. the back 
panel) where the country of origin marking is demarcated by, for 
example, a box, a header, bold print, margins, a contrasting 
background, or other graphic devices, would constitute a 
``conspicuous place'' for purposes of the marking statute.

    This question was intended in part to explore the potential for a 
compromise solution that would comply with the statute, correct 
existing marking problems, and be acceptable to the interested parties. 
Customs was interested in whether, for example, a ``conspicuous place'' 
on the back panel could be constructed by regulatory fiat in a manner 
analogous to the FDA-mandated ``Nutrition Facts'' box. Such a solution 
might eventuate from government design, industry-government agreement, 
or negotiated rulemaking in which Customs mediated between and among 
interested parties. However, no commenter came forward with such a 
solution. Also, while such an alternative would be a compromise 
position, it would have the disadvantage of involving Customs in 
developing a potentially elaborate set of guidelines for back panel 
marking, suitable for different styles and sizes of produce packages, 
thus injecting the government more deeply into labeling decisions.
    Consideration was also given to providing the manufacturer with a 
choice: (1) Provide a simple and legible marking on the front panel or 
(2) submit to a more detailed set of guidelines for marking on the back 
panel as in the foregoing option. While this option would offer the 
regulated industry some flexibility, it was rejected in part because of 
its potential for confusing the ultimate purchaser who would not have a 
consistent place on the package to look for country of origin marking.
    In sum, based on the results of the ANPRM and other information 
available, Customs concludes that the back panel (as well as the side 
panel), with its manifold distractions and without qualifications or 
graphic highlighting, is not a ``conspicuous place''. In contrast, the 
front panel, with its limited amount of clutter and its ready 
visibility, does constitute a conspicuous place. The front panel thus 
meets the statutory test of marking in a conspicuous place without 
elaborate conditions or regulations specifying, e.g., type size or 
other details of the marking. Country of origin marking on the front 
panel is presumptively adequate so long as it is permanent, indelible 
and legible and the ultimate purchaser can see it without strain.
    In the interest of an open rulemaking process, Customs has the 
following comments on a number of key issues highlighted by commenters 
opposed to front panel marking:

Importance and Prominence of Origin Marking Relative to the Nutritional 
Information

    Commenters opposed to a front panel marking requirement argued that 
country of origin information is not as ``important'' as the nutrition 
and health information. Yet the latter, under current government 
regulations, may be relegated to the back panel. In the opinion of such 
commenters, if the back panel is conspicuous enough for the concededly 
important nutritional information, it ought to be sufficiently 
conspicuous for the origin marking.
    Such a comparison, in Customs' view, contributes little to the 
analysis of whether front panel marking of produce is necessary to 
comply with the law and to produce the desired consumer recognition. A 
number of items on the label, even discretionary information provided 
by the manufacturer such as preparation instructions and serving 
suggestions, may be considered ``important''.
    However, the rationale behind the different mandatory label 
elements such as net weight, brand name, product identity, nutrition 
facts, and country of origin are different. They do not necessarily 
lend themselves to comparative valuation as to their relative 
``importance'' and must be considered on their individual merits. The 
issue in each case is what placement enables the particular information 
to be effectively communicated to the consumer in a manner that carries 
out the intended statutory or regulatory purpose.
1. The ``Nutrition Facts'' Box, Without Regard to Location, Is 
Intrinsically More Visible Than Current Origin Marking
    The ``Nutrition Facts'' box, mandated by the Food and Drug 
Administration after extensive rulemaking procedures, is now one of the 
most visible things on any panel of a package of food. Its distinctive 
graphics, required by regulation, are as instantly recognizable to the 
American consumer today as major corporate logos and trademarks. It 
contains its own eye-catching headline ``Nutrition Facts'' and is 
graphically subdivided by three distinctive bold lines. It must be 
large enough to accommodate a significant amount of required 
information. Hence, the high visibility or ``conspicuousness'' of the 
Nutrition Facts Box derives from its relative size and its unique 
design characteristics, not from the panel on which it is located. The 
term ``conspicuous'' in the marking statute, however, refers only to 
the location of the marking.
    In contrast to the nutritional information, under current industry 
practice, the country of origin marking may consist of one or a few 
words such as ``Mexico'' or ``Product of Mexico'' placed without any 
attention-getting graphics in a place on the back panel where it is not 
particularly likely to be noticed. An example is for the country of 
origin to follow or to be merged with other geographical information, 
such as ``PRODUCT FROM THE UNITED STATES AND MEXICO. PACKAGED IN THE 
UNITED STATES''. Also, in the words of one of the petitioners in the 
Section 516 proceeding, the origin information is frequently submerged 
on the back panel in a ``sea of cooking instructions.'' The CIT 
observed in Norcal I that most often the marking is lost among the 
various small typeface information contained on the back or side panel 
of the package. In sum, Customs is not persuaded by the comparison of 
the relatively obscure placements accorded to country of origin marks 
in current practice to the very prominent government-mandated 
presentation of the nutritional data.
2. The ``Nutrition Facts'' Box May Not Lead the Consumer's Attention to 
the Origin Marking
    While the availability of nutritional data may provide a consumer 
with a reason to consult the back or information panel of the package, 
this may not draw his attention to the origin marking. As indicated 
above, the ``Nutrition Facts'' box tends to dominate the panel on which 
it appears and the origin marking does not appear within the box or 
necessarily even in proximity to it. Furthermore, the origin marking 
may be relegated by design to an inconspicuous spot on the label.
    There also is a fundamental difference between the type of 
information imparted by the ``Nutrition Facts'' box

[[Page 38125]]

and that imparted by the country of origin marking. The former 
identifies a number of characteristics that the product possesses 
which, in fact, it may share generically with the same type of product 
from another manufacturer and/or with a different origin. As one 
commenter suggested, consumers tend to purchase frozen vegetables as a 
``commodity''. For common vegetables, the nutritional value of this 
commodity is often a known quantity to the experienced, health-
conscious consumer. Furthermore, nutritional characteristics of frozen 
produce will not be likely to vary greatly from purchase to purchase, 
particularly if the consumer chooses brands consistently. This may 
diminish the attention paid by the consumer to the nutritional 
information once he is familiar with the produce and brand.
    In this regard, it is believed that consumers reserve their closest 
scrutiny of the nutritional information for ``suspect foods'', e.g., 
processed foods, foods known or suspected of containing high levels of 
fat, sodium, sugar, or additives. In contrast, frozen fruits and 
vegetables tend to be the ``good guys'' of the supermarket which 
require little scrutiny. In fact, in response to a petition filed by 
the American Frozen Food Institute, the Food and Drug Administration 
recently has published a notice of proposed rulemaking that would 
permit the use of the term ``healthy'' to describe frozen vegetables 
based on arguments submitted by the industry that the nutrient profile 
for frozen vegetables is essentially the same as that for fresh 
vegetables. 61 FR 534 (February 12, 1996). The foregoing considerations 
may result in the fine print on the information panel of frozen produce 
packages, including both nutritional information and origin marking, 
receiving less attention while the consumer is in the store than in the 
case of other products, including canned produce.
3. Origin Marking Relates to the Identity of the Product and Is 
Exclusively ``Point of Sale'' Information
    Country of origin marking, in contrast to nutritional information, 
furnishes information that is specific to the product in the individual 
package that the consumer is examining. In fact, the origin information 
can be considered part of the ``identity'' of the product. Other 
information that describes, defines, or illustrates the identity of the 
product, such as the brand name or the vignette; the product name, 
e.g., cauliflower; and the net weight are on the front panel where they 
can be instantly grasped by the consumer in making a purchasing 
decision. All of this information is ``point of sale'' information. It 
has little or no value (except perhaps in promoting brand loyalty) once 
the consumer leaves the store. In contrast, nutritional information has 
continuing educational value and may be consulted by the consumer at 
home, particularly during food preparation (e.g., serving size).
    Since country of origin marking is point of sale information, if 
the consumer does not notice the information until he or she arrives at 
home, it then is too late to assist in the purchasing decision. The 
consumer cannot even adjust purchasing intentions based on experience 
for when he or she returns to the store for the next purchase. By then, 
the facts of country of origin may have shifted again even if the 
consumer chooses the same product with the same brand name.
    The foregoing factors, in conjunction with the factors cited by the 
CIT in Norcal I, relating to the environment in the frozen food aisle, 
may cause the country of origin marking of frozen imported produce not 
to be noticed prior to purchase. This is precisely the type of outcome 
that the section 1304 requirement that the marking be in a 
``conspicuous place'' is designed to prevent.

Health and Safety Implications of Front Panel Marking

    A number of the commenters who opposed further rulemaking expressed 
concerns that requiring more conspicuous labeling of produce would 
arouse false concerns about health and safety on the part of consumers. 
In their view, this could lead to decreased purchases and consumption 
of frozen produce with resulting negative impacts on the U.S. economy 
and even on the health of consumers.
    No information has been submitted to us and none suggests itself to 
us that would validate this concern. Customs believes that it is 
unlikely that a consumer will perceive an implied health warning in 
label information that is in no way identified as a warning. Consumers 
are presumably familiar with the health warning labels on tobacco 
products and alcoholic beverages, which are clearly stated as such, as 
well as poison warnings. Further, it is unlikely that the consumer will 
conclude that information such as country of origin that does not 
appear in the ``Nutrition Facts'' box is intended to convey a health 
and safety advisory. We believe it would take a highly explicit warning 
to overcome the consumer's belief in the presumptive healthfulness of 
frozen vegetables and fruits.
    Moreover, we believe that the economic motivation that lies behind 
the marking statute is readily apparent to the informed consumer. Major 
trade developments and bilateral trade disputes and sanctions have 
received extensive publicity in the media and in public campaigns by 
trade associations, labor unions and others urging consumers to ``Buy 
American''. Thus, we see little likelihood that the consumer will 
misunderstand the significance of the country of origin marking. While 
the consumer, once informed of the country of origin, may choose a 
domestic source product over a foreign source product or vice versa, we 
do not see evidence that overall consumption of frozen produce is 
likely to be affected by labeling rules.

Impact of Front Panel Marking on Cost and Price

    Finally, a number of commenters argued that more detailed labeling 
requirements would be costly to the manufacturers and that these costs 
would be passed on to the consumer. This would particularly be true, 
they state, if the product were sourced from many countries and if the 
sources were constantly shifting. Some of these broadly stated 
arguments seem aimed at the marking requirement itself, a statutory 
mandate that Customs has no choice but to enforce. Implicit in the 
marking statute is the effort and expense of adding information to a 
label that might not otherwise be incurred. There is no exemption in 
the statute, or in the Customs Regulations, for products sourced in a 
number of countries.
    On the other hand, it may be noted that frozen produce labels 
already frequently are characterized by colorful, sophisticated, and 
detailed graphics. These labels may include an array of totally 
discretionary and promotional information offered by the manufacturer 
such as recipes and advertisements for other products. Realistically 
evaluating the proposed rule in this context, we have not received 
convincing evidence that placing simple country of origin information 
in a different or additional place on the label, if required after a 
reasonable period of time for industry to adjust, will adversely impact 
profit margins, be economically injurious to the consumer, or have an 
inflationary impact.
    Further, as a practical matter, we have not received to date 
empirical evidence that sourcing from more than two or three countries 
is widespread as an industry practice. In fact, we are not aware that 
it is likely that more than a single source is typically involved in 
the

[[Page 38126]]

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

Other Issues

1. Type Size and Style Requirements
    T.D. 94-5 contained fairly detailed type size requirements 
applicable to its front panel marking requirement. Three different type 
sizes were specified for different size packages of produce. However, 
this proposed rule does not specify type sizes and styles, background 
colors or other graphic stipulations applicable to front panel marking. 
Customs believes that this is consistent with regulatory economy and 
minimum regulatory burden to the industry. Moreover, Customs has 
concluded that the front panel marking requirement, subject to the 
other statutory criteria of legibility, indelibility, and permanence is 
sufficient to provide an adequate opportunity for the reasonably 
attentive consumer to notice the country of origin information at point 
of sale. Customs reserves its right to take enforcement action in the 
event that label graphics on a package obscure or destroy the requisite 
legibility of the marking.
2. Overstamped Markings and Other Illegible Markings
    The plaintiffs in Norcal I and various commenters have alleged that 
packages of frozen produce contained stamped markings that are smeared 
or otherwise illegible. In a number of cases, packages are apparently 
ink stamped with the name of the country of origin after the packages 
have been filled with product. Frequently the result is a stamp that is 
smeared or all but wiped off due to condensation on the package. In 
other cases, the stamping is upside down vis-a-vis the print on the 
panel where the stamp appears, is turned sideways, or is placed over 
other text or graphics. All of these practices violate statutory 
standards.
    No change in the marking requirements is proposed to address these 
problems. Customs believes that current regulations and enforcement 
powers are adequate. The importer is responsible for compliance with 
the marking statute. If ink markings, stick-on labels and other 
practices that importers use to avoid the cost or rigidity of 
preprinted labels do not hold up until the product reaches the ultimate 
consumer at the point of sale, then Customs reserves the right to take 
appropriate action, as prescribed by statute and regulations, including 
detention of the merchandise and imposition of marking duties.
3. Implementation Period
    Suggestions received in response to the ANPRM regarding the length 
of the period from the publication date of a final rule to the required 
implementation date ranged from 6 to 12 months from commenters favoring 
tightened marking rules to 17 months or more from commenters opposed to 
a new rulemaking on marking of country of origin. Common sense as well 
as evidence in the record of this matter indicates to Customs that the 
incremental cost of relabeling to comply with new marking rules tends 
to have dropped dramatically by 18 months after the promulgation of new 
rules. Thus, Customs is proposing an 18-month implementation period to 
allow for current stock of labels to be depleted prior to the effective 
date of any final rule.
4. Consumer Surveys
    Information submitted by commenters in response to the question in 
the ANPRM regarding determination of consumer behavior through surveys 
was divided and not conclusive. In general, there was opposition, 
particularly by commenters opposed to rulemaking, to the government 
conducting surveys at taxpayers' expense. In fact, Customs has 
conducted no survey and does not contemplate conducting a survey.
    Commenters basing opinions on existing surveys reached different 
conclusions. Those favoring rulemaking argued that consumers were 
interested in country of origin information and tended to modify their 
behavior if such information were available. Some of the data relied on 
by these commenters concerned products other than produce, e.g., 
apparel. Opponents of rulemaking argued, among other things, that 
consumers had little interest in country of origin information. While 
some consumers may value country of origin information as enabling them 
to act on preferences they may have regarding imported versus domestic-
source products, other consumers may be relatively indifferent to the 
information. In either event, the marking statute is not designed 
solely for the individual benefit of the consumer, but serves a broader 
purpose.

Opportunity for Public Comment

    As the foregoing illustrates, several issues with respect to the 
rulemaking procedure to promulgate country of origin marking 
regulations for frozen imported produce remain and public comments are 
once again being solicited prior to the issuance of a final rule. 
Suggestions received in response to the ANPRM on the length of the 
comment period for an NPRM ranged from 60 days to 120 days. Customs is 
herein providing its customary 60-day period. Since no commenter 
requested time in which to conduct a consumer survey, Customs believes 
the 60-day period is adequate, particularly in view of the extensive 
opportunity to comment already afforded, and it is not expected that 
this period will be extended. In addition to comments received on this 
proposal, all relevant material previously submitted will be taken into 
account in deciding on a final rule.
    Pending a decision on whether a final rule will be promulgated, 
Customs continues to deliberate on what requirements are proper in the 
case of multiple source countries and whether Customs should set forth 
a de minimis level of foreign content that would trigger the country of 
origin marking requirements. These issues are not within the scope of 
this proposed rulemaking. Customs will consider the possible need for 
rulemaking on these issues in the future.
    Since this administrative rulemaking process affects the decision 
to be made on the pending section 516 petition, the Customs Service has 
decided to delay issuance of a final decision on the section 516 
petition until a final determination regarding the proposed regulations 
concerning the country of origin marking of packages of frozen produce 
contained in this document is made.

Discussion of Proposed Amendment

    Customs proposes to amend part 134 of the Customs Regulations (19 
CFR part 134) by adding a new paragraph (f) to Sec. 134.43 to implement 
the country of origin marking requirements for packages of frozen 
imported produce. Section 134.43 sets forth the methods of marking for 
specific articles, such as watches, clocks, timing apparatus, Native-
American-style jewelry, and Native American-style arts and crafts. 
Proposed paragraph (f) will contain two subparagraphs: Paragraph (1) 
will define frozen produce which is subject to the marking requirement, 
and paragraph (2) will denote the method of marking that is deemed 
acceptable.

Proposed Effective Date

    Customs recognizes that manufacturers, distributors, and packers of 
frozen imported produce will need to consider revisions in their 
current packaging which may be needed to comply with these proposed 
regulations. Thus, in order to minimize the impact of these new 
requirements, it is also proposed that the regulations, if

[[Page 38127]]

adopted, not be effective until eighteen months from the date of the 
Federal Register Notice of Final Rulemaking.

Comments

    While Customs received a request for a public hearing on the issues 
involved in this rulemaking from one commenter, the great majority of 
the commenters did not favor a hearing. Under these circumstances, 
Customs does not believe that a hearing would significantly enhance the 
process of public participation in the rulemaking and does not plan to 
hold a hearing. However, before adopting this proposed regulation as a 
final rule, consideration will be given to any written comments that 
are timely submitted in connection with this notice. Comments are 
requested on both the substance of these proposals and the proposed 
effective date, if the proposals are adopted. Members of the public 
submitting comments based on current labeling practices are requested, 
where possible, to submit sample labels illustrating the alleged 
practices. The submission of duplicate sets of labels will expedite 
evaluation of the comments and will be appreciated by the Customs 
Service.
    Comments submitted will be available for public inspection in 
accordance with the Freedom of Information Act (5 U.S.C. 552), 
Sec. 1.4, Treasury Regulations (31 CFR 1.4), and Sec. 103.11(b), 
Customs Regulations (19 CFR 103.11(b)), on regular business days 
between the hours of 9 a.m. and 4:30 p.m. at the Regulations Branch, 
Office of Regulations and Rulings, U.S. Customs Service, 1099 14th 
Street, NW., Suite 4000, Washington, DC.

Inapplicability of the Regulatory Flexibility Act, and Executive Order 
12866

    For the reasons set forth in the preamble, pursuant to the 
provisions of the Regulatory Flexibility Act (5 U.S.C. 601, et seq.), 
it is certified that the amendment, if adopted, will not have a 
significant economic impact on a substantial number of small entities. 
Accordingly, it is not subject to the regulatory analysis or other 
requirements of 5 U.S.C. 603 and 604. Further, this proposed amendment 
does not meet the criteria for a ``significant regulatory action'' as 
specified in E.O. 12866.

List of Subjects in 19 CFR Part 134

    Country of origin, Customs duties and inspection, Imports, 
Labeling, Marking, Packaging and containers.

Proposed Amendments

    It is proposed to amend part 134, Customs Regulations (19 CFR part 
134), as set forth below:

PART 134--COUNTRY OF ORIGIN MARKING

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

    Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 20, 
Harmonized Tariff Schedule of the United States), 1304, 1624.

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


Sec. 134.43  Methods of marking specific articles.

* * * * *
    (f) Frozen Produce--(1) Definition. Frozen produce means frozen 
vegetables or mixtures of frozen vegetables provided for in Chapter 7, 
Harmonized Tariff Schedule of the United States (HTSUS), or frozen 
fruits or mixtures of frozen fruits provided for in Chapter 8, HTSUS.
    (2) Method of Marking. (i) Unless otherwise excepted pursuant to 19 
U.S.C. 1304(a)(3) and subpart D of this part, frozen produce must be 
marked with the country of origin of the produce on the front panel of 
its package for retail sale. The front panel is the part of a package 
that is most likely to be displayed, presented, shown, or examined by 
the ultimate purchaser under customary conditions of display for retail 
sale.
    (ii) The country of origin marking on the frozen produce required 
by paragraph (f)(2)(i) of this section must appear in permanent, 
indelible and legible print or type so that the consumer can easily 
read it without strain. Condensed or compressed typefaces or 
arrangements shall not be used.
    Approved: July 9, 1996.
Michael H. Lane,
Acting Commissioner of Customs.
James E. Johnson,
Assistant Secretary of the Treasury (enforcement).
[FR Doc. 96-18544 Filed 7-22-96; 8:45 am]
BILLING CODE 4820-02-P