[Federal Register Volume 83, Number 185 (Monday, September 24, 2018)]
[Rules and Regulations]
[Pages 48213-48216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20273]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

16 CFR Part 311

RIN 3084-AB48


Test Procedures and Labeling Standards for Recycled Oil

AGENCY: Federal Trade Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') has 
completed its regulatory review of the Test Procedures and Labeling 
Standards for Recycled Oil (``Recycled Oil Rule'' or ``Rule''), as part 
of the Commission's systematic review of all current Commission 
regulations and guides. The Commission now updates the Rule's reference 
to American Petroleum Institute Publication 1509 to reflect the most 
recent version of that document. Otherwise, the Commission retains the 
Rule in its current form.

DATES: The amendments are effective October 24, 2018. The incorporation 
by reference of the publication listed in this rule is approved by the 
Director of the Federal Register as of October 24, 2018.

ADDRESSES: Relevant portions of the record of this proceeding, 
including this document, are available at https://www.ftc.gov.

FOR FURTHER INFORMATION CONTACT: Hampton Newsome, (202) 326-2889, 
Attorney, Division of Enforcement, Bureau of Consumer Protection, 
Federal Trade Commission, Mailstop CC-9528, 600 Pennsylvania Avenue NW, 
Washington, DC 20580.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Recycled Oil Rule, mandated by the Energy Policy and 
Conservation Act (``EPCA'') (42 U.S.C. 6363), contains testing and 
labeling requirements for recycled engine oil. As indicated in the 
statute, the Rule's purpose is to encourage oil recycling, promote 
recycled oil use, reduce new oil consumption, and reduce environmental 
hazards and wasteful practices associated with used oil disposal.\1\ 
Initially promulgated in 1995 (60 FR 55414 (Oct. 31, 1995)), the Rule 
allows manufacturers to represent that processed used engine oil is 
substantially equivalent to new oil as long as they substantiate such 
claims using American Petroleum Institute (API) Publication 1509 
(``Engine Oil Licensing and Certification System'').\2\ The Rule does 
not require manufacturers to explicitly state their engine oil is 
substantially equivalent to new oil, nor does it mandate other specific 
qualifiers or disclosures.\3\
---------------------------------------------------------------------------

    \1\ 42 U.S.C. 6363(a).
    \2\ Under EPCA (42 U.S.C. 6363(c)), the National Institute of 
Standards and Technology (``NIST'') must develop (and report to the 
FTC) applicable standards for determining the substantial 
equivalence of processed used engine oil with new engine oil. NIST 
recommended API Publication 1509 when the Commission originally 
promulgated the Rule in 1995.
    \3\ 60 FR at 55418-19. As the Commission has previously 
explained, until NIST develops test procedures for end uses other 
than engine oil, the Recycled Oil Rule is limited to recycled oil 
used for that purpose. Moreover, because NIST's test procedures and 
performance standards are the same as those adopted by API for 
engine oils, the Commission must limit the Rule's scope to 
categories of engine oil that are covered by the API Engine Oil 
Licensing and Certification System, as prescribed in API Publication 
1509. See 72 FR 14410, n.1 (Mar. 28, 2007).
---------------------------------------------------------------------------

II. Regulatory Review Program

    The Commission reviews its rules and guides periodically to seek 
information about their costs and benefits, regulatory and economic 
impact, and general effectiveness in protecting consumers and helping 
industry avoid deceptive claims. These reviews assist the Commission in 
identifying rules and guides warranting modification or rescission. 
When it last reviewed the Rule in 2007, the Commission updated the 
reference to API Publication 1509, Fifteenth Edition, and added an 
explanation of incorporation by reference in Section 311.4.\4\
---------------------------------------------------------------------------

    \4\ 72 FR 14410, 14413 (Mar. 28, 2007).
---------------------------------------------------------------------------

    In a December 20, 2017 proposed rule (82 FR 60334), the Commission 
initiated a new review and sought comments on, among other things, the 
need for the Rule, its economic impact, its benefits to consumers, and 
its burdens on industry members, including small businesses. The 
Commission also specifically asked whether it should update the Rule's 
reference to API Publication 1509 to reflect the most recent version. 
In response to the proposed rule, the Commission received seven 
comments.\5\
---------------------------------------------------------------------------

    \5\ The public comments are posted at: https://www.ftc.gov/policy/public-comments/2018/01/initiative-735. They include: Avista 
Oil Group (Avista) (#00006); American Petroleum Institute (API) 
(#00007); National Automobile Dealers Association (NADA) (#00008); 
Independent Lubricant Manufacturers Association (ILMA) (#00010); 
NORA, An Association of Responsible Recyclers (NORA) (#00011); 
Safety-Kleen (#00005); and Curtiss (#00003).
---------------------------------------------------------------------------

III. Public Comment Analysis and Amendment

    After reviewing the comments, the Commission updates the Rule's 
reference to API Publication 1509 and the Rule's incorporation by 
reference language. Otherwise the Commission retains the Rule in its 
current form. A

[[Page 48214]]

discussion of the comments and the amendments follow.\6\
---------------------------------------------------------------------------

    \6\ The Commission has not published an additional proposed rule 
in this proceeding because the December 2017 proposed rule provided 
interested persons an adequate opportunity to comment on the final 
amendments published here (i.e., the updated reference to API 
Publication 1509).
---------------------------------------------------------------------------

A. Rule Need, Benefits, Costs, and Compliance

    As discussed below, commenters indicated the Commission should 
retain the Rule because it continues to serve its purpose, benefits 
both consumers and industry, imposes no unwarranted costs, and has high 
compliance rates.\7\
---------------------------------------------------------------------------

    \7\ See, e.g., API, NADA, NORA, and Safety-Kleen.
---------------------------------------------------------------------------

    Several commenters indicated the Rule continues to serve EPCA's 
purposes. For example, NORA explained that the Rule encourages used oil 
recycling, promotes recycled oil use, reduces consumption of new oil, 
and reduces hazards and waste associated with used oil disposal. In 
addition, in NORA's view, the Rule's substantiation requirements for 
recycled oil have helped remedy a general perception that recycled oil 
is inferior to new oil. NORA also indicated that the Rule's provisions 
help encourage consumer demand for recycled oil, which creates 
environmental benefits through oil collection and reuse in place of 
costly disposal.\8\ ILMA added that, without the Rule, some states may 
impose their own labeling requirements, potentially creating 
inconsistencies, which could confuse consumers nationwide. It further 
explained that the Rule furnishes ``an effective regulatory tool'' to 
prevent the marketing of ``junk'' oil.\9\ Safety-Kleen concluded the 
Rule has ``helped to increase acceptance of re-refined oil by creating 
an objective benchmark by which all oil can be measured.''
---------------------------------------------------------------------------

    \8\ Safety Kleen added that recycled oil, which is increasing in 
availability, ``generates significant energy and environmental 
benefits'' at a competitive price and helps create domestic jobs.
    \9\ ILMA also discussed its efforts to address the sale of 
``obsolete oils'', an issue outside the Rule's scope.
---------------------------------------------------------------------------

    In addition to serving the enumerated purposes of the statute, 
commenters indicated the Rule provides significant benefits to 
consumers and industry members. ILMA and API stated it helps consumers 
by providing an additional marketplace choice, backed by the API 
performance standards. NORA asserted that competition encouraged by the 
Rule keeps prices low. It also noted the Rule helps assure consumers 
that ``substantially similar'' claims for re-refined lubricants are 
accurate and supported by test data. Regarding industry benefits, API 
commented the Rule aids companies by allowing sellers to market re-
refined base stocks without concern that consumers will view recycled 
oil as a lower quality product. Similarly, NADA contended the Rule aids 
sellers by encouraging growing market acceptance of recycled oil while 
affording processors marketing flexibility. According to Avista, the 
Rule has ``incentivized domestic re-refiners to pioneer new 
technology.'' NORA also indicated that recycled oil has a ``reduced 
carbon dioxide footprint.'' Finally, Safety-Kleen stated that a 
standardized testing and certification process decreases industry 
costs. No commenter identified any unwarranted costs associated with 
the Rule.\10\
---------------------------------------------------------------------------

    \10\ Commenter Curtiss stated that oil recycling should be a 
``top priority'' and urged ``continued improvement of oil 
recycling.'' Curtiss also recommended, without elaboration, that 
``this oil be labeled as such'' and certified. As discussed in the 
original rulemaking, the Commission has not identified a need for 
any affirmative disclosure requirements related to used oil, as long 
as marketers meet the API Publication 1509. See 60 FR at 55418-
55419. Curtiss also recommended a deposit system for oil. However, 
such a system falls outside the scope of the Commission's authority.
---------------------------------------------------------------------------

    No commenters identified significant compliance issues with the 
Rule. Safety Kleen explained that the Rule provides a standardized, 
objectively verifiable test that can be used to refute false claims. In 
addition, NORA and ILMA asserted that companies have little incentive 
to engage in deceptive conduct given the potential penalties involved. 
Furthermore, several commenters described ongoing industry efforts to 
monitor engine oil quality. For example, ILMA explained that it runs a 
program to randomly test engine oil marketed by its members and has 
found high compliance rates. Similarly, Safety-Kleen noted that API 
conducts an After Market Audit Program that tests products ``for 
compliance against the original fluid certification testing,'' and API 
did not identify any significant compliance problems.\11\
---------------------------------------------------------------------------

    \11\ Commenters did not identify any conflicts between the Rule 
and other requirements, nor did they identify any technological 
advances that would warrant changes to the Rule.
---------------------------------------------------------------------------

B. Suggested Changes and Updates

    Comments: Commenters recommended several Rule amendments, including 
updating the reference to API Publication 1509, permitting automatic 
updates to the API publication, expanding the claims covered by the 
Rule, and changing several definitions.
    Commenters agreed the Commission should update the Rule's reference 
to API Publication 1509 to reflect the seventeenth edition, as the 
Commission proposed in its December 2017 proposed rule.\12\ For 
instance, Safety-Kleen explained that this update will ``ensure both 
virgin and re-refined quality levels meet the most current standard.'' 
ILMA identified no significant costs to industry for this updated 
reference. No commenters opposed the conforming change.
---------------------------------------------------------------------------

    \12\ See, e.g., API, NADA, NORA, and Safety-Kleen.
---------------------------------------------------------------------------

    In addition, three commenters (API, NORA, and ILMA) recommended 
amending the Rule to allow for automatic updates to the ``most recent 
version'' of the API publication. In the commenters' view, such a 
change would preclude the need for the Commission to publish future 
Rule updates. Similarly, API supported automatic Rule updates, noting 
Publication 1509 is generally updated every three to five years.
    Aside from updating the API Publication, several commenters urged 
the Commission to refrain from making any other changes.\13\ For 
instance, Safety Kleen stated that all the current provisions are 
``necessary and appropriate.'' Similarly, no commenters identified 
technological changes that necessitate Rule amendments; nor did they 
note any conflicts between the Rule and other requirements. NADA 
advised that any proposed Rule changes should comport with the 
statute's goals.
---------------------------------------------------------------------------

    \13\ See ILMA and Safety-Kleen.
---------------------------------------------------------------------------

    Other commenters, however, recommended additional revisions. First, 
Avista suggested the Rule allow recycled oil marketers to label their 
products as ``equal in quality'' to new oil (i.e., oil manufactured 
from crude oil). In its view, technological improvements in the 
industry during the last decade have rendered recycled oil of equal or 
better quality than refined oil, and this fact ``must be reflected in 
the new Rule.''
    Some commenters also recommended changing the Rule's definitions to 
make them more consistent with existing industry usage and practice. 
NORA explained that, in the oil recycling industry, the term ``recycled 
oil'' generally refers not only to oil processed for use as an engine 
oil (i.e., lubricant) but also to used oil processed for fuel.\14\ 
However, in the Rule, ``recycled oil'' only means re-refined oil 
successfully tested pursuant to the API publication (which addresses 
engine oil, not fuel). NORA also noted overlap in the Rule's 
definitions of ``processed used oil,'' ``recycled oil,'' and ``re-
refined oil.'' Although NORA did not provide

[[Page 48215]]

specific suggestions, its comments implied that the Commission should 
harmonize the Rule's terms with common industry understanding and 
otherwise define the terms more precisely to avoid confusion.
---------------------------------------------------------------------------

    \14\ In addition, ``processed used oil'' as defined in the FTC 
Rule refers to re-refined used oil, while in EPA regulations (40 CFR 
part 279) the same term refers to used oil processed into a fuel.
---------------------------------------------------------------------------

    Similarly, API recommended amending the Rule to clearly distinguish 
base stock ``manufacturers'' from ``oil marketers'' (i.e., 
organizations ``responsible for identifying the standard met by an 
engine oil'').'' \15\ Specifically, it urged the Commission to use the 
term ``oil marketer'' in lieu of ``manufacturer'' wherever the Rule 
addresses entities responsible for oil branding. API also suggested the 
Commission amend the definition of ``manufacturer'' to exclude entities 
that blend processed used oil with new oil or additives by limiting the 
definition to entities that re-refine or otherwise process ``used oil 
to remove physical or chemical impurities acquired through use.''
---------------------------------------------------------------------------

    \15\ API recommended the Commission adopt the ``oil marketer'' 
definition in the current version of API 1509.
---------------------------------------------------------------------------

    API also urged the Commission to change the definition for 
``recycled oil'' so that it refers to oil ``deposited, collected, and 
managed in accordance with'' EPA's used oil management standards (40 
CFR part 279), instead of oil determined to be ``substantially 
equivalent to new oil for use as engine oil'' under Publication 1509, 
as currently required by the Rule. API explained that this change would 
``clarify oil disposition once it has been introduced'' into a vehicle 
engine. In clarifying the common industry understanding of various 
terms, API noted that the term ``used oil'' identifies the oil drained 
from a crankcase; ``recycled oil'' refers to the used oil once it has 
entered the used oil management stream; ``re-refined oil'' is one 
method used to repurpose used oil; and ``processed used oil'' is a 
broad term that covers all potential methods used to repurpose used 
oil.
    Discussion: The Commission amends the Rule to update the reference 
to API Publication 1509, including the regulatory language for 
incorporation by reference. With the exception of this minor update, 
the Commission retains the Rule in its current form. As discussed 
below, the Commission does not propose making other changes suggested 
by commenters, including providing for automatic updates to the test 
procedures incorporated by reference, addressing ``equal in quality'' 
claims for recycled oil in the Rule, or changing the Rule's 
definitions.
    The Commission does not amend the Rule to include automatic updates 
because such an approach is inconsistent with Office of Federal 
Register (OFR) requirements. Under OFR rules, incorporation by 
reference is ``limited to the edition of the publication that is 
approved'' and cannot include future amendments or revisions.\16\ While 
the Commission cannot include such a perpetual update mechanism, it 
will consider future updates to the test procedures in the Rule as part 
of its periodic reviews. In the interim, stakeholders may petition the 
Commission if there is a pressing need for a particular update.
---------------------------------------------------------------------------

    \16\ See 1 CFR 51.1(f).
---------------------------------------------------------------------------

    Likewise, the Commission declines to amend the Rule to address 
whether recycled oil marketers can label their products as ``equal in 
quality'' to new oil. The record does not clearly establish the basis 
and need for additional affirmative labeling provisions beyond the 
statutory requirement that representations of substantial equivalency 
be based on the NIST standards.\17\ Furthermore, the FTC Act (15 U.S.C. 
45(a)) does not restrict the scope of truthful advertising claims 
sellers may make for recycled oil. Indeed, marketers may make recycled 
oil claims beyond those covered by the Rule, as long as such 
representations are supported by competent and reliable evidence and do 
not otherwise violate the FTC Act.\18\
---------------------------------------------------------------------------

    \17\ See 60 FR 55414, 55419.
    \18\ The Rule, however, preempts 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 the Rule. See 42 U.S.C. 6363(e)(1); 16 CFR 311.3.
---------------------------------------------------------------------------

    Further, the Commission declines to amend the Rule's definitions. 
Specifically, the proposed clarification to the definition of 
``processed used oil'' does not appear necessary. Although industry 
members may understand the term as applying to oil processed for engine 
lubrication and fuel, the Rule's principal provisions clearly involve 
oil recycled ``for use as engine oil.'' \19\ Moreover, the record 
provides little evidence that the narrow application of this term in 
the Rule has caused significant problems in the regulated community or 
for consumers.
---------------------------------------------------------------------------

    \19\ See, e.g., 16 CFR 311.1(d), 311.5, and 311.6.
---------------------------------------------------------------------------

    Additionally, the Commission declines to alter the term 
``manufacturer'' or add the term ``oil marketer'' as API recommended. 
The Rule's definition for ``manufacturer'' is consistent with the 
statutory language for that term, which encompasses not only entities 
that process used oil to remove impurities, but also entities that 
blend processed used oil with new oil. Although the statute's 
definition may stretch beyond industry's conventional use of the term, 
API did not detail any problems, for consumers or industry members, 
caused by the current language, nor did it delineate its proposal's 
benefits. Likewise, there appears to be no need to add a definition of 
``oil marketer'' or to change the scope of ``manufacturer.'' The Rule's 
core provisions already apply broadly to ``any manufacturer or other 
seller,'' thus negating the need to expand the Rule's existing 
terms.\20\
---------------------------------------------------------------------------

    \20\ See 16 CFR 311.5 and 311.6 (emphasis added). Under EPCA, 
``person'' is defined to include ``(A) any individual, (B) any 
corporation, company, association, firm, partnership, society, 
trust, joint venture, or joint stock company, and (C) the government 
and any agency of the United States or any State or political 
subdivision thereof.'' 42 U.S.C. 6202(2).
---------------------------------------------------------------------------

    Finally, the Commission does not change the definition of 
``recycled oil'' to tie the term to EPA's used oil management 
regulations (instead of the substantial equivalency determination) as 
suggested by API. This change would be inconsistent with the statute, 
which specifically defines the term ``recycled oil'' as used oil the 
manufacturer has determined to be substantially equivalent to new oil 
under the procedures set out in the Rule.

IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-612, 
requires an agency to provide a Final Regulatory Flexibility Analysis 
with the final rule, unless the agency certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities. See 5 U.S.C. 603-605. The amendment, which merely updates the 
Rule's reference to the API publication, does not increase the Rule's 
burdens.\21\ Accordingly, the Commission certifies that the amendment 
will not have a significant economic impact on a substantial number of 
small entities. This document serves as notice of that determination to 
the Small Business Administration.
---------------------------------------------------------------------------

    \21\ The Rule itself 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 a determination has been made 
in accordance with the prescribed test procedures. The Rule imposes 
no reporting or recordkeeping requirements, and it permits recycled 
oil to be labeled with information that is basic and easily 
ascertainable.
---------------------------------------------------------------------------

V. Paperwork Reduction Act

    Under the Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501-3520, 
Federal agencies must obtain approval from the

[[Page 48216]]

Office of Management and Budget (``OMB'') for each collection of 
information they conduct or sponsor. ``Collection of information'' 
means agency requests or requirements that members of the public submit 
reports, keep records, or provide information to a third party. 44 
U.S.C. 3502(3); 5 CFR 1320.3(c). The amended Rule does not involve the 
``collection of information'' under the PRA and, therefore, OMB 
approval is not required.

VI. Incorporation by Reference

    Consistent with 5 U.S.C. 552(a) and 1 CFR part 51, the Commission 
incorporates the specifications of the following document published by 
the American Petroleum Institute: API 1509, ``Engine Oil Licensing and 
Certification System,'' Seventeenth Edition, September 2012 (Addendum 
1, October 2014, Errata, March 2015). According to API, this 
publication ``describes the API Engine Oil Licensing and Certification 
System (EOLCS), a voluntary licensing and certification program 
designed to define, certify, and monitor engine oil performance deemed 
necessary for satisfactory equipment life and performance by vehicle 
and engine manufacturers.'' API 1509 is reasonably available to 
interested parties. Members of the public can obtain copies of API 
Publication 1509 from API, 1220 L Street NW, Washington, DC 20005; 
telephone: (202) 682-8000; internet address: https://www.api.org.
    These standards are also available for inspection at the FTC 
Library, (202) 326-2395, Federal Trade Commission, Room H-630, 600 
Pennsylvania Avenue NW, Washington, DC 20580.

List of Subjects in 16 CFR Part 311

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

    For the reason set forth in the preamble, 16 CFR part 311 is 
amended as follows:

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

0
1. The authority citation for part 311 continues to read as follows:

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


0
2. Revise Sec.  311.4 to read as follows:


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 in API 1509, Engine Oil Licensing and 
Certification System, Seventeenth Edition, September 2012 (Addendum 1, 
October 2014, Errata, March 2015). The Director of the Federal Register 
approves this incorporation by reference in accordance with 5 U.S.C. 
552(a) and 1 CFR part 51. You may obtain a copy from API, 1220 L Street 
NW, Washington, DC 20005; telephone: 202-682-8000; internet address: 
https://www.api.org. You may inspect a copy at the FTC Library, 202-
326-2395, Federal Trade Commission, Room H-630, 600 Pennsylvania Avenue 
NW, Washington, DC 20580. It is also available for inspection at the 
National Archives and Records Administration (NARA). For information on 
the availability of this material at NARA, call 202-741-6030 or go to 
www.archives.gov/federal-register/cfr/ibr-locations.html.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2018-20273 Filed 9-21-18; 8:45 am]
 BILLING CODE 6750-01-P