[Federal Register Volume 61, Number 126 (Friday, June 28, 1996)]
[Rules and Regulations]
[Pages 33651-33654]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16476]


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FEDERAL TRADE COMMISSION

16 CFR Part 305


Rule Concerning Disclosures Regarding Energy Consumption and 
Water use of Certain Home Appliances and Other Products Required Under 
the Energy Policy and Conservation Act (``Appliance Labeling Rule'')

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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SUMMARY: The Federal Trade Commission (``Commission'') issues final 
amendments to the Appliance Labeling Rule (``the Rule'') to permit the 
placement of energy use labels required by the Canadian and Mexican 
governments in a location ``directly adjoining'' the Rule's required 
``EnergyGuide'' label. Previously the Rule prohibited the affixation of 
non-required information ``on or directly adjoining'' the EnergyGuide. 
The relaxation of this prohibition will further the goal of the North 
American Free Trade Agreement (``NAFTA'') to make compatible the 
standards-related measures of the signatories to facilitate trade in a 
good or service among the parties. Moreover, the amendment will result 
in considerable savings for the appliance manufacturing industry.

EFFECTIVE DATE: June 28, 1996.

FOR FURTHER INFORMATION CONTACT: James G. Mills, Attorney, Division of 
Enforcement, Federal Trade Commission, Washington, D.C. 20580 (202-326-
3035).

SUPPLEMENTARY INFORMATION:

I. Background

A. The Request by Whirlpool

    In July, 1995, the Whirlpool Corporation (``Whirlpool'') requested 
permission to use hang tag EnergyGuide labels that have the 
corresponding Canadian ``EnerGuide'' appliance energy use label printed 
on the reverse side, and/or permission to use a single stick-on or hang 
tag label consisting of the Commission's EnergyGuide immediately next 
to (or above) the appropriately corresponding Canadian EnerGuide. 
Whirlpool also asked for permission to label in the same manner using 
the appliance energy use label required by Mexico, or using all three 
labels.
    In support of its request, Whirlpool stated that the continued 
existence of separate appliance labeling requirements among the United 
States, Canada, and Mexico represents an obstacle to free trade among 
the signatories to NAFTA. Whirlpool contended that the ability to print 
the labels required by the three countries next to each other on a 
single piece of label stock would mitigate the impact of that obstacle. 
Whirlpool also stated that using such labels would save Whirlpool 
significant resources--by reducing the number of separate U.S. and 
Canadian models of appliances that Whirlpool produces and by reducing 
labeling expenses.

B. Applicable Sections of the Appliance Labeling Rule

    Section 305.11(a)(5)(i)(K) of the Rule, 16 CFR 305.11(a)(5)(i)(K), 
states that: No marks or information other than that specified in this 
Part shall appear on or directly adjoining [the EnergyGuide] label 
except for a part or publication number identification, as desired by 
the manufacturer. * * * [emphasis added]
    The language in this section pertains to labels for refrigerators, 
refrigerator-freezers, freezers, dishwashers, clothes washers, water 
heaters, and room air conditioners. Identical language appears in two 
other sections relating to labels for furnaces and pool heaters (16 CFR 
305.11(a)(5)(ii)(I)) and central air conditioners (16 CFR 
305.11(a)(5)(iii)(H)(1)). The purpose of this prohibition was to avoid 
having other information detract from the Energy Guide label.

C. The Notice of Proposed Rulemaking

    The Commission agreed that permitting manufacturers to use side-by-
side or back-to-back labeling that included the energy use labels of 
the three NAFTA signatories could further the goals of NAFTA and could 
reduce the cost of compliance with the Rule. The Commission, therefore, 
on February 22, 1996, issued a Notice of Proposed Rulemaking (``NPR'') 
proposing amendments to the above-referenced sections of the Rule.\1\
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    \1\ 61 FR 6801.
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    In the NPR, the Commission addressed whether permitting this type 
of labeling would result in consumer confusion. The Commission reasoned 
that, because the EnergyGuide is the only one of the three labels that 
is exclusively in English, and because there are two disclosures on it 
stating that the information is derived from U.S. government tests and 
utility costs, U.S. consumers may realize that only one label is 
pertinent to them. Further, the United States and Canada, and, to a 
slightly lesser extent, Mexico, use compatible test procedures for 
identifying energy use, and require information to be reported in terms 
of kilowatt-hour use per year. Thus, the Commission concluded 
preliminarily that the similarity of the information being disclosed on 
each country's label may make the possibility of confusion less likely. 
Moreover, U.S. consumers are already seeing Canadian labels on some 
appliances (especially in the northern states), and possibly Mexican 
labels, although not directly adjoining the EnergyGuide. Finally, the 
Commission pointed out that, on many

[[Page 33652]]

packages, instruction manuals, and labels that accompany products 
destined for multiple countries, consumers are presented with 
information in more than one language. Thus, the Commission tentatively 
determined that consumers are not likely to be confused or misled by 
the presence of multiple appliance energy use labels, as long as they 
can clearly distinguish which is intended for the U.S. audience.
    The Commission noted in the NPR that it has worked closely with 
representatives of the Canadian EnerGuide program over the past two 
years to explore regulatory harmonization under NAFTA. This work has 
centered around each country's recent review of its respective 
appliance labeling rule, with both considering each other's research 
and proposed changes. More recently, representatives of the Mexican 
government have joined in this dialogue. The Commission stated its 
intention to continue this cooperative pursuit of tri-lateral 
harmonization to determine whether a single label can be designed that 
effectively fulfills the requirements of all three countries, and 
characterized the proposed amendments as an interim measure to provide 
manufacturers greater labeling flexibility to facilitate trade.
    To obtain more information regarding its proposal, the Commission 
posed the following questions in the NPR:
    1. Would allowing energy use labels required by the Canadian or 
Mexican governments to be placed next to the U.S. EnergyGuide be likely 
to detract from the effectiveness of the EnergyGuide or cause consumer 
confusion?
    2. Should the Commission limit the information that the amendments 
would permit to be placed ``directly adjoining'' the EnergyGuide only 
to energy use disclosures required by the governments of Canada and 
Mexico? For example, should the amendments permit additional 
information required by the governments of Canada and Mexico, such as 
environmental or safety-related information, also to be placed 
``directly adjoining'' the EnergyGuide?
    3. Should the Commission limit the amendments to apply to energy 
use (or other) information required only by the governments of Canada 
and Mexico, or should the amendments permit energy use (or other) 
information required by the governments of all other nations?

II. Discussion of Comments

    The Commission received four comments in response to the NPR.\2\ 
Three comments were from manufacturers of major household 
appliances,\3\ and one was from a trade association representing 
manufacturers.\4\ All the comments supported the proposed amendments.
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    \2\ The comments are found on the Public Record at the Federal 
Trade Commission in Washington, D.C., under Rulemaking Record Number 
R611004 (Appliance Labeling Rule). They are numbered B19229500001-
B19229500004. The numerical prefix ``B192295'' identifies the 
comments as being in response to the NPR. In this notice, the 
comments are cited by an identification of the commentor, the last 
two digits of the comment number, and the relevant page number(s), 
e.g., ``Whirlpool, 02, 2-3.'' The four comments were from: The 
Association of Home Appliance Manufacturers (``AHAM, 01''); The 
Whirlpool Corporation (``Whirlpool, 02''); White Consolidated 
Industries, Inc. (``White, 03''); and, W.C. Wood Company, Inc. 
(``Wood, 04'').
    \3\ Wood, 04; Whirlpool, 02; White, 03.
    \4\ AHAM, 01.
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A. Amending the Rule To Permit Placement of Canadian and Mexican Energy 
Use Labels in Close Proximity to the EnergyGuide

    AHAM and Whirlpool agreed with the Commission that the proposed 
amendments would promote the intend of NAFTA to facilitate the free 
flow of commerce across North American international boundaries.\5\ 
AHAM, White, and Wood agreed that the proposed amendments would benefit 
appliance manufacturers until the Commission's Rule could be harmonized 
with the energy use regulations of Canada and Mexico.\6\ These comments 
commended the Commission for its continuing efforts at harmonization 
and its goal of developing a single energy use label that meets the 
requirements of all three NAFTA signatories.\7\
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    \5\ AHAM, 01, 2; Whirlpool, 02, 1.
    \6\ AHAM, 01, 2; White, 03, 1; Wood, 04, 2.
    \7\ Id.
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    AHAM, Whirlpool, and Wood stated that the proposed amendments would 
enable manufacturers to comply with the Rule more efficiently and 
economically.\8\ Wood explained:
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    \6\ AHAM, 01, 1-2; Whirlpool, 02, 1, 3; Wood, 04, 1.
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    Allowing the placement of any two or all three of the energy 
labels on applicable models side by side, above and below or on a 
single label or hang tag will allow our company to reduce the number 
of [stock-keeping units) required to be built and tracked. The 
reason for this is that a great many of the appliances going to 
Canada and Mexico are identical to that produced for the domestic 
market, with the only difference being the energy' label. In order 
to build this change on the production line and keep track of the 
`energy' label through the warehouse and distribution chain, a 
separate and unique model is built.
    The appliance industry is a very competitive market and with 
NAFTA it is a very competitive North American market. A relaxation 
in the current labeling rules will provide our company with real 
economic benefits.\9\
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    \9\ Wood, 04, 1.
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B. Would the Proposed Amendments Be Likely To Result in Consumer 
Confusion or Detraction From the EnergyGuide?

    The comments unanimously concluded that placement of Canadian and/
or Mexican energy use labels next to the EnergyGuide would not detract 
from the Commission's label and would not confuse consumers.\10\ 
Whirlpool's reasoning was representative of all the comments:

    \10\ AHAM, 01, 3, 4; Whirlpool, 02, 2; White, 03, 1; Wood, 04, 
2.
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    The primary energy descriptors are identical for all three 
nations and the U.S. label is the only one written entirely in 
English. Also, the FTC label notes that energy consumption estimates 
are based on U.S. government standard tests. Furthermore, we submit 
that consumers are becoming more and more sophisticated in quickly 
identifying the differences in instructional and point of purchase 
labels since an increasing number of such materials are being 
written in multilingual script to accommodate world marketing 
trends.\11\
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    \11\ Whirlpool, 02, 2.
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C. Should the Proposed Amendments Be Limited To Apply Only to Energy 
Use Labels? Should the Proposed Amendments Be Limited To Apply Only to 
Information Required by the Canadian and Mexican Governments?

    All four comments agreed that the proposed amendments should apply 
only to energy use disclosure labels.\12\ They reasoned that too many 
unrelated labels next to the EnergyGuide would detract from its message 
and cause information overload and confusion. As suggested by White, 
other information may be more appropriate communicated in care and use 
manuals:

    \12\ AHAM, 01, 3-4; Whirlpool, 02, 1-2; White, 03, 1; Wood, 04, 
2.
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    [We] urge that the content remain energy information only, 
consistent with the familiar Energy Guide. Diverse information 
detracts from the important energy information and the industry 
guards against the appliance becoming a ``billboard.'' Literature 
included with the appliance and intended as a continuous guide for 
safe use and maintenance is more appropriate for including other 
information.\13\

    \13\ White, 03, 1.
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    Moreover, as AHAM pointed out, some safety and environmental 
disclosures are voluntary in some of the

[[Page 33653]]

countries, and mandatory in others, while energy use information is 
required by law in all three.\14\
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    \14\ AHAM, 01, 4.
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    Whirlpool suggested that the proposed amendments be expanded to 
apply to the energy use labels required by countries in Europe, Latin 
America, and Asia, in addition to Canada and Mexico, even though total 
harmonization of labels of all the countries in these areas may be 
decades away. In support of this proposal, Whirlpool stated that the 
Commission should take the lead in permitting multinational labeling to 
avoid future conflicts as the appliance industry markets its produces 
worldwide. Whirlpool provided regulatory language with its comment that 
would accomplish this end.\15\
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    \15\ Whirlpool, 02, 2.
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    AHAM, advocated a more conservative approach, stating:

    There will likely come a time when a common international 
``energy use disclosure'' is appropriate and desired, as U.S. 
product exports increase to countries throughout the world. However, 
at this time, AHAM does not recommend other countries' information 
be permitted in conjunction with the EnergyGuide label.\16\

    \16\ AHAM, 01, 4.
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    The Commission agrees with AHAM in this regard. While there may be 
sufficient similarity between the Commission's Rule and the labeling 
requirements of other nations at some future time to justify including 
them in this section of the Rule, the present record does not contain 
evidence to justify an expansion of the proposed amendments as 
Whirlpool has suggested.

III. Conclusion

    The record contains unanimous support for the proposed amendments. 
Moreover, with the exception of Whirlpool's suggestion to allow the 
placement of the energy use labels of other countries, in addition to 
those of Canada and Mexico, ``on or directly adjoining'' the 
EnergyGuide, the record also supports the form and language of the 
proposed amendments as they appear in the NPR. The Commission, 
therefore, amends the Appliance Labeling Rule as proposed in the NPR. 
Manufacturers are still prohibited from placing other information on or 
directly adjoining the EnergyGuide.

Section A--Regulatory Flexibility Act

    In the NPR, the Commission concluded, on a preliminary basis, that 
the provisions of the Regulatory Flexibility Act relating to an initial 
Regulatory Flexibility Act analysis (5 U.S.C. 603-604) were not 
applicable to this proceeding because the amendments, if promulgated, 
would not have a ``significant economic impact on a substantial number 
of small entities'' (5 U.S.C. 605). The Commission concluded, 
therefore, that a regulatory flexibility analysis was not necessary.
    To determine whether a final regulatory flexibility analysis would 
be necessary, however, in the NPR the Commission requested information 
on whether the proposed amendments would have a significant impact on a 
substantial number of small entities. No comments were received on this 
issue.
    In light of the above, and because the amendments do not impose any 
new obligations on entities regulated by the Appliance Labeling Rule, 
the Commission certifies, under Section 605 of the Regulatory 
Flexibility Act (5 U.S.C. 605(b)), that the amendments announced today 
will not have a significant impact on a substantial number of small 
entities.

Section B--Paperwork Reduction Act

    In the NPR, the Commission stated that the amendments would not 
expand the Appliance Labeling Rule's existing recordkeeping and 
reporting requirements, and that the Commission, therefore, was not 
requesting that the Office of Management and Budget adjust the existing 
clearance for the Appliance Labeling Rule (OMB No. 3084-0069) under the 
Paperwork Reduction Act (44 U.S.C. 3501 et seq.). To substantiate the 
accuracy of its reporting burden estimate, however, the Commission 
requested comment on the extent of the reporting and recordkeeping 
burden associated with the amendments.
    The Commission received one comment on this issue. Whirlpool agreed 
with the Commission's conclusion that the amendments would not expand 
existing recordkeeping and reporting requirements. Whirlpool stated, 
``In fact, granting of this proposal would reduce recordkeeping and 
reporting among the regulated community.'' \17\
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    \17\ Whirlpool,02, 3.
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    Accordingly, the Commission reaffirms its prior determination that 
the amendments do not alter the Rule's recordkeeping or reporting 
requirements and that they do not, therefore, require OMB clearance.

Text of Amendments

    For the reasons discussed above, the Commission amends 16 CFR Part 
305 to permit (but not require) appliance manufacturers to place the 
energy use disclosure labels required by the governments of Canada and 
Mexico in a location directly adjoining the Commission's EnergyGuide, 
as follows below:

List of Subjects in 16 CFR Part 305

    Advertising, Energy conservation, Household appliances, Labeling, 
Reporting and recordkeeping requirements.

PART 305--[AMENDED]

    1. The authority citation for Part 305 continues to read as 
follows:

    Authority: 42 U.S.C. 6294.

    2. Section 305.11(a)(5)(i)(K), (a)(5)(ii) (I), and 
(a)(5)(iii)(H)(1) are revised to read as follows:


Sec. 305.11  Labeling for covered products.

    (a) * * *
    (5) * * *
    (i) * * *
    (K) No marks or information other than that specified in this Part 
shall appear on or directly adjoining this label, except a part or 
publication number identification may be included on this label, as 
desired by the manufacturer, and the energy use disclosure labels 
required by the governments of Canada or Mexico may appear directly 
adjoining this label, as desired by the manufacturer. If a manufacturer 
elects to use a part or publication number, it must appear in the lower 
right-hand corner of the label and be set in 6-point type or smaller.
    (ii) * * *
    (I) No marks or information other than that specified in this Part 
shall appear on or directly adjoining this label, except a part or 
publication number identification may be included on this label, as 
desired by the manufacturer, and the energy use disclosure labels 
required by the governments of Canada or Mexico may appear directly 
adjoining this label, as desired by the manufacturer. If a manufacturer 
elects to use a part or publication number, it must appear in the lower 
right-hand corner of the label and be set in 6-point type or smaller.
* * * * *
    (iii) * * *
    (H) * * *
    (1) No marks or information other than that specified in this Part 
shall appear on or directly adjoining this label, except a part or 
publication number identification may be included on this label, as 
desired by the manufacturer, and the energy use disclosure labels 
required by the governments of Canada or Mexico may appear directly 
adjoining this label, as

[[Page 33654]]

desired by the manufacturer. If a manufacturer elects to use a part or 
publication number, it must appear in the lower right-hand corner of 
the label and be set in 6-point type or smaller.
* * * * *
    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 96-16476 Filed 6-27-96; 8:45 am]
BILLING CODE 6750-01-M