issue-1995-12-28•Federal Register proposed rules — 1995-12-28
Federal Register proposed rules — 1995-12-28
issue-1995-12-28Federal Register proposed rules — 1995-12-28Proposed Regulation
Published Federal Register documents, not public-inspection drafts. The GPO XML/text rendition is a research aid; the linked complete official PDF retains the printed layout and all graphics. Graphics are retained in that PDF and are not independently reproduced in this text rendition. Publication does not establish that every provision remains legally in force.
FR Doc. 95-31411 Trade Regulation Rule on Care Labeling of Textile Wearing Apparel and Certain Piece Goods
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67102-67108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31411]
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FEDERAL TRADE COMMISSION
16 CFR Part 423
Trade Regulation Rule on Care Labeling of Textile Wearing Apparel
and Certain Piece Goods
AGENCY: Federal Trade Commission.
action: Advance Notice of Proposed Rulemaking.
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summary: The Federal Trade Commission (the ``Commission'') proposes to
commence a rulemaking proceeding to amend its Trade Regulation Rule on
Care Labeling of Textile Wearing Apparel and Certain Piece Goods, 16
CFR Part 423 (``the Care Labeling Rule'' or ``the Rule''). The
Commission seeks comment on whether the definitions of water
temperatures in the Appendix of the Rule should be amended. In
addition, the Commission seeks comment on possible alternatives for
amending the Rule's current requirement that either a washing
instruction or a dry cleaning instruction may be used. Finally, the
Commission seeks comment on whether the reasonable basis portion of the
Rule should be amended.
date: Written comments must be submitted on or before March 13, 1996.
addresses: Written comments should be identified as ``16 CFR Part 423''
and sent to Secretary, Federal Trade Commission, Room 159, Sixth Street
and Pennsylvania Ave., NW., Washington D.C. 20580.
for further information contact: Constance M. Vecellio or Laura Koss,
Attorneys, Federal Trade Commission, Division of Enforcement, Bureau of
Consumer Protection, Sixth Street and Pennsylvania, Ave., NW., S-4302,
Washington, DC 20580, (202) 326-2966 or (202) 326-2890.
SUPPLEMENTARY INFORMATION:
Part A--General Background Information
This notice is being published pursuant to Section 18 of the
Federal Trade Commission (``FTC'') Act, 15 U.S.C. 57a et seq., the
provisions of Part 1, Subpart B of the Commission's Rules of Practice,
16 CFR 1.7, and 5 U.S.C. 551 et seq. This authority permits the
Commission to promulgate, modify, and repeal trade regulation rules
that define with specificity acts or practices that are unfair or
deceptive in or affecting commerce within the meaning of Section
5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).
The Care Labeling Rule was promulgated by the Commission on
December 16, 1971, 36 FR 23883 (1971). In 1983, the Commission amended
the Rule to clarify its requirements by identifying in greater detail
the washing or dry cleaning information to be included on care
labels.\1\ The Care Labeling Rule, as amended, requires manufacturers
and importers of textile wearing apparel and certain piece goods to
attach care labels to these items stating ``what regular care is needed
for the ordinary use of the product.'' (16 CFR 423.6(a) and (b)). The
Rule also requires that the manufacturer or importer possess, prior to
sale, a reasonable basis for the care instructions. (16 CFR 423.6(c)).
\1\ The Rule was amended on May 20, 1983, 48 FR 22733 (1983).
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As part of its continuing review of its trade regulation rules to
determine their current effectiveness and impact, the Commission
published a Federal Register notice (``FRN'') on June 15, 1994. This
FRN sought comment on the standard regulatory review questions, such as
what changes in the Rule would increase the benefits of the Rule to
purchasers and how those changes would affect the costs the Rule
imposes on firms subject to its requirements.
The FRN elicited 81 comments.\2\ The comments generally expressed
continuing support for the Rule, stating that correct care instructions
benefit consumers by extending the useful life of the garment, by
helping the consumer maximize the appearance of the garment, and/or by
allowing the consumer to take the ease and cost of care into
consideration when making a purchase. Most comments said that the costs
imposed on consumers because of the Rule were minimal when compared to
the benefits. Based on this review, the Commission has determined to
retain the Rule, but to seek additional
[[Page 67103]]
comment on possible amendments to the Rule as discussed below.
\2\ The commenters included cleaners; consumers; public
interest-related groups; fiber, textile, or apparel manufacturers or
sellers (or conglomerates); federal government entities; fiber,
textile, or apparel manufacturers or retailers trade associations;
two label manufacturers; one cleaning products manufacturer; one
association representing the leather apparel industry; one Committee
formed by industry members from the countries signatory to NAFTA;
one appliance technician; one appliance manufacturers trade
association; two standards-setting organizations; and two
representatives from foreign nations. The comments are on the public
record and are available for public inspection in accordance with
the Freedom of Information Act, 5 U.S.C. 552, and the Commission's
Rules of Practice, 16 CFR 4.11, during normal business days from
8:30 a.m. to 5 p.m., at the Public Reference Room, Room 130, Federal
Trade Commission, 6th and Pennsylvania Avenue, NW, Washington, D.C.
The comments are referred to within this Advance Notice of Proposed
Rulemaking (``ANPR'') by their name and the number assigned to each
submitted comment.
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The FRN sought comment on possible amendments, which are addressed
below, in this ANPR, including: (1) Whether the Rule should be amended
to require labeling instructions for both washing and dry cleaning,
rather than for just one method of cleaning and (2) whether the
reasonable basis standard set forth in the Rule should be clarified or
changed. The comments also recommended that the Commission consider
other amendments, which also are addressed in detail below.
Several comments suggested expanding the coverage of the Rule. The
Leather Apparel Association (``LAA'') suggested that garments made
completely of leather be included in the Rule, which now applies only
to textile wearing apparel and certain piece goods.3 J.C. Penney
suggested that consumers would benefit by expanding the Rule to cover
items such as ``towels, sheets, window coverings and other textile home
furnishing products.''4 However, the Commission considered and
rejected including these product categories when it amended the Rule in
1983. The comments do not provide sufficient evidence for reopening
these issues.
\3\ Comment 58, p.1; see also Drycleaners Fund (65) p.4. LAA
stated that consumers ``would benefit from having a label that, in
so many words, advises consumers that leather requires special care
* * *.'' Comment 58, p.1. However, it seems probable that most
consumers know that leather requires special care; in the absence of
evidence to the contrary, the Commission cannot conclude that it is
unfair or deceptive for manufacturers of leather garments to fail to
disclose this information. Secondly, LAA stated that leather
cleaning ``is more art than science'' and that any care label ``must
be non-specific as to the cleaning process.'' LAA suggested a label
that simply states ``Do not wash or dry clean by fabric method. Take
to a leather expert.'' Id. Such a label is unlikely to significantly
assist the average dry cleaner, who presumably already knows that
conventional dry cleaner, who presumably used on leather garments
and knows whether or not he has the ability to clean leather
garments.
\4\ Comment 70, p.1.
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Part B--Objectives the Commission Seeks To Achieve and Possible
Regulatory Alternatives
1. Definitions of Water Temperature in the Appendix
a. Background
Some comments recommended that the Commission revise the definition
of cold water temperature in the Appendix to the Rule. The Appendix to
the Rule currently states that ``cold'' water means ``cold tap water up
to 85 degrees F (29 degrees C).'' 5 Commenters noted that tap
water temperatures vary across the United States, and that such
differences can cause problems in washing clothes because, in the
winter in colder parts of the country, granular detergents may not
fully dissolve and activate during a cold wash cycle.6 An
appliance technician from Maine noted that consumers may hesitate to
use hotter water when the label advises to use ``cold'' water.\7\ As a
result, clothes may not be thoroughly cleaned and may be left with soap
residue.8
\5\ 16 CFR Part 423, Appendix A, 2.c.
\6\ Association of Home Appliance Manufacturers (53) p.2.
\7\ Bruce W. Fifield (62) p.1.
\8\ Id.
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Other comments suggested that the Rule's definition of hot water
(up to 150 degrees F, or 66 C) 9 should be changed. The American
Association of Textile Chemists and Colorists (``AATCC'') commented
that the temperatures stated in the Appendix to the Rule should be
changed to match the AATCC definitions, which the AATCC believes ``more
accurately reflect current washing machine settings and consumer
practice.'' 10 The AATCC defines ``hot'' as 120 F plus or minus 5
(49 C plus or minus 3). Another commenter noted the variances in
temperature definitions within the NAFTA countries and suggested they
should be harmonized.11
\9\ 16 CFR Part 423, Appendix A, 2.a.
\10\ Comment 34, p.1.
\11\ Jo Ann Pullen (44) p.3.
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b. Objectives and Regulatory Alternatives
The Commission believes that the definition of cold water in the
Appendix may need to be revised to ensure that consumers understand
that washing clothes in extremely cold water may not be effective. In
addition, the Commission believes that the definitions of warm and hot
water may need to be changed to ``more accurately reflect current
washing machine settings and consumer practice.'' Accordingly, the
Commission seeks comment on whether the Commission should amend the
Rule to change the definitions of ``warm'' and ``hot'' water, or to
include a new term such as ``cool'' or ``lukewarm'' in the Appendix.
The Commission further seeks comment on whether the Rule should be
amended to state that care labels recommending ``cold'' wash must
define the highest acceptable temperature for ``cold'' on the label,
and on the benefits and costs to consumers and manufacturers of such an
amendment.
2. Environmental Issues
a. Background
In the June 1994 FRN, the Commission stated that, because of
evidence that dry cleaning solvents are damaging to the environment,
the Environmental Protection Agency (``EPA'') was interested in
reducing the use of such solvents. The Commission stated that EPA's
Office of Pollution Prevention and Toxics had been working with the dry
cleaning industry to reduce the public's exposure to perchloroethylene
(``PCE''), the most common dry cleaning solvent.\12\ In connection with
this effort, EPA has published a summary of a process referred to as
``Multiprocess Wet Cleaning,'' which is an alternative cleaning process
that relies on the controlled application of heat, steam and natural
soaps to clean clothes that would ordinarily be dry cleaned.\13\
\12\ PCE has been designated as a hazardous air pollutant under
Section 112 of the Clean Air Act and under many state air toxics
regulations. On September 15, 1993, EPA set national emission
standards for new and existing PCE dry cleaning facilities.
According to a study conducted on Staten Island and in New Jersey,
PCE is among the toxic air pollutants found at the highest
concentrations in urban air.
\13\ 59 FR 30733-34. See also EPA (73) p.1.
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The FRN asked whether the current Rule may pose an impediment to
reducing solvent use because it requires either a washing instruction
or a dry cleaning instruction; it does not require both. Thus, garments
that can legally be labeled with a ``dry clean'' instruction alone also
may be washable, a fact not ascertainable from such an instruction. If
the Rule were amended to require both washing and dry cleaning
instructions for garments cleanable by both methods, consumers and
cleaners could make more informed choices and the use of dry cleaning
solvents might be lessened. To solicit comment on these issues, the
Commission posed a series of questions in the FRN, each of which is
separately addressed below:
(i) Does the current Rule pose an impediment to the EPA's goal of
reducing the use of dry cleaning solvents? Nine commenters addressed
this question. Three responded simply that the Rule does not pose an
impediment to EPA's goals.\14\ Six others, however, contended that the
current Rule impedes EPA's goal of reducing the use of dry cleaning
solvents by permitting manufacturers to disclose only one cleaning
instruction when a
[[Page 67104]]
garment can be either washed or dry cleaned.\15\
\14\ Baby Togs, Inc. (2) p.2; The Warren Featherbone Co. (33)
p.3; VF Corp. (36) p.5.
\15\ Business Habits, Inc. (38) p.4 (the current Rule is a
disincentive for the dry cleaner to consider washing or professional
wet cleaning when the labels state ``Dry Clean Only''); Mothers &
Others (22) pp.1-4 (unless consumers are informed of their options,
the market will be skewed in favor of dry cleaning and consumers may
not use cheaper methods (home laundering) and/or safer methods
(professional wet cleaning)); Aqua Clean System (20) p.4;
Ecofranchising, Inc. (28) pp.3-4; Jo Ann Pullen (44) p.7; Center for
Neighborhood Technology (59) pp.2-3.
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(ii) What is the actual incidence of labeling that fails to include
both washing and dry cleaning instructions? Few comments responded
directly to this question. One guessed that the incidence is ``Probably
none,'' reasoning that, because washing is less expensive than dry
cleaning, it would be unimaginable for a manufacturer to put a ``Dry
Clean'' label on a garment that could be washed.\16\ Another stated
that it is common practice to label conservatively (e.g., ``dry clean
only''),\17\ and a third alleged that there is a wide variation in
adherence to the requirements of the Rule, especially among small firms
and importers.\18\ Two cleaners using wet cleaning technology contended
between them that the incidence ranged from 40% to 100% because a
``Professionally Wet Clean'' instruction is never given on labels for
garments that normally would be dry cleaned but also could be
professionally wet cleaned.\19\
\16\ Baby Togs, Inc. (2) p.2.
\17\ Carter's (24) p.3.
\18\ OshKosh B'Gosh, Inc. (27) p.2.
\19\ Aqua Clean System (20) p.4; Ecofranchising, Inc. (28) pp.3-
4.
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(iii) With regard to a garment that can be either washed or dry
cleaned, should the Commission amend the Rule to require that care
instructions be provided for both washing and dry cleaning? Several
commenters preferred that the Rule not be amended in this regard at
all, contending that apparel manufacturers should be free to select the
best care method based on their own judgment.\20\ Some commenters
favored, without extensive analysis, requiring care instructions for
both dry cleaning and home laundering if neither process would harm the
garment. Most of these expected that such an amendment would enable
consumers to save the expense associated with unnecessary dry cleaning
for products that could safely be laundered at home.\21\ Others
maintained that a reduction in dry cleaning would diminish for humans
and the environment those risks that are associated with the use of
PCE.\22\ One commenter pointed out that some consumers may prefer to
dry clean washable garments and that care instructions should give
these individuals a choice of methods when both laundering and dry
cleaning would be appropriate.\23\
\20\ The Warren Featherbone Co. (33) p.1-2, 3; Clothing
Manufacturers Association (40) p.1; Salant Corp. (52) p.1. See also
Braham Norwick (25) p.3.
\21\ See, e.g., Benjamin Axleroad (1) p.1; Don Pietsch (3) p.1;
Evelyn Borrow (4) p.1; Claudia G. Pasche (5) p.1; Margaret S. Jones
(6) p.1; Judith S. Barton (7) p.1; Virginia J. Martin (8) p.1;
SuzAnne A. Darlington (14) p.1; Ann Geerhar (29) p.1.
\22\ See, e.g., Ardis W. Koester (12) p.1; University of
Kentucky College of Agriculture (15) p.1; Center for Neighborhood
Technology (59) pp. 2-3.
\23\ Drycleaners Environmental Legislative Fund (65) p.2.
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Another group of commenters suggested that the Rule be amended to
require washing instructions for garments that can be safety laundered
as well as dry cleaned, and to require dry cleaning instructions solely
for those garments that must only be dry cleaned, rather than to
require that both instructions be specified for garments that could
withstand both processes.\24\ These commenters reasoned that, although
many items (cotton underwear and outerwear, children's clothing, wash-
and-wear apparel, etc.) could safely be dry cleaned, it would be
neither necessary nor desirable to do so. In fact, they contended, a
requirement for dual instructions for such products would actually
result in an increase in the use of dry cleaning solvents because
manufacturers now exclusively producing washable (but also dry
cleanable) products would have to install dry cleaning facilities and
equipment so they could provide a reasonable basis for the dry cleaning
instruction.
\24\ See, e.g., OshKosh B'Gosh, Inc. (27) p.2; VF Corp. (36) p.
5; see also Fieldcrest Cannon (11) p. 4 (opposed suggested amendment
but advanced the same reasoning as the preceding commenters);
American Textile Manufacturers Institute (56) pp.5-6.
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Other commenters suggested that the Rule be amended to include a
requirement that labels on garments for which dry cleaning is
appropriate include a ``professionally wet clean'' instruction in
addition to the dry cleaning instruction.\25\ These commenters
contended that the professional wet cleaning process is a viable
alternative to dry cleaning in most cases, and that the process does
little damage to the environment. Because wet-cleaning wash formulas
are created to cover categories of fabric type, two commenters stated
that labels should clearly state the composition of the fabric or
fabrics used so the correct machine wet-cleaning formula may be
used.\26\
\25\ Aqua Clean System (20) pp. 4-6; Mothers & Others (22) pp.
2-3; The Massachusetts Toxics Use Reduction Institute (23) pp. 1-2;
Ecofranchising, Inc. (28) p. 3; Public Advocate for the City of New
York (39) pp. 8, 73; Friends of the Earth (43) p. 1, Jo Ann Pullen
(44) p. 7; Greenpeace (45) pp. 1-3; Association of Home Appliance
Manufacturers (53) p. 2, Center for Neighborhood Technology (59) pp.
2-4; EPA (73) p. 1. See also American Apparel Manufacturers
Association (68) p. 5.
\26\ Aqua Clean (20) p. 7; Ecofranchising (28) pp. 2, 4.
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(iv) What are the costs and benefits, including environmental
benefits, of such an amendment? Several commenters opposing the
amendment to require instructions for both washing and dry cleaning
contended that a dual labeling requirement would result in increased
costs for manufacturers who would have to test for both methods instead
of only one.\27\ However, those who favored amending the Rule in any of
the ways discussed above cited as benefits the reduced cleaning costs
to consumers, the benefits to human health and the environment, or,
occasionally, both.
\27\ Fieldcrest Cannon (11) p. 4; Woolrich, Inc. (21) p. 1;
OshKosh B'Gosh, Inc. (27) p. 2; VF Corp. (36) p. 5, Industry Canada
(37) p. 3; The GAP, Inc. (78) p. 5.
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Materials describing methods, training, and equipment in many of
the comments suggesting a requirement for a ``Professionally Wet
Clean'' instruction implied that a significant cost would be incurred
by cleaners wishing to use the new technology. One comments also
concluded that an amendment to require such an instruction should be
accompanied by a consumer education effort.\28\
\28\ See, e.g., Mothers & Others (22) pp. 1-2; Public Advocate
for the City of New York (39) (transmitting the comprehensive report
on ``The Risk to New Yorkers from Drycleaning Emissions and What Can
Be Done About It''); Greenpeace (45) pp. 1-3, Attachment: ``Dressed
to Kill''; Center for Neighborhood Technology (59) pp. 2-3.
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b. Objectives and Regulatory Alternatives
The record indicates that PCE is dangerous to humans and the
environment, and that some consumers are interested in avoiding the use
of PCE when possible. Through the proposed amendments to the Rule,
discussed below, the Commission seeks to ensure that consumers are
provided with information that would allow them the choice of washing
garments when possible, or having them professionally wet cleaned. The
information about washability may be important to many consumers,
either for economic or environmental reasons.
When a garment is labeled ``dry clean,'' many consumers may be
misled into believing that the garment cannot be washed in water; if
the garment can be washed in water, the consumer may
[[Page 67105]]
incur the unnecessary expense of dry cleaning the garment.\29\ If the
garment is labeled ``dry clean'' when it in fact could be wet cleaned
by a professional cleaner, the consumer may believe it is necessary to
have the garment dry cleaned although the consumer would prefer a
cleaning method that is less damaging to the environment.
\29\ A Perdue University survey found that 89.3% of the 962
respondents indicated that they would not wash a garment labeled
``dryclean.'' Staff Report to the Federal Trade Commission and
Proposed Revised Trade Regulation Rule (16 CFR Part 423) (May 1978),
p. 141. Other surveys showed similar results. Id. at 142-143.
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The lack of this information can result in substantial injury to
consumers in the form of unnecessary expense and/or damage to the
environment that the consumer wishes to avoid. Moreover, it can be
extremely difficult for consumers to avoid this injury by obtaining the
information about washability of an item for themselves. While fiber
content can be a guide to washability, other factors--such as the type
of dye or finish used--can also determine washability, and consumers
have no way of learning what dyes and finishes were used and whether
they will survive washing. In addition, it may be that some garments
that traditionally have been damaged by washing (e.g., wool business
suits) can be cleaned without damage by new methods of professional wet
cleaning, but consumers have no way of determining for themselves which
of the many garments available to them are now washable.
Accordingly, the Commission seeks comment on whether it should
amend the Care Labeling Rule to require a laundering instruction for
all covered products for which laundering is appropriate. This
amendment would permit optional dry cleaning instructions for such
washable items, provided dry cleaning would be an appropriate
alternative cleaning method.\30\ The amendment would, however, require
that manufacturers marketing items with a ``Dry Clean'' instruction
alone be able to substantiate both that the items could be safely dry
cleaned and that home laundering would be inappropriate for them.\31\
\30\ The Commission has learned from several commenters,
primarily manufacturers, that requiring both washing and dry clean
labels (a ``dual disclosure'' amendment) would require a dry
cleaning instruction on virtually all washable items. According to
these commenters, this would necessitate additional testing expenses
for manufacturers and a resulting increase in PCE use, to the
detriment of human health and the environment. The Commission has no
reason to believe at this time that it is either unfair or deceptive
for a manufacturer or importer to fail to reveal that a garment
labeled for washing can also be dry cleaned. The comments also
indicate that most consumers would not want to spend the additional
money necessary to dry clean such items.
\31\ The Rule currently requires this level of substantiation
for a ``Dry Clean Only'' instruction.
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The disclosures required by this proposal would inform consumers
purchasing washable items that the items could be safely laundered at
home. As noted in the comments, this would enable consumers to make a
more informed purchasing choice and provide them with the option of
saving money by laundering at home instead of incurring the higher
expenses of dry cleaning. In addition, consumers who are concerned
about reducing the use of PCE will have information about the
``washability'' of all apparel items they are considering purchasing.
Moreover, this proposal would not result in the additional
substantiation testing (and increased PCE use) that the comments
suggested a ``dual disclosure'' requirement could necessitate, because
a dry cleaning instruction would be optional, as would the necessary
substantiation to support it.
The Commission also seeks comment on the feasibility of requiring,
for all covered products bearing a dry cleaning instruction, the
addition of a professional wet cleaning instruction for items for which
professional wet cleaning would be appropriate. The comments indicate
that the comparatively new processes of professional wet cleaning
technologies are promising alternatives to PCE-based dry cleaning.
However, these comments do not provide enough information about
professional wet cleaning for the Commission to assess whether and how
the Rule should address wet cleaning. Therefore, the Commission seeks
information on the cost of wet cleaning, the availability of wet
cleaning facilities, and any other information that would help the
Commission determine whether it should consider amending the Rule to
require, for all covered products bearing a dry cleaning instruction,
the addition of a professional wet cleaning instruction for items for
which professional wet cleaning would be appropriate. The Commission
also seeks comment on the feasibility of the processes as practical
current alternatives to dry cleaning. In addition, the Commission seeks
comment on whether fiber identification should be on a permanent label,
as is currently required for care information, because this information
may be needed for wet-cleaning processes, and comment on the costs to
manufacturers of such a requirement.
3. The Reasonable Basis Requirement of the Rule
a. Background
The rule requires that manufacturers and importers of textile
wearing apparel possess, prior to sale, a reasonable basis for the care
instructions they provide. Under the Rule, a reasonable basis must
consist of reliable evidence supporting the instructions on the label.
16 CFR 423.6(c). Specifically, a reasonable basis can consist of (1)
reliable evidence that the product was not harmed when cleaned
reasonably often according to the instructions; (2) reliable evidence
that the product or a fair sample of the product was harmed when
cleaned by methods warned against on the label; (3) reliable evidence,
like that described in (1) or (2), for each component part; (4)
reliable evidence that the product or a fair sample of the product was
successfully tested; (5) reliable evidence of current technical
literature, past experience, or the industry expertise supporting the
care information on the label; or (6) other reliable evidence. 16 CFR
423.6(c).
The FRN solicited comment on whether the Commission should amend
the Rule ``to make clear that a variety of types of evidence, alone or
in combination, might provide a reasonable basis [for cleaning
directions] in specific instances,'' but that as reflected in the
Rule's original Statement of Basis and Purpose, the Rule should not be
read to suggest that the reasonable basis standard necessarily is met
whenever a seller possesses at least one of the types of evidence set
forth as examples of how the standard might be satisfied. The FRN also
sought comment on whether the Commission should clarify in the Rule
that the criteria for determining the proper level of substantiation
that were recited in the Commission's Policy Statement Regarding
Advertising Substantiation,\32\ apply to care labeling claims, whether
analyzed directly under Section 5 or under the Rule.
\32\ FTC Policy Statement Regarding Advertising Substantiation,
104 F.T.C. 839 (1984). The Commission issued this statement to
``reaffirm[]'' its commitment under Section 5 of the FTC Act, 15
U.S.C. Sec. 45, to requiring adequate substantiation for objective
advertising claims before they are disseminated.
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In addition, the Commission expressed interest in whether
particular types of garments or garment components might necessitate
special treatment. Question 9 in the FRN asked:
Should the Commission amend the Rule to specify under what
conditions a manufacturer or importer must possess a particular type
of basis among those listed in
[[Page 67106]]
Sec. 423.6(c) of the Rule, such as test results? Should the
``reasonable basis'' requirements of the Rule be modified in any
other way?
The comments responding to these portions of the FRN suggest that
some care labels may lack a reasonable basis. One commenter stated that
inaccurate care labels were responsible for 33-45% of the damaged
garments sent in to the International Fabricare Institute for testing
during a 1988-1993 period.\33\ Furthermore, many of the commenters'
responses to Question 10 in the FRN (``Are there garments in the
marketplace that contain inaccurate or incomplete care instructions?'')
indicate that many garments are labeled ``dry clean only'' without a
reasonable basis for warning that they cannot be washed.\34\ The
comments additionally suggest that care instructions may not be
appropriate for all components of a garment, such as trims.\35\
Colorfastness and shrinkage were also identified as problems
experienced with inaccurate or incomplete care instructions.\36\
\33\ Drycleaners Environmental Legislative Fund (65) p.4.
\34\ Evelyn Borrow (4) p.1; Claudia G. Pasche (5) p.1; Margaret
S. Jones (6) p.1; University of Kentucky College of Agriculture (15)
p.1; Aqua Clean System (20) p.3; Carter's (24) p.3; Braham Norwick
(25) p.1; Ecofranchising, Inc. (28) pp.3-4; Jo Ann Pullen (44) pp.2-
3; J.C. Penney (70) p.3.
\35\ VF Corp. (36) p.7; Drycleaners Environmental Legislative
Fund (65) p.4.
\36\ J.C. Penney (70) p.3.
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Twelve commenters stated that they were in favor of modifying the
reasonable basis portion of the Rule, suggesting that the reasonable
basis requirement should be clarified and strengthened to reduce the
problem of inaccurate and incomplete care labels.\37\ Seven commenters
were opposed to modifying the reasonable basis requirements of the
Rule.\38\ These commenters expressed concern, for example, that
requiring tests would be too expensive and would ultimately increase
costs for consumers.
\37\ Clorox Co. (32); Industry Canada (37); Business Habits,
Inc. (38); Jo Ann Pullen (44); Salant Corp. (52); Association of
Home Appliance Manufacturers (53); Center for Neighborhoods
Technology (59); Drycleaners Environmental Legislative Fund (65);
Department of the Air Force (67); American Apparel Manufacturers
Association (68); EPA (73); The Gap, Inc. (78).
\38\ Baby Togs, Inc. (2); Carter's (24); OshKosh B'gosh, Inc.
(27); The Warren Featherbone Co. (33); VF Corp. (36); American
Textile Manufacturers Institute (56); Fruit of the Loom (64).
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Several commenters recommended clarifying the Rule by specifying
the circumstances in which a manufacturer or importer must possess test
results or another specific type of evidence to establish a reasonable
basis.\39\ One commenter said that testing might not always be required
and suggested that the Rule should specify different types of required
evidence for different circumstances.\40\ This commenter stressed,
however, that the Rule should require a reasonable basis for a garment
in its finished state, noting that the current Rule suggests that it is
satisfactory to have reliable evidence ``for each component part'' of a
garment.\41\ Another Commenter suggested that the Rule should set out
performance standards for certain properties of garments (e.g.,
dimensional stability and colorfastness) and should identify both
testing methodologies and evaluation criteria for those properties.\42\
\39\ E.g., Center for Neighborhood Technology (59) p.1; Salant
Corp. (52) p.2; Drycleaners Environmental Legislative Fund (65) p.4;
Clorox Co. (32) p.3.
\40\ Drycleaners Environmental Legislative Fund (65) p.4. Thus,
for example, for garments made entirely of material with a long
history of care, such as 100% undyed cotton, historical knowledge
may be sufficient to constitute a reasonable basis. In contrast,
when the garment is made of a new fiber and is dyed with a new dye
or when the garment is a cotton garment with a bright trim, a
manufacturer may be required to conduct multiple tests on various
samples of the garment in order to establish a reasonable basis.
\41\ Drycleaners Environmental Legislative Fund pointed out that
a trim might not noticeably bleed when cleaned by itself but might
bleed onto the body of a garment when the finished garment is
cleaned. Thus, it would not suffice to have one ``reasonable basis''
for the body of a garment and another for the trim. Comment 65, p.4.
\42\ Industry Canada (37) p.2.
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b. Objectives and Regulatory Alternatives
The Commission appreciates the comments submitted on the FRN and
continues to explore this area. The Commission seeks comment on the
incidence of inaccurate and incomplete labels, the extent to which that
incidence might be reduced by clarifying the reasonable basis standard,
and the costs and benefits of such a clarification. Section 423.6(c)(3)
of the Rule provides that a reasonable basis may consist of reliable
evidence that ``each component'' of the garment can be cleaned
according to the care instructions. As several commenters pointed out,
however, a garment component that may be cleaned satisfactorily by
itself might not be cleaned satisfactorily when cleaned as part of an
assembled garment made of different components, for example, by
bleeding noticeably onto the other parts of the garment. The
Commission, therefore, seeks comment on whether to amend the Rule to
specify that the reasonable basis requirement applies to the garment in
its entirety rather than to each of its individual components.
If the Commission decides to amend the reasonable basis standard,
one option is to indicate in the Rule that whether one or more of the
types of evidence described in Section 423.6(c) constitutes a
reasonable basis for care labeling instructions depends on the factors
set forth in the FTC Policy Statement Regarding Advertising
Substantiation.\43\ Another option, as reflected in Question 9 of the
FRN, is to require in the Rule that cleaning directions for certain
garments, fabrics or materials will comply with the Rule only if they
are supported by the results of appropriately designed and conducted
scientific tests recognized by experts in the field as probative of
whether the item can be cleaned as directed without damage. The
Commission also seeks comment on whether, if testing is required under
certain circumstances, the Rule should specify particular testing
methodologies to be used.
\43\ In the Statement, the Commission set forth criteria to
consider in establishing the minimum required basis for objective
advertising claims, where no specific basis was stated or implied:
``These factors include: the type of claim, the product, the
consequences of a false claim, the benefits of a truthful claim, the
cost of developing substantiation for the claim, and the amount of
substantiation experts in the field believe is reasonable.'' FTC
Policy Statement Regarding Advertising Substantiation, 104 F.T.C.
839, 840 (1984).
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Finally, the Commission solicits comment on whether the Rule should
set forth standards for acceptable and unacceptable changes in garments
following cleaning as directed. The Commission also seeks comment on
whether it would be useful for the Rule to specify properties, such as
dimensional stability and colorfastness, to which such standards would
apply.
Part C--Request for Comments
Members of the public are invited to comment on any issues or
concerns they believe are relevant or appropriate to the Commission's
consideration of proposed amendments to the Care Labeling Rule. The
Commission requests that factual data upon which the comments are based
be submitted with the comments. In addition to the issues raised above,
the Commission solicits public comment on the specific questions
identified below. These questions are designed to assist the public and
should not be construed as a limitation on the issues on which public
comment may be submitted.
Questions
A. Definitions of Water Temperatures in the Appendix
(1) Is it feasible and desirable to use the words ``lukewarm'' or
``cool'' on a care label rather than ``cold''? Should
[[Page 67107]]
these terms be required instead of the word ``cold''? What benefits
would consumers derive from such a change?
(2) Is it feasible and desirable to amend the Rule to require that
the highest acceptable temperature for ``cold'' water be stated on the
care label? What benefits would consumers derive from such an
amendment? What costs would such an amendment impose on manufacturers?
(3) Should the Rule's definition of ``warm'' water be amended, and
if so, what temperature should be specified instead? What benefits
would consumers derive from such an amendment?
(4) Should the Rule's definition of ``hot'' water be amended, and
if so, what temperature should be specified instead? What benefits
would consumers derive from such an amendment?
B. Environmental Issues
(1) Please describe the process, or the processes, commonly
referred to as ``Wet Cleaning,'' ``Multiprocess Wet Cleaning,''
``Professional Wet Cleaning,'' or other similar terms, and provide as
much technical detail as possible.
(2) What equipment and what materials are necessary for a
professional cleaning establishment to employ the wet cleaning
processes?
(3) What effects do the materials used in the wet cleaning process
have on human beings, animals, plants, and the environment? Please be
as specific as possible.
(4) How many domestic businesses provide professional wet cleaning
to the public on a regular basis? Please specify the type(s) of
professional wet cleaning provided. Does the service comprise all, or a
part of, each such company's business? If part, what percentage?
(5) What percentage of garments and other items for which
professional dry cleaning has historically been the only appropriate
cleaning method are safely and satisfactorily cleanable by professional
wet cleaning? Please be as specific as possible as to fiber, fabric,
and garment type. What difference, if any, would there be in customer
satisfaction between the results of the two processes?
(6) What is the average cost, for as many items as respondents can
reasonably describe, of professional wet cleaning compared to
professional dry cleaning? The Commission requests information both as
it pertains to the cost to the cleaner providing the service and the
cost to the consumer using it.
(7) With regard to a garment that cannot be home laundered but can
be dry cleaned, should the Commission amend the Rule to require a
professional wet cleaning instruction too (provided wet cleaning is
appropriate for the garment)? What would be the benefits and costs to
consumers and manufacturers of such an amendment?
(8) Should fiber identification be on a permanent label? Should
fiber identification be on the same label as care information? What
costs would such requirements impose on manufacturers?
(9) How many garments currently labeled ``dry clean'' or ``dry
clean only'' could be washed at home by consumers? Should the Rule be
amended to require a laundering instruction for all covered products
for which laundering is appropriate? What would be the benefits and
costs to consumers and manufacturers of such an amendment?
C. The Reasonable Basis Requirement of the Rule
(1) Are care label instructions generally accurate? If not, in what
ways are they inaccurate, and do these inaccuracies result in damage to
the affected garments or other costs to consumers?
(2) Are any types of garments or piece goods particularly prone to
damage even when the care label instructions are followed?
(3) Are home laundering directions on care labels incomplete or
inaccurate in ways that result in damage to garments when they are
laundered as directed? If so, what are the most common problems, and
how widespread are they?
(4) Are dry cleaning directions on care labels incomplete or
inaccurate in ways that result in damage to garments when they are dry
cleaned as directed? If so, what are the most common problems, and how
widespread are they?
(5) What actions, if any, do garment or piece goods manufacturers
ordinarily take to assure that care labels are accurate? To what extent
do garment manufacturers rely solely on care information provided by
the suppliers of components of garments?
(6) Do garment manufacturers typically analyze or test garments for
appropriate cleaning procedures in their completed form or before the
garments' components are assembled?
(7) In what situations, if any, should the testing of garments be
the only evidence that would be legally acceptable?
(8) Should the Rule specify testing methodologies to be used in
situations in which testing would be required? What should those
methodologies be?
(9) Should the Rule refer to performance standards for certain
properties of garments? If so, which properties, and what should these
performance standards be?
(10) What steps, if any, do garment manufacturers take to provide
cleaning instructions for products comprising more than one fabric or
material, such as those with metallic trim or trim of a fabric or color
different from that of the main part of the product?
(11) What evidence is there concerning the effectiveness of current
actions by garment manufacturers to ensure appropriate cleaning of
their products?
(12) Do garment labels stating, for example, that particular
cleaning instructions apply to the garment ``exclusive of trim''
provide sufficient guidance to consumers or cleaners to enable them to
avoid damaging the garments by improper cleaning?
(13) Should the Rule be amended to delete Section 423.6(c)(3),
which provides that a reasonable basis can consist of reliable evidence
that each component of the garment can be cleaned according to the care
instructions and to state, instead, that a manufacturer must possess a
reasonable basis for the garment as a whole?
(14) Should the Rule be amended to clarify that whether one or more
of the types of evidence described in Section 423.6(c) constitutes a
reasonable basis is based on the factors set forth in the FTC Policy
Statement Regulating Advertising Substantiation?
(15) Do garment or piece goods manufacturers or retailers offer
refunds for products damaged in cleaning despite adherence to care
label directions? What is the typical refund policy? How is the
existence of such refunds made known to consumers?
(16) What are the costs to consumers of complaining to
manufacturers or retailers about garments damaged in cleaning? Are
there factors that discourage consumers whose garments have been
damaged in cleaning from complaining to manufacturers or retailers?
(17) What would be the benefits and costs to consumers and
manufacturers of these amendments clarifying the Rule's reasonable
basis requirement?
Authority: Section 18(d)(2)(B) of the Federal Trade Commission
Act, 15 U.S.C. 57a(d)(2)(B).
[[Page 67108]]
List of Subjects in 16 CFR Part 423
Care labeling of textile wearing apparel and certain piece goods;
Trade Practices.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 95-31411 Filed 12-27-95; 8:45 am]
BILLING CODE 6750-01-M
Complete official Federal Register PDF
FR Doc. 95-31371 Structural Measures To Reduce Oil Spills From Existing Tank Vessels Without Double Hulls
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67226-67251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31371]
[[Page 67225]]
_______________________________________________________________________
Part III
Department of Transportation
_______________________________________________________________________
Coast Guard
_______________________________________________________________________
33 CFR Part 157
Structural Measures To Reduce Oil Spills From Existing Tank Vessels
Without Double Hulls; Proposed Rule
Federal Register / Vol. 60, No. 249 / Thursday, December 28, 1995 /
Proposed Rules
=======================================================================
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[[Page 67226]]
DEPARTMENT OF TRANSPORTATION
Coast Guard
33 CFR Part 157
[CGD 91-045]
RIN 2115-AE01
Structural Measures To Reduce Oil Spills From Existing Tank
Vessels Without Double Hulls
agency: Coast Guard, DOT.
action: Supplemental notice of proposed rulemaking.
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summary: The Coast Guard solicits comments on structural measures for
certain existing tank vessels of 5,000 gross tons (GT) or more that do
not have double hulls. This supplemental notice of proposed rulemaking
(SNPRM) responds to comments received on the notice of proposed
rulemaking, presents a summary of a regulatory assessment for various
structural measures, notifies the public of the availability of this
assessment, and solicits comments on the economic feasibility of the
measures. This SNPRM represents the third step in the Coast Guard's
three-step effort to establish structural and operational measures,
that are economically and technologically feasible for reducing the
threat of oil spills from tank vessels without double hulls, as
required by the Oil Pollution Act of 1990 (OPA 90). It analyzes a
number of measures and describes the results of extensive cost and
benefit research on those measures deemed technologically feasible. No
regulatory text is introduced in this SNPRM; however, comments received
on this SNPRM will enable the Coast Guard to assess the economic
feasibility for structural measures.
dates: Comments on this notice must be received on or before March 27,
1996.
addresses: Comments may be mailed to the Executive Secretary, Marine
Safety Council (G-LRA/3406) (CGD 91-045), U.S. Coast Guard
Headquarters, 2100 Second Street SW., Washington, DC 20593-0001, or may
be delivered to room 3406 at the same address between 8 a.m. and 3
p.m., Monday through Friday, except Federal holidays. The telephone
number is (202) 267-1477.
The Executive Secretary maintains the public docket for this
rulemaking. Comments will become part of this docket and will be
available for inspection or copying in room 3406, U.S. Coast Guard
Headquarters, between 8 a.m. and 3 p.m., Monday through Friday, except
Federal holidays.
for further information contact: LCDR Suzanne Englebert, Project
Manager, Standards Evaluation and Development Division, at (202) 267-
6490. This number is equipped to record messages on a 24-hour basis.
supplementary information:
Request for Comments
The Coast Guard encourages interested persons to participate in
this rulemaking by submitting written data, views, or arguments.
Persons submitting comments should include their names and addresses,
identify this rulemaking (CGD 91-045) and the specific section of this
proposal to which each comment applies, and give the reason for each
comment. Please submit two copies of all comments and attachments in an
unbound format, no larger than 8\1/2\ by 11 inches, suitable for
copying and electronic filing. Persons wanting acknowledgment of
receipt of comments should enclose a stamped, self-addressed postcard
or envelope.
The Coast Guard will consider all comments received during the
comment period. It may change this proposal in view of the comments.
The Coast Guard plans to hold a public meeting concerning this
SNPRM. A notice of public meeting will be published in the Federal
Register to announce the date, time, and location of the meeting.
Regulatory History
Section 4115(b) of the Oil Pollution Act of 1990 (OPA 90) (which
appears as a statutory note following 46 U.S.C. 3703a) directs the
Coast Guard to develop structural or operational requirements for tank
vessels of 5,000 gross tons or more without double hulls to serve as
regulations until 2015, when all tank vessels operating in U.S. waters
are required to have double hulls under section 4115(a) of OPA 90 (46
U.S.C. 3703a). Regulations issued under the authority of section
4115(b) must provide as substantial protection to the environment as is
economically and technologically feasible.
On November 1, 1991, the Coast Guard published an advance notice of
proposed rulemaking (ANPRM) (56 FR 56284) which discussed structural
and operational measures intended to meet the requirements of section
4115(b) of OPA 90. The ANPRM included a request for data on the
technical and economic feasibility of those measures for use on vessels
covered by section 4115(b). Eighty-eight comments were received by the
close of the extended comment period, which ended on January 30, 1992
(57 FR 1243).
After reviewing the comments, the Coast Guard published an NPRM
entitled ``Structural and Operational Measures to Reduce Oil Spills
from Existing Tank Vessels Without Double Hulls'' (existing Vessels) on
October 22, 1993 (58 FR 54870). The Coast Guard issued two subsequent
correction notices on November 19, 1993 (58 FR 61143), and December 14,
1993 (58 FR 65298), which made technical corrections to the NPRM. In
response to several comments received on the NPRM, the Coast Guard
published, on December 16, 1993, a notice of public meeting and
extension of comment period (58 FR 65683).
The Coast Guard held a public meeting on January 20, 1994, to
obtain information from the public on the proposed regulations. Topics
addressed by speakers included applicability, differences between tank
barges and tankships, exemptions, and economic and technical
feasibility of the proposed regulations. Some of the basic assumptions
of the proposed regulations related to certain structural measures were
also discussed, particularly their reliance on Regulation 13G of Annex
I of the International Convention for the Prevention of Pollution from
Ships, 1973, as modified by the Protocol of 1978 (MARPOL 73/78).
Information on the public meeting is available for public review at the
address under ADDRESSES.
In light of the comments received at the public meeting and in
response to the written comments received on the NPRM, the Coast Guard
conducted an extensive review of its regulatory plan for this
rulemaking. To expedite the implementation of section 4115(b) of OPA
90, the Coast Guard developed a three-pronged approach which
encompassed three separate rulemaking projects. First, the Coast Guard
issued a final rule on August 5, 1994, requiring the carriage of
emergency lightering equipment and the inclusion of the vessel's
International Maritime Organization (IMO) number in the advance notice
of arrival report (59 FR 40186); second, it issued a supplemental
notice of proposed rulemaking (SNPRM) on November 3, 1995, (60 FR
55904) regarding additional operational measures; and third, it is
issuing this SNPRM to describe its analysis of the technological
feasibility and cost effectiveness of imposing various structural
requirements.
Comments received on most of the structural measures proposed in
the regulatory text of the Existing Vessels NPRM (58 FR 54870) were
negative. As a result, the Coast Guard is no longer proposing any of
the structural
[[Page 67227]]
measures it proposed in the NPRM. Instead, the Coast Guard is
reexamining the economic and technological feasibility of imposing
certain structural requirements in light of the findings contained in
the revised regulatory assessment. The Coast Guard also intends to
carefully consider all comments received from the public on this
analysis of the revised regulatory assessment, and determine whether
any structural measure is both economically and technologically
feasible.
Background and Purpose
The Coast Guard recognizes that operational and structural measures
perform unique and important functions to prevent oil pollution. The
second phase of the Coast Guard's three-phase effort to establish
measures for existing tank vessels addresses reducing the risk of a
grounding, collision, or fire. Many pollution incidents from tank
vessels can be prevented by applying operational measures. Common
failure modes which lead to pollution incidents include personnel
error, navigation problems, and improper maintenance practices. A
separate SNPRM entitled ``Operational Measures to Reduce Oil Spills
From Existing Tank Vessels Without Double Hulls'' (Operational Measures
SNPRM) (60 FR 55904; November 3, 1995) proposes requirements for bridge
resource management training, vessel specific training, rest hour
minimums, enhanced structural surveys, maneuvering performance
capability requirements, and other requirements aimed at reducing the
risk of accidents involving existing tank vessels.
The Coast Guard's third phase of this effort to reduce oil
pollution from certain existing tank vessels addresses mitigation of
pollution if an accident occurs. The Coast Guard evaluated those
structural measures that would reduce the oil outflow on various
existing vessel designs. This analysis included measures such as
fitting double bottoms or sides, requiring hydrostatic-balanced loading
(HBL) for all vessel configurations, and fitting segregated ballast
tanks (SBTs) or clean ballast tanks (CBTs) on those vessels presently
without them.
Discussion of Comments and Changes
Background information on proposals for structural measures for
existing vessels without double hulls is provided in the preambles to
the ANPRM and NPRM. These proposals focus on measures to reduce oil
outflow after a collision or grounding has occurred.
The Coast Guard received 132 comments on the Existing Vessels NPRM.
Thirty of these comments related to the operational measures phase of
this rulemaking project while the remaining 102 comments discussed
issues related to reducing the oil outflow on an existing tank vessel
after an accident occurs. The following discussion summarizes the
comments received on the NPRM and is divided by topic: (1)
applicability and treatment of existing double hull or double bottom
vessels, (2) consistency with international standards, (3)
protectively-located spaces (PL/spaces), (4) hydrostatic-balanced
loading (HBL), (5) protectively-located segregated ballast tanks (PL/
SBT) requirements, (5) alternative measures, (6) phase-in alternatives
and economic incentives, (7) regulatory assessment--general, (8)
regulatory assessment--costs, and (9) regulatory assessment--benefits.
1. Applicability and Treatment of Existing Double Hull or Double Bottom
Vessels
The Coast Guard received one comment that inquired about the
lightering zones referred to in section 4115 of OPA 90. The comment
questioned how the lightering zones would impact the vessels that are
required to comply with structural requirements for existing tank
vessels. The Coast Guard issued a final rule on August 29, 1995,
entitled ``Designation of Lightering Zones'' (60 FR 45006), which
established four lightering zones in the Gulf of Mexico. Under the
provisions of the final rule, tank vessels without double hulls may
lighter in the Exclusive Economic Zone (EEZ) in these zones, including
the existing vessels affected by this rulemaking. These vessels would
be allowed to continue conducting lightering operations in these zones
after they are phased out of service under the provisions of section
4115(a) of OPA 90 until 2015. However, under section 4115(b) of OPA 90,
these vessels would also be required to meet any structural and
operational measures for tank vessels without double hulls.
Another comment indicated that States should not attempt to preempt
this proposed Federal regulation. The Coast Guard works closely with
local and State governments and encourages them to actively participate
in its regulatory process. There should be no conflict between State
and Federal law; however, to the extent there is such a conflict,
Federal law remains supreme (U.S. CONST. art. VI, cl. 2).
On comment stated that the more limited definition of oil used in
this rulemaking, which excludes animal fats and vegetable oils, should
apply to all OPA 90 regulations. Other comments requested the exemption
of vessels which carry non-persistent oils. The NPRM specifically
excluded vessels carrying only animal fats and vegetable oils because
the proposed structural requirements were believed to be too costly for
vessels carrying only non-petroleum oils. Additionally, the exemption
was proposed in an effort to be consistent with the international
structural measures for existing vessels established in MARPOL 73/78.
The Coast Guard has determined that the application of some of the
structural measures presented in this SNPRM is technologically feasible
for all existing tank vessels. Comments on the economic feasibility of
imposing structural measures on vessels that carry only non-petroleum
oils are solicited. The Coast Guard also requests comments on the
benefits that may result from structural requirements. It should be
noted that the Operational Measures SNPRM (60 FR XXXX; date) proposes
the application of operational measures to all existing tank vessels,
including non-petroleum oil carriers.
Several comments requested clarification on whether the proposed
rulemaking would apply to vessels operating in the U.S. EEZ and to
vessels that carry cargo to foreign destinations. One comment asked
whether the rulemaking would apply to vessels that unload cargo at
deepwater ports or that engage in lightering in U.S. waters. The Coast
Guard determined that any operational or structural measures
reulemaking implementing section 4115(b) would be consistent with the
applicability section 4115(a) of OPA 90 which requires certain existing
tank vessels without double hulls to be phased out of operation by
2015. Therefore, this SNPRM would apply to vessels unloading cargo at
deepwater ports or engaging in lightering in U.S. waters. It would also
apply to any other existing tank vessel without a double hull that is
required to be phased out under section 4115(a) of OPA 90.
The Coast Guard rulemaking implementing section 4115(a) entitled
``Double Hull Standards for Vessels Carrying Oil in Bulk'' (CGD 90-051)
(60 FR 13318; March 10, 1995) added 33 CFR 157.10(d), which applies the
regulations to certain tank vessels carrying oil in bulk as cargo
operating in U.S. waters, including vessels unloading oil as cargo at
deepwater ports and lightering in established lightering zones more
than 60 miles from the territorial sea baseline. The regulations also
apply to non-dedicated oil spill response vessels (OSRVs). The
Navigation and Inspection Circular (NVIC) 10-94, ``Guidance for
[[Page 67228]]
Determination and Documentation of the Oil Pollution Act of 1990 (OPA
90) Phase-out Schedule for Existing Single Hull Vessel Carrying Oil in
Bulk,'' provides a detailed explanation of the applicability of section
4115(a). Without conclusively resolving all the complex interplay
between the Oil Pollution Act and the Law of the Sea, the Coast Guard
presently intends that operational and structural requirements would
not apply to foreign tankships engaged in innocent passage on U.S.
navigable waters, which includes the territorial sea of the United
States and the EEZ.
One comment requested clarification on whether structural measures
would apply to Floating Production and Storage Off-loading (FPSO)
Systems, Floating Production Systems (FPS), and Mobile Offshore
Drilling Units (MODUs). FPSO systems and FPS are tank vessels; however,
they would be excluded from this rulemaking if they are less than 5,000
GT, are not engaged in the movement of petroleum oils, and are not used
in lightering operations. MODUs are not included under the definition
of tank vessel in OPA 90. Therefore, they would not have to comply with
structural measures.
One comment asked why the NPRM differentiated between crude
tankships of 20,000 deadweight tons (dwt) or more and product carriers
of 30,000 dwt or more. The NPRM reflected the distinction in vessel
size made by Regulation 13G of Annex I of MARPOL 73/78. This
distinction was continued in the regulatory assessment in this SNPRM to
enable those companies operating vessels on international routes to
compare estimated cost and benefit results.
The Coast Guard received several comments which objected to the
imposition of structural measures on tank barges. The regulatory
assessment in this SNPRM reviewed several technologically feasible
measures that could be implemented on barges to reduce oil outflow.
Comments are solicited on the economic feasibility of these measures.
The Coast Guard received one comment on the double hull
requirements proposed in Sec. 157.410(a) of the NPRM. The comment
recommended the immediate construction of double hull vessels in lieu
of retrofitting existing vessels with structural measures. Section
4115(a) of OPA 90 establishes a phase-in schedule for double hull
requirements for all existing tank vessels. These section 4115(a)
provisions establish a schedule that balances environmental safety with
the overall impact on the U.S. economy, worldwide U.S. shipping
capability, and oil availability to U.S. consumers. The Coast Guard
does not have the authority to change the phase-out schedule of section
4115(a); rather, it is tasked with issuing interim regulations to
protect the marine environment until all vessels are required to be
equipped with double hulls under section 4115(a).
2. Consistency With International Standards
The Coast Guard received several comments which expressed support
for the development of regulations that are equivalent to Regulation
13G of Annex I of MARPOL 73/78. Another comment stated that for 70
percent of the fleet that it applied to, the NPRM duplicated the
requirements of the proposed Regulation 13G of Annex I of MARPOL 73/78.
The comment further stated that the Coast Guard has neglected its
responsibility to make an independent decision to designate the
strongest feasible antipollution measures. As previously stated, the
Coast Guard's goal is to implement its statutory mandates in
regulations that are consistent with international regulations wherever
doing so is lawful, appropriate, and practical. Based on comments from
the NPRM, the Coast Guard has reevaluated various pollution prevention
measures. Accordingly, the Coast Guard conducted an extensive cost and
benefit analysis of structural measures that are both consistent with
international standards and that exceed current international
agreements. The regulatory assessment in this SNPRM reflects the
structural measures deemed technologically feasible for existing tank
vessels.
One comment recommended that product tankships from 20,000 dwt to
30,000 dwt be exempted from further rulemaking action because they
presently comply with MARPOL 73/78 and the Port and Tanker Safety Act
of 1978. The comment contended that these tankers would already be in
compliance with the provisions of the published NPRM. The above
statements are accurate; however, the Coast Guard also considered
requirements above those of MARPOL for the regulatory assessment in
this SNPRM and has continued to include this group of vessels to ensure
it reflects accurate cost benefits.
3. Protectively-located Spaces (PL/Spaces)
The Coast Guard received several comments on the proposed
requirements for PL/spaces. In the NPRM, a PL/space includes any tank
or void space that is not used for the carriage of cargo, cargo
residue, slops, dirty ballast or fuel oil. The protectively-located
(PL) qualifier refers to the distribution of these spaces along the
length of the vessel's hull as described in Appendix C to 33 CFR 157.
One comment stated that a requirement for oil-free spaces has already
been in effect under international rules and corresponding U.S. law
that covers all vessels except for small tank vessels built since 1979;
thus, the comment contends, the proposed requirement for PL/spaces
would provide no additional improvement for nearly 30 percent of the
world's single hull tanker fleet. Another comment contended that
approximately 75 to 80 percent of the world fleet of crude carriers
consists of tankers that are not fitted with SBT or CBT (pre-MARPOL
tankers). The comment indicated that HBL with a safety factor of 1.0 or
less, as used in Regulation 13F of MARPOL, is more economical and
technically viable in the case of groundings than the originally
proposed PL/spaces for these vessels.
The Coast Guard focused its analysis for this SNPRM on determining
what would happen if various PL/space requirements were applied to pre-
MARPOL vessels. In this assessment, it took into account whether the
pre-MARPOL vessels are fitted with SBT or CBT. This SNPRM summarizes a
revised regulatory assessment and solicits comments on the economic
feasibility of requiring pre-MARPOL tank vessels to be fitted with PL/
spaces as compared to HBL.
One comment stated that requiring PL/spaces on non-SBT tankships
would lead to greater oil outflow in a grounding or collision. Another
comment indicated that, based on recent calculations performed by the
oil tanker industry on ships of different sizes, PL/spaces are capable
of achieving an improvement in estimated oil outflow reduction,
provided certain operating conditions are maintained. The Coast Guard
agrees with both comments. When PL/spaces are used in such a way that
they result in an increased freeboard, oil outflow in groundings could
be expected to increase. However, the use of PL/spaces, in such a way
that the operational freeboard is essentially unchanged (by ballasting
the PL/spaces), will result in reduced oil outflow. As suggested by
several comments, the Coast Guard modified its original assessment and
considered the implementation of PL/spaces made in conjunction with
HBL.
One comment questioned whether ships that are fitted with SBTs in
accordance with the provisions of Regulation 13E of Annex I of MARPOL
73/78 would be accepted as meeting the provisions of Sec. 157.410(a) in
the NPRM
[[Page 67229]]
as it applies to the provision of side or bottom protection. The
comment indicated that under a strict interpretation of the provisions
of Sec. 157.410(a) of the NPRM, these vessels would not be in
compliance with the proposed requirement. The intent of the NPRM
proposal was that any vessel in compliance with Regulation 13E of Annex
I of MARPOL 73/78 would also be in compliance with proposed 157.410(a)
of the NPRM.
One comment recommended that existing tank vessels be fitted with
PL/spaces that protect 100 percent of the cargo tank length
encompassing the full depth of each side. The comment suggested that
the benefits would include a significantly reduced likelihood of oil
outflow and greater use of surplus tonnage for pollution control. The
comment stated that this would also accelerate a replacement program
with double hull tankers as freight rates rise and estimated that
existing tankers would have about the same operating cost as a new
double hull tanker. The Coast Guard analyzed the retrofit of full
double sides, which may be interpreted as fitting PL/spaces along the
length of the vessel, and presents the results in the regulatory
assessment in this SNPRM. Comments on the economic feasibility of this
measure for existing tankships are solicited.
One comment stated that both the preamble and proposed rule
explicitly state that PL/spaces must either protect 30 percent of each
side or 30 percent of the bottom of the vessel. The comment stated that
more consideration should be given to all around protection, especially
in cases where a vessel falls short of the NPRM's proposed PL/space
requirement. The NPRM proposed PL/spaces in this proportion because
doing so is consistent with existing international standards. The Coast
Guard continued to consider this arrangement in the regulatory
assessment of this SNPRM, and also considered more stringent variations
of PL/space protection.
One comment questioned whether a non-SBT tank vessel would be able
to use its full cargo carrying capacity when trading outside the U.S.
EEZ, and whether it would be accepted as meeting the proposed
provisions of the NPRM if certain cargo tanks are simply left empty
when trading in U.S. waters. The comment suggested that tanks that are
normally used for carrying cargo during worldwide trading could be
converted to void spaces for U.S. trading if adequate crude oil
washing, full gas freeing, and blanking of pipelines leading to the
tanks are accomplished. According to the comment, these operations
could be witnessed by a classification society which could issue voyage
certificates listing the tanks as void or SBT spaces. Blanks could be
removed for resuming worldwide trading. For non-SBT tank vessels,
simply leaving certain cargo tanks empty is one of the measures
considered in the regulatory assessment in this SNPRM. As explained in
the discussion on applicability, there are also certain circumstances
in which a non-SBT tank vessel could be able to carry a full cargo load
and engage in U.S. trade. While it is technologically feasible to take
tanks out of service and reduce oil outflow, comments are solicited on
the economic feasibility of this practice. Comments that propose
enforcement mechanisms for this type of measure are also requested.
One comment recommended that PL/spaces be required to protect
against collisions by permanently filling them with ballast water. The
Coast Guard has focused this phase of the rulemaking on reducing oil
outflow after an accident. The regulatory assessment in this SNPRM
evaluated PL/spaces in unballasted, HBL, and full-ballast states to
determine the effects on oil outflow. While oil outflow is reduced when
the vessel is completely ballasted down, the practice also causes cost
increases due to possible port draft restrictions and may compound a
vessel's grounding risk. Comments are solicited on this SNPRM's
assessment of the different ballast states as they are combined with
PL/spaces and the economic feasibility of such combinations.
One comment stated that locating all PL/spaces forward could lead
to unacceptable levels of trim or stress on some ships. On most tank
vessel designs, the most technologically feasible place to install PL/
spaces is in the tankship's midbody; however, due to unique design
considerations and the need to vary a vessel's draft or cargo carrying
capacity based on the route traveled, the Coast Guard does not intend
to require PL/spaces be located in a particular part of a ship.
4. Hydrostatic-Balanced Loading (HBL)
The Coast Guard received several comments concerning the HBL option
proposed in the NPRM. Two comments stated that the NPRM must require
HBL as a minimum measure to effectively provide ``as substantial
protection to the environment as is economically and technologically
feasible.'' The Coast Guard recognizes HBL as an effective outflow
reduction measure and included it in several forms for the regulatory
assessment in this SNPRM. The assessment considers HBL as a
technologically feasible measure for all existing tank vessels, even
those presently meeting MARPOL 73/78 requirements. Comments on the
economic feasibility of HBL requirements are solicited.
The Coast Guard received one comment stating that requiring
specific structural or operational measures like HBL, which force ships
to change loading or operational practices from one trade to another,
are unsafe because of an increase in the opportunity for human error.
The concerns expressed in the comment are valid; however, the degree of
human error that would be introduced into the vessel's procedures
depends on several factors. An example could be a poorly worded loading
procedure which complicates loading and increases accident risk to a
tank vessel. The Operational Measures SNPRM (60 FR 55904; November 3,
1995) attempts to mitigate the risk of human error that could be
incurred by complex or confusing loading instructions. In contrast, the
regulatory assessment in this SNPRM assumes that adequate operational
measures are in place to mitigate this type of potential human error
and only considers HBL for its potential oil outflow reduction
capabilities. The Coast Guard solicits comments on quantifying the
negative effect that HBL could cause due to frequent loading
adjustments.
Several comments expressed concern that the Coast Guard is imposing
measures, such as HBL, on ships for which they were not designed and
could be introducing hull bending stresses which exceed classification
society standards. The Coast Guard studied the structural consequences
of the measures proposed in the NPRM, in terms of hull bending moments,
and concluded in the regulatory assessment for this SNPRM that, in
general, excessively high global stress levels due to HBL should not be
a problem. The technical feasibility of HBL is assumed based on hull
bending stresses and sloshing loads. However, in some cases,
unacceptably high local stresses may be created due to HBL. The Coast
Guard solicits comments on specific cases in which local stresses would
exceed maximums set by recognized classification societies.
One comment stated that the formula for HBL presented in the NPRM
was based on the draft guidelines for alternatives required under
Regulation 13G of Annex I of MARPOL 73/78. The comment stated that use
of the formula for HBL results in a high loss of cargo carrying
capacity. Further, the comment states that the original formula was
based on the height of an intermediate
[[Page 67230]]
oil-tight deck on a tankship fitted with double sides, and may not be
suitable for application to the definition of HBL in the context of
existing tankers. The Coast Guard believes that the definition of
``hydrostatic-balanced loading'' used in the NPRM should not be used.
The IMO has finalized the guidelines concerning the implementation of
HBL and modified the original definition. A factor of 1.0 replaced the
original factor of 1.1. Consequently, the Coast Guard has used the
definition of ``hydrostatic-balanced loading'' that is consistent with
the guidelines developed by the IMO for the regulatory assessment in
this SNPRM.
Another comment suggested the use of HBL combined with PL/spaces as
an alternative to applying HBL to all tanks. The Coast Guard presents
several combinations of PL/space and HBL in the regulatory assessment
for this SNPRM and solicits comments on them.
One comment stated that 50 percent of all tankship collision damage
is located above the waterline only; therefore, vessels should be
required to load their side tanks only to the waterline level. The
comment stated that if side tanks were filled using HBL procedures, and
40 percent of the cargo was carried in the side tanks, all spills due
to grounding would be reduced by 40 percent in the case of a grounding.
The Coast Guard's probabilistic oil outflow analyses, as described in
``Interim Guidelines for the Approval of Alternative Methods of Design
and Construction of Oil Tankers Under Regulation 13F(5) of Annex I of
MARPOL 73/78'' (IMO Marine Environmental Protection Committee's
Resolution MEPC 37/14; December 23, 1994), of various measures,
including HBL, is assessed in this SNPRM. Comments are solicited on the
oil outflow reduction estimates achieved through HBL and the resulting
costs associated with the reduction.
One comment suggested that the Coast Guard place a notation in 33
CFR 157, subpart G, that states that structural increases or
modifications to the cargo area of a vessel may be necessary to apply
HBL when a vessel receives cargo. Another comment stated that the high
tensile steel used in some ships may not be suitable for the fatigue
effects that could result from HBL. Other comments expressed concerns
about using HBL because of the possibility of sloshing. The Coast Guard
recognizes that when employing HBL, in some cases, it may be necessary
to retrofit swash bulkheads or modify the vessel's structure to reduce
the effects of fatigue. Prior to applying HBL, the owner or operator of
a loading tankship would have to evaluate the effects of HBL on a
tankship's cargo tanks and structure to determine if swash bulkheads or
other modifications are necessary. The regulatory assessment in this
SNPRM did not consider shipyard cost for the modifications needed to
accommodate HBL. Comments are solicited on specific structural
modifications and their anticipated added shipyard cost, if any, for
HBL measures.
One comment expressed concern that HBL may raise the risk of
spillage due to an increase in total sailings resulting from reduced
unit cargo loading. The oil outflow benefit analyses summarized in this
SNPRM does not directly account for the effects of increased traffic
due to reductions in cargo carrying capacity. Another comment stated
that the benefits for all structural measures were overestimated
because they did not reflect the added risk of an accident due to an
increase in traffic volume. Historical accident data was used to
estimate how much oil is spilled annually as a result of accidents.
Estimated cargo shutout from measures similar to Regulation 13G of
Annex I of MARPOL 73/78 reveal that the resultant increase in tank
vessel traffic would be 12 percent. While this traffic increase could
also increase accident risk, it represents approximately a 2 percent
increase in the total U.S. port deep draft traffic volume. It is
reasonable to assume that this small increase in traffic volume would
be offset by the accident reduction measures implemented through the
Coast Guard's proposed Operational Measures (60 FR 55904; November 3,
1995.
One comment inquired as to whether a load line would be necessary
to enforce the use of HBL. The Coast Guard did not propose any changes
to the International Convention on Load Lines, 1966, within the NPRM.
If an HBL requirement is deemed economically feasible, it could be
enforced using a number of methods. A tankship's master could be
required to ensure that the ullage measurement reports or other tank
gauging reports are recorded, kept in the Oil Record Book, and
available for examination. Additionally, a visual inspection of draft
marks should be sufficient to determine if a vessel has employed HBL
loading procedures. The Coast Guard requests comments on the best way
to determine whether a vessel is in compliance with its HBL loading
plans.
One comment stated that, for ultra large crude carriers (ULCCs) and
very large crude carriers (VLCCs) operating at offshore terminals, the
risk of grounding is limited; however, collision is the most likely
accident to occur. The comment proposed that, for these vessels, a very
safe method of operation would be to HBL only the side cargo tanks. The
Coast Guard disagrees. For collisions, the use of PL/spaces is
necessary to reduce oil outflow. HBL provides added oil outflow
protection only in groundings. If a collision were to cause the side of
a large tankship to be pierced and a cargo tank to be ruptured, the
hydrostatic head, which acts in balance with the seawater, would be
lost; thus, oil would flow out of the tank.
5. Alternative Measures
The Coast Guard received several comments which encouraged it to
adopt alternative systems to reduce oil outflow. These include
emergency rescue and emergency transfer systems, resilient membranes,
vacuum and underpressure systems, independent tanks, and intermediate
oil tight decks. Alternative measures to prevent oil outflow are viable
in some applications. For the regulatory assessment in this SNPRM,
specific alternative measures were not researched. Cost assessments for
alternative measures vary greatly. While there are indications that
some of these measures could be less costly than PL/spaces or HBL, they
were not included in the regulatory assessment because none of them
meet the benchmark equivalency for alternative compliance found in
``Guidelines For Approval of Alternative Structural or Operational
Arrangements as Called for in Regulation 13G(7) of Annex I of MARPOL
73/78,'' Resolution MEPC.64(36) adopted on November 4, 1994. These
guidelines include oil outflow criteria that must be met for certain
damage assumptions and general operational and safety points such as
exposure of the tanker to stress, creation of fire or explosion
hazards, stability considerations, and loading requirements. The Coast
Guard solicits comments on these alternative measures. Specifically,
the Coast Guard requests comments on whether they meet or exceed the
IMO guidelines, whether they have been submitted and approved by IMO's
Marine Environment Protection Committee (MEPC), and whether they are
economically and technologically feasible.
Four comments recommended that the Coast Guard include provisions
for using alternative systems to provide flexibility in complying with
the requirements for structural measures. One comment suggested that
the Coast Guard adopt the recommendations of the National Research
Council report entitled ``Tanker Spills: Prevention by Design,'' which
encourages the adoption
[[Page 67231]]
of multifaceted measures such as a combination of PL/spaces and HBL.
Another comment stated that the regulation should provide an owner or
operator with a choice of equivalent measures so that the owner or
operator may select the best arrangement for each ship in his or her
fleet. The third comment stated that the NPRM should describe the
results that a system should achieve, or quantitative measures of
effectiveness, instead of mandating a single structure measure. The
fourth comment stated that the proposed alternative oil outflow
prevention measure provision grants total discretion to the Coast Guard
without providing any criteria for the alternative measure, such as
ensuring that it is at least as environmentally protective as the
specified measure for the type and size of tankship under review.
The regulatory assessment in this SNPRM analyzes multifaceted
measures such as combining PL/spaces with HBL and SBT with HBL. The
Coast Guard still considers alternatives to, or choices between
measures viable and solicits comments on the measures that should be
deemed equivalent and their economic feasibility. Additionally, the
Coast Guard is reviewing the performance criteria in the IMO
alternative guidelines and encourages comment on them. The Coast Guard
views the following safety requirements as key in this type of system
equivalency evaluation: the human interface required by the operator to
control the system: the operational complexity and increased burden
placed on the operating crew as a result of working with an inherently
complex system that would increase the probability of a spill due to
human error; the added potential for fire and explosion, including the
performance of the inert gas and vapor recovery systems (if installed)
once the alternative measure has been installed; the adverse impact on
intact and damage stability; the adverse impact the installed
alternative measure has on structural strength, including sloshing
loads and the need to fit large structural fixtures in existing tank
structures; and the overall consideration of the operational history of
the alternative and its components.
The Coast Guard received several comments which suggested that
response systems be fitted as alternative measures to the ones proposed
in the NPRM. These systems have already been evaluated in ``Discharge
Removal Equipment for Vessels Carrying Oil'' (58 FR 67988; December 22,
1993). The alternatives considered in this SNPRM are passive pollution
prevention systems, not spill response systems which require human or
machine intervention following a collision or grounding. The Coast
Guard has implemented several response oriented requirements including
Vessel Response Plans (58 FR 7424; February 5, 1993) and the discharge
removal requirements and believes that the structural measures intended
by section 4115(b) should be addressed through vessel design or passive
protection.
6. Phase-in Alternatives and Economic Incentives
The Coast Guard received several comments regarding the 3-year
phase-in provision that was proposed in the NPRM. One comment stated
that the 3-year phase-in period would result in the acceleration of
shipyard schedules, higher costs, and tonnage restraints. The comment
contended that the 3-year phase-in schedule would be economically
overburdensome on the tankship owner because it would require many
vessels to be removed from normal service to perform the modifications
required by the proposed rulemaking. The assessment for this SNPRM
reflects cost estimates associated with removing the vessel from
service for an extended shipyard period. However, no shipyard
scheduling constraints were considered. Comments on this phase-in cost
and specific shipyard availability constraints are solicited.
Many comments expressed concern that the original proposed 3-year
phase-in period was too generous. One comment expressed concern that no
action would be taken by industry and the Coast Guard to reduce oil
spills and pollution during this period. Other comments stated that the
proposed phase-in period penalizes operators who have already invested
in modern double hull vessels because it reduces the cost of single
hull vessel operation. One comment contended that a vessel should be
required to retrofit during the regularly scheduled drydocking period
which immediately follows the issuance of the final rule.
The Coast Guard has taken action to implement interim measures for
existing tank vessels by issuing regulations for emergency lightering
equipment and advanced notice of arrival requirements (59 FR 40186;
August 5, 1994) and proposing regulations for operational measures (60
FR 55904; November 3, 1994; STD). These two efforts will reduce the
risk of oil discharges from existing tank vessels that do not have
double hulls, regardless of the outcome of the feasibility assessment
for structural measures. Since a tank vessel on an ocean or
international route is required by its flag administration or
classification society to drydock twice every 5 years, the 3-year
phase-in schedule proposed in the NPRM reflected an implementation
period comparable to one for the regularly scheduled drydocking period
immediately following the issuance of the final rule. The Coast Guard
requests comments on the economic feasibility of the 3-year phase-in
period versus a 5-year period or a 1-year period. Comments are also
requested on an appropriate phase-in period for those measures that do
not require drydocking. The regulatory assessment for this SNPRM
estimates that a 60,000 dwt pre-MARPOL vessel's annualized value and
cost is $273,000 less for its estimated 5 remaining years than its
counterpart double hull vessel which can operate indefinitely.
One comment stated that the 3-year phase-in schedule for Regulation
13G is flawed. The comment contended that newer vessels should be
allowed a longer time period to comply with the proposed structural
requirements. The comment stated that for these vessels, the risk to
the environment should be commensurately lower, provided the vessels
have been properly maintained. Oil outflow can be reduced even on newer
single hull vessels meeting MARPOL 73 or MARPOL 78 requirements as
shown by the regulatory assessment in this SNPRM. While it is true that
the oil outflow reduction benefits presented in this SNPRM for vessels
fitted with SBT or CBT are less than for pre-MARPOL tankers, they
exist. Comments are requested on possible phase-in periods for vessels
fitted with SBT or CBT that, in light of the benefit analysis presented
in this SNPRM, would be economically feasible.
One comment contended that the phase-in period would place U.S.
vessels at a significant disadvantage in relation to foreign vessels.
The comment stated that U.S. vessels were required to retrofit SBTs in
accordance with the Port and Tanker Safety Act of 1978, and would
already be in compliance with the proposed SBT requirements of the
NPRM. The comment indicated that the proposed phase-in period would
provide foreign vessels with additional time to retrofit SBTs. Section
4115(b) of OPA 90 requires the Coast Guard to issue this rulemaking so
that it is economically feasible for both U.S. and foreign tank
vessels. The Coast Guard solicits comments on the economic feasibility
of a phase-in period for foreign tank vessels that is shorter than 3
years.
[[Page 67232]]
One comment expressed concern that the NPRM does not provide
incentives to tanker owners for pursuing and adopting new technologies.
The comment stated that shipowners' budgets generally do not include
monies for pure research, and without clear incentives to embrace new
technologies, there is a small chance that vessel owners will use them.
The comment urged the Coast Guard to amend the proposed rule to include
specific incentives to encourage the industry to develop and adopt such
technologies. Another comment stated that many vessel owners already
are operating with double hull vessels and/or SBTs. The comment stated
that companies using these vessels should receive pollution credits.
Additionally, the comment contended that pollution credits should be
issued to owners who build new tankers or significantly upgrade
existing tankers. The comment stated that these credits could be traded
for debits to continue using existing tankers with little modification.
Similarly, another comment stated that owners who build new tankers
should receive tax credits. Issuing monetary incentives for company
research, granting pollution credits to a company to support uneven
implementation of oil outflow reduction measures among their fleet, or
granting tax credits for companies that comply with requirements are
beyond the authority and scope of this rulemaking.
7. Regulatory Assessment--General Comments
Several comments questioned the assumptions made in the Regulatory
Impact Analysis (RIA) performed by Mercer Management Consulting, Inc.
for the NPRM. One comment stated that the RIA for the NPRM does not
take into account the barrels of oil saved from spillage by other OPA
90 rules. The Coast Guard has developed a wide range of regulations
mandated by OPA 90 to implement provisions pertaining to spill
prevention, mitigation, cleanup, and liability. To facilitate the
rulemaking process, the Coast Guard has divided rulemaking requirements
into relatively small, individual rulemaking projects and has prepared
regulatory, environmental, regulatory flexibility, and paperwork
analyses for each project. To expedite effective rulemaking, the Coast
Guard analyzed each project as a stand alone rulemaking. Recognizing
that there are interactive effects of the suite of OPA 90-derived
regulations, the Coast Guard has begun a programmatic regulatory
assessment for the OPA 90 rulemaking projects.
One comment stated that the RIA for the NPRM assumed that all the
work for structural modifications can be done during a normal
drydocking period. The comment contended that this is not correct
because the cleaning for hot work entails a much higher degree of
cleaning and more lost service time. The Coast Guard recognizes that
additional cleaning and gas freeing would be necessary to perform
structural modifications and has included the cost of an extended
drydock in the regulatory assessment for this SNPRM.
One comment disagreed with the assumption that some existing ships
will be replaced rather than converted. The results of the assessment
conducted for this SNPRM indicate that no vessels are expected to be
replaced early as a result of the measures researched.
One comment disputed the size of the international vessel
population assumed in the RIA. The comment stated that the
international fleet affected by the NPRM would range from 1,500 to
2,000 vessels, not the 300 or 400 assumed in the RIA. The regulatory
assessment in this SNPRM revises the NPRM vessel population numbers,
based on the number of tankships applying for a Certificate of
Financial Responsibility, excluding certain tankships such as double
hull tankships. The RIA for this SNPRM estimates that there are a total
of 1,085 existing tankships likely to be affected by this SNPRM.
Several comments stated that the assumption made in the NPRM RIA
that newer vessels that comply with MARPOL Regulation 13G will be
allocated to U.S. trades in the same proportion as non-complying
vessels is inaccurate. The comments went on to state that the number of
newer vessels operating in the U.S. trade is higher because of the Port
and Tanker Safety Act of 1978. The comments contend that the existing
fleet of vessels meeting either MARPOL PL/SBT standards or having
double hulls is already sufficient to carry all U.S. cargo. One comment
stated that the NPRM proposals would have a devastating impact on the
product tanker market. Another comment stated that there was no
consideration in the NPRM for a company's ability to secure adequate
capital to replace existing vessels with double hull vessels. The
vessel population and U.S. coastal trade population affected by this
rulemaking were reconsidered for the regulatory assessment in this
SNPRM. Build dates were also researched and correlated with trade
estimates. Neither the ability of the existing fleet of double hull or
MARPOL PL/SBT tankers to meet U.S. import needs nor a company's ability
to secure funding is influential for this rulemaking. Comments are
solicited on the specific economic feasibility of these measures on
product tankers.
8. Regulatory Assessment--Costs
Comments on the Existing Vessels NPRM and from the public meeting
expressed concern about the accuracy of the costs and benefits stated
in the Regulatory Impact Assessment (RIA). The comments indicated that
the costs, in some cases, were not fully developed. Comments included
concern over using only two ship sizes to calculate the cost, the
assumption that there will be minimal cargo capacity loss across the
fleet, the gross underestimate of compliance costs for tank barges, the
potential adverse costs to vessels which carry non-persistent oils, and
the 3-year phase-in costs as compared to following the MARPOL 73/78,
Regulation 13G schedule. After reviewing the comments, the Coast Guard
redirected its approach, expanded the vessel models used in the cost
analysis, and revised its assessment to reflect these comments.
The Coast Guard received several comments regarding the economic
feasibility of the regulations. One comment stated that Congress made
it clear that all regulations should be economically feasible. The
comment stated that requiring industry to spend $573 million over a 3-
year period for unknown environmental benefits would be pressing the
intent of Congress. Another comment stressed that a requirement that a
measure be economically feasible does not mean that it must be the
least expensive. Pollution prevention benefits are measured as a ratio
of cost per barrel of oil not spilled. The most desirable measures
would be those that prevent the spillage of the greatest number of
barrels of oil at the lowest cost. The Coast Guard recognizes that a
measure can be costly; however, if it provides a significantly improved
degree of protection in terms of barrels of oil not spilled, it may
still be cost effective. The Coast Guard solicits comments on the cost
effectiveness of the measures presented in this SNPRM.
One comment noted that when retrofitting PL/spaces on vessels in
the 80,000 dwt to 300,000 dwt range, there is a loss of approximately
15 percent of the cargo volume. The comment further stated that for an
80,000 dwt vessel without SBT, there is a loss of approximately 29
percent of the cargo volume. A tank vessel owner commented that if the
company's VLCCs were required to be converted to PL/SBT or PL/spaces,
the company
[[Page 67233]]
would lose more than $1 million of revenue per year, and that a medium
size crude carrier could have a $500,000 reduction in revenue per year.
The comment stated that this would change the economic formulas for the
company's fleet and would force the company to lay up or sell half of
its fleet because it would no longer be economically feasible to
operate the vessels. Another comment stated that the capital costs and
lost cargo capacity costs for dedicated PL/spaces or HBL would be much
higher for most ships than the amount estimated in the NPRM RIA because
many existing vessels would be required to have their cargo
compartments structurally refit to accommodate a 30 percent PL/Space
requirement of the NPRM. The Coast Guard recognizes this argument and
includes a revised cargo shutout estimate in this SNPRM assessment.
Comments on the regulatory assessment for this SNPRM and the economic
feasibility of the measures within it are solicited.
The Coast Guard received several comments on the economics of
requiring HBL for existing tank vessels. One comment stated that
requiring HBL would be economically burdensome. Four comments
questioned the NPRM's statement that HBL was not economically feasible.
Three comments stated that HBL could be implemented without costly
structural modifications. One comment added that the most costly
structural modification would be the installation of swash bulkheads;
however, the comment stated that it has been demonstrated that swash
bulkheads are not necessary in most cases. Two of the comments stated
that HBL is economically feasible because the reduced cargo carrying
capacity requires more trips to be made. The comment contended that as
a result of the need to make more voyages to haul a given amount of
cargo, more revenue would be generated and the market demand for
tankers would increase. Cargo shutout and structural refit needs for
HBL implementation were revised and are presented in the regulatory
assessment in this SNPRM. Comments on the economic and technological
feasibility of the different HBL measures discussed within this SNPRM
are solicited.
One comment stated that the NPRM RIA's estimate of $4 billion for
the present value of total compliance for HBL over 20 years could
readily be financed by the major oil companies out of annual profits.
The comment stated that, traditionally, the oil industry has passed on
a doubling or even a tripling of the price of crude oil, as well as the
price of its transportation, and could do so for this rulemaking.
Section 4115(b) tasked the Coast guard with implementing interim
structural and operational measures that were technologically and
economically feasible. The definitions of these two qualifiers were not
developed within OPA 90 or its associated documents. The Coast Guard
has researched structural measures deemed technologically feasible and
is publishing this SNPRM assessment in order to receive comments on
their economic feasibility. After the comment period for this SNPRM has
closed, an assessment of the economic feasibility for structural
measures will be done and further action will be taken accordingly.
Specific comments justifying why a measure is either economically
infeasible or how it could be feasible are solicited.
9. Regulatory Assessment--Benefits
The Coast Guard received several comments questioning the accuracy
of the benefit estimates presented in the NPRM. Many comments stated
that, in general, the benefits specified in the NPRM RIA were
overstated. Four comments stated that the effectiveness estimates were
not accurate. One comment specifically indicated that projected
effectiveness for PL/spaces, the Underpressure System (UPS),the
Emergency Rapid Transfer System (ERTS), and the Emergency Rescue System
(ERS) were extremely optimistic. Other comments stated that the
estimated effectiveness of SBT was correct as presented in the tables
but underestimated within the NPRM text. Another comment stated that
the benefits associated with PL/spaces were significantly understated
in the NPRM because the costs for cleanup, third-party claims, and
damage to natural resources were not included.
The Coast Guard reviewed the NPRM RIA and has revised the benefit
assessment for certain measures presented in the NPRM. It has also
added benefit analysis on other structural measures and presents a
summary in this SNPRM. The costs associated with third-party cleanup
and damage to natural resources were not considered because the Coast
Guard reviews benefits as the amount of oil not spilled rather than a
dollar value. Details on the extensive work the National Oceanic and
Atmospheric Administration has done on this subject can be found in its
NPRM entitled, ``Natural Resources Damage Assessments; Proposed Rule''
published on August 3, 1995 (60 FR 39804). Comments are solicited on
the revised benefits assessment for this SNPRM.
Other comments argued that PL/spaces would not reduce oil outflow
by 30 percent in collisions as assumed in the RIA. The comment
contended that the reduction in oil outflow would be considerably less
because collisions do not occur uniformly along the side-shell of a
vessel. At the public meeting held on January 20, 1994, a speaker
presented his company's conclusions about oil outflow from PL/spaces
based on probabilistic investigations and analyses, as described in
``Interim Guidelines for the Approval of Alternative Methods of Design
and Construction of Oil Tankers Under Regulation 13F(5) of Annex I of
MARPOL 73/78'' (IMO Marine Environmental Protection Committee's
Resolution MEPC 37/14; December 23, 1994). The results indicated that
PL/spaces, when retrofitted on a non-SBT tankship, would result in a
higher oil outflow when compared to the outflow of the same tankship
that has not been fitted with PL/spaces. The speaker indicated that
retrofitting PL/spaces on a non-SBT tankship would create a higher
freeboard, which would result in greater oil outflow if the vessel's
hull were to become damaged. The Coast Guard agrees that the
effectiveness of PL/spaces as assumed in the NPRM RIA may have been
overstated. The Coast Guard has conducted further studies to obtain
more accurate estimates of the effectiveness of PL/spaces. A summary of
the revised benefit estimates for PL/spaces is contained in the
regulatory assessment for this SNPRM.
One comment stated that an IMO sponsored model of oil outflow
indicated that, for any unprotected tank configuration, it is not
possible to attain 100 percent effectiveness in a grounding scenario.
The comment contended that within the structural limitations of most
existing ships, the UPS system will be substantially less than 100
percent effective and that the NPRM overestimated its effectiveness.
The Coast Guard has revised its estimates for the measures presented in
this SNPRM. The UPS was not analyzed further; however, the Coast Guard
is willing to analyze alternative oil outflow prevention measures if
they meet international alternative standards, including safety
assessments.
One comment stated that the RIA for the NPRM did not analyze
historical incidents. Two comments stated that, without accurate
estimates of the number of oil spills and the volume of oil spilled, it
is impossible to accurately quantify environmental benefits and costs.
The Coast Guard reviewed the
[[Page 67234]]
historical data used for the NPRM RIA and revised it for the regulatory
assessment for this SNPRM. Comments on the revised data are solicited.
Assessment
The methodology for completing the regulatory assessment for this
SNPRM employed a two phase process. First, a screening analysis was
conducted to evaluate the effectiveness, efficiency, and technological
feasibility of certain structural measures on a baseline of analytical
tank vessel models. The screening analysis included an estimation of
the onetime expense associated with refitting the vessel at a shipyard,
called a rough order-of-magnitude (ROM) estimate; the cost of losing
cargo carrying capacity due to implementing a measure that would not
allow cargo carriage in certain tanks or above certain levels, called
cargo shutout; and other costs such as loss of revenue during the
shipyard period, called opportunity costs. It also included an estimate
of the potential reduction in accidental oil outflow and operational
oil outflow for certain measures. For this assessment, operational oil
outflow is the oil prevented from being discharged by pre-MARPOL
vessels if, instead of being allowed to discharge dirty ballast water,
they are fitted with SBT or CBT and are not permitted to discharge
dirty ballast water. Vessels are not allowed to discharge dirty ballast
water in U.S. navigable waters; however, in accordance with
international conventions they may do so in certain areas outside of
these waters.
The second phase of this regulatory assessment consists of a
detailed analysis conducted to estimate the costs and benefits of those
measures which were deemed not only technologically feasible, but also
appeared to be the most effective at reducing oil outflow on the
affected existing single hull tank vessel fleet. The detailed analysis
included a breakdown in costs, benefits, and a cost-benefit analysis
over the 19-year period this rule is expected to be in effect.
Screening Analysis
1. General
There were five steps to the screening analysis phase of this
assessment. First, baseline analytical tank vessel models were
developed that represented the existing single hull tank vessel fleet.
Second, selected measures were imposed on four of these analytical tank
vessel models and the resultant oil outflow reductions were calculated.
Third, cargo shutout, operating costs, and onetime ROM refit costs were
developed. Then cost-effectiveness ratios were developed and the
results of each measure were correlated with selected baseline
analytical tank vessel models. Finally, the ratios were used to rank
the measures and identify those combinations of measures and vessel
categories that resulted in the lowest cost per barrel of oil not
spilled. Table 1 summarizes the combinations of vessels and measures
researched for this screening analysis.
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To develop the baseline fleet and its characteristics, several
designs were considered. It was assumed that the pre-MARPOL tank vessel
had crude oil washing capabilities but no other required MARPOL
features. MARPOL 73 tank vessels were assumed to be fitted with SBT,
and MARPOL 78 tank vessels were assumed to have PL/SBT. As part of the
process of ensuring that the design of the baseline models was
appropriate, the baseline tank vessels were investigated for intact
stability, longitudinal bending stresses, shear stresses, and sloshing
frequencies. It was also assumed that the vessels were constructed to
comply with the prevailing American Bureau of Shipping rules when the
vessels were built; specifically, the still water bending moment,
bending stress, and shear stress values. The resulting average shear
stresses and bending moments were satisfactory. The fill depth level to
tank depth level ratio for all loading conditions of the vessels
investigated did not fall below 75-80 percent,
[[Page 67235]]
meaning that the sloshing frequencies were not near the roll or pitch
periods of the vessels. Resonance can occur in longitudinal modes for
liquid level ratios in the range of 30-45 percent, which are well below
normal oil cargo levels and well below levels resulting from the
application of HBL in this assessment. Another important consideration
in developing the analytical tank vessel models was to ensure that they
were, in general, reasonable representations of tank vessels serving
the U.S. An analysis was conducted to determine the representativeness
of the model tank vessels with respect to the existing fleet. The
70,000 dwt and 264,000 dwt pre-MARPOL, MARPOL 73 and MARPOL 78 models,
and the 40,000 dwt pre-MARPOL model were compared to data on existing
tank vessels obtained from ``The Tanker Register,'' Clarkson Research
Studies, 1994. Information on the number of center and wing tanks, and
on the cargo and ballast capacity, for existing vessels was analyzed.
This analysis confirmed that the key vessel characteristics associated
with the model vessels were within the distributions found on existing
tank vessels.
The four deadweight categories (two tankship categories and two
tank barge categories) selected for this screening represent a
significant portion of tank vessels that are affected by section
4115(b) of OPA 90. Due to the nature of the measures and baseline tank
vessels examined, certain of the baseline vessel and pollution
prevention combinations were not analyzed because the tank vessel model
already substantially meets the specification of the measure. For
example, the MARPOL 78 baseline model tank vessel already substantially
meets (and exceeds) PL/Space specifications. Additionally, because
analyses of the pre-MARPOL baseline tank vessels and tank barges
indicated that they generally operate at close to an HBL condition, the
MARPOL 73 tank vessel models were selected to analyze the benefits of
the measures employing HBL.
The measures researched in this screening have the following
parameters:
Measure 1.a. reflects a measure that includes PL/Spaces covering 30
percent of the projected area of the sides or the projected area of the
bottom of the vessels. For this measure, additional bulkheads were
assumed to be installed to provide the minimum width of the PL/Spaces.
Measure 1.b. reflects a measure for PL/Spaces covering 30 percent
of the projected area of the sides or the projected area of the bottom
of the vessels; however, the vessels were also required to include
water ballast in the wing tanks selected as PL/Spaces to provide the
maximum feasible draft in the load condition. It was assumed additional
ballast piping and pumping capability would be required.
Measure 1.c. reflects a measure for PL/CBT or PL/Spaces covering 30
percent of the projected area of the sides or the projected area of the
bottom of the vessels; however, the vessels were also configured to
carry ballast to the maximum extent possible in lieu of other spaces,
with no new pumps or piping being refit. Exiting cargo wing tanks were
assumed to remain as empty as possible with trim and longitudinal
bending moment considerations.
Measure 2.a. reflects a measure for HBL which is incorporated in
all cargo tanks.
Measure 2.b. reflects a measure for HBL which is incorporated only
to the extent necessary for compliance with Regulation 13G of Annex I
of MARPOL 73/78.
Measure 3 reflects a measure for a combination of HBL and PL/Spaces
covering 30 percent of the projected area of the sides or the projected
area of the bottom of the vessels; however, they were also configured
to carry ballast to the maximum extent possible in lieu of other
spaces, with no new pumps or piping being refit.
Measure 4 reflects a measure to refit a double bottom that has the
minimum required depth of B/15 or 2 meters (6.56 feet) installed to
cover the full length of the cargo tanks.
Measure 5 reflects a measure to refit double sides that have a
minimum width of 2 meters to cover the full length of the cargo tanks.
Measure 6 reflects a measure to fit PL/Spaces covering 30 percent
of the projected area of the sides or the projected area of the bottom
of the vessels on tank barges. For this measure, additional bulkheads
were assumed to be installed to provide the minimum width of the PL/
Spaces.
Measure 7 reflects a measure to have PL/Spaces covering 30 percent
of the projected of the projected area of the sides or the projected
area of the bottom of the tank barge; however, the barges were also
configured to carry ballast to the maximum extent possible in lieu of
other spaces, with no new pumps or piping being refit. Existing cargo
wing tanks were assumed to remain as empty as possible with trim and
longitudinal bending moment considerations.
2. Costs
Table 2 summarizes the estimates of the cargo shutout, the onetime
refit ROM costs, and the operating and voyage costs as a result of
implementing the measure on the tank vessel models. Cargo shutout was
calculated as the difference between the cargo capacity (98 percent) of
the unmodified vessel and the cargo capacity after the measure was
applied. It is expressed in both the volumetric difference and as a
percentage of the cargo capacity of the baseline model.
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3. Benefits
Benefits were developed by estimating the total annual expected
accidental and operational oil outflow avoided as a result of each
measure. The estimate the annual reduction in the number of barrels
spilled as a result of the measures, the total annual accidental and
operational oil outflow was estimated both before and after the measure
was implemented. The accidental oil outflow estimates for grounding and
collisions were annualized using historical spill data provided in the
regulatory assessment for the NPRM and verified through an independent
calculation using worldwide casualty data. Lloyd's Maritime Information
Services Casualty Information System was analyzed for a sample of tank
vessels drawn from Clarkson's Tanker Register to estimate the per-
vessel annual probability of having grounding and collisions. The
analysis resulted in annual grounding and collision probabilities of
0.026 and 0.017, respectively, for an existing tank vessel moving oil
through U.S. waters in 1990.
The accidental oil outflow estimates are also presented using both
Regulation 13F and 13G calculations. The Regulation 13F calculations
are based on a probabilistic methodology, described in ``Interim
Guidelines for the Approval of Alternative Methods of Design and
Construction of Oil Tankers Under Regulation 13F(5) of Annex I of
MARPOL 73/78'' (IMO Marine Environmental Protection Committee's
Resolution MEPC 37/14; December 23, 1994), which uses currently
available accident damage statistics for tank vessels. To obtain the
total accidental oil outflow, the average bottom outflow estimate was
combined with the average collision outflow estimate by using a weight
of 0.6 for grounding damage and a weight of 0.4 for collision damage.
The Regulation 13G calculations are more deterministic, as described in
MEPC Resolution 64(36) entitled, ``Guidelines for Approval of
Alternative Structural or Operational Arrangements as Called for in
Regulation 13G(7) of Annex I of MARPOL 73/78.'' Both calculations take
into account hydrostatic pressure from the cargo oil and the outside
sea water in the case of bottom damage. They also allow for 50 percent
capture by double bottom tanks in cases where bottom damage extends
through these tanks. To estimate the reduction in the expected annual
oil outflow as a result of the measures, the annual oil outflow for the
vessel after the measure was implemented was subtracted from the total
oil outflow of the baseline tank vessel. Table 3 summarizes the
estimated oil outflows after implementation of each measure.
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4. Cost-benefits
To estimate the cost-effectiveness ratio for each combination of
tank vessel model and measure, an annualized cost of compliance
calculation was divided by the annualized total expected oil outflow
avoided. Because operating and voyage costs differ significantly
depending on whether the tank vessel is deployed in the international
or U.S. coastal fleet, cost-effectiveness ratios were developed
separately for the tank vessel models by these fleet categories. These
ratios were also developed assuming the tank vessels have another 5
years of remaining service life; however, the ranking of the results of
the analysis do not change if a longer remaining service life is
assumed. Table 4 summarizes the cost-effectiveness ratios attained in
this screening analysis.
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Detailed Analysis
1. General.
The results from the screening analysis cost-effectiveness phase
indicated that for tank vessels in both the international and U.S.
coastal fleets, the appropriate measures to analyze in depth included:
(1) pre-MARPOL vessels with a combination of PL/CBT and HBL (measure
3), and (2) for both MARPOL 73 vessels and MARPOL 78 vessels, an HBL
measure on certain tanks (measure 2.b.). Although MARPOL 78 model tank
vessels were not analyzed in the screening analysis, these vessels are
similar to MARPOL 73 vessels in terms of oil outflow and related
characteristics.
The screening analysis measure 3, pre-MARPOL vessels with a
combination of PL/CBT and HBL, was chosen over measures 1.b and 1.c
because of its overall cost-effectiveness and accidental oil
FR Doc. 95-31371 Structural Measures To Reduce Oil Spills From Existing Tank Vessels Without Double Hulls
outflow
mitigation characteristics. In general, implementation of measure 1.c.
results in higher oil outflow when bottom damage occurs. The cost
effectiveness of measure 1.b and measure 3 may be considered to be
roughly equivalent, however, the accidental oil outflow cost
effectiveness for pre-MARPOL 264,000 dwt tankers in 34 percent greater
for both international and U.S. coastal tank vessels.
To analyze the measures further, four steps were taken. First, the
affected vessel population was determined and categorized by the three
vessel categories. Second, a cost analysis was conducted including per
vessel and total cost estimates. Then a benefit estimate was developed
based on an expanded range of analytical tank vessel models developed
with the same assumptions and criteria used for the screening analysis.
Finally, a cost-benefit analysis was developed along with an
effectiveness analysis.
Data on the world tanker fleet was obtained from several sources,
including Lloyd's Maritime Information Services, Clarkson Research
Studies Limited, Coast Guard Marine Safety Management System, and
industry. Vessels that are expected to comply with this rulemaking were
identified based on whether the vessel had complied with current
financial responsibility regulations as implemented under OPA 90 and
the Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA), as amended. All oil tankers in the world fleet that
complied with the Coast Guard's financial responsibility final
rulemaking (59 FR 34210) requirements to obtain a Certificate of
Financial Responsibility (COFR) as of April 30, 1995, were used as a
baseline tank vessel population for this assessment. A check of the
COFR database was completed to update the tank vessel numbers and make
them reflect COFRs issued as of August 30, 1995. An alternative
approach was also developed to assess the accuracy of using COFRs to
define the baseline fleet. Port call data from 1991 to 1993 was
obtained for U.S. ports, including the Louisiana Offshore Oil Port
(LOOP). This data was matched with the worldwide tanker database to
estimate the number of annual port calls to and from the U.S. for tank
vessels in the international fleet.
Once the affected fleet was identified, vessels were categorized
into one of the three vessel categories: pre-MARPOL, MARPOL 73, and
MARPOL 78. Because the measures vary depending on vessel category,
total fleet compliance costs and the number of barrels of spilled oil
avoided as a result of the measure vary significantly depending on the
distribution of the existing tank vessel fleet by vessel category. This
categorization was based primarily on the vessel's delivery date,
deadweight tonnage, and type (product or crude carrier). Vessels
permitted to engage in U.S. coastal trade are commonly referred to as
Jones Act vessels and are required to be built and flagged in the
United States. These vessels must, in general, be serviced and repaired
in the United States, and were designated to be in the U.S. coastal
trade. Because not all U.S. flag vessels qualify as Jones Act tankers,
U.S. flag tankers that operate on routes to international ports were
included in the international fleet. Analysis of port call data
confirmed that these vessels are engaged in international trade.
2. Costs
The incremental costs for existing single hull tank vessels to
comply with the proposed measures were estimated for eight
international tank vessel models and six U.S. coast tank vessel models,
and for three vessel categories: pre-MARPOL. MARPOL 73, and MARPOL 78.
To estimate total costs, the baseline fleet of existing single hull
tank vessels was projected from 1996 to 2015 based on the double hull
rulemaking phaseout schedule. Once the regulated baseline fleet are
defined and projected from 1996 to 2015, total costs were estimated by
multiplying the number of vessels projected to be in operation in a
given year by the appropriate per-vessel compliance cost estimates.
Table 5 summarizes the estimated fleet categorization and the phaseout
of tank vessels affected by this rulemaking.
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General assumptions for this phase of the regulatory assessment
included: (1) a vessel owner or operator will begin to comply with this
rulemaking starting in 1999 and the entire fleet of tank vessels will
be in compliance with the proposed measures by 2002; (2) one-third of
the fleet would be in compliance with the rulemaking each year between
1999 and 2001 until the entire fleet is in full compliance by the
beginning of 2002; (3) pre-MARPOL tank vessels would require physical
modifications to implement PL/CBT and the number of days the tank
vessel would be laid up was estimated by deadweight tonnage; (4) MARPOL
73 and 78 vessels would have no disruption in service since HBL would
not require steel work or other physical modifications; (5) all tank
vessels were assumed to be in full compliance with all applicable
existing U.S. laws; and (6) prior compliance with HBL on MARPOL 73 or
MARPOL 78 vessels was assumed to be zero.
The incremental compliance costs as a result of the measures were
estimated by deadweight and vessel category for the international and
U.S. coastal fleets. The categories for compliance costs were estimated
as: (1) cost of operating or voyage inefficiency due to cargo shutout
as a result of implementing the proposed measures; (2) cost to retrofit
the existing tank vessel; and (3) cost associated with the time the
vessel is expected to be out of service (i.e., opportunity costs) while
the vessel is being retrofitted with the measure.
For each modeled tank vessel (pre-MARPOL, MARPOL 73, and MARPOL
78), the percentage of cargo shutout was estimated by dividing the
change in cargo capacity before and after the proposed measure was
implemented by the cargo capacity of the baseline vessel. Although the
cargo shutout percentage varies depending on the characteristics of the
tank vessel, an averaged effectiveness ratio was used for the several
tank vessels that were modeled. Table 6 summarizes the cargo shutout
estimates for the affected vessels.
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Retrofit cost estimates were developed by vessel category to
conform to the structure of the proposed measures. The measure
researched for pre-MARPOL tankers required implementation of PL/CBT
using existing cargo wing tanks. These vessels would incur costs
associated with converting the cargo tanks to ballast tanks and
modifying the cargo piping and related systems. Cost differences were
included in this analysis for the disparity between foreign and U.S.
shipyards. MARPOL 73 and MARPOL 78 vessels, however, would not incur a
onetime cost because the measure researched for these vessels required
implementation of HBL. A structural analysis of the analytical tank
vessel models determined that, in general, HBL could be implemented on
[[Page 67245]]
these vessels without having to reinforce bulkheads and related
structures.
Opportunity costs were estimated to account for the onetime cost
tank vessels would be out of service as a result of being retrofitted.
This cost was estimated by subtracting from the daily time charter rate
the daily operating cost that would be saved as a result of being out
of service as well as crew cost savings if the retrofit would take more
than two weeks since crews would be flown home. For pre-MARPOL vessels,
the number of days the tank vessel would be laid up was estimated by
deadweight ton range. A summary of the onetime costs and opportunity
costs for the measures is presented in Table 7. For MARPOL 73 and
MARPOL 78 vessels, no disruption in service was assumed. Therefore, no
opportunity costs were considered.
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The affected fleet was also analyzed to determine whether a vessel
owner or operator would replace the vessel with a double hull vessel
rather than implement the measures researched in this regulatory
assessment. The key consideration underlying the decision about whether
to ``replace'' or ``retrofit'' depends on whether the amortized costs
to purchase and operate a double hull tank vessel are less than the
annualized incremental cost for a single hull vessel to comply with the
proposed measure. The existing single hull tank vessel is assumed to be
replaced if the amortized cost of purchasing and operating a new double
hull vessel earlier than required is less expensive than retrofitting
the existing tank vessel with the proposed measure. This analysis
dependent on several factors, including the onetime retrofit costs of
the measures; the annual costs related to cargo shutout; the number of
years remaining until the existing single hull vessel must be replaced
by a double hull vessel; the price the vessel owner would receive if
the single hull vessel was replaced (scrap or secondhand price); and
the capital costs and operating costs of a double hull vessel. The
analysis indicated that none of the fleet of existing single hull
vessels would be replaced early by double hull vessels due to the
measures in this phase of the regulatory assessment. The primary reason
for this outcome is that the compliance costs for the measures,
including the onetime capital costs, are relatively low in comparison
to the annualized cost to purchase and operate double hull vessels.
3. Government Costs
The majority of tank vessels owned or operated by the Federal
Government, such as oil tank vessels used by the U.S. Navy, qualify as
public vessels under OPA 90 and are not subject to this rulemaking. The
National Defense Reserve Fleet/Ready Reserve Force (NDRF/RRF) currently
does not qualify for the public vessel exemption and has ten tank
vessels available for service that would be affected by this
rulemaking. Because the NDRF/RRF is composed of vessels similar to
those used in this analysis, costs and benefits would be similar.
However, there is legislation being discussed that would exempt these
vessels from the OPA 90 double hull phase-in requirements. Because
these vessels may not be subject to this rulemaking and no specific
regulatory language is proposed in this SNPRM, this analysis did not
include costs to the NDRF/RRF.
The burden of implementing structural measures may require the
Coast Guard to conduct plan review for those vessels refitting their
tanks or
[[Page 67246]]
spend time inspecting vessels for compliance; however, since specific
regulatory language is not proposed in this SNPRM, no government cost
is associated with it.
4. Benefits
The incremental reduction in the volume of oil spilled as a result
of the measures was determined by estimating the difference in the
accidental oil volume spilled and operational discharges for the
baseline fleet before and after the measures were implemented on the
analytical tanker models. This benefit analysis was completed in three
steps. First, accidental oil spill volumes and operational discharges
for the baseline fleet over time by vessel category and deadweight ton
ranges were completed. Second, the effectiveness of the measures to
reduce accidental spill volumes and operational discharges on the
applicable portions of the baseline fleet was determined. Third, the
effectiveness ratios were used to estimate the reduction in oil spill
volumes as a result of each measure.
The volume of oil spilled due to accidents by the baseline fleet
was estimated based on an analysis of historical oil spill data in both
U.S. waters and international waters. This analysis was similar to the
accident analysis done for the screening phase of this regulatory
assessment. Historical data taken from the regulatory assessment done
for the NPRM was adjusted using worldwide spill data to fully account
for the effectiveness of the measures in reducing oil spills for the
international fleet. Additionally, annual spill rates were estimated
based on oil movement projections and an annualized estimate of the
adjusted accidental spill data. The volume of oil moved in any year
after 1995 was estimated by reducing the volume of oil moved by the
baseline fleet by the proportion of existing single hull tank vessels
projected to be in operation for each year between 1996 and 2015.
Accidental oil spill volumes were estimated by applying the spill rates
to the volume of oil moved by the baseline fleet in future years. These
spill volumes were estimated by deadweight ton range and vessel
category for tank vessels in the international and U.S. coastal fleets.
The benefits also included estimates on the difference in the
operational discharges for the baseline fleet before and after the
proposed measures would be implemented. Assumptions made for the
benefits of the measures for reducing operation discharges included:
(1) for the operational discharge analyses, only pre-MARPOL tank
vessels have operational discharges because these vessels are not
equipped with sufficient SBT or CBT capacity; (2) pre-MARPOL tank
vessels in the U.S. coastal fleet were assumed to have no operational
discharges because they spend the majority of their time in U.S.
waters; however, the pre-MARPOL tank vessels in the international fleet
were estimated to have operational discharges when outside U.S. waters;
(3) for the operational discharge analyses, pre-MARPOL tank vessels
were assumed to meet MARPOL 73 requirements and discharge no more than
1/15,000 of their cargo per voyage; and (4) annual operational
discharge volume varies proportionately with the estimated number of
U.S. voyages. Projected accidental and operational discharges for the
baseline fleet with no measures implemented were estimated over the
period of this rulemaking and are summarized in Table 8.
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Effectiveness ratios were developed based on the results of the oil
outflow analyses conducted on the analytical tank vessel models. In
addition to developing the effectiveness ratios for the existing single
hull tank vessel fleet, ratios were also developed for potential
``early phase-in'' of double hull tank vessels with comparable carriage
capacity. Accidental oil spill incident effectiveness ratios were
developed for three of the five incident categories: groundings,
collisions, and structural failures. The measures were not expected to
directly affect oil outflow in the event of fires or explosions or oil
spills that occur during cargo transfer operations. Effectiveness
ratios for groundings and collisions were developed based on the oil
outflow estimates using the guidelines for Regulation 13F and 13G of
Annex I of MARPOL 73/78. Structural failure ratios were developed based
on an analysis of casualty incidents as reported in a Ship Structural
Committee report entitled ``A Limited Survey of Ship Structural
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Damage,'' published in 1971 (NO. SSC-220). A 100 percent effectiveness
ratio for operational spills, applicable to the PL/CBT and HBL measure
on pre-MARPOL tank vessels, was used for this analysis because it was
assumed they would use the CBTs, thereby avoiding the need to discharge
dirty ballast from cargo tanks. Effectiveness ratios for each measure
and a comparison between comparable deadweight ton double hull design
are summarized in Table 9.
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The estimated incremental benefits of the measure in terms of the
number of spilled barrels avoided was calculated by multiplying the
effectiveness ratios by the accidental oil spill and operational
discharge volumes estimated for the baseline fleet. As the existing
single hull tank vessel fleet is phased out over time, the benefits are
projected to decrease to zero at the beginning of 2015. The present
value and annualized value of the number of barrels spilled that would
be avoided were also estimated using a real discount rate of seven
percent. Table 10 summarizes the number of spilled barrels avoided in
selected years starting in 1999, by vessel category, for the
international and U.S. coastal fleets. It also includes a break down of
benefits by fleet categories. For this section of the table, small
vessels are defined as all international and U.S. coastal tank vessels
less than 30,000 dwt and large vessels are defined as all international
and U.S. coastal tank vessels that are greater than or equal or 30,000
dwt. The Jones Act fleet numbers represent both small and large vessels
numbers. Therefore, these three categories are not mutually exclusive.
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5. Cost-benefits
The estimated cost per barrel of unspilled oil is categorized by
international and U.S. coastal fleets in Table 11. These cost-
effectiveness estimates were developed using a 7 percent real discount
rate. The table also includes a breakdown of estimated cost per barrel
of unspilled oil for small vessels, large vessels and Jones Act
vessels. These fleet categories are not mutually exclusive. As shown in
Table 11, there is a difference in the estimated cost-benefit for pre-
MARPOL international tank vessels as compared to the U.S. coastal tank
vessel fleet. The primary reason for this difference is that the
measure reduces both accidental and operational oil outflow for the
pre-MARPOL international fleet. The retrofit costs for these vessels to
implement the measures are also greater for U.S. coastal tank vessels
of a given deadweight tonnage because they would be required to have
the retrofit work performed at U.S. shipyards, which historically have
charged higher rates than foreign shipyards.
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The present value cost of the measures researched in this
assessment was estimated over a 19-year time period (1996 to 2015).
Using a 7 percent real discount rate, the present value cost would be
$1.41 billion. The annualized value is approximately $133 million. The
present and annualized value of the number of barrels of spilled oil
avoided is estimated to be about 131,000 barrels and 12,300 barrels,
respectively.
This SNPRM is an economically significant regulatory action under
section 3(f) of Executive Order 12866 and has been reviewed by the
Office of Management and Budget under that order. It requires an
assessment of potential costs and benefits under section 6(a)(3) of
that order. It is significant under the regulatory policies and
procedures of the Department of Transportation (DOT) (44 FR 11040;
February 26, 1979).
Because the Coast Guard wishes to provide the public with an
opportunity to comment on the economic feasibility of this assessment,
no regularity text is introduced in this SNPRM. Comments received on
this SNPRM will enable the Coast Guard to further evaluate the economic
feasibility for structural measures and determine whether additional
regulations are appropriate to implement section 4115(b) of OPA 90.
Notice of Availability
The Coast Guard solicits comments on the regulatory assessment for
this SNPRM. Copies of the regulatory assessment, entitled ``Regulatory
Assessment of Supplemental Notice of Proposed Rulemaking on Structural
Measures for Existing Single Hull Tankers'' are available for
inspection at U.S. coast Guard Headquarters or can be ordered through
the National Technical Information Service (NTIS), Springfield,
Virginia, 22161 by requesting report number PB96-119086. Orders can
also be placed by calling NTIS at (703) 487-4650 or (800) 553-6847.
Small Entities
Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq., ), the
Coast Guard must consider whether this proposal, if adopted, will have
a significant economic impact on a substantial number of small
entities. ``Small entities'' may include (1) small businesses and not-
for-profit organizations that are independently owned and operated and
are not dominant in their fields and (2) governmental jurisdictions
with populations of less than 50,000.
This rulemaking considered small business impact for vessels
privately held by independent companies with an estimated capital
investment value of less than $500 million or companies with that have
less than 500 employees. State and local governments, which altogether
own less than a dozen tank vessels, will not be significantly affected.
Not-for-profit organizations do not engage in the transportation of oil
in bulk by water.
There are a number of companies meeting the definition of a small
business operating tank vessels. Of the 190 U.S. tankships affected by
this rulemaking, 16 are owned by 6 small businesses. Many of these
company's tankships are over 30 years old, have less cargo carrying
capacity than their competition, and are laid up due to market or
company financial conditions. Six small businesses own or operate 32 of
the affected U.S. tank barge population. No foreign small businesses
own or operate foreign tank vessels that would be affected by this
rulemaking.
If structural measures were imposed on the small businesses that
own or operate tank vessels, an economic impact is unavoidable, as the
statue clearly targets existing vessels of 5,000 GT or more that carry
oil in bulk as cargo and that do not have double hulls. A complete
review of this impact on small entities would be done if the Coast
Guard proposes specific structural requirements.
This SNPRM responds to comments received on the NPRM, presents a
summary of a regulatory assessment for various structural measures,
notifies the public of the availability of this assessment, and
solicits comments on the economic feasibility of the measures. This
SNPRM does not propose specific regulatory text. Therefore, the Coast
Guard certifies under 5 U.S.C. 605(b) that this SNPRM will not have a
significant economic impact on a substantial number of small entities.
If you think that your business or organization qualifies as a small
entity and the NPRM cost assessment, as modified by the discussions and
data provided in this document, will have a significant economic impact
on your business or organization, please submit a comment (see
ADDRESSES) explaining why you think it qualifies and in what
[[Page 67251]]
way and to what degree this proposal will economically affect it.
Collection of Information
Under the Paperwork Reduction Act (44 U.S.C. 3501, et seq., ), the
Office of Management and Budget (OMB) reviews each proposed rule that
contains a collection-of-information requirement to determine whether
the practical value of the information is worth the burden imposed by
its collection. Collection-of-information requirements include
reporting, recordkeeping, notification, and other similar requirements.
This proposal contains no collection of information requirements.
Federalism
The Coast Guard has analyzed this proposal under the principles and
criteria contained in Executive Order 12612 and has determined that
this proposal does not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment.
Environment
The Coast Guard has considered the environmental impact of this
supplemental notice of proposed rulemaking under COMDTINST M16475.1B.
Although this SNPRM proposes no Federal regulations and therefore does
not amount to the type of major Federal action typically subject to
analysis under the National Environmental Policy Act (NEPA), the Coast
Guard solicits comments on its analysis of structural measures. An
Environmental Assessment (EA) from the notice of proposed rulemaking
(NPRM) is available in the docket for copying and inspection as
indicated in the ``ADDRESSES'' section of this preamble.
By the year 2015, all tank vessels (with certain exceptions) over
5,000 dwt operating in U.S. waters will be equipped with double hulls.
In the interim, the Coast Guard has been given wide latitude under OPA
90 section 4115(b) to set structural and operational standards for
single hull vessels for the purpose of reducing the amount of oil
spilled into the marine environment.
Sound structural design and efficient operational procedures, when
combined with other requirements of OPA 90, should contribute to
increased environmental protection and human safety. The impact of
section 4115(b), however is not expected to result in significant
impact on the quality of human environment, as defined in the NEPA.
Although no regulatory text is introduced in this SNPRM, the public
is encouraged to comment on the technological and economic feasibility
of the structural measures discussed in this SNPRM. Comments received
on this SNPRM will enable the Coast Guard to assess the economic and
technological feasibility of structural measures to reduce the risk of
oil outflow from existing tank vessels and effectively implement
section 4115(b) of OPA 90.
Dated: December 21, 1995.
A.E. Henn,
Vice Admiral, U.S. Coast Guard, Acting Commandant.
[FR Doc. 95-31371 Filed 12-22-95; 2:10 pm]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 95-31364 International Banking Operations
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67100-67102]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31364]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Part 211
[Regulation K; Docket No. R-0911]
International Banking Operations
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is proposing to amend its Regulation K regarding interstate banking
operations of foreign banking organizations. The Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (Interstate Act) removed
geographic restrictions on interstate banking by foreign banks
effective September 29, 1995, and requires certain foreign banks
without U.S. deposit-taking offices to select a home state for the
first time. The proposed amendments to Regulation K would require these
foreign banks to select a home state by March 31, 1996, and would
immediately remove outdated restrictions on certain mergers by U.S.
bank subsidiaries of foreign banks outside the home state of the
foreign bank. Obsolete and superseded provisions of Regulation K
concerning home state selection would be deleted. The Board is also
requesting comment on other aspects of the Interstate Act as it applies
to foreign banks.
DATES: Comments must be received by February 5, 1996.
ADDRESSES: Comments should refer to Docket No. R-0911 and may be mailed
to William W. Wiles, Secretary, Board of Governors of the Federal
Reserve System, 20th Street and Constitution Avenue, N.W., Washington
D.C. 20551. Comments also may be delivered to Room B-2222 of the Eccles
Building between 8:45 a.m. and 5:15 p.m. weekdays, or to the guard
station in the Eccles building courtyard on 20th Street, N.W. (between
Constitution Avenue and C Street, N.W.) at any time. Comments may be
inspected in Room MP-500 of the Martin Building between 9:00 a.m. and
5:00 p.m. weekdays, except as provided in Sec. 261.8 of the Board's
rules regarding availability of information, 12 CFR 261.8.
FOR FURTHER INFORMATION CONTACT: Kathleen M. O'Day, Associate General
Counsel (202/452-3786), Ann E. Misback, Managing Senior Counsel (202/
452-3788), Douglas M. Ely, Senior Attorney (202/452-5289), Legal
Division; Michael G. Martinson, Assistant Director (202/452-3640),
Division of Banking Supervision and Regulation, Board of Governors of
the Federal Reserve System. For users of Telecommunication Device for
the Deaf [TDD] only, please contact Dorothea Thompson (202/452-3544),
Board of Governors of the Federal Reserve System, 20th and C Streets,
N.W., Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION: The Interstate Act amended section 5 of the
International Banking Act of 1978 (IBA), which governs interstate
banking and branching operations of foreign banks. The Interstate Act
also amended the Bank Holding Company Act of 1956 (BHC Act), the
Federal Deposit Insurance Act and several other statutes regarding
interstate banking operations of bank holding companies, national banks
and state banks. In light of these amendments, the Board proposes to
amend the provisions of its Regulation K regarding interstate banking
operations of foreign banking organizations (12 CFR 211.22) as
discussed below.
Determination of Home State
Section 104(d) of the Interstate Act modifies the existing
definition of a foreign bank's home state under section 5(c) of the
IBA. Section 104(d) retains the provision of the IBA stating that the
home state of a foreign bank that has any combination of branches,
agencies, subsidiary commercial lending companies and subsidiary banks
(U.S. banking operations) in more than one state is whichever of these
states is selected by the foreign bank, or by the Board if the foreign
bank fails to choose. Section 104(d) also provides, for the first time,
that if a foreign bank has U.S. banking operations, including agencies
or subsidiary commercial lending companies, in one state only, that
state is the foreign bank's home state for purposes of interstate
branching. The Board proposes the following amendments to 12 CFR
211.22(a) in order to reflect and implement these changes to the
definition of a foreign bank's home state.
Abolition of Distinction Between Deposit-Taking Offices and Nondeposit-
Taking Offices
Prior to the Interstate Act, the Board interpreted the IBA to
require a foreign bank to have a home state only if the foreign bank
had deposit-taking offices, i.e., branches or subsidiary banks. 44 FR
62903 (November 1, 1979). This interpretation is set forth in
Sec. 211.22(a)(2) of Regulation K. Section 104(d) of the Interstate Act
superseded this interpretation by providing for the first time that
foreign banks with only agencies or subsidiary commercial lending
companies have a home state. Accordingly, the Board proposes that
Sec. 211.22(a)(2) be deleted.
The Board also proposes that Sec. 211.22(a)(5) be deleted. This
provision follows the Board's interpretation of the IBA in
Sec. 211.22(a)(2) by requiring foreign banks to select as their home
state the state where their first U.S. deposit-taking office is
located. Since the Interstate Act has superseded that interpretation,
Sec. 211.22(a)(5) is proposed to be removed.
[[Page 67101]]
Initial Home State Selection Under the Interstate Act
As noted, the Interstate Act for the first time requires foreign
banks with only subsidiary commercial lending companies or agencies in
the United States to have a home state. In order to implement this
requirement, the Board proposes that any foreign bank required for the
first time to have a home state because it has subsidiary commercial
lending companies or agencies in more than one state, and no other U.S.
banking operations, be permitted to select its home state. (Foreign
banks with domestic agencies and subsidiary commercial lending
companies in one state only are assigned that state as their home state
by section 5(c)(2) of the IBA, as amended by section 104(d) of the
Interstate Act.) Each foreign bank covered by the rule would be
required to select its home state from those states in which the
foreign bank established U.S. agencies and subsidiary commercial
lending companies before September 29, 1994 (the date of enactment of
the Interstate Act), and has continuously operated such offices. A
foreign bank covered by the rule shall select its home state by filing
with the Board a declaration of home state by March 31, 1996.
In the event a foreign bank required to select a home state fails
to do so, the Board would exercise its authority, as contemplated by
section 104(d) of the Interstate Act, to determine a foreign bank's
home state. In such cases, the Board proposes to designate as a foreign
bank's home state the state in which the total assets of all its
offices, net of claims on affiliates or other offices of the foreign
bank, is the largest, as reflected in the foreign bank's most recent
report of condition.
The Board also proposes to state in its new rule that, as is
provided in section 5(c)(2) of the IBA as amended by section 104(d) of
the Interstate Act, a foreign bank with branches, agencies, subsidiary
commercial lending companies or subsidiary banks in one state only
shall have that state as its home state. A foreign bank that has
already chosen a home state would not be affected by the proposed rule.
The Board intends to review other issues raised by the Interstate
Act relating to the interstate operations of foreign banks in a future
rule-making proceeding. The Board accordingly invites comment
concerning all aspects of the application of the Interstate Act to
foreign banks.
Deletions of Other Obsolete Sections
The Board proposes that current Secs. 211.22(a)(1),(3) and (4) be
deleted. These sections governed initial selection of home states for
foreign banks under the IBA as enacted in 1978 and the Board's
implementing regulations, which were adopted in 1980. The foreign banks
affected by these provisions selected a home state, or had one selected
for them by the Board or through operation of Regulation K, several
years ago. Accordingly, the Board proposes that these provisions be
deleted.
Bank Mergers Outside Home State
Section 211.22(c) of Regulation K provides that a foreign bank with
one or more domestic banking subsidiaries outside its home state shall
notify the Board if it proposes to acquire through a subsidiary bank
all or substantially all of the assets of a U.S. bank which is larger
than the subsidiary bank and is located outside of the foreign bank's
home state under the IBA. The Board may direct the foreign bank to
redesignate as its home state the state in which its subsidiary bank is
located if the Board finds the proposed acquisition would be
inconsistent with the foreign bank's home state selection under the
IBA.
The Board adopted this rule in 1980 due to a concern that allowing
a foreign bank to expand its deposit-taking capabilities both by
branching in its IBA home state and through major acquisitions by
merger outside its home state might permit evasion of the interstate
restrictions then in place under the IBA and the BHC Act. At that time,
a foreign bank with a subsidiary bank in one state (State X) and a
branch in another state (State Y) which declared State Y as its home
state under the IBA generally could not acquire more than 5 per cent of
the shares of an additional bank in State Y, because such acquisitions
were subject to the geographic restrictions of section 3(d) of the BHC
Act. These restricted purchases of banks outside a foreign bank's home
state for purposes of the BHC Act, in this case State X. In addition,
such a foreign bank generally could not acquire more than 5 per cent of
the shares of an additional bank in State X as a result of section
5(a)(5) of the IBA, which also applied the limits of section 3(d) of
the BHC Act to interstate bank acquisitions by foreign banks outside
their home state as determined under the IBA (in this case, State Y).
The Board concluded that a foreign bank might circumvent these
restrictions on interstate banking by engaging, through a subsidiary
bank, in a large merger outside its IBA home state (in this case, State
X), and framed its interstate bank merger rule to allow the Board to
redesignate the foreign bank's home state to prevent this
circumvention.
The concerns underlying the rule no longer apply due to the changes
made by the Interstate Act. The geographic limits on interstate bank
purchases by foreign banks outside their IBA home state under section
5(a)(5) of the IBA have been abolished. In addition, section 3(d) of
the BHC Act was amended as of September 29, 1995 to phase out the
principal geographic restrictions on interstate banking acquisitions
applicable to domestic and foreign acquirors under the BHC Act. As of
that date, there is no need to prevent foreign banks from circumventing
geographic limits that no longer apply. Accordingly, the Board proposes
that the bank merger rule of Sec. 211.22(c) be deleted effective
immediately.
Retained Provisions
The Board proposes that Secs. 211.22(b) and (d) of Regulation K be
retained with no change at this time. Section 211.22(b), which allows
foreign banks to change their home states once, will be reviewed in the
Board's future rule-making process discussed above. Until such time,
foreign banks which have not previously changed their home states may
change their home state in accordance with Sec. 211.22(b). Section
211.22(d), which concerns attribution of home states to foreign banking
organizations controlled by other foreign banking organizations, also
is proposed to be retained pending future review.
Request for Comment
The Board requests comment on all aspects of the proposed changes
to Regulation K, and on all other aspects of the application of the
Interstate Act to foreign banks which may be dealt with appropriately
through rulemaking.
Paperwork Reduction Act
In accordance with section 3506 of the Paperwork Reduction Act of
1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix A.1), the Board reviewed
the proposed rule under the authority delegated to the Board by the
Office of Management and Budget. No collections of information pursuant
to the Paperwork Reduction Act are contained in the proposed rule.
Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act (Pub.
L. 96-354, 5 U.S.C. 601 et seq.), the Board certifies that the proposed
revisions to
[[Page 67102]]
Regulation K would not have a significant economic impact on a
substantial number of small entities that are subject to its
regulation.
List of Subjects in 12 CFR Part 211
Exports, Federal Reserve System, Foreign banking, Holding
companies, Investments, Reporting and recordkeeping requirements.
For the reasons set out in the preamble, the Board proposes to
amend 12 CFR Part 211 as set forth below:
PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)
1. The authority citation for Part 211 continues to read as
follows:
Authority: 12 U.S.C. 221 et seq., 1818, 1841 et seq., 3101 et
seq., 3901 et seq.
2. In Sec. 211.22, paragraph (a) is revised; paragraph (c) is
removed; and paragraph (d) is redesignated as paragraph (c) to read as
follows:
Sec. 211.22 Interstate banking operations of foreign banking
organizations.
(a) Determination of home state. (1) A foreign bank (except a
foreign bank to which paragraph (a)(2) of this section applies) that
has any combination of domestic agencies or subsidiary commercial
lending companies that were established before September 29, 1994, in
more than one state and have been continuously operated shall select
its home state from those states in which such offices or subsidiaries
are located. A foreign bank shall do so by filing with the Board a
declaration of home state by March 31, 1996. In the absence of such
selection, the Board shall designate the home state for such foreign
banks.
(2) A foreign bank that, as of September 29, 1994, had declared a
home state or had a home state determined pursuant to the law and
regulations in effect prior to that date shall have that state as its
home state.
(3) A foreign bank that has any branches, agencies, subsidiary
commercial lending companies, or subsidiary banks in one state, and has
no such offices or subsidiaries in any other states, shall have as its
home state the state in which such offices or subsidiaries are located.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, December 21, 1995.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 95-31364 Filed 12-27-95; 8:45 am]
BILLING CODE 6210-01-P
Complete official Federal Register PDF
FR Doc. 95-31363 Equal Credit Opportunity
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67097-67100]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31363]
=======================================================================
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Part 202
[Regulation B; Docket No. R-0910]
Equal Credit Opportunity
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule; official staff interpretation.
-----------------------------------------------------------------------
SUMMARY: The Board is publishing for comment proposed revisions to its
official staff commentary to Regulation B (Equal Credit Opportunity).
The commentary applies and interprets the requirements of Regulation B
and substitutes for individual staff interpretations. The proposed
revisions to the commentary provide guidance on issues that the Board
has been asked to clarify, including credit scoring and spousal
signature rules.
DATES: Comments must be received on or before February 28, 1996.
ADDRESSES: Comments should refer to Docket No. R-0910, and may be
mailed to William W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, N.W.,
Washington, D.C. 20551. Comments also may be delivered to Room B-2222
of the Eccles Building between 8:45 a.m. and 5:15 p.m. weekdays, or to
the guard station in the Eccles Building courtyard on 20th Street, N.W.
(between Constitution Avenue and C Street) at any time. Comments
received will be available for inspection in Room MP-500 of the Martin
Building between 9:00 a.m. and 5:00 p.m. weekdays, except as provided
in 12 CFR 261.8 of the Board's rules regarding the availability of
information.
FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell, Sheilah A. Goodman,
or Natalie E. Taylor, Staff Attorneys, Division of Consumer and
Community Affairs, Board of Governors of the Federal Reserve System, at
(202) 452-3667 or 452-2412. For users of the Telecommunications Device
for the Deaf, contact Dorothea Thompson at (202) 452-3544.
SUPPLEMENTARY INFORMATION:
I. Background
The Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691-1691f,
makes it unlawful for creditors to discriminate in any aspect of a
credit transaction on the basis of race, color, religion, national
origin, sex, marital status, or age (provided the applicant has the
capacity to contract), because all or part of an applicant's income
derives from public assistance, or because the applicant has in good
faith exercised any right under the Consumer Credit Protection Act.
This statute is implemented by the Board's Regulation B (12 CFR Part
202). The Board also has an official staff commentary (12 CFR Part 202
(Supp. I)) that interprets the regulation. The commentary provides
general guidance to creditors in applying Regulation B to various
credit transactions, and is updated periodically to address significant
questions that arise.
II. Explanation of Proposed Commentary
Section 202.2--Definitions
2(p) Empirically Derived and Other Credit Scoring Systems
Comment 2(p)-2 would be revised to provide guidance on revalidation
requirements for credit scoring systems.
Section 202.5--Rules Concerning Taking of Applications
5(e) Written Applications
Comment 5(e)-3 would be revised to cross-reference the proposed
comments to section 202.13(b), which address applications submitted
through an electronic medium.
Section 202.6--Rules Concerning Evaluation of Applications
6(b) Specific Rules Concerning Use of Information
6(b)(2)
Comment 6(b)(2)-2 would be revised to address the use of age in
credit scoring systems that use scorecards for different age groups
based on characteristics that are predictive for each group. Each
scorecard considers the correlation among the predictive variables
(representing characteristics such as income, length of residence, and
credit history) for the age group. Each predictive variable is assigned
the appropriate weight given the impact of the other predictive
variables in that age group, so that comparable scores for each group
reflect the same level of risk.
Under the ECOA and Regulation B, if a creditor considers age--
whether by directly assigning a value to age or by some other means
such as establishing scorecards for different age groups--the age of an
elderly applicant must not be assigned a negative value. The Board
believes that, to ensure that the treatment accorded applicants age 62
or older complies with the law, elderly applicants who do not qualify
for credit under the factors assigned to the scorecard for their age
group must be rescored under the factors assigned to the scorecards for
all other age groups in the system. Comment 6(b)(2)-2 would be revised
to incorporate this concept.
Proposed comment 6(b)(2)-4 addresses the use of age in a reverse
mortgage transaction. A reverse mortgage is a home-secured loan in
which the borrower receives payments from the creditor, and the
repayment of these amounts does not become due until the borrower dies,
moves permanently from the home, or transfers title to the home. The
proposed comment clarifies that using age, as a proxy for life
expectancy, in a reverse mortgage transaction to determine the line of
credit or monthly payment amount that a borrower will receive does not
violate the regulation.
6(b)(6)
Comment 6(b)(6)-1 would be revised to clarify that if a creditor
considers credit history, it must consider information presented by the
applicant that is not included in the credit report, if it is the type
the creditor normally considers on a credit report. The comment also
clarifies that when one spouse is applying for individual credit, the
creditor must consider information presented by the applicant that
would
[[Page 67098]]
tend to show that a credit history appearing in the name of both
spouses is not reflective of the applicant's individual
creditworthiness.
Section 202.7--Rules Concerning Extensions of Credit
7(d) Signature of Spouse or Other Person
7(d)(2)
Proposed comment 7(d)(2)-1 clarifies that in determining the value
of an applicant's interest in property, a creditor must look to the
actual form of ownership of the property prior to or at consummation.
Regulation B requires that if an applicant is not individually
creditworthy and the creditor seeks the signature of a co-owner of
property relied upon to establish creditworthiness, the signature may
be required only on the documents that are reasonably necessary, under
state law, to make the property available in the event of death or
default of the applicant. In some states, a signature on the debt
instrument itself may be necessary. In other states, a creditor may be
able to protect its interest with a signature on an instrument that
creates a limited obligation--a document allowing the creditor to reach
the nonapplicant signatory's interest only in the property at issue in
the event of default. Examples of such instruments include a security
agreement, mortgage, deed of trust, or limited guarantee. The creditor
could also consider requesting a signature on a document sometimes
referred to as a status statement. This document ascertains the
character of property that will be used in the credit decision; affirms
the purpose of the loan (if a business purpose, affirms or disclaims
any interest or participation in the business); and attests to or
disclaims the non-applicant's desire to be an applicant or guarantor of
the requested credit.
The Board proposes to revise comment 7(d)(2)-1 to clarify that
where an individual applicant jointly owns property in a form and
amount sufficient to establish creditworthiness, a creditor may not
require the nonapplicant joint owner of the property to execute any
instrument that forfeits or conveys that person's interest in the
property to the applicant or other owners as a condition of credit. For
example, a creditor could not require a non-applicant spouse to
quitclaim their interest in jointly owned property relied upon to
establish creditworthiness if the applicant spouse's interest in the
property, and other resources, are sufficient to support the credit
requested.
7(d)(6)
Proposed comment 7(d)(6)-1 clarifies that a creditor may require
that the partners, officers or directors of a creditworthy business
personally guarantee an extension of credit to the business, as long as
a guarantee is not required on a prohibited basis--e.g., only those
businesses owned by women or minorities.
Comment 7(d)(6)-2 would be revised to clarify that when the
circumstances of a business loan require the guarantee of a spouse with
no interest in the business, the creditor could ask the disinterested
spouse to sign a limited guarantee.
Section 202.13--Information for Monitoring Purposes
13(a) Information To Be Requested
Comment 13(a)-6 would be revised to clarify that a refinancing
involves the satisfaction of an existing obligation that is replaced by
a new obligation undertaken by the same borrower. The proposed
clarification is consistent with the definition of ``refinancing'' in
other Board regulations, such as Regulation C (Home Mortgage
Disclosure), 12 CFR 203, and Regulation Z (Truth in Lending), 12 CFR
226.
13(b) Obtaining of Information
Proposed comment 13(b)-4 addresses the collection of monitoring
information for applications submitted through an electronic medium
that does not permit the creditor to view the applicant. In these
instances, the creditor should treat the application as if it were
accepted by mail or telephone.
Proposed comment 13(b)-5 addresses the collection of monitoring
information for applications submitted through an interactive video
process. Regulation B requires a creditor to ask home mortgage loan
applicants for monitoring information and, if the applicant chooses not
to provide the information, requires the creditor to note the
information on the application on the basis of visual observation or
surname. There is an exception for telephone or mail applications.
Where the creditor has the capability to view the applicant during the
process, however, such as with an interactive video, the Board believes
the application is like an in-person application. Thus, a creditor must
ask the applicant for monitoring information and enter the information
provided on the application form. If the applicant does not provide the
information, the creditor must note the information to the extent the
video display makes it possible to do so.
III. Form of Comment Letters
Comment letters should refer to Docket No. R-0910. The Board
requests that, when possible, comments be prepared using a standard
courier typeface with a type size of 10 or 12 characters per inch. This
will enable the Board to convert the text into machine-readable form
through electronic scanning, and will facilitate automated retrieval of
comments for review. Comments may also be submitted on computer
diskettes, using either the 3.5'' or 5.25'' size, in any IBM-compatible
DOS-based format. Comments on computer diskettes must be accompanied by
a paper version.
List of Subjects in 12 CFR Part 202
Aged, Banks, banking, Civil rights, Consumer protection, Credit,
Discrimination, Federal Reserve System, Marital status discrimination,
Penalties, Religious discrimination, Reporting and recordkeeping
requirements, Sex discrimination.
Certain conventions have been used to highlight the proposed
changes to the staff commentary. New language is shown inside bold-
faced arrows, while language that would be removed is set off with
brackets.
For the reasons set forth in the preamble, the Board proposes to
amend 12 CFR part 202 as set forth below:
PART 202--EQUAL CREDIT OPPORTUNITY (REGULATION B)
1. The authority citation for Part 202 continues to read as
follows:
Authority: 15 U.S.C. 1691-1691f.
2. In Supplement I to Part 202, under Section 202.2 Definitions,
under 2(p) Empirically derived and other credit scoring systems., three
new sentences would be added at the end of paragraph 2 to read as
follows:
Supplement I to Part 202--Official Staff Interpretations
* * * * *
Section 202.2 Definitions
* * * * *
2(p) Empirically derived and other credit scoring systems.
* * * * *
2. * * * To ensure that predictive ability is being
maintained, the performance of the system should be monitored. This
could be done, for example, by analyzing the loan portfolio to
determine the delinquency rate for each score interval. If these
data indicate that the system is no longer identifying risk as
predicted, the system must
[[Page 67099]]
be revalidated and the variables for each score interval adjusted
accordingly.
* * * * *
3. In Supplement I to Part 202, under Section 202.5 Rules
Concerning Taking of Applications, under 5(e) Written applications.,
paragraph 3. would be revised to read as follows:
* * * * *
Section 202.5 Rules Concerning Taking of Applications
* * * * *
5(e) Written applications.
* * * * *
3. Computerized entry. Information entered directly into and
retained by a computerized system qualifies as a written application
under this paragraph. (See the commentary to section 202.13(b)
, Applications through electronic media and Applications
through interactive video.)
* * * * *
4. In Supplement I to Part 202, Section 202.6 Rules Concerning
Evaluation of Applications would be amended as follows:
a. Under Paragraph 6(b)(2), paragraph 2. would be revised;
paragraphs 4. and 5. would be redesignated as paragraphs 5. and 6.,
respectively; and new paragraph 4. would be added; and
b. Paragraph 6(b)(6) would be revised.
The additions and revisions would read as follows:
* * * * *
Section 202.6--Rules Concerning Evaluation of Applications
* * * * *
Paragraph 6(b)(2)
* * * * *
2. Consideration of age in a credit scoring system. Age may be
taken directly into account in a credit scoring system that is
``demonstrably and statistically sound,'' as defined in
Sec. 202.2(p), with one limitation: an applicant who is 62 years or
older must be treated at least as favorably as anyone who is under
62. For example, an applicant who is 62 years or older
may not be denied credit if an applicant under age 62 with the same
characteristics would be approved for credit under the scoring
system. Thus, a creditor using an age-based credit scoring system
must ensure that elderly applicants who do not qualify under the
factors assigned to elderly age groups are rescored using the
factors or weights assigned to all other age groups in the
system.
* * * * *
4. Consideration of age in a reverse mortgage. A
reverse mortgage is a home-secured loan in which the borrower
receives payments from the creditor, and does not become obligated
to repay these amounts until the expiration of a term or when the
borrower dies, moves permanently from the home, or transfers title
to the home. Disbursements to the borrower under a reverse mortgage
typically are determined by considering the value of the borrower's
home, the current interest rate, and the borrower's life expectancy.
Age may be directly taken into account in setting the terms of a
reverse mortgage without violating the regulation B.
* * * * *
Paragraph 6(b)(6)
1. [Types of credit references.] Evaluating credit
history. A creditor may restrict the types of credit
history and credit references that it will consider, provided that
the restrictions are applied to all credit applicants without regard
to sex, marital status, or any other prohibited basis. However, on
the applicant's request, a creditor must consider credit information
not reported through a credit bureau when the information relates to
the same types of credit references and history that the creditor
would consider if reported through a credit bureau.
i. At the applicant's request, a creditor must
consider credit information of the same type that the creditor would
consider if reported through a credit bureau. For example, if a
creditor normally considers car loan payments, and the consumer
presents credible information (such as cancelled checks or money-
order receipts) about payment history on a car loan from a finance
company that did not report to a credit bureau, the creditor must
consider this information in its evaluation of credit history.
ii. At the applicant's request, a creditor must consider
information that a credit history reported in both spouses' names
does not accurately reflect the applicant's ability or willingness
to repay. For example, assume an applicant applies for individual
credit and the credit bureau report shows late payments on a
mortgage obligation held jointly with a former spouse. If the
applicant can demonstrate that the former spouse alone was
responsible for the late payments (such as by a transfer of title to
the former spouse and a document from the mortgage creditor that
released the applicant from liability for the debt) the creditor
must disregard both the mortgage debt and the late payments in
determining the applicant's creditworthiness.
* * * * *
5. In Supplement I to Part 202, Section 202.7--Rules Concerning
Extensions of Credit, would be amended as follows:
a. Under Paragraph 7(d)(2), paragraph 1. would be revised; and
b. Paragraph 7(d)(6) would be revised.
The revisions would read as follows:
* * * * *
Section 202.7--Rules Concerning Extensions of Credit
* * * * *
Paragraph 7(d)(2)
1. Jointly owned property. a. Valuation of
applicant's interest. In determining the value of [the]
an applicant's interest in jointly owned
property, a creditor may consider factors such as the [form of
ownership and the] property's susceptibility to attachment,
execution, severance, or partition and the cost of such action.
This determination must be based on the actual form of
ownership of the property prior to or at consummation, and not on
the possibility of a subsequent change in the form of ownership. For
example, in determining whether a married applicant's interest in
property is sufficient to satisfy the creditor's standards of
creditworthiness for individual credit, a creditor may not obtain
the signature of the nonapplicant spouse based on the possibility
that the applicant's separately-held property may be transferred
into tenancy by the entirety after consummation. Similarly, a
creditor may not routinely require a nonapplicant joint owner to
execute any document (such as a quitclaim deed) that would change
the nonapplicant joint owner's interest in property offered by the
applicant to support the extension of credit.
b. Other options to support credit. If the
applicant's interest in the property does not support the amount and
terms of credit sought, the creditor may give the applicant some
other option of providing additional support for the extension of
credit[, f] . For example[--]:
i. [r]Requiring an additional
party under Sec. 202.7(d)(5);
ii. [o]Offering to grant the
applicant's request on a secured credit basis; or
iii. [a]Asking for the
signature of the co-owner of the property on an instrument that
ensures access to the property but does not impose personal
liability unless necessary under state law (which could
include, for example, a security agreement, deed of trust, mortgage,
limited guarantee, quitclaim deed, or status statement from the
nonapplicant owner).
* * * * *
Paragraph 7(d)(6)
1. Guarantees. A guarantee on an extension of credit is part of
a credit transaction and therefore subject to the regulation.
A creditor may require the personal guarantee of the
partners, directors, or officers of a business even if the business
itself is creditworthy. The guarantee must be based on the
guarantor's relationship with the business, however, and not on a
prohibited basis.
2. Spousal guarantees. The rules in Sec. 202.7(d) bar a creditor
from requiring the signature of a guarantor's spouse just as they
bar the creditor from requiring the signature of an applicant's
spouse. For example, although a creditor may require all officers of
a closely held corporation to personally guarantee a corporate loan,
the creditor may not automatically require that spouses of married
officers also sign the guarantee. If an evaluation of the financial
circumstances of an officer indicates that an additional signature
is necessary, however, the creditor may require the signature of a
spouse in appropriate circumstances--for example, if the property
relied upon to meet the creditor's standards is held jointly. In
such a case, the creditor could ask the spouse to sign an instrument
that provides for liability to the extent of the spouse's interest
in the property relied upon to support the credit (such as a limited
guarantee).
* * * * *
[[Page 67100]]
6. In Supplement I to Part 202, Section 202.13--Information for
Monitoring purposes, would be amended as follows:
a. Under 13(a) Information to be requested., paragraph 6. would be
revised; and
b. Under 13(b) Obtaining of information., paragraphs 4. and 5.
would be redesignated as paragraphs 6. and 7. respectively, and new
paragraphs 4. and 5. would be added.
The revisions and additions would read as follows:
* * * * *
Section 202.13 Information for Monitoring purposes
13(a) Information to be requested.
* * * * *
6. Refinancings. A refinancing occurs when an
existing obligation is satisfied and replaced by a new obligation
undertaken by the same borrower. A creditor that
receives an application to [change the terms and conditions of]
refinance an existing extension of credit made
by that creditor for the purchase of the applicant's dwelling may
request the monitoring information again but is not required to do
so if it was obtained in the earlier transaction.
* * * * *
13(b) Obtaining of information.
* * * * *
4. Applications through electronic media. If an
applicant applies through an electronic medium (for example, via the
Internet or by facsimile) without any face-to-face interactive video
capability, the creditor should treat the application as if it were
accepted by mail or telephone.
5. Applications through interactive video. If a
creditor takes an application through an interactive application
process with video capabilities, and the creditor can see the
applicant, the creditor should treat these applications as taken in
person and collect the monitoring information.
* * * * *
By order of the Secretary of the Board, acting pursuant to
delegated authority for the Board of Governors of the Federal
Reserve System, December 21, 1995.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 95-31363 Filed 12-27-95; 8:45 am]
BILLING CODE 6210-01-P
Complete official Federal Register PDF
FR Doc. 95-31361 New England Fishery Management Council; Meeting
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Page 67116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31361]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 651
[I.D. 121995A]
New England Fishery Management Council; Meeting
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Public meeting.
-----------------------------------------------------------------------
SUMMARY: The New England Fishery Management Council (Council) will hold
a 2-day public meeting to consider actions affecting New England
fisheries in the exclusive economic zone.
DATES: The meeting will begin on Wednesday, January 10, 1996, at 10
a.m. and on Thursday, January 11, 1995, at 8:30 a.m.
ADDRESSES: The meeting will be held at the Tara's Ferncroft Conference
Resort and Hotel, 50 Ferncroft Road, Danvers, MA; telephone: (508) 277-
2500. Requests for special accommodations should be addressed to the
New England Fishery Management Council, 5 Broadway, Saugus, MA 01906-
1097; telephone: (617) 231-0422.
FOR FURTHER INFORMATION CONTACT: Douglas G. Marshall, Executive
Director, (617) 231-0422.
SUPPLEMENTARY INFORMATION: The January 10-11 meeting is being convened
specifically to address the remaining groundfish issues that relate to
finalizing draft Amendment 7 to the Northeast Multispecies (Groundfish)
Fishery Management Plan. The intent of this amendment is to implement
measures to rebuild severely overfished stocks, with particular
emphasis on cod, haddock, and yellowtail flounder. If time allows, the
Council may consider other relevant business.
Special Accommodations
This meeting is physically accessible to people with disabilities.
Requests for sign language interpretation or other auxiliary aids
should be directed to Douglas G. Marshall (see ADDRESSES) at least 5
days prior to the meeting date.
Authority: 16 U.S.C. 1801 et seq.
Dated: December 21, 1995.
Richard H. Schaefer,
Director, Office of Fisheries Conservation and Management, National
Marine Fisheries Service.
[FR Doc. 95-31361 Filed 12-27-95; 8:45 am]
BILLING CODE 3510-22-F
Complete official Federal Register PDF
FR Doc. 95-31336 Defense Federal Acquisition Regulation Supplement; Foreign Product Restrictions
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67115-67116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31336]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
48 CFR Parts 225 and 252
Defense Federal Acquisition Regulation Supplement; Foreign
Product Restrictions
AGENCY: Department of Defense (DoD).
ACTION: Proposed rule with request for comment.
-----------------------------------------------------------------------
SUMMARY: The Director of Defense Procurement is proposing to amend the
Defense Federal Acquisition Regulation Supplement (DFARS) to rescind
most of the non-statutory foreign product restrictions in subpart
225.71.
DATES: Comment Date: Comments on the proposed rule should be submitted
in writing to the address below on or before February 26, 1996, to be
considered in the formulation of the final rule.
ADDRESSES: Interested parties should submit written comments to:
Defense Acquisition Regulations Council, Attn: Ms. Amy Williams, PDUSD
(A&T) DP (DAR), IMD 3D139, 3062 Defense Pentagon, Washington, D.C.
20301-3062. Telefax number (703) 602-0350. Please cite DFARS Case 95-
D033 in all correspondence related to this issue.
FOR FURTHER INFORMATION CONTACT:
Ms. Amy Williams, (703) 602-0131.
SUPPLEMENTARY INFORMATION:
A. Background
This proposed rule amends language in the Defense Federal
Acquisition Regulation Supplement (DFARS) to rescind most of the non-
statutory foreign product restrictions in Subpart 225.71, except for
the restrictions on several forging items, which are still under
review.
B. Regulatory Flexibility Act
The proposed rule may have a significant economic impact on a
substantial number of small entities within the meaning of the
Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the proposed
rule will affect the preference for domestic manufacturers of miniature
and instrument ball bearings, precision components for certain
mechanical time devices, high purity silicon, high carbon ferrochrome,
and certain foreign items. It is estimated that approximately 135
contractors, some of which are small businesses, will now be subject to
foreign competition. An Initial Regulatory Flexibility Analysis has
been prepared and may be obtained from the address stated herein.
Comments are invited from small businesses and other interested
parties. Comments from small entities concerning the affected DFARS
subparts will be considered in accordance with Section 610 of the Act.
Such comments must be submitted separately and cite DFARS Case 95-D033
in correspondence.
C. Paperwork Reduction Act
Because many items are no longer restricted, the proposed rule will
result in a reduction of the paperwork burden associated with DFARS
clause 252.225-7025, Foreign Source Restrictions (OMB Control No. 0704-
0229), which requires that contractors maintain records showing
compliance with the restrictions until three years after final payment
and make records available upon request of the Contracting Officer. The
rule does not impose any additional information collection requirements
which require the approval of the Office of Management and Budget under
44 U.S.C. 3501, et seq.
List of Subjects in 48 CFR Parts 225 and 252
Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
Therefore, 48 CFR Parts 225 and 252 are proposed to be amended as
follows:
PART 225--FOREIGN ACQUISITION
1. The authority citation for 48 CFR Parts 225 and 252 continues to
read as follows:
Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.
2. Section 225.7102 is revised to read as follows:
225.7102 Forgings policy.
DoD requirements for the following forging items, whether as end
items or components, shall be acquired from U.S. or Canadian sources to
the maximum extent practicable--
------------------------------------------------------------------------
Items Categories
------------------------------------------------------------------------
Ship propulsion shafts.................... Excludes service and landing
craft shafts.
Periscope tubes........................... All.
Ring forgings for bull gears.............. All greater than 120 inches
in diameter.
------------------------------------------------------------------------
3. Section 225.7103 is revised to read as follows:
225.7103 Forgings exceptions.
The policy in 225.7102 does not apply to acquisitions--
(a) When using simplified acquisition procedures, unless the
restricted item is the end item being purchased:
(b) Overseas for overseas use; or
(c) When the quantity acquired exceeds the amount needed to
maintain the U.S. defense mobilization base (provided such quantity is
an economical purchase quantity). The restriction to domestic sources
does not apply to the quantity above that required to maintain the
base, in which case, qualifying country sources may compete.
4. Section 225.7104 is revised to read as follows:
225.7104 Forgings waivers.
Upon request from a prime contractor, the contracting officer may
waive the requirement for domestic manufacture of the items covered by
the policy in 225.7102.
PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
5. Section 252.225-7105, is revised to read as follows:
252.225-7025 Foreign Source Restrictions.
As prescribed in 225.7105, use the following clause:
Foreign Source Restrictions (XXX XXXX)
(a) Definitions. As used in this clause--
(1) ``Domestic manufacture'' means manufactured in the United
States or Canada if the Canadian firm--
(i) Normally produces similar items or is currently producing
the item in support of DoD contracts (as prime or subcontractor);
and
(ii) Agrees to become (upon receiving a contract/order) a
planned producer under
[[Page 67116]]
DoD's Industrial Preparedness Program, if it is not already a planned
producer for the item.
(2) ``Forging items'' means--
------------------------------------------------------------------------
Items Categories
------------------------------------------------------------------------
Ship propulsion shafts.................... Excludes service and landing
craft shafts.
Periscope tubes........................... All.
Ring forgings for bull gears.............. All greater than 120 inches
in diameter.
------------------------------------------------------------------------
(b) The Contractor agrees that end items and their components
delivered under this contract shall contain forging items that are
of domestic manufacture only.
(c) The restrictions in paragraph (b) of this clause may be
waived upon request from the Contractor in accordance with section
225.7104 of the Defense FAR Supplement.
(d) The Contractor agrees to retain records showing compliance
with this restriction until three years after final payment and to
make records available upon request of the Contracting Officer.
(e) The Contractor agrees to insert this clause, including this
paragraph (e), in subcontracts and purchase orders issued in
performance of this contract, when products purchased contain
restricted forging items.
(End of clause)
[FR Doc. 95-31336 Filed 12-27-95; 8:45 am]
BILLING CODE 5000-04-M
Complete official Federal Register PDF
FR Doc. 95-31335 Federal Acquisition Regulation; Contracting by Negotiations; FAR Part 15 Rewrite
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67113-67115]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31335]
=======================================================================
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 15
Federal Acquisition Regulation; Contracting by Negotiations; FAR
Part 15 Rewrite
AGENCIES: Department of Defense, General Services Administration, and
National Aeronautics and Space Administration.
ACTION: Advance notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: Comments are solicited from both government and industry
personnel on how FAR Part 15 can be rewritten to better support
contracting by negotiation. The Director of Defense Procurement, in
concert with the Federal Acquisition Regulatory Council, is sponsoring
an initiative to rewrite Federal Acquisition Regulation (FAR) Part 15,
Contracting by Negotiation. The goal is to make Part 15 easier to
understand and to eliminate policies, procedures, or requirements that
impose unnecessary burdens on contractors or contracting officers.
Regulatory requirements that are not required by statute, required to
ensure adequately standardized government business practices, or
required to protect the public interest will be considered for
elimination. Innovative means of simplifying the procurement process
and enhancing its efficiency will be considered for incorporation into
the regulation.
Comments may be submitted in two formats: (1) By letter to the
address below, or (2) by electronic response on the Acquisition Reform
Network's FAR Part 15 Rewrite Forum located on the
[[Page 67114]]
Internet at http://www-far.npr.gov. All comments received will be
posted in the Acquisition Reform Network's FAR Part 15 Rewrite Forum.
DATES: Comments are due on or before January 16, 1996.
ADDRESSES: Send comments to the Part 15 Rewrite Committee Chair, Ms.
Melissa Rider, DAR Council, Attn: IMD 3D139, PDUSD(A&T)DP/DAR, 3062
Defense Pentagon, Washington, D.C. 20301-3062.
FOR FURTHER INFORMATION CONTACT:
Ms. Melissa Rider, telephone (703) 602-0131. FAX (703) 602-0350.
SUPPLEMENTARY INFORMATION: An interagency team has been established to
rewrite FAR Part 15. The team members are drawn from the Department of
Defense, civilian agencies, and the Office of Federal Procurement
Policy. The team chair is Ms. Melissa Rider, with the Department of
Defense. The team vice chair is Ms. Frances Sullivan, with the National
Aeronautics and Space Agency (NASA).
The team is soliciting comments on recommended changes to Part 15.
The following topics have already been raised by the Administrator,
Office of Federal Procurement Policy, as potential areas of interest.
Comments are requested on these topics, and any other ideas interested
parties may offer.
1. Use of Shall: In what way do you think Part 15 is overly
prescriptive or overly permissive? We would appreciate your comments on
this issue.
2(a). Government-Industry Communications; Draft Solicitations: The
team is considering expanding the use of draft RFPs. We would
appreciate your input regarding the positive or negative impacts of
using draft RFPs and any other comments you may have on the subject.
2(b). Government-Industry Communications; Discussions: Within the
confines of applicable law, the team is considering expanding the
nature, scope, and timing of discussions held during the course of a
procurement. We would appreciate your comments regarding the pros and
cons of changing what constitutes discussions.
2(c). Government-Industry Communications; Oral Presentations: FAR
15.402(f) provides for oral solicitations in certain circumstances, but
makes no provisions for oral circumstances, but makes no provisions for
oral presentations. The team is considering adding guidance on the use
of oral presentations. The team would appreciate your comments
regarding the use of oral presentations, including experiences (good
and bad) your organization has had with their use.
3. Commercial Items: FAR 15.4, Solicitations and Receipt of
Proposals and Quotations, and FAR 15.6, Source Selection, do not apply
to acquisitions made using simplified acquisition procedures. We would
appreciate your comments regarding whether commerical items should also
be exempted from any of Part 15?
4. Source Selection: The team would appreciate your comments on how
the Part 15 coverage of greatest value contracting can be enhanced.
5(a). Competitive Range; No Cost Proposal: Current coverage at FAR
15.609(a) requires the contracting officer to determine the competitive
range ``on the basis of cost or price and other factors.'' It has been
suggested that it would be better for both the Government and the
offeror to determine the competitive range without requiring a cost
proposal. The Contracting Officer would still be able to get certain
cost information (e.g., labor rates, past performance on cost control,
etc.) to help determine which offerors are not in the running based on
cost, but would not get a complete cost proposal prior to determining
the competitive range. The team solicits your comments on benefits or
disadvantages of deleting the requirement to consider cost in making
the initial competitive range determination.
5(b). Competitive Range; When there is doubt: The team directs your
attention to FAR Case number 95-008, which was published as a proposed
rule in the Federal Register on November 6, 1995 (60 FR 56035). You may
provide comments on the proposed rule, which deletes the statement that
a proposal should be included in the competitive range for the purpose
of conducting discussions, if there is doubt as to whether the proposal
is in the competitive range, through the GSA case manager noted in the
proposed rule. The public comment period for the proposed rule ends on
January 5, 1996.
5(c). Competitive Range; Reasonable Chance: The team solicits your
comments on the benefits or disadvantages of changing the standard for
inclusion in the competitive range.
5(d). Competitive Range; Two-phase Acquisitions: In using a two-
phase process, the agency would solicit information in the first phase
regarding an offeror's capability to perform the contract. The offeror
would not prepare a detailed cost or technical proposal in the first
phase. Based on an offeror's capabilities, it would be invited to the
second phase wherein the agency would ask for detailed technical
proposals and cost information. Several agencies are already
considering similar methods. If you have had experience using similar
methods or would like to share your opinions on the topic, we would
appreciate your comments.
6(a). Contract Pricing; Subcontracts: The current coverage at FAR
15.806-1(d) states that the prices of negotiated subcontractors should
``in no instance * * * be accepted as the sole evidence that [such]
prices are fair and reasonable.'' It has been suggested that this
language be removed. We would appreciate any comments you want to share
on the subject.
6(b). Contract Pricing: TINA: If there are additional revisions you
believe would further the efforts of the TINA drafting team, please let
us know. The team would also like to solicit your opinions regarding
the field pricing support coverage at FAR 15.805-5.
7. Agency supplementation: The public's views are sought on the
extent to which agency supplementation of FAR Part 15, other than
internal agency procedures, should be limited.
8. Evolving (changes to) solicitations on commercial item
acquisitions: Under traditional procurement thinking, contracting
officials are expected to have completed intensive needs and product
analyses before they initiate the formal competitive procurement
process, which requires substantial acquisition leadtimes. The public's
views are sought regarding whether and how the FAR provisions for
making changes to evaluation factors and contract requirements in the
acquisition of commercial items should be modified to ensure that
agencies may more efficiently and effectively match their needs with
commercially available technologies and products.
9. Open negotiation techniques: In the commercial marketplace,
competitions may involve techniques in which the buyer releases or
otherwise makes available the bid prices of all vendors without
revealing competitive secrets (e.g., cost breakdowns, vendor name,
etc.). These sorts of auctioning techniques are currently prohibited in
the FAR. The public's view are sought on whether such prohibitions can
and should be narrowed or eliminated.
10. Use of source selection standards: Currently, agencies develop
evaluation standards to establish a uniform baseline to determine how
well an offeror's proposal satisfies the source selection evaluation
criteria. Evaluation criteria and standards can be difficult to
determine, particularly with respect to commercial items and in cases
where the Government's requirements are stated in terms of performance
objectives rather than detailed
[[Page 67115]]
specifications. In such cases, the offeror's lack of knowledge of the
standards may hinder its ability to know the basis upon which the offer
will be evaluated.
The public's views are sought regarding what types of acquisitions,
if any, might warrant the release of evaluation standards as part of
the solicitation. The public's views are also sought on whether there
are circumstances in which proposals should be evaluated against one
another as opposed to a set of standards.
11. Unsolicited proposals: The public's views are sought on whether
the FAR provisions addressing the handling of unsolicited proposals
discourage industry from investing independent research and development
funds in unique and innovative ideas and, therefore, should be
modified.
Linda W. Neilson,
Deputy Director, Defense Acquisition Regulations Council.
[FR Doc. 95-31335 Filed 12-27-95; 8:45 am]
BILLING CODE 5000-04-M
Complete official Federal Register PDF
FR Doc. 95-31311 Recovery of Overpayments
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67108-67113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31311]
=======================================================================
-----------------------------------------------------------------------
RAILROAD RETIREMENT BOARD
20 CFR Part 255
RIN 3220-AA44
Recovery of Overpayments
AGENCY: Railroad Retirement Board.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Railroad Retirement Board (Board) revises part 255 of its
regulations, currently entitled ``Recovery of Erroneous Payments'', to
clarify and update its regulations with respect to recovery of
overpayments. The revisions more clearly identify the individuals from
whom recovery may be sought and under what circumstances recovery of an
overpayment of benefits will be made. The revisions also cover the
circumstances under which such recovery may be waived, and the
circumstances under which such recovery may be terminated or suspended
under the Board's authority concerning administrative relief from
recovery.
DATES: Comments must be received by January 29, 1996.
ADDRESSES: Secretary to the Board, Railroad Retirement Board, 844 Rush
Street, Chicago, Illinois 60611.
FOR FURTHER INFORMATION CONTACT:
Thomas W. Sadler, Assistant General Counsel, Railroad Retirement Board,
844 Rush Street, Chicago, Illinois 60611, (312) 751-4513, TDD (312)
751-4701).
SUPPLEMENTARY INFORMATION: Part 255 of the Board's regulations has not
been revised since 1967. Although section 10 of the Railroad Retirement
Act of 1974 (45 U.S.C. 231i) includes provisions for recovery and
waiver of overpayments of benefits which are substantially the same
provisions included in the Railroad Retirement Act of 1937 (45 U.S.C.
228i, superseded), internal procedures dealing with overpayments of
benefits have been developed which should properly be included in the
regulations of the Board. In addition, in the Board's view, waiver
should not be available with respect to certain types of overpayments
and this proposed rule reflects those proosals. Because the proposed
rule would make extensive changes in the existing regulation, a
section-by-section analysis is provided below.
The title of part 255 is proposed to be revised to ``Recovery of
Overpayments''. The current title, ``Recovery of Erroneous Payments'',
mistakenly implied that all such payments were caused by ``fault''.
Overpayments can and do occur through no fault of the recipients of
such payments. The purpose of part 255 is to set out regulations to
govern those instances where more than the correct amount of benefits
has been paid, regardless of whether or not ``fault'' exists.
Section 255.1 would replace the present Sec. 255.1, which sets out
statutory provisions, with an introductory statement to summarize what
is included in part 255.
Section 255.2 defines ``overpayment'' using essentially the same
language that is used in the current Sec. 255.2 to define ``erroneous
payments''.
Section 255.3 states the general rule that overpayments shall be
recovered in all cases except where recovery is waived under
Sec. 255.10 or administrative relief from recovery is granted under
Sec. 255.17 or where collection is suspended or terminated under these
regulations or the Federal Claims Collection Standards.
Section 255.4 would replace the current Sec. 255.4, which simply
states in a summary manner the methods by which erroneous payments may
be recovered, with a detailed description of those individuals from
whom overpayments may be recovered.
Section 255.5-255.8 set out the methods by which an overpayment of
benefits may be recovered. These methods include recovery by cash
payment (Sec. 255.5), recovery by setoff from any subsequent payment
determined to be payable on the basis of the same record of
compensation (Sec. 255.6), recovery by deduction in the computation of
a residual lump-sum death benefit payable under the Railroad Retirement
Act (Sec. 255.7), and recovery by actuarial adjustment of an annuity
(Sec. 255.8). These sections are substantially similar to the current
Secs. 255.5-255.8. However, Sec. 255.8, unlike the current section,
provides that an actuarial adjustment is not effective until the
overpaid annuitant negotiates the first check which reflects the
actuarially adjusted rate.
Section 255.9 provides that where recovery of an overpayment is by
setoff which can be effected within 5 months and the individual from
whom recovery is sought is an enrollee under Medicare Part B, the
individual's monthly Medicare premium will be paid and the balance of
the annuity amount will be applied toward recovery of the overpayment.
This section is new and is intended both to save the agency the
administrative costs of billing an annuitant for his or her Part B
Medicare premium where his or her annuity would be offset in its
entirety to recover an overpayment and also to avoid lapse of Medicare
coverage.
Section 255.10 sets out the general requirements for waiver of
recovery of an overpayment as set forth in the Railroad Retirement Act
and replaces the present Secs. 255.10 and 255.11.
Section 255.11, as currently in effect, would be removed because it
is redundant. The new section 255.11 would define ``fault'' and gives
examples of when an individual is or is not at fault based upon past
agency decisions. Section 255.12 defines when recovery is contrary to
the purpose of the Railroad Retirement Act, based upon past agency
decisions. Section 255.13 defines when recovery is against equity or
good conscience. Each of these sections is new and together they expand
on the present Sec. 255.12.
Sections 255.14, 255.15, and 255.16 are new sections which describe
special situations where waiver of recovery of an overpayment is not
available. Specifically, Sec. 255.14 provides that waiver is not
available under certain circumstances when recovery can be made from an
accrual of social security benefits. Section 255.15 provides that
waiver is not available to the estate of an individual.
Section 225.16 would provide that recovery of a small overpayment
of less than $500 will never be considered contrary to the purpose of
the Railroad Retirement Act or against equity or good conscience. Under
this rule, waiver of recovery would not be applicable for debts under
$500. This proposed rule is similar to the rule contained in
Sec. 340.10(e)(2) of the Board's regulations with respect to recovery
of overpayments under the Railroad Unemployment Insurance Act (20 CFR
340.10(e)(2)).
Section 255.17 sets out internal Board policy governing those
situations where recovery of an overpayment may not be waived under
section 10(c) of the Railroad Retirement Act, thus extinguishing the
debt, but where recovery will not be sought for equitable reasons. The
regulations do not currently contain such a provision.
Section 255.18 is new and explains how an overpayment is recovered
when that overpayment was made to a representative payee under part 266
of this chapter.
[[Page 67109]]
Sections 255.19 and 255.20, which deal with compromise, suspension,
or termination of the collection of overpayments are substantively
identical to the current Secs. 255.14 and 255.15 with the exception
that references to the Federal Claims Collection Standards (4 CFR
Chapter 2) have been added.
This rule was previously published as a proposed rule on September
19, 1991 (56 FR 47426). Because the Board has substantially revised the
rule as originally published, it has been determined to republish the
rule as a proposed rule and to seek further public comment.
The Labor Member of the Board dissented from the action of the
majority of the Board in approving this proposed rule. The Labor
Member's reasons from dissenting from this action are set out below.
Views of the Labor Member of the Board
The Labor Member finds it to be a document seriously lacking in
fairness and in grant need of a balanced approach to sensible debt
collection.
Section 255.12 includes non-liquid assets in the list of
resources to be considered when determining whether recovery of an
overpayment will be contrary to the purpose of the Railroad Retirement
Act. The Labor Member thinks it would be unconscionable to expect
anyone to liquidate personal property, for the purpose of repaying an
overpayment for which he or she was not at fault, and accordingly feels
this has no place in any waiver consideration.
Example (1) in this same section is meant to illustrate
when recovery would not be contrary to the purpose of the Act, but, in
fact, the Labor Member considers it to be a one-sided attempt to
construct as narrow a definition of financial hardship as possible,
with the intention to leave the individual with as little as possible
in the recovery process. He takes issue with the majority's failure to
consider imminent financial obligations when making financial hardship
determinations, as well.
Section 255.13(b) states that an individual's ability to
repay an overpayment is relevant with respect to the credibility of the
claim that the individual detrimentally relied on the incorrect
payment, but the Labor Member believes that, consistent with the Social
Security Administration's regulations, a person's financial
circumstances are not material in this regard.
Section 255.15 does not allow waiver when recovery is
sought from the estate of an overpaid individual. However, the Labor
Member submits that a literal reading of section 10(c) of the Act
directs waiver consideration for estates, as well as individuals, when
qualifying criteria is met. He feels that if the Act limited waiver to
situations where there was no fault, and recovery would be ``contrary
to the purpose of the Act,'' then this restrictive interpretation
presented by the majority would possibly have merit. But, since the Act
also allows for waiver when recovery would be ``against equity or good
conscience,'' it should also be granted to the estate in situations
where it would have been granted while the individual was alive. He
sees the proposed regulation as being at odds with the statute on this
point.
Proposed Section 255.16 states that where the amount of an
overpayment is less than $500 it may not be waived. The majority
compares this proposal to the rule contained in section 340.10(e)(2) of
the Board's regulations with respect to recovery of overpayments under
the Railroad Unemployment Insurance Act (RUIA). The Labor Member does
not see this as a valid comparison. He suggests that overpayments under
the RUIA often involve working individuals whose income from employment
is only temporarily halted, which is in direct contrast to the
situations at hand involving elderly or disabled individuals on fixed
incomes. Moreover, waiver requests for both RUIA and Railroad
Retirement Act overpayments usually include a request to reconsider the
amount of the overpayment. Small RUIA overpayments are usually less
complex, thus less costly to recompute, providing more of an incentive
to complete the recovery process. Conversely, Railroad Retirement Act
overpayments can involve various issues and complexities adding to the
cost of adjudication. He recommends as a more reasonable and fair
approach the allowance of a blanket relief from recovery in these small
overpayment situations. From a business standpoint, he believes that
the cost to the agency in trying to collect small overpayments will
outweigh the benefits. Furthermore, he argues that past experience has
shown that overpayments under $500 because of their complexities
routinely result from computational errors by the Board where the
beneficiary would have no knowledge than an incorrect payment was made.
As a government agency with a responsibility to pay benefits
accurately, we, not the beneficiary, should be held accountable when we
fail to do so.
The Labor Member also points out that, on the issue of
``fault,'' if an individual received an incorrect annuity rate for a
period of more than 5 months after the Board has received information
which should have caused it to reduce the benefits, it has been a long-
standing agency policy to consider the individual not at fault for any
payment after the fifth month. This is provided that the continued
issuance of the payments at the incorrect rate led the beneficiary to
believe in good faith the he or she was entitled to the amount
represented by the payment. The majority has refused to include such a
provision in this proposed rule. Rather, it believes that the fault
determination should be decided on a case-by-case basis. The Labor
Member, on the other hand, believes that given the advanced technology
available to the Board, the five-month rule should be incorporated into
the proposed rule and, in fact, be reduced even further. He notes that
the Social Security Administration has a provision similar to the one
that he favors.
The Labor Member also takes exception to the majority's
decision not to include a provision which would allow blanket relief
from overpayment recovery clearly resulting from the fault of the
agency, contending that the Board must accept full responsibility for
its own errors.
In conclusion, he finds the proposed rule to be
insensitive in tone and content and completely slanted against the
overpaid individual. He notes that the Social Security Administration
takes a far more sensible approach to handling overpayments than is
presented in the proposal. He is of the opinion that his colleagues
view the Board more as a collection agency than one whose primary
mission is the payment of benefits,and would like to see as much
attention paid to preventing overpayments as there is to collecting
them.
The agency has determined that this is not a significant regulatory
action for purposes of Executive Order 12866; therefore, no regulatory
impact analysis is required. There are no information collections
associated with this rule.
List of Subjects in 20 CFR Part 255
Railroad employees, Railroad retirement.
1. For the reasons set out in the preamble, part 255 of title 20,
chapter II of the Code of Federal Regulations is proposed to be revised
to read as follows:
[[Page 67110]]
PART 255--RECOVERY OF OVERPAYMENTS
Sec.
255.1 Introduction.
255.2 Overpayments.
255.3 When overpayments are to be recovered.
255.4 Persons from whom overpayments may be recovered.
255.5 Recovery by cash payment.
255.6 Recovery by setoff.
255.7 Recovery by deduction in computation of death benefit.
255.8 Recovery by adjustment in connection with subsequent
payments.
255.9 Individual enrolled under supplementary medical insurance
plan.
255.10 Waiver of recovery.
255.11 Fault.
255.12 When recovery is contrary to the purpose of the Railroad
Retirement Act.
255.13 When recovery is against equity or good conscience.
255.14 Waiver not available when recovery can be made from accrual
of social security benefits.
255.15 Waiver not available to an estate.
255.16 Waiver not available for small overpayments.
255.17 Administrative relief from recovery.
255.18 Recovery of overpayments from a representative payee.
255.19 Compromise of overpayments.
255.20 Suspension or termination of the collection of overpayments.
Authority: 45 U.S.C. 231f(b)(5), 231i.
Sec. 255.1 Introduction.
Section 10 of the Railroad Retirement Act provides for the recovery
of an overpayment of benefits to an individual. This part explains when
an overpayment must be recovered, from whom an overpayment may be
recovered, and when recovery of the overpayment may be waived for
administrative relief from recovery granted, and circumstances under
which the overpayment may be compromised, or circumstances under which
recovery of the overpayment may be suspended or terminated.
Sec. 255.2 Overpayments.
An overpayment, within the meaning of this part, is made in any
case in which an individual receives a payment under the Railroad
Retirement Act, all or part of which payment he or she is not entitled
to receive.
Sec. 255.3 When overpayments are to be recovered.
Overpayments shall be recovered in all cases except those in which
recovery is waived under Sec. 255.10 or administrative relief from
recovery is granted under Sec. 255.17, or where the overpayment is
compromised or recovery is terminated or suspended under Secs. 255.19
or 255.20.
Sec. 255.4 Persons from whom overpayments may be recovered.
(a) Overpaid individual. The Board may recover an overpayment from
the individual to whom the overpayment has been made by any method
permitted by this part, or by the Federal Claims Collection Standards
(4 CFR Chapter 2) (Example 1). If the overpaid individual dies before
recovery is completed, then recovery may be effected by recovery from
the estate or the heirs of such individual.
(b) Other than overpaid individual. The Board may recover an
overpayment from a person other than the overpaid individual if such
person is receiving benefits under a statute administered by the Board
based upon the same record of compensation as the overpaid individual.
In such a case, the Board will ordinarily recover the overpayment by
setoff against such benefits as are provided for in Sec. 255.6 (Example
2). However, the Board may ask for a cash refund of the overpayment.
(c) Individual not in the same household. Recovery under paragraph
(b) of this section may be made from an individual who was not living
in the same household, as defined in part 216 of this chapter, as the
overpaid individual at the time of the overpayment, if the individual
from whom recovery is to be made either was aware that benefits were
paid incorrectly or benefited from the overpayment. (Example 3).
(d) Examples. This section may be illustrated by the following
examples:
Example (1). An employee receiving a disability annuity returns
to work without notifying the Board. The Board discovers that the
employee is working and determines that the employee has recovered
from his disability and has been overpaid. The Board requests that
the employee repay the overpayment by cash refund either in one lump
sum or in installment payments. If the employee refuses, the Board
may refer the debt to a collection agency or the Department of
Justice for civil suit or may collect the debt in any other manner
permitted by law.
Example (2). The employee in Example 1 agrees to refund the
overpayment by cash installment payments. However, the employee dies
before repaying the total amount of the overpayment. At his death
the employee's widow, who was living with the employee at the time
the overpayment was incurred, becomes entitled to a widow's annuity.
The Board may recover the remainder of the overpayment from any
benefits due the widow.
Example (3). C, a child of a deceased employee by his first
marriage, is receiving a disability annuity on the employee's record
of compensation. W, the employee's second wife, is receiving a
widow's annuity on the employee's record of compensation. C lives
with his mother, the employee's first wife. C marries without
notifying the Board. Marriage terminates a child's annuity. W is not
aware of C's marriage. Upon discovery of C's marriage, the Board
demands that C refund the overpaid annuities; C refuses. Even though
W is receiving an annuity based upon the same record of compensation
as that of C, the Board will not recover the overpayment from W
because she is not in the same household as C, was not aware of the
incorrect benefits paid, and did not benefit from them.
Sec. 255.5 Recovery by cash payment.
The Board shall have the right to require that an overpayment to an
individual be immediately and fully repaid in cash by that individual.
However, if the Board determines that the individual is financially
unable to pay the amount of the indebtedness in a lump sum, payment may
be accepted in regular installments in accordance with the Federal
Claims Collection Standards, found in 4 CFR chapter 2. These standards
provide that whenever possible installment payments should be
sufficient in amounts and frequency to liquidate the debt in not more
than 3 years.
Sec. 255.6 Recovery by setoff.
An overpayment may be recovered by setoff from any subsequent
payment determined to be payable under any statute administered by the
Board to the individual who received the overpayment. An overpayment
may be recovered from someone other than the overpaid individual by
setoff from a subsequent payment determined to be payable to that other
individual on the basis of the same record of compensation as that of
the overpaid individual.
Sec. 255.7 Recovery by deduction in computation of death benefit.
In computing the residual lump sum provided for in part 234,
subpart D, of this chapter, the Board shall include in the benefits to
be deducted from the applicable percentages of the aggregate
compensation provided for in that part all overpayments, whether waived
under Sec. 255.10 or otherwise not recovered, that were paid to the
employee or to his or her spouse or to his or her survivors with
respect to the employee's employment.
Sec. 255.8 Recovery by adjustment in connection with subsequent
payments.
Recovery of an overpayment may be made by permanently reducing the
amount of any annuity payable to the individual or individuals from
whom recovery is sought. This method of recovery is called an actuarial
adjustment of the annuity. The Board cannot require any individual to
take an
[[Page 67111]]
actuarial adjustment in order to recover an overpayment not is an
actuarial adjustment available as a matter of right. An actuarial
adjustment does not become effective until the overpaid individual
negotiates the first annuity check which reflects the annuity rate
after actuarial adjustment
Example. An annuitant agrees to recovery of a $5,000 overpayment
by actuarial adjustment. However, the annuitant dies before
negotiating the first annuity check reflecting the actuarially-
reduced rate. The $5,000 is not considered recovered. If the
annuitant had negotiated the check before he died, the $5000 would
be considered fully recovered.
Sec. 255.9 Individual enrolled under supplementary medical insurance
plan.
Where recovery of the overpayment is by setoff as provided for in
Sec. 255.6, and where recovery of the overpayment by such means will be
accomplished within a period of 5 months, and the individual from whom
recovery is sought is an enrollee under part B of title XVIII of the
Social Security Act (Supplementary Medical Insurance Benefits for the
Aged and Disabled), an amount of such individual's monthly benefit
which is equal to his or her obligation for supplementary medical
insurance premiums will be applied toward payment of such premiums, and
the balance of the monthly benefit will be applied toward recovery of
the overpayment.
Sec. 255.10 Waiver of recovery.
There shall be no recovery from any person in any case where more
than the correct amount of annuities or other benefits has been paid to
an individual or where payment has been made to an individual not
entitled thereto if in the judgment of the Board:
(a) The overpaid individual is without fault; and
(b) Recovery would be contrary to the purpose of the Railroad
Retirement Act or would be against equity or good conscience.
Sec. 255.11 Fault.
(a) Before recovery of an overpayment may be waived, it must be
determined that the overpaid individual was without fault in causing
the overpayment. If recovery is sought from other than the overpaid
individual but the overpaid individual was not without fault, then
waiver is not available. However, see Sec. 255.17 for provisions as to
when administrative relief from recovery may be granted in such
circumstances.
(b) Fault means a defect of judgment or conduct arising from
inattention or bad faith. Judgment or conduct is defective when it
deviates from a standard of reasonable care taken to comply with the
entitlement provisions of this chapter. Conduct includes both action
and inaction. Unlike fraud, fault does not require a deliberate intent
to deceive.
(c) Whether an individual is at fault in causing an overpayment
generally depends on all circumstances surrounding the overpayment.
Among the factors the Board will consider are: the ability of the
overpaid individual to understand the reporting requirements of the
Railroad Retirement Act or to realize that he or she is being overpaid
(e.g., age, education, comprehension, physical and mental condition);
the particular cause of non-entitlement to benefits; and the number of
instances in which the individual may have made erroneous statements.
(d)(1) Circumstances in which the Board will find an individual at
fault include but are not limited to:
(i) Failure to furnish to the Railroad Retirement Board information
which the individual knew or should have known to be material;
(ii) An incorrect statement made by the Individual which he or she
knew or should have known was incorrect (including furnishing an
opinion or conclusion when asked for facts); and
(iii) Failure to return a payment which the individual knew or
should have known was incorrect.
(2) Where any of the circumstances listed in paragraph (d)(1) of
this section are found to have occurred, the individual shall be
presumed to be not without fault. This presumption may be rebutted, but
the burden of presenting evidence to rebut the presumption is on the
individual.
(3) For purposes of paragraph (d)(1)(i) of this section, furnishing
information to the Social Security Administration or any other agency
shall not be considered to constitute furnishing information to the
Railroad Retirement Board.
(4) For purposes of this section, an error on the part of the
agency shall not extinguish fault on the part of the individual.
(e) Circumstances in which the Board will find an individual not at
fault include but are not limited to:
(1) the overpayment is the result of Board error of which the
overpaid individual was not aware and could not reasonably have been
expected to be aware (Example 1).
(2) The overpayment is the result of an adjustment tot the overpaid
individual's annuity because of entitlement of another individual to an
annuity on the same record of compensation as that of the overpaid
individual (Example 2).
(f) The application of this section may be illustrated by the
following examples:
Example (1). The Board makes a mathematical error in the
computation of an employee's annuity, thus giving the employee a
higher rate than he or she is entitled to but which is sufficiently
close to the estimated rate given the employee at the time he or she
applied for the annuity that the employee believed, in good faith,
that the amount was correct. The employee is not at fault in causing
the overpayment in this case. The overpayment may be waived if the
requirements of Sec. 255.12 or Sec. 255.13 are met.
Example (2). The widow and four minor children of a railroad
employee are receiving benefits from the Board under the family
maximum. Another minor child not living in the same household as the
above individuals is also determined to be the child of the deceased
employee. The widow was not aware of the existence of this child. An
award of benefits to this child causes a reduction in benefits to
the other individuals under the family maximum benefit provision of
the Social Security Act. Because of normal administrative delay this
reduction does not take place for a period of 2 months after its
effective date. The widow and her children are without fault with
respect to this overpayment. The overpayment may be waived if the
requirements of Sec. 255.12 or Sec. 255.13 are met.
Sec. 255.12 When recovery is contrary to the purpose of the Railroad
Retirement Act.
(a) The purpose of the Railroad Retirement Act is to pay retirement
and survivor annuities and other benefits to eligible beneficiaries. It
is contrary to the purpose of the Act for an overpayment to be
recovered from income and resources which the individual requires to
meet ordinary and necessary living expenses. If either income or
resources, or a combination thereof, are sufficient to meet such
expenses, recovery of an overpayment is not contrary to the purpose of
the Act.
(b) For purposes of this section, income includes any funds which
may reasonably be considered available for the individual's use,
regardless of source. Income to the individual's spouse or dependents
is available to the individual if the spouse or dependent lived with
the individual at the time wavier is considered. Types of income
include but are not limited to:
(1) Government benefits, such as Black Lung, Social Security,
Workers' Compensation, and Unemployment Compensation benefits;
(2) Wages and self-employment income;
(3) Regular incoming payments, such as rent or pensions; and
(4) Investment income.
[[Page 67112]]
(c) For purposes of this section, resources may include:
(1) Liquid assets, such as cash on hand, the value of stocks,
bonds, savings accounts, mutual funds and the like;
(2) Non-liquid assets at their fair market value; and
(3) Accumulated, unpaid Federal benefits; and
(d) For purposes of paragraphs (c) (1) and (2) of this section,
assets disposed of on and after the date of notification of the
overpayment, other than cash expended to meet ordinary and necessary
living expenses, shall be included.
(e) Whether an individual has sufficient income and resources to
meet ordinary and necessary living expenses depends not only on the
amount of his or her income and resources, but also on whether the
expenses are ordinary and necessary. While the level of expenses which
is ordinary and necessary may vary among individuals, it must be held
at a level reasonable for an individual who is living on a fixed
income. The Board will consider the discretionary nature of an expense
in determining whether it is reasonable. Ordinary and necessary living
expenses include:
(1) Fixed living expenses such as food and clothing, rent, mortgage
payments, utilities, maintenance, insurance (e.g., life, accident, and
health insurance), taxes, installment payments, etc.;
(2) Medical, hospital, and other similar expenses;
(3) Expenses for the support of others for whom the individual is
legally responsible; and
(4) Miscellaneous expenses (e.g., newspapers, haircuts).
(f) Where recovery of the full amount of an overpayment would be
made from income and resources required to meet ordinary and necessary
living expenses, but recovery of a lesser amount would leave income or
resources sufficient to meet such expenses, recovery of the lesser
amount is not contrary to the purpose of the Act.
(g) This section may be illustrated by the following examples:
Example (1). A remarried widow, W, is overpaid $6000 due to
receipt of benefits on the wage records of both her late husbands.
It has been determined that she is without fault. Her financial
disclosure statement reveals monthly income greater than monthly
expenses, and asset of $12,000, $10,000 of which is in cash. She
claims to be saving these funds for future medical expenses, because
she has a progressive disease. It is not contrary to the purposes of
the Act to recover the overpayment. The desire, on the part of the
beneficiary, to retain her assets to satisfy some potential future
obligation, does not change the determination.
Example (2). A disability annuitant, D, is overpaid $33,000
because of simultaneous entitlement to workers' compensation
payments. He is determined to be without fault. He claims he has
assumed financial responsibility for his adult child and her
children. A claimed expense for which the annuitant has no legal
obligation to pay does not make recovery contrary to the purposes of
the Act.
Sec. 255.13 When recovery is against equity or good conscience.
(a) Recovery is considered to be against equity or good conscience
if a person, in reliance on payments made to him or her or on notice
that payment would be made, relinquished a significant and valuable
right (Example 1) or changed his or her position to his or her
substantial detriment (Example 2).
(b) An individual's ability to repay an overpayment is not material
to a finding that recovery would be against equity or good conscience
but is relevant with respect to the credibility of a claim of
detrimental reliance under paragraph (a) of this section.
(c) This section may be illustrated by the following examples:
Example (1). After being informed by the Board that he had been
credited with sufficient years of railroad service to retire at age
60, and employee quit his railroad job and applied for benefits
under the Railroad Retirement Act. He receives benefits for six
months when it is discovered that he had insufficient railroad
service to retire at age 60 and was not entitled to the benefits he
received. His annuity was terminated. Because the employee gave up
his seniority rights when he quit his railroad job, he cannot get
his job back. It is determined that the employee was not at fault in
causing the overpayments. In this situation recovery of the
overpayments would be against equity or good conscience because the
overpaid individual gave up a valuable right.
Example (2). A widow, having been awarded annuities for herself
and her daughter, entered her daughter in a private school. The
widow did not have substantial assets and her income, apart from the
annuities she received in the amounts payable, would not have been
sufficient for her to have undertaken the obligation to send her
daughter to private school. In order to pay for the schooling she
took out a loan and used the monthly annuities to pay interest and
principal on the loan. After the widow and her daughter had received
payments for almost a year, the deceased employee was found not to
have been insured under the Railroad Retirement Act. Therefore, all
payments to the widow and child were erroneous and the annuities
were terminated. It is determined that the widow was not at fault in
causing the overpayment. Having incurred a financial obligation (the
school loan) toward which the benefits had been applied, the widow
was in a worse position financially than if she and her daughter had
never been entitled to benefits. In this situation, the recovery of
the overpayment would be against equity or good conscience.
Sec. 255.14 Waiver not available when recovery can be made from
accrual of social security benefits.
Where the overpayment is the result of a reduction of benefits
payable under the Railroad Retirement Act due to the overpaid
individual's entitlement to social security benefits and recovery of
such overpayment may be made by offset against an accrual of social
security benefits, it shall not be considered to be against equity or
good conscience or contrary to the purpose of the Railroad Retirement
Act to recover the overpayment by offset against the accrual.
Consequently, in such a case recovery of an overpayment is not subject
to waiver consideration.
Sec. 255.15 Waiver not available to an estate.
There shall be no waiver when recovery is sought from the estate of
an overpaid individual.
Sec. 255.16 Waiver not available for small overpayments.
Where the amount of the overpayment is less than $500, it shall not
be considered contrary to the purpose of the Railroad Retirement Act or
against equity or good conscience to recover the overpayment.
Consequently, recovery may not be waived.
Sec. 255.17 Administrative relief from recovery.
(a) Where the Board seeks to recover an overpayment from someone
other than the overpaid individual, as provided for in Sec. 255.4 of
this part, and where waiver of recovery, as provided for in Sec. 255.10
of this part, is not available because the overpaid individual was at
fault as defined in Sec. 255.11, the Board may forego recovery of the
overpayment where the individual from whom recovery is sought was not
at fault in causing the overpayment and where recovery is contrary to
the purpose of the Railroad Retirement Act as defined in Sec. 255.12.
(b) Application of administrative relief from recovery with respect
to a given person from whom recovery may be made shall have no effect
on the authority of the Board to recover the overpayment from anyone
else from whom recovery may be sought.
(c) This section may be illustrated by the following examples:
Example (1): An employee, through his own fault, causes an
overpayment in his annuity. The employee dies before the overpayment
can be recovered from him and he leaves no estate. A widow's annuity
is payable on the employee's compensation record. The widow was not
at fault in
[[Page 67113]]
causing the overpayment. The Board may recover the remainder of the
overpayment by setoff against the widow's annuity. However, it may
forego recovery under this section if such recovery would be
contrary to the purpose of the Railroad Retirement Act as defined in
Sec. 255.12. Since this is not a waiver of the overpayment, the
Board is free to recover the overpayment from the widow at a later
date, for example, if an accrual of benefits should become payable,
or if it determines that such recovery would not be against the
purpose of the Railroad Retirement Act.
Example (2): A representative payee for a retarded child,
through her own fault, causes an overpayment in the child's annuity.
The overpaid amounts were used for the benefit of the child. The
representative payee dies before the overpayment can be recovered
from her and she leaves no estate. The Board may not waive the
remainder of the overpayment with respect to the child since for
purposes of waiver the representative payee is considered the
overpaid individual (see Sec. 255.18) and the overpaid individual
was at fault. However, if the child was not at fault in causing the
overpayment and recovery would be contrary to the purpose of the
Railroad Retirement Act as defined in Sec. 255.12, then the Board
may forego recovery of the overpayment from the child's annuity
under this section.
Sec. 255.18 Recovery of overpayments from a representative payee.
(a) Joint liability. In general, if an overpayment is made to an
individual receiving benefits as a representative payee (see part 266
of this chapter) the Board may recovery the overpayment from either the
representative payee or the beneficiary, or both. If the beneficiary is
currently receiving benefits, either in his or her own right or through
a representative payee, the Board will generally propose to recover the
overpayment by setoff against those benefits as provided for in
Sec. 255.6 of this part. If the beneficiary is not currently receiving
benefits but the representative payee is receiving benefits, then the
Board will generally propose to recover the overpayment by setoff
against those benefits.
(b) Waiver of overpayments. For purposes of Sec. 255.10 (Waiver of
recovery), if it is determined that the representative payee was at
fault in causing the overpayment there may be no waiver of the
overpayment either as to the representative payee or the beneficiary.
However, if the beneficiary was not at fault in causing the overpayment
he or she may be eligible for administrative relief from recovery under
Sec. 255.17.
(c) This section may be illustrated by the following examples:
Example (1). M is receiving a child's annuity as a
representative payee for her disabled son, S. With M's knowledge S
marries. Although both M and S know that marriage terminates the
child's annuity, neither of them informs the Board of this event.
Both M and S are liable for any overpayment caused. Wavier is not
available since M would be considered at fault in causing the
overpayment. Administrative relief from recovery is not available to
S since he would also be considered at fault.
Example (2). R is a representative payee for B, who resides in a
skilled-care facility. R is found to be at fault in causing an
overpayment of benefits to B. The Board may recover the overpayment
from either R or B. Waiver is not available because R was at fault
in causing the overpayment. However, if B was not at fault in
causing the overpayment he or she may be entitled to administrative
relief from recovery under Sec. 255.17.
Sec. 255.19 Compromise of overpayments.
(a) This section sets forth the principal standards which the Board
applies in exercising its authority under 31 U.S.C. 3711 to compromise
an overpayment. In addition, the Board may compromise an overpayment
under the Federal Claims Collection Standards set forth in 4 CFR part
103.
(b) An overpayment may be compromised only if it is in the best
interest of the agency. Circumstances and factors to be considered are:
(1) The overpayment cannot be collected because of the overpaid
individual's inability to pay the full amount of the overpayment within
a reasonable time;
(2) The overpaid individual refuses to pay the overpayment in full
and it appears that enforced collection procedures will take an
inordinate amount of time or that the cost of collecting does not
justify the enforced collection of the full amount; or
(3) There is doubt that the Board could prove its case in court for
the full amount claimed because of a bona fide dispute as to the facts
or because of the legal issues involved.
Sec. 255.20 Suspension or termination of the collection of
overpayments.
This section sets forth the principal standards which the Board
applies in approving the suspension or termination of the collection of
an overpayment. In addition the Board may suspend or terminate
collection under the Federal Claims Collection Standards set forth in 4
CFR part 104.
(a) Collection action on a Board claim may be suspended temporarily
when the debtor cannot be located and there is reason to believe future
collection action may be productive or collection may be effected by
offset in the near future.
(b) Collection action may be terminated when:
(1) The debtor is unable to make any substantial payment;
(2) The debtor cannot be located and offset is too remote to
justify retention of the claim;
(3) The cost of collection action will exceed the amount
recoverable; or
(4) The claim is legally without merit or cannot be substantiated
by the evidence.
Dated: December 20, 1995.
By Authority of the Board.
For the Board.
Beatrice Ezerski,
Secretary of the Board.
[FR Doc. 95-31311 Filed 12-27-95; 8:45 am]
BILLING CODE 7905-01-M
Complete official Federal Register PDF
FR Doc. 95-31196 Food Labeling; Statement of Identity, Nutrition Labeling and Ingredient Labeling of Dietary Supplements
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67194-67224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31196]
=======================================================================
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
21 CFR Part 101
[Docket No. 95N-0245]
RIN 0910-AA59
Food Labeling; Statement of Identity, Nutrition Labeling and
Ingredient Labeling of Dietary Supplements
AGENCY: Food and Drug Administration, HHS.
ACTION: Proposed rule.
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SUMMARY: The Food and Drug Administration (FDA) is proposing to amend
its food labeling regulations to require that dietary supplements be
identified with the statement of identity ``Dietary Supplement'' on the
principal display panel of the label and modify the nutrition labeling
and ingredient labeling requirements for these foods. FDA is proposing
these actions in response to the Dietary Supplement Health and
Education Act of 1994 (the DSHEA). FDA is also responding to a citizen
petition on type size requirements for these products.
DATES: Written comments by March 13, 1996; except that comments
regarding information collection should be submitted by January 29,
1996, but not later than February 26, 1996. The agency is proposing
that any final rule that may issue based upon this proposal become
effective January 1, 1997.
ADDRESSES: Submit written comments to the Dockets Management Branch
(HFA-305), Food and Drug Administration, rm. 1-23, 12420 Parklawn Dr.,
Rockville, MD 20857. Written comments regarding paperwork burden
estimates should be sent to the Office of Information and Regulatory
Affairs, OMB, New Executive Office Building, rm. 10235, Washington, DC
20503, ATTN: Desk Officer for FDA.
FOR FURTHER INFORMATION CONTACT: Susan Thompson, Center for Food Safety
and Applied Nutrition (HFS-165), Food and Drug Administration, 200 C
St. SW., Washington, DC 20204, 202-205-5587.
SUPPLEMENTARY INFORMATION:
I. Background
On November 8, 1990, the President signed into law the Nutrition
Labeling and Education Act of 1990 (the 1990 amendments) (Pub. L. 101-
535). This new law amended the Federal Food, Drug, and Cosmetic Act
(the act) in a number of important ways. One of the notable aspects of
the 1990 amendments is that they added section 403(q) to the act (21
U.S.C. 343(q)). This section provided that most foods are misbranded
unless they bear nutrition labeling.
In particular, section 403(q)(5)(F) of the act (originally section
403(q)(5)(E)) provided that if a food to which section 411 of the act
(21 U.S.C. 350) applies (i.e., a dietary supplement of vitamins or
minerals) contained any of the nutrients required to be listed in
nutrition labeling, ``the label or labeling of such food shall comply
with requirements of subparagraphs (1) and (2) [of section 403(q) of
the act] in a manner which is appropriate for such food and which is
specified in regulations of the Secretary.''
In response to this provision of the 1990 amendments, FDA published
a proposal on nutrition labeling in the Federal Register of November
27, 1991 (56 FR 60366 at 60393). The document proposed, among other
things, specific nutrition labeling requirements for dietary
supplements of vitamins or minerals (proposed Sec. 101.36) and to
require that dietary supplements of herbs or other similar nutritional
substances comply with the general regulation on nutrition labeling
(Sec. 101.9) (21 CFR 101.9).
On October 6, 1992, the President signed into law the Dietary
Supplement Act of 1992 (the DS act) (Pub. L. 102-571). In section
202(a)(1) (21 U.S.C. 343 note), the DS act established a moratorium
until December 15, 1993, on the implementation of the 1990 amendments
with respect to dietary supplements not in the form of conventional
food. Section 202(a)(2) of the DS act required that the Secretary of
Health and Human Services (the Secretary), and by delegation FDA, issue
new proposed regulations applicable to dietary supplements no later
than June 15, 1993, and final regulations by December 31, 1993.
In the Federal Register of January 6, 1993 (58 FR 2079), FDA
published a final rule on the nutrition labeling of food in
conventional food form (Sec. 101.9). Because of the DS act, however,
this final rule did not cover the nutrition labeling of dietary
supplements.
In the Federal Register of June 18, 1993 (58 FR 33715), FDA
published a new proposed rule on the nutrition labeling of dietary
supplements, as required by the DS act. FDA received over 400 responses
to that proposed rule. In the Federal Register of January 4, 1994 (59
FR 354), FDA published a final rule (hereinafter referred to as ``the
1994 dietary supplement final rule'') based on the June 1993 proposed
rule. Consistent with section 403(q)(5)(F) of the act, the 1994 dietary
supplement final rule included separate nutrition labeling requirements
for dietary supplements of vitamins or minerals, which are set out in
Sec. 101.36, and for dietary supplements of herbs and other nutritional
substances, which the agency said were subject to Sec. 101.9.
In the Federal Register of January 4, 1994 (59 FR 427), the agency
proposed to expand the list of nutrients for which there are Reference
Daily Intake (RDI) values in Sec. 101.9(c)(8)(iv) to include vitamin K,
selenium, chloride, manganese, fluoride, chromium, and molybdenum. The
final rule based on that proposed rule is published elsewhere in this
issue of the Federal Register.
On October 25, 1994, the DSHEA (Pub. L. 103-417) was signed into
law. The DSHEA, among other things, amended the act by adding section
201(ff) (21 U.S.C. 321(ff)), which defines a ``dietary supplement,'' in
part, as a product, other than tobacco, intended to supplement the diet
that contains at least one or more of the following ingredients: A
vitamin; a mineral; an herb or other botanical; an amino acid; a
dietary substance for use to supplement the diet by increasing the
total dietary intake; or a concentrate, metabolite, constituent,
extract, or
[[Page 67195]]
combination of any of the previously mentioned ingredients (section
201(ff)(1) of the act). These ingredients are referred to in the
provisions added to the act by the DSHEA, and in this document, as
``dietary ingredients.''
Additionally, the DSHEA amended section 403(q)(5)(F) of the act.
While this section continues to provide that dietary supplement
products shall comply with section 403 (q)(1) and (q)(2) of the act and
provide nutrition labeling, it has been changed in a number of
significant ways. First, it no longer distinguishes between supplements
of vitamins and minerals and other dietary supplements. Second, it now
contains specific provisions on: (1) The order in which dietary
ingredients are to be listed in the nutrition information, (2) the
listing of the quantity of each dietary ingredient, (3) the optional
listing of the source of a dietary ingredient within the nutrition
label, and (4) the listing of the other ingredients of the dietary
supplement.
Given these changes in the law that requires that dietary
supplements be nutrition labeled, changes in the regulations that FDA
adopted to implement the 1990 amendments for dietary supplements are
also necessary. In this document, the agency is proposing changes in
its regulations that are necessary to reflect the changes that were
enacted as part of the DSHEA. FDA's regulations were scheduled to go
into effect on July 1, 1995. Given the need for these revisions,
however, the agency has published notice of its intention not to
enforce the regulations until after it has conformed its labeling
regulations to the DSHEA, and industry has had an opportunity to
relabel their products; that is, until after December 31, 1996 (60 FR
7711, February 9, 1995).
In this preamble, the agency will explain the proposed revisions to
Sec. 101.36 (21 CFR 101.36) and state which provisions of that
regulation it is not proposing to change. The latter provisions will be
discussed only to the extent necessary to understand how the revised
provisions fit in the overall scheme on the nutrition labeling of
dietary supplements. The agency seeks comments on the proposed changes
to implement the DSHEA with respect to nutrition labeling. Although the
codified section will be reproduced in its entirety, the agency urges
those who comment to focus on the provisions in which changes are being
proposed. Cooperation in this respect will hasten the publication of
the final rule and thus maximize the time that industry will have to
plan changes in its labeling.
II. The Term ``Dietary Supplement'' in the Statement of Identity
The DSHEA definition of ``dietary supplement'' provides, in part
(section 201(ff)(2)(C) of the act), that such a product must be labeled
as a dietary supplement. In addition, the DSHEA amended section 403 of
the act by adding a new paragraph (s)(2)(B), which states that a food
shall be deemed to be misbranded if it is a dietary supplement, and the
label or labeling of the dietary supplement fails to identify the
product by using the term ``dietary supplement,'' which term may be
modified with the name of such an ingredient.
Thus, the label of a dietary supplement clearly must bear the term
``dietary supplement.'' However, no provision of the DSHEA explicitly
addresses where on the food label identification with this term must
appear. The Statement of Agreement on the bill that ultimately became
the DSHEA states clearly that there is no legislative history for the
DSHEA other than that agreement, and the agreement is silent with
respect to where this term must appear (140 Congressional Record S14801
(October 7, 1994)).
It is a general rule of statutory construction that the act must be
read as a whole. Thus, section 403(s)(2)(B) of the act, which states
that the term must ``identify the product,'' must be read in
conjunction with the other provisions of the act that address how food
products are to be identified. These provisions, which have been in
effect for many years, are section 403 (g)(2) and (i)(1) of the act.
Section 403(g)(2) of the act, which pertains to a food for which a
definition and standard of identity have been prescribed by regulation,
provides that the food label must bear the name of the food specified
in the definition and standard. Section 403(i)(1) of the act, which
pertains to all other foods, provides that the food label must bear the
common or usual name of the food, if any exists. Dietary supplements
are labeled subject to the provisions of section 403(i)(1) of the act.
FDA has implemented section 403(g)(2) and (i)(1) of the act by
adopting Sec. 101.3 (21 CFR 101.3) on the identity of food in packaged
form. This regulation states that the principal display panel of a food
shall bear as one of its principal features a statement of the identity
of the commodity (Sec. 101.3(a)). The regulation goes on in
Sec. 101.3(b) to state that the statement of identity shall be in terms
of: (1) The name specified in or required by any applicable Federal law
or regulation; or, in the absence thereof, (2) the common or usual name
of the food; or, in the absence thereof, (3) an appropriately
descriptive term, or when the nature of the food is obvious, a fanciful
name commonly used by the public for such food.
When the requirement of section 403(s)(2)(B) of the act that the
food be identified as a ``dietary supplement'' is read in conjunction
with section 403(i)(1), which requires that the label of the food bear
its common or usual name, that is, a statement that identifies the food
(see Sec. 102.5(a) (21 CFR 102.5(a))), it is clear that the term
``dietary supplement'' needs to appear as part of the common or usual
name of any food that is to be marketed subject to the definition in
section 201(ff) of the act. While under section 403(s)(2)(B) of this
act this term may be modified with the name of a dietary ingredient,
FDA tentatively concludes that the term ``dietary supplement'' must
appear in the statement of identity of such products. To reflect this
tentative conclusion, FDA is proposing to require in Sec. 101.3(g) that
when a food is marketed as a dietary supplement, its label shall bear
the term ``dietary supplement'' as part of its statement of identity.
This proposed requirement is further supported by Sec. 102.5 of
FDA's regulations. This regulation sets out general principles for
arriving at the common or usual name of a nonstandardized product, that
is, a product that is not subject to a definition adopted under section
401 of the act (21 U.S.C. 341). Section 102.5(a) states in part:
The common or usual name of a food, which may be a coined term,
shall accurately identify or describe, in as simple and direct terms
as possible, the basic nature of the food or its characterizing
properties or ingredients. The name shall be uniform among all
identical or similar products and may not be confusingly similar to
the name of any other food that is not reasonably encompassed within
the same name. Each class or subclass of food shall be given its own
common or usual name that states, in clear terms, what it is in a
way that distinguishes it from different foods.
Requiring that ``dietary supplement'' be included as part of the
statement of identity of such foods is consistent with Sec. 102.5 in
several important respects. First, it will ensure that a term that
accurately describes the basic nature of the food will appear
prominently on the label of each dietary supplement. Second, it will
ensure that there is consistency in the labeling of dietary supplements
by requiring that they bear a consistent term. The agency stresses that
the provisions of Sec. 102.5 pertaining to uniformity of common or
usual
[[Page 67196]]
names among all identical or similar products could be seriously
compromised unless the term ``dietary supplement'' is included in the
common or usual name of such a supplement. As explained below, the
potential for compromising this requirement would be particularly great
where dietary supplements are in other than tablet, capsule, powder,
softgel, gelcap, or liquid form. Finally, use of this term as part of
the statement of identity of dietary supplements will distinguish this
potentially broad class of products from other types of food.
New section 201(ff)(2) of the act provides that a ``dietary
supplement'' is a product that is not represented for use as a
conventional food. At the same time, the DSHEA struck the provision
that excluded products that simulate conventional foods from the
coverage of section 411 of the act. (See section 3(c)(2) of the DSHEA.)
As a result of the latter change, however, there may now be dietary
supplements for which the presence of the term ``dietary supplement''
constitutes the primary, if not the only, means by which consumers will
be able to determine that the food is a dietary supplement. Under such
circumstances, it seems imperative that the term ``dietary supplement''
appear in the statement of identity.
For the foregoing reasons, FDA is proposing to add Sec. 101.3(g),
which states that products marketed as dietary supplements shall bear
the term ``dietary supplement'' as part of their statement of identity,
to its regulations.
III. Provisions of Proposed Sec. 101.36
A. Foods Covered by Sec. 101.36
The agency is proposing to revise Sec. 101.36(a) to state that the
label of a dietary supplement shall bear nutrition labeling in
accordance with Sec. 101.36, unless an exemption is provided for the
product in Sec. 101.36(h). Previously, only dietary supplements of
vitamins and minerals were subject to the provisions of Sec. 101.36. As
stated above, dietary supplements of herbs and other similar
nutritional substances were to follow the general nutrition labeling
requirements in Sec. 101.9. This separation was in accordance with
section 403(q)(5)(F) of the act as passed in the 1990 amendments, which
instructed the Secretary to issue nutrition labeling regulations
appropriate for dietary supplements of vitamins and minerals.
However, the DSHEA revised 403(q)(5)(F) of the act to provide that
it covers all dietary supplements, that is, all products that meet the
definition in section 201(ff) of the act. Consequently, the agency is
proposing to amend Sec. 101.36(a) to reflect this change.
B. General Requirements
In Sec. 101.36(b), the agency is proposing to require that
nutrition information on dietary supplements include the information
specified in this section of the regulations, and that it be presented
in the format specified in proposed Sec. 101.36(e). These proposed
requirements reflect the requirements in section 403(q)(1) of the act
and in section 2(b)(1)(A) of the 1990 amendments, which states that the
information required under section 403(q) is to ``be conveyed to the
public in a manner which enables the public to readily observe and
comprehend such information and to understand its relative significance
in the context of the total daily diet.''
The agency notes that it has been asked whether current
Sec. 101.36(b) is to be interpreted as requiring nutrition labeling in
all dietary supplement labeling (i.e., printed material accompanying a
product) as well as on the label attached to a product. The agency
advises that it does not intend that nutrition labeling appear on all
labeling. It generally must appear on the label of dietary supplement
products, although there may be circumstances in which it appears in
labeling in lieu of the label. When nutrition labeling is presented,
however, it must conform to the requirements of Sec. 101.36.
C. Serving Size
Proposed Sec. 101.36 (b)(1)(i) and (b)(1)(ii) on serving size and
on servings per container, respectively, differ only slightly from
current Sec. 101.36 (b)(1) and (b)(2). In the first sentence of
proposed Sec. 101.36(b)(1)(i), the agency is stating that the
subheading ``Serving Size'' is to be placed under the heading of
``Supplement Facts.'' The agency is proposing to include the name of
the heading (i.e., ``Supplement Facts'') in Sec. 101.36(b)(1)(i) for
clarity.
On a related note, the agency points out that it is proposing to
change the language in Sec. 101.12(b), Table 2, to read ``Dietary
supplements'' instead of ``Dietary supplements not in conventional food
form'' in response to the DSHEA. The language in current Sec. 101.12(b)
reflected the DS act, which, in its legislative history, made clear
that the moratorium it effected applied only to dietary supplements of
vitamins, minerals, herbs, or other similar nutritional substances not
in the form of conventional food. (See 138 Congressional Record S17240
(Joint Statement Senators Kennedy and Hatch) (October 7, 1992).) The
DSHEA, however, evidences an intent, for labeling purposes, to treat
all dietary supplements in a similar manner. In particular, section 7
of the DSHEA addresses dietary supplement labeling and does not
distinguish between dietary supplements that are not in conventional
food form and those that are. Therefore, FDA is proposing to amend
Sec. 101.12(b), Table 2, to reflect this development.
D. Requirements for Dietary Ingredients Having Recommendations for
Daily Consumption
The DSHEA added four subclauses to section 403(q)(5)(F) of the act.
Subclause (i) states that the Secretary (and, by delegation, FDA) shall
provide by regulation that the nutrition information on dietary
supplements first list those dietary ingredients that are present in
the product in a significant amount and for which a recommendation for
daily consumption has been established by the Secretary, except that a
dietary ingredient shall not be required to be listed if it is not
present in a significant amount, and shall list any other dietary
ingredient present and identified as having no such recommendation. The
agency tentatively concludes that by a dietary ingredient ``for which a
recommendation for daily consumption has been established by the
Secretary,'' the DSHEA is referring to a nutrient having an RDI as
established in Sec. 101.9 (c)(7)(iii) and (c)(8)(iv) or a Daily
Reference Value (DRV) as established in Sec. 101.9 (c)(7)(iii) and
(c)(9).
The requirement in section 403(q)(5)(F)(i) of the act that the
dietary ingredients for which there are no RDI's or DRV's be listed in
the nutrition label following the listing of dietary ingredients for
which RDI's or DRV's have been established necessitates changes in the
organization of Sec. 101.36. The agency is therefore consolidating all
of the information required in the listing of dietary ingredients for
which RDI's or DRV's have been established under proposed
Sec. 101.36(b)(2) and the information required in the listing of other
dietary ingredients in proposed Sec. 101.36(b)(3). (See section III. E.
of this document.)
1. Listing of Dietary Ingredients for Which RDI's and DRV's Have Been
Established
With respect to the listing of dietary ingredients for which RDI's
and DRV's have been established, the agency tentatively concludes that
no major change in the 1994 dietary supplement final rule is needed as
a result of the DSHEA. The agency is proposing in Sec. 101.36(b)(2)(i)
that the 14 nutrients
[[Page 67197]]
that, under Sec. 101.9(c), must be listed in the nutrition labeling of
a conventional food, when they are present, shall be listed in the
nutrition label of a dietary supplement when they are present in the
supplement in amounts greater than that that can be declared as zero
under Sec. 101.9(c). For clarity, the agency is identifying these
nutrients by name in this proposed paragraph. This requirement is
consistent with current Sec. 101.36(b)(3), except that the current
provision calls for ``a listing of all nutrients required in
Sec. 101.9(c),'' rather than specifying the name of each nutrient.
However, current Sec. 101.36(b)(3) is silent on the subcomponents
(e.g., polyunsaturated fat, soluble fiber, sugar alcohols) specified in
Sec. 101.9(c) that provide additional information about some of the
nutrients required to be listed in the nutrition labeling of
conventional foods. The listing of most subcomponents is voluntary
under Sec. 101.9(c). Generally, it is required only when claims are
made. For example, the listing of soluble fiber is voluntary for
conventional foods, except when a nutrient content claim is made about
this nutrient. The agency did not require a listing of subcomponents in
the 1994 dietary supplement final rule because it concluded that such
labeling was not appropriate for such foods under section 403(q)(5)(F)
of the act because that section applied only to dietary supplements of
vitamins and minerals. Therefore, a fiber supplement, for example, did
not come under the scope of supplement labeling.
Now, however, all dietary supplements, including products such as
fiber supplements, are to be covered by the same nutrition labeling
regulation (i.e., Sec. 101.36). Therefore, the agency has tentatively
concluded that it is appropriate to provide for the listing of the
subcomponents specified in Sec. 101.9(c). Accordingly, the agency is
providing in proposed Sec. 101.36(b)(2)(i) that calories from saturated
fat and amounts of polyunsaturated fat, monounsaturated fat, soluble
fiber, insoluble fiber, sugar alcohol, and other carbohydrate may be
declared in the nutrition label of dietary supplements and is proposing
to require that they be declared when a claim is made about them.
There are other subcomponents of the nutrients that are required
under Sec. 101.9(c) to be listed in nutrition labeling that are not
mentioned in that regulation (e.g., amino acids (subcomponents of
protein), omega-3 fatty acids (subcomponents of fat)), and that may not
be included in the nutrition label on conventional foods (see
Sec. 101.9(c)). However, because these subcomponents may be classified
as dietary ingredients under section 201(ff)(1) of the act,
manufacturers of dietary supplements may list them in the nutrition
label under Sec. 101.36. The difference in treatment of these
subcomponents when they are present in dietary supplements as compared
to when they are present in conventional foods creates the possibility
of consumer confusion. To minimize this possibility, FDA is trying to
retain as much consistency as possible between the nutrition labeling
of conventional foods under Sec. 101.9 and dietary supplements under
Sec. 101.36 (section 2(b)(1)(A) of the 1990 amendments). Thus, the
agency is proposing that subcomponents that are not specified in
Sec. 101.9(c), e.g., individual amino acids, be listed under proposed
Sec. 101.36(b)(3) as dietary ingredients for which RDI's and DRV's have
not been established.1
\1\ To save space and to help the reader differentiate between
these two types of dietary ingredients, the agency will refer to the
dietary ingredients listed in proposed Sec. 101.36(b)(2) as
``(b)(2)-dietary ingredients'' and to all other dietary ingredients
as ``other dietary ingredients.''
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Among the 14 nutrients required to be listed in nutrition labeling
of conventional foods are sodium, vitamin A, vitamin C, calcium, and
iron. The other vitamins and minerals for which RDI's have been
established in Sec. 101.9(c)(8)(iv) are not required to be listed in
the nutrition label of conventional foods except when they are added
for the purpose of supplementation, or when a claim is made about them.
(See Sec. 101.9(c)(8)(ii).) The agency did not include this distinction
among vitamins and minerals in the 1994 dietary supplement final rule
because that rule pertained exclusively to supplements of vitamins and
minerals. Because dietary supplements of vitamins and minerals are
usually fabricated and, with few exceptions, contain only vitamins and
minerals that are added for purposes of supplementation, the agency
requires in current Sec. 101.36(b)(3) that vitamins and minerals be
listed whenever they are present in significant amounts.
Although the act, as amended by the DSHEA, requires that all
dietary ingredients and their amounts be listed, the agency tentatively
finds that requiring the listing of all vitamins and minerals with
RDI's or DRV's that are present in herbal products, for example, would
be unduly burdensome and in conflict with section 403(q)(1)(E) of the
act, which requires the listing of vitamins and minerals only if the
Secretary (and, by delegation, FDA) determines that such information
will assist consumers in maintaining healthy dietary practices. In
implementing the 1990 amendments, the agency made such a finding only
for sodium, vitamin A, vitamin C, calcium, and iron (58 FR 2079 at
2106). Requiring all dietary ingredients in herbal products to be
listed would necessitate extensive nutritional analyses of the vitamin
and mineral content of all such products. While manufacturers are free
to do so, FDA tentatively finds that it is unnecessary and
inappropriate to require that such analyses be done. Thus, FDA
tentatively concludes that, because the act must be read as a whole,
and because section 403(q)(5)(F)(i) of the act must be read in
conjunction with section 403(q)(1)(E) (in fact, it explicitly
references that section), it is appropriate for the agency to follow
the approach that it used in Sec. 101.9 for conventional foods and to
require the listings of vitamins and minerals (including potassium)
other than sodium, vitamin A, vitamin C, calcium, and iron in the
nutrition label of dietary supplements only when such other vitamins
and minerals are added to the product for purposes of supplementation,
or when a claim is made about them. Comments are requested on this
tentative conclusion.
The agency observes that it did not clearly express in the 1994
dietary supplement final rule the amounts of vitamins and minerals that
are not to be declared on the labels of dietary supplements because
they are so small. Current Sec. 101.36(b)(3) requires a listing of
``nutrients required in Sec. 101.9(c) that are present in the dietary
supplement in quantitative amounts by weight that exceed the amount
that can be declared as zero in Sec. 101.9(c),'' while
Sec. 101.9(c)(8)(iii) states that amounts of vitamins and minerals
present at less than 2 percent of the RDI are not required to be
declared in nutrition labeling but may be declared by a zero. For
clarity on what amounts do not have to be declared, the agency is
proposing to include a statement in Sec. 101.36(b)(2)(i) that amounts
of vitamins and minerals corresponding to less than 2 percent of the
RDI shall not be declared. The agency points out that this statement
does not represent a change from the 1994 dietary supplement final rule
but is merely a clarification of its provisions.
The agency notes that current Sec. 101.36(b)(3) specifies that
vitamin K, chloride, chromium, fluoride, manganese, molybdenum, and
selenium shall be listed, when present. Because the agency has
established RDI's for these nutrients (except for fluoride) (see the
final rule on RDI's published
[[Page 67198]]
elsewhere in this issue of the Federal Register), their listing is
covered by the reference to all other vitamins or minerals listed in
Sec. 101.9(c)(8)(iv) in proposed Sec. 101.36(b)(2). Accordingly,
special mention of vitamin K, chloride, chromium, manganese,
molybdenum, and selenium is no longer needed. Because FDA has not
established an RDI for fluoride, if it is declared in nutrition
labeling, under the proposed rule, it will have to be listed with the
other dietary ingredients, as provided for in proposed
Sec. 101.36(b)(3).
FDA is also providing in proposed Sec. 101.36(b)(2)(i) that protein
not be declared in the nutrition label of dietary supplements that,
other than ingredients added solely for technological reasons, contain
only individual amino acids. While Sec. 101.9(c)(7) allows protein
content to be calculated as 6.25 times the nitrogen content of the
food, the agency tentatively finds that it is misleading to declare the
protein content in the nutrition label of a dietary supplement that
contains free (individual) amino acids because protein, by definition,
is composed of chains of amino acids connected together by peptide
bonds. Such linkages are not found in products composed of free amino
acids (Ref. 1, pp. 57 and 58).
The agency is proposing to require in Sec. 101.36(b)(2)(i)(A) use
of the heading ``Amount Per Serving,'' except that the agency is
proposing to allow other appropriate headings when the serving size of
the product is one unit. This aspect of the proposal is unchanged from
what appeared in the 1994 dietary supplement final rule. The agency
tentatively concludes that the proposed requirement is consistent with
section 403(q)(1)(A) of the act, which provides that nutrition
information is to be expressed on a ``per serving'' basis.
The agency notes that because it is proposing that quantitative
amounts be presented in a separate column, rather than immediately
following the listing of names as provided in the 1994 dietary
supplement final rule, the agency is proposing that the heading may
appear over the column of amounts rather than the column of names. The
agency is proposing to provide flexibility in the placement of this
heading because space constraints may make placement over the column of
amounts impractical in some cases. Comments are requested on the
placement of this heading.
The agency points out that, under current Sec. 101.36(b)(3), the
heading ``Amount Per Serving'' must be separated from the other
information on the nutrition label by a bar above and beneath it. While
the agency is proposing to carry forward this requirement, it is doing
so in proposed Sec. 101.36(e) on format. FDA will discuss this proposed
requirement in more detail as part of its description of that
paragraph.
The agency is proposing in Sec. 101.36(b)(2)(i)(B) that (b)(2)-
dietary ingredients be listed in a column on the left side of the
nutrition label in the order and manner of indentation that is
specified in that paragraph. No change in the order from current
Sec. 101.36(b)(3)(ii) is required as a result of the DSHEA, and FDA is
not proposing to make any change.
The agency is addressing issues related to the column of names of
(b)(2)-dietary ingredients in three paragraphs under proposed
Sec. 101.36(b)(2)(i)(B). Proposed Sec. 101.36(b)(2)(i)(B)(1) specifies
how calorie information is to be presented. The agency is proposing
that, instead of listing calories above the column of names, they be
listed first in the column of names, under a bar that separates the
list from the heading ``Amount Per Serving.'' The agency tentatively
concludes that giving calories prominence over other nutrients is not
appropriate for supplements, which usually do not contain many
calories. In addition, this change will save space. Proposed
Sec. 101.36(b)(2)(i)(B)(1) also requires that when ``Calories from
fat'' or ``Calories from saturated fat'' are declared, they are to be
indented beneath ``Calories'' in a manner similar to the indentation
specified in Sec. 101.9(d)(5).
Proposed Sec. 101.36(b)(2)(i)(B)(2) specifies the synonyms that may
be added in parentheses following the names of the (b)(2)-dietary
ingredients. This paragraph is identical to the current regulation on
synonyms in dietary supplement labeling (current Sec. 101.36(b)(3)(v)),
except that the agency is proposing to permit the use of ``folic acid''
as a synonym for folate. FDA recognizes that current regulations for
nutrition labeling in Secs. 101.9 and 101.36 do not include the term
``folic acid'' as an allowable synonym for folate. This omission was an
oversight when FDA amended Sec. 101.9 (58 FR 2079 at 2178) and issued
Sec. 101.36 (59 FR 373). Before the agency took these actions,
Sec. 101.9 had listed ``folic acid'' as the preferred term, with
``folacin'' as an allowable parenthetical synonym. When amendments to
Sec. 101.9 were initially proposed (55 FR 29847, July 19, 1990), the
agency explained why the term ``folate'' was preferred to ``folacin.''
However, an explanation for the transition from ``folic acid'' to
``folate'' was inadvertently omitted, as was inclusion of the term
``folic acid'' as a synonym.
In light of common usage and FDA policy, and for consistency among
the nutrition labeling and health claim regulations, the agency is
proposing to correct Sec. 101.36(b)(3)(v) to include ``folic acid'' as
an allowable synonym for folate. The agency advises that it intends to
revise Sec. 101.9(c)(8)(v) to allow the listing of folic acid as a
synonym for folate on conventional foods as well.
In proposed Sec. 101.36(b)(2)(i)(B)(3), the agency provides that
the percent of vitamin A that is present as beta-carotene may be
declared immediately adjacent to or beneath the listing of vitamin A.
This proposed provision essentially carries forward current
Sec. 101.36(b)(3)(iv). The agency tentatively finds that no change is
needed in this provision as a result of the DSHEA, except that the
agency is deleting the amount of vitamin A from the example given in
this provision because, under this proposal, information on the
quantity of each dietary ingredient will no longer appear immediately
following the name but instead in a separate column.
2. Quantity of Each (b)(2)-Dietary Ingredient
The DSHEA added section 403(q)(5)(F)(ii) to the act. This section
states that the listing of dietary ingredients shall include the
quantity of each such ingredient (described in section
413(q)(5)(F)(i)), per serving, except that only the total quantity is
required for proprietary blends, as discussed elsewhere in this
preamble. Consistent with this section, the agency is proposing to
require in Sec. 101.36(b)(2)(ii) that the number of calories, if
declared, and the quantitative amounts by weight of the (b)(2)-dietary
ingredients be listed in a column to the right of the column of names.
As previously discussed, this proposal differs from the 1994 dietary
supplement final rule in that this information is to be listed in a
separate column instead of immediately following the name of any
dietary ingredient listed. The agency is proposing this change to allow
space for information on the source of the dietary ingredient to be
included immediately following the name, as discussed elsewhere in this
document. The agency considered continuing to have the weight of the
dietary ingredient placed immediately after the name of the dietary
ingredient or its source but tentatively concluded that the wide
variation in placement that could result when some dietary ingredients
are listed
[[Page 67199]]
by name only, while others include the source ingredient, would make it
difficult for some consumers to find the declaration of weight.
Comments on this tentative conclusion, and on its possible impact on
space requirements for the nutrition label, are requested.
The agency emphasizes that, consistent with the 1994 dietary
supplement final rule (59 FR 354 at 360) and the DSHEA, the
quantitative amount by weight declared for any dietary ingredient is to
be the weight of the dietary ingredient rather than the weight of the
source of the dietary ingredient.2 The agency points out that new
section 403(s)(2)(A) of the act states that a dietary supplement is
misbranded if its label or labeling fails to list, among other things,
the ``name of each ingredient of the supplement that is described in
section 201(ff)'' and the quantity of each such ingredient. The use of
the word ``ingredient'' in section 403(s)(2)(A) of the act, instead of
``dietary ingredient,'' creates some ambiguity. However, the agency
tentatively concludes that in this section the phrase ``that is
described in section 201(ff)'' modifies the word ``ingredient'' rather
than ``supplement.'' Thus, this provision is referring to a listing of
the names and amounts of dietary ingredients. Accordingly, using the
example of calcium carbonate, the weight of calcium would be declared,
rather than the weight of calcium carbonate, the source of the dietary
ingredient.
\2\ It is important to distinguish between the terms
``ingredient'' and ``dietary ingredient.'' The DSHEA uses the term
``dietary ingredient'' to refer to the primary substances to be
listed in nutrition labeling, as opposed to ``ingredients'' that are
the compounds used in the manufacture of the product. For instance,
when calcium carbonate is an ingredient used to provide calcium in
the manufacture of a dietary supplement, calcium is the ``dietary
ingredient,'' and calcium carbonate is the ``ingredient,'' or, as
specified in new section 403(q)(5)(F)(iii) of the act, the ``source
of'' the dietary ingredient. Similarly, omega-3 fatty acids are
``dietary ingredients,'' while their source, fish liver oil, is the
``ingredient.'' (See section III., G. of this document for a further
discussion.)
---------------------------------------------------------------------------
Section 403(s)(2)(A)(ii) of the act is also unclear on what basis
the quantitative information should be reported (e.g., per dosage
unit). The agency tentatively concludes that it is appropriate to
require that this quantitative information be provided on a ``per
serving'' basis because interpreting this provision in this way will
mean that there need only be one list of the quantitative amounts of
dietary ingredients in a supplement. Section 403(q)(5)(F) of the act
also requires a list of dietary ingredients, but it specifies that the
listing be on a ``per serving'' basis. If FDA were to interpret section
403(s)(2)(A)(ii) of the act differently, for example, to require
information on a per dosage unit basis, it would mean that for dietary
supplements whose serving size is two capsules, there would have to be
two lists of dietary ingredient amounts on the label, one per capsule,
the other per serving (two capsules). The agency tentatively concludes
that such an interpretation would result in overcrowded labels with
essentially redundant information. The agency recognizes, however, that
the interpretation that it is proposing renders section 403(s)(2)(A) of
the act somewhat redundant to section 403(q)(5)(F), and that the rules
of statutory construction generally do not favor such a reading.
Therefore, FDA specifically requests comments on the proposed
interpretation.
In proposed Sec. 101.36(b)(2)(ii)(A), the agency states that the
declaration of quantitative amounts by weight shall be expressed using
the increments specified in Sec. 101.9(c)(1) through (c)(7), which
includes increments for sodium and potassium. This proposed provision
is carried forward from current Sec. 101.36(b)(3)(i). As explained in
the proposal of June 18, 1993 (58 FR 33715 at 33719), the agency was
not aware of any reason for treating dietary supplements of vitamins
and minerals any differently in this regard than conventional food. The
agency is still unaware of any reason to modify this approach.
In proposed Sec. 101.36(b)(2)(ii)(B), the agency states that the
amounts of vitamins and minerals, excluding sodium and potassium, shall
be the actual amounts present, using the units of measurement given in
Sec. 101.9(c)(8)(iv). The agency points out that in a final rule
published elsewhere in this issue of the Federal Register entitled
``Food Labeling; Reference Daily Intakes,'' it is amending Sec. 101.9
to change the units for biotin and folate to micrograms (mcg) and for
calcium and phosphorus to milligrams (mg). The proposed specifications
pertaining to the manner in which quantitative amounts by weight are to
be declared simply carry forward those found in current
Sec. 101.36(b)(3)(i).
3. Declaration of Percent Daily Value for Each (b)(2)-Dietary
Ingredient
In proposed Sec. 101.36(b)(2)(iii), the agency is requiring that a
percent Daily Value, where appropriate, be listed for the dietary
ingredients declared under Sec. 101.36(b)(2)(i), except that: (1) The
percent for protein may be omitted as provided in Sec. 101.9(c)(7)
because the methods for analyzing protein are costly, and protein
deficiency is not a public health concern in the United States; (2) no
percent shall be given for the subcomponents for which DRV's have not
been established (e.g., sugars) because it is not possible to calculate
percent Daily Values when there are no DRV's; and (3) for the labels of
dietary supplements that are represented or purported to be for use by
infants, children less than 4 years of age, or pregnant or lactating
women, no percent shall be given for total fat, saturated fat,
cholesterol, total carbohydrate, dietary fiber, sodium, potassium,
vitamin K, chloride, chromium, manganese, molybdenum, or selenium
because RDI's or DRV's have not been established for these groups.
The agency points out that the exception for protein is carried
forward from current Sec. 101.36. The listing of no percent Daily Value
for subcomponents is new in this proposal, but it is consistent with
current Sec. 101.36(b)(4) which states that ``no percent shall be given
for sugars.'' As discussed previously, the agency did not address the
listing of other subcomponents specified in Sec. 101.9(c) because
Sec. 101.36 had applied only to dietary supplements of vitamins and
minerals. Thus, the exception for these subcomponents was not needed
because they were not declared.
The exception for total fat, saturated fat, cholesterol, total
carbohydrate, dietary fiber, sodium, and potassium on the labels of
dietary supplements for use by infants, children less than 4 years of
age, or pregnant or lactating women is new in this proposal and was
omitted inadvertently in current Sec. 101.36. Because DRV's are not
established for these groups, percents of Daily Values cannot be
calculated. Hence, the exception is needed.
Finally, the exception for vitamin K, chloride, chromium,
manganese, molybdenum, and selenium for the population subgroups
specified above is carried forward from current Sec. 101.36. The agency
points out that, in current Sec. 101.36(b)(4), this exception had
covered products intended for adults and children 4 or more years of
age. Because the agency is adopting RDI's for these nutrients for
adults and children 4 or more years of age in the final rule on RDI's
published elsewhere in this issue of the Federal Register, this
exception is no longer needed for products for that group.
The agency acknowledges that there are no RDI values codified for
infants, children less than 4 years of age, or pregnant or lactating
women for any of the vitamins and minerals. However, as explained in
the 1994 dietary
[[Page 67200]]
supplement final rule (58 FR 33721), FDA had intended to codify RDI
values for these groups but did not in accordance with section 203 of
the DS act, which provided that the agency could not adopt recommended
daily values different from the values set forth in the agency
regulation then in effect (Sec. 101.9(c)(7)(1992)) before November 8,
1993. To provide guidance to manufacturers in lieu of codifying values,
the agency published label reference values for these groups in the
preamble of the final rule on RDI's and DRV's on January 6, 1993 (58 FR
2206 at 2213). The agency encourages manufacturers to use these values
for the labels of products intended for use by these groups. FDA
intends to propose to codify RDI values for these groups in the near
future for both the nutrients listed on the bottom of page 2213 of the
final rule on RDI's and DRV's (58 FR 2206 at 2213) and the nutrients
for which FDA is establishing RDI's for adults and children 4 or more
years of age in the final rule published elsewhere in this issue of the
Federal Register.
In proposed Sec. 101.36(b)(2)(iii)(A), the agency is requiring
that, when information on the percent of Daily Values is listed, the
percentages be presented in a column on the right side of the nutrition
label under the heading ``% Daily Value.'' This requirement is not
different from what appears in current Sec. 101.36(b)(4), except that
the heading need not appear on a line lower than the heading ``Amount
Per Serving.'' Current Sec. 101.36(b)(4) provides for ``% Daily Value''
to appear below ``Amount Per Serving'' when calorie information is
presented. Under this proposal, calorie information will go in the
column of dietary ingredients. Therefore, FDA is proposing that
``Amount Per Serving'' and ``% Daily Value'' appear on the same line.
In proposed Sec. 101.36(b)(2)(iii)(B), the agency set forth how the
percent Daily Value is to be calculated. Although the agency is making
no change in this calculation, it is rewording current
Sec. 101.36(b)(4)(i) to clarify that the actual amount is to be used in
the calculation for vitamins and minerals (except for sodium and
potassium), and that either the actual amount or the rounded amount may
be used for other nutrients, e.g., fat. Under the proposed regulation,
sodium and potassium are treated in the same manner as the other
nutrients for which DRV's are established because Sec. 101.9(c)
provides for the declaration of their weight in rounded increments.
The agency is also rewording current Sec. 101.36(b)(4)(ii), which
it is carrying forward as proposed Sec. 101.36(b)(2)(iii)(C), to make
clear when ``Less than 1%'' (or ``<1%'') is to be used. Under proposed
Sec. 101.36(b)(2)(iii)(C), it is to be used to describe the percent
Daily Value of a dietary ingredient when the dietary ingredient is
present in an amount by weight that requires declaration (i.e., exceeds
the amount that can be declared as zero), yet the amount is so small
that the percent Daily Value when rounded to the nearest percent comes
to ``0%.'' In place of ``0%,'' which might be confusing to consumers
when a quantitative amount by weight is listed, ``Less than 1%'' is to
be listed as the percent Daily Value for these substances. For example,
for 1 gram (g) of total carbohydrate, the manufacturer could list
``Less than 1%'' as the percent of Daily Value.
As previously discussed, vitamins and minerals at less than 2
percent of the RDI shall not be declared, except that sodium and
potassium can be listed at values less than 2 percent, consistent with
Sec. 101.9(c)(4) and (c)(5), respectively. Thus, proposed
Sec. 101.36(b)(2)(iii)(C), if adopted, will not apply to vitamins and
minerals other than to sodium and potassium.
The agency is proposing that ``<1%'' may be used in place of ``Less
than 1%'' to provide more flexibility when space is limited on the
label. FDA did not provide for use of the symbol ``<'' for ``less
than'' in regulations implementing the 1990 amendments because of
concerns that a large number of persons would not understand its
meaning. The agency has received numerous requests, however, to permit
use of the symbol and is aware that it is being used on some nutrition
labels with tight space constraints. FDA requests comments on the
advisability of allowing use of the symbol ``<'' and the submission of
any available data that would demonstrate consumers' comprehension of
it. If the agency allows the symbol on nutrition labels of dietary
supplements, it intends to provide for such use on conventional foods
as well.
The agency points out that proposed Sec. 101.36(b)(2)(iii)(D)
through (F) parallel provisions in the current regulations. Proposed
Sec. 101.36(b)(2)(iii)(D) carries forward the requirement in current
Sec. 101.36(b)(4)(v) that the footnote ``Percent Daily Values are based
on a 2,000 calorie diet'' be present when the percent of Daily Value is
declared for total fat, saturated fat, total carbohydrate, dietary
fiber, or protein. The agency is proposing to require that the symbol
that refers to the footnote, when needed, immediately follow the value
listed. For clarity, the agency is proposing to add to this provision
that the footnote is to go below the last heavy bar required under
proposed Sec. 101.36(e)(6) and inside the box.
Consistent with current Sec. 101.36(b)(4)(iii), in proposed
Sec. 101.36(b)(2)(iii)(E), the agency provides that the percent of
Daily Value shall be based upon values for adults and children 4 or
more years of age, unless the product is represented for one of the
subgroups specified, in which case the column heading shall clearly
state the intended subgroup. If the product is for persons within more
than one group, the percent of Daily Value for each group shall be
presented in separate columns, as shown in the sample label in
Sec. 101.36(e)(10)(ii).
Finally, proposed Sec. 101.36(b)(2)(iii)(F), consistent with
current Sec. 101.36(b)(4)(vi), requires the use of the footnote ``Daily
Value not established'' for dietary ingredients that have no RDI's or
DRV's and, therefore, for which a percent Daily Value cannot be
calculated. Under this proposed rule, this footnote will apply to most
subcomponents and, on labels of dietary supplements that are intended
for use by infants, children less than 4 years of age, and pregnant and
lactating women, to total fat, saturated fat, cholesterol, total
carbohydrate, dietary fiber, sodium, potassium, vitamin K, chloride,
chromium, manganese, molybdenum, or selenium. As previously explained,
a final rule published elsewhere in this issue of the Federal Register
establishes RDI values for vitamin K, chloride, chromium, manganese,
molybdenum and selenium for adults and children 4 or more years of age,
and, thus, percent Daily Values can now be calculated for those
nutrients for that group. Therefore, the proposed footnote will have a
more narrow application than under current Sec. 101.36(b)(4)(vi). The
agency points out that when both the footnotes ``Daily Value not
established'' and ``Percent Daily Values are based on a 2,000 calorie
diet'' are required, different symbols must be used to refer to each
footnote so that consumers will not be confused.
Proposed Sec. 101.36(b)(2)(iii)(G) is new and specifies that when
calories, calories from fat, or calories from saturated fat are
declared, the space under the ``% Daily Value'' column must be left
blank for these items. This provision is necessary as a result of
proposed Sec. 101.36(b)(2)(i)(B)(1) that includes calories in the list
of (b)(2)-dietary ingredients that are placed beneath the line in which
the column headings, ``Amount Per Serving'' and ``% Daily Value,'' are
specified. In nutrition labels of foods labeled in accordance with
Sec. 101.9, calories are
[[Page 67201]]
listed above the heading ``% Daily Value.''
In addition, proposed paragraph Sec. 101.36(b)(2)(iii)(G) provides
that the column ``% Daily Value'' may be omitted when there are no
numerical values declared beneath it. For example, this situation will
occur when only calories and protein are listed (a percent Daily Value
cannot be calculated for calories in the absence of an RDI or DRV, and
this declaration is optional for protein except as noted in
Sec. 101.9(c)(7)(i)), or when only calories or dietary ingredients
subject to proposed Sec. 101.36(b)(2)(iii)(F) are listed. Where the
latter situation occurs, and the footnote ``Daily Value not
established'' is required, the symbol (e.g., asterisk) must immediately
follow the quantitative amount by weight for each dietary ingredient
listed under ``Amount Per Serving.''
E. Requirements for Other Dietary Ingredients
The agency is proposing in Sec. 101.36(b)(3) to prescribe how
dietary ingredients that do not have RDI's or DRV's, and that are not
subject to regulation under Sec. 101.36(b)(2), are to be declared in
the nutrition label when present in a dietary supplement. The agency is
proposing this provision, which did not appear in the 1994 dietary
supplement final rule, in response to section 403(q)(5)(F)(i) of the
act, which was added by the DSHEA. As stated above, this provision
states that the nutrition information on a dietary supplement shall
first list those dietary ingredients for which RDI's or DRV's have been
established and then list ``any other dietary ingredient present and
identified as having no such recommendation'' (i.e., no RDI or DRV). As
discussed earlier, to avoid confusion, the agency is proposing to refer
to the latter group of dietary ingredients as ``other dietary
ingredients.'' FDA is also proposing in Sec. 101.36(b)(3) to set out
how the quantitative amounts of these dietary ingredients are to be
presented.
1. Names of Other Dietary Ingredients
The agency is proposing in Sec. 101.36(b)(3)(i) that other dietary
ingredients are to be listed in the nutrition label by their common or
usual name in a column that is underneath the column of names of
(b)(2)-dietary ingredients and the heavy bar described in proposed
Sec. 101.36(e)(6). The agency tentatively concludes that it is
appropriate to list these names in a column because it is consistent
with the format proposed for the listing of names of (b)(2)-dietary
ingredients. Consistency makes the label more comprehensible to
consumers. To enable consumers to distinguish between these two columns
of dietary ingredients, the agency is proposing that they be separated
by a heavy bar (see section H of this preamble on format
specifications).
The agency considered specifying that the other dietary ingredients
be listed in a particular order, such as alphabetical order or
descending order of predominance by weight, to provide for a consistent
theme in their presentation to assist consumers. Alphabetical order
would have the advantage of being user friendly but would not be
scientifically meaningful. Descending order of predominance by weight
would be consistent with Sec. 101.4 which specifies the order used in
the ingredient statement on conventional foods. Because conventional
foods are not required to declare the amounts of ingredients, this
manner of listing gives consumers an indication of the relative amount
of ingredients present. However, imposing this requirement on dietary
supplements may be unnecessary because the amounts of the dietary
ingredients (although not necessarily the ingredient sources of the
dietary ingredients) are required to be listed in the nutrition label
under section 403(q)(5)(F)(ii) of the act. Furthermore, such a listing
would not necessarily reflect the relative biological activity of the
dietary ingredients. Consequently, the agency has tentatively concluded
that specifying a particular order is not justified. The agency
requests comments on this issue.
The agency is proposing in Sec. 101.36(b)(3)(i) that other dietary
ingredients be listed by their common or usual name. This requirement
is consistent with Sec. 101.4 which requires that the ingredients of
conventional foods be listed by common or usual name. To the extent
that another dietary ingredient is covered by an official compendium,
FDA would expect that the dietary ingredient's common or usual name to
be drawn from that source (see section 403(s)(2)(D) of the act).
With regard to herbs and other botanicals, the agency encourages
manufacturers to use common or usual names that are found in botanical
data bases and that are widely used. Many of these names are part of
our everyday language and are easily recognized by consumers. However,
the agency realizes that arriving at an appropriate name for botanicals
may be a problem because some plants have more than one common or usual
name, or one name is used to describe many different species. In other
cases, a particular species may not even have a common or usual name.
Furthermore, the agency notes that uncertainty may exist as to which
dietary ingredients are botanicals. For example, those in the trade may
regard fungi (i.e., yeasts, molds, mushrooms) as ``botanicals,'' while
a taxonomist may not (Ref. 2).
For the purposes of this regulation, the agency considers the term
``botanical'' as used in section 201(ff)(1)(C) of the act to include
fungi and algae. While some questions may be raised about fungi, the
agency believes there is general agreement that they are botanicals
(Ref. 2). With respect to bacteria, the agency believes it is clear
from both a botanical as well as a commercial viewpoint, they are not
botanicals (Ref. 2).
2. Quantity of Other Dietary Ingredients
The agency is proposing in Sec. 101.36(b)(3)(ii) that the
quantitative amount by weight per serving of other dietary ingredients
shall be presented in a column aligned to the right of the column of
names and beneath the column of amounts described in proposed
Sec. 101.36(b)(2)(ii). The agency is proposing Sec. 101.36(b)(3)(ii) in
response to section 403(q)(5)(F)(ii) of the act, which was added by the
DSHEA. This provision specifies that the listing of dietary ingredients
shall include the quantity of each such ingredient per serving.
FDA is proposing to require that the quantitative amount listed in
the nutrition label for a declared dietary ingredient be the total
weight of that dietary ingredient and not the weight of a component of
that dietary ingredient or of the source of that dietary ingredient.
While a component of an ingredient may be listed as the dietary
ingredient, under the proposed regulation, the name of that component
ought to appear in the left column, and the weight of that component is
what would be listed. For example, if a dietary supplement lists garlic
as a dietary ingredient and makes no reference to a component of
garlic, then the weight specified should be the weight of garlic.
However, if the nutrition label lists allicin as the dietary
ingredient, with garlic noted as the source ingredient, the weight
specified should be the weight of allicin only. Liquid extracts of
dietary ingredients are not to be treated any differently in that the
weight specified should be the weight of the dietary ingredient listed
that is in the extract and not include the weight of any solvent. The
agency appreciates that such determinations may be difficult and seeks
comments on this issue.
[[Page 67202]]
Manufacturers have the option of deciding what to list as a dietary
ingredient (e.g., either garlic or the constituent, allicin). The
agency is proposing this flexibility in accordance with section 201(ff)
of the act, which provides, among other things, that a dietary
ingredient may be a botanical or a constituent of a botanical. Thus,
the agency is proposing that either the botanical or one or more
constituents of a botanical may be declared as the dietary ingredient.
The agency considered allowing manufacturers to declare both the
botanical and one or more constituents as dietary ingredients within a
single product, with the constituents of the botanical indented beneath
the listing of the botanical. The quantitative amounts for the
botanical and listed constituents would also be declared. This approach
would possibly give consumers more information. However, the agency has
tentatively rejected this approach because of concern that it would be
potentially confusing to consumers who may not understand that the
indented items are constituents of the nonindented dietary ingredient
listed immediately above, or that the quantitative amounts of the
constituents are also included in the quantitative amount of the
nonindented dietary ingredient. The agency requests comments on whether
it should consider allowing declaration of constituent information in
the manner described above, whether there are alterative approaches to
providing this type of information, and whether such flexibility is
consistent with the DSHEA.
The agency notes that the DSHEA provides that dietary ingredients
having RDI's or DRV's need be listed only when present in ``significant
amounts.'' This limitation on listing in section 403(q)(5)(F)(i) of the
act does not apply to other dietary ingredients, apparently because
they do not have RDI's or DRV's, and, consequently, there is no basis
for determining what constitutes a ``significant amount'' with respect
to daily consumption. Hence, under the act, for other dietary
ingredients there is no level below which declaration is not required.
In the absence of RDI's or DRV's, which are expressed in the units
suitable for the declaration of nutrients in the nutrition label (i.e.,
mg for vitamin C), the agency is proposing to require that
manufacturers express the amounts of other dietary ingredients in
metric units that are appropriate. While it is not possible to specify
appropriate units for every possible other dietary ingredient, for
uniformity, FDA is proposing that any declaration of 1,000 or more
units (mcg, mg, g) be declared in the next higher set of units (e.g.,
1,100 mg should be declared as 1.1 g).
3. Symbol To Reflect Lack of Daily Value
In accordance with section 403(q)(5)(F)(i) of the act, which
requires that other dietary ingredients be identified as having no
recommendation for daily consumption, the agency is proposing in
Sec. 101.36(b)(3)(iii) that other dietary ingredients bear a symbol
(e.g., an asterisk) in the column under the heading of ``% Daily
Value'' that refers to another symbol placed at the bottom of the
nutrition label that is followed by the statement ``Daily Value not
established.'' When no dietary ingredients are declared in accordance
with Sec. 101.36(b)(2)(i), and the heading ``% Daily Value'' is not
used, the agency is proposing that the symbol shall follow the
declaration of the quantitative amount by weight for each other dietary
ingredient listed. The agency considered placing the symbol elsewhere
on the label (e.g., following the heading ``Amount Per Serving'' or
with the name of each dietary ingredient) but tentatively concluded
that it is most appropriate with the declaration of amounts because
these values are used in the calculation of percent Daily Values when
there are RDI's or DRV's.
The agency gave extensive consideration to the most appropriate
wording for the statement to which the symbol refers. The agency
considered a statement such as ``Not currently determined essential,''
which was suggested in a letter from a dietary supplement trade
association (Ref. 3). The agency is unsure if such a statement would be
more useful to consumers than the proposed statement, ``Daily Value not
established,'' which is consistent with the statement used in current
Sec. 101.36(b)(4)(vi) and proposed Sec. 101.36(b)(2)(iii)(F) for
dietary ingredients without Daily Values. The agency requests comments
on this issue.
F. Proprietary Blends
The agency is proposing in Sec. 101.36(c) to provide for the
listing of dietary ingredients in proprietary blends. New section
403(q)(5)(F)(ii) of the act provides that ``the listing of dietary
ingredients shall include the quantity of each such ingredient (or of a
proprietary blend of such ingredients) per serving.'' New section
403(s)(2)(A)(ii)(II) of the act contains a similar provision that
requires ``the quantity of each such ingredient; or with respect to a
proprietary blend of such ingredients, the total quantity of all
ingredients in the blend.'' The ingredients referred to in this section
are those in section 403(s)(2)(A)(i) of the act that are described in
201(ff), i.e., dietary ingredients. The agency notes that section
403(q)(5)(F)(ii) of the act specifies that the information is to be
reported on a ``per serving'' basis. While section 403(s)(2)(A)(ii)(II)
of the act does not specify any basis, FDA tentatively concludes, for
the reasons set out in the earlier discussion of section
403(s)(2)(A)(ii) (see section III. D. 2. of this document) that the
more specific instructions given in section 403(q), which directly
addresses nutrition labeling and the listing of dietary ingredients,
provide an appropriate basis for the declaration of the information
required under section 403(s)(2)(A)(ii)(II) of the act.
Accordingly, the agency is proposing in Sec. 101.36(c) to provide
that a blend of dietary ingredients shall be identified by the term
``Proprietary Blend,'' which may be modified by an appropriate
descriptive term or fanciful name (e.g., ``Proprietary Blend of
Bioflavonoids''). To promote uniform presentation and, thereby, to
minimize consumer confusion, FDA is proposing that the dietary
ingredients in the proprietary blend be indented under the term
``Proprietary Blend'' (or a modification of this term) and be listed in
a column or in a linear fashion.
The agency is proposing that the total weight of the dietary
ingredients listed as components of the proprietary blend appear on the
same line as the name of the blend, as illustrated in the sample label
in Sec. 101.36(e)(10)(v), to make it clear that the weight represents
the total weight of the dietary ingredients listed. As previously
explained, the manufacturer has the discretion to decide what to list
as a dietary ingredient, e.g., whether to list garlic or a component of
garlic, such as allicin. Regardless of what is considered to be the
dietary ingredient, it is the weight of the dietary ingredient declared
that is to be used in calculating the total weight of the blend.
Proposed Sec. 101.36(c) also requires that the list of other
dietary ingredients in a proprietary blend be given in order of
predominance by weight since the weights of the individual dietary
ingredients need not be specified (proposed Sec. 101.36(c)(2)). The
required listing by order of predominance by weight is consistent with
ingredient labeling of conventional foods under Sec. 101.4(a)(1) and is
intended to give consumers an indication of the relative amounts of the
other dietary ingredients present in the absence of information on
their actual amounts.
[[Page 67203]]
All other requirements for the listing of dietary ingredients
remain in effect for dietary supplements containing, or consisting
solely of, a proprietary blend. For example, under proposed
Sec. 101.36(c)(3), the total weight must be specified to the right
(beneath the column of amounts described in paragraph (b)(2)(ii) of
Sec. 101.36), and the symbol (e.g., asterisk) referring to the
statement ``Daily Value not established'' must be placed in the column
under the heading of ``% Daily Value,'' if present, or immediately
following the quantitative amount by weight for the proprietary blend.
In addition, the agency is proposing to require that a dietary
supplement containing a proprietary blend comply with Sec. 101.36(b)(2)
(Sec. 101.36(c)(1)). If the proprietary blend furnishes more than
insignificant amounts of any required (b)(2)-dietary ingredients (i.e.,
calories, calories from fat, total fat, saturated fat, cholesterol,
sodium, total carbohydrate, sugars, dietary fiber, protein, vitamin A,
vitamin C, calcium, iron, or any other dietary ingredient listed in
proposed Sec. 101.36(b)(2)(i) that is added for purposes of
supplementation or about which claims are made), that dietary
ingredient must be declared, as well as the amount of the ingredient
and the percent of the Daily Value that the supplement supplies. While
FDA recognizes some ambiguity in the language of section 403
(q)(5)(F)(ii) and (s)(2)(ii)(II) of the act, the agency tentatively
concludes that an interpretation of these provisions of the act to mean
that amounts of (b)(2)-dietary ingredients need not be listed
individually, but rather be included in the total weight of the
proprietary blend, would be inconsistent with section 403(q)(5)(F) of
the act, which states that dietary supplement products ``shall comply
with the requirements of subparagraphs (1) and (2),'' albeit in a
manner which is appropriate for the product. Section 403(q)(1) and
(q)(2) of the act require the listing of the individual nutrients
determined by the Secretary to assist consumers in maintaining healthy
dietary practices. FDA tentatively concludes that it would be contrary
to the intent of the 1990 amendments to fail to list nutrients such as
calories, total fat, sodium, or vitamin C, when present, in the
nutrition labeling of dietary supplements containing proprietary
blends.
Inasmuch as FDA is proposing that any (b)(2)-dietary ingredients
present in the proprietary blend be listed in accordance with
Sec. 101.36(b)(2) (e.g., above the heavy bar separating (b)(2)-dietary
ingredients and other dietary ingredients), these (b)(2)-dietary
ingredients in the blend would not need to be listed a second time
under the term ``Proprietary Blend'' and, if not listed, would not be
included in the weight specified for such blend.
G. Information on the Source of a Dietary Ingredient and Other
Ingredient Labeling Issues
In response to sections 403 (q)(5)(F)(iii) and (q)(5)(F)(iv) of the
act, which were added by the DSHEA, FDA is proposing in new
Sec. 101.36(d) to allow the source of a dietary ingredient to be
declared in the nutrition label. Section 403(q)(5)(F)(iii) of the act
states that ``the listing of dietary ingredients may include the source
of a dietary ingredient,'' and subclause (iv) states that ``the
nutrition information shall immediately precede the ingredient
information required under subclause (i), except that no ingredient
identified pursuant to subclause (i) shall be required to be identified
a second time.'' With respect to subclause (iv), the agency observes
that it has received questions regarding the intent of the phrase
``except that no ingredient identified pursuant to subclause (i) shall
be required to be identified a second time.'' The agency acknowledges
that the meaning of this phrase is not clear and has speculated whether
the reference to ``subclause (i)'' is intended to refer to section
403(i) of the act. Given this ambiguity, the agency is interpreting
subclause (iv) to mean that any ingredient listed in the nutrition
label need not be listed a second time in the ingredient statement
required in Sec. 101.4. For example, under the agency's proposal, if an
ingredient such as calcium carbonate is listed as the source of
``calcium'' in the nutrition information, it would not need to be
listed again in the ingredient statement. Accordingly, the agency is
proposing to revise Sec. 101.4(a)(1) to provide that any ingredient of
a dietary supplement that is listed in the nutrition label in
accordance with proposed Sec. 101.36(d) (i.e., inside the box) need not
be repeated in the ingredient list.
The agency notes that one of the analyses of the DSHEA that it has
received addressed section 403(q)(5)(F)(iv) of the act in detail (Ref.
4). The analysis stated: ``The listing [of dietary ingredients] can
also include the source ingredient of the dietary ingredient, and the
traditional ingredient declaration need not repeat those ingredients
(although a technical correction is needed so that the first cross
reference in section 403(q)(5)(F)(iv) of the act is to `subsection (i)'
rather than to `subclause(i)').'' Hence, this analysis is suggesting
the first cross reference is to section 403(i) of the act that deals
with the ingredient statement that is required in Sec. 101.4. This
analysis is consistent with FDA's interpretation that: (1) A source
ingredient may be included in the nutrition information, (2) the
nutrition information must immediately precede the ingredient statement
required in Sec. 101.4, and (3) no ingredient listed in the nutrition
label is required to be declared a second time in the ingredient
statement.
Accordingly, the agency is proposing in Sec. 101.36(d) that the
source of any dietary ingredient (i.e., the ingredient supplying the
dietary ingredient) may be added in parentheses immediately following
or indented ben
FR Doc. 95-31196 Food Labeling; Statement of Identity, Nutrition Labeling and Ingredient Labeling of Dietary Supplements
eath the name of the dietary ingredient, and that the
words ``as'' or ``from'' must precede the name of the source
ingredient, e.g., ``calcium (as calcium carbonate)'' or ``calcium (from
oyster shell powder).'' By way of exception, the agency is proposing
that, if the name of the dietary ingredient (e.g., Siberian ginseng) or
its synonym (e.g., ascorbic acid as a synonym for vitamin C) is itself
the source ingredient, the listing of the dietary ingredient will
fulfill the requirement for the listing of the ingredient. In regard to
the use of the words ``as'' or ``from,'' many dietary supplements in
the marketplace currently use such terminology. The agency tentatively
concludes that these words will help to convey to consumers the
understanding that such compounds are the source of the dietary
ingredients.
If this proposal becomes final, when a source is disclosed in
parentheses in the nutrition label, or when the name of a dietary
ingredient or its synonym (e.g., ascorbic acid) is itself the source
ingredient, the ingredient need not be listed in the ingredient
statement that is required under section 403(i)(2) of the act. When a
source is not identified within the nutrition label, proposed
Sec. 101.36(d) provides that it shall be listed in the ingredient
statement in accordance with proposed Sec. 101.4(g).
Under proposed Sec. 101.4(g), the ingredient statement on a dietary
supplement shall appear outside and immediately below the nutrition
label or, if there is insufficient space below the nutrition label,
immediately contiguous and to the right of the nutrition label. This
provision is in accordance with section 403(q)(5)(F)(iv) of the act,
which was added by the DSHEA. It requires that the nutrition
information immediately precede the ingredient information. The agency
tentatively concludes that when there is insufficient space below the
nutrition label, it is appropriate to allow the
[[Page 67204]]
flexibility indicated and have the nutrition label precede the
ingredient statement horizontally.
FDA is proposing in Sec. 101.4(g) to require that the ingredient
list be preceded by the word ``Ingredients,'' unless some ingredients
(i.e., dietary ingredients or sources of dietary ingredients) are
identified within the nutrition label, in which case the ingredients
listed outside the nutrition label shall be in a list preceded by the
words ``Other Ingredients.'' FDA is proposing that the word
``Ingredients'' precede the list of ingredients so that the appearance
of this aspect of the label is as consistent as possible with the
labeling of other foods. As stated above, consistency in the
presentation of food labeling information enhances consumer
understanding. FDA is proposing that the term ``Other Ingredients'' be
used to indicate to consumers that some ingredient information appears
in the nutrition information that precedes the ingredient list.
Proposed Sec. 101.4(g) also requires that ingredients that are not,
or do not contain, dietary ingredients, such as excipients, fillers,
artificial colors, artificial sweeteners, flavors, or binders, be
listed in the ingredient statement. The agency acknowledges that a 1942
Trade Correspondence identified as TC- 387 (Ref. 5) exempted
``excipients, fillers, binders, and other fabricating ingredients''
from complete ingredient declaration when used in manufacturing dietary
supplements (i.e., labels could list ``excipients'' rather than listing
excipients by name). As explained in the final rule on ingredient
labeling (58 FR 2850 at 2869, January 6, 1993), however, although TC-
387 has not been officially revoked, its position has been overturned
by more recent agency statements of policy on this subject, as
expressed in the Federal Register of August 2, 1973 (38 FR 20730), the
Federal Register of March 16, 1979 (44 FR 16005), and in subsequent
correspondence with industry (Refs. 6 and 7). These more recent
statements of policy make it clear that the label for dietary
supplements must contain a list of nutrients and a full statement of
ingredients (except those exempted under section 403(i)(2) of the act),
declared by their common or usual name. At this time, because TC-387
expresses a position contrary to the agency's policy since 1973, the
agency is revoking TC-387.
In proposed Sec. 101.36(d)(1), the agency is providing that source
ingredients in dietary supplements be identified in accordance with
Sec. 101.4 that addresses ingredient labeling for all food products. A
basic requirement of this section is that ingredients be listed by
common or usual name (see Sec. 101.4(a)). To help ensure correct
identification of herbs or other botanicals, including algae and fungi,
the agency is proposing in Sec. 101.4(h)(1) that the botanical name in
Latin binomial form be included in parentheses following the common or
usual name. Proper scientific reference to a species is done with its
Latin binomial, representing the genus in which the species has been
placed and the species epithet, followed by the designation of the
author or authors who published the name. When an author has moved a
species from one genus to another, the name of the original author is
enclosed in parentheses followed by the author who made the transfer.
To ensure that there is consistency and clarity in declaration, the
agency is proposing that any botanical name declared should be in
accordance with internationally accepted rules on nomenclature, such as
those found in the International Code of Botanical Nomenclature (Ref.
8). The agency requests comments on this issue.
FDA recognizes that it is possible to have more than one acceptable
botanical name in Latin form (i.e., a synonym). FDA advises
manufacturers to choose the name that is most currently used in
commerce and in appropriate references and, in cases of confusion, to
consult with the agency.
Section 403(s)(2)(C) of the act, which was added by the DSHEA,
provides that a dietary supplement is misbranded if it contains an herb
or other botanical, and the label or labeling of the supplement fails
to identify any part of the plant from which the dietary ingredient is
derived. Accordingly, FDA is proposing in Sec. 101.4(h)(2) that this
information be provided as part of the required ingredient information.
While nothing in the act requires that information on the part of the
plant from which a botanical is derived be in a particular place on the
label, FDA tentatively finds that it would be in the interest of
consumers if the information were presented as part of the ingredient
information because it would ensure that all the identifying
information about the herb or other botanical (i.e., common or usual
name, Latin binomial, and part of plant from which it is derived) is
presented in one place.
FDA is proposing in Sec. 101.4(h)(2) to require that the part or
parts of the plant (e.g., leaf, flower, root, fruit, seed, or bark) be
presented in parentheses immediately following the Latin binomial name
of the botanical ingredient. This manner of presentation is consistent
with the way other clarifying information is presented in ingredient
statements (see Sec. 101.4(d) and (e)). Whenever information on the
part of the plant is presented on the label or in labeling, FDA is
proposing to require that the name of the part of the plant be
expressed in English. FDA tentatively concludes that pharmaceutical
names such as ``flos'' for flower, ``radix'' for root, or ``fructus''
for fruit should not be used because they are not recognized in
botanical nomenclature, and their meanings would not be commonly
understood by American consumers. When an entire plant is used, the
label should specify ``entire plant'' to meet the requirements of the
act.
The requirements of proposed Sec. 101.4(h)(1) and (2) apply whether
the botanical ingredient is listed in an ingredient statement or in the
nutrition label as provided by proposed Sec. 101.36(d). However,
inasmuch as section 403(i) of the act does not require ingredients to
be listed when the food contains only one ingredient, FDA is proposing
in Sec. 101.36(h)(3) that for single-ingredient dietary supplements,
the Latin binomial name and the part of the plant from which the
dietary ingredient is derived may be prominently placed on the
principal display panel or the information panel, or included in the
nutrition label.
In proposed Sec. 101.36(d)(2), the agency is requiring that when
two or more sources are listed within a parentheses, they be listed in
descending order by weight, which is consistent with the way
ingredients are to be listed in Sec. 101.4. This listing of ingredients
in descending order by weight will provide consumers with an indication
of the relative amount of each ingredient in the absence of information
on their actual amounts. As discussed elsewhere in this preamble, the
agency is not proposing that other dietary ingredients be listed in
descending order by weight because the amounts of these dietary
ingredients are required to be listed.
In proposed Sec. 101.36(d)(3), the agency is providing that
representations that a source ingredient conforms to an official
compendium may be included such as by a reference to the compendium
(e.g., ``Calcium (from calcium carbonate USP)''). This provision is
consistent with the discussion in the preamble of the 1994 dietary
supplement final rule that explained that the agency would not object
to the use of the U.S.P. symbol in the ingredient list to identify
those ingredients that are U.S.P. grade (59 FR 354 at 369), as long as
the ingredients meet FDA's compliance requirements in Sec. 101.9(g)(4),
which are discussed below under Compliance and
[[Page 67205]]
Location Requirements. The agency recognizes that in some cases
individual dietary ingredients may conform to compendial specifications
even though the entire product does not. Thus, the agency is proposing
in Sec. 101.36(d)(3) to allow individual dietary ingredients to be so
represented.
If such a representation is made, and the ingredient does not
comply with the specifications of the official compendium, the
supplement would be misbranded under 403(a) of the act. The agency
notes that section 403(s)(2)(D) of the act provides that a dietary
supplement is misbranded if it is represented as complying with an
official compendium and fails to do so. Proposed Sec. 101.36(d)(3)
applies to representations about a particular ingredient and not the
entire supplement, as does section 403(s)(2)(D) of the act.
H. Format Requirements
As stated above, the agency continues to believe that consistency
in the presentation of nutrition information on all foods will help
consumers observe and comprehend such information, as required by
section 2(b)(1)(A) of the 1990 amendments. Accordingly, FDA is
proposing in Sec. 101.36(e) that the information required in proposed
Sec. 101.36 (b) and (c) be presented in a manner that is similar to the
requirements listed in Sec. 101.9(d) for conventional foods, as well as
those in current Sec. 101.36 for dietary supplements of vitamins and
minerals. In this rulemaking, the agency is proposing to alter slightly
the organization in current Sec. 101.36 to combine all format
requirements in proposed Sec. 101.36(e), all exemptions in
Sec. 101.36(h), and all special labeling provisions (such as those for
small or intermediate-sized containers) in Sec. 101.36(i),
respectively.
Despite the desire for consistency in the appearance of nutrition
information on dietary supplements and conventional foods, the
requirements adopted in the DSHEA, such as the listing of the names and
amounts of other dietary ingredients and the optional listing of source
information, necessitate that there be some differences in format.
Accordingly, to signal to consumers that nutrition labeling on dietary
supplements differs in several significant respects from that on
conventional foods, FDA is proposing in Sec. 101.36(e)(1) that the
title for the nutrition information on packages of dietary supplements
be ``Supplement Facts.'' The agency tentatively concludes that the
title ``Supplement Facts'' and the proposed format structure are
sufficiently similar to the title ``Nutrition Facts'' and the format
requirements used in nutrition labeling of conventional foods for the
consumer to immediately recognize that the information in the two boxes
is related. However, by the use of a different name, the consumer can
be taught to recognize the basic structural differences in nutrition
information on the two different types of food products. For example,
the nutrition information on dietary supplements will have the
quantitative amounts by weight located in a separate column; may
include source ingredients; and may not have a ``% Daily Value'' column
if no dietary ingredients having RDI's or DRV's are present in the
product. Comments are requested on the appropriateness of the title
``Supplement Facts.''
FDA is proposing in Sec. 101.36 (e)(1) through (e)(3) to maintain
the graphic requirements in current Sec. 101.36(b) and (c)(1) through
(c)(5). These sections require the use of the largest type size within
the nutrition label for the title; bolding of the title and column
headings; a hairline box around the nutrition label; a single easy-to-
read type style; all black or one color type on a white or other
neutral contrasting background, whenever practical; upper and lower
case letters, except on very small packages; at least one point
leading; and letters that do not touch. The agency is retaining these
requirements because they are responsible, in large measure, for the
appearance of the nutrition label and are designed to maximize the
legibility of the label.
The agency is addressing type size requirements in proposed
Sec. 101.36(e)(4). Current Sec. 101.36(c)(6) requires that: (1)
packages with less than 12 square inches of total surface area
available to bear labeling (i.e., small-sized packages) use a type size
no smaller than 4.5 point for the nutrition label, (2) packages with 12
to 40 square inches of total surface area available to bear labeling
(i.e., intermediate-sized packages) use a type size no smaller than 6
point, and (3) packages with more than 40 square inches of total
surface area available to bear labeling use type size no smaller than 8
point, except that these larger packages could use 6 point type for
column headings, footnotes, and information on beta-carotene, when
present. Because the DSHEA does not necessitate any changes in type
size, the agency is proposing in Sec. 101.36(e)(4) to carry forward the
requirement for larger-sized packages of 8 point type with 6 point type
for column headings and footnotes. (The agency is not proposing to
carry forward 6 point type for the information on beta-carotene because
the agency tentatively concludes that the type size for all dietary
ingredients should be uniform.) To be more consistent with the
organization of Sec. 101.9, FDA is proposing to move the exceptions in
type size for small and intermediate-sized packages to
Sec. 101.36(i)(2). The agency will discuss these exceptions under
section III.J. of this document.
Proposed Sec. 101.36(e)(5) requires a hairline rule between the
listing of each dietary ingredient. This requirement is identical to
that in current Sec. 101.36(c)(7). Following publication of the 1994
dietary supplement final rule, the agency received comment on this
requirement and on the effect that the multiple hairlines could have on
the legibility of labels of products with large numbers of dietary
ingredients, where labels have severe space constraints, and where the
minimum type size (i.e., 4.5 point type) is used. FDA requests comments
on the use of hairlines to separate the dietary ingredients listed.
Such comments will be particularly helpful if actual sample labels are
included as well as suggestions for when relief from such a requirement
should be provided, e.g., should hairlines be omitted when more than 8
(or some other number) dietary ingredients that qualify to use 4.5
point type are listed? Comments should set out in detail the basis for
their recommendations.
Comments received by the agency since publication of the 1994
dietary supplement final rule suggest that there is some confusion
about the relative size of bars used to separate parts of the nutrition
label, and whether the bars are required by regulation. It appears that
many persons were unable to find the regulatory references to the bars
in current Sec. 101.36 (b)(3), (b)(3)(ii), and (b)(4). Therefore, FDA
is proposing to focus two paragraphs, Sec. 101.36 (e)(6) and (e)(7),
specifically on bars, rather than addressing them as ancillary issues
in broader provisions. These paragraphs identify the points in the
label format where bars are required and differentiate the thickness of
the bars (i.e., ``heavy bars'' versus ``light bars'').
In proposed Sec. 101.36(e)(6), the agency is requiring that a heavy
bar be placed beneath the subheading ``Serving Size'' or the subheading
``Servings Per Container'' when it is required, beneath the last
dietary ingredient to be listed in proposed Sec. 101.36(b)(2)(i), and
beneath the last other dietary ingredient to be listed in proposed
Sec. 101.36(b)(3). Also, in proposed Sec. 101.36(e)(7), the agency is
proposing that a light bar be placed beneath the headings ``Amount Per
Serving'' and ``% Daily Value,'' which
[[Page 67206]]
will be above the listing of ``Calories,'' when the latter is required.
Except for the introduction in this rulemaking of a bar above,
rather than below, the listing of ``Calories'' and of a bar to separate
(b)(2)-dietary ingredients from other dietary ingredients, FDA is
proposing no change from the bars as currently required above and
beneath the ``Amount Per Serving'' heading in current Sec. 101.36(b)(3)
and at the bottom of the nutrition label in current
Sec. 101.36(b)(3)(ii). The use of the bars and their respective
thickness is illustrated in sample labels under proposed
Sec. 101.36(e)(10).
For products that contain both (b)(2)-dietary ingredients and other
dietary ingredients, the heavy bar that FDA is proposing to require in
Sec. 101.36(e)(6)(ii) beneath the last (b)(2)-dietary ingredient will
result in a bar separating the list of (b)(2)-dietary ingredients from
that of other dietary ingredients. FDA has tentatively concluded that
this visual separation will assist consumers to differentiate dietary
ingredients for which RDI's and DRV's have been established from other
dietary ingredients for which such daily values have not been
established.
The agency interprets the direction given in section
403(q)(5)(F)(i) of the act that ``nutrition information shall first
list those dietary ingredients * * * for which a recommendation for
daily consumption has been established * * * and shall list any other
dietary ingredient present and identified as having no such
recommendation'' as evidencing that such a differentiation should be
made. FDA has tentatively concluded that the use of a heavy bar,
similar to that which is used in Sec. 101.9 to differentiate vitamins
and minerals from preceding nutrients, will distinguish the two groups
of dietary ingredients while helping to maintain some consistency in
the appearance between nutrition labels on dietary supplements and
products represented as conventional foods.
Proposed Sec. 101.36(e)(8) addresses how nutrition information is
to be presented on products that contain two or more separately
packaged dietary supplements that differ from each other. This section,
which allows manufacturers to choose between separate nutrition labels
for each product or one aggregate nutrition label, is analogous to
Sec. 101.9(d)(13) for conventional foods and maintains the provisions
of current Sec. 101.36(b)(3)(iii), except that there is no longer a
need to specify that separate columns be used to list quantitative
amounts because the agency is proposing to require that the
quantitative amounts on all dietary supplements be listed in separate
columns.
Proposed Sec. 101.36(e)(9), which encourages uniformity in
presentation, and proposed Sec. 101.36(e)(11), which allows for
flexibility when there is insufficient continuous vertical space to
accommodate the required components of the nutrition label, are
identical to current Sec. 101.36(c)(8) and (c)(10).
Proposed Sec. 101.36(e)(10) provides sample labels to illustrate
the format requirements of Sec. 101.36.
I. Compliance and Location Requirements
FDA is proposing in Sec. 101.36(f)(1) to provide that compliance
with Sec. 101.36 will be determined using the procedures outlined in
Sec. 101.9(g)(1) through (g)(8) for conventional foods. These
regulations, which are cited in current Sec. 101.36(d)(1), describe how
FDA will collect samples for compliance reviews and the types of
analytical methods that it will use, set quantitative criteria (e.g.,
allowable margins of error) for added and naturally occurring
nutrients, and provide for the use of FDA-approved data bases.
An issue addressed in the preamble to the 1994 dietary supplement
final rule was the requirement in Sec. 101.9(g)(4)(i) for added
vitamins, minerals, protein, dietary fiber, or potassium to be present
in amounts ``at least equal to the value for that nutrient declared on
the label'' (59 FR 354 at 369). A comment pointed out that U.S.P.
monographs for several nutritional products require a minimum nutrient
content of 90 percent of the label declaration, and that this
specification was in conflict with FDA's requirement that added
nutrients be present at 100 percent of declared value when tested
during the shelf life of the product. In responding, the agency noted
an inconsistency in U.S.P. directives in that the General Notices of
the U.S.P. state that a dosage should be formulated to provide 100
percent of the labeled amount (Ref. 9).
In light of new section 403(s)(2)(D) of the act, the agency
questioned whether it should alter its long-standing compliance
criterion in Sec. 101.9(g)(4)(i). The agency reviewed its response to
the comment mentioned above and earlier correspondence from the agency
to U.S.P. informing that organization that anything less than 100
percent of the value declared on the label for vitamin and mineral
products is not acceptable, and that the only permissible deviation
from this requirement would be a deviation that is attributable to the
variability of the analytical method (Ref. 10).
The agency tentatively concludes that any deviation from the
criterion in Sec. 101.9(g)(4)(i) that is attributable to reasons other
than variability of analytical methods would be a material fact and
would need to be disclosed on the label if the agency were to allow
less than 100 percent of the value declared. Accordingly, FDA has
considered proposing that, on labels of products where U.S.P.
specifications are met but less than 100 percent of the labeled amount
is present, the U.S.P. designation would be allowed with a disclosure
of the lack of the declared amount (e.g., a symbol by the U.S.P.
designation that refers to a footnote that states ``May contain only --
--% of the amount listed''). However, the agency is concerned that such
a message could diminish consumer confidence in the values declared in
nutrition labeling for all foods. Therefore, FDA tentatively concludes
that its previous position is the better course of action (i.e., that,
other than deviations that are attributable to the variability of the
analytical method, anything less than 100 percent of the value declared
on the label is not acceptable for added nutrients). Consequently, FDA
is not proposing any change in its position that the requirements for
the nutrients listed in Sec. 101.9(g)(4) should pertain regardless of
whether these nutrients are present in conventional foods or in dietary
supplements.
Likewise, the agency is proposing in Sec. 101.36(f)(1) that the
criteria in Sec. 101.9(g)(3) and (g)(4) are applicable to other dietary
ingredients described in proposed Sec. 101.36(b)(3)(i). The agency is
unaware of any reason why these criteria that pertain to dietary
ingredients that are nutrients should not apply to other dietary
ingredients. Hence, the agency tentatively concludes that other dietary
ingredients, when they are added, be present in amounts at least equal
to the values declared in the nutrition label and, when they occur
naturally, be present in amounts at least equal to 80 percent of the
value declared. The agency is also proposing that reasonable excesses
of other dietary ingredients over labeled amounts are acceptable within
current good manufacturing practice, which is consistent with
Sec. 101.9(g)(6). The agency is unaware of any reason at this time for
applying the approach in Sec. 101.9(g)(5) to any other dietary
ingredients. This section provides that food with a label declaration
of calories, sugars, total fat, saturated fat, cholesterol, or sodium
shall be deemed to be misbranded under section 403(a) of the act if a
composite of the product
[[Page 67207]]
is found to contain more than 20 percent in excess of the amount
declared for one of these nutrients. FDA is not aware of any other
dietary ingredient that should be singled out in this way. The agency
requests comments on the proposed criteria for other dietary
ingredients.
In recognition of the fact that the exemptive provisions referenced
in proposed Sec. 101.36(f)(1) may not include all situations in which
nutrition information is technologically infeasible or impracticable on
a particular package, the agency is proposing in Sec. 101.36(f)(2) to
carry forward current Sec. 101.36(d)(2), which provides the opportunity
in such a situation for firms to write to the Office of Food Labeling,
FDA, to request additional exemptions or alternative means of
compliance. This provision is identical to that in Sec. 101.9(g)(9) for
conventional foods. In such a situation, the firm should state why it
is technologically infeasible or impracticable for the specified
products to comply with the nutrition labeling regulations, identify
alternative means of compliance that would be used to provide nutrition
information for the product (e.g., specify type size variations
needed), and explain why this mode of compliance would be consistent
with the intent of the 1990 amendments and the DSHEA.
With respect to analytical procedures for compliance programs,
Sec. 101.9(g)(2) states that FDA will use methods as given in the
``Official Methods of Analysis of the AOAC [Association of Official
Analytical Chemists] International'' unless no AOAC method is available
or appropriate, in which case other reliable and appropriate analytical
procedures will be used. AOAC methods and other reliable analytical
methods exist for most vitamins and minerals used as, or as a component
of, dietary supplements. However, AOAC methods do not exist for most
other dietary ingredients, including many botanicals. Accordingly, the
agency is interested in identifying a variety of analytical procedures
and sources of information that can be used for other dietary
ingredients. FDA requests comments on appropriate analytical procedures
or other alternative approaches for determining whether the dietary
supplement provides the quantity of dietary ingredient listed in the
nutrition label for the supplement. Additionally, FDA is requesting
information on organizations that establish such procedures.
The agency is proposing in Sec. 101.36(g) to require that the
location of nutrition information on a label be in compliance with
Sec. 101.2, except as provided in proposed paragraphs (i)(2) and (i)(5)
of Sec. 101.36. Proposed (i)(2) states that dietary supplements are
subject to the special labeling provisions specified in
Sec. 101.9(j)(13) for foods in small or intermediate-sized packages.
Section 101.9(j)(13)(ii)(D) provides that foods in packages that have a
total surface area available to bear labeling of 40 or less square
inches may present the required nutrition information on any label
panel. In addition, proposed (i)(5) states that dietary supplements are
subject to the special labeling provision specified in
Sec. 101.9(j)(17) for foods in packages that have a total surface area
available to bear labeling greater than 40 square inches but whose
principal display panel and information panel do not provide sufficient
space to accommodate all required label information (see 50 FR 17202,
April 5, 1995). Section 101.9(j)(17) allows the nutrition label on such
packages to be moved to any other label panel that is readily seen by
consumers. However, because of the requirement in section
403(q)(5)(F)(iv) of the act that the ingredient list immediately follow
the nutrition label, proposed Sec. 101.36(i)(5) states that the
ingredient list shall continue to be located immediately below the
nutrition label, or, if there is insufficient space below the nutrition
label, immediately contiguous and to the right of the nutrition label
as specified in Sec. 101.4(g), which FDA has proposed to adopt in this
document.
J. Exemptions and Special Labeling Provisions
FDA is proposing in Sec. 101.36(h)(1) and (h)(2) to provide for
small business exemptions in accordance with the 1990 amendments and
the Nutrition Labeling and Education Act Amendments of 1993 (the 1993
amendments) (Pub. L. 103-80), which (1) stated that, after May 8, 1995,
section 403(q)(5)(D) of the act, which provides an exemption based on
total gross annual sales, shall apply to food from retailers only, and
(2) established a new exemption for low-volume food products from
manufacturers, packers, distributors, and retailers that are small
businesses. A proposed rule to implement this change in Sec. 101.9(j)
and current Sec. 101.36(f) was published on March 14, 1994 (59 FR
11872). A final rule has not yet been published.
To streamline the regulations and be consistent with the manner in
which other exemptions and special labeling provisions are listed in
current Sec. 101.36(f) and (g) (proposed Sec. 101.36(h) and (i)), FDA
is proposing in Sec. 101.36(h)(1) and (2) to cross reference the small
business exemption in Sec. 101.9(j)(1) and the exemption for low-volume
food products of small businesses in proposed Sec. 101.9(j)(18),
respectively, rather than to independently codify those exemptions
under Sec. 101.36.
Proposed Sec. 101.36(h)(3) incorporates the exemption in
Sec. 101.9(j)(9) for foods shipped in bulk form that are not for
distribution to consumers in such form and that are for use solely in
the manufacture of other foods or that are to be processed, labeled, or
repacked at a site other than where originally processed or packed.
This exemption was incorrectly listed in current Sec. 101.36(g) and
identified as a special labeling condition. Inasmuch as nutrition
labeling is not required on products shipped in bulk form that are not
intended to be seen by consumers (section 403(q)(5)(A)(v)) of the act,
it is being redesignated as an exemption under proposed
Sec. 101.36(h)(3).
Special labeling provisions (or conditions) are provided for
specific situations in which the product is not exempt from nutrition
labeling requirements, but deviations from the general nutrition
labeling requirements are necessary for a variety of reasons. For
example, proposed Sec. 101.36(i)(1), which was carried forward from
current Sec. 101.36(g), references Sec. 101.9(j)(5)(i) which describes
a special labeling provision that pertains to the nutrition labeling of
foods represented or purported to be for children less the 2 years of
age. In the nutrition labeling of these foods, other than infant
formula, the listing of calories from fat, calories from saturated fat,
saturated fat, polysaturated fat, monounsaturated fat, and cholesterol
is prohibited. FDA included this special labeling provision in its
regulations to discourage the inappropriate application of adult
dietary guidelines to infants and toddlers (55 FR 29487 at 29506, July
19, 1990, as modified in 58 FR 2079 at 2150). While current
Sec. 101.36(g) also cross references Sec. 101.9(j)(5)(ii), which
addresses broader issues of the format of nutrition labeling on foods
intended for children less than 4 years of ages, these format issues
are addressed elsewhere in this proposed regulation (e.g., the
exclusion of percent Daily Value in proposed Sec. 101.36(b)(2)(iii)(F)
for total fat, saturated fat, cholesterol, sodium, potassium, total
carbohydrate, and dietary fiber because DRV's have not been established
for this age group). Accordingly, proposed Sec. 101.36(i)(1) references
only that portion of Sec. 101.9(j)(5)(i) that prohibits the inclusion
of calories from fat, calories from saturated fat, saturated fat,
[[Page 67208]]
polyunsaturated fat, monounsaturated fat, and cholesterol in the
nutrition label of foods, other than infant formula, represented or
purported to be for children less than 2 years of age.
Proposed Sec. 101.36(i)(2) describes special labeling provisions
for small and intermediate-sized containers. Special labeling
provisions are provided for these containers in current Sec. 101.36(g)
which cross references Sec. 101.9(j)(13). Section 101.9(j)(13)(i)
allows small packages with less than 12 square inches of space
available to bear labeling to supply an address or telephone number for
the consumer's use in obtaining nutrition information in lieu of
nutrition labeling when no claims or other nutrition information are
present on the label or in labeling or advertising, or, if they are
present, to provide the required nutrition information in 6 point type
or in all upper case type of 1/16 inches minimum height. Section
101.9(j)(13)(ii) allows packages with 40 or less square inches of space
available to bear labeling to present the nutrition label in a tabular
format when the package shape and size cannot accommodate a standard
vertical display and in a linear display if the label will not
accommodate a tabular display; to use specified abbreviations; to
shorten the required footnotes; and to place the required nutrition
information on any label panel.
In addition to cross referencing these special labeling provisions,
current Sec. 101.36(c)(6) provides for smaller type size requirements
for dietary supplements in small and intermediate- sized containers.
That provision allows labels of dietary supplements in packages with
less than 12 square inches of total surface area available to bear
labeling to use a type size no smaller than 4.5 point in the nutrition
label, in packages with 12 to 40 square inches of total surface area
available to bear labeling to use a type size no smaller than 6 point,
and in packages with more than 40 square inches of total surface area
available to bear labeling to use type size no smaller than 8 point,
except that these larger packages can use 6 point type for column
headings, footnotes, and information on beta-carotene, when present.
In proposed Sec. 101.36(i)(2), FDA is continuing to cross reference
the special provisions in Sec. 101.9(j)(13) and to allow the use of 4.5
point type on packages with less than 12 square inches of available
label space and the use of 6 point type on packages with 12 to 40
square inches of available label space. However, in response to a
citizen petition (Docket No. 94P-0110/CP1) (Ref. 11) from a trade
association, the agency is proposing to provide additional flexibility
for multi-ingredient dietary supplements in packages with less than 20
square inches of available label space. The petition stated that the
majority of dietary supplement products on the market have labels that
are 12 to 20 square inches in size, and that, while 6 point type in the
nutrition label is feasible on single-nutrient products with this size
label, there is insufficient space for all the required information on
multinutrient products. The petitioner submitted sample labels in
support of their position.
FDA is persuaded by this citizen petition that it is infeasible to
use 6 point type on many products containing multiple dietary
ingredients in packages with less than 20 square inches of space
available to bear labeling. However, the agency tentatively finds that
6 point type is feasible on products with a limited number of dietary
ingredients based on the following calculations. The agency calculates
that a listing of 8 dietary ingredients in 6 point type plus one point
leading between each name would take less than 1 inch of vertical
space. Adding another inch to this for the title, headings, bars, and
footnote would result in a nutrition label for a product declaring up
to 8 dietary ingredients of no more, and possibly less, than 2 inches
in height. Assuming a 1\1/2\ inch width, such a nutrition label would
take no more than 3 square inches of surface area.
In the preamble to the final rule implementing the 1990 amendments,
FDA based decisions on small package sizes on the assumption that not
more than 30 percent of the total surface area of a package should be
required to be devoted to FDA-required information that is not on the
principal display panel (58 FR 2079 at 2155). On a package with 12
square inches of available label space, 30 percent of the total surface
area is 3.6 square inches. Inasmuch as the ingredient list can be
included in the nutrition label and based on the above calculations,
the agency tentatively concludes that it is reasonable to require that
6 point type be used on a package with 12 to 20 square inches of space
available to bear labeling when 8 or fewer dietary ingredients are
listed. However, when a dietary supplement is in a package that has
from 12 to 20 square inches of surface area available to bear labeling,
and the nutrition label lists more than 8 dietary ingredients, the use
of 6 point type would likely mean that more than 30 percent of the
total surface area of the package would have to be devoted to FDA
required information. Therefore, FDA is proposing in
Sec. 101.36(i)(2)(ii) to provide for the use of a smaller type size
(i.e., a minimum of 4.5 point type) in such circumstances.
It should be noted that the dimensions used by the agency are
inclusive of ``space available to bear labeling,'' not merely the
dimensions of the current label. When there is space on the container
to enlarge the current label (i.e., unused surface area available to
bear labeling), and the current label is not large enough to provide
the required information in accordance with format and type size
specifications, FDA considers it is reasonable to expect that the
manufacturer, packer, or distributor will increase the size of the
label.
This action (i.e., proposing to allow only those products with more
than eight dietary ingredients to use the smaller type size) is
supported by the petitioner referred to above (Ref. 11), who stated in
followup correspondence that, in a survey of its membership,
``responding companies agreed that eight or ten would be an appropriate
cutoff number, triggering the smaller type size for multinutrient
products,'' and that the responding companies believed that the cutoff
should be set at eight nutrients (Ref. 12).
The aforementioned citizen petition (Ref. 11) also requested that
Sec. 101.2(c) be amended to allow the type size requirements in
Sec. 101.2 (c)(1) through (c)(3) to apply to the labeling of dietary
supplements of vitamins and minerals. Current Sec. 101.36 and proposed
Sec. 101.36 include type size requirements for varying sizes of
packages of dietary supplements. Therefore, the agency is denying the
request to have the type size requirements in Sec. 101.2(c) pertain to
the nutrition labeling of dietary supplements.
The agency notes that Sec. 101.2 (c)(1) through (c)(3) were added
to the regulations in 1974 (39 FR 15268), in part, in an effort to
encourage manufacturers, packers, and distributors to include nutrition
labeling on conventional foods. However, because the final rule on
nutrition labeling (58 FR 2079) includes type size requirements, the
agency believes there is no longer a need for Sec. 101.2 (c)(1) through
(c)(3) to address the type size of information in the nutrition label.
The agency plans to amend Sec. 101.2 (c)(1) through (c)(3) accordingly
in a later document dealing with the labeling of conventional foods, as
well as dietary supplements, so that the rulemaking will be seen by the
greatest number of persons who may be affected by such action.
[[Page 67209]]
The agency is proposing, however, to amend Sec. 101.2 (b) and (f)
to include Sec. 101.36 among the list of sections noted. Section
101.2(b) states that the information required to appear under the
sections noted shall appear either on the principal display panel or
the information panel unless otherwise specified by regulation. Section
101.2(f) provides that when the label of any package is too small to
accommodate all of the information required under the sections noted,
FDA may establish by regulation an acceptable alternative method of
disseminating such information to the public (e.g., by the use of
smaller type size).
FDA is proposing a special labeling provision in proposed
Sec. 101.36(i)(2)(iii) for dietary supplements in packages that have a
surface area available to bear labeling of 40 or less square inches.
Under this provision, when the nutrition label on packages of this size
is presented on a label panel other than the principal display or
information panels, as allowed in Sec. 101.9(j)(13)(ii)(D), the
ingredient information must move in conjunction with the nutrition
label. This provision is in response to section 403(q)(5)(F)(iv) of the
act as added by the DSHEA, which states that nutrition information
shall immediately precede the ingredient information.
In proposed Sec. 101.36(i)(2)(iv), the agency is providing
additional flexibility for dietary supplements in packages that have a
surface area available to bear labeling of 40 or less square inches.
When it is not possible for primary (inner) containers of this size to
comply with the type size requirements, the agency is proposing that
type as small as needed may be used in the nutrition label as long as
the primary container is securely enclosed in outer packaging that
bears nutrition labeling in required type size. In the preamble of the
1994 dietary supplement final rule (59 FR 354 at 367), the agency
erroneously advised that it considered outer packaging that securely
encloses a primary container and that is not intended to be separated
from the primary container under conditions of retail sale to be the
equivalent of the product label. In these situations, the agency stated
that manufacturers did not have to repeat the nutrition information on
the primary container, although it encouraged them to do so to give
consumers easy access to the information once the container is removed
from the outer packaging. These statements were inconsistent with
section 201(k) of the act which defines the term ``label'' as ``* * * a
display of written, printed, or graphic matter upon the immediate
container of any article * * *'' as well as with previous agency policy
that requires that other required information appear on the primary
container (e.g., statement of identity, quantity of contents, name and
place of business of the manufacturer, packer, or distributor).
Therefore, nutrition labeling is required to appear on the label of the
primary container. However, consistent with FDA's intent in the
preamble of the 1994 dietary supplement final rule to allow
flexibility, the agency is proposing in Sec. 101.36(i)(2)(iv) that when
nutrition labeling is presented in required type size on outer
packaging that securely encloses a primary container and is not
intended to be separated from the primary container under conditions of
retail sale, the nutrition labeling on the primary container may use
type size as small as needed to accommodate all of the required
information on the label.
FDA is proposing to carry forward the special labeling provisions
in current Sec. 101.36(g) for foods in multiunit containers in proposed
Sec. 101.36(i)(3) and for foods sold in bulk containers in proposed
Sec. 101.36(i)(4).
FDA is proposing to add a special labeling provision in proposed
Sec. 101.36(i)(5) for foods in packages that have a total surface area
available to bear labeling greater than 40 square inches but whose
principal display panel and information panel do not provide sufficient
space to accommodate all required label information. This provision
cross references Sec. 101.9(j)(17), which was recently added to the
regulations (60 FR 17202, April 5, 1995) and allows the nutrition label
on such packages to be placed on any alternate panel that can be
readily seen by consumers. However, as previously discussed, ingredient
information must move in conjunction with the nutrition label.
Accordingly, proposed Sec. 101.36(i)(5) includes an exception to
Sec. 101.9(j)(17) whereby the ingredient list would continue to be
located immediately beneath the nutrition label, or, if there is
insufficient space below the nutrition label, immediately contiguous
and to the right of the nutrition label as proposed in Sec. 101.4(g).
K. Misbranding Provisions
Current Sec. 101.36(h), redesignated as Sec. 101.36(j) in this
proposed rulemaking, cross references the misbranding provisions of
Sec. 101.9(k) that were first proposed in the Federal Register of March
30, 1972 (37 FR 6493) and that were issued and published in the Federal
Register of January 19, 1973 (38 FR 2125). These provisions were based
on findings of fact and conclusions of law resulting from 1968-1970
Special Dietary Hearings (38 FR 2143). Following a comment period,
these regulations were modified and published as final regulations in
Sec. 1.17 (i)(2) through (i)(6) on March 14, 1973 (38 FR 6961). In the
reorganization and republication of Title 21 of the Code of Federal
Regulations that appeared in the Federal Register of March 15, 1977 (42
FR 14308), Sec. 1.17(i) was recodified as Sec. 101.9(i).
No changes were made to the original codified language of the
subject paragraphs until regulations implementing the 1990 amendments
were published on January 6, 1993, at which time FDA redesignated the
paragraphs as Sec. 101.9(k) and modified Sec. 101.9(k)(1) to
incorporate a reference to the general requirements for health claims
in Secs. 101.14 and 101.9(k)(5) in response to requests to remove
restrictions about the incorporation of substances such as rutin,
inositol, and other similar substances to conventional foods or dietary
supplements (38 FR 2478 at 2502 and 38 FR 2079 at 2166, respectively).
The current misbranding provisions in Sec. 101.9(k) state that a
food will be considered to be misbranded under sections 201(n) and
403(a) of the act if its label or labeling represents, suggests, or
implies: (1) That the food, because of the presence or absence of
certain dietary properties, is adequate or effective in the prevention,
cure, mitigation, or treatment of any disease or symptom except as
provided for in health claim regulations; (2) that a balanced diet of
ordinary foods cannot supply adequate amounts of nutrients; (3) that
the lack of optimum nutritive quality of a food, by reason of the soil
on which the food was grown, is or may be responsible for an inadequacy
or deficiency in the quality of the diet; (4) that the storage,
transportation, processing, or cooking of a food is or may be
responsible for an inadequacy or deficiency in the quality of the diet;
(5) that the food has special dietary properties when such properties
are of no significant value or need in human nutrition; and (6) that a
natural vitamin in a food is superior to an added or synthetic vitamin
or to differentiate in any way between vitamins naturally present from
those added.
FDA has reviewed these misbranding provisions in light of the DSHEA
and current scientific knowledge. As a result of its review, the agency
is proposing to delete current Sec. 101.9 (k)(2) and (k)(5). Section
101.9(k)(2) states that a food is misbranded if its label or labeling
represents, suggests, or implies that a
[[Page 67210]]
balanced diet of ordinary foods cannot supply adequate amounts of
nutrients. The agency is deleting this provision based on the
acknowledgment by scientific and consensus groups that there are
certain situations in which the use of dietary supplements may be
needed for persons to obtain adequate nutrient intakes. For example,
the National Academy of Sciences has stated in the 10th edition of
``Recommended Dietary Allowances'' that ``In a few cases where
deficiency is commonly observed (e.g., iron deficiency in women), food
fortification and individual supplementation are appropriate'' (Ref.
13, p. 14). Also, the ``Dietary Guidelines for Americans'' states that
supplements may be needed by pregnant or lactating women; other women
in their childbearing years; people who are unable to be active and eat
little food; and people, especially older people, who take medicines
that interact with nutrients (Ref. 14). These conclusions are supported
by other documents such as ``Diet and Health, Implications for Reducing
Chronic Disease Risk'' (Ref. 15, pp. 509-525) and a task force
representing the American Dietetic Association, National Council
Against Health Fraud, Inc., Society for Nutrition Education, American
Society for Clinical Nutrition, and the American Institute of Nutrition
(Ref. 16).
Section 101.9(k)(5) states that a food is misbranded if its label
or labeling represents, suggests, or implies that ``the food has
dietary properties when such properties are of no significant value or
need in human nutrition.'' New section 403(r)(6) of the act, which was
added by the DSHEA, provides for statements that, in part, describe the
role of a nutrient or dietary ingredient intended to affect the
structure or function in humans or which describe general well-being
from consumption of a nutrient or dietary ingredient. There is no
requirement in this new section that the subject of the statement be of
significant value or need in human nutrition. Therefore, to eliminate
any inconsistency between section 403(r)(6) of the act and the agency's
regulations, FDA is proposing to delete Sec. 101.9(k)(5). If it adopts
the proposed deletion of Sec. 101.9 (k)(2) and (k)(5), the agency will
redesignate current Sec. 101.9(k)(3) as (k)(2), Sec. 101.9(k)(4) as
(k)(3), and Sec. 101.9(k)(6) as (k)(4).
FDA is not aware of grounds for eliminating the other provisions
under Sec. 101.9(k). However, if information is provided in comments to
this proposed rule that persuades the agency that the findings of fact
and conclusions of law resulting from 1968-1970 special dietary
hearings (38 FR 2143) that underlie the other provisions in
Sec. 101.9(k) are no longer supportable, FDA will consider deleting the
subject provisions in the final rule.
IV. Conforming Amendments
As previously discussed (in section III.J. of this document), FDA
is proposing to amend Sec. 101.2 (b) and (f) to include Sec. 101.36 in
the lists of sections noted. The agency is also proposing to amend
Sec. 101.2(d)(1), which states that all required label information
shall appear on the principal display panel or the information panel.
This paragraph was recently amended in a document entitled ``Food
Labeling; Placement of the Nutrition Label on Food Packages'' (60 FR
17202, April 5, 1995) to exclude from its coverage products that are
exempt under Sec. 101.9(j)(13), which allows flexibility in the
placement of the nutrition label on packages that have less than 40
square inches of space available to bear labeling, and
Sec. 101.9(j)(17), which allows the nutrition label on packages that
have a total surface area available to bear labeling greater than 40
square inches but whose principal display panel and information panel
do not provide sufficient space to accommodate all required information
to be placed on any alternate panel that can be readily seen by
consumers. Inasmuch as proposed Sec. 101.36 (i)(2) and (i)(5) cross
reference Sec. 101.9 (j)(13) and (j)(17), respectively, and therefore
similarly exclude dietary supplements that meet the criteria in
Sec. 101.9 (j)(13) and (j)(17) from coverage of Sec. 101.2(d)(1), FDA
is proposing to amend that paragraph to cite Sec. 101.36 (i)(2) and
(i)(5) as exceptions.
Section 101.9(j)(6) of the nutrition labeling regulations lists as
an exemption: Dietary supplements of vitamins and minerals that have an
RDI as established in Sec. 101.9(c)(8)(iv) of this section or a DRV as
established in Sec. 101.9(c)(9) of this section shall be labeled in
compliance with Sec. 101.36, except that dietary supplements of
vitamins and minerals in food in conventional form (e.g., a breakfast
cereals), of herbs, and of other similar nutritional substances shall
conform to the labeling of this section.
As discussed previously (in section III. of this document), the
definition of dietary supplements in new section 201(ff) of the act
broadens the coverage of proposed Sec. 101.36 and eliminates
differentiation based on the form of the food. Therefore, FDA is
proposing to amend Sec. 101.9(j)(6) to exempt all dietary supplements
from coverage under Sec. 101.9, noting that such foods must be labeled
in compliance with Sec. 101.36.
The agency is also proposing to amend Sec. 101.65(b)(4) to modify
the example given of the statement of identity of a dietary supplement
of vitamin C to incorporate the term ``dietary supplement'' in
accordance with proposed Sec. 101.3(g). The amended paragraph will
state:
A statement of identity for a food in which an ingredient
constitutes essentially 100 percent of a food (e.g., ``corn oil,''
``oat bran,'' ``dietary supplement of vitamin C 60 mg tablet'').
V. Regulatory Review Under Executive Order 12866
This proposed rule has been deemed by the Office of Information and
Regulatory Affairs (OIRA) of the Office of Management and Budget to be
a significant regulatory action pursuant to Section 3(f)(4) of
Executive Order 12866 because it raises novel legal and/or policy
issues arising out of a legal mandate, namely the DSHEA, or principles
set forth in Executive Order 12866. Accordingly, this proposed rule has
been formally reviewed by OIRA pursuant to the provisions of Executive
Order 12866.
VI. Economic Impact
FDA has examined the economic implications of the proposed rule as
required by Executive Order 12866 and the Regulatory Flexibility Act
(Pub. Law 96-354). Executive Order 12866 directs agencies to assess all
costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects; distributive impacts; and equity). The
Regulatory Flexibility Act requires analyzing options for regulatory
relief for small businesses. FDA finds that this proposed rule is not
an economically significant rule as defined by Executive Order 12866.
In accordance with the Regulatory Flexibility Act, the agency certifies
that the proposed rule will not have a significant impact on a
substantial number of small businesses.
There are several different types of products that may be
considered to be dietary supplements. These products include, but are
not limited to, vitamin and mineral supplements, herbal products, and
products that contain other similar nutritional substances. Estimates
of the number of such products range from 4,000 to over 25,000 such
products. Similarly, estimates of the number of dietary supplement
manufacturers range from 150 to 600.
[[Page 67211]]
A. Costs
Categories of costs for relabeling include administrative,
analytical, printing, inventory disposal, and reformulation. The
administrative costs associated with a labeling regulation result from
the incremental administrative labor expended in order to comply with
it. The administrative activities that FDA anticipates will be
undertaken in response to a change in regulation include: Identifying
the underlying policy of the regulation, interpreting that policy
relative to a firm's products, determining the scope and coverage
related to product labels, establishing a corporate position,
formulating a method for compliance, and managing the compliance
method. Longer compliance periods decrease administrative costs because
firm executives often delegate downward decisions that are less
immediate. Many firms estimate that administrative effort would be
twice as high for a 6-month compliance period as for a 12- month
compliance period (Ref. 17). FDA is proposing that any final rule that
may issue based upon this proposal become effective January 1, 1997.
This effective date leads to a compliance period of approximately 1
year. FDA estimates that for a 1-year compliance period, manufacturers
of dietary supplements will incur administrative costs of $425 per firm
for each of between 150 and 600 firms, or a total of between
approximately $65,000 and $300,000.
FDA requests comments on whether dietary supplement products will
undergo analytical testing as a result of these regulations if
implemented as proposed. Dietary supplement products need only list
those nutrients present in significant amounts. The agency assumes that
manufacturers of vitamin and mineral supplements are already aware of
the nutritional content of their products, and that those products will
not undergo any additional testing. However, it is possible that herbal
and other botanical products may undergo additional testing for their
nutritional content. The agency estimates that between 4,000 and 20,000
products may undergo testing once every 5 years for a total discounted
analytical cost over the next 20 years of between $8.3 and $41 million
(7 percent discount rate).
However, many herbs do not contain significant amounts of the
nutrients that must be listed in the nutrition label, and this fact may
be determinable from reference works without testing. Thus, some herbal
and botanical products may not require nutrient testing at all. FDA
requests comments on this issue.
FDA estimates that printing/redesign costs for dietary supplement
manufacturers would be approximately $1,000 per label for each of
75,000 labels with a 6-month compliance period, or a total of $75
million. However, the length of the compliance period determines a
firm's ability to combine planned label changes with mandated changes.
Therefore, incremental labeling and redesign activities are less costly
with lengthier compliance periods. With the proposed compliance period
of 1 year, printing and redesign costs would be approximately half that
of a 6-month compliance period, or approximately $37.5 million.
FDA estimates the cost of inventory disposal associated with a 1-
year compliance period to be approximately $13 million. However,
manufacturers of these products have been aware of the potential for
regulated labeling changes due to recent regulatory and legal
activities. FDA assumes that the majority of these manufacturers have
been taking the necessary steps to reduce their label inventories since
January of 1994, the date of publication of FDA's previous regulations
regarding the labeling of dietary supplements. Therefore, the cost of
inventory disposal is more accurately calculated on a compliance period
of 2 years, or approximately $6.5 million.
FDA has examined the impact of the proposed regulations on dietary
supplement manufacturers and has determined that administrative costs
would be between $65,000 and $300,000, discounted analytical testing
costs would be between $8.3 and $41 million over the next 20 years (7
percent discount rate), printing and redesign costs would be $37.5
million, and inventory disposal costs would be $6.5 million. Therefore,
total discounted costs are estimated to be between $52 and $85 million.
B. Benefits
According to Congress as stated in the DSHEA, almost 50 percent of
the 260,000,000 Americans regularly consume dietary supplements of
vitamins, minerals, or herbs as a means of improving their nutrition.
Although almost all dietary supplements of vitamins and minerals
currently contain substantial nutrition information, many other dietary
supplements do not typically provide such information. Moreover, the
information that is presented is not presented in any particular order
or following any particular format.
This proposed regulation will benefit consumers by ensuring that
adequate and complete nutrition information is provided accurately and
consistently in order to aid consumers in their dietary choices. As
consumers are given more informative labeling in an improved format,
uncertainty and ignorance concerning the ingredient and nutrient
content of the products they consume will decrease, and some consumers
may select more nutritious, healthier products. Moreover, since FDA
began its food labeling initiative in 1989, a theme that has been
consistently sounded is that consumers will benefit from nutrition
labeling that is presented in a consistent manner, not only within a
particular product class but also across all foods. Such a consistent
manner will not only help to make the information presented more
comprehensible but will facilitate comparisons among food products.
This proposed rule, if adopted, will help to ensure that dietary
supplements are nutrition labeled in a manner that is as consistent as
possible with other foods, yet, with such features as the listing of
substances for which no daily reference amount has been established, in
a manner that is fully tailored to the special nature of those
products.
All told, this action, if adopted, will benefit consumers by
ensuring that nutrition labeling is provided on dietary supplements in
a manner that will help consumers to follow healthy dietary practices.
C. Regulatory Flexibility
According to the Regulatory Flexibility Act, the definition of
small business is a business independently owned and operated and not
dominant in its field. The Small Business Administration (SBA) has set
size standards for most business categories through use of four-digit
Standard Industrial Classification codes. For most food processing
industries, a business is considered small if it has fewer than 500
employees. For dietary supplements, a business is considered small if
it has fewer than 750 employees. FDA estimates that the majority of
manufacturers of dietary supplements meet the SBA definition of a small
business.
The agency has published an exemption from mandatory nutrition
labeling for small businesses in Sec. 101.9(j)(1) (incorporated in this
proposed rule in Sec. 101.36(h)(1)) and has proposed an exemption for
low-volume food products of small businesses in Sec. 101.9(j)(18) (59
FR 11872, March 14, 1994) (incorporated in this proposed rule in
Sec. 101.36(h)(2)). As of the date this subject rulemaking is proposed
to become effective, January 1, 1997,
[[Page 67212]]
Sec. 101.9(j)(1) (and proposed Sec. 101.36(h)(1)) will only apply to
retailers. Proposed Sec. 101.9(j)(18) (and proposed Sec. 101.36(h)(2))
will apply to manufacturers, packers, distributors, or retailers of low
volume products, defined as fewer than 200,000 units, produced by firms
with fewer than 200 employees. As of May 1997, criteria for meeting the
definition of low volume product will be reduced to 100,000 units and
100 employees. FDA does not have information to show how many dietary
supplement products would be exempted under this provision. The agency
believes that several herbal and botanical products will have unit
sales and firm size low enough to meet this definition. Therefore, many
of the products produced by businesses defined as small by the SBA will
not be subject to the rules if issued as proposed.
The agency requests information regarding the impact of this
regulation on small firms. Most of the costs associated with labeling
regulations are fixed costs which are typically more burdensome for
small firms than for large firms because of the smaller sales base on
which to spread costs. Estimates of annual sales for the dietary
supplement industry range from $2.9 billion to over $4 billion. The
estimated cost of between $52 and $85 million is approximately one to
three percent of industry annual sales. In relation to the volume of
sales, this amount does not appear to represent a significant cost.
D. Summary
Total discounted costs of this regulation is estimated to be
between $52 and $85 million over the next 20 years (7 percent discount
rate). These costs include administrative, analytical, printing, and
inventory disposal costs. The benefits are improved and more consistent
information with which consumers can refine their choices for health or
other reasons. FDA is unable to quantify this benefit.
FDA has analyzed the costs and benefits of this proposed rule and
has determined that it does not constitute an economically significant
rule as defined by Executive Order 12866.
FDA has also analyzed the impacts on small firms according to the
Regulatory Flexibility Act and has determined that the proposed rules
will probably not have an adverse impact on a substantial number of
small businesses. Nonetheless, the agency requests comments on the
impact on small businesses and any burden-reducing options.
VII. Environmental Impact
The agency has determined under Sec. 25.24(a)(11) that this action
is of a type that does not individually or cumulatively have a
significant effect on the human environment. Therefore, neither an
environment assessment nor an environmental impact statement is
required.
VIII. Paperwork Reduction Act of 1995
This proposed rule contains information collections that are
subject to review by the Office of Management and Budget (OMB) under
the Paperwork Reduction Act of 1995 (Pub. L. 104-13). In particular,
the proposed regulations would require that manufacturers and
distributors of dietary supplements disclose information on the levels
of specific nutrients on the label or in labeling of their products
with some exceptions. Additionally, the proposed regulations would
require that these firms disclose the quantity of other dietary
ingredients in their dietary supplements. Therefore, in accordance with
5 CFR Part 1320, FDA is providing below the title, description, and
respondent descriptions for the information collection requirements
that will be submitted to OMB along with an estimate of the annual
collection of information burden. Included in the estimate is the time
for reviewing instructions, searching existing data sources, gathering
necessary information, and disclosure of the information.
FDA is soliciting comments to: (1) Evaluate whether the proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information will
have practical utility; (2) evaluate the accuracy of the agency's
estimate of the burden of the proposed collection of information; (3)
evaluate the quality, utility, and clarity of the information to be
collected; and (4) minimize the burden of the collection of information
on those who are to respond, including through the use of automated
collection techniques or other forms of information technology, when
appropriate.
Title: Requirements for Nutrition and Ingredient Labeling of
Dietary Supplements.
Description: The proposed rule, Sec. 101.36, would require that
most dietary supplements provide on their labels and in their labeling
information on the quantity of specific nutrients present in them,
along with daily value for each, and the quantity of other dietary
ingredients. This requirement is being proposed to implement the
requirements of the 1990 amendments and the DSHEA.
The DSHEA requires that dietary supplements provide information on
their labels as to the level of nutrients and other dietary ingredients
present in them. The DSHEA requires that FDA issue regulations to
implement these requirements within specific timeframes. Section
101.36(b)(2) specifies the nutrients for which amount must be present
on the labels of dietary supplements and Sec. 101.36(b)(3) provides for
the listing of the quantity of other dietary ingredients, respectively.
Other paragraphs of Sec. 101.36 provide information to assist
manufacturers and distributors of dietary supplements to determine the
amount of nutrient that their products contain and that should be
disclosed on the labels of the products.
Description of Respondents: Persons and businesses, including small
businesses.
----------------------------------------------------------------------------------------------------------------
No. of Total
No. of responses Total Hours per Total operating
Title 21 respondents per annual response annual maintenance
respondent responses hours costs
----------------------------------------------------------------------------------------------------------------
101.36............................ 600 40 24,000 4 96,000 $51,616,000
----------------------------------------------------------------------------------------------------------------
FDA estimates that each supplier of dietary supplements will revise
the labels for each product that is not otherwise exempt to comply with
the requirements for nutrition labeling within the first year after
publication of a final rule. The agency expects that the number of
respondents and corresponding annual burden hours will decrease over
succeeding years because it does not believe that firms will modify the
composition of each of their products and revise the labeling for each
of their products each year. FDA has estimated the total annual
operating and
[[Page 67213]]
maintenance costs of $51,616,000 based on maximum estimated relabeling
costs of $34 million, all of which will be incurred in the first year;
annualized analytical costs of $13.2 million; and labor and overhead
costs of $4.616 million for the first year. The agency believes that
these costs will decrease significantly over succeeding years. The
agency does not believe that this proposed regulation requires capital
costs on the part of respondents.
The agency has submitted copies of the proposed rule to OMB for its
review of these requirements. Interested persons are requested to send
comments regarding information collection by Janaury 29, 1996, but not
later than February 26, 1996 to the Office of Information and
Regulatory Affairs, OMB, New Executive Office Building, rm. 10235,
Washington, DC 20503, ATTN: Desk Officer for FDA.
IX. Effective Date
FDA is proposing to make this regulation effective on January 1,
1997. This date is consistent with section 7(e) of the DSHEA, which
states that dietary supplements must be labeled in accordance with its
provisions after December 31, 1996.
X. Comments
Interested persons may, on or before March 13, 1996 submit to the
Dockets Management Branch (address above) written comments regarding
this proposal. Two copies of any comments are to be submitted, except
that individuals may submit one copy. Comments are to be identified
with the docket number found in brackets in the heading of this
document. Received comments may be seen in the office above between 9
a.m. and 4 p.m., Monday through Friday.
XI. References
The following references have been placed on display in the Dockets
Management Branch (address above) and may be seen by interested persons
between 9 a.m. and 4 p.m., Monday through Friday.
1. Lehninger, A. L., ``Biochemistry,'' Second Edition, pp. 57-
58, Worth Publishers, Inc., New York, NY, 1977.
2. Memorandum of telephone conversation between Mr. Mark
Blumenthal, American Botanical Council, and Susan Thompson, FDA,
March 16, 1995.
3. Bass, I. S., A. L. Young, and S. C. Stolzer, Piper & Marbury,
letter to F. E. Scarbrough, January 31, 1995.
4. Covington & Burling, ``Dietary Supplement Health and
Education Act of 1994,'' October 12, 1994.
5. FDA trade correspondence letter (387), June 23, 1942.
6. FDA opinion letter, Taylor M. Quinn, Office of Compliance,
Bureau of Foods, to Stanley Skelskie, March 30, 1979.
7. FDA opinion letter, Taylor M. Quinn, Office of Compliance,
Bureau of Foods, to Stanley Skelskie, January 25, 1980.
8. Greuter, W., editor (chairperson), International Code of
Botanical Nomenclature (Tokyo Code) Adopted by the 15th
International Botanical Congress, Koeltz Scientific Books, D-61453
Konigstein, Germany, 1994.
9. U. S. Pharmacopeial Convention, Inc. USP XXII, NF XVII, The
United States Pharmacopeia, The National Formulary, General Notices
and Requirements Applying to Standards, Test, Assays, and Other
Specifications of the United States Pharmacopeia, pp. 1 to 3,
January 1, 1990.
10. Tanner, J. T., letter to V. Srinivasan, U.S. Pharmacopeial
Convention, Inc., May 7, 1991.
11. Citizen Petition, Docket No. 94P-0110/CP1.
12. Dickinson, Annette, Council for Responsible Nutrition,
Letter to Susan Thompson, FDA, February 28, 1995.
13. Subcommittee on the 10th Edition of the RDA's, Food and
Nutrition Board, Commission of Life Sciences, National Research
Council, ``Recommended Dietary Allowances,
FR Doc. 95-31196 Food Labeling; Statement of Identity, Nutrition Labeling and Ingredient Labeling of Dietary Supplements
10th Ed.,'' p. 14,
Washington, DC, National Academy Press, 1989.
14. U.S. Department of Agriculture and U.S. Department of Health
and Human Services, ``Nutrition and Your Health, Dietary Guidelines
for Americans,'' Home and Garden Bulletin No. 232, U.S. Government
Printing Office, Washington DC, 1990.
15. Committee on Diet and Health, Food and Nutrition Board,
Commission of Life Sciences, National Research Council, ``Diet and
Health, Implications for Reducing Chronic Disease Risk,'' Chapter
18, Dietary Supplements, National Academy Press, Washington, DC,
1989.
16. ``Recommendations concerning supplement usage: ADA
statement,'' Journal of the American Dietetic Association, 87:1742-
3, 1987.
17. Center for Economics Research, ``Compliance Costs of Food
Labeling Regulations Final Report,'' prepared under FDA Contract No.
223-87-2097, Washington, DC, FDA, DHHS, 1991.
List of Subjects in 21 CFR Part 101
Food labeling, Nutrition, Reporting and recordkeeping requirements.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs, it is
proposed that 21 CFR part 101 be amended as follows:
PART 101--FOOD LABELING
1. The authority citation for 21 CFR part 101 is revised to read as
follows:
Authority: Secs. 4, 5, 6 of the Fair Packaging and Labeling Act
(15 U.S.C. 1453, 1454, 1455); secs. 201, 301, 402, 403, 409, 501,
502, 505, 701 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
321, 331, 342, 343, 348, 351, 352, 355, 371).
1. Section 101.2 is amended by revising paragraphs (b), (d)(1), and
(f) to read as follows:
Sec. 101.2 Information panel of package form food.
* * * * *
(b) All information required to appear on the label of any package
of food pursuant to Secs. 101.4, 101.5, 101.8, 101.9, 101.13, 101.17,
101.36, subpart D of part 101, and part 105 of this chapter shall
appear either on the principal display panel or on the information
panel, unless otherwise specified by regulations in this chapter.
* * * * *
(d)(1) Except as provided by Sec. 101.9(j)(13) and (j)(17) and
Sec. 101.36(i)(2) and (i)(5), all information required to appear on the
principal display panel or on the information panel under this section
shall appear on the same panel unless there is insufficient space. In
determining the sufficiency of the available space, except as provided
by Sec. 101.9(j)(17) and Sec. 101.36(i)(5), any vignettes, designs, and
other nonmandatory label information shall not be considered. If there
is insufficient space for all of this information to appear on a single
panel, it may be divided between these two panels except that the
information required under any given section or part shall all appear
on the same panel. A food whose label is required to bear the
ingredient statement on the principal display panel may bear all other
information specified in paragraph (b) of this section on the
information panel.
* * * * *
(f) If the label of any package of food is too small to accommodate
all of the information required by Secs. 101.4, 101.5, 101.8, 101.9,
101.13, 101.17, 101.36, subpart D of part 101, and part 105 of this
chapter, the Commissioner may establish by regulation an acceptable
alternative method of disseminating such information to the public,
e.g., a type size smaller than one-sixteenth inch in height, or
labeling attached to or inserted in the package or available at the
point of purchase. A petition requesting such a regulation, as an
amendment to this paragraph, shall be submitted under part 10 of this
chapter.
2. Section 101.3 is amended by adding new paragraph (g) to read as
follows:
Sec. 101.3 Identity labeling of food in packaged form.
* * * * *
(g) When a food is marketed as a dietary supplement, the label
shall bear the term ``dietary supplement'' as a part of the statement
of identity in
[[Page 67214]]
conformance with the provisions of paragraph (d) of this section.
3. Section 101.4 is amended by revising paragraph (a)(1) and adding
new paragraphs (g) and (h) to read as follows:
Sec. 101.4 Food; designation of ingredients.
(a)(1) Ingredients required to be declared on the label or labeling
of a food, including foods that comply with standards of identity,
except those ingredients exempted by Sec. 101.100, shall be listed by
common or usual name in descending order of predominance by weight on
either the principal display panel or the information panel in
accordance with the provisions of Sec. 101.2, except that ingredients
in dietary supplements that are listed in the nutrition label in
accordance with Sec. 101.36 need not be repeated in the ingredient
list. Paragraph (g) of this section describes the ingredient list on
dietary supplement products.
* * * * *
(g) When present, the ingredient list on dietary supplement
products shall be located immediately below the nutrition label, or, if
there is insufficient space below the nutrition label, immediately
contiguous and to the right of the nutrition label and shall be
preceded by the word ``Ingredients,'' unless some ingredients (i.e.,
sources) are identified within the nutrition label in accordance with
Sec. 101.36(d), in which case the ingredients listed outside the
nutrition label shall be in a list preceded by the words ``Other
Ingredients.'' Ingredients in dietary supplements that are not dietary
ingredients or that do not contain dietary ingredients, such as
excipients, fillers, artificial colors, artificial sweeteners, flavors,
or binders, shall be included in the ingredient list.
(h) The common or usual name of ingredients of dietary supplements
that are botanicals (including fungi and algae) shall be immediately
followed by parenthetical statements of:
(1) The Latin binomial name of the plant. Any name in Latin form
shall be in accordance with internationally accepted rules on
nomenclature, such as those found in the International Code of
Botanical Nomenclature, and shall include the designation of the author
or authors who published the Latin name, when appropriate; and
(2) The part of the plant (e.g., root, leaves) from which the
dietary ingredient is derived (e.g., ``Garlic (Allium sativum L.)
(bulb)''), except that this designation is not required for algae. The
name of the part of the plant shall be expressed in English (e.g.,
``flower'' rather than ``flos'').
(3) On labels of single-ingredient dietary supplements that do not
include an ingredient list, the required identification of the Latin
binomial name and the part of the plant may be prominently placed on
the principal display panel or information panel, or included in the
nutrition label.
4. Section 101.9 is amended by revising paragraph (j)(6), by
removing paragraphs (k)(2) and (k)(5), and by redesignating paragraphs
(k)(3), (k)(4), and (k)(6) as (k)(2), (k)(3), and (k)(4), respectively,
to read as follows:
Sec. 101.9 Nutrition labeling of food.
* * * * *
(j) * * *
(6) Dietary supplements, except that such foods shall be labeled in
compliance with Sec. 101.36.
* * * * *
5. Section 101.12 is amended in paragraph (b), Table 2, by revising
the entry ``Dietary supplements not in conventional food form'' under
the subheading ``Miscellaneous category'' to read as follows:
Sec. 101.12 Reference amounts customarily consumed per eating
occasion.
* * * * *
(b) * * *
Table 2.--Reference Amounts Customarily Consumed Per Eating Occasion: General Food Supply 1,2,3,4
----------------------------------------------------------------------------------------------------------------
Product category Reference amount Label statement \5\
----------------------------------------------------------------------------------------------------------------
* * * * * *
*
Miscellaneous Category--
* * * * * *
*
Dietary supplements.......................... The maximum amount recommended, ______ tablet(s) ______
as appropriate, on the label capsule(s), ____ packet(s),
for consumption per eating tsp(s) (______g), etc.
occasion, or, in the absence of
recommendations, 1 unit, e.g.,
tablet, capsule, packet,
teaspoonsful, etc.
* * * * * *
*
----------------------------------------------------------------------------------------------------------------
\1\ These values represent the amount (edible portion) of food customarily consumed per eating occasion and were
primarily derived from the 1977-78 and the 1987-1988 Nationwide Food Consumption Surveys conducted by the U.S.
Department of Agriculture.
\2\ Unless otherwise noted in the Reference Amount column, the reference amounts are for the ready-to-serve or
almost ready-to-serve form of the product (i.e, heat and serve, brown and serve). If not listed separately,
the reference amount for the unprepared form (e.g., dry mixes; concentrates; dough; batter; dry, fresh, and
frozen pasta) is the amount required to make the reference amount of the prepared form. Prepared means
prepared for consumption (e.g., cooked).
\3\ Manufacturers are required to convert the reference amount to the label serving size in a household measure
most appropriate to their specific product using the procedures in 21 CFR 101.9(b).
\4\ Copies of the list of products for each product category are available from the Office of Food Labeling (HFS-
150), Center for Food Safety and Applied Nutrition, Food and Drug Administration, 200 C St. SW., Washington,
DC 20204.
\5\ The label statements are meant to provide guidance to manufacturers on the presentation of serving size
information on the label, but they are not required. The term ``piece'' is used as a generic description of a
discrete unit. Manufacturers should use the description of a unit that is most appropriate for the specific
product (e.g., sandwich for sandwiches, cookie for cookies, and bar for ice cream bars). The guidance provided
is for the label statement of products in ready-to-serve or almost ready-to-serve form. The guidance does not
apply to the products which require further preparation for consumption (e.g., dry mixes, concentrates) unless
specifically stated in the product category, reference amount, or label statement column that it is for these
forms of the product. For products that require further preparation, manufacturers must determine the label
statement following the rules in Sec. 101.9(b) using the reference amount determined according to Sec.
101.12(c).
[[Page 67215]]
* * * * *
6. Section 101.36 is revised to read as follows:
Sec. 101.36 Nutrition labeling of dietary supplements.
(a) The label of a dietary supplement shall bear nutrition labeling
in accordance with this regulation unless an exemption is provided for
the product in paragraph (h) of this section.
(b) The declaration of nutrition information on the label and in
labeling shall contain the following information, using the subheadings
and the format specified in paragraph (e) of this section.
(1) Serving size. (i) The subheading ``Serving Size'' shall be
placed under the heading ``Supplement Facts'' and aligned on the left
side of the nutrition label. The serving size shall be determined in
accordance with Secs. 101.9(b) and 101.12(b), Table 2. Serving size for
dietary supplements shall be expressed using a term that is appropriate
for the form of the supplement, such as ``tablets,'' ``capsules,''
``packets,'' or ``teaspoonfuls.''
(ii) The subheading ``Servings Per Container'' shall be placed
under the subheading ``Serving Size'' and aligned on the left side of
the nutrition label, except that this information need not be provided
when it is stated in the net quantity of contents declaration.
(2) Information on dietary ingredients that have a Reference Daily
Intake (RDI) or a Daily Reference Value (DRV) as established in
Sec. 101.9(c) and their subcomponents (hereinafter referred to as
``(b)(2)-dietary ingredients'').
(i) The (b)(2)-dietary ingredients to be declared, that is, total
calories, calories from fat, total fat, saturated fat, cholesterol,
sodium, total carbohydrate, dietary fiber, sugars, protein, vitamin A,
vitamin C, calcium and iron, shall be declared when they are present in
a dietary supplement in quantitative amounts by weight that exceed the
amount that can be declared as zero in nutrition labeling of foods in
accordance with Sec. 101.9(c). Calories from saturated fat and
polyunsaturated fat, monounsaturated fat, soluble fiber, insoluble
fiber, sugar alcohol, and other carbohydrate may be declared, but they
shall be declared when a claim is made about them. Any other vitamins
or minerals listed in Sec. 101.9(c)(8)(iv) or in Sec. 101.9(c)(9) may
be declared, but they shall be declared when they are added to the
product for purposes of supplementation, or when a claim is made about
them. Any (b)(2)-dietary ingredients that are not present, or that are
present in amounts that can be declared as zero in Sec. 101.9(c), shall
not be declared (e.g., amounts corresponding to less than 2 percent of
the RDI for vitamins and minerals). Protein shall not be declared on
labels of products that, other than ingredients added solely for
technological reasons, contain only individual amino acids.
(A) The names and the quantitative amounts by weight of each
(b)(2)-dietary ingredient shall be presented under the heading ``Amount
Per Serving.'' The heading may be centered over the column of
quantitative amounts, described by paragraph (b)(2)(ii) of this
section, if space permits. When the serving size of the product is one
unit (e.g., one tablet), a heading consistent with the declaration of
the serving size, such as ``Amount Per Tablet'' or ``Each Tablet
Contains,'' may be used in place of the heading ``Amount Per Serving.''
Other appropriate terms, such as capsule, packet, or teaspoonful, also
may be used in place of the term ``Serving.''
(B) The names of dietary ingredients that are declared under
paragraph (b)(2)(i) of this section shall be presented in a column
aligned on the left side of the nutrition label in the order and manner
of indentation specified in Sec. 101.9(c) except that calcium and iron
shall follow pantothenic acid, and sodium and potassium shall follow
chloride. This results in the following order for vitamins and
minerals: Vitamin A, vitamin C, vitamin D, vitamin E, vitamin K,
thiamin, riboflavin, niacin, vitamin B6, folate, vitamin B12, biotin,
pantothenic acid, calcium, iron, phosphorus, iodine, magnesium, zinc,
selenium, copper, manganese, chromium, molybdenum, chloride, sodium,
and potassium. The (b)(2)-dietary ingredients shall be listed according
to the nomenclature specified in Sec. 101.9.
(1) When ``Calories'' are declared, they shall be listed first in
the column of names, beneath a light bar separating the heading
``Amount Per Serving'' from the list of names. When ``Calories from
fat'' or ``Calories from saturated fat'' are declared, they shall be
indented beneath ``Calories.''
(2) The following synonyms may be added in parentheses immediately
following the name of these (b)(2)-dietary ingredients: Vitamin C
(ascorbic acid), thiamin (vitamin B1), riboflavin (vitamin B2), folate
(folacin or folic acid), and calories (energy). Energy content per
serving may be expressed in kilojoules units, added in parentheses
immediately following the statement of caloric content.
(3) Beta-carotene may be declared as the percent of vitamin A that
is present as beta-carotene, except that the declaration is required
when a claim is made about beta-carotene. When declared, the percent
shall be declared to the nearest whole percent, immediately adjacent to
or beneath the name vitamin A (e.g., ``Vitamin A (90% as beta-
carotene)''). The amount of beta-carotene in terms of international
units (IU) may be included in parentheses following the percent
statement (e.g., ``Vitamin A (90% (4500 IU) as beta-carotene)'').
(ii) The number of calories, if declared, and the quantitative
amount by weight per serving of each dietary ingredient required to be
listed under paragraph (b)(2)(i) of this section shall be presented in
a separate column aligned to the right of the column of names. The
quantitative amounts by weight shall represent the weight of the
dietary ingredient rather than the weight of the source of the dietary
ingredient (e.g., the weight of calcium rather than that of calcium
carbonate).
(A) These amounts shall be expressed in the increments specified in
Sec. 101.9 (c)(1) through (c)(7), which includes increments for sodium
and potassium.
(B) The amounts of vitamins and minerals, excluding sodium and
potassium, shall be the actual amount of the vitamin or mineral
included in one serving of the product, using the units of measurement
and the levels of significance given in Sec. 101.9(c)(8)(iv), except
that zeros following decimal points may be dropped, and additional
levels of significance may be used when the number of decimal places
indicated is not sufficient to express lower amounts (e.g., the RDI for
zinc is given in whole milligrams (mg), but the quantitative amount may
be declared in tenths of a mg).
(iii) The percent of the Daily Value of all dietary ingredients
declared under paragraph (b)(2)(i) of this section shall be listed
except that the percent for protein may be omitted as provided in
Sec. 101.9(c)(7), no percent shall be given for subcomponents for which
DRV's have not been established (e.g., sugars), and, for labels of
dietary supplements of vitamins and minerals that are represented or
purported to be for use by infants, children less than 4 years of age,
or pregnant or lactating women, no percent shall be given for total
fat, saturated fat, cholesterol, total carbohydrate, dietary fiber,
sodium, potassium, vitamin K, chloride, chromium, manganese,
molybdenum, or selenium.
(A) When information on the percent of Daily Values is listed, this
[[Page 67216]]
information shall be presented in one column aligned under the heading
of ``% Daily Value'' and to the right of the column of amounts. The
headings ``% Daily Value (DV),'' ``% DV,'' ``Percent Daily Value,'' or
``Percent DV'' may be substituted for ``% Daily Value.'' The heading
``% Daily Value'' shall be placed on the same line as the heading
``Amount Per Serving.''
(B) The percent of Daily Value shall be calculated by dividing the
quantitative amount by weight of each (b)(2)-dietary ingredient by the
RDI as established in Sec. 101.9(c)(8)(iv) or the DRV as established in
Sec. 101.9(c)(9) for the specified dietary ingredient and multiplying
by 100, except that the percent of Daily Value for protein, when
present, shall be calculated as specified in Sec. 101.9(c)(7)(ii). The
actual quantitative amount by weight of each dietary ingredient shall
be used in this calculation, except that for total fat, saturated fat,
cholesterol, sodium, potassium, total carbohydrate, and dietary fiber,
the percent shall be calculated by dividing either the quantitative
amount by weight declared on the label or the actual amount (i.e.,
before rounding) by the DRV for the dietary ingredient. The numerical
value shall be followed by the symbol for percent (i.e., %).
(C) The percentages based on RDI's and on DRV's shall be expressed
to the nearest whole percent, except that for dietary ingredients for
which DRV's have been established, ``Less than 1%'' or ``<1%'' shall be
used to declare the ``% Daily Value'' when the quantitative amount of
the dietary ingredient by weight is great enough to require that the
dietary ingredient be listed, but the amount is so small that the ``%
Daily Value'' when rounded to the nearest percent is zero (e.g., the
percent Daily Value for 1 gram of total carbohydrate is to be listed as
``Less than 1%'' or ``<1%'').
(D) If the percent of Daily Value is declared for total fat,
saturated fat, total carbohydrate, dietary fiber, or protein, a symbol
shall follow the value listed for those nutrients that refers to the
same symbol that is placed at the bottom of the nutrition label, below
the bar required under paragraph (e)(6) of this section and inside the
box, that is followed by the statement ``Percent Daily Values are based
on a 2,000 calorie diet.''
(E) The percent of Daily Value shall be based on RDI and DRV values
for adults and children 4 or more years of age, unless the product is
represented or purported to be for use by infants, children less than 4
years of age, pregnant women, or lactating women, in which case the
column heading shall clearly state the intended group. If the product
is for persons within more than one group, the percent of Daily Value
for each group shall be presented in separate columns as shown in
paragraph (e)(10)(ii) of this section.
(F) For declared subcomponents that have no DRV's and, on the
labels of dietary supplements of vitamins and minerals that are
represented or purported to be for use by infants, children less that 4
years of age, or pregnant or lactating women, for total fat, saturated
fat, cholesterol, total carbohydrate, dietary fiber, sodium, potassium,
vitamin K, chloride, chromium, manganese, molybdenum, or selenium, a
symbol (e.g., an asterisk) shall be placed in the ``Percent Daily
Value'' column that shall refer to the same symbol that is placed at
the bottom of the nutrition label, below the last heavy bar and inside
the box, and followed by the statement ``Daily Value not established.''
(G) When calories, calories from fat, or calories from saturated
fat are declared, the space under the ``% Daily Value'' column shall be
left blank for these items. When there are no other (b)(2)-dietary
ingredients listed for which a value must be declared in the ``% Daily
Value'' column, the column may be omitted as shown in paragraph
(e)(10)(vii) of this section. When the ``% Daily Value'' column is not
required, but the dietary ingredients listed are subject to paragraph
(b)(2)(iii)(F) of this section, the symbol required in that paragraph
shall immediately follow the quantitative amount by weight for each
dietary ingredient listed under ``Amount Per Serving.''
(3) Information on dietary ingredients for which RDI's and DRV's
have not been established. (i) Dietary ingredients for which FDA has
not established an RDI or DRV and that are not subject to regulation
under paragraph (b)(2) of this section (hereinafter referred to as
``other dietary ingredients'') shall be declared by their common or
usual name when they are present in a dietary supplement, in a column
that is under the column of names described in paragraph (b)(2)(i)(B)
of this section and under the heavy bar described in paragraph (e)(6)
of this section, except that if no (b)(2)-dietary ingredients are
declared, other dietary ingredients shall be listed directly beneath
the heading ``Amount Per Serving'' described in paragraph (b)(2)(i)(A).
(ii) The quantitative amount by weight per serving of other dietary
ingredients shall be presented in a separate column aligned to the
right of the column of names and underneath the column of amounts
described in paragraph (b)(2)(ii) of this section. The quantitative
amount by weight shall be the weight of the other dietary ingredient
listed and not the weight of any component, or the source, of that
dietary ingredient. These amounts shall be expressed using metric
measures in appropriate units (i.e., 1,000 or more units shall be
declared in the next higher set of units, e.g., 1,100 mg shall be
declared as 1.1 g). For any dietary ingredients that are liquid
extracts, the weight shall not include the weight of solvents.
(iii) Other dietary ingredients shall bear a symbol (e.g., an
asterisk) in the column under the heading of ``% Daily Value'' that
refers to the same symbol placed at the bottom of the nutrition label
and followed by the statement ``Daily Value not established,'' except
that when the heading ``% Daily Value'' is not used, the symbol shall
follow the quantitative amount by weight for each dietary ingredient
listed.
(c) A proprietary blend of dietary ingredients shall be included in
the list of dietary ingredients described in paragraph (b)(3)(i) of
this section and identified by the term ``Proprietary Blend,'' which
may be modified by an appropriate descriptive term or fanciful name.
Except as specified in this paragraph, all other requirements for the
listing of dietary ingredients in dietary supplements are applicable.
(1) Dietary ingredients contained in the proprietary blend that are
listed under paragraph (b)(2) of this section shall be declared in
accordance with paragraph (b)(2) of this section.
(2) Dietary ingredients contained in the proprietary blend that are
listed under paragraph (b)(3) of this section (i.e., ``other dietary
ingredients'') shall be declared in descending order of predominance by
weight, in a column or linear fashion, and indented under the term
``Proprietary Blend.''
(3) The quantitative amount by weight specified for the proprietary
blend shall be the total weight of all other dietary ingredients
contained in the proprietary blend and shall be placed on the same line
to the right of the term ``Proprietary Blend'' underneath the column of
amounts described in paragraph (b)(2)(ii) of this section. A symbol
(e.g., asterisk), which refers to the same symbol placed at the bottom
of the nutrition label that is followed by the statement ``Daily Value
not established,'' shall be placed under the heading ``% Daily Value,''
if present, or immediately following the quantitative amount by weight
for the proprietary blend.
[[Page 67217]]
(4) The sample label shown in paragraph (e)(10)(v) of this section
illustrates one method of nutrition labeling a proprietary blend of
dietary ingredients.
(d) The source ingredient that supplies a dietary ingredient may be
identified within the nutrition label in parentheses immediately
following or indented beneath the name of a dietary ingredient and
preceded by the words ``as'' or ``from'', e.g., ``Calcium (as calcium
carbonate),'' except that manner of presentation is unnecessary when
the name of the dietary ingredient (e.g., Siberian ginseng) or its
synonym (e.g., ascorbic acid) is itself the source ingredient. When a
source ingredient is identified in parentheses within the nutrition
label, or when the name of the dietary ingredient or its synonym is the
source ingredient, it shall not be required to be listed again in the
ingredient statement that appears outside of the nutrition label. When
a source ingredient is not identified within the nutrition label, it
shall be listed in an ingredient statement in accordance with
Sec. 101.4(g), which shall appear outside and immediately below the
nutrition label or, if there is insufficient space below the nutrition
label, immediately contiguous and to the right of the nutrition label.
(1) Source ingredients shall be identified in accordance with
Sec. 101.4 (i.e., shall be listed by common or usual name, and the
listing of botanicals shall specify the Latin binomial name and the
part of the plant from which the ingredient is derived) regardless of
whether they are listed in an ingredient statement or in the nutrition
label.
(2) When source ingredients are listed within the nutrition label,
and two or more are used to provide a single dietary ingredient, all of
the sources shall be listed within the parentheses in descending order
by weight.
(3) Representations that the source ingredient conforms to an
official compendium may be included either in the nutrition label or in
the ingredient list (e.g., ``Calcium (as calcium carbonate USP)'').
(e) Nutrition information specified in this section shall be
presented as follows:
(1) The title, ``Supplement Facts,'' shall be set in a type size
larger than all other print size in the nutrition label and, unless
impractical, shall be set full width of the nutrition label. The title
and all headings shall be bolded to distinguish them from other
information.
(2) The nutrition information shall be enclosed in a box by using
hairlines.
(3) All information within the nutrition label shall utilize:
(i) A single easy-to-read type style,
(ii) All black or one color type, printed on a white or other
neutral contrasting background whenever practical,
(iii) Upper and lower case letters, except that all uppercase
lettering may be utilized for packages that have a total surface area
available to bear labeling of less than 12 square inches,
(iv) At least one point leading (i.e., space between lines of
text), and
(v) Letters that do not touch.
(4) Except as provided for small and intermediate-sized packages
under paragraph (i)(2) of this section, information other than the
title, headings, and footnotes shall be in uniform type size no smaller
than 8 point. Type size no smaller than 6 point may be used for column
headings (e.g., ``Amount Per Serving'' and ``% Daily Value'') and for
footnotes (e.g., ``Percent Daily Values are based on a 2,000 calorie
diet'').
(5) A hairline rule that is centered between the lines of text
shall separate each dietary ingredient required in paragraph (b)(2) and
(b)(3) of this section from the dietary ingredient above and beneath
it, as shown in paragraph (e)(10) of this section.
(6) A heavy bar shall be placed:
(i) Beneath the subheading ``Servings Per Container'' except that
if ``Servings Per Container'' is not required and, as a result, not
declared, the bar shall be placed beneath the subheading ``Serving
Size,''
(ii) Beneath the last dietary ingredient to be listed under
paragraph (b)(2)(i) of this section, if any, and
(iii) Beneath the last other dietary ingredient to be listed under
paragraph (b)(3) of this section, if any.
(7) A light bar shall be placed beneath the headings ``Amount Per
Serving'' and ``% Daily Value.''
(8) If the product contains two or more separately packaged dietary
supplements that differ from each other (e.g., the product has a packet
of supplements to be taken in the morning and a different packet to be
taken in the afternoon), the quantitative amounts and percent of Daily
Value may be presented as specified in this paragraph in individual
nutrition labels or in one aggregate nutrition label as illustrated in
paragraph (e)(10)(iii) of this section.
(9) In the interest of uniformity of presentation, FDA urges that
the information be presented using the graphic specifications set forth
in Appendix B to part 101, as applicable.
(10) The following sample labels are presented for the purpose of
illustration:
BILLING CODE 4160-01-P
[[Page 67218]]
[GRAPHIC][TIFF OMITTED]TP28DE95.000
[[Page 67219]]
[GRAPHIC][TIFF OMITTED]TP28DE95.001
[[Page 67220]]
[GRAPHIC][TIFF OMITTED]TP28DE95.002
[[Page 67221]]
[GRAPHIC][TIFF OMITTED]TP28DE95.003
BILLING CODE 4160-01-C
[[Page 67222]]
(11) If space is not adequate to list the required information as
shown in the sample labels in paragraph (e)(10) of this section, the
list may be split and continued to the right as long as the headings
are repeated. The list to the right shall be set off by a line that
distinguishes it and sets it apart from the dietary ingredients and
percent of Daily Value information given to the left. The following
sample label illustrates this display:
BILLING CODE 4160-01-P
[[Page 67223]]
[GRAPHIC][TIFF OMITTED]TP28DE95.004
BILLING CODE 4160-01-C
[[Page 67224]]
(f)(1) Compliance with this section will be determined in
accordance with Sec. 101.9 (g)(1) through (g)(8). The criteria on class
I and class II nutrients given in Sec. 101.9 (g)(3) and (g)(4) also are
applicable to other dietary ingredients described in paragraph
(b)(3)(i) of this section. Reasonable excesses of these other dietary
ingredients over labeled amounts are acceptable within current good
manufacturing practice.
(2) When it is not technologically feasible, or some other
circumstance makes it impracticable, for firms to comply with the
requirements of this section, FDA may permit alternative means of
compliance or additional exemptions to deal with the situation in
accordance with Sec. 101.9(g)(9). Firms in need of such special
allowances shall make their request in writing to the Office of Food
Labeling (HFS-150), Food and Drug Administration, 200 C St. SW.,
Washington, DC 20204.
(g) Except as provided in paragraphs (i)(2) and (i)(5) of this
section, the location of nutrition information on a label shall be in
compliance with Sec. 101.2.
(h) Dietary supplements are subject to the exemptions specified in:
(1) Sec. 101.9(j)(1) for dietary supplements that are offered for
sale by a person who makes direct sales to consumers (i.e., a retailer)
who has annual gross sales or business done in sales to consumers that
is not more than $500,000 or has annual gross sales made or business
done in sales of food to consumers of not more than $50,000, and whose
labels, labeling, and advertising do not provide nutrition information
or make a nutrient content or health claim;
(2) Sec. 101.9(j)(18) for dietary supplements that are low- volume
products (that is, they meet the requirements for units sold in
Sec. 101.9(j)(18) (i) or (ii)) that, except as provided in
Sec. 101.9(j)(18)(iv), are the subject of a claim for an exemption that
provides the information required under Sec. 101.9(j)(18)(iv), that is
filed before the beginning of the time period for which the exemption
is claimed, and that is filed by a person that qualifies to claim the
exemption under the requirements for average full-time equivalent
employees in Sec. 101.9(j)(18) (i) or (ii), and whose labels, labeling,
and advertising do not provide nutrition information or make a nutrient
content or health claim;
(3) Sec. 101.9(j)(9) for dietary supplements shipped in bulk form
that are not for distribution to consumers in such form and that are
for use solely in the manufacture of other dietary supplements or that
are to be processed, labeled, or repacked at a site other than where
originally processed or packed.
(i) Dietary supplements are subject to the special labeling
provisions specified in:
(1) Sec. 101.9(j)(5)(i) for food, other than infant formula,
represented or purported to be specifically for infants and children
less than 2 years of age, in that nutrition labels on such foods shall
not include calories from fat, calories from saturated fat, saturated
fat, polyunsaturated fat, monounsaturated fat, and cholesterol;
(2) Sec. 101.9(j)(13) for foods in small or intermediate-sized
packages, except that:
(i) All information within the nutrition label on small-sized
packages, which have a total surface area available to labeling of less
than 12 square inches, shall be in type size no smaller than 4.5 point;
(ii) All information within the nutrition label on intermediate-
sized packages, which have from 12 to 40 square inches of surface area
available to bear labeling, shall be in type size no smaller than 6
point, except that dietary supplements in which there are more than 8
dietary ingredients to be listed in the nutrition label, and that are
in packages that have less than 20 square inches of surface area
available to bear labeling, may use type size no smaller than 4.5 point
when necessary.
(iii) When the nutrition information is presented on any panel
under Sec. 101.9(j)(13)(ii)(D), the ingredient list shall continue to
be located immediately below the nutrition label, or, if there is
insufficient space below the nutrition label, immediately contiguous
and to the right of the nutrition label as specified in Sec. 101.4(g).
(iv) When it is not possible for a small or intermediate-sized
package that is enclosed in an outer package to comply with these type
size requirements, the type size of the nutrition label on the primary
(inner) container may be as small as needed to accommodate all of the
required label information provided that the primary container is
securely enclosed in outer packaging, the nutrition labeling on the
outer packaging meets the applicable type size requirements, and such
outer packaging is not intended to be separated from the primary
container under conditions of retail sale.
(3) Sec. 101.9(j)(15) for foods in multiunit food containers;
(4) Sec. 101.9(j)(16) for foods sold in bulk containers; and
(5) Sec. 101.9(j)(17) for foods in packages that have a total
surface area available to bear labeling greater than 40 square inches
but whose principal display panel and information panel do not provide
sufficient space to accommodate all required label information, except
that the ingredient list shall continue to be located immediately below
the nutrition label, or, if there is insufficient space below the
nutrition label, immediately contiguous and to the right of the
nutrition label as specified in Sec. 101.4(g).
(j) Dietary supplements shall be subject to the misbranding
provisions of Sec. 101.9(k).
7. Section 101.65 is amended by revising paragraph (b)(4) to read
as follows:
Sec. 101.65 Implied Nutrient Content Claims and Related Label
Statements.
* * * * *
(b) * * *
(4) A statement of identity for a food in which an ingredient
constitutes essentially 100 percent of a food (e.g., ``corn oil,''
``oat bran,'' ``dietary supplement of vitamin C 60 mg tablet'').
* * * * *
Dated: October 11, 1995.
David A. Kessler,
Commissioner of Food and Drugs.
Donna E. Shalala,
Secretary of Health and Human Services.
[FR Doc. 95-31196 Filed 12-27-95; 8:45 am]
BILLING CODE 4160-01-P
Complete official Federal Register PDF
FR Doc. 95-31194 Food Labeling; Nutrient Content Claims: Definition for High Potency'' Claim for Dietary Supplements and Definition of Antioxidant'' for Use in Nutrient Content Claims for Dietary Supplements and Conventional Foods
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67184-67194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31194]
=======================================================================
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
21 CFR Part 101
[Docket No. 95N-0347]
RIN 0910-AA23
Food Labeling; Nutrient Content Claims: Definition for ``High
Potency'' Claim for Dietary Supplements and Definition of
``Antioxidant'' for Use in Nutrient Content Claims for Dietary
Supplements and Conventional Foods
AGENCY: Food and Drug Administration, HHS.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Food and Drug Administration (FDA) is proposing to amend
its regulations to define the term ``high potency'' as a nutrient
content claim for dietary supplements; define the term ``antioxidant''
for use in nutrient content claims on labels or in labeling of dietary
supplements and conventional foods; and correct an omission pertaining
to the use of ``sugar free'' claims on dietary supplements. FDA is
taking these actions to provide for the use of additional nutrient
content claims in response to provisions of the Nutrition Labeling and
Education Act of 1990. This proposed rule will benefit consumers by
providing established definitions for use in food labeling for the
terms ``high potency,'' ``antioxidant,'' and ``sugar free.''
DATES: Written comments by March 13, 1996. The agency proposes that any
final rule that may issue based upon this proposal become effective
January 1, 1997.
ADDRESSES: Submit written comments to the Dockets Management Branch
(HFA-305), Food and Drug Administration, 12420 Parklawn Dr., rm. 1-23,
Rockville, MD 20857.
FOR FURTHER INFORMATION CONTACT: Camille E. Brewer, Center for Food
Safety and Applied Nutrition (HFS-165), Food and Drug Administration,
200 C St. SW., Washington, DC 20204, 202-205-5483.
SUPPLEMENTARY INFORMATION:
I. Regulatory History
A. The Nutrition Labeling and Education Act of 1990 and Subsequent
Proposals
On November 8, 1990, the President signed into law the Nutrition
Labeling and Education Act of 1990 (the 1990 amendments) (Pub. L. 101-
535). The 1990 amendments revised the Federal Food, Drug, and Cosmetic
Act (the act) in a number of important ways. One of the most notable
aspects of the 1990 amendments is that they establish FDA's authority
to regulate nutrient content claims on food labels and in food
labeling. Section 403(r)(1)(A) of the act (21 U.S.C. 343(r)(1)(A)),
which was added by the 1990 amendments, provides that a product is
misbranded if it bears a claim in its label or labeling that either
expressly or implicitly characterizes the level, in the food, of any
nutrient of the type required to be declared as part of nutrition
labeling, unless such claim has been specifically defined (or otherwise
exempted) by regulation.
In the Federal Register of November 27, 1991 (56 FR 60421 and 56 FR
60478), FDA published two documents (``Food Labeling: Nutrient Content
Claims, General Principles, Petitions, Definition of Terms;'' and
``Food Labeling: Definitions of Nutrient Content Claims for the Fat,
Fatty Acid, and Cholesterol Content of Food'') in which it proposed,
among other things, to define nutrient content claims and to provide
for their use on food labels. FDA intended that these proposals would
apply to dietary supplements as well as conventional foods. -
B. The Dietary Supplement Act of 1992, Final Labeling Rules, and the
Dietary Supplement Health and Education Act of 1994
On October 6, 1992, the President signed into law the Dietary
Supplement Act of 1992, Title II of Pub. L. 102-571 (the DS Act).
Section 202(a)(1) of the DS Act established a moratorium on the
implementation of the 1990 amendments with respect to dietary
supplements until December 15, 1993. Section 202(a)(2)(A) of the DS Act
directed the Secretary of Health and Human Services to issue new
proposed regulations that are applicable to dietary supplements of
vitamins, minerals, herbs, and other similar nutritional substances.
FDA published final regulations that implemented the 1990
amendments with respect to nutrient content claims in the Federal
Register of January 6, 1993, in a document entitled ``Food Labeling;
Nutrient Content Claims; General Principles, Petitions, and Definition
of Terms'' (hereinafter referred to as ``the 1993 nutrient content
claims final rule''). As a result of the DS Act, this final rule
applied only to the use of such claims on conventional foods (58 FR
2302 as corrected at 58 FR 17341). FDA made technical corrections to
these final regulations in documents published in the Federal Register
on August 18, 1993 (58 FR 44020).
In response to the requirements of the 1990 amendments and the DS
Act, FDA published in the Federal Register of June 18, 1993 (58 FR
33731), a proposal entitled ``Food Labeling; Requirements for Nutrient
Content Claims for Dietary Supplements of Vitamins, Minerals, Herbs,
and Other Similar Nutritional Substances'' (hereinafter referred to as
the 1993 nutrient content claims proposal) to: (1) Include dietary
supplements of vitamins, minerals, herbs, and other similar nutritional
substances under the coverage of the general principles for nutrient
content claims; (2) provide for the use of expressed and implied
nutrient content claims on labels or in labeling of dietary
supplements; and (3) provide for petitions for nutrient content claims
for dietary supplements. FDA received approximately 500 letters in
response to its 1993 nutrient content claims proposal. FDA issued final
regulations on nutrient content claims for dietary supplements on
January 4, 1994 (59 FR 378) (hereinafter referred to as the 1994
nutrient content claims final rule).
On October 25, 1994, the President signed into law the Dietary
Supplement Health and Education Act of 1994 (the DSHEA) (Pub. L. 103-
417). Among other things, the DSHEA provided a statutory definition for
``dietary supplements,'' provided for some flexibility in the manner in
which ingredient and nutrition labeling information is to be provided
for dietary supplements, and made provision for statements that
characterize the percentage level of dietary ingredients for which
Reference Daily Intakes (RDI's) and Daily Reference Values (DRV's) have
not been established. However, these changes do not bear directly on
this rulemaking.
In the 1994 nutrient content claims final rule, FDA used the terms
``dietary supplements of vitamins, minerals, herbs, and other similar
nutritional
[[Page 67185]]
substances'' and ``food in conventional food form.'' With the passage
of the DSHEA, however, Congress has defined the term ``dietary
supplement'' and has modified the act in sections 201(ff) and 411(c)(1)
(21 U.S.C. 321(ff) and 350(c)(1)) to make clear that the form of the
food is not necessarily determinative of whether it is a dietary
supplement or not. Therefore, in this document, FDA will use the more
simple terms ``dietary supplement'' and ``conventional food.''
II. FDA Authority
Section 403(r)(2)(A)(i) of the act states that claims that
characterize the level of a nutrient may be made only if the claim uses
terms that are defined in regulations. In response to this section, the
agency is proposing to amend its regulations on nutrient content claims
to define the term ``high potency'' as a nutrient content claim for use
on labels and in labeling of dietary supplements and the term
``antioxidant'' for use in nutrient content claims for dietary
supplements and conventional foods.
FDA has authority to take these actions regarding nutrient content
claims under sections 201(n) and 403(a), as well as section 403(r), of
the act (21 U.S.C. 321(n) and 343(a)). These sections prohibit labeling
that: (1) Is false or misleading in that it fails to reveal facts that
are material in light of other representations made in the labeling or
that are material with respect to the consequences that may result from
use of the food, and (2) uses terms to characterize the level of any
nutrient in a food that have not been defined by regulation by FDA.
III. Proposed Rules
A. ``High Potency''
1. Background
In the 1993 nutrient content claims proposal, FDA requested comment
on several terms, including ``high potency,'' that are often
encountered on labels or in labeling of dietary supplements and that
seem to imply that the dietary supplement will contribute to good
health (58 FR 33731 at 33748). The agency requested comment on whether
there are established meanings for these terms, and, if so, whether
they characterize the level of the nutrients in the food. The agency
received about 10 comments from trade associations, manufacturers of
dietary supplements and conventional foods, academicians, and consumer
groups regarding the term ``high potency.''
FDA was persuaded, based on comments that suggested definitions for
the term, that ``high potency'' is a claim that characterizes the level
of a nutrient or nutrients and, therefore, meets the definition in
Sec. 101.13(b) of a nutrient content claim (59 FR 378 at 391). However,
given the time constraints under which FDA prepared the final rule, and
the range and diversity of the suggested definitions, the agency was
not able to adopt a definition of ``high potency'' in the final rule on
nutrient content claims for dietary supplements. FDA announced its
intention to review the suggestions for a definition of ``high
potency'' and, based on information received in the comments, to
propose an appropriate definition for this term (59 FR 378 at 391). In
this document, the agency is proceeding with its commitment to propose
a definition for ``high potency.''
2. Limitation to Dietary Supplements
In the 1994 nutrient content claims final rule, the agency
determined that, in many respects, the regulations issued in the 1993
nutrient content claims final rule (58 FR 2302) are directly applicable
to dietary supplements (59 FR 378 at 380). However, FDA acknowledged
that dietary supplements differ in several respects from conventional
foods in their history of use and in their perceived function in the
diet (59 FR 378 at 380). This fact and the fact that certain dietary
supplements are likely to contain much higher levels of nutrients than
conventional foods led FDA to conclude that nutrient content claims
that are specific for dietary supplements may be appropriate (59 FR 378
at 380). Comments to the nutrient content claims proposal for dietary
supplements stated that the term ``high potency'' seems more
appropriate for dietary supplements than for conventional foods (59 FR
378 at 390).
In considering the coverage of this term, FDA has relied, in part,
on the National Academy of Sciences' (NAS) Institute of Medicine's
(IOM) recommendations found in ``Nutrition Labeling, Issues and
Directions for the 1990's'' (Ref. 1). In discussing claims, the IOM
suggested that the terms that should be defined are those that are most
commonly used (Ref. 1, p. 296). FDA has no evidence that the term
``high potency'' is used with any frequency on conventional foods, that
the term was used on conventional foods before the enactment of the
1990 amendments, or that consumers expect or would understand it in
association with conventional foods. In contrast, the term ``high
potency'' was in widespread use on the labels of dietary supplements
before the enactment of the 1990 amendments, continues to be used on
dietary supplements, and appears to convey information to the consumer
about the level of the nutrients in dietary supplements.
Lacking a clear history of use, or any other indication of the
usefulness, of the term ``high potency'' on conventional foods, the
agency tentatively concludes that this term should be limited to use on
dietary supplements. Accordingly, FDA is proposing to amend part 101
(21 CFR part 101) by adding new Sec. 101.13(b)(6), which states that
the term ``high potency'' may be used only on dietary supplements.
FDA recognizes that defining a nutrient content claim exclusively
for use on labels and in labeling of dietary supplements is a departure
from previous practice. However, the agency tentatively concludes that
limiting this claim to dietary supplements is the appropriate course
for the reasons stated above. Comment is requested on this tentative
conclusion.
3. Definition of ``High Potency'' as a Nutrient Content Claim
a. Describing a nutrient. FDA received several comments that
presented a wide range of views on how ``high potency'' should be
defined. One comment to the proposed rule on nutrient content claims
suggested that the term ``high potency'' have the same definition as
``high'' (i.e., 20 percent or more of the RDI), but did not provide any
elaboration on why this suggested definition is appropriate. Other
comments asserted that this term could be used to establish an
hierarchy of absolute claims (i.e., ``good source,'' ``high,'' and
``high potency'') to describe dietary supplements. This hierarchy, the
comments suggested, will enable consumers to use the claims to quickly
differentiate between varying nutrient levels in dietary supplements.
A few comments suggested that the term be defined to mean that the
product contains 200 percent of the RDI. These comments argued that
while a multivitamin supplement at 100 percent of the RDI might be
``high potency'' compared to a conventional food, it is not ``high
potency'' when compared to other dietary supplements. These comments
suggested that defining ``high potency'' as twice the RDI or more would
more accurately reflect the level of nutrients found in dietary
supplements. One of these comments stated that, in addition to
requiring that single nutrient supplements be twice the RDI for that
nutrient, FDA should require that the principal display panel disclose
what multiple of the RDI the supplement contains. For example, the
comment suggested that the principal display panel of a 250 milligram
(mg)
[[Page 67186]]
vitamin C supplement carry an asterisk next to the words ``high
potency'' with the following disclosure: ``Contains four times the RDI
for vitamin C.'' The comment went on to state that under this scheme,
some nutrients, such as calcium and selenium, would not qualify to
carry a ``high potency'' claim because they are rarely sold at 200
percent of the RDI. The comment suggested that if the supplement
industry begins to market those nutrients at higher doses to make
``high potency'' claims, FDA could establish a lower minimum level,
such as 50 percent of the RDI for selenium and 50 percent of the RDI
for calcium. The comment stated that those minimum levels would apply
to those nutrients only.
Several comments, however, argued that the term ``high potency''
should mean 100 percent or more of the RDI because that is the current
industry practice, and it has been helpful in directing consumers in
their choice of products. One comment from the dietary supplement
industry stated that, in their experience, the term ``high potency''
has generally been used for the last 20 years to refer to formulations
that are at levels above the U.S. Recommended Daily Allowances (U.S.
RDA's).
FDA acknowledges that many dietary supplements, particularly
dietary supplements of vitamins or minerals, are likely to contain much
higher levels of nutrients than conventional foods (Ref. 2). Currently
approved nutrient content claims are of limited value in identifying
those dietary supplements that contain amounts of vitamins or minerals
at or above the Daily Value (DV). Claims such as ``good source'' and
``high'' are adequate to describe nutrient levels found in the majority
of conventional foods, but they do not allow for differentiation of
dietary supplement products containing much higher levels of nutrients.
Therefore, the agency is in agreement with the comments that suggested
that the term ``high potency'' should be defined in a way that permits
such differentiation.
Accordingly, FDA rejects the comment that suggested that ``high
potency'' be defined as 20 percent or more of the RDI. Such a
definition would make ``high potency'' synonymous with ``high'' and
thus would not help consumers differentiate between relatively low
nutrient levels in many dietary supplements in the marketplace and
those at higher levels.
FDA is not persuaded by the comments that suggested that 200
percent of the RDI is an appropriate definition for ``high potency.''
While the agency acknowledges that dietary supplements of vitamins and
minerals often contain levels that meet or exceed 200 percent of the
RDI per unit, that fact alone does not justify defining ``high
potency'' at that level.
Supplement users report a variety of reasons for taking dietary
supplements, including ensuring adequacy of intake of specific
nutrients (Refs. 3, 4, and 5). FDA is interested in ensuring, and the
nutrient content claim provisions were intended to ensure (see, e.g.,
section 403(r)(2)(A)(ii)(II) of the act) that consumers have useful
label information that will help them maintain healthy dietary
practices, in part by constructing nutritionally adequate diets.
However, the agency is not persuaded that proposing a definition for
``high potency'' at 200 percent or more of the RDI will contribute to
this goal. The RDI's are based on the NAS Recommended Dietary
Allowances (RDA's), which are intended to reflect ``the levels of
intake of essential nutrients that, on the basis of scientific
knowledge, are judged by the Food and Nutrition Board, NAS to be
adequate to meet the known nutrient needs of practically all healthy
persons'' (Ref. 6). FDA is aware that the NAS is in the process of
reevaluating the basis on which RDA's are determined and is considering
expanding the RDA concept to include reducing the risk of chronic
disease (Ref. 7). Until that debate is resolved, the agency tentatively
concludes that it is appropriate to define ``high potency'' at a level
that will assist consumers interested in using dietary supplements in
obtaining an adequate intake as determined by established RDI values.
The agency tentatively concludes that 100 percent of the RDI per
serving is a reasonable definition of ``high potency'' because this
level is high enough ``to meet the needs of practically all healthy
persons.'' RDI values represent the highest NAS RDA values from among
the various age/sex groups specified by the NAS for persons 4 or more
years of age (58 FR 2206 at 2210). Thus, a person consuming a ``high
potency'' vitamin or mineral will be assured of meeting his or her need
for the nutrient described as ``high potency.'' Such action would be a
healthy dietary practice.
FDA tentatively concludes that the proposed definition of ``high
potency'' makes sense for two additional reasons. First, as stated in
the comments, it is consistent with current industry practice. Second,
as a matter of common sense, providing of 100 percent of the RDI for a
vitamin or mineral is to provide an amount of the vitamin or mineral
that is highly potent.
FDA's tentative conclusion does not mean, however, that the agency
is opposed to the presence of more than 100 percent of the RDI of a
nutrient per serving. Manufacturers can formulate and describe the
level of a nutrient as multiples of the RDI (e.g., using the
terminology ``Daily Value'' to represent RDI's on the label, a vitamin
C tablet containing 500 mg would declare ``833 percent of the Daily
Value of vitamin C''). Nonetheless, because the purpose of nutrient
content claims is to assist consumers in maintaining healthy dietary
practices, and given the recommendations of the NAS on which the RDI's
are based, FDA tentatively concludes that it is appropriate to tie a
``high potency'' claim to the RDI itself.
In addition to the nutrients for which RDI's have been established,
FDA is proposing that the claim ``high potency'' may be used to
describe protein and dietary fiber for which DRV's have been
established in Sec. 101.9(c)(9). Because dietary guidelines recommend
that consumers moderate or reduce dietary levels of four other
nutrients for which DRV's have been established (i.e., total fat,
saturated fat, cholesterol, and sodium) to reduce the risk of
developing certain chronic diseases (Ref. 8), FDA does not expect, and,
therefore, is not proposing, that ``high potency'' claims be used to
apply to them.
Additionally, the agency is not proposing that ``high potency''
claims be used to apply to two other nutrients, total carbohydrate and
potassium, for which DRV's have been established. Section 101.54(a)
precludes the use of the claims listed in that section in relation to
total carbohydrate.\1\ In the case of potassium, tablets containing
potassium chloride or other potassium salts, which supply 100 mg or
more of potassium per tablet, are considered to be drugs. (See 21 CFR
201.306.)
\1\In the 1993 nutrient content claims proposal, FDA stated that
consensus reports and dietary recommendations generally encourage
the increased consumption of complex carbohydrates, while suggesting
that sugars be consumed in moderation (56 FR 60421 at 60444). The
agency concluded that a nutrient content claim such as ``high in
carbohydrate'' may provide misleading dietary advice because the
claim does not allow for the distinction between high levels of
complex carbohydrates and high levels of sugars (56 FR 60421 at
60444).
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The agency is not aware of any reason why ``high potency'' claims
should not be allowed to be used with protein and dietary fiber. FDA
established the DRV's at levels for each nutrient that represent
scientific consensus on the characteristics of foods Americans should
choose both to have a healthier diet and to reduce risk factors for
chronic diseases and conditions (58 FR
[[Page 67187]]
2206 at 2217). Nutrient content claims that assist consumers in
constructing diets by identifying foods, including dietary supplements,
that contain protein and dietary fiber at such levels should be
allowed.
FDA tentatively concludes that, consistent with the agency's
treatment of the claim for nutrients for which RDI's have been
established, ``high potency'' should be defined for protein and dietary
fiber at 100 percent of the DRV. The agency notes that throughout its
rulemakings on nutrient content claims, it has used identical values
for nutrients for which a DRV has been established as for those that
are the subject of an RDI (e.g., ``good source'' claims are defined in
Sec. 101.54(c) as 10 to 19 percent of the RDI or DRV per reference
amount customarily consumed).
Accordingly, FDA is proposing in Sec. 101.54(f)(1) that the term
``high potency'' may be used on the label or in labeling of a dietary
supplement to describe a nutrient that is present at 100 percent or
more of the RDI for vitamins and minerals or the DRV for protein or
dietary fiber per reference amount customarily consumed.
In response to the comment that suggested that FDA require that the
principal display panel disclose what multiple of the nutrient's RDI is
present (e.g., ``Contains 400 percent of the Daily Value of Vitamin
C''), FDA is not persuaded that this action would be helpful to
consumers. The referral statement, ``See -------------- for nutrition
information,'' which directs the consumer to the nutrition panel is
required for all nutrient content claims as specified in
Sec. 101.13(g). As proposed in a companion document published elsewhere
in this issue of the Federal Register and entitled ``Food Labeling;
Statement of Identity; Nutrition Labeling and Ingredient Labeling of
Dietary Supplements,'' the nutrition label for dietary supplements of
vitamins and minerals will have to provide quantitative information on
the levels of specific nutrients as well as the percent Daily Value
(DV) for each nutrient. Consequently, the consumer will have easy
access to information regarding the levels of specific nutrients and
may adjust their level of intake accordingly.
In addition, not requiring any additional information or disclosure
beyond the referral statement is consistent with rules for the use of
other expressed nutrient content claims, e.g., ``good source'' and
``high'' claims, which do not have to disclose the fraction of the RDI
present. While FDA tentatively concludes that there is no need for
additional disclosure requirements for products bearing a ``high
potency'' claim, the agency points out that manufacturers may
voluntarily place a statement on the label that discloses the amount or
percentage of nutrients in relation to the DV as provided for in
Sec. 101.13(i) and (q)(3) (e.g., ``50 percent of the RDI for calcium,''
``10 mg of iron'').
In response to the comment that suggested that the agency consider
establishing a definition for ``high potency'' at lower levels for some
nutrients if manufacturers start increasing amounts of the nutrients so
that they can meet the criterion for the claim ``high potency,'' the
agency believes that such action is unnecessary and potentially
confusing to consumers. The agency tentatively concludes that the term
``high potency'' should have the same definition for all nutrients. In
instances in which the product does not meet the proposed criteria for
the claim ``high potency,'' the product may qualify to use another
nutrient content claim, such as ``good source'' (defined in
Sec. 101.54(c) as 10 to 19 percent of the RDI or DRV) or ``high''
(defined in Sec. 101.54(b) as 20 percent or more of the RDI or DRV).
For example, when calcium is present in a dietary supplement at 20
percent or more of the RDI, the manufacturer can use the nutrient
content claim ``high'' to describe the level of calcium. In addition,
as stated above, under Sec. 101.13(i) and (q)(3) the manufacturer may
declare the amount or percentage of the nutrient on the label.
b. Describing a dietary supplement product. The comments stated
that in addition to being used to describe the level of a nutrient in a
product, the term ``high potency'' is also often used to describe
multinutrient dietary supplement products themselves. Several comments
discussed the use of a ``high potency'' claim on multinutrient
products, and whether all nutrients in such a product would have to be
present at levels that would meet the criterion for the claim. One
comment stated that the claim should be permitted on any supplement
that contains 100 percent of the RDI for each vitamin and mineral that
is included in the product and for which an RDI has been established.
The comment went on to state that the presence or absence of vitamins,
minerals, or other substances for which no RDI's have been established
should not affect a product's eligibility to bear the claim, so long as
those nutrients for which RDI's have been established are present at
required levels.
In contrast with this comment, a few comments stated that
multinutrient products should be termed ``high potency'' when the
majority of nutrients with RDI's are present at levels equal to or in
excess of the RDI. Another comment stated that FDA should allow ``high
potency'' claims on multinutrient supplements when more than one-third
of the nutrients that they contain meet the minimum level required for
a ``high potency'' claim. The latter comment stated that it is not
reasonable to require that all of the nutrients in a multiingredient
supplement be present at the level that is defined as ``high potency''
because many nutrients are not, and should not, be sold in such high
doses. For example, the comment stated that ``high potency'' claims
should be allowed on a multinutrient supplement that contains high
levels of vitamins A, C, E, B6, B12, thiamin, riboflavin, and niacin,
but smaller amounts of vitamin D, iron, calcium, magnesium, zinc, and
copper. The comment stated that the latter nutrients are typically sold
at lower doses, and some may pose a risk at high levels.
FDA has considered the comments that ``all,'' ``most,'' or ``one-
third'' of the nutrients in a dietary supplement be present at 100
percent of the RDI or DRV for the supplement to qualify to bear the
term ``high potency.'' A review of an informal FDA survey of labels of
dietary supplements that bear the term ``high potency'' revealed that
most multinutrient products that used the claim contained a majority,
but not all, nutrients at 100 percent or more of the RDI (Ref. 9). FDA
agrees with the comment that it may be impracticable to include 100
percent of the RDI or DRV for several nutrients for technological
reasons. For instance, the bulkiness of calcium, phosphorus, magnesium,
and fiber may make it difficult to provide sufficient amounts of those
nutrients for them to be included in ``high potency'' tablets if they
must be present at 100 percent of the RDI or DRV.
FDA tentatively concludes that it is not necessary to prohibit the
use of a ``high potency'' claim on multinutrient dietary supplements if
the supplements do not contain 100 percent or more of the RDI for each
vitamin and mineral that is present, or 100 percent of the DRV for
protein or dietary fiber, when present. The agency is persuaded by the
comments that the public will be better served from a public health
perspective if some nutrients are allowed to be present in such
products at levels that are below 100 percent of the RDI or DRV.
Without such an allowance, those nutrients that cannot be included at
100 percent levels because of technological difficulties could not be
included at all if the dietary supplement is to bear a
[[Page 67188]]
``high potency'' claim. The exclusion of these nutrients will not
necessarily help consumers to engage in healthy dietary practices.
Having tentatively concluded that some nutrients may be present in
a ``high potency'' multinutrient dietary supplement at less than 100
percent of the RDI or DRV, the agency must determine what percentage of
nutrients must be present in the product at 100 percent of the RDI or
DRV for the product to qualify to make a ``high potency'' claim. A
logical starting point is determination of: (1) How many nutrients have
had RDI's and DRV's established for them, and (2) of those nutrients,
how many cannot, or should not, be expected to be present at 100
percent of the RDI or DRV for technological reasons or because of
public health concerns.
In the RDI/DRV final rules published on January 6, 1993 (58 FR
2206), FDA established RDI's in Sec. 101.9(c)(8)(iv) for 19 vitamins
and minerals (i.e., vitamin A, vitamin C, calcium, iron, vitamin D,
vitamin E, thiamin, riboflavin, niacin, vitamin B6, folate, vitamin
B12, biotin, pantothenic acid, phosphorus, iodine, magnesium, zinc, and
copper) and DRV's in Sec. 101.9(c)(9) for eight nutrients (i.e., total
fat, saturated fat, cholesterol, total carbohydrate, dietary fiber,
sodium, potassium, and protein). In addition, in a companion document
entitled ``Food Labeling: Reference Daily Intakes'' published elsewhere
in this issue of the Federal Register, FDA is establishing RDI's for
six additional vitamins and minerals (i.e., vitamin K, selenium,
chloride, manganese, chromium, molybdenum). Thus, there are a total of
33 nutrients for which RDI's or DRV's have been established. Of these
33 nutrients, 4 (i.e., calcium, phosphorus, magnesium, and fiber) have
already been mentioned as being difficult to include in dietary
supplements in amounts equal to 100 percent of the DV because of
technological problems related to their bulk.
Other nutrients that should not be expected to be present at 100
percent of the DV include total fat, saturated fat, cholesterol, and
sodium. It would be nonsensical to associate the term ``high potency''
with these nutrients because, as discussed earlier, dietary guidelines
recommend that intake of these nutrients be limited or moderated in the
diet (Ref. 8). In addition, it is not useful to include chloride at
high levels in multinutrient supplements. Salt is the primary source of
dietary chloride, and the typical American diet already contains
significant levels of chloride because of high intakes of salt (Refs. 6
and 10). (See the discussion of the exemption of chloride in
Sec. 101.3(e)(4)(ii) in the final rule entitled ``Food Labeling:
Reference Daily Intakes'' published elsewhere in this issue of the
Federal Register.) Lastly, as discussed earlier, potassium would be
considered a drug at such high levels, so it should not be included in
dietary supplements at 100 percent of the DRV.
Therefore, FDA tentatively concludes that there are 11 nutrients
(calcium, phosphorus, magnesium, dietary fiber, total carbohydrate,
total fat, saturated fat, cholesterol, sodium, chloride, and potassium)
for which it would be impracticable or imprudent to require that, when
present in a multinutrient product, they be present at levels at or
above 100 percent of the RDI or DRV for the product to qualify for the
use of the nutrient content claim ``high potency.'' This amounts to
one-third of the nutrients for which RDI's and DRV's have been
established (11 out of 33 nutrients). Accordingly, the agency believes
that it would be reasonable to expect that the remaining two-thirds of
the nutrients for which RDI's and DRV's have been established could be
present at 100 percent of the RDI or DRV in a ``high potency''
multinutrient dietary supplement product that contained all 33
nutrients for which RDI's and DRV's have been established.
FDA finds merit in the comment that suggested that not all
nutrients need be present at or above the RDI for the product to
qualify for the claim. This comment suggests that the agency establish
a standard for ``high potency'' that applies to supplements that do not
contain all of the 33 nutrients for which RDI's and DRV's have been
established as well as those that do. FDA tentatively concludes that
two-thirds represents a reasonable standard; it provides flexibility
for supplements that do not contain all 33 nutrients, and it provides a
consistent standard for all supplement products. Finally, it is a
familiar fraction that is easy to use. With a two-thirds standard, the
manufacturer would have latitude to decide, in formulating a product
that will qualify to bear a ``high potency'' claim, which nutrients to
include at 100 percent of the RDI or DRV. The alternative would be to
require that any of the 22 nutrients that can be present at 100 percent
of the DRV be present at that level if the supplement is to bear a
``high potency'' claim. FDA is concerned, however, that such a
requirement would set too high a standard and not provide appropriate
flexibility. Comment is requested on the agency's tentative conclusion.
Based on these factors, the agency is proposing in
Sec. 101.54(f)(2) that the term ``high potency'' may be used on the
label or in the labeling of a dietary supplement to describe the
product (e.g., ``High potency multivitamin, multimineral dietary
supplement tablets'') if the product contains 100 percent or more of
the RDI or DRV for at least two-thirds of the vitamins, minerals,
protein, and dietary fiber present in the product. This proposed
requirement will mean that each nutrient (i.e., vitamin, mineral,
protein, or dietary fiber) in a dietary supplement containing only one
or two nutrients will have to be present at 100 percent or more of the
RDI or DRV because two-thirds of one or two nutrients does not result
in a whole number that is different from the original number (e.g., 2
times 2/3 equals 1.34; the product 1.34 indicates that more than one
nutrient is needed to meet the criterion; therefore both nutrients
would have to meet or exceed 100 percent of the RDI or DRV).
The agency recognizes that dietary supplements that consist of an
assortment of dietary ingredients are widely available in the
marketplace. FDA agrees with the comment that stated that the presence
or absence of dietary ingredients for which RDI's or DRV's have not
been established (e.g., omega-3 fatty acids, choline, boron)
(hereinafter referred to as ``other dietary ingredients'') should not
affect the claim so long as those nutrients with RDI's or DRV's are
present at levels required for the claim. The presence or absence of
other dietary ingredients for which RDI's and DRV's have not been
established is immaterial to the claim, and, therefore, the agency
finds no basis for proposing alternate requirements for such products.
It is important to note that because the definition that FDA is
proposing is based on the presence of a nutrient at 100 percent of the
RDI or DRV, dietary supplements that do not contain nutrients for which
RDI's or DRV's have been established will not be able to use the term
``high potency.''
c. Disclosure requirement. One comment stated that the label of a
``high potency'' multivitamin product should disclose the names or
number of nutrients that are present at high levels. For example, the
comment suggested that the label could carry an asterisk next to the
claim, with the following disclosure: ``contains high levels of
[number] vitamins.''
The agency rejects this comment. The agency tentatively concludes
that such a requirement for the label or labeling of a ``high potency''
multinutrient dietary supplement is not needed to prevent consumers
from being misled by the claim. Section 403(s) of the act, added by the
DSHEA, states that a dietary
[[Page 67189]]
supplement is misbranded if its label or labeling fails to list the
quantity of each dietary ingredient present. (See implementing
regulations proposed in a companion document published elsewhere in
this issue of the Federal Register entitled ``Food Labeling; Statement
of Identity, Nutrition Labeling and Ingredient Labeling of Dietary
Supplements.'') In accordance with the proposed and current nutrition
labeling regulations, information on what, and how many, nutrients are
present at 100 percent or more of the RDI or DRV can be readily
determined from the nutrition label.
In addition, it would be cumbersome for a product containing 100
percent of the RDI for several nutrients for which RDI's or DRV's have
been established to list all of those nutrients on the principal
display panel. Many comments to the agency's proposals on the labeling
of dietary supplements have addressed the lack of available space to
meet current labeling requirements on multinutrient dietary supplement
products. Therefore, the agency tentatively concludes that it is
unnecessary, and would be impracticable, to require a list on the
principal display panel of the number or names of all nutrients present
at 100 percent or more of the RDI or DRV.
4. Synonyms
Although the agency asked for specific comment on the term ``high
potency,'' several comments in response to the nutrient content claims
proposal for dietary supplements used the term ``full potency'' in
discussions. FDA requests comment on whether the term ``full potency''
is generally viewed by consumers as a synonym to ``high potency,'' and
if there are other terms that appropriately can be defined as
synonymous with ``high potency.'' If reasonable synonyms are suggested
in the comments, and the comments establish that use of these terms
will not be misleading, the agency will consider defining them as
synonyms with ``high potency'' in the final rule.
B. Nutrient Content Claims Using the Term ``Antioxidants''
1. Background
One comment to the 1993 nutrient content claims proposal (58 FR
33731) stated that FDA failed to address whether the currently used
claim of ``high in antioxidants'' was within the scope of the proposed
regulation. The agency stated in the 1994 nutrient content claims final
rule that while this claim was not explicitly discussed in the 1993
nutrient content claims proposal. FDA considered it to be a nutrient
content claim (59 FR 378 at 389). One problem noted with the claim,
however, was that there is no established definition of the term
``antioxidants.''
In an informal survey of dietary supplement products sold in the
Washington, DC area, FDA found that the claim ``high in antioxidants''
often refers to a variety of nutrients and other dietary ingredients
that are present in widely varying amounts (Ref. 9). This inconsistent
use of the claim can lead to consumer confusion. To ensure that
consumers are not confused or misled, Congress found in passing the
1990 amendments that it is appropriate for FDA to establish specific
definitions to standardize the terms used by manufacturers to describe
the nutrient content of foods. Accordingly, in this document, FDA is
proposing to define ``antioxidants'' so that it can be used in a clear
and consistent manner in conjunction with currently defined nutrient
content claims such as ``good source,'' ``high,'' and ``more'' and the
proposed ``high potency'' claim. The agency is following up on the
commitment that it made in the 1994 nutrient content claims final rule
to propose to adopt a definition for the term (59 FR 378 at 389).
The term ``antioxidants'' is unique in comparison to the names of
other nutrients associated with nutrient content claims. Unlike
previously approved nutrient content claims that characterize the level
of a particular nutrient (e.g., ``low sodium''), a term such as ``high
in antioxidants'' ties a claim (i.e., ``high'') to a class of nutrients
that share a specific characteristic (i.e., they are antioxidants)
whose very name indicates a metabolic function. Because of this fact,
it is important to make a clear distinction between the term when used
as part of a nutrient content claim and possible uses of the term as
part of a health claim or a statement of nutritional support.
Nutrient content claims expressly or implicitly characterize the
level of a nutrient in a food and are regulated under Sec. 101.13.
Health claims are claims that expressly or by implication characterize
the relationship of any substance to a disease or health-related
condition. They are regulated under Sec. 101.14. Moreover, statements
of nutritional support, authorized by section 403(r)(6) of the act,
which was added by the DSHEA, encompass label statements on dietary
supplements that claim a benefit related to a classical nutrient
deficiency disease, describe how a nutrient or dietary ingredient
affects the structure or function in humans, characterize the
documented mechanism by which a nutrient or dietary ingredient acts to
maintain the structure or function, or describe general well-being from
consumption of a nutrient or dietary ingredient.
In the case of a claim such as ``high in antioxidants,'' a set of
substances is clearly identified (i.e., ``antioxidants'') and a level
of nutrients is stated (i.e., ``high''), but there is no disease or
health-related condition stated or implied, and the descriptive or
characterizing aspects of nutritional support statements are not
present. Accordingly, such a term is properly regulated as a nutrient
content claim.
2. Express Versus Implied Nutrient Content Claims
In the 1994 nutrient content claims final rule, FDA stated that it
considered ``high in antioxidants'' to be an implied nutrient content
claim that would come under Sec. 101.65 (59 FR 378 at 389). However,
after further consideration, the agency tentatively concludes that when
the term ``antioxidants'' appears in association with expressed
nutrient content claims (i.e., ``good source,'' ``high,'' ``more,'' and
the proposed ``high potency''), the claim is more properly classified
as an expressed claim. Therefore, the agency is defining the term
``antioxidants'' in Sec. 101.54 Nutrient Content Claims for ``Good
Source,'' ``High,'' and ``More.'' This placement is consistent with the
manner in which fiber claims (e.g., ``high in fiber'') are regulated.
(See Sec. 101.54(d).) Accordingly, the agency is proposing to add
paragraph (g) to Sec. 101.54 to address nutrient content claims using
the term ``antioxidants.''
3. Definition of ``Antioxidants''
As stated, the agency is proposing to define the term
``antioxidants'' for use with nutrient content claims such as ``good
source,'' ``high,'' and ``more'' that are defined in Sec. 101.54, and
with the proposed ``high potency.'' This task entails determining which
nutrients are to be included within the coverage of the term
``antioxidants.''
In a previous rulemaking, FDA has reviewed the characteristics of
three vitamins that function as antioxidants. Section 3(b)(1)(A)(x) of
the 1990 amendments directed the agency to address the relationship
between antioxidant vitamins and cancer. In its proposed regulations to
implement the 1990 amendments, FDA considered the effects of vitamin C,
vitamin E, and beta-carotene on cancer (56 FR 60624, November 27,
1991). In that document, FDA summarized the antioxidant properties of
those nutrients.
[[Page 67190]]
FDA stated that vitamin C serves as an effective free-radical
scavenger to protect cells from damage by reactive oxygen molecules (a
free-radical being an atom containing an unpaired electron which tends
to give the atom more reactivity, often leading to a pro-oxidative
chain reaction which can damage cells). The basic biological function
of vitamin E was found to be as an antioxidant where it acts as a
defense against potentially harmful reactions with oxygen by
deactivation of the free-radicals. In the case of beta-carotene, the
agency stated that it was chosen because it is an antioxidant, and,
although it is not recognized as a vitamin itself, it is a provitamin
and makes important contributions to the vitamin A activity of most
diets. Beta-carotene acts by trapping, deactivating, and destroying
reactive oxygen molecules and preventing the damage that they can
cause. FDA did not include vitamin A (retinol) and retinoic acid in its
consideration because their biological functions are not achieved
through an antioxidant role, and because vitamin A cannot function in a
fashion similar to that of beta carotene (carotenoids) and vitamins C
and E (Refs. 11 and 12).
In the final rule on antioxidant vitamins and cancer, FDA concluded
that this selection of nutrients was appropriate (58 FR 2622, January
6, 1993).
In addition, a recent conference entitled ``Antioxidant Vitamins
and Cancer and Cardiovascular Disease,'' initiated by FDA, supported
this conclusion and affirmed that the biological role of other vitamins
as direct antioxidants remains unsubstantiated (Ref. 13). Riboflavin
and niacin, two of the B-vitamins, are precursors of coenzymes that are
involved in large numbers of oxidation and reduction reactions. By
themselves, however, these vitamins do not have direct antioxidant
activities. Moreover, after conversion to their coenzyme forms, they
have indirect effects that are both antioxidant and pro-oxidative in
character (Refs. 14 and 15). When pro-oxidative conditions (i.e., the
opposite of antioxidative) predominate, oxidative damage occurs to
cells, lipids, proteins, and carbohydrates (Ref. 16). Thus, FDA
tentatively concludes that these nutrients should not be classed as
antioxidants.
As stated earlier, the 1990 amendments specifically required that
the agency evaluate the relationship of antioxidant vitamins to cancer.
Antioxidant minerals were not mentioned in the statute and were not
considered by the agency. However, in this rulemaking to define
``antioxidants'' for use in nutrient content claims, FDA is not
restricted in the nutrients that are to be encompassed by this term.
Based on its informal survey, the agency notes that some dietary
supplements, including both single nutrient and multinutrient products,
use the term ``antioxidant'' on their label and in labeling to describe
minerals such as copper, zinc, manganese, iron, and selenium (Ref. 9).
Accordingly, FDA has reviewed the literature on the biological
activities of these minerals.
As a result of its review, the agency tentatively concludes that
there is no evidence that these substances have direct antioxidant
properties, and that, in fact, some of them are pro-oxidative at
certain levels. For example, copper, manganese, and zinc activate
specific forms of the enzyme superoxide dismutase (SOD) which acts to
remove the superoxide radical, and thus these minerals have indirect
antioxidant effects (Refs. 17, 18, and 19). However, copper and
manganese, in their free forms, are effective catalysts for oxidation
reactions (i.e., pro-oxidants). Their role as an indirect antioxidant
would be expected to predominate only at intakes at or below the
quantities needed to saturate SOD. Higher intakes would be expected to
have pro-oxidative effects (Refs. 17 and 18). Zinc does not have direct
antioxidant or oxidant effects. It activates one form of SOD and thus
has only indirect antioxidant activity (Ref. 19). Iron, another
mineral, is an activator of catalase, which destroys peroxides, and
thus has indirect antioxidant effects, but, again, iron itself
catalyzes oxidative reactions (Ref. 20). Selenium is required for the
activity of the enzyme glutathione peroxidase and thus has indirect
antioxidant effects (Ref. 21).
The agency's tentative view is that it is appropriate to identify
only those nutrients having a clear, direct antioxidant function in
defining the coverage of the term ``antioxidants.'' Because none of the
minerals discussed above function directly as antioxidants, the agency
tentatively concludes that they should not be included in the
definition of the term ``antioxidants'' for purposes of making a
nutrient content claim. -Accordingly, FDA is proposing in
Sec. 101.54(g)(1), in part, that ``antioxidants'' be defined as a
collective term inclusive of vitamin C, vitamin E, and beta-carotene
when used as a part of nutrient content claims (e.g., ``good source of
antioxidants,'' ``high in antioxidants'') that describe food products.
FDA also provides in the proposed regulation that the food must contain
the requisite amounts of each of the three nutrients to qualify to bear
the claim (e.g., for ``high in antioxidants,'' the product must contain
20 percent or more of the RDI for vitamin C and vitamin E per reference
amount customarily consumed, and 20 percent or more of the RDI for
vitamin A must be present as beta-carotene per reference amount
customarily consumed).
Because there is a recent history of use of nutrient content claims
for ``antioxidants'' on both dietary supplements and conventional
foods, the agency is proposing in Sec. 101.54(g)(1) that such claims be
allowed on both types of foods. It should be noted, however, that
because the agency is proposing in this document that the term ``high
potency'' be limited to dietary supplements, the term ``high potency
antioxidants'' could be used only on dietary supplements.
FDA notes that some herbs and other dietary ingredients use the
term ``antioxidants'' in association with a nutrient content claim
(e.g., ``raspberry leaf--high in antioxidants''). The agency advises
that the regulations being proposed would not permit such nutrient
content claims unless the product contains the nutrients identified in
the proposed definition of ``antioxidants.''
4. Beta-carotene
Nutrient content claims are authorized for nutrients for which
there are RDI's or DRV's. This approach has the advantage of linking
nutrient content claims to established reference values, thereby
providing a consistent and quantitative basis for defining terms. As a
pro-vitamin, beta-carotene does not have an RDI or DRV. However, FDA
stated in the final rule on nutrient content claims for dietary
supplements that claims regarding beta-carotene (e.g., ``contains beta-
carotene'') are claims that make implied representations about the
level of vitamin A that is present in the food as beta-carotene (59 FR
378 at 384). Accordingly, the agency stated that it considers that the
claim ``contains beta-carotene'' implies that there is enough beta-
carotene in the food for the food to qualify as a ``good source'' of
vitamin A (i.e., it contains 10 percent or more of the DV for vitamin A
from beta-carotene) (59 FR 378 at 384). Such a claim is provided for in
Sec. 101.65(c).
The agency tentatively concludes that this standard should also
apply to beta-carotene when it, either by itself or in association with
other antioxidants, is the subject of an ``antioxidant'' claim. This
standard allows beta-carotene to be tied to vitamin A, a nutrient with
an RDI, as an implied claim, thereby
[[Page 67191]]
permitting nutrient content claims to be made about this substance.
Therefore, proposed Sec. 101.54(g)(1) includes a requirement that
vitamin A present as beta-carotene be present at a sufficient level to
qualify for the claim (e.g., for ``high in antioxidants,'' 20 percent
or more of the DV for vitamin A must be present as beta-carotene; for
``high potency antioxidant,'' 100 percent or more of the DV for vitamin
A must be present as beta-carotene).
FDA acknowledges that the antioxidant role of beta-carotene was not
taken into account by the NAS in setting the RDA's for vitamin A (Ref.
6). Therefore, there is no reason to believe that the amount of beta-
carotene potentially useful as an antioxidant is related to the RDI for
vitamin A. However, the agency tentatively concludes that the above
approach is a practical means of quantifying the level of beta-carotene
that must be present for a food to qualify to bear an antioxidant
nutrient content claim.
5. Disclosure Requirement
FDA is aware of the availability of products that do not contain
all three of the nutrients included in the proposed definition of
``antioxidants'' (i.e., vitamin C, vitamin E, and beta-carotene) yet
that highlight the antioxidant properties of a particular nutrient
(e.g., ``Contains antioxidant vitamin E'') on the label or in labeling.
FDA tentatively concludes that it is appropriate to allow products to
bear such claims because the antioxidant properties of each nutrient
are significant enough to highlight. However, the agency finds that
when a food makes a claim for ``antioxidants'' yet fails to contain all
three nutrients, the disclosure of the specific antioxidant nutrients
that are present in the product is necessary to ensure that consumers
are not misled into thinking that the product contains all three
nutrients. Such a disclosure is necessary to reveal a fact that is
material in light of the antioxidant claim (section 201(n) of the act),
that is, to disclose which nutrients with antioxidant effects are
present in the product at the highlighted level.-
Accordingly, the agency is proposing in Sec. 101.54(g)(2) that when
a nutrient content claim using the term ``antioxidant'' is included on
the label or in labeling of a product that does not contain all three
antioxidants at the required levels, the claim may only be used on the
label or in labeling when the food contains at least one of the
nutrients at the requisite level, and the label or labeling discloses
the antioxidants contained in the product in sufficient amounts to
qualify for the claim (e.g., ``High in antioxidant vitamins C and E'').
6. Collective Claims
Collective claims such as ``complete antioxidant complex'' and
``antioxidant formula'' seem to convey that the product contains each
antioxidant. Because FDA has identified three vitamins with direct
antioxidant activity, it is reasonable to expect that a dietary
supplement or conventional food making such a collective claim about
antioxidants will contain each of these vitamins. Further, such claims
imply that each nutrient is present at a level sufficient to make a
significant contribution to the total daily diet, or at a minimum, is a
``good source'' of each nutrient.
Therefore, FDA tentatively concludes that collective claims about
antioxidants, such as ``complete antioxidant complex'' or ``antioxidant
formula'' state that the labeled product contains 10 percent or more of
the RDI of vitamin C and vitamin E, and that 10 percent or more of the
RDI for vitamin A is present as beta-carotene. -
Accordingly, FDA is proposing to add Sec. 101.54(g)(3) to provide
for the use, under section 403(r)(2)(A)(i) of the act, of such
collective antioxidant terms (e.g., ``complete antioxidant formula,''
``antioxidant complex'') as nutrient content claims provided that
vitamin C and vitamin E are present at 10 percent or more of the RDI
per reference amount customarily consumed, and that 10 percent or more
of the RDI for vitamin A is present as beta-carotene per reference
amount customarily consumed when such a term is used. This definition,
if adopted, would not preclude the presence of other nutrients (e.g.,
selenium and zinc) in the product, nor would this definition preclude
manufacturers from making other nutrient content claims that
characterize the level of other nutrients that have RDI's or DRV's.
Further, manufacturers may also describe the nutritional properties of
other ingredients as long as the statements are not false or misleading
or do not constitute unauthorized health claims or unapproved drug
claims.
C. Limitation of ``High Potency'' and Nutrient Content Claims Using the
Term ``Antioxidant'' on Products for Infants and Toddlers
The agency points out that Sec. 101.13(b)(3) states that except for
percentage claims regarding vitamins and minerals described in
Sec. 101.13(q)(3), no nutrient content claims may be made on food
intended specifically for use by infants and children less than 2 years
of age unless the claim is specifically provided for in parts 101, 105,
or 107 (21 CFR parts 105 and 107).
The agency sees no reason why an exception should be made to extend
the use of the terms discussed in this rulemaking to products for
infants and toddlers. FDA is not aware of any evidence that the intake
of dietary supplements at ``high potency'' levels, or that an increased
intake of antioxidants, are appropriate for infants and toddlers.
Relatively little attention has been given to the role of the diet of
children less than 2 years of age in modifying the risk of chronic
diseases, such as hypertension and cancer, found in adults (Refs. 10
and 22). Thus, FDA is not aware of any basis on which to conclude that
these claims would be useful to the parents of young children. In fact,
such terms would be misleading on foods for infants and toddlers
because they imply benefits that have not been demonstrated.
In addition, the definitions of nutrient content claims for both
``high potency'' and for the several possible levels of
``antioxidants'' (e.g., ``good source,'' ``high,'' and ``more'') are
dependent upon calculation of the percent of the RDI for the
appropriate nutrient present in the product. However, no RDI's are
currently established for infants and children less than 2 years of
age. The agency has stated that it intends to address the issue of
RDI's for infants, children less than 4 years, and pregnant and
lactating women in future rulemaking (59 FR 427 at 430, January 4,
1994), and it reiterates that intention in the final rule on RDI's
published elsewhere in this issue of the Federal Register. However,
until it establishes these levels, there is no basis on which to define
these terms for use on foods intended for infants and children less
than 2 years of age.
D. Amendment to Sec. 101.60 Concerning Nutrient Content Claims for the
Calorie Content of Foods for Dietary Supplements
Section 101.60(c)(1) states that consumers may reasonably be
expected to regard terms that represent that the food contains no
sugars or sweeteners as an indication that a product is low in calories
or is significantly reduced in calories. This section also states that
a food cannot be labeled ``sugar free'' or ``no sugar'' unless it meets
the following conditions: (1) The food contains less than 0.5 gram (g)
of sugars per reference amount and per labeled serving, (2) the food
contains no ingredient that is a sugar or that is generally understood
by consumers to contain sugars unless the
[[Page 67192]]
listing of the ingredient in the ingredient statement is followed by an
asterisk that refers to a statement below the list of ingredients such
as ``adds a negligible amount of sugar,'' and (3) it is labeled ``low
calorie'' or ``reduced calorie'' or bears a relative claim of special
dietary usefulness, or is labeled ``not a reduced calorie food,'' ``not
a low calorie food,'' or ``not for weight control.''
In the 1994 nutrient content claims final rule, FDA added paragraph
Sec. 101.60(a)(4) to state that ``calorie free'' and ``low calorie''
claims may not be made on dietary supplement products, except when an
equivalent amount of a dietary supplement that the labeled food
resembles and for which it substitutes (e.g., another protein
supplement), normally exceeds the definition for ``low calorie'' in
Sec. 101.60(b)(2). The agency also similarly revised Sec. 101.13(b)(5).
This change in Secs. 101.13(b)(5) and 101.60(a)(4) had the unintended
effect of limiting the use of ``sugar free'' or ``no sugar'' claims on
dietary supplements that would otherwise meet the requirements for
``low calorie'' in Sec. 101.60(b)(2) but are not permitted to bear the
claim because they do not substitute for a similar dietary supplement
that normally exceeds the definition for ``low calorie.''
In the 1994 nutrient content claims final rule, FDA had found that,
because the level of sugars in dietary supplements can vary
substantially, claims about the sugars content of dietary supplements
may be useful in helping consumers make purchasing decisions that will
assist them in maintaining healthy dietary practices (59 FR 378 at
382). Thus, the agency concluded that extending the definitions of
``sugar free'' and ``reduced sugar'' to dietary supplements was
appropriate irrespective of the calorie level of the dietary
supplement. Therefore, FDA did not modify the requirements governing
claims for sugars in Sec. 101.60(c) for dietary supplements. In not
making a change to Sec. 101.60(c), however, FDA overlooked the impact
of new Secs. 101.13(b)(5) and 101.60(a)(4).
In order to allow for ``sugar free'' or ``no sugar'' claims on
dietary supplements that meet the other criteria for the claim (i.e.,
contain less than 0.5 g of sugars per reference amount and contain no
ingredient that is a sugar or that is generally understood by consumers
to contain sugars unless an appropriate statement is added after the
ingredient list), the requirement that the product be labeled ``low
calorie'' should have been modified for dietary supplements that were
prohibited from making ``low calorie'' claims because no other dietary
supplement that the labeled food resembles and for which it substitutes
exceeded the definition for ``low calorie.'' FDA is proposing to make
that change now. No modification is needed for dietary supplements
labeled ``reduced calorie'' since that claim was not changed by the
final rules on nutrient content claims for dietary supplements or for
those dietary supplements that are not low or reduced in calories.
The agency is not aware of any reason why its position in
Sec. 101.60(c)(1) that consumers may be expected to regard ``sugar
free'' and ``no sugar'' claims as indicative of a product that is low
or reduced in calories should be different for dietary supplements than
for conventional foods. Therefore, FDA is proposing to revise
Sec. 101.60(c)(1)(iii)(A) to excuse only dietary supplements that
otherwise meet the definition of ``low calorie'' under
Sec. 101.60(b)(2) but that are prohibited by Secs. 101.13(b)(5) and
101.60(a)(4) from bearing the claim.
IV. Effective Date
FDA is proposing an effective date of January 1, 1997. This date is
consistent with the effective date proposed in two companion proposals
published elsewhere in this issue of the Federal Register entitled
``Food Labeling; Statement of Identity, Nutrition Labeling and
Ingredient Labeling of Dietary Supplements'' and ``Food Labeling;
Requirements for Nutrient Content Claims, Health Claims, and Statements
of Nutritional Support for Dietary Supplements.'' This date will allow
firms to make all label changes associated with the DSHEA and with the
two companion proposals at the same time.
V. Economic Impact
FDA has examined the economic implications of the proposed rule
amending 21 CFR as required by Executive Order 12866 and the Regulatory
Flexibility Act (Pub. L. 96-354). Executive Order 12866 directs
agencies to assess all costs and benefits of available regulatory
alternatives and, when regulation is necessary, to select regulatory
approaches which maximize net benefits (including potential economic,
environmental, public health and safety effects; distributive impacts;
and equity). The Regulatory Flexibility Act requires analyzing options
for regulatory relief for small businesses. FDA finds that this
proposed rule is not a significant rule as defined by Executive Order
12866. In accordance with the Regulatory Flexibility Act, the agency
certifies that the proposed rule will not have a significant impact on
a substantial number of small businesses.
Many currently marketed foods and dietary supplements use the terms
``high potency'' and ``high in antioxidants'' to describe the level of
nutrients in the products. Without definitions for these terms,
manufacturers will not be able to continue to use them. This proposed
rule will require that any manufacturer currently using the terms
``high potency'' or ``antioxidant'' bear the costs of removing such
statements from their labels only if the products do not meet the
proposed definition. FDA does not believe that the number of products
that would not meet the proposed definition is high.
VI.- Paperwork Reduction Act
FDA tentatively concludes that this proposed rule contains no
reporting, recordkeeping, labeling, or other third party disclosure
requirements; thus there is no ``information collection'' necessitating
clearance by the Office of Management and Budget. However, to ensure
the accuracy of this tentative conclusion, FDA is asking for comment on
whether this proposed rule to define the term ``high potency'' as a
nutrient content claim for dietary supplements, to define the term
``antioxidant'' for use in nutrient content claims for dietary
supplements, and to correct an omission pertaining to the use of
``sugar free'' claims on dietary supplements imposes any paperwork
burden.
VII. Environmental Impact
The agency has determined under 21 CFR 25.24(a)(11) that this
action is of a type that does not individually or cumulatively have a
significant effect on the human environment. Therefore, neither an
environmental assessment nor an environmental impact statement is
required.-
VIII. Comments
Interested persons may, on or before March 13, 1996, submit to the
Dockets Management Branch (address above) written comments regarding
this proposal. Two copies of any comments are to be submitted, except
that individuals may submit one copy. Comments are to be identified
with the docket number found in brackets in the heading of this
document. Received comments may be seen in the office above between 9
a.m. and 4 p.m., Monday through Friday.
IX. References
The following references have been placed on file in the Dockets
Management Branch (address above) and may be seen by interested persons
[[Page 67193]]
between 9 a.m. and 4 p.m., Monday through Friday.
1. Committee on the Nutrition Components of Food Labeling, Food
and Nutrition Board, Institute of Medicine, National Academy of
Sciences, ``Nutrition Labeling, Issues and Directions for the
1990's,'' Washington, DC, National Academy Press, 1990.
2. Park, Y. K., I. Kim, and E. A. Yetley, ``Characteristics of
Vitamin and Mineral Supplement Products in the United States,''
American Journal of Clinical Nutrition, 54:750-759, 1991.
3. Moss, A. J., A. S. Levy, I. Kim, and Y. Park, ``Use of
Vitamin and Mineral Supplements in the United States, Current Users,
Types of Products and Nutrients, Advance Data from Vital and Health
Statistics of the National Center for Health Statistics,'' No. 174,
July 18, 1989.
4. Bender, M. M., A. S. Levy, R. E. Schucker, and E. A. Yetley,
``Trends in Prevalence and Magnitude of Vitamin and Mineral
Supplement Usage and Correlation with Health Status,'' Journal of
the American Dietetic Association, 92:1096-1101, 1992.
5. Levy, A. S. and R. E. Schucker, ``Patterns of Nutrient Intake
Among Dietary Supplement Users: Attitudinal and Behavioral
Correlates,'' Journal of the American Dietetic Association, 87:754-
760, 1987.
6. Subcommittee on the 10th Edition of the Recommended Dietary
Allowances, Food and Nutrition Board, Commission on Life Sciences,
National Research Council, ``Recommended Dietary Allowances, 10th
ed.,'' Washington, DC, National Academy Press, 1989.
7. Food and Nutrition Board, Institute of Medicine, National
Academy of Sciences, ``How Should the Recommended Dietary Allowances
Be Revised,'' Washington, DC, National Academy Press, 1994.
8. U.S. Department of Agriculture and U.S. Department of Health
and Human Services, ``Nutrition and Your Health, Dietary Guidelines
for Americans,'' Washington, DC, Home and Garden Bulletin, 3d ed.,
U.S. Government Printing Office, 1990.
9. Memorandum from C. E. Brewer, FDA, to file, nutrient content
of multinutrient products, March 28, 1994.-
10. Committee on Diet and Health, Food and Nutrition Board,
Commission on Life Sciences, National Research Council, National
Academy of Sciences, ``Diet and Health, Implications for Reducing
Chronic Disease Risk,'' National Academy Press, Washington, DC,
1989.
11. Merrill, A. H., Jr., A. Foltz, D. B. McCormick, ``Vitamins
and Cancer,'' edited by Alfin-Slater, R. B., and D. Kritchevsky,
Cancer and Nutrition, pp. 261-320, Plenum Press, New York, 1991.
12. Olson, J. A., ``Vitamin A, Retinoids, and Carotenoids,''
edited by Shils, M. E., J. A. Olson, and M. Shike, Modern Nutrition
in Health and Disease, pp. 287-307, Lea & Febiger, Philadelphia,
1994.
13. Transcript to Docket 93N-0389 for FDA-initiated public
conference on antioxidant vitamins and cancer and cardiovascular
disease, November, 1993.
14. McCormick, D. B., ``Riboflavin,'' edited by Shils, M. E., J.
A. Olson, and M. Shike, Modern Nutrition in Health and Disease, pp.
367-375, Lea & Febiger, Philadelphia, 1994.
15. Swendseid, M. E., and R. A. Jacob, ``Niacin,'' edited by
Shils, M. E., J. A. Olson, and M. Shike, Modern Nutrition in Health
and Disease, pp. 376-382, Lea & Febiger, Philadelphia, 1994.
16. Thomas, J. A. ``Oxidative Stress, Oxidant Defense, and
Dietary Constituents,'' edited by Shils, M. E., J. A. Olson, and M.
Shike, Modern Nutrition in Health and Disease, pp. 501-512, Lea &
Febiger, Philadelphia, 1994.
17. Turnland, J. R., ``Copper,'' edited by Shils, M. E., J. A.
Olson, and M. Shike, Modern Nutrition in Health and Disease, pp.
231-241, Lea & Febiger, Philadelphia, 1994.
18. Nielsen, F. H., ``Ultratrace Elements,'' edited by Shils, M.
E., J. A. Olson, and M. Shike, Modern Nutrition in Health and
Disease, pp. 269-286, Lea & Febiger, Philadelphia, 1994.
19. King, J. C., and C. L. Keen, ``Zinc,'' edited by Shils, M.
E., J. A. Olson, and M. Shike, Modern Nutrition in Health and
Disease, pp. 214-230, Lea & Febiger, Philadelphia, 1994.
20. Fairbanks, V. F., ``Iron in Medicine and Nutrition,'' edited
by Shils, M. E., J. A. Olson, and M. Shike, Modern Nutrition in
Health and Disease, pp. 185-213, Lea & Febiger, Philadelphia, 1994.
21. Levander, O. A., and R. F. Burk, ``Selenium,'' edited by
Shils, M. E., J. A. Olson, and M. Shike, Modern Nutrition in Health
and Disease, pp. 242-251, Lea & Febiger, Philadelphia, 1994.
22. U.S. Department of Health and Human Services, ``The Surgeon
General's Report on Nutrition and Health,'' DHHS (Public Health
Service) Publication No. 88-50210 (Government Printing Office Stock
No. 017-001-00465-1), U.S. Government Printing Office, Washington,
DC, 1988.
List of Subjects in 21 CFR Part 101
Food labeling, Nutrition, Reporting and recordkeeping requirements.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs, it is
proposed that 21 CFR part 101 be amended as follows:
PART 101--FOOD LABELING
1. The authority citation for 21 CFR part 101 continues to read as
follows:
Authority: Secs. 4, 5, 6 of the Fair Packaging and Labeling Act
(15 U.S.C. 1453, 1454, 1455); secs. 201, 301, 402, 403, 409, 701 of
the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321, 331, 342,
343, 348, 371).
2. Section 101.13 is amended by adding new paragraph (b)(6) to read
as follows:
Sec. 101.13 Nutrient content claims--general principles.
* * * * *
(b) * * *
(6) The term ``high potency'' may only be used on the labels or in
the labeling of dietary supplements as defined by section 201(ff) of
the Federal Food, Drug, and Cosmetic Act.
* * * * *
3. Section 101.54 is amended by revising the section heading and
adding new paragraphs (f) and (g) to read as follows:
Sec. 101.54 Nutrient content claims for ``good source,'' ``high,''
``more,'' and ``high potency.''
* * * * *
(f) ``High potency'' claims. (1) The term ``high potency'' may be
used on the label or in the labeling of dietary supplements to describe
a nutrient that is present at 100 percent or more of the RDI for
vitamins and minerals or of the DRV for protein and dietary fiber per
reference amount customarily consumed.
(2) The term ``high potency'' may be used on the label or in the
labeling of dietary supplements to describe a product that contains 100
percent or more of the RDI, or of the DRV, for at least two-thirds of
the vitamins and minerals, and of the protein and dietary fiber,
present in the product (e.g., ``High potency multivitamin, multimineral
dietary supplement tablets'').
(g) ``Antioxidants'' claims. (1) The term ``antioxidants'' is
defined as a collective term inclusive of vitamin C, vitamin E, and the
provitamin beta-carotene when used as part of a nutrient content claim
(e.g., ``good source of antioxidants,'' ``high in antioxidants'') on
labels or in labeling of conventional foods or dietary supplements. The
levels of vitamin C and vitamin E and the level of vitamin A present as
beta-carotene in the food that bears the claim all must be sufficient
to qualify for the claim (i.e., for ``high in antioxidants,'' the
product must contain 20 percent or more of the RDI for vitamin C and
vitamin E per reference amount customarily consumed and 20 percent or
more of the RDI for vitamin A must be present as beta-carotene per
reference amount customarily consumed).
(2) The term ``antioxidants'' may only be used on the label or in
labeling of a food that does not contain each of the three antioxidants
(i.e., vitamin C, vitamin E, and beta-carotene) in sufficient amounts
to qualify for the claim if the food contains at least one of these
nutrients at the requisite level, and the claim discloses which
antioxidants in the food meet the required level (e.g., ``High in
antioxidant vitamins C and E'').
(3) A collective claim about antioxidant nutrients (e.g.,
``complete antioxidant formula,'' ``antioxidant complex'') may be used
on the label or in labeling of foods provided that
[[Page 67194]]
vitamin C and vitamin E are present at 10 percent or more of the RDI
per reference amount customarily consumed, and that 10 percent or more
of the RDI for vitamin A is present as beta-carotene per reference
amount customarily consumed.
4. Section 101.60 is amended by revising paragraph (c)(1)(iii)(A)
to read as follows:
Sec. 101.60 Nutrient content claims for the calorie content of foods.
* * * * *
(c) * * *
(1) * * *
(iii)(A) It is labeled ``low calorie'' or ``reduced calorie'' or
bears a relative claim of special dietary usefulness labeled in
compliance with paragraphs (b)(2), (b)(3), (b)(4), or (b)(5) of this
section, or, if a dietary supplement, it meets the definition in
paragraph (b)(2) of this section for ``low calorie'' but is prohibited
by Secs. 101.13(b)(5) and 101.60(a)(4) from bearing the claim; or
* * * * *
Dated: December 18, 1995.
William B. Schultz,
Deputy Commissioner for Policy.
[FR Doc. 95-31194 Filed 12-27-95; 8:45 am]
BILLING CODE 4160-01-F
Complete official Federal Register PDF
FR Doc. 95-31193 Food Labeling; Requirements for Nutrient Content Claims, Health Claims, and Statements of Nutritional Support for Dietary Supplements
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67176-67184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31193]
Federal Register / Vol. 60, No. 249 / Thursday, December 28, 1995 /
Proposed Rules
[[Page 67176]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
21 CFR Part 101
[Docket No. 95N-0282]
Food Labeling; Requirements for Nutrient Content Claims, Health
Claims, and Statements of Nutritional Support for Dietary Supplements
AGENCY: Food and Drug Administration, HHS.
ACTION: Proposed rule.
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SUMMARY: The Food and Drug Administration (FDA) is proposing to amend
its nutrient content claims regulations to change the terminology used
to describe dietary supplements; provide for the use of statements that
characterize the percentage level of dietary ingredients that do not
have Reference Daily Intakes (RDI's) or Daily Reference Values (DRV's);
and withdraw the provision that dietary supplements of vitamins and
minerals may not give prominence to any ingredient that is not a
vitamin or a mineral on its label or in labeling. The agency is also
proposing to specify how (i.e., text, placement, and type size) the
disclaimer required by the Federal Food, Drug, and Cosmetic Act (the
act) is to be presented with statements of nutritional support.
Additionally, FDA is proposing to remove the definition of ``dietary
supplements'' and to change the terminology used to describe dietary
supplements in regulations governing health claims for food products.
This action is being taken to implement in part the Dietary Supplement
Health and Education Act of 1994 (the DSHEA).
DATES: Written comments by March 13, 1996. The agency is proposing that
any final rule that may issue based upon this proposal become effective
January 1, 1997.
ADDRESSES: Submit written comments to the Dockets Management Branch
(HFA-305), Food and Drug Administration, rm. 1-23, 12420 Parklawn Dr.,
Rockville, MD 20857, 301-245-1064.
FOR FURTHER INFORMATION CONTACT: Camille E. Brewer, Center for Food
Safety and Applied Nutrition (HFS-165), Food and Drug Administration,
200 C St. SW., Washington, DC 20204, 202-205-5483.
SUPPLEMENTARY INFORMATION:
I. Background
On November 8, 1990, the President signed into law the Nutrition
Labeling and Education Act of 1990 (the 1990 amendments) (Pub. L. 101-
535). The 1990 amendments amended the act in a number of important
ways. One of the most notable aspects of the 1990 amendments is that
they established FDA's authority to regulate nutrient content and
health claims on food labels and in food labeling. Section 403(r)(1)(A)
of the act (21 U.S.C. 343(r)(1)(A)), which was added by the 1990
amendments, provides that a product is misbranded if it bears a claim
in its label or labeling that either expressly or implicitly
characterizes the level of any nutrient of the type required to be
declared as part of nutrition labeling, unless such claim has been
specifically defined (or otherwise exempted) by regulation. Section
403(r)(1)(B) of the act, also added by the 1990 amendments, provides
that a product is misbranded if it bears a claim that characterizes the
relationship of a nutrient to a disease or health-related condition,
unless the claim is made in accordance with sections 403(r)(3) of the
act (which pertains to foods in conventional food form) or 403(r)(5)(D)
(which pertains to dietary supplements).
In the Federal Register of November 27, 1991 (56 FR 60421 and 56 FR
60478), FDA published two documents, one general and the other on fat,
fatty acid, and cholesterol claims, in which the agency proposed, among
other things, to define nutrient content claims, to provide for their
use on foods labels, and to establish procedures for the submission and
review of petitions regarding the use of specific nutrient content
claims. These proposals applied to dietary supplements as well as to
foods in conventional food form. In the same issue of the Federal
Register, FDA proposed general requirements on the use of health claims
and on petitions to the agency to authorize health claims (56 FR
60537).
On October 6, 1992, the President signed into law the Dietary
Supplement Act of 1992 (the DS Act) (Pub. L. 102-571). Section
202(a)(1) of the DS Act established a moratorium on the implementation
of the 1990 amendments with respect to dietary supplements until
December 15, 1993. Section 202(a)(2) of the DS Act required that the
Secretary of Health and Human Services (the Secretary), and by
delegation FDA, issue new proposed regulations applicable to dietary
supplements no later than June 15, 1993, and final regulations by
December 31, 1993.
In the Federal Register of January 6, 1993, FDA published final
regulations that implemented the 1990 amendments with respect to
nutrient content claims (hereinafter referred to as the ``1993 nutrient
content claims final rule'') (58 FR 2302) and health claims
(hereinafter referred to as the ``1993 health claims final rule'') (58
FR 2478) on foods in conventional food form. In the Federal Register of
August 18, 1993 (58 FR 44020 and 44036), FDA made technical amendments
to these final regulations.
In response to the requirements of the DS Act, FDA published in the
Federal Register of June 18, 1993 (58 FR 33731), a proposal to: (1)
Include dietary supplements of vitamins, minerals, herbs, and other
similar nutritional substances under the coverage of the general
principles for nutrient content claims; (2) provide for the use of
express and implied nutrient content claims on labels or in labeling of
dietary supplements; and (3) provide for petitions for nutrient content
claims for dietary supplements (hereinafter referred to as the ``1993
nutrient content claims for dietary supplements proposal''). In the
same issue of the Federal Register, FDA also proposed to make dietary
supplements of vitamins, minerals, herbs, and other similar nutritional
substances subject to the general requirements that apply to all other
types of food with respect to the use of health claims (hereinafter
referred to as the ``1993 dietary supplement health claims proposal'')
(58 FR 33700).
FDA received approximately 500 letters in response to its 1993
nutrient content claims for dietary supplements proposal. A summary of
the comments, the agency's responses to the comments, and a complete
discussion of the agency's conclusions with respect to nutrient content
claims for dietary supplements were published in the Federal Register
of January 4, 1994 (59 FR 378), in the final rule on nutrient content
claims for dietary supplements (hereinafter referred to as the ``1994
nutrient content claims for dietary supplements final rule''). FDA
received over 1,200 letters in response to the 1993 dietary supplement
health claims proposal. FDA summarized and responded to these comments
in the final rule on health claims for dietary supplements in the same
issue of the Federal Register (59 FR 395).
On October 25, 1994, the President signed into law the DSHEA (Pub.
L. 103-417). The DSHEA, among other things, defined ``dietary
supplement'' (adding section 201(ff) to the act (21 U.S.C. 321(ff))),
made provision for statements that characterize the percentage level of
dietary ingredients that do not have RDI's or DRV's (adding section
403(r)(2)(F) to the act), and amended section 411 (b)(2) and (c)(1) of
the act (21 U.S.C. 350 (b)(2) and (c)(1))
[[Page 67177]]
on the labeling of products that contain vitamins and minerals. In
addition, the DSHEA added section 403(r)(6) to the act, which states
that statements may be made for dietary supplements if:
the statement claims a benefit related to a classical nutrient
deficiency disease and discloses the prevalence of such disease in
the United States, describes the role of a nutrient or dietary
ingredient intended to affect the structure or function in humans,
characterizes the documented mechanism by which a nutrient or
dietary ingredient acts to maintain such structure or function, or
describes general well-being from consumption of a nutrient or
dietary ingredient * * *.
(section 403(r)(6)(A) of the act), and if certain other conditions are
met. The manufacturer of the dietary supplement must have
substantiation that the statement is truthful and not misleading
(section 403(r)(6)(B)), and the nutritional support statement must
prominently contain the following disclaimer:
This statement has not been evaluated by the Food and Drug
Administration. This product is not intended to diagnose, treat,
cure, or prevent any disease.
(section 403(r)(6)(C)).
This proposal addresses how this disclaimer is to be presented on
the label or in labeling of a dietary supplement. The agency is issuing
this proposal in response to requests from the dietary supplement
industry that FDA define how this statement is to be presented. In
addition, this proposal seeks to bring the agency's nutrient content
claim and health claim regulations into conformance with the DSHEA and
provides for the use of statements that characterize the percentage
level of dietary ingredients that do not have RDI's or DRV's on labels
and in labeling of dietary supplements.
II. Proposed Regulations
A. Coverage
As discussed in the preamble to the 1994 nutrient content claims
for dietary supplements final rule (59 FR 378 at 379), section
403(r)(1)(A) of the act states that a food intended for human
consumption is misbranded if it bears a claim that expressly or by
implication ``characterizes the level of any nutrient which is of the
type required by paragraph (q)(1) or (q)(2) to be in the label or
labeling of the food * * *.'' The statute uses the same language in
section 403(r)(1)(B) to describe the substances that could be the
subject of a health claim, i.e., a health claim is a claim that
``characterizes the relationship of any nutrient which is of the type
required by paragraph (q)(1) or (q)(2) to be in the label or labeling
of the food to a disease or a health-related condition * * *.'' Under
section 403(r)(1)(B), a health claim must be made in accordance with
section 403(r)(3) or section 403(r)(5)(D). The latter section, which
addresses health claims for dietary supplements of vitamins, minerals,
herbs, and other similar nutritional substances, is relevant to this
proceeding. The legislative history of the phrase ``other similar
nutritional substances'' reveals that its coverage is broad (136
Congressional Record S16609 (October 24, 1990)).
Section 3(a) of the DSHEA amends section 201 of the act by adding
section 201(ff), which defines a ``dietary supplement'' as a product,
other than tobacco, intended to supplement the diet that bears or
contains one or more of the following dietary ingredients: A vitamin; a
mineral; an herb or other botanical; an amino acid; a dietary substance
for use by man to supplement the diet by increasing the total dietary
intake; or a concentrate, metabolite, constituent, extract, or
combination of any of the aforementioned dietary ingredients. In
effect, the list of dietary ingredients in section 201(ff)(1) is an
explication of the term ``other similar nutritional substances'' in
section 403(r)(5)(D). Thus, based on the foregoing analysis, all
dietary ingredients may qualify, in appropriate circumstances, as
``nutrients of the type required by paragraph (q)(1) and (q)(2)'' for
purposes of section 403(r) the act.1 To clarify this point in its
regulations, FDA is proposing to amend Sec. 101.13(b) (21 CFR
101.13(b)) by adding a reference to Sec. 101.36 Nutrition labeling of
dietary supplements of vitamins and minerals (21 CFR 101.36), so that
Sec. 101.13(b) will read, in part, if this amendment is adopted: ``A
claim that expressly or implicitly characterizes the level of a
nutrient of the type required to be in nutrition labeling under
Sec. 101.9 or under Sec. 101.36 (that is, a nutrient content claim) * *
*.''
1 While all dietary ingredients can be ``nutrients of the
type required by paragraph (q)(1) and (q)(2) to be in the label or
labeling of the food'' in appropriate circumstances, all dietary
ingredients are not nutrients as that term is generally understood,
in that they do not all have nutritive value. The DSHEA recognizes
this fact by using the phrase ``nutrient or dietary ingredient''
(e.g., see section 403(r)(6) of the act), indicating that the two
terms are not mutually inclusive. Furthermore, all dietary
ingredients are not necessarily ``ingredients'' within the
traditional meaning of that term under section 403(i) of the act.
For example, in a ``calcium dietary supplement,'' calcium would be
the ``dietary ingredient,'' whereas calcium carbonate or some other
calcium salt would be the ``ingredient,'' i.e., the ``source'' of
the dietary ingredient, calcium. In a dietary supplement of garlic,
garlic could be the dietary ingredient, while the common or usual
name of the ingredient might be ``dried, powdered garlic.'' However,
if the manufacturer promoted the same supplement for its allicin
content, allicin could be the dietary ingredient and the source of
allicin, i.e., the ingredient, would be ``dried, powdered garlic.''
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The broad range of substances that can be dietary ingredients under
section 201(ff) has the potential to create ambiguities as to the
coverage of the nutrient content claim regime. With respect to some
substances that can be dietary ingredients, the context in which
statements about them are made will determine whether they are nutrient
content claims or not. For example, garlic can be the dietary
ingredient. A claim on the label or in the labeling of a dietary
supplement that it is ``high in garlic,'' or that it ``now contains
more garlic,'' is a nutrient content claim within the meaning of the
act, and the food is misbranded unless such a claim has been authorized
by FDA through regulation. The claim characterizes the level of garlic
in a food in which the garlic is a ``nutrient which is of the type''
required to be listed in the nutrition label because the food is
intended to supplement the dietary intake of garlic. On the other hand,
a label statement on garlic bread, for example, that the product now
contains more garlic would not be a nutrient content claim if the bread
is not labeled as a dietary supplement, and if it is clear from the
context in which the claim is made that the claim refers to the taste
of the product. As FDA has provided in Sec. 101.65(b)(3) (21 CFR
101.65(b)(3)), a claim about the presence of an ingredient that is
perceived to add value to the product, which would clearly be the case
when one adds more garlic to garlic bread, is not an implied nutrient
content claim.
B. Terminology
1. Nutrient Content Claims
Current Sec. 101.13(a), on nutrient content claims, states:
This section and the regulations in subpart D of this part apply
to foods that are intended for human consumption and that are
offered for sale, including foods in conventional food form and
dietary supplements of vitamins, minerals, herbs, and other similar
nutritional substances (dietary supplements).
As discussed above, new section 201(ff) of the act creates a new
definition for the term ``dietary supplement.'' To reflect this
definition and to simplify its regulations in the manner that the new
definition permits, FDA is proposing to amend Sec. 101.13(a) to read as
follows: ``This section and the regulations in subpart D of this part
apply to foods that are intended for human consumption
[[Page 67178]]
and that are offered for sale, including conventional foods and dietary
supplements.''
2. Health Claims
Under the general principles governing health claims,
Sec. 101.14(a)(4) (21 CFR 101.14(a)(4)) currently states that ``dietary
supplement'' means a food, not in conventional food form, that supplies
a component to supplement the diet by increasing the total dietary
intake of that component. This definition has been superseded by the
definition of ``dietary supplement'' found in new section 201(ff) of
the act. Further, because section 201(ff)(2)(A) makes it clear that
dietary supplements can be in a variety of forms, including
conventional food form, FDA is proposing to remove Sec. 101.14(a)(4)
and redesignate current Sec. 101.14 (a)(5) and (a)(6) as Sec. 101.14
(a)(4) and (a)(5), respectively.
A similar conforming change is necessary in Sec. 101.14(b)(3)(i) in
the preliminary requirements for a substance to be eligible to be the
subject of a health claim. This regulation refers to the fact that the
food in which a substance is found may be ``in conventional food form
or dietary supplement form.''
To bring this section into conformance with section 201(ff) of the
act, FDA is proposing to revise Sec. 101.14(b)(3)(i) to read as
follows:
The substance must, regardless of whether the food is a
conventional food or a dietary supplement, contribute taste, aroma,
or nutritive value, or any other technical effect listed in
Sec. 170.3(o) of this chapter, to the food and must retain that
attribute when consumed at levels that are necessary to justify a
claim; and * * *.
Section Sec. 101.14(d)(3) currently states:
Nutrition labeling shall be provided in the label or labeling of
any food for which a health claim is made in accordance with
Sec. 101.9; for restaurant foods, in accordance with Sec. 101.10; or
for dietary supplements of vitamins or minerals, in accordance with
Sec. 101.36. The requirements of the introductory text of paragraph
(d)(3) of this section are effective as of May 8, 1993, except:
(i)-(ii) [Reserved]
(iii) For dietary supplements of vitamins, minerals, herbs, or
other similar nutritional substances for which the requirements of
paragraph (d)(3) of this section will be effective July 5, 1994.
In the Federal Register of March 31, 1994 (59 FR 15050), the
effective date was corrected for the nutrient content claims provision
to July 1, 1994. Because of the passage of the DSHEA, the agency
published a notice in the Federal Register of February 9, 1995 (60 FR
7711), stating that it does not intend to enforce the Nutrient Content
Claim regulations for dietary supplements until after December 31,
1996.
As above, the terminology for dietary supplements (i.e., ``dietary
supplements of vitamins and minerals'') used in Sec. 101.14(d)(3) is
too narrowly drawn in light of new section 201(ff) of the act. In
addition, since the effective date is past, there is no longer a need
to include it in the regulations. Therefore, FDA is proposing to revise
Sec. 101.14(d)(3) to remove ``of vitamins and minerals'' as a qualifier
of the types of dietary supplements and to remove the language setting
out the effective date in the second sentence of Sec. 101.14(d)(3).
These changes also mean that there is no need for paragraphs (d)(3)(i)
through (d)(3)(iii). Accordingly, proposed Sec. 101.14(d)(3) reads as
follows:
Nutrition labeling shall be provided in the label or labeling of
any food for which a health claim is made in accordance with
Sec. 101.9; for restaurant foods, in accordance with Sec. 101.10; or
for dietary supplements, in accordance with Sec. 101.36.
C. Percentage Claims
Section 7(c) of the DSHEA amends section 403(r)(2) of the act by adding
clause (F) which reads:
Subclause (i) clause (A) does not apply to a statement in the
labeling of a dietary supplement that characterizes the percentage
level of a dietary ingredient for which the Secretary has not
established a reference daily intake, daily recommended value, or
other recommendation for daily consumption.
This new provision refers to section 403(r)(2)(A)(i) of the act,
which states that nutrient content claims may be made only if the
characterization of the level made in the claim uses terms which are
defined in regulations of the Secretary. Thus, section 403(r)(2)(A)(i)
of the act limits the type of nutrient content claims that can be made
to those terms that are defined and authorized by regulation. The
effect of section 403(r)(2)(F) of the act is to permit the use on the
labels or in the labeling of dietary supplements of statements that
have not been defined by FDA that characterize the percentage level of
a dietary ingredient for which an RDI or DRV has not been established.
In the absence of any substantive legislative history on this
provision, the agency interprets section 403(r)(2)(F) of the act as
authorizing claims on the label or in labeling of a dietary supplement
that disclose the percentage level in the dietary supplement of a
dietary ingredient for which an RDI and DRV has not been established in
a product (e.g., ``40 percent omega-3 fatty acids'') as well as
statements that characterize the percentage of such dietary ingredients
in relation to an equivalent or increased/decreased amount found in
another food product (e.g., ``100 percent of the allicin in a bulb of
garlic,'' ``twice the allicin as (product alternative)'' [where
``twice'' is another way of saying 200 percent]).
Section 3(b)(1)(A)(iv) of the 1990 amendments directed the agency
to promulgate regulations that permit statements describing the amount
and percentage of nutrients in food that are not misleading and that
are consistent with the terms defined under section 403(r)(2)(A)(i) of
the act. Consequently, FDA provided in Sec. 101.13(i) for statements
about the amount or percentage of nutrients when specified criteria are
met. While this regulation did not specifically include a provision for
the use of such statements with respect to dietary ingredients for
which no RDI or DRV had been established, Sec. 101.13(i)(3) allowed for
the use of amount or percentage statements that do not implicitly
characterize the level of the nutrient in the food (e.g., claims that
do not imply whether the amount is high or low based on an established
RDI or DRV value), and that are not misleading in any way. In ``Food
Labeling, Questions and Answers'' (Ref. 1, p. 36, C23), FDA stated that
statements about a nutrient for which there is no established daily
value (i.e., no RDI or DRV) could be made under Sec. 101.13(i)(3) as
long as the claim specifies only the amount of the nutrient per serving
and does not imply that there is a lot or a little of that nutrient in
the product. The example ``x grams of omega-3 fatty acids'' was given.
Accordingly, percentage claims such as ``40 percent omega-3 fatty
acids'' that do not in any way characterize the level of a nutrient in
terms of defined claims such as ``high,'' ``low,'' or ``reduced'' were
permitted on dietary supplements as well as conventional foods before
the enactment of the DSHEA. To memorialize this fact and to implement
the DSHEA by reflecting that labels or labeling of dietary supplements
may bear statements that characterize the percentage level of a dietary
ingredient for which an RDI or DRV has not been established even though
those statements have not been defined by FDA, the agency is proposing
to amend Sec. 101.13 by adding new paragraph (q)(3)(ii) to read as
follows:
Under section 403(r)(2)(F) of the act, a statement that
characterizes the percentage level of a dietary ingredient for which
an RDI or daily reference value (DRV) has not been established
(e.g., ``40 percent omega-3 fatty acids,'' ``100 percent of the
allicin in a bulb of garlic,'' or ``twice the allicin as (name of
[[Page 67179]]
product alternative)'' * * *) may be made on the label or in labeling
of dietary supplements without a regulation that specifically
defines such a statement. * * *
Because this provision allows for an exemption to the nutrient content
claims rules and is somewhat similar to the exemption in
Sec. 101.13(q)(3) for percentage statements for vitamins and minerals,
the agency is placing the new paragraph in Sec. 101.13(q)(3) by
redesignating current Sec. 101.13(q)(3) as Sec. 101.13(q)(3)(i) and
adding new Sec. 101.13(q)(3)(ii).
The agency believes that percentage statements on the label or in
labeling of a dietary supplement that characterize the percentage level
of a dietary ingredient for which there is no established RDI or DRV in
relation to an equivalent or increased/decreased amount of the dietary
ingredient in another food, such as ``100 percent of the allicin in a
bulb of garlic'' and ``twice the allicin as (name of product
alternative),'' would be misleading under sections 403(a) and 201(n) of
the act if there is not a meaningful amount of the dietary ingredient
in both foods being compared and a meaningful difference between the
two foods being contrasted. However, because many dietary ingredients,
which are the subject of clause (F), do not have established reference
amounts for daily consumption, there is not a single, consistent way to
describe the amount or difference that would be considered meaningful
for the broad spectrum of these dietary ingredients. Therefore, firms
will need to determine on a case-by-case basis whether the stated
amount of a dietary ingredient for which an RDI or DRV has not been
established, and the difference between the amount of such a dietary
ingredient in two products, is meaningful. In making such a
determination, published literature on the dietary ingredient,
knowledge of the functional properties of the dietary ingredient, and
any additional information available to the manufacturer, packer, or
distributor should be taken into account.
It should be noted that while FDA is proposing in
Sec. 101.13(q)(3)(ii) to provide for statements that characterize the
percentage level of dietary ingredients for which no RDI or DRV has
been established, the proposed regulations do not provide for use of
the defined terms, such as ``more,'' ``good source,'' ``high,'' and
``as much as.'' For example, the statement ``300 percent of the
bioflavonoids in a large grapefruit'' is permissible, but a claim such
as ``high in bioflavonoids'' is not. As discussed in the nutrient
content claims for dietary supplements proposal and final rule, FDA has
concluded that if the defined term (i.e., the nutrient content claim)
is to have any meaning, there must be a level that can be used as a
reference in determining whether the claim is valid and appropriate.
The RDI's and DRV's provide such levels. Thus, FDA has limited the use
of ``good source,'' ``high,'' and other defined terms to use with
nutrients for which RDI's or DRV's have been established.
By way of exception, ``contains'' and ``provides'' are listed in
Sec. 101.54(c)(1) (21 CFR 101.54(c)(1)) as synonyms for ``good source''
(e.g., ``Contains vitamin C'' is considered synonymous with ``good
source of vitamin C'') and are therefore dependent on the establishment
of an RDI or DRV for the nutrient to qualify for the claim. However,
the agency has stated that these words may be used with nutrients that
do not have RDI's or DRV's when specific amounts are given for the
nutrient (Ref. 1, p. 37, C24). Accordingly, the agency has no objection
to statements such as ``Contains 4 grams of omega-3 fatty acids per
serving'' being made for dietary ingredients for which RDI's and DRV's
have not been established provided the specific amount of the nutrient
is stated.
It should be noted that section 403(r)(2)(F) of the act applies
only to dietary supplements. Congress did not provide this exemption
for conventional foods. Therefore, except for the statements discussed
in the preceding paragraph that come under Sec. 101.13(i)(3),
statements that characterize the level of a dietary ingredient without
an established RDI or DRV will continue to be prohibited on
conventional foods.
While section 403(r)(2)(F) of the act states that section
403(r)(2)(A)(i) does not apply to statements on the labels of dietary
supplements that characterize the percent level of dietary ingredients,
there is nothing in the DSHEA that exempts such statements from the
requirement in section 403(r)(2)(B) for referral statements (i.e.,
``See [location] for nutrition information'') or from other
requirements for nutrient content claims. Accordingly, FDA is proposing
to require in Sec. 101.13(q)(3)(ii) that a referral statement (or
disclosure statement when fat, saturated fat, cholesterol, or sodium
exceed specified limits) accompany the claim in accordance with
Sec. 101.13 (g) or (h).
In addition, the agency tentatively concludes that when percentage
statements are made comparing or contrasting the amount of a dietary
ingredient for which an RDI or DRV has not been established in a
dietary supplement to that in a reference food, information on the
identity of the reference food and on the quantitative amount of the
dietary ingredient in both foods are material facts. Consumers need
this information to evaluate and understand the claim being made, and
the claim would be misleading under sections 403(a) and 201(n) of the
act without it (see 56 FR 60421 at 60446, and 58 FR 2302 at 2365). This
situation is analogous to that encountered with relative claims for
nutrients, where there is a requirement in Sec. 101.13(j)(2)(iv) for
quantitative information comparing the amount of the subject nutrient
in the product with that in the reference food. Inclusion of this
information is particularly important because, while the nutrition
label on dietary supplements will include information about the amount
of dietary ingredients for which RDI's and DRV's have not been
established that are present in the food (see proposed
Sec. 101.36(b)(3) in the companion document entitled ``Food Labeling;
Statement of Identity, Nutrition Labeling and Ingredient Labeling of
Dietary Supplements'' published elsewhere in this issue of the Federal
Register), the nutrition label on conventional foods will not (except
for nutrients provided for in Sec. 101.9(c) such as sugars and
polyunsaturated fat that do not have RDI's and DRV's established).
Accordingly, when conventional foods are used as the reference food,
information about the amount of a dietary ingredient for which there is
no RDI or DRV that is present in the food is likely to only be
available when it is provided as accompanying information, in
accordance with Sec. 101.13(j)(2)(iv).
For these reasons, FDA is proposing in Sec. 101.13(q)(3)(ii) to
require that whenever statements characterizing the percentage level of
a dietary ingredient for which there is no RDI or DRV are made in
comparison to the amount in a reference food, the reference food be
clearly identified, and information on the actual amount of the dietary
ingredient in both foods be provided in accordance with
Sec. 101.13(j)(2)(iv). Section 101.13(j)(2)(iv)(B) requires that this
quantitative information be placed adjacent to the most prominent claim
or to the nutrition label, except that when the nutrition label is on
the information panel, the quantitative information may be placed
elsewhere on that panel in accordance with Sec. 101.2 (21 CFR 101.2)
(see 60 FR 17202, April 5, 1995).
[[Page 67180]]
D. Disclaimer for Statements of Nutritional Support
1. Exclusion From Drug Definition
As mentioned previously, the DSHEA added section 403(r)(6) to the
act, which provides for certain statements of nutritional support for
dietary supplements, including a statement that ``describes the role of
a nutrient or dietary ingredient intended to affect the structure or
function in humans.'' Section 201(g)(1)(C) of the act states that a
``drug'' is an article (other than food) intended to affect the
structure or any function of the body of man or other animals. Section
10(a) of the DSHEA adds the following statement to section 201(g)(1) of
the act:
A food, dietary ingredient, or dietary supplement for which a
truthful and not misleading statement is made in accordance with
section 403(r)(6) is not a drug under clause (C) solely because the
label or the labeling contains such a statement.
Under section 10(a) of the DSHEA and section 403(r)(6) of the act,
for a firm to take advantage of the exclusion from the ``drug''
definition for a statement of nutritional support on the label or in
labeling of a dietary supplement, it must meet each of the conditions
established under section 403(r)(6), including having substantiation
that the claim is truthful and not misleading and having the disclaimer
required in section 403(r)(6) displayed in conjunction with the
statement. To implement the latter requirement, FDA is proposing in
Sec. 101.94, as stated in proposed Sec. 101.94(a), to set forth the
requirements for the text, placement, and typesize of the disclaimer
that must accompany the statement of nutritional support for it to be
subject to the exemption in section 201(g)(1)(C) of the act.
2. Text
Section 403(r)(6)(C) requires the following disclaimer to be
prominently displayed in boldface type:
This statement has not been evaluated by the Food and Drug
Administration. This product is not intended to diagnose, treat,
cure, or prevent any disease.
Based on inquiries that FDA has received from the dietary
supplement industry, FDA tentatively finds that aspects of the
statutory requirements for the disclaimer (e.g. ``prominent display'')
need to be defined and implemented through regulations. Prominence is a
relative term, and without regulations, the agency would be forced to
evaluate prominence on a case-by-case basis. Such an approach would not
provide firms with sufficient guidance to be assured that product
labels would not trigger regulatory action.
A literal reading of section 403(r)(6)(C) of the act suggests that
each nutritional support statement must contain the disclaimer in its
entirety, without any deviation from the statutory language. FDA
tentatively concludes that, where a label contains only one nutritional
support statement, there is no reason not to adopt such a reading of
the act. Accordingly, the agency is proposing in Sec. 101.94(b)(1) that
where the label contains one statement of nutritional support provided
for in section 403(r)(6) of the act, the label or labeling must
prominently contain the disclaimer as required by the act without
modification to the text.
However, where there are multiple nutritional support statements,
or where the same statement appears several times, the agency
recognizes that repeated use of the statutory text with each
nutritional support statement could be confusing to consumers and
burdensome to manufacturers. For example, if a dietary supplement
includes three nutritional support statements on the same label panel,
or in a piece of labeling such as a brochure, the literal reading of
the act would require that each statement include the complete
disclaimer. Because the statutory text is of some length, only very
large label panels could conform to this requirement if they contained
multiple statements.
FDA wishes to implement the statute in a practical way that still
fully effectuates the purposes of the statute. In light of this fact,
the agency tentatively concludes that it is appropriate to provide that
the disclaimer required in section 403(r)(6)(C) of the act can be
slightly modified to reflect the use of multiple statements of
nutritional support. FDA is proposing in Sec. 101.94(b)(2) to require
that, where there is more than one statement of nutritional support,
each statement contain the disclaimer as required by the act, or that
the first sentence of the disclaimer be modified to the plural form to
read as follows: ``These statements have not been evaluated by the Food
and Drug Administration.'' Under this proposal, the second sentence
will remain as required by the act. For convenience, FDA will refer to
this modified form of the disclaimer as ``the plural disclaimer.''
3. Placement
The juxtaposition of the disclaimer to the statement of nutritional
support as required by the act is one way to ensure prominence. Because
the act states that the statement of nutritional support must
``contain'' the disclaimer, the agency tentatively concludes that the
disclaimer must be part of the statement of nutritional support. When
there is only one such statement, this inclusion can be readily
accomplished by presenting the disclaimer as part of the claim.
Accordingly, FDA is proposing in Sec. 101.94(c)(1) that the disclaimer
be contained in each statement of nutritional support by placing the
disclaimer immediately adjacent to the statement of nutritional support
with no intervening material.
However, consistent with its desire to interpret section 403(r)(6)
of the act in a practical way, FDA is proposing to provide for an
alternative placement for the disclaimer on the label or in labeling in
situations in which repetitive presentation of the disclaimer could be
burdensome. In these situations, FDA wants to provide an approach to
placement of the disclaimer that will give the disclaimer a prominence
that will ensure that it will be read and understood by consumers but
that will result in its presentation only once on the label panel or in
labeling.
FDA tentatively concludes that where the label or labeling contains
multiple statements of nutritional support, and the relationship
between each of those statements and the disclaimer can be made
obvious, the statutory requirement of prominent display of the
disclaimer can be met without requiring that each statement of
nutritional support actually include the disclaimer. FDA experience has
been that one of the most effective ways of tieing two label statements
that are physically separated on the same label panel is through the
use of a symbol such as an asterisk. Symbols have been used within
nutrition labeling since its inception in 1973 and have proven to be an
effective way of relating label information to explanatory footnotes.
For example, asterisks have been used adjacent to names of vitamins and
minerals present at very low levels to refer the consumer to a footnote
stating ``Contains less than 2 percent of the Daily Value (formerly the
U.S. Recommended Daily Allowance).'' FDA is unaware of any data
indicating consumer difficulties with such use of symbols. The use of
symbols would also help consumers differentiate between label
statements to which the disclaimer is referring and other label claims
to which the disclaimer does not apply (e.g., authorized health claims
or nutrient content claims).
Accordingly, FDA is proposing in Sec. 101.94(c)(2) that where there
is more than one statement of nutritional support on a label panel or
in labeling
[[Page 67181]]
other than a label, and the manufacturer, packer, or distributor wishes
to comply with section 403(r)(6) of the act without having to place the
disclaimer immediately after each statement of nutritional support, it
can place a symbol (e.g., an asterisk) at the end of each statement of
nutritional support that refers to the same symbol placed elsewhere on
the same label panel or in the labeling that is followed by the
disclaimer.
In a citizen petition dated March 20, 1995 (petition number 95P-
0079/CP 1), the Nutritional Health Alliance (NHA) requested, among
other things, that FDA issue regulations implementing section 403(r)(6)
of the act. With respect to the placement of the disclaimer, NHA
suggested that an asterisk follow each statement of nutritional support
to refer the consumer to a specific place on the label, such as the
information panel, where the disclaimer would appear only once.
Although FDA is proposing to provide most of what this petition
seeks, the agency tentatively rejects the last aspect of this
suggestion. Splitting the statement of nutritional support from the
required disclaimer and allowing the disclaimer to appear on another
panel does not establish an obvious relationship between the two pieces
of information. The agency is concerned that the placement of the
disclaimer on another panel would not reveal material facts in
conjunction with the statement of nutritional support that are
necessary for consumers to fully understand the significance of the
statement. However, the agency will consider establishing provisions
for the use of asterisks that refer to the disclaimer in a single
specific location (such as the information panel), instead of on each
panel bearing a statement of nutritional support, if the comments
convince it that such an approach is consistent with the statute and
would be useful to consumers. FDA requests any data that bear on the
question of the effect that splitting a statement from a disclaimer in
this manner will have on the likelihood that consumers will read the
disclaimer. Specifically, the agency requests data on whether a
consumer will track a symbol from one label panel or page of labeling
to another to obtain the information about a statement of nutritional
support that follows the symbol.
In addition, the requirement in the act for prominent display means
that when the disclaimer does not appear immediately adjacent to a
statement of nutritional support, it must be presented on the label or
labeling in a manner that renders it as readily observable and as
likely to be read as the statement of nutritional support itself. In
this regard, the agency's experience with the graphic requirements for
the new nutrition label has been that a box around required label
information greatly increases the prominence of the information placed
inside the box (Ref. 2). Moreover, focus group discussions regarding
warning labels show that messages put in a boxed area help consumers to
distinguish the message from other information as well as draw
attention to it (Ref. 3). Therefore, FDA is proposing in
Sec. 101.94(c)(2) to require that a box be drawn around the disclaimer
when the disclaimer is not immediately adjacent to the statement of
nutritional support.
For example, a side panel of a dietary supplement label may contain
paragraphs of text that include more than one statement of nutritional
support. Assuming that the manufacturer did not choose to place the
disclaimer immediately after each statement of nutritional support,
each such statement would be followed by a symbol, and the referenced
symbol and disclaimer would be placed in a box on the same panel with
the first sentence reading ``*These statements have not been evaluated
by the Food and Drug Administration,'' as proposed in section
Sec. 101.94(b)(2).
4. Type Size and Style
With respect to the style of type to be used in the disclaimer, the
DSHEA specifies that ``boldface type'' shall be used (section
403(r)(6)(C) of the act). FDA has reiterated this provision in proposed
Sec. 101.94(d).
With respect to type size requirements, FDA notes that even though
section 403(r)(6) of the act does not include specific type size
requirements for the accompanying information referred to as the
disclaimer, other sections of the act, and the regulations promulgated
thereunder, address a variety of requirements for information that is
to accompany a claim. Sections 403(r)(2)(A)(iii) through (r)(2)(A)(v)
of the act require that statements that disclose the level of fat,
saturated fat, or cholesterol, which must be presented in conjunction
with certain nutrient content claims, ``have appropriate prominence
which shall be no less than one-half the size of the claim.'' The
agency tentatively concludes that, for consistency, this requirement
should be considered a key element of ``prominent display'' for the
disclaimer.
FDA has long held that accompanying information should be in a size
reasonably related to that of the information that it modifies. This
relative prominence, when codified, has (except in the case of
provisions pertaining to nutrient content claim referral and disclosure
statements in Sec. 101.13) been one-half the type size of the
information modified (see, e.g., Secs. 101.22(i)(2) and
102.5(b)(2)(ii)). For nutrient content claims, FDA did establish type
size requirements for referral and disclosure statements related to the
area of the surface bearing the principal display panel rather than to
the type size used for the nutrient content claim. However, nutrient
content claims often have very large type size, whereas nutritional
support statements will likely not appear in such large type because
they are intended to convey more lengthy information. Certainly the
statements that would qualify as nutritional support statements under
section 403(r)(6) of the act that have appeared in dietary supplement
labeling are of much greater length than most nutrient content claims.
Because nutritional support statements are likely to be more
lengthy, firms are likely to use relatively small type for them. The
agency is concerned that one-half the size of the type commonly used
for long statements or paragraphs may be too small for consumers to
read easily. Thus, FDA is proposing one-sixteenth of an inch as the
minimum type size for the disclaimer in Sec. 101.94(d).
One-sixteenth of an inch is specified in Sec. 101.2(c) as the
minimum type size for most other mandatory information on the principal
display panel or information panel, e.g., designation of ingredients,
name and place of business, and warning and disclaimer statements.
Further, one-sixteenth of an inch is the minimum size required in
Sec. 101.105(i) for net quantity of contents statements. Consequently,
the agency tentatively concludes that a minimum type size of one-
sixteenth of an inch for the disclaimer is necessary to ensure that it
is prominently displayed in accordance with section 403(r)(6)(C) of the
act.
E. Prominence of Ingredients That Are Not Vitamins or Minerals
Section 7(d) of the DSHEA strikes section 411(b)(2)(B) of the act.
Before it was removed by the DSHEA, section 411(b)(2)(B) stated that
the labeling and advertising of dietary supplements of vitamins and
minerals could not give prominence to or emphasize ingredients that are
not vitamins, minerals, or represented as a source of vitamins or
minerals. Because of this provision, the agency stated that nutrient
content claims about ingredients that are not
[[Page 67182]]
vitamins or minerals (e.g., ``more fiber,'' ``high protein'') could not
be made on dietary supplements of vitamins or minerals (59 FR 378 at
387). This limitation was carried through in the final rule for
nutrient content claims for dietary supplements in Sec. 101.54(b)(1),
(c)(1), and (e)(1) that addressed ``high,'' ``good source,'' and
``more'' claims, respectively, for dietary supplements.
For example, Sec. 101.54(b)(1) as amended by the nutrient content
claims for dietary supplements final rule (59 FR 378 at 394) reads:
The terms ``high,'' ``rich in,'' or ``excellent source of'' may
be used on the label and in the labeling of foods except meal
products as defined in Sec. 101.13(l), main dish products as defined
in Sec. 101.13(m), and dietary supplements of vitamins or minerals
to characterize the level of any substance that is not a vitamin or
mineral, provided that the food contains 20 percent or more of the
RDI or the DRV per reference amount customarily consumed.
(emphasis added).
Similar restrictions were added to Sec. 101.54(c)(1) and (e)(1) by
the 1994 nutrient content claims for dietary supplements final rule.
In response to section 7(d) of the DSHEA, FDA is proposing to amend
Sec. 101.54(b)(1) for ``high'' claims, Sec. 101.54(c)(1) for ``good
source'' claims, and Sec. 101.54(e)(1) for ``more,'' ``fortified,''
``enriched,'' and ``added'' claims to remove these restrictions on
claims on dietary supplements that characterize the levels of
substances that are not vitamins and minerals. These restrictions are
no longer required under the act.
III. Analysis of Impacts
FDA has examined the impacts of the proposed rule under Executive
Order 12866 and the Regulatory Flexibility Act (Pub. L. 96-354).
Executive Order 12866 directs agencies to assess all costs and benefits
of available regulatory alternatives and, when regulation is necessary,
to select regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety, and other
advantages; distributive impacts; and equity). The agency believes that
this proposed rule is consistent with the regulatory philosophy and
principles identified in the Executive Order. In addition, the proposed
rule is not a significant regulatory action as defined by the Executive
Order and so is not subject to review under the Executive Order.
The Regulatory Flexibility Act requires agencies to analyze
regulatory options that would minimize any significant impact of a rule
on small entities. In accordance with the Regulatory Flexibility Act,
the agency certifies that the proposed rule will not have a significant
economic impact on a substantial number of small entities. Therefore,
under the Regulatory Flexibility Act, no further analysis is required.
The proposed rule does not significantly change the way in which
claims are made with three exceptions: (1) Percentage claims for
dietary supplements that do not have RDI's or DRV's are no longer
prohibited; (2) dietary supplements of vitamins and minerals may now
highlight an ingredient that is not a vitamin or mineral; and (3)
labels or labeling of dietary supplements may include statements of
nutritional support so long as those statements include an appropriate
disclaimer, and the manufacturer has substantiation that the statement
is truthful and not misleading. With regards to these actions, costs of
redesigning labels will be incurred only by those firms wishing to take
advantage of the DSHEA. With respect to the third, firms who wish to
make nutritional support statements will incur the additional cost of
redesigning labels to include the disclaimer. When the label or
labeling contains more than one nutritional support statement, the cost
of the disclaimer will depend on whether the disclaimer must be made on
each label panel, page, or piece of labeling that contains a statement
of nutritional support, or whether the disclaimer need only appear
once.
FDA is unable to quantify the benefits from this proposed rule. It
may be that some consumers will benefit from the additional information
about dietary ingredients that will become available. However, because
statements of nutritional support may now be made for some dietary
ingredients without any publicly available information to demonstrate
that the dietary ingredient is safe, or that it will have its claimed
effect, it is uncertain whether this proposed rule will in fact provide
any significant benefits to consumers. FDA requests comment on this
issue.
IV. Environmental Impact
The agency has determined under 21 CFR 25.24(a)(11) that this
action is of a type that does not individually or cumulatively have a
significant effect on the human environment. Therefore, neither an
environmental assessment nor an environmental impact statement is
required.
V. Paperwork Reduction Act
FDA tentatively concludes that this proposed rule contains no
reporting, recordkeeping, labeling, or other third party disclosure
requirements; thus there is no ``information collection'' necessitating
clearance by the Office of Management and Budget. However, to ensure
the accuracy of this tentative conclusion, FDA is asking for comment on
whether this proposed rule to amend its regulations establishing
requirements for the use of nutrient content claims and health claims
for dietary supplements and to specify how the disclaimer required by
section 403(r)(6)(C) of the act is to be presented on the labels or
labeling or dietary supplements imposes any paperwork burden.
VI. Effective Date
FDA is proposing to make this regulation effective on January 1,
1997. This is consistent with section 7(e) of the DSHEA, which states
that dietary supplements must be labeled in accordance with the
amendments of that section after December 31, 1996.
VII. Comments
Interested persons may, on or before March 13, 1996, submit to the
Dockets Management Branch (address above) written comments regarding
this proposal. Two copies of any comments are to be submitted, except
that individuals may submit one copy. Comments are to be identified
with the docket number found in brackets in the heading of this
document. Received comments may be seen in the office above between 9
a.m. and 4 p.m., Monday through Friday.
VIII. References
The following references have been placed on display in the Dockets
Management Branch (address above) and may be seen by interested persons
between 9 a.m. and 4 p.m., Monday through Friday.
1. Office of Food Labeling, Center for Food Safety and Applied
Nutrition, Food and Drug Administration, ``Food Labeling, Questions
and Answers,'' August, 1993.
2. Wilkening, Virginia L., Memo to the Record, June 30, 1995.
3. Macro International Inc., ``Iron Supplement Warning Label
Focus Group Report,'' U.S. Department of Health and Human Services,
Food and Drug Administration, April 14, 1995.
List of Subjects in 21 CFR Part 101
Food labeling, Nutrition, Reporting and recordkeeping requirements.
Therefore, under the Federal Food, Drug, and Cosmetic Act and under
[[Page 67183]]
authority delegated to the Commissioner of Food and Drugs, it is
proposed that 21 CFR part 101 be amended as follows:
PART 101--FOOD LABELING
1. The authority citation for 21 CFR part 101 continues to read as
follows:
Authority: Secs. 4, 5, 6 of the Fair Packaging and Labeling Act
(15 U.S.C. 1453, 1454, 1455); secs. 201, 301, 402, 403, 409, 701 of
the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321, 331, 342,
343, 348, 371).
2. Section 101.13(a) is amended by revising paragraphs (a) and (b),
redesignating paragraph (q)(3) as (q)(3)(i), and adding new paragraph
(q)(3)(ii) to read as follows:
Sec. 101.13 Nutrient content claims---general principles.
(a) This section and the regulations in subpart D of this part
apply to foods that are intended for human consumption and that are
offered for sale, including conventional foods and dietary supplements.
(b) A claim that expressly or implicitly characterizes the level of
a nutrient of the type required to be in nutrition labeling under
Sec. 101.9 or under Sec. 101.36 (that is, a nutrient content claim),
with the exception of such claims on restaurant menus, may not be made
on the label or in labeling of foods unless the claim is made in
accordance with this regulation and with the applicable regulations in
subpart D of this part or in part 105 or part 107 of this chapter.
* * * * *
(q) * * *
(3) * * *
(ii) Under section 403(r)(2)(F) of the act, a statement that
characterizes the percentage level of a dietary ingredient for which an
RDI or daily reference value (DRV) has not been established (e.g., ``40
percent omega-3 fatty acids,'' ``100 percent of the allicin in a bulb
of garlic,'' or ``twice the allicin as (name of product alternative)''
[where ``twice'' is another way of saying 200 percent]) may be made on
the label or in labeling of dietary supplements without a regulation
that specifically defines such a statement. All such claims shall be
accompanied by a referral or disclosure statement in accordance with
paragraphs (g) or (h) of this section. In addition, whenever a
statement that characterizes the percentage level of a dietary
ingredient for which there is no RDI or DRV is made in a way that draws
a comparison to the amount of the dietary ingredient in a reference
food, the reference food shall be clearly identified, and the
information on the actual amount of the dietary ingredient in both
foods shall be declared in accordance with paragraph (j)(2)(iv) of this
section.
* * * * *
3. Section 101.14 is amended by removing paragraph (a)(4); by
redesignating paragraphs (a)(5) and (a)(6) as paragraphs (a)(4) and
(a)(5), respectively; and by revising paragraphs (b)(3)(i) and (d)(3)
to read as follows:
Sec. 101.14 Health claims: general requirements.
* * * * *
(b) * * *
(3) * * *
(i) The substance must, regardless of whether the food is a
conventional food or a dietary supplement, contribute taste, aroma, or
nutritive value, or any other technical effect listed in Sec. 170.3(o)
of this chapter, to the food and must retain that attribute when
consumed at levels that are necessary to justify a claim; and
* * * * *
(d) * * *
(3) Nutrition labeling shall be provided in the label or labeling
of any food for which a health claim is made in accordance with
Sec. 101.9; for restaurant foods, in accordance with Sec. 101.10; or
for dietary supplements, in accordance with Sec. 101.36.
* * * * *
4. Section 101.54 is amended by revising paragraphs (b)(1), (c)(1),
and (e)(1) introductory text to read as follows:
Sec. 101.54 Nutrient content claims for ``good source,'' ``high,'' and
``more.''
* * * * *
(b) ``High'' claims. (1) The terms ``high,'' ``rich in,'' or
``excellent source of'' may be used on the label and in the labeling of
foods, except meal products as defined in Sec. 101.13(l) and main dish
products as defined in Sec. 101.13(m), provided that the food contains
20 percent or more of the RDI or the DRV per reference amount
customarily consumed.
* * * * *
(c) ``Good Source'' claims. (1) The terms ``good source,''
``contains,'' or ``provides'' may be used on the label and in the
labeling of foods, except meal products as defined in Sec. 101.13(l)
and main dish products as defined in Sec. 101.13(m), provided that the
food contains 10 to 19 percent of the RDI or the DRV per reference
amount customarily consumed.
* * * * *
(e) ``More'' claims. (1) A relative claim using the terms ``more,''
``fortified,'' ``enriched,'' and ``added'' may be used on the label or
in labeling of foods to describe the level of protein, vitamins,
minerals, dietary fiber, or potassium, except as limited by
Sec. 101.13(j)(1)(i) and except meal products as defined in
Sec. 101.13(l) and main dish products as defined in Sec. 101.13(m),
provided that:
* * * * *
5. Section 101.94 is added to subpart F to read as follows:
Sec. 101.94 Statements of nutritional support; disclaimer.
(a) The requirements in this section apply to the label or labeling
of dietary supplements where the dietary supplement bears a statement
of nutritional support that is provided for by section 403(r)(6) of the
Federal Food, Drug, and Cosmetic Act (the act), and where the
manufacturer, packer, or distributor wishes to take advantage of the
exemption to section 201(g)(1)(C) of the act by complying with section
403(r)(6) of the act.
(b) Text for disclaimer. (1) Where there is one statement of
nutritional support on the label or in the labeling, the disclaimer
shall be placed in accordance with paragraph (c)(1) of this section and
shall state:
This statement has not been evaluated by the Food and Drug
Administration. This product is not intended to diagnose, treat,
cure, or prevent any disease.
(2) Where there is more than one statement of nutritional support
on the label or in the labeling, each statement shall bear the
disclaimer in accordance with paragraph (b)(1) of this section, or a
plural disclaimer may be placed in accordance with paragraph (c)(2) of
this section and shall state:
These statements have not been evaluated by the Food and Drug
Administration. This product is not intended to diagnose, treat,
cure, or prevent any disease.
(c) Placement. (1) Except as provided in paragraph (c)(2) of this
section, the disclaimer shall be contained in each statement of
nutritional support. The disclaimer shall be placed immediately
adjacent to the statement of nutritional support with no intervening
material.
(2) Where there is more than one statement of nutritional support
on a label panel or in labeling other than a label, and the
manufacturer, packer, or distributor wishes to comply with section
403(r)(6) of the act without having to place the disclaimer after each
statement of nutritional support, it shall place a symbol (e.g., an
asterisk) at the end of each statement of nutritional support that
refers to the same symbol placed elsewhere on the same label panel or
piece of labeling that is followed by the disclaimer. In this
[[Page 67184]]
situation, the referenced symbol and disclaimer shall be placed in a
box.
(d) Typesize. The disclaimer in paragraph (b) of this section shall
appear in boldface type in letters of a type size height no smaller
than the larger of:
(1) One-half the type size of the largest statement of nutritional
support; or
(2) One-sixteenth inch.
Dated: September 26, 1995.
William B. Schultz,
Deputy Commissioner for Policy.
[FR Doc. 95-31193 Filed 12-27-95; 8:45 am]
BILLING CODE 4160-01-P
Complete official Federal Register PDF
FR Doc. 95-31021 Community Development Corporation and Project Investments and Other Public Welfare Investments
[Federal Register Volume 60, Number 249 (Thursday, December 28, 1995)]
[Proposed Rules]
[Pages 67091-67097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31021]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 60, No. 249 / Thursday, December 28, 1995 /
Proposed Rules
[[Page 67091]]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 24
[Docket No. 95-35]
RIN 1557-AB46
Community Development Corporation and Project Investments and
Other Public Welfare Investments
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Office of the Comptroller of the Currency (OCC) is
proposing to revise its regulation governing national bank investments
designed primarily to promote the public welfare. The revisions clarify
banks' authority under this part; renumber and reorganize the
regulation; provide the OCC greater flexibility for determining whether
investments primarily promote the public welfare; and simplify the
regulation's investment self-certification and prior approval
processes. The proposed revisions reduce regulatory burden and
inconsistencies while enhancing the ability of national banks to make
public welfare investments.
DATES: Comments must be received on or before February 26, 1996.
ADDRESSES: Interested persons are invited to submit comments to
Communications Division, Third Floor, Office of the Comptroller of the
Currency, 250 E Street, S.W., Washington, D.C. 20219. Attention: Docket
No. 95-35. Comments will be available for inspection and photocopying
at that address. In addition, comments may be sent by facsimile to
(202) 874-5274, or by electronic mail to [email protected].
FOR FURTHER INFORMATION CONTACT: Karen Bellesi, Program Coordinator,
Community Development Investments, Community Development Division,
(202) 874-4930; or Michele Meyer, Attorney, Community and Consumer Law
Division, (202) 874-5750.
SUPPLEMENTARY INFORMATION:
Background
As part of its Regulation Review Program, the OCC is proposing
revisions to 12 CFR Part 24. In December of 1993, the OCC adopted part
24 to implement the recently-enacted 12 U.S.C. 24(Eleventh). Section
24(Eleventh) authorizes national banks to make investments ``designed
primarily to promote the public welfare, including the welfare of low-
and moderate-income families and communities (such as through the
provision of housing, services, or jobs),'' subject to certain
percentage of capital limitations.
As currently written, part 24 reflects the statute's broad policy
of promoting the public welfare and places particular emphasis on
community development investments. Part 24 permits national banks to
make investments in community development corporations (CDCs) and
community development projects (CD Projects), consistent with safe and
sound banking practices. Under part 24, banks may self-certify certain
community development investments. Investments that do not qualify for
self-certification are subject to one of two prior approval processes.
The first requires that a bank file an investment proposal, which the
OCC usually approves or disapproves within 30 days. The second consists
of a five-day review period for investment proposals that the OCC has
previously approved for another bank.
Part 24 was crafted carefully initially to permit the agency and
the industry to gain experience with the new investment authority
provided by the statute. The proposed revisions reflect the OCC's and
the industry's successful experience with part 24. In the two years
since the OCC adopted part 24, national banks and their community
partners have invested millions of dollars in hundreds of CDCs and CD
Projects. Based on this success, and the OCC's desire to facilitate
increased community development lending and investment, the OCC
believes that it can ease some restrictions and reduce the regulatory
burden associated with part 24.
The proposed revisions preserve part 24's community development
focus but provide greater flexibility for determining whether
investments promote the public welfare. To encourage innovation in
banks' public welfare investments, the proposal modifies the current
test for determining whether an investment is designed primarily to
promote the public welfare (public welfare test). In addition, the
proposal simplifies part 24's self-certification and prior approval
processes. The proposed revisions simplify the rule and enhance its
clarity by using terms common to other recently adopted or revised
regulations, such as the Federal Reserve Board's Community Development
and Public Welfare Investments Regulation, 12 CFR Part 208.21, and the
OCC's Community Reinvestment Act Regulation (CRA Regulation), 12 CFR
Part 25. In addition, the proposal reorganizes part 24 and renumbers
its provisions. A derivation table showing these changes appears at the
end of this preamble.
Description of the Proposal
The following discussion identifies and explains the significant
proposed changes to the regulation. The OCC requests comment on all
aspects of the proposed regulation, as well as specific comment on the
changes discussed in this preamble.
Title
The proposal reflects the OCC's view that national banks can
promote the public welfare through a variety of authorized investments,
including CDCs and CD Projects that develop affordable housing, foster
revitalization and stabilization of low-and moderate-income areas, or
provide equity or debt financing for small businesses. Thus, the OCC
proposes to change the title of part 24 from ``Community Development
Corporation and Project Investments'' to ``Community Development
Corporation and Project Investments and other Public Welfare
Investments.''
Authority, Purpose, and OMB Control Number (Sec. 24.1)
The proposal amends the ``purpose'' paragraph to reflect that CDCs
and CD Projects that develop affordable housing, foster revitalization
and stabilization of low-and moderate-income areas, or provide equity
or debt financing for small businesses are just some of the types of
investments that a national bank can make under part 24. The OCC
continues to encourage
[[Page 67092]]
national banks to make these types of investments but also emphasizes
that many kinds of investments can promote the public welfare.
Definitions (Sec. 24.2)
In keeping with the Regulation Review Program's goal of using
terminology consistently throughout the OCC's regulations, the OCC is
proposing definitions and terms common to other OCC regulations. For
example, the definition of ``low-income and moderate-income'' now
refers to the OCC's CRA Regulation. The definition of ``capital and
surplus'' is the same as the definition of ``capital and surplus'' in
the OCC's Lending Limit Regulation, 12 CFR Part 32. Twelve CFR 32.2
defines ``capital and surplus'' as a bank's Tier 1 and Tier 2 capital
under the OCC's Minimum Capital Ratios in Appendix A to 12 CFR Part 3,
plus the balance of a bank's allowance for loan and lease losses not
included in the bank's Tier 2 capital, for purposes of the calculation
of risk-based capital under 12 CFR Part 3.
The OCC continues to recognize CDCs and CD Projects as vehicles
that national banks may use to make investments under this part. These
terms are defined at proposed Sec. 24.2. The proposal, however, omits
the current regulation's definitions of community development limited
partnership and community-based development corporation as unnecessary
further examples of such vehicles. This change does not affect national
banks' authority to invest in community development limited
partnerships or community based development corporations. Consistent
with the requirements of this part, national banks may continue to
invest in these and other vehicles.
The proposal adds a definition of ``eligible bank'' that is the
same as the ``eligible bank'' definition proposed by the OCC for
corporate applications in its November 29, 1994 Notice of Proposed
Rulemaking concerning 12 CFR Part 5 (59 FR 61034). The proposal
provides that a bank may self-certify investments for purposes of part
24 if it has a composite rating of 1 or 2 under the Uniform Financial
Institutions Rating System, has at least a satisfactory CRA rating, is
well capitalized, and is not subject to any current OCC enforcement
actions. As explained in proposed Sec. 24.5(a)(4), a national bank that
is at least adequately capitalized and that has a composite rating of
at least 3 with improving trends may submit a letter to the OCC's
Community Development Division requesting permission to self-certify
investments. This is a change from the current rule, which allows an
adequately capitalized, 1 or 2 rated bank that is not subject to a
current OCC enforcement action to self-certify investments. The OCC
believes this modification avoids the potential confusion of two
different ``eligible bank'' definitions in different sections of the
OCC's rules, and is appropriate in light of the proposal's
significantly expanded self-certification opportunities for banks (See
proposed Sec. 24.6.)
In addition, the proposal changes the definition of ``significant
risk to the deposit insurance fund'' to include risk to all federal
deposit insurance funds.
Finally, the proposal makes two changes concerning the small
business definitions in current part 24. First, the proposal removes
the definition of ``minority-owned small businesses'' because these
businesses are encompassed by the regulation's provisions concerning
all small businesses. Second, the proposal updates the citation to the
Small Business Administration regulations referenced in the definition
of ``small business'' in the current regulation.
Public Welfare Investments (Sec. 24.3)
Part 24 currently delineates a public welfare test that consists of
four requirements. Under current Sec. 24.4, an investment in a CDC or
CD Project is designed primarily to promote the public welfare only if:
(1) the investment primarily benefits low- and moderate-income persons
and families or small businesses; (2) the investment addresses
community development needs not met by the private market in one or
more communities served by the bank; (3) there is nonbank community
involvement in the CDC or CD Project; and (4) the profits and
distributions from a CDC or CD Project are reinvested in activities
that primarily promote the public welfare.1
1 On October 26, 1995, the OCC published a proposal to
eliminate part 24's reinvestment requirement. 60 FR 54819. The
public comment period on that proposal ended on November 27, 1995.
The final rule is published elsewhere in this issue of the Federal
Register.
---------------------------------------------------------------------------
Based on its experience since it adopted part 24, the OCC believes
that the existing public welfare test should be modified to reflect a
more diverse standard for whether an investment promotes the public
welfare. Therefore, proposed Sec. 24.3(a) retains the first element of
the public welfare test, benefit to low- and moderate-income
individuals and small businesses, but makes clear that this benefit can
be provided in a variety of ways. Section 24.3(a) sets forth a non-
exhaustive list of permissible investment activities that provide the
required benefit. The list incorporates the definition of ``community
development'' provided in the CRA regulation, and reflects the factors
for determining whether an institution qualifies as a Community
Development Financial Institution under the Riegle Community
Development and Regulatory Improvement Act and the OCC Community
Development Division's experience with recent innovative investment
proposals.
Proposed Sec. 24.3(b) clarifies that, under the second element of
the current public welfare test, a bank is not required to demonstrate
that it is impossible to obtain private market financing. A bank must
demonstrate, however, the reasons that it is difficult to secure such
financing for its proposed investment. Proposed Sec. 24.3(d) permits a
bank to make an investment that also benefits an area outside those
where the bank provides its core banking services. The bank must still
demonstrate, however, the extent to which its investment benefits the
communities where it provides these services.
The proposal also modifies the existing community participation
requirement of the public welfare test. Current Sec. 24.4(a)(3)
requires a bank to demonstrate nonbank community involvement in a CDC
or CD project by indicating support from the affected primary
beneficiaries and representatives of local government. In the case of a
CDC, a bank must demonstrate such support by the composition of the
organization's board of directors.
The OCC believes that community involvement is vital to the success
of banks' part 24 investment programs. Therefore, the proposal modifies
the community participation requirement to allow banks and community
groups to determine how best to structure community partnerships under
part 24. Proposed Sec. 24.3(c) requires that a bank demonstrate
community support for or participation in an investment proposal. A
bank could demonstrate such community support or participation in a
variety of ways including non-bank community representation on a CDC
board of directors, establishment of a community advisory board for the
bank's community development activities, formation of a formal business
relationship with a community-based organization, public sector or
community group financing, or letters of support from community
representatives. The OCC requests comment on the appropriate means of
demonstrating community support for or participation in a bank's part
24
[[Page 67093]]
investment and whether the final rule should specify some or all of
them.
The proposal removes as unnecessary current Sec. 24.4(e), which
provides that a bank must manage its CDC and CD Project investments in
a prudent manner. National banks must, of course, continue to manage
their part 24 investments prudently.
Investment Limits (Sec. 24.4)
The current regulation contains investment limit provisions at
current Sec. 24.4(b) and (d). For ease of reference, the proposal
groups the provisions concerning part 24 investment limits into a
separately titled section. Proposed Sec. 24.4(a) has been modified to
clarify that, as provided in 12 U.S.C. 24(Eleventh), a bank's aggregate
outstanding investments under part 24 may not exceed 5 percent of its
capital and surplus unless the bank is at least adequately capitalized
and the OCC determines, by written approval of a proposed investment,
that a higher amount will pose no significant risk to the deposit
insurance fund.
Public Welfare Investment Self-Certification and Prior Approval
Procedures (Sec. 24.5)
Proposed Sec. 24.5 simplifies, clarifies, and reduces the burden
associated with the self-certification and prior approval procedures
set forth in current Sec. 24.11. Section 24.11 now provides three
processes for approval of authorized investments. The first requires
that a bank file an investment proposal, which the OCC usually approves
or disapproves within 30 days. The second process consists of a five-
day review period by the OCC for investment proposals that the OCC has
previously approved for another bank. The third is a self-certification
process for certain investments, under which a bank files a notice with
the OCC within 10 days after it makes an investment, and the OCC sends
a confirmation of receipt within five days.
The proposal eliminates the second approval process and streamlines
the third. Under proposed Sec. 24.5(a) and Sec. 24.6(a), a bank may
self-certify an investment previously approved by the OCC for another
bank. Although not specified in the proposed rule, the OCC will
continue its practice of sending a simple confirmation of receipt of a
bank's self-certification notice within five days. Under the proposal,
however, the OCC will not retroactively review a self-certified
investment proposal. Instead, the OCC will review the self-
certification documents simply to ensure that they meet the self-
certification requirements set forth in proposed Sec. 24.5(a).
The prior approval procedures for investment proposals that do not
qualify for self-certification are set forth in proposed
Sec. 24.5(b).2 In considering a bank's investment proposal, the
OCC will consider whether the investment satisfies the requirements of
Sec. 24.3 and whether it is consistent with the bank's safe and sound
operation and the OCC's policies.
2 The proposal removes the current rule's provision for
optional review as unnecessary. A national bank may continue to
request prior OCC review and approval of any investment proposal,
including one that qualifies for self-certification.
---------------------------------------------------------------------------
Although not specified in the proposal, the OCC will continue its
practice of sending a simple confirmation of receipt of an investment
proposal within five days. Unless otherwise notified by the OCC, a bank
may make a proposed investment 30 calendar days after the date on which
the OCC receives the bank's investment proposal. The OCC may notify the
bank that it is extending the review period. If so notified, the bank
may make the investment only with the OCC's written approval.
Current Sec. 24.11(b) contains a limit on the size of investments
eligible for self- certification by banks with more than $250 million
in assets. These banks must seek prior OCC approval for investments
that exceed the lesser of 2 percent of their unimpaired capital and
surplus or $10 million. The OCC proposes to remove this limitation in
light of the proposed new standards that define the banks eligible to
use the self-certification process.
Investments Eligible for Self-Certification (Sec. 24.6)
Proposed Sec. 24.6 replaces the current Sec. 24.13, which limits
self-certification to investments using certain structures as well as
certain activities. These structures include multi-bank CDCs; CDCs
established by state or local government; community-based
organizations; and certain community development limited partnerships.
A CDC subsidiary is not currently an eligible structure for self-
certification.
The OCC believes that a structure-based self-certification
limitation is no longer necessary. This limitation was intended to
allow the OCC to ensure that particular investments did not expose
banks to safety and soundness risks or unlimited liability. However, by
limiting self-certification to eligible banks (as defined in proposed
Sec. 24.2(e)), the OCC believes it can reasonably rely on bank
management to determine the appropriate structures for part 24
investments.
In addition to eliminating the list of eligible structures,
proposed Sec. 24.6(a) expands the list of activities eligible for self-
certification to reflect the industry's increasing innovation in making
part 24 investments and the OCC's experience with self-certification
under part 24. Part 24's self-certification provisions encourage public
welfare investments by banks by reducing the regulatory steps
associated with making the investments. In order to maximize the use of
self-certification as an incentive for banks to make investments that
primarily promote the public welfare, and to encourage banks'
creativity in making these investments, the OCC has identified in
proposed Sec. 24.6(a) a clear and expanded list of eligible activities.
This list includes, but is not limited to, certain investments that
benefit low- and moderate-income persons and small businesses,
investments that have been determined by the OCC to be permissible
under part 24, and investments previously approved by the Federal
Reserve Board under 12 CFR 208.21 for state member banks.
Notwithstanding the eligible activities listed in Sec. 24.6(a),
proposed Sec. 24.6(b) provides that a bank may not self-certify
investments that involve properties carried on the bank's books as
``other real estate owned'' (OREO properties) or that fund projects
outside the states or metropolitan areas in which the bank's main
office or branches are located. The latter limitation is similar to the
limit on self-certification that appears in current part 24 but is
revised to reflect that some national banks now have branches in more
than one state.
Examination, Records, and Remedial Action (Sec. 24.7)
Proposed Sec. 24.7 replaces current Sec. 24.21 but makes no
substantive change.
Accounting for Public Welfare Investments (Current Sec. 24.4(c))
Current Sec. 24.4(c) provides that a bank's investments in CDCs and
CD Projects generally may be recorded as ``other assets at cost.'' The
rule also sets forth circumstances under which a bank would be required
to consolidate its investments on a line-by-line basis or account for
them under the equity method of accounting. The proposal eliminates
this section as unnecessary, because banks generally look to other
sources for their accounting instructions. Banks should record their
investments, as appropriate, pursuant to the instructions for
Consolidated Reports of Condition and Income
[[Page 67094]]
published by the Federal Financial Institutions Examination Council.
Policy Issue
Currently, the OCC does not generally use 12 U.S.C. 24(Eleventh),
as implemented by part 24, as an alternative basis for approving
activities that are otherwise permissible under other provisions of the
National Bank Act, 12 U.S.C. 1, et seq. This is a policy position
intended to prevent banks' activities from being subjected
unnecessarily to part 24's capital limitation.3 This position,
however, does not reflect the OCC's general approach of allowing banks
to decide how best to structure their investments.
3 For example, a bank could make an affordable housing
loan under both 12 U.S.C. 24(Seventh) and 24(Eleventh). If the bank
made such a loan under the authority of 12 U.S.C. 24(Eleventh), the
loan would be subject to a capital limitation that is stricter than
the generally applicable lending limits.
---------------------------------------------------------------------------
The OCC requests comment on whether it should continue its policy
of not using part 24 as a basis for approving activities otherwise
permissible under the National Bank Act.
Derivation Table
This table directs readers to the provision(s) of the current
regulation, if any, upon which the proposed provision is based.
----------------------------------------------------------------------------------------------------------------
Revised provision Original provision Comments
----------------------------------------------------------------------------------------------------------------
Sec. 24.1............................... Sec. 24.1............................. Modified.
Sec. 24.2(a)............................ Sec. 24.2(a).......................... Modified.
(b).................................. Sec. 24.2(m).......................... Substantial
change.
(c).................................. Sec. 24.2(b).......................... Modified.
(d).................................. Sec. 24.2(e).......................... Modified.
(e).................................. ....................................... Added.
(f).................................. Sec. 24.2(g), (h)..................... Substantial
change.
(g).................................. Sec. 24.2(k).......................... Modified.
(h).................................. Sec. 24.2(l).......................... Modified.
Sec. 24.2(c).......................... Removed.
Sec. 24.2(d).......................... Removed.
Sec. 24.2(f).......................... Removed.
Sec. 24.2(i).......................... Removed.
(i).................................. Sec. 24.2(a).......................... Modified.
Sec. 24.2(j).......................... Removed.
Sec. 24.3............................... Sec. 24.4(a).......................... Substantial
change.
Sec. 24.4............................... Sec. 24.4(b), (d)..................... Modified.
Sec. 24.4(c).......................... Removed.
Sec. 24.4(e).......................... Removed.
Sec. 24.5(a)............................ Sec. 24.11(a)......................... Substantial
change.
(b).................................. Sec. 24.11(b), (d), (e)............... Substantial
change.
Sec. 24.11(c)......................... Removed.
Sec. 24.6(a)............................ Sec. 24.13(b)......................... Substantial
change.
(b).................................. Sec. 24.11(b)......................... Modified.
Sec. 24.13(a)......................... Removed.
Sec. 24.7............................... Sec. 24.21............................ Modified.
----------------------------------------------------------------------------------------------------------------
Regulatory Flexibility Act
It is hereby certified that this notice of proposed rulemaking, if
adopted as a final rule, will not have a significant economic impact on
a substantial number of small entities. Accordingly, a regulatory
flexibility analysis is not required. This notice of proposed
rulemaking, if adopted as a final rule, will reduce the regulatory
burden on national banks, regardless of size, by replacing part 24's
public welfare test with a non-exhaustive list of permissible public
welfare investment activities, streamlining the self-certification and
prior approval sections of the rule, and eliminating unnecessary
provisions. While beneficial, these changes will not have a material
impact on affected banks.
Executive Order 12866
The OCC has determined that this proposal is not a significant
regulatory action under Executive Order 12866.
Unfunded Mandates
The OCC has determined that this proposal will not result in
expenditures by state, local and tribal governments, or by the private
sector, of more than $100 million in any one year. Accordingly, a
budgetary impact statement is not required under section 202 of the
Unfunded Mandates Reform Act of 1995.
Paperwork Reduction Act of 1995
The OCC invites comment on:
(1) Whether the proposed collection of information contained in
this notice of proposed rulemaking is necessary for the proper
performance of its functions, including whether the information has
practical utility;
(2) The accuracy of the OCC's estimate of the burden of the
proposed information collection;
(3) Ways to enhance the quality, utility, and clarity of the
information to be collected; and
(4) Ways to minimize the burden of the information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology.
Respondents are not required to respond to this collection of
information unless it displays a currently valid OMB control number.
The collection of information requirements contained in this notice
of proposed rulemaking have been submitted to the Office of Management
[[Page 67095]]
and Budget for review in accordance with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)). Comments on the collections of information
should be sent to the Office of Management and Budget, Paperwork
Reduction Project (1557), Washington, DC 20503, with a copy to the
Legislation and Regulatory Activities Division (1557), Office of the
Comptroller of the Currency, 250 E Street, SW., Washington, DC 20219.
The collection of information requirements in this proposed rule
are found in 12 CFR 24.5. This information is required for the public
welfare investment self- certification and prior approval procedures.
The likely respondents are national banks.
Estimated average annual burden hours per respondent: 1.05 hours.
Estimated number of respondents: 400.
Estimated total annual reporting burden: 418 hours.
Start-up costs to respondents: None.
List of Subjects in 12 CFR Part 24
Community development, Credit, Investments, National banks,
Reporting and recordkeeping requirements.
Authority and Issuance
For the reasons set forth in the preamble, the OCC proposes to
revise part 24, title 12, chapter I, of the Code of Federal Regulations
to read as follows:
PART 24--COMMUNITY DEVELOPMENT CORPORATIONS, COMMUNITY DEVELOPMENT
PROJECTS, AND OTHER PUBLIC WELFARE INVESTMENTS
Sec.
24.1 Authority, purpose, and OMB control number.
24.2 Definitions.
24.3 Public welfare investments.
24.4 Investment limits.
24.5 Public welfare investment self-certification and prior
approval procedures.
24.6 Activities eligible for self-certification.
24.7 Examination, records, and remedial action.
Authority: 12 U.S.C. 24 (Eleventh) and 93a.
Sec. 24.1 Authority, purpose, and OMB control number.
(a) Authority. The Office of the Comptroller of the Currency (OCC)
issues this part pursuant to its authority under 12 U.S.C. 24(Eleventh)
93a, and 481.
(b) Purpose. This part implements 12 U.S.C. 24(Eleventh), which
authorizes national banks to make investments designed primarily to
promote the public welfare, including the welfare of low- and moderate-
income communities or families, such as by providing housing, services,
or jobs. It is the OCC's policy to encourage national banks to make
investments described in Sec. 24.3, consistent with safety and
soundness. The OCC believes that national banks can promote the public
welfare through a variety of investments, including those in community
development corporations (CDCs) and community development projects (CD
Projects), that develop affordable housing, foster revitalization or
stabilization of low- and moderate-income areas, or provide equity or
debt financing for small businesses. This part provides:
(1) The standards that the OCC uses to determine whether an
investment is designed primarily to promote the public welfare; and
(2) The procedures that apply to these investments.
(c) OMB Control Number. The collection of information requirements
contained in this part were approved by the Office of Management and
Budget under OMB control number 1557-0194.
Sec. 24.2 Definitions.
For purposes of this part, the following definitions apply:
(a) Adequately capitalized has the same meaning as adequately
capitalized in 12 CFR 6.4.
(b) Capital and surplus means:
(1) A bank's Tier 1 and Tier 2 capital under the OCC's Minimum
Capital Ratios in Appendix A to 12 CFR Part 3; plus
(2) The balance of a bank's allowance for loan and lease losses not
included in the bank's Tier 2 capital, for purposes of the calculation
of risk-based capital under 12 CFR part 3.
(c) Community development corporation (CDC) means a corporation
established by one or more insured financial institutions, or by
insured financial institutions and other investors, to make one or more
investments that meet the requirements of Sec. 24.3.
(d) Community development Project (CD Project) means a project to
make an investment that meets the requirements of Sec. 24.3.
(e) Eligible bank means a national bank that:
(1) Is well capitalized;
(2) Has a composite rating of 1 or 2 under the Uniform Financial
Institutions Rating System (CAMEL);
(3) Has a Community Reinvestment Act (CRA) rating of
``Outstanding'' or ``Satisfactory''; and
(4) Is not subject to a cease and desist order, consent order,
formal written agreement, or Prompt Corrective Action directive (see 12
CFR part 6, subpart B) or, if subject to any such order, agreement or
directive, is informed in writing by the OCC that the bank may be
treated as an ``eligible bank'' for purposes of this part.
(f) Low-income and moderate-income have the same meanings as low-
income and moderate- income in 12 CFR 25.12(n).
(g) Significant risk to the deposit insurance fund means a
substantial probability that any federal deposit insurance fund could
suffer a loss.
(h) Small business means a business that meets the qualifications
for Small Business Administration loan programs in 13 CFR 121.802
(a)(1) through (3).
(i) Well capitalized has the same meaning as well capitalized in 12
CFR 6.4.
Sec. 24.3 Public welfare investments.
A national bank may make an investment under this part if:
(a) The investment primarily benefits low- and moderate-income
individuals or small businesses by providing or supporting one or more
of the following activities:
(1) Affordable housing, community services, or permanent jobs for
low- and moderate-income individuals;
(2) Equity or special debt financing for small businesses;
(3) Revitalization or stabilization of low- or moderate-income
areas or other areas (including rural areas) targeted for redevelopment
by local, state, or federal government; or
(4) Other activities, services, or facilities conducive to the
public welfare;
(b) The bank sets forth the reasons why it is difficult to secure
private market financing for the proposed investment;
(c) The bank demonstrates non-bank community support for or
participation in the investment; and
(d) The bank demonstrates the extent to which the investment
benefits communities otherwise served by the bank.
Sec. 24.4 Investment limits.
(a) Limit on aggregate outstanding investments. A national bank's
aggregate outstanding investments under this part may not exceed 5
percent of its capital and surplus, unless the bank is at least
adequately capitalized and the OCC determines, by written approval of
the bank's proposed investment(s), that a higher amount will pose no
significant risk to the deposit insurance fund. In no case may a bank's
aggregate outstanding investments under this part exceed 10 percent of
its capital and surplus.
(b) Limited liability. A national bank may not make an investment
under this
[[Page 67096]]
part that would expose the bank to unlimited liability.
Sec. 24.5 Public welfare investment self-certification and prior
approval procedures.
(a) Self-certification of public welfare investments. (1) Subject
to Sec. 24.4(a), an eligible bank may make an investment described in
Sec. 24.6(a) without prior notification to, or approval by, the OCC if
the bank follows the self-certification procedures prescribed in this
section.
(2) To self-certify an investment, an eligible bank shall submit,
within 10 working days after an investment is made, a letter of self-
certification to the Director, Community Development Division, Office
of the Comptroller of the Currency, Washington, DC 20219.
(3) The bank's letter of self-certification must include:
(i) The name of the CDC, CD Project, or other entity in which the
bank has invested;
(ii) The date the investment was made;
(iii) The type of investment (equity or debt), the investment
activity listed in Sec. 24.6(a) that the investment supports, and a
brief description of the particular investment;
(iv) The bank's total investment in the CDC, CD Project or other
entity, and the bank's aggregate outstanding investments under this
part, including commitments and the investment being self-certified;
(v) The percentage of the bank's capital and surplus represented by
the bank's aggregate outstanding investments under this part, including
commitments and the investment being self-certified; and
(vi) A statement demonstrating compliance with Sec. 24.3 and
Sec. 24.4.
(4) A national bank that is not an eligible bank but is at least
adequately capitalized, and has a composite rating of at least 3 with
improving trends under the Uniform Financial Institutions Rating
System, may submit a letter to the Community Development Division
requesting authority to self-certify investments. The Community
Development Division considers these requests on a case-by-case basis.
(b) Investments requiring prior approval. (1) If a national bank or
its proposed investment does not meet the requirements for self-
certification set forth in paragraph (a) of this section, the bank
shall submit a proposal for an investment to the Director, Community
Development Division, Office of the Comptroller of the Currency,
Washington, DC 20219.
(2) The bank's investment proposal must include:
(i) The name of the CDC, CD Project, or other entity in which the
bank intends to invest;
(ii) The date on which the bank intends to make the investment;
(iii) The type of investment (equity or debt), the investment
activity listed in Sec. 24.3(a) that the investment supports, and a
description of the particular investment;
(iv) The bank's total investment in the CDC, CD Project or other
entity, and the bank's aggregate outstanding investments under this
part (including commitments and the investment being proposed);
(v) The percentage of the bank's capital and surplus represented by
the bank's aggregate outstanding investments under this part (including
commitments and the investment being proposed); and
(vi) A statement demonstrating compliance with Sec. 24.3 and
Sec. 24.4.
(3) In reviewing a proposal, the OCC considers the following
factors and other available information including:
(i) Whether the investment satisfies the requirements of Sec. 24.3;
(ii) Whether the investment is consistent with the safe and sound
operation of the bank; and
(iii) Whether the investment is consistent with the requirements of
this part and the OCC's policies.
(4) Unless otherwise notified by the OCC, and subject to
Sec. 24.4(a), the bank may make the proposed investment after 30
calendar days from the date on which the OCC receives the bank's
investment proposal.
(5) The OCC, by notifying the bank, may extend its period for
reviewing the investment proposal. If so notified, the bank may make
the investment only with the OCC's written approval.
(6) The OCC may impose one or more conditions in connection with
its approval of an investment under this part. All approvals are
subject to the condition that a national bank must conduct the approved
activity in a manner consistent with any published guidance issued by
the OCC regarding the activity.
Sec. 24.6 Activities eligible for self-certification.
(a) Eligible activities. In accordance with the process described
in Sec. 24.5(a), a bank may self-certify the following investments
without prior notice to, or approval by, the OCC:
(1) Investments in an entity that finances, acquires, develops,
rehabilitates, manages, sells, or rents housing primarily for low- and
moderate-income persons;
(2) Investments that stimulate economic development, community
stabilization or revitalization, or permanent job creation or retention
for low- and moderate-income persons by financing small businesses
(including equity or debt financing and investments in an entity that
provides loan guarantees);
(3) Investments that stimulate economic development, community
stabilization or revitalization, or permanent job-creation or retention
for low- and moderate-income persons by providing credit counseling,
job training, community development research, and similar technical
assistance services for small businesses, non-profit community
development organizations, low- and moderate-income persons or areas,
or other areas (including rural areas) targeted for redevelopment by
state or local government;
(4) Investments in an entity that stimulates economic development,
community stabilization or revitalization, or permanent job creation or
retention for low- and moderate- income persons by acquiring,
developing, rehabilitating, managing, selling, or renting commercial or
industrial property that is located in a low- and moderate- income area
or other area (including rural areas) targeted for redevelopment by
state or local government, and which is occupied primarily by small
businesses;
(5) Investments as a limited partner in a project with a general
partner that is, or is primarily owned and operated by, a 26 U.S.C.
501(c)(3) or (4) non-profit corporation and that qualifies for the
federal low-income housing tax credit;
(6) Investments in low- or moderate-income areas, or other areas
(including rural areas) targeted for redevelopment by state or local
government that create long term employment opportunities, the majority
of which will be held by low- and moderate-income persons;
(7) Investments in a national bank that has been approved by the
OCC as a national bank with a community development focus;
(8) Investments that have been approved by the Federal Reserve
Board under 12 CFR 208.21 for state member banks; and
(9) Investments that have been previously determined by the OCC to
be permissible under this part.
(b) Ineligible activities. Notwithstanding the provisions of this
section, a bank may not self-certify an investment if:
(1) The investment involves properties carried on the bank's book
as ``other real estate owned'';
(2) The investment funds projects in a state or metropolitan area
other than
[[Page 67097]]
the states or metropolitan areas in which the bank maintains its main
office or branches; or
(3) The OCC determines, in published guidance, that the investment
is inappropriate for self-certification.
Sec. 24.7 Examination, records, and remedial action.
(a) Examination. National bank investments under this part are
subject to the examination provisions of 12 U.S.C. 481.
(b) Records. Each national bank shall maintain in its files
information adequate to demonstrate that it is in compliance with the
requirements of this part.
(c) Remedial action. If the OCC finds that an investment under this
part is in violation of law or regulation, is inconsistent with the
safe and sound operation of the bank, or poses a significant risk to a
federal deposit insurance fund, the national bank shall take
appropriate remedial action as determined by the OCC.
Dated: December 14, 1995.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 95-31021 Filed 12-27-95; 8:45 am]
BILLING CODE 4810-33-P
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