This page explains federal law for companies in New York that make, import, private-label or sell appliances and equipment covered by federal energy and water conservation standards under the Energy Policy and Conservation Act and the Department of Energy's rules in 10 CFR Part 429. KOR Law LLP's regulatory and enforcement practice defends clients in enforcement proceedings by federal agencies, including the DOE and the FTC. Online sellers and importers are often surprised to learn that the statute treats importing as manufacturing: "manufacture" means "to manufacture, produce, assemble or import" (42 U.S.C. 6291(10)).

Who enforces the efficiency rules?

The DOE's Office of Enforcement, part of its Office of the General Counsel, "leads the Department's efforts to ensure manufacturers deliver products that meet energy and water conservation standards," working with the Appliance and Equipment Standards Program, which conducts testing. The same page notes that the Environmental Protection Agency enforces ENERGY STAR specifications and the Federal Trade Commission oversees the accuracy of EnergyGuide labels. That division of labor matters because one product can draw more than one agency; the FTC's investigative process is covered in what the deadlines are for an FTC civil investigative demand.

What conduct is prohibited?

The DOE's rule lists prohibited acts (10 CFR 429.102(a)), including:

  • failing to keep, provide or permit access to required records or reports, "including but not limited to failure to properly certify covered products";
  • failing to test a covered product under the applicable test procedure;
  • deliberately using controls or features to circumvent a test procedure;
  • failing to supply units for testing when DOE requests them, or to let DOE observe required testing;
  • distributing a new covered product that does not meet the applicable standard, or distributing a basic model after a notice of noncompliance; and
  • knowingly certifying an efficiency rating not supported by test data.
Key numbers in a DOE efficiency enforcement case
ItemRuleSource
Maximum civil penalty$575 for each knowing violation (current rule)10 CFR 429.120
Counting violations: certification failures and distribution violationsEach unit distributed is a separate violation10 CFR 429.120
Counting violations: records, circumvention, test unitsEach day of noncompliance, per basic model10 CFR 429.120
Records after a noncompliance noticeWithin 30 calendar days of DOE's request10 CFR 429.114(a)(3)
Election of proceduresWithin 30 calendar days of receiving the notice of proposed penalty10 CFR 429.122(b)(3)
Appeal after an ALJ-based final orderWithin 60 calendar days, to the court of appeals10 CFR 429.126(c)(2)
Payment after an immediate assessmentIf unpaid within 60 days, DOE sues in district court, which reviews de novo10 CFR 429.128(b)

How does a DOE case proceed, step by step?

  1. Investigation and information requests. DOE may open an investigation at any time and request any information relevant to compliance, including the data behind a certification (10 CFR 429.106).
  2. Enforcement testing. If DOE has reason to believe a basic model is noncompliant, it may test units, generally at an accredited laboratory (10 CFR 429.110(a)).
  3. Notice of noncompliance. If DOE determines a model is noncompliant, it may require the company to immediately stop distributing it, notify everyone it sold units to since the last determination of compliance, and provide distribution records within 30 days of the request (10 CFR 429.114(a)).
  4. Notice of proposed civil penalty. It states the amount and the material facts, and gives 30 calendar days to elect the expedited procedure (10 CFR 429.122).
  5. Election. The company chooses an administrative hearing before an administrative law judge or an immediate assessment order; silence means the case goes to an ALJ (10 CFR 429.124).
  6. Decision and review. After an ALJ hearing, DOE's General Counsel issues a final order, appealable to a federal court of appeals within 60 days (429.126). Under the immediate route, an order issues 30 days after receipt of the notice, and if it is unpaid within 60 days DOE sues in district court, which reviews the law and facts de novo (429.128).
  7. Settlement. DOE may compromise or remit a penalty, considering the seriousness of the violation and the company's efforts to remedy it promptly, at any time before a final court decision (10 CFR 429.132).

Where can a DOE penalty be challenged?

Always in federal court, but which court depends on the route the company elects. After an administrative hearing, review of DOE's final order lies in the United States Court of Appeals for the appropriate circuit, sought within 60 calendar days (10 CFR 429.126(c)(2)). Under the immediate assessment route, DOE must sue in the appropriate United States District Court if the penalty is not paid within 60 days, and that court reviews the law and the facts de novo (10 CFR 429.128(b)). How federal and state courts differ for New York companies is explained in federal court or state court for a New York business dispute.

A company that imported or bought noncompliant products may also look to its supplier. Contract and warranty claims for goods follow Article 2 of the Uniform Commercial Code, described in the rules that govern a sale of goods between businesses in New York. Those claims have their own deadlines, covered in how long you have to sue for breach of contract, fraud, or a sale of goods in New York.

What changes the answer?

  • Knowledge. Penalties apply to knowing violations, and "knowingly" includes knowledge a reasonable person would have with due care (42 U.S.C. 6303(b); 10 CFR 429.120).
  • The type of violation. It decides whether violations are counted per unit or per day (10 CFR 429.120).
  • Role in the supply chain. Importers can be manufacturers (42 U.S.C. 6291(10)); distribution duties attach to manufacturers and private labelers (10 CFR 429.102(a)(6), (7)).
  • Prompt remediation. DOE may weigh timely efforts to remedy a violation when compromising a penalty (10 CFR 429.132(b)).
  • The procedure elected. ALJ hearing with court of appeals review, or assessment with de novo district court review (10 CFR 429.124 to 429.128).
  • Current figures. The penalty cap in the rule is adjusted over time; the $575 figure is the one in the current rule (10 CFR 429.120).

For example: an importer of portable air conditioners

For example, imagine a Brooklyn company that imports portable air conditioners from an overseas factory and sells them online under its own brand. (This is a made-up illustration, not a real client or result.) It relied on the factory's paperwork and never filed its own certification reports. DOE sends a request for the certification data and test reports for two basic models (10 CFR 429.106(b)).

Because importing counts as manufacturing (42 U.S.C. 6291(10)), the company may be responsible for certification. Failing to properly certify is a prohibited act, and for certification failures each unit distributed can be a separate violation (10 CFR 429.102(a)(1), 429.120). The company gathers its import and sales records, obtains test data, and considers how to present its remediation efforts, which DOE may weigh in any compromise (429.132(b)).

Common mistakes

  • Assuming the factory handles compliance. Importers can be manufacturers under the statute (42 U.S.C. 6291(10)).
  • Missing the 30-day election. Silence sends the case to an ALJ by default (10 CFR 429.124(c)).
  • Continuing to ship after a noncompliance notice. That is its own prohibited act (10 CFR 429.102(a)(7)).
  • Losing distribution records. DOE can demand them within 30 days (10 CFR 429.114(a)(3)).
  • Treating DOE and FTC issues as one. They enforce different rules (DOE Office of Enforcement).
  • Overlooking privilege. Internal reviews of test data should be structured with counsel; see how to run an internal investigation without losing privilege.

What to do this week

  1. Identify every covered model you make, import or private-label.
  2. Collect certification reports and the test data behind them.
  3. Pull import, inventory and sales records by model and unit count.
  4. Preserve all communications with factories and test labs.
  5. Calendar any response or election deadline in DOE's letter.
  6. Speak with counsel before responding to DOE.

The general steps for any government demand are in what a company should do in the first week after a government subpoena.

Frequently asked questions

Is the $575 figure per product or per case?

Per violation, and for certification and distribution violations, each unit distributed is a separate violation (10 CFR 429.120). For records, circumvention and test-unit violations, each day of noncompliance is a separate violation for each basic model.

Can DOE stop us from selling a model?

Yes. A notice of noncompliance determination can require the company to immediately cease distribution of the basic model and notify its customers (10 CFR 429.114(a)).

Which route is better, the ALJ or the immediate assessment?

It depends. The ALJ route provides an agency hearing and then court of appeals review (429.126); the immediate route leads to de novo review in district court if the penalty is not paid (429.128). The choice is irrevocable without DOE's consent (429.124(b)).

Can a penalty be settled?

Yes. DOE may compromise, modify or remit a penalty and may consider the seriousness of the violation and timely remediation (10 CFR 429.132).

Could other agencies become involved?

Yes. The FTC oversees EnergyGuide label accuracy, according to DOE's enforcement office, and companies under multiple inquiries should coordinate responses. See what powers the New York Attorney General has in a business investigation for state-level inquiries.