Hardwood Lumber and Hardwood Plywood Promotion, Research and Information Order, 68297-68319 [2013-27108]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 78, Number 219 (Wednesday, November 13, 2013)]
[Proposed Rules]
[Pages 68297-68319]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27108]



[[Page 68297]]

Vol. 78

Wednesday,

No. 219

November 13, 2013

Part IV





Department of Agriculture





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Agricultural Marketing Service





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7 CFR Part 1211





Hardwood Lumber and Hardwood Plywood Promotion, Research and 
Information Order; Proposed Rule

Federal Register / Vol. 78 , No. 219 / Wednesday, November 13, 2013 / 
Proposed Rules

[[Page 68298]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1211

[Document Number AMS-FV-11-0074; PR-A1]
RIN 0581-AD24


Hardwood Lumber and Hardwood Plywood Promotion, Research and 
Information Order

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule invites comments on a proposed Hardwood Lumber and 
Hardwood Plywood Promotion, Research and Information Order (Order). 
Hardwood lumber and hardwood plywood are used in products like 
flooring, furniture, moldings, doors, and kitchen cabinets. The program 
would be financed by an assessment on hardwood lumber manufacturers and 
hardwood plywood manufacturers and would be administered by a board of 
industry members selected by the Secretary of Agriculture (Secretary). 
The assessment rate varies according to the product manufactured. The 
purpose of the program would be to strengthen the position of hardwood 
lumber and hardwood plywood in the marketplace and maintain and expand 
markets for hardwood lumber and hardwood plywood. A referendum would be 
held among eligible hardwood lumber manufacturers and hardwood plywood 
manufacturers to determine whether they favor implementation of the 
program prior to it going into effect. This rule also announces the 
Agricultural Marketing Service's (AMS) intent to request approval by 
the Office of Management and Budget (OMB) of new information collection 
requirements to implement the program.

DATES: Comments must be received by January 13, 2014. Pursuant to the 
Paperwork Reduction Act (PRA), comments on the information collection 
burden that would result from this proposal must be received by January 
13, 2014.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments may be submitted on the Internet at: 
https://www.regulations.gov or to the Promotion and Economics Division, 
Fruit and Vegetable Program, AMS, USDA, 1400 Independence Avenue SW., 
Room 1406-S, Stop 0244, Washington, DC 20250-0244; facsimile: (202) 
205-2800. All comments should reference the docket number and the date 
and page number of this issue of the Federal Register and will be made 
available for public inspection, including name and address, if 
provided, in the above office during regular business hours or it can 
be viewed at https://www.regulations.gov.
    Pursuant to the PRA, comments regarding the accuracy of the burden 
estimate, ways to minimize the burden, including the use of automated 
collection techniques or other forms of information technology, or any 
other aspect of this collection of information, should be sent to the 
above address. In addition, comments concerning the information 
collection should also be sent to the Desk Office for Agriculture, 
Office of Information and Regulatory Affairs, OMB, New Executive Office 
Building, 725 17th Street NW., Room 725, Washington, DC 20503.

FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella, Marketing 
Specialist, Promotion and Economics Division, Fruit and Vegetable 
Program, AMS, USDA, 1400 Independence Avenue SW., Room 1406, Stop 0244, 
Washington, DC 20250-0244; telephone: (301) 334-2891; facsimile (301) 
334-2896; or electronic mail: Patricia.Petrella@ams.usda.gov.

SUPPLEMENTARY INFORMATION: This rule is issued pursuant to the 
Commodity Promotion, Research and Information Act of 1996 (1996 Act) (7 
U.S.C. 7411-7425).

Executive Order 12866 and Executive Order 13563

    Executive Order 12866 and 13563 direct agencies to assess all costs 
and benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). Executive order 13563 
emphasizes the importance of quantifying both costs and benefits, of 
reducing costs, of harmonizing rules, and of promoting flexibility. 
This rule has been designated as ``non-significant regulatory action'' 
under section 3(f) of Executive Order 12866. Accordingly, the Office of 
Management and Budget (OMB) has waived the review process.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. It is not intended to have retroactive effect. Section 
524 of the 1996 Act provides that it shall not affect or preempt any 
other Federal or State law authorizing promotion or research relating 
to an agricultural commodity.
    Under section 519 of the 1996 Act, a person subject to an order may 
file a written petition with the U.S. Department of Agriculture (USDA) 
stating that an order, any provision of an order, or any obligation 
imposed in connection with an order, is not established in accordance 
with the law, and request a modification of an order or an exemption 
from an order. Any petition filed challenging an order, any provision 
of an order, or any obligation imposed in connection with an order, 
shall be filed within two years after the effective date of an order, 
provision, or obligation subject to challenge in the petition. The 
petitioner will have the opportunity for a hearing on the petition. 
Thereafter, USDA will issue a ruling on the petition. The 1996 Act 
provides that the district court of the United States for any district 
in which the petitioner resides or conducts business shall have the 
jurisdiction to review a final ruling on the petition, if the 
petitioner files a complaint for that purpose not later than 20 days 
after the date of the entry of USDA's final ruling.

Background

    This rule invites comments on a proposed industry-funded promotion, 
research and information program for hardwood lumber and hardwood 
plywood. Hardwood lumber products are used in residential and 
commercial construction including flooring, furniture, moldings, doors 
and kitchen cabinets. Industrial products include pallets, wood 
dunning, and railroad ties. The program would be financed by an 
assessment on hardwood lumber, hardwood lumber products, hardwood 
lumber value-added products, and hardwood plywood manufacturers and 
would be administered by a board of industry members selected by the 
Secretary. The initial assessment rate would be: (1) $1.00 per $1,000 
in sales of hardwood lumber and hardwood lumber products; (2) $0.75 per 
$1,000 in sales of hardwood lumber value-added products; and (3) $3.00 
per $1,000 in sales of hardwood plywood. These assessments should 
generate about $10 million annually. The program would exempt those 
hardwood lumber manufacturers with annual sales of less than $2 million 
and hardwood plywood manufacturers with annual sales of less than $10 
million. Exports would be exempted from the program and imports would 
not be covered under the program. The purpose of the program would be 
to strengthen the position of hardwood lumber, hardwood lumber 
products, hardwood lumber value-

[[Page 68299]]

added products and hardwood plywood in the marketplace and maintain and 
expand markets for United States hardwood lumber, hardwood lumber 
products, hardwood lumber value-added products and hardwood plywood.
    A referendum would be held among eligible hardwood lumber 
manufacturers and hardwood plywood manufacturers to determine whether 
they favor implementation of the program prior to it going into effect. 
The proposal was submitted to USDA by the Blue Ribbon Committee (BRC), 
a committee of 14 hardwood lumber and hardwood plywood industry leaders 
representing small and large manufacturers and geographically 
distributed throughout the United States.
    This rule also announces AMS's intent to request approval by the 
OMB of new information collection requirements to implement the 
program.

Authority in 1996 Act

    The proposed Order is promulgated under the 1996 Act which 
authorizes USDA to establish agricultural commodity research and 
promotion orders which may include a combination of promotion, 
research, industry information, and consumer information activities 
funded by mandatory assessments. These programs are designed to 
maintain and expand markets and uses for agricultural commodities. As 
defined under section 513(1)(D) of the 1996 Act, agricultural 
commodities include the products of forestry, which includes hardwood 
lumber and hardwood plywood.
    The 1996 Act provides for a number of optional provisions that 
allow the tailoring of orders for different commodities. Section 516 of 
the 1996 Act provides permissive terms for orders, and other sections 
provide for alternatives. For example, section 514 of the 1996 Act 
provides for orders applicable to (1) producers, (2) first handlers and 
others in the marketing chain as appropriate, and (3) importers (if 
imports are subject to assessments). Section 516 states that an order 
may include an exemption of de minimis quantities of an agricultural 
commodity. However, the 1996 Act does not define the term de minimis 
and USDA is not limited to using the definition of de minimis as 
specified in another law or agreement. The de minimis quantity is 
defined for a particular program and industry.
    Section 516 also includes different payment and reporting 
schedules; coverage of research, promotion, and information activities 
to expand, improve, or make more efficient the marketing or use of an 
agricultural commodity in both domestic and foreign markets; provision 
for reserve funds; provision for credits for generic and branded 
activities; and assessment of imports.
    In addition, section 518 of the 1996 Act provides for referenda to 
ascertain approval of an order to be conducted either prior to its 
going into effect or within three years after assessments first begin 
under the order. An order also may provide for its approval in a 
referendum based upon different voting patterns. Section 515 provides 
for establishment of a board or council from among producers, first 
handlers and others in the marketing chain as appropriate, and 
importers, if imports are subject to assessment.

Industry Background

    The hardwood lumber industry is comprised of manufacturers of non-
structural products used primarily in construction and renovation of 
homes, transport packaging and industrial applications. Hardwoods are 
timber from the wood of a cypress tree or a deciduous, broad-leafed 
tree which could include: aspen, birch, cypress, popular, maple, 
cherry, walnut and oak. Hardwood lumber products that are used in 
residential and commercial construction include flooring, furniture, 
moldings, doors and kitchen cabinets. Industrial hardwood products 
include pallets, wood dunning, and railroad ties. Hardwood plywood 
products are made by applying a high quality hardwood veneer to a 
backing and used in manufacturing of furniture and wood paneling. 
Hardwood lumber value-added products that would be assessed under the 
Order could include such products as solid wood unfinished strip 
flooring, all-sides surfaced boards, finger-jointed strips ripped to 
width, and moldings, but does not include multi-component or further 
manufactured products such as furniture, cabinets, cabinet doors, 
prefinished or engineered flooring, or dimension or glued components 
for cabinets or furniture.
    Hardwood sawmills also may manufacture other sawn products 
including crossties, pallet cants, frame stock, and board road. The 
specific mix of products produced by a hardwood sawmill is influenced 
by mill location; local, national, and international market conditions; 
quality and size of logs; species availability; mill design; business 
practices; and other factors.
    Hardwood lumber can be sold green, air dried, or kiln dried. Green 
and air dried lumber is normally measured and sold under National 
Hardwood Lumber Association (NHLA) rules \1\ but can be measured and 
sold under proprietary rules established by an individual firm. Kiln 
dried lumber can be sold rough or dressed in the same quarter inch 
thickness increments as green lumber. Since drying normally reduces the 
width of boards, lumber may be sold on measurement taken before going 
into the kiln (net measurement prior to kiln drying is commonly 
referred to as gross tally) or remeasured after the kiln drying process 
(net tally). Kiln dried lumber is normally measured and also sold under 
NHLA rules but can be measured and sold under proprietary procedures 
established by an individual firm.\2\
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    \1\ National Hardwood Lumber Association Rules for the 
Measurement and Inspection of Hardwood and cypress, Effective 
January 1, 2011 v1.1.
    \2\ Judd Johnson, Hardwood Market Report, 2011.
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Regional U.S. Timber Production \3\
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    \3\ USDA Forest Service, Dr. William Luppold, Princeton, WV.
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    According to the USDA Forest Service the volume of hardwood lumber 
produced in 2010 was 7,581 MMBF (million board feet). Some of the main 
species produced in the United States are red oak, hard maple, white 
oak, and sweet gum. The major producing States in the east are 
Pennsylvania, Tennessee, Virginia, North Carolina, and West Virginia. 
The bulk of timber production in the western United States is confined 
to Oregon and Washington. Red alder and maple trees dominate the 
region.
    The USDA Forest Service, for 2010 stated total production of 
hardwood lumber in the eastern region was 3,579 MMBF and in the central 
region was 4,002 MMBF.

U.S. Hardwood Lumber Consumption and Output by Region

    According to the industry's Hardwood Market Report (provides weekly 
reports on North America hardwood lumber and products since 1922), 
output of hardwood nonstructural products peaked in 1999 at 12.6 MMBF 
and fell to a record low in 2009 at 5.73 MMBF. Consumption of U.S. 
hardwoods has declined significantly primarily due to the U.S. housing 
crisis beginning in 2006. Use of U.S. hardwood products has decreased 
almost 50 percent since 2009. Demand has improved moderately from the 
2009 low point. Hardwood consumption in 2012 was 43.6 percent below the 
1999 level.
    The U.S. cabinet industry consumed 42.7 percent less lumber in 2010 
as compared to 2009 as more imported species and alternative materials 
replaced U.S. hardwoods. The flooring industry was the largest consumer 
of

[[Page 68300]]

U.S. hardwood lumber, however, use of hardwoods in this sector has 
declined from 1.5 BBF (billion board feet) in 2005 to 0.6 BBF in 2010 
as competing products and imports replace domestic hardwood lumber. The 
furniture industry has seen a fundamental shift in consumption by U.S. 
manufacturers. In 1999, the furniture industry consumed 2.6 BBF of 
hardwood lumber and today only 350 million board feet. This is a 
decrease of 2.25 BBF. It is estimated that the U.S. has lost 70 percent 
of the entire furniture manufacturing industry.

Hardwood Lumber Markets \4\
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    \4\ Forest Products Journal, Volume 58, No. 5, Forest Products 
Society.
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    During the mid-1990's, domestic hardwood lumber consumption surged 
as use by construction and remodeling (CR) producers increased. The 
nearly 1.1 BBF increase in lumber usage by the CR group over a 5-year 
period (1992-1997) was largely the result of increased use of hardwood 
material in home construction, as well as larger homes being built. 
Industrial product manufacturers were the largest users of hardwood 
lumber, consuming nearly 5 BBF in 1997.
    Hardwood lumber consumption by the wood household and office and 
institutional furniture industries increased between 1992 and 1997, but 
this increase was offset by decreased use in upholstered furniture. The 
decreased use of lumber by upholstered furniture manufacturers was the 
result of increased use of plywood in furniture.
    Hardwood lumber consumption by the pallet industry also declined 
more than 400 MMBF between 1997 and 2002. This reduction was not a 
function of reduced pallet use but of increased recycling of pallets 
and pallet parts. One factor that encouraged the pallet industry to 
adopt recycling was increased prices of lower grade oak lumber 
resulting from increased flooring production.

Competition \5\
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    \5\ Dr. William G. Luppold, Ph.D. USDA Forest Service, 2012.
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    Hardwood lumber competes with several alternative products and 
imported species. Competitive products used in furniture, cabinets and 
mill work include composite products such as medium density fiberboard 
and particle board, composite material, plastic, and imported lumber. 
Competitive products used in flooring include composite laminated 
flooring product, products that look like wood, bamboo, and imported 
hardwood flooring. In addition, competitive industrial pallet products 
include recycled pallet parts, composite products, plastic, and 
cardboard.

Price and Cost Trends \6\
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    \6\ Dr. William G. Luppold, Ph.D. and Matthew S. Baumgardner, 
Examination of Lumber Price Trends for Major Hardwood Species, 2007.
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    Over the last 40 years, trends in interspecies and intergrade 
hardwood lumber prices have been irregular. In the early 1960s, high 
and midgrade hard maple commanded high prices while red oak was the 
least valuable lumber regardless of grade. In the 1980s, high and 
midgrade oak prices surged, but prices of all grades of maple and 
yellow-poplar declined. During the 1990s, maple prices increased in all 
grades while the price of oak increased only in the lower grades. It is 
important to understand changes in interspecies and intergrade pricing 
as well as the market forces causing these changes because lumber price 
reflects the use of these products relative to availability. In 
addition, species of wood produced in different regions of the country 
can have different desirable attributes that may be reflected in the 
price.
    The price of hardwood lumber depend on a series of demand and 
supply interactions in numerous final markets including furniture, 
pallets, flooring, and kitchen cabinets and on four market levels: 
final consumer, secondary (furniture etc.), primary (lumber), and 
timber. Each species and grade designation varies in visual and 
physical characteristics.

Need for a Program

    According to the proponents, the hardwood lumber industry is 
experiencing one of the worst markets in history. The U.S. cabinet 
industry consumed 42.7 percent less lumber in 2010 as compared to 2009 
as more species and alternative materials replaced U.S. hardwoods. The 
flooring industry was the largest consumer of U.S. hardwood lumber. Use 
of U.S. hardwoods in this sector has declined from 1.5 BBF in 2005 to 
0.6 BBF in 2010 as competing products and imports replace domestic 
lumber. The furniture industry has seen a fundamental shift in 
consumption by U.S. manufacturers. The proponents reported that in 
1999, the furniture industry consumed 2.6 BBF of hardwood lumber and 
today only 350 million board feet. That is a decrease of 2.25 BBF. 
Estimates are that the U.S. has lost 70 percent of the entire furniture 
manufacturing sector.
    Additionally, at the request of the U.S. and Canadian governments, 
the U.S. Endowment for Forestry and Communities (Endowment) was formed 
in 2006. The Endowment is a non-profit organization that works with 
public and private sectors to advance the interests of the forestry 
community. In the past, the industry attempted voluntary assessment 
efforts to conduct marketing programs, but they were sporadic, 
underfunded, and narrowly targeted. Since early 2008 the Endowment has 
directly invested monies to study and catalyze the potential of 
commodity checkoffs to help grow the market for wood and wood products.
    As a result of the Endowment's efforts, the BRC was subsequently 
formed to pursue an industry research and promotion program. The BRC is 
comprised of 14 members representing the United States. The BRC 
submitted an initial proposal for a program to USDA in June 2011.
    The BRC proposed a program that would be financed by an assessment 
on hardwood lumber manufacturers and hardwood plywood manufacturers and 
administered by a board of industry members selected by the Secretary. 
The initial assessment rate would be: (1) $1.00 per $1,000 in sales of 
hardwood lumber and hardwood lumber products; (2) $0.75 per $1,000 in 
sales of hardwood lumber value-added products; and (3) $3.00 per $1,000 
in sales of hardwood plywood. These assessments should generate about 
$10 million annually. The program would exempt those hardwood lumber 
manufacturers with annual sales of less than $2 million and hardwood 
plywood manufacturers with annual sales of less than $10 million. 
Exports from the United States would also be exempt from assessments. 
The purpose of the program would be to strengthen the position of 
hardwood lumber and hardwood plywood in the marketplace and maintain 
and expand markets for hardwood lumber and hardwood plywood. A 
referendum would be held among eligible hardwood manufacturers and 
hardwood plywood manufacturers to determine whether they favor 
implementation of the program prior to it going into effect. A majority 
of eligible manufacturers by volume of the commodity represented in the 
referendum would have to support the program for it to be implemented. 
The specific provisions of the program are discussed below.

Provisions of Proposed Program

Definitions

    Pursuant to section 513 of the 1996 Act, Sec. Sec.  1211.1 through 
1211.37 of the proposed Order define certain terms that would be used 
throughout the

[[Page 68301]]

Order. Several of the terms are common to all research and promotion 
programs authorized under the 1996 Act while other terms are specific 
to the proposed hardwood lumber Order.
    Section 1211.1 would define the term ``Act'' to mean the Commodity 
Promotion, Research and Information Act of 1996 (7 U.S.C. 7411-7425), 
and any amendments thereto.
    Section 1211.2 would define the term ``Blue Ribbon Committee'' to 
mean the committee representing businesses that manufacture hardwood 
lumber in the United States formed to pursue an industry research, 
promotion, and information program. As specified in proposed Sec.  
1211.42, the BRC would conduct the initial nominations for the Hardwood 
Lumber and Hardwood Plywood Board and submit them to the Secretary. 
This would be the only role of the BRC under the program.
    Section 1211.3 would define the term ``Board'' or ``Hardwood Lumber 
and Hardwood Plywood Board'' to mean the administrative body 
established pursuant to Sec.  1211.41, or such other name as 
recommended by the Board and approved by the Secretary.
    Section 1211.4 would define the term ``Brokered sale'' to mean a 
product that is purchased from a person and resold to a different 
person without taking physical possession of the product. This term is 
necessary for assessment purposes because in order to be liable for the 
assessment collection the individual must take possession of the 
product.
    Section 1211.5 would define the term ``Concentration yard'' to mean 
an operation with kilns that purchases hardwood lumber from sawmills, 
or wholesalers or by means of a brokered sale and may grade, sort, dry 
and/or surface the lumber. It excludes distribution yards which do not 
have kilns.
    Section 1211.7 would define the term ``Covered hardwood'' to mean 
hardwood lumber, hardwood lumber products, hardwood value-added lumber 
products, and hardwood plywood to which an assessment has been or may 
be levied pursuant to the Order.
    Section 1211.9 would define the term ``Fair market value'' to mean, 
with respect to covered hardwood, the value of the lumber as reported 
by a credible and reliable source. Such source shall be determined by 
the Secretary from recommendations from the Board.
    Section 1211.10 would define the term ``Fiscal period'' or ``Fiscal 
year'' to mean a calendar year from January 1 through December 31, or 
such other period as recommended by the Board and approved by the 
Secretary.
    Section 1211.11 would define the term ``Green lumber'' to mean 
hardwood lumber that has not been kiln dried.
    Section 1211.12 would define the term ``Hardwood lumber'' to mean 
timber from the wood of a cypress tree or a deciduous, broad leafed 
tree that could include but not limited to: aspen, birch, cypress, 
popular, maple, cherry, walnut and oak that has been sawn into boards 
or blocks by a sawmill in the United States.
    Section 1211.13 would define the term ``Hardwood lumber 
manufacturer'' to mean a person who cuts raw hardwood logs into 
hardwood lumber, hardwood lumber products, or a person who kiln dries 
green hardwood lumber to create hardwood lumber, hardwood lumber 
products or hardwood lumber value-added products.
    Section 1211.14 would define the term ``Hardwood lumber products'' 
to mean hardwood lumber that has been transformed from timber or green 
lumber into products that remain boards or blocks such as surfaced 
boards, ties, cants, or pallet stock (the hardwood lumber contained in 
pallet stock is assessed if produced and transferred within the same 
company). The transfer definition is discussed under section 1121.36. 
For purposes of this order, the term hardwood lumber products does not 
include products which are transformed from boards or blocks of lumber 
into other products, such as furniture, cabinetry, and constructed 
pallets because the proponents proposed to assess the raw or green 
hardwood lumber used in certain but not all products. Further, hardwood 
lumber is used in many finished products which could become difficult 
to administer.
    Section 1211.15 would define the term ``Hardwood lumber value-added 
product manufacturer'' to mean a person who has a sawmill or who uses 
kilns to dry hardwood lumber that is then used to manufacture hardwood 
lumber value-added products.
    Section 1211.16 would define the term ``Hardwood lumber value-added 
products'' to mean products which remain in the general shape of 
boards, but have undergone additional processing beyond surfacing or 
cutting to a particular size. Hardwood lumber value-added products 
include solid wood strip flooring, all-sides surfaced boards, finger-
jointed strips ripped to width, and moldings but does not include 
multi-component or further manufactured finished products such as 
furniture, cabinets, pallets, or componentry for cabinets or furniture.
    Section 1211.17 would define the term ``Hardwood plywood'' to mean 
a panel product, the decorative face of which is made from hardwood 
lumber or veneer, intended for interior use composed of an assembly of 
layers or piles of veneer or veneers in combination with lumber core, 
particleboard, medium density fiberboard core, hardwood core, or 
special core or special back material joined with an adhesive.
    Section 1211.18 would define the term ``Hardwood plywood 
manufacturers'' to mean a person who utilizes hardwood logs or veneer 
to create hardwood plywood.
    Section 1211.19 would define the term ``Information'' to mean 
activities or programs designed to disseminate the results of research, 
new and existing marketing programs, new and existing marketing 
strategies, new and existing uses and applications, and to enhance the 
image of hardwood lumber and hardwood plywood and the forests from 
which it comes. This would include consumer information, which would 
mean any action taken to provide information to, and broaden the 
understanding of, the general public regarding covered hardwood. This 
would also include industry information, which would mean information 
and programs that would enhance the image of the hardwood lumber and 
hardwood plywood industry.
    Section 1211.20 would define the term ``Kiln dried'' to mean 
hardwood lumber that has been seasoned in a kiln by means of artificial 
heat, humidity and circulation.
    Section 1211.21 would define the term ``Market or Marketing'' to 
mean the sale or other disposition of covered hardwood in interstate, 
foreign, or intrastate commerce.
    Section 1211.22 would define the term ``Manufacturer'' to mean 
domestic manufacturers of covered hardwood lumber as defined in this 
Order.
    Section 1211.23 would define the term ``Manufacturing'' to mean the 
process of transforming logs into hardwood lumber, or the process of 
creating hardwood lumber products, value-added hardwood lumber 
products, or hardwood plywood.
    Section 1211.24 would define the term ``Member'' to mean a member 
appointed by the Secretary to the Hardwood Lumber and Hardwood Plywood 
Promotion, Research and Information Board.
    Section 1211.25 would define the term ``Order'' to mean an order 
issued by the Secretary under Section 514 of the Act that provides for 
a program of

[[Page 68302]]

generic promotion, research, and information of covered hardwood under 
the Act.
    Section 1211.26 would define the terms ``part'' and ``subpart.'' 
The term ``part'' would mean the Hardwood Lumber and Hardwood Plywood 
Promotion, Research and Information Order and all rules, regulations, 
and supplemental orders issued pursuant to the Act and the Order. The 
Order would be a ``subpart'' of the part.
    Section 1211.27 would define the term ``Person'' to mean any 
individual, group of individuals, partnership, corporation, 
association, joint stock company, cooperative, or any other legal 
entity.
    Section 1211.28 would define the terms ``Programs, plans and 
projects'' to mean research, promotion, and information programs, 
plans, or projects established under the Order.
    Section 1211.29 would define the term ``promotion'' to mean any 
action taken, including paid advertising, public relations and other 
communications, and promoting the results of research, that presents a 
favorable image of covered hardwood to the public and to any and all 
consumers, with the intent of improving the perception, markets and 
competitive position of covered hardwood lumber and stimulating sales 
of covered hardwood lumber.
    Section 1211.30 would define the term ``research'' to mean any 
activity that advances the position of covered hardwood in the 
marketplace that includes any type of test, study, or analysis designed 
to advance the knowledge, image, desirability, use, marketability, 
production, product development, or quality of covered hardwood. This 
term includes the communication of the results of any research 
conducted under this Order.
    Section 1211.31 would define the term ``Sales'' to mean the total 
dollar purchases of covered hardwood that are purchased from a hardwood 
lumber or plywood manufacturer subject to the assessment. ``Sales'' for 
purposes of the assessment does not include freight or discounts, and 
brokered sales are not included within the meaning of sale.
    Section 1211.37 would define the term ``Transfer'' to mean when a 
vertically integrated manufacturing plant in which post-manufacturing 
operations turns covered hardwoods into a non-assessed product while 
remaining under the control of the same person. This function regularly 
occurs in the industry. Such a vertically integrated manufacturing 
plant shall assign a sales price based on the fair market value of the 
covered hardwood at the time it leaves the initial manufacturing 
operation to determine the assessment to be paid. Fair market value is 
defined in section 1211.9 of the proposed order.
    Sections 1211.6, 1211.8, 1211.25, 1211.27, 1211.28, 1211.32, 
1211.33, 1211.34, 1211.35, and 1211.37 would define the terms 
``Conflict of interest,'' ``Department or UDSA,'' ``Order,'' 
``Person,'' ``Programs, plans and projects,'' ``Secretary,'' ``State,'' 
``Suspend,'' ``Terminate,'' and ``United States,'' respectively. The 
definitions are the same as those specified in section 513 of the Act.

Establishment of the Board

    Pursuant to section 515 of the 1996 Act, Sec. Sec.  1211.41 through 
1211.49 of the proposed Order would detail the establishment and 
membership of the proposed Hardwood Lumber and Hardwood Plywood, 
Promotion, Research and Information Board, nominations and 
appointments, the term of office, removal and vacancies, procedure, 
reimbursement and attendance, powers and duties, contracting, and 
prohibited activities.
    Section 1211.41 would specify the Board establishment and 
membership. The Board would be composed of 28 members comprised of 
owners or employees of hardwood lumber manufacturers or hardwood 
plywood manufacturers for the U.S. market who manufacture and 
domestically sell $2 million or more of hardwood lumber, products and/
or value-added products, or $10 million or more of hardwood plywood in 
the United States during a fiscal period. Seats on the Board would be 
apportioned based on the volume of covered hardwood produced and sold 
in the geographical areas. For the purposes of the geographical 
distribution of the Board membership, the proponents used State data 
from the 2008 Current Industrial Report. That report has been 
discontinued and State estimates were also discontinued four years ago. 
In the future the Board could use data from the U.S. Forest Service's 
Timber Product Output Program or other source approved by the 
Secretary.
    The Board would be composed of 28 members. Twenty-two members would 
be hardwood lumber manufacturers and would be allocated to districts in 
the United States based on the volume of hardwood lumber produced in 
and sold from the respective district. Of the 22 members, six would be 
from District 1, four members would be from District 2, five members 
would be from District 3, six members would be from District 4, and one 
member would be from District 5. One member would be a hardwood lumber 
value-added manufacturer that manufactures flooring products. This 
would allow the unfinished flooring industry to be represented on the 
Board. This seat can be from any State within the United States. Five 
members would be hardwood plywood manufacturers. Of the five members 
designated as hardwood plywood manufacturers, three members would be 
from the States that are west of the Mississippi River and two members 
would be from the States east of the Mississippi River.
    The BRC also opted to have no alternate Board members. This would 
encourage industry members who seek representation and serve on the 
Board to be committed to their service and participate in all Board 
meetings.
    Every 5 years the Board must review the geographical distribution 
of the volume of covered hardwood produced and sold within the United 
States by hardwood lumber manufacturers and hardwood plywood 
manufacturers. If warranted, the Board would recommend to the Secretary 
that the Board membership be reapportioned appropriately to reflect 
such changes. The distribution of volumes between districts also shall 
be considered. Any changes in Board composition would be implemented by 
the Secretary through notice and comment rulemaking.
    Section 1211.42 of the proposed Order would specify Board 
nominations and appointments. The initial nominations would be 
submitted to the Secretary by the BRC. This would be the only role of 
the BRC under the program. The BRC would publicize the nomination 
process, using trade press or other means it deems appropriate, and 
outreach to all hardwood lumber, hardwood lumber products and hardwood 
lumber value-added manufacturers who sold $2 million or more of any 
assessed products per fiscal year. The BRC would also publicize the 
nomination process to hardwood plywood manufacturers who sold $10 
million or more of hardwood plywood per fiscal year. The BRC could use 
regional caucuses, mail or other methods to solicit potential nominees 
and would work with USDA to help ensure that all interested persons are 
apprised of the nomination process. The BRC could also solicit nominees 
through existing regional hardwood lumber, hardwood lumber products, 
hardwood lumber value-added products and hardwood plywood 
organizations. The BRC would submit the nominations to the Secretary 
and recommend two nominees for each Board position. The nominations to 
the Board should reasonably represent large, medium, and small-sized 
operations. In addition to

[[Page 68303]]

the BRC nominations for the initial board, nominees may be submitted 
directly to USDA if accompanied by the signatures of at least 20 
persons who would pay assessments under the Order. The BRC suggested 
that 20 signatures would be appropriate to show support for such 
nominee. In addition, nominees for the initial Board may provide a 
short background statement outlining their qualifications and desire to 
serve on the Board. The Secretary would select the members of the Board 
from the submitted nominations.
    Regarding subsequent nominations, the Board would solicit 
nominations as described in the previous paragraph, except that 
nominations may not be submitted directly to the Secretary by third 
parties after the initial Board nominations. Nominees would have the 
opportunity to provide the Board a short background statement outlining 
their qualifications and desire to serve on the Board.
    Manufacturers who manufacture covered hardwood in more than one 
district could seek nomination in only the district in which they 
manufacture the majority of their volume of covered hardwood. The names 
of manufacturer nominees would be placed on a ballot by district. The 
ballots along with the background statements would be mailed to 
manufacturers in each respective district for a vote. Manufacturers who 
manufacture covered hardwood in more than one district could only vote 
in the district in which they manufacture the majority of their 
hardwood lumber or hardwood plywood. The votes would be tabulated for 
each district with the nominee receiving the highest number of votes at 
the top of the list in descending order by vote. The top two candidates 
for each position would be submitted to the Secretary. No two members 
would be employed by a single corporation, company, partnership, or any 
other legal entity in the United States.
    The Board would submit nominations to the Secretary at least 6 
months before the new Board term begins. The Secretary would select the 
members of the Board from the nominations submitted by the Board.
    In order to provide the Board flexibility, the Board could 
recommend to the Secretary modifications to its nomination procedures. 
Any such modifications would be implemented through notice and comment 
rulemaking by the Secretary.
    Section 1211.43 of the proposed Order would specify the term of 
office. With the exception of the initial Board, each Board member 
would serve a three-year term or until the Secretary selected his or 
her successor. Each term of office would begin on January 1 and end on 
December 31. No member could serve more than two consecutive terms, 
excluding any term of office less than three years. For the initial 
board, the terms of Board members would be staggered for two, three, 
and four years so that the subsequent terms of office of approximately 
one-third of the Board expire in any given year.
    Section 1211.44 of the proposed Order would specify criteria for 
the removal of members and for filling vacancies. If a Board member 
ceased to own or work for or be affiliated with a manufacturer or 
ceased to do business in the district he or she represented, such 
position would become vacant. Additionally, the Board could recommend 
to the Secretary that a member be removed from office if the member 
consistently refused to perform his or her duties or engaged in 
dishonest acts or willful misconduct. The Secretary can remove the 
member if he or she finds that the Board's recommendation shows 
adequate cause. The Secretary may remove a member of the Board without 
Board recommendation, upon showing of adequate cause, including the 
failure to submit reports or remit assessments required under this 
part, if the Secretary determines that such member's continued service 
would be detrimental to the achievement of the purposes of the Act. If 
a position became vacant, nominations to fill the vacancy would be 
conducted using the nominations process as proposed in Sec.  1211.42 of 
the Order. A vacancy would not be required to be filled if the 
unexpired term is less than six months.
    Section 1211.45 of the proposed Order would specify procedures of 
the Board. A majority of the Board members (15) would constitute a 
quorum. A member may attend a meeting by electronic means and be 
considered present for purposes of a quorum. All votes at a convened 
Board meeting or any committees will be cast in person or by electronic 
or telephoning if participating in the meeting in this manner. Proxy 
voting would not be permitted. A motion would carry if supported by 
more than a majority of those Board members present or participating by 
electronic means.
    The proposed Order would also provide for the Board to take action, 
in lieu of voting at a properly convened meeting, by mail, telephone, 
electronic mail, facsimile, or any other electronic means when the 
chairperson believes it is necessary. Actions taken under these 
procedures would be valid only if all members and the Secretary were 
notified of the meeting and all members were provided the opportunity 
to vote and if supported by more than 50 percent of Board members 
present or participating by electronic or other means. Additionally, 
all votes would have to be confirmed in writing and recorded in Board 
minutes.
    The proposed Order would specify that Board members would serve 
without compensation. However, Board members would be reimbursed for 
reasonable travel expenses, as approved by the Board, incurred when 
performing Board business.
    Section 1211.47 of the proposed Order would specify powers and 
duties of the Board. These are similar in promotion programs authorized 
under the 1996 Act. They include, among other things, to administer the 
Order and collect assessments; to develop bylaws and recommend 
regulations necessary to administer the Order; to select a chairperson 
and other Board officers; to create an executive committee and form 
other committees and subcommittees as necessary; to hire staff or 
contractors; to provide appropriate notice of meetings to the industry 
and USDA and keep minutes of such meetings; to develop programs and 
enter into contracts to implement programs subject to USDA approval; to 
submit a budget to USDA for approval 60 calendar days prior to the 
start of the fiscal year; to borrow funds necessary to cover startup 
costs of the Order; to invest Board funds pursuant to the Act; to have 
its books audited by an outside certified public accountant at the end 
of each fiscal period and at other times as requested by the Secretary; 
to report its activities to manufacturers for the U.S. market; to make 
public an accounting of funds received and expended; to receive, 
investigate and report to the Secretary complaints of violations of the 
Order or regulations; to act as an intermediary between the Secretary 
and any manufacturer, to recommend changes to the assessment rate as 
provided in this part; to borrow funds necessary for startup expenses 
of the Order; and to recommend amendments to the Order as appropriate.
    Section 1211.48 of the proposed Order would specify contract 
responsibilities of the Board. Also, this section would include 
procedures for developing contracts with vendors and items that each 
contract should include. All contracts entered into by the Board must 
be approved by the Secretary before becoming effective.
    Section 1211.49 of the proposed Order would specify prohibited 
activities that are common to all promotion programs authorized under

[[Page 68304]]

the 1996 Act. In summary, the Board nor its employees and agents could 
engage in actions that would be a conflict of interest; use Board funds 
to lobby (influencing legislation or governmental action or policy, by 
local, state, Federal, and foreign governments or subdivision thereof, 
other than recommending to the Secretary amendments to the Order); and 
engage in any advertising or activities that may be false, misleading 
or disparaging to another agricultural commodity.

Expenses and Assessments

    Pursuant to sections 516 and 517 of the 1996 Act, Sec. Sec.  
1211.50 through 1211.53 of the proposed Order detail requirements 
regarding the Board's budget and expenses, financial statements, 
assessments, and exemption from assessments. At least 60 calendar days 
before the start of the fiscal period and as necessary during the year, 
the Board would submit a budget to USDA for approval covering its 
projected expenses. The budget must include a summary of anticipated 
revenue and expenses for each program along with a breakdown of staff 
and administrative expenses. Except for the initial budget, the Board's 
budgets should include at least one preceding fiscal period's budget 
for comparative purposes.
    Each budget must provide for adequate funds to cover the Board's 
anticipated expenses. Any amendment or addition to an approved budget 
must be approved by USDA, including shifting of funds from one program, 
plan or project to another. The Board would be authorized to incur 
reasonable expenses for its maintenance and functioning. During its 
first year of operation, the Board could borrow funds for startup costs 
and capital outlay. Any borrowed funds would be subject to the same 
fiscal, budget, and audit controls as other funds of the Board.
    The Board could also accept voluntary contributions. Any 
contributions received by the Board would be free from encumbrances by 
the donor and the Board would retain control over use of the funds. The 
Board would also be required to reimburse USDA for all costs incurred 
by USDA in overseeing the Order's operations, including all costs 
associated with referenda.
    The Board would be limited to spending no more than 15 percent of 
its available funds for administration, maintenance, and the 
functioning of the Board. This limitation would begin three fiscal 
years after the date of the establishment of the Board. Reimbursements 
to USDA would not be considered administrative costs. As an example, if 
the Board received $15 million in assessments during fiscal year 5, and 
had available $1 million in reserve funds, the Board's available funds 
would be $16 million. In this scenario, the Board would be limited to 
spending no more than $2.4 million (.15 x $16 million) on 
administrative costs. The Board could also maintain a monetary reserve 
and carry over excess funds from one fiscal period to the next. 
However, such reserve funds could not exceed one fiscal year's budgeted 
expenses. For example, if the Board's budgeted expenses for a fiscal 
year were $15 million, it could carry over no more than $15 million in 
reserve. With approval of the Secretary, reserve funds could be used to 
pay expenses.
    The Board could invest its revenue collected under the Order in the 
following: (1) Obligations of the United States or any agency of the 
United States; (2) General obligations of any State or any political 
subdivision of a State; (3) Interest bearing accounts or certificates 
of deposit of financial institutions that are members of the Federal 
Reserve; and (4) Obligations fully guaranteed as to principal interest 
by the United States.
    The Board would be required to submit to USDA financial statements 
on a quarterly basis, or at any other time as requested by the 
Secretary. Financial statements should include, at a minimum, a balance 
sheet, an income statement, and an expense budget.

Assessments

    The Board's programs and expenses would be funded through 
assessments on covered hardwood, other income, and other funds 
available to the Board. The Order would provide for an initial 
assessment rate of: (1) $1.00 per $1,000 in sales of hardwood lumber 
and hardwood lumber products; (2) $0.75 per $1,000 in sales of hardwood 
lumber value-added products; and (3) $3.00 per $1,000 in sales of 
hardwood plywood. Hardwood plywood is a higher value-added product than 
the other lumber categories, and therefore is assessed at a higher 
level.
    The intent is to assess the green (raw) hardwood lumber. Sales 
rather than production or volume provides a better measurement to apply 
assessments because of the regional differences in the production of 
the different species of wood. There are no consistent uniform 
measurements or sizes of green hardwood lumber because of the many 
different species of hardwood and its uses. In addition, the quantity 
of hardwood lumber contained in assessed hardwood lumber products and 
value-added products varies according to the products manufactured.
    The following table summarizes the assessment rates mentioned 
above:

----------------------------------------------------------------------------------------------------------------
                                             Description              Assessment rate      Allowable deductions
----------------------------------------------------------------------------------------------------------------
Hardwood lumber....................  --hardwood logs turned into  $1/$1,000 in sales....  N/A.
                                      lumber (raw green lumber).
Hardwood lumber product............  --stays a board or block (a  $1/$1,000 in sales....  --deduct the hardwood
                                      little more processed than                           lumber purchase.
                                      green lumber).
Hardwood value-added products......  --flooring and molding       $0.75/$1,000 in sales.  --deduct the hardwood
                                      (stays the shape of a                                lumber purchase.
                                      board but has undergone
                                      additional processing--
                                      does NOT include multi-
                                      component or further
                                      manufactured products such
                                      as furniture, cabinets,
                                      cabinet doors, prefinished
                                      or engineered flooring,
                                      pallets, or dimension or
                                      glued components for
                                      cabinets or furniture..
Hardwood plywood...................  --plywood..................  $3/$1,000 in sales....  N/A.
----------------------------------------------------------------------------------------------------------------

    Manufacturers like sawmills cut (raw) green hardwood logs into 
hardwood lumber that remain boards or blocks or sometimes kiln dry 
green hardwood lumber to create hardwood lumber that can be further 
processed into hardwood lumber products by them or other manufacturers. 
This green hardwood lumber would be assessed at $1.00 per $1,000 in 
sales of covered hardwood lumber.
    Other manufacturers like concentration yards cut or buy (raw) green 
hardwood logs and kiln dry the green hardwood lumber to further

[[Page 68305]]

manufacture hardwood lumber products. Sawmills can also further 
manufacture boards or blocks into hardwood lumber products. These 
hardwood lumber products include: Products that remain hardwood lumber 
boards or blocks such as surface boards, ties, cants, strips, crane mat 
material or pallet stock (the hardwood lumber contained in pallet stock 
is assessed if produced and transferred within the same company). The 
hardwood lumber products manufactured (covered hardwood) would be 
assessed at $1.00 per $1,000 in sales of hardwood minus the dollar 
value of any green hardwood lumber purchases. For example, if a 
concentration yard has annual sales of hardwood lumber products of $5 
million and has annual green hardwood lumber purchases of $1 million, 
the calculated assessment would be $4 million. The $1 million dollars 
of green hardwood lumber purchases is subtracted from the annual sales 
of hardwood lumber products because a manufacturer has already paid the 
assessment on the green hardwood lumber.
    A hardwood lumber value-added product manufacturer who operates a 
sawmill or a concentration yard that manufactures hardwood lumber 
value-added products would be assessed as follows: Total assessment 
would be $0.75 for every $1,000 in value-added product sales, plus $1 
for every $1,000 in green and kiln dried lumber sales, minus $1 for 
every $1,000 in green and kiln dried lumber purchases. This computation 
is necessary to capture the purchases and sales of green hardwood 
lumber by this manufacturer that may be used to manufacture hardwood 
value-added products. Hardwood lumber value-added products include 
solid wood unfinished strip flooring, all-sides surfaced boards, 
moldings; and these products would be assessed at a lesser amount to 
take into account the amount of hardwood lumber contained in the 
finished product. In addition, the assessed value of any green hardwood 
lumber purchases made would be subtracted since that assessment has 
already been paid by a manufacturer. For example, if a hardwood lumber 
value-added products manufacturer has annual sales of hardwood lumber 
value-added products of $16 million, $4 million in sales of green 
hardwood lumber, and annual green hardwood lumber purchases of $10 
million, the calculated assessment would be $6,000 ($16 million x .75 
plus $4 million x 1.0 minus $10 million x 1.0 equals $6 million divided 
by $1000 equals $6,000 in assessment owed). The following worksheet 
illustrates how assessments are calculated:
    See computation example below:

Annual SALES of hardwood lumber value-added products                            ------------
                                                                                (a)
Multiply (a) by .75 for every $1,000 in sales                                   ------------
                                                                                (b)
Annual SALES of hardwood lumber (raw) green and kiln dried lumber               ------------
                                                                                (c)
Multiply (c) by $1 for every $1,000 in (raw) green and kiln dried lumber        ------------
                                                                                (d)
Add (b) and (d)                                                                 ------------
                                                                                (e)
Annual PURCHASES of hardwood lumber (raw) green and kiln dried lumber           ------------
                                                                                (f)
Multiply (f) by $1 for every $1,000 purchases of hardwood lumber (raw) green    ------------
 and kiln dried lumber
                                                                                (g)
Subtract (g) from (e) = TOTAL ASSESSMENT DUE                                    ------------
                                                                                Due
 

    The assessment rate for kiln dried and pallet sales that are 
manufactured by vertically integrated pallet manufacturers would be 
based on the fair market value of the green, kiln dried and pallet 
sales that the vertically integrated manufacturer cut and transferred 
or sold to themselves. Subtracted from that value is dollar sales of 
green or kiln dried lumber. Finally, subtracted from that value are 
annual green hardwood purchases times $.001. This formula is necessary 
to take into account covered hardwood lumber that is cut and 
transferred within the same company and covered hardwood lumber 
purchases from other manufacturers used in the manufacturing of 
pallets. Pallets may be manufactured using covered hardwood from 
different manufacturers. Pallet manufactured products include hardwood 
pallet lumber, cants, crane mats and pallet stock produced and 
transferred within the same company.
    For example, if an integrated pallet manufacturer has a fair market 
value of hardwood pallet lumber sales of $10 million, $5 million in 
sales of hardwood lumber, and annual hardwood lumber purchases of $4 
million; the calculated assessment would be $1,000 ($10 million minus 
$5 million minus $4 million multiplied by $.001).
    The fair market value of lumber would be determined by a credible 
and reliable source. Such source shall be determined by the Secretary 
from recommendations from the Board. The proponents have indicated 
there are currently two companies that could compute the fair market 
values of hardwood lumber that the Board could recommend to the 
Secretary to define this value.
    Brokered sales of hardwood lumber or hardwood lumber products are 
excluded from the calculation of assessments as the proponents 
determined these transactions would be difficult to administer under 
the program.
    Hardwood plywood manufacturers would pay at a rate of $3.00 per 
$1,000 in sales of hardwood lumber plywood. Hardwood plywood is a 
higher value-added product than the other lumber categories and is 
assessed at higher level. For example, if a hardwood plywood 
manufacturer has $25 million in sales of hardwood plywood the 
assessment would be $75,000.
    Manufacturers would pay assessments based on sales of hardwood 
lumber, hardwood lumber products, hardwood lumber value-added products 
and hardwood plywood. The Board can recommend to the Secretary a change 
in the assessment rate. Any such change would be implemented through 
notice and comment rulemaking by the Secretary. Manufacturers would be 
required to pay their assessments owed to the Board on a quarterly 
basis, on a form that the Board shall develop, no later than the 30th 
calendar day of the month following the end of the quarter in which the 
hardwood lumber, hardwood lumber products, value-added, or hardwood 
plywood was marketed. Thus, the January to

[[Page 68306]]

December fiscal year would have four quarters ending the last day of 
March, June, September, and December, respectively. Assessments would 
be due April 30th, July 30th, October 30th, and January 30th. As an 
example, assessments for lumber marketed in January would be due to the 
Board by April 30th. The Order would provide authority for the Board to 
impose a late payment charge and interest for assessments overdue to 
the Board by 60 calendar days. The late payment charge and rate of 
interest would be prescribed in the Order's regulations issued by the 
Secretary.

Exemptions

    The Order would provide for two exemptions. First, hardwood lumber 
manufacturers, hardwood lumber product manufacturers and hardwood 
lumber value-added products manufacturers with combined annual sales of 
less than $2 million of any covered hardwood during a fiscal year would 
be exempt from paying assessments. In addition, hardwood plywood 
manufacturers with annual sales of less than $10 million during a 
fiscal year are exempt from paying assessments.
    Manufacturers would apply to the Board for an exemption prior to 
the start of the fiscal year. This would be an annual exemption; 
entities would have to reapply each year. Manufacturers would have to 
certify that they expect to market less than the respective sales for 
each covered entity under the proposed Order for the applicable fiscal 
year. The Board could request past sales data to support the exemption 
request. The Board would then issue, if deemed appropriate, a 
certificate of exemption to the eligible manufacturer.
    Once approved, manufacturers would not have to pay assessments to 
the Board for the applicable fiscal year unless they exceed the 
threshold.
    Hardwood lumber manufacturers and hardwood plywood manufacturers 
who did not apply to the Board for an exemption and had sales of less 
than $2 million or sales less than $10 million, respectively, during 
the fiscal year would receive a refund from the Board for the 
applicable assessments within 30 calendar days after the end of the 
fiscal year. Board staff would determine the assessments paid and 
refund the manufacturer accordingly. On the other hand, hardwood lumber 
manufacturers and hardwood plywood manufacturers who receive an 
exemption certificate but have sales more than $2 million and $10 
million, respectively, during the fiscal year would have to pay the 
Board the applicable assessments owed within 30 calendar days after the 
end of the fiscal year and submit any necessary reports to the Board.
    The Board could recommend additional procedures to administer the 
exemption as appropriate. Any procedures would be implemented through 
notice and comment rulemaking by the Secretary.
    A manufacturer of covered hardwood lumber who operates under an 
approved National Organic Program (NOP) (7 CFR part 205) system plan, 
only manufactures covered hardwood lumber that is eligible to be 
labeled as 100 percent organic under the NOP and is not a split 
operation would be exempt from payment of assessments.

Promotion, Research and Information

    Pursuant to section 516 of the 1996 Act, Sec. Sec.  1211.60 through 
1211.62 of the proposed Order would detail requirements regarding 
promotion, research and information programs, plans and projects 
authorized under the Order and approved by the Secretary. The Board 
would develop and submit to the Secretary for approval programs, plans 
and projects regarding promotion, research, education, and other 
activities, including consumer and industry information and advertising 
designed to, among other things, build markets for covered hardwood. 
The Board would be required to evaluate each plan and program to ensure 
that it contributes to an effective promotion program. Research 
projects could include the energy efficiency and preferability of 
covered hardwood. Covered Hardwood of all origins would have to be 
treated equally by the Board, and no program, plan, or project could be 
false, misleading, or disparage against another agricultural commodity.
    The Order would also require that, at least once every five years, 
the Board fund an independent evaluation of the effectiveness of the 
Order and programs conducted by the Board. Finally, the Order would 
specify that any patents, copyrights, trademarks, inventions, product 
formulations and publications developed through the use of funds 
received by the Board would be the property of the U.S. Government, as 
represented by the Board. These along with any rents, royalties and the 
like from their use would be considered income subject to the same 
fiscal, budget, and audit controls as other funds of the Board, and 
could be licensed with approval of the Secretary.

Reports, Books and Records

    Pursuant to section 515 of the 1996 Act, Sec. Sec.  1211.70 through 
1211.72 specify the reporting and recordkeeping requirements under the 
proposed Order as well as requirements regarding confidentiality of 
information.
    Hardwood lumber and plywood manufacturers would be required to 
submit periodically to the Board certain information as the Board may 
recommend with approval of the Secretary. Specifically, manufacturers 
would submit a report to the Board that would include, but not be 
limited to, the manufacturer's name, address, and telephone number; the 
annual sales of covered hardwood lumber and hardwood plywood; and the 
sales of covered hardwood lumber and hardwood plywood for which 
assessments were paid. Hardwood lumber and plywood manufacturers would 
submit this report at the same time they remit their assessments to the 
Board. Hardwood lumber and plywood manufacturers who received a 
certificate of exemption from the Board would not have to submit such a 
report to the Board. However, exempt hardwood lumber manufacturers and 
hardwood plywood manufacturers who have sales over the exemption 
threshold of $2 million and $10 million, respectively, during the 
fiscal year would have to pay the Board the applicable assessments owed 
within 30 calendar days after the end of the fiscal year and submit any 
necessary reports to the Board.
    Additionally, hardwood manufacturers including those who are 
exempt, would be required to maintain books and records needed to 
verify any required reports. Such books and records must be made 
available during normal business hours for inspection by the Board's or 
USDA's employees or agents. Hardwood manufacturers would be required to 
maintain such books and records for two years beyond the applicable 
fiscal period.
    The Order would also require that all information obtained from 
persons subject to the Order as a result of proposed recordkeeping and 
reporting requirements would be kept confidential by all officers, 
employees, and agents of the Board and USDA. Such information could 
only be disclosed if the Secretary considered it relevant, and the 
information were revealed in a judicial proceeding or administrative 
hearing brought at the direction or at the request of the Secretary or 
to which the Secretary or any officer of USDA were a party. Other 
exceptions for disclosure of confidential information would include the 
issuance of general statements based on reports or on information 
relating to a number of persons subject to the Order, if the statements 
did not identify the information furnished by any person, or

[[Page 68307]]

the publication, by direction of the Secretary, of the name of any 
person violating the Order and a statement of the particular provisions 
of the Order violated.

Miscellaneous Provisions

Referenda

    Pursuant to section 518 of the 1996 Act, Sec.  1211.81(a) of the 
proposed Order specifies that the program would not go into effect 
unless it is approved by a majority of hardwood manufacturers and 
hardwood plywood manufacturers who represent a majority of the volume 
of covered hardwood lumber represented in the referendum who, during a 
representative period determined by the Secretary, were engaged in the 
manufacturing of covered hardwood lumber.
    Section 1211.81(b) of the proposed Order specifies criteria for 
subsequent referenda. Under the Order, a referendum would be held to 
ascertain whether the program should continue, be amended, or be 
terminated. This section specifies that a referendum would be held 5 
years after the Order becomes effective, and every 7 years thereafter, 
to determine whether hardwood lumber manufacturers and hardwood plywood 
manufacturers favor continuation of the Order. The Order would continue 
if favored by hardwood manufacturers and hardwood plywood manufacturers 
who represent a majority of the volume of covered hardwood lumber 
represented in the referendum who, during a representative period 
determined by the Secretary, was engaged in the manufacturing of 
covered hardwood lumber.
    Additionally, a referendum could be conducted at the request of the 
Secretary. A referendum could also be conducted at the request of 10 
percent or more of the number of persons eligible to vote in a 
referendum under the Order. Finally, a referendum could be conducted at 
any time as determined by the Secretary.

Other Miscellaneous Provisions

    Sections 1211.80 and Sec. Sec.  1211.82 through 1211.88 describe 
the rights of the Secretary; authorize the Secretary to suspend or 
terminate the Order when deemed appropriate; prescribe proceedings 
after termination; address personal liability, separability, and 
amendments; and provide OMB control numbers. These provisions are 
common to all research and promotion program authorized under the 1996 
Act.
    In addition, the Secretary shall suspend or terminate an order or a 
provision of an order if Secretary finds that an order or a provision 
of an order obstructs or does not tend to effectuate the purpose of 
this subtitle, or if the Secretary determines that the order or a 
provision of an order is not favored by persons voting in a referendum.

Initial Regulatory Flexibility Act Analysis

    In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 
601-612), AMS is required to examine the impact of the proposed rule on 
small entities. Accordingly, AMS has considered the economic impact of 
this action on small entities.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions so that small businesses will not be 
disproportionately burdened. The Small Business Administration defines, 
in 13 CFR Part 121, small agricultural producers as those having annual 
receipts of no more than $750,000 and small agricultural service firms 
(manufacturers) as those having annual receipts of no more than $7.0 
million. According to information submitted by the proponents, it is 
estimated that there are 2,804 hardwood lumber manufacturers and 36 
hardwood plywood manufacturers in the United States annually. This 
number represents separate business entities and includes exempted and 
assessed entities under the Order; one business entity may include 
multiple sawmills. It is estimated that 85 to 90 percent of the 
manufacturers are small businesses.
    This rule invites comments on a proposed industry-funded promotion, 
research, and information program for hardwood lumber and hardwood 
plywood. Hardwood lumber products are used in residential and 
commercial construction includes flooring, furniture, moldings, doors 
and kitchen cabinets. Industrial products include pallets, wood 
dunning, and railroad ties. The program would be financed by an 
assessment on hardwood lumber, hardwood lumber products, hardwood 
lumber value-added, and hardwood plywood manufacturers and would be 
administered by a board of industry members selected by the Secretary. 
The initial assessment rate would be: (1) $1.00 per $1,000 in sales of 
hardwood lumber and hardwood lumber products; (2) $0.75 per $1,000 in 
sales of hardwood lumber value-added products; and (3) $3.00 per $1,000 
in sales of hardwood plywood. These assessments should generate about 
$10 million annually. The program would exempt small hardwood lumber 
manufacturers with annual sales of less than $2 million and small 
hardwood plywood manufacturers with annual sales of less than $10 
million. Exports would be exempted from the program and imports would 
not be covered under the program. The purpose of the program would be 
to strengthen the position of covered hardwood in the marketplace and 
maintain and expand markets for United States covered hardwood. By 
strengthening demand, a research and promotion program benefits all 
businesses both small and large. A referendum would be held among 
eligible hardwood lumber manufacturers and hardwood plywood 
manufacturers to determine whether they favor implementation of the 
program prior to it going into effect. The program is authorized under 
the 1996 Act. In addition, the numbers used in the RFA analysis herein 
represent the total universe of manufacturers known to USDA and not 
those who may be eligible to vote in the referendum.
    Regarding the economic impact of the proposed Order on affected 
entities, hardwood lumber, hardwood lumber products, hardwood lumber 
value-added product, and hardwood plywood manufacturers would be 
required to pay assessments to the Board. As previously mentioned, the 
initial assessment rate would be: (1) $1.00 per $1,000 in sales of 
hardwood lumber and hardwood lumber products; (2) $0.75 per $1,000 in 
sales of hardwood lumber value-added products; and (3) $3.00 per $1,000 
in sales of hardwood plywood. The percentage of revenue represented by 
the assessment rate would be 0.01 percent for sales of hardwood lumber 
and hardwood lumber products, 0.0075 percent for sales of hardwood 
lumber value-added products, and 0.03 percent for sales of hardwood 
plywood. Assessment revenue is expected to be around $10 million 
dollars. Thus, the percentage revenue represented by the assessment 
rate would be well under one percent of sales. Any change in the 
assessment rate may be changed only upon approval of the Board and only 
after the Secretary has conducted rulemaking.
    The Order would provide for two exemptions. First, hardwood lumber 
manufacturers, hardwood lumber product manufacturers and hardwood 
lumber value-added products manufacturers with annual sales less than 
$2 million of any assessed covered hardwood combined during a fiscal 
year would be exempt from paying assessments. In addition, hardwood 
plywood manufacturers with annual sales of less than $10 million during 
a fiscal year are exempt from paying assessments. It would be a burden 
on

[[Page 68308]]

small entities to assess the smaller manufacturers under this program.
    Regarding the impact on the industry as a whole, the proposed 
program is expected to grow markets for covered hardwood by increasing 
the market share of covered hardwood in residential, commercial and 
industrial product areas. While the benefits of the proposed program 
are difficult to quantify, the benefits are expected to outweigh the 
program's costs of approximately $10 million per year, which is less 
than one percent of sales. Academic researchers have estimated benefit-
to-cost ratios for promotion programs across a broad range of 
commodities in the range of 4:1 to 6:1, indicating that for each dollar 
of promotion at least 4 to 6 times that amount is generated in new 
revenues, profit, or ``economic surplus'' to the industry.\7\
---------------------------------------------------------------------------

    \7\ Ward, Ronald, Commodity Checkoff Programs and Generic 
Advertising Choices, 2nd Quarter 2006, 21/(2)).
---------------------------------------------------------------------------

    Regarding alternatives, the proponents, the BRC, considered various 
options to the proposed range in assessment rates and various products 
to be assessed. The BRC believes that $10 million in assessment income 
is the threshold for an effective program that could help to improve 
the market for covered hardwood.
    The exemption levels reflect what the industry considers a very 
small business that would be economically affected if covered under the 
program. In addition, the proponents considered the exemption levels 
and decided the exemption levels were adequate in order to allow them 
to obtain sufficient funds to operate an effective program.
    The industry explored the merits of a voluntary promotion program. 
One program, the Hardwood Council, united several major hardwood 
associations behind a marketing program and collected enough funds to 
establish a Web site and a limited number of marketing programs. 
Funding for this program declined as competing demands arose with the 
supporting associations. In 2009, a renewed effort was put forth 
organizing the Unified Hardwood Promotion campaign which was funded by 
various companies and trade associations which resulted in the 
development of a hardwood logo and tagline. However, given the 
fragmented nature of the industry and about 3,000 small companies to 
reach, the level of funding needed was not achieved.
    This action would impose additional reporting and recordkeeping 
burden on manufacturers of hardwood lumber, hardwood lumber products, 
hardwood lumber value-added products, and hardwood plywood 
manufacturers. Hardwood lumber manufacturers and hardwood plywood 
manufacturers interested in serving on the Board would be asked to 
submit a nomination form to the Board indicating their desire to serve 
or nominating another industry member to serve on the Board. Interested 
persons could also submit an additional background statement outlining 
their qualifications to serve on the Board. Hardwood lumber 
manufacturers and hardwood plywood manufacturers would have the 
opportunity to cast a ballot and vote for candidates to serve on the 
Board. Hardwood lumber manufacturers and hardwood plywood 
manufacturers' nominees to the Board would have to submit a nomination 
form to the Secretary to ensure they are qualified to serve on the 
Board.
    Additionally, the Order would provide for an exemption for hardwood 
lumber, hardwood lumber products, and hardwood lumber value-added 
products manufacturers for the U.S. market with annual sales less than 
$2 million of any assessed product combined during a fiscal year. In 
addition, hardwood plywood manufacturers with annual sales of less than 
$10 million during a fiscal year are exempt from paying assessments. 
Hardwood lumber manufacturers, hardwood lumber product manufacturers, 
hardwood lumber value-added products manufacturers and hardwood plywood 
manufacturers would also be asked to submit a report regarding their 
sales that would accompany their assessments paid to the Board. 
Hardwood lumber manufacturers and hardwood plywood manufacturers who 
would qualify as 100 percent organic under the NOP could submit a 
request to the Board for an exemption from assessments.
    Finally, hardwood lumber manufacturers and hardwood plywood 
manufacturers who want to participate in the referendum to vote on 
whether the Order should become effective would have to complete a 
ballot for submission to the Secretary. These forms are being submitted 
to the OMB for approval under OMB Control No. 0581-NEW. Specific 
burdens for the forms are detailed later in this document in the 
section titled Paperwork Reduction Act. As with all Federal promotion 
programs, reports and forms are periodically reviewed to reduce 
information requirements and duplication by industry and public sector 
agencies. Finally, USDA has not identified any relevant Federal rules 
that duplicate, overlap, or conflict with this rule.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    Regarding outreach efforts, the Blue Ribbon Committee was formed 
about one year ago and met in person and by conference call more than 
10 times each. They have developed a Web site that has been available 
to the public that details a description of the program under 
development, related hardwood press articles, timeframes for program 
development, and Powerpoint presentations used to brief various 
hardwood lumber audiences. This information can be found at: 
www.hardwoodcheckoff.com. Members of the BRC have presented the 
hardwood checkoff program across the country at various industry 
meetings attended by as many as 300 industry participants. In depth 
articles describing the program have been published in industry media.
    While USDA has performed this initial RFA analysis regarding the 
impact of the proposed rule on small entities, in order to have as much 
data as possible for a more comprehensive analysis, we invite comments 
concerning potential effects. USDA is also requesting comments 
regarding the number and size of entities covered under the proposed 
Order.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), AMS announces its intention to request an approval of a 
new information collection and recordkeeping requirements for the 
proposed lumber program.
    Title: Advisory Committee or Research and Promotion Background 
Information.
    OMB Number for background form AD-755: (Approved under OMB No. 
0505-0001).
    Expiration Date of Approval: 5/31/2015.
    Title: Hardwood Lumber and Hardwood Plywood Promotion, Research and 
Information Order.
    OMB Number: 0581-NEW.
    Expiration Date of Approval: 3 years from approval date.
    Type of Request: New information collection for research and 
promotion programs.
    Abstract: The information collection requirements in the request 
are essential to carry out the intent of the 1996 Act. The information 
collection concerns a proposal received by USDA for a

[[Page 68309]]

national research and promotion program for the hardwood lumber 
industry. The program would be financed by an assessment on hardwood 
lumber manufacturers and hardwood lumber plywood manufactures and would 
be administered by a board of industry members selected by the 
Secretary. The program would provide for an exemption for hardwood 
lumber, hardwood lumber products, hardwood lumber value-added products 
manufactured for the U.S. market with annual sales less than $2 million 
of any assessed product combined during a fiscal year. In addition, 
hardwood plywood manufacturers with annual sales of less than $10 
million during a fiscal year are exempt from paying assessments. A 
referendum would be held among eligible hardwood lumber manufacturers 
and hardwood plywood manufacturers to determine whether they favor 
implementation of the program prior to it going into effect. The 
purpose of the program would be to help build the market for hardwood 
lumber.
    In summary, the information collection requirements under the 
program concern Board nominations, the collection of assessments, and 
referenda. For Board nominations, hardwood lumber manufacturers and 
hardwood plywood manufacturers interested in serving on the Board would 
be asked to submit a ``Nomination Form'' to the Board indicating their 
desire to serve or to nominate another industry member to serve on the 
Board. Interested persons could also submit a background statement 
outlining qualifications to serve on the Board. Except for the initial 
Board nominations, hardwood lumber manufacturers and hardwood plywood 
manufacturers would submit a ``Nomination Ballot'' to the Board where 
they would vote for candidates to serve on the Board. Nominees would 
also have to submit a background information form, ``AD-755,'' to the 
Secretary to ensure they are qualified to serve on the Board.
    Regarding assessments, hardwood manufacturers and hardwood plywood 
manufacturers who have sales under the exemption threshold of $2 
million and $10 million, respectively, during the fiscal year could 
submit a request, ``Application for Exemption from Assessments,'' to 
the Board for an exemption from paying assessments. Hardwood lumber 
manufacturers and plywood manufacturers would be asked to submit a 
``Sales Report'' that would accompany their assessments paid to the 
Board and report the sales of hardwood lumber or hardwood plywood sold 
during the applicable period, and the quantity for which assessments 
were paid. Hardwood lumber manufacturers and hardwood plywood 
manufacturers who sold less than the exemption threshold of $2 million 
and $10 million, respectively, during the fiscal year are exempt from 
paying assessments would not be required to submit this report. 
Finally, hardwood lumber manufacturers and hardwood plywood 
manufacturers who would qualify as 100 percent organic under the NOP 
could submit an ``Organic Exemption Form'' to the Board and request an 
exemption from assessments.
    There would also be an additional burden on hardwood lumber 
manufacturers and hardwood plywood manufacturers voting in referenda. 
The referendum ballot, which represents the information collection 
requirement relating to referenda, is addressed in a proposed rule on 
referendum procedures which is published separately in this issue of 
the Federal Register.
    Information collection requirements that are included in this 
proposal include:

(1) Nomination Form

    Estimate of Burden: Public recordkeeping burden for this collection 
of information is estimated to average 0.25 hour per application.
    Respondents: Hardwood lumber manufacturers and hardwood plywood 
manufacturers.
    Estimated Number of Respondents: 56.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 14 hours.

(2) Background Statement

    Estimate of Burden: Public recordkeeping burden for this collection 
of information is estimated to average 0.25 hour per application.
    Respondents: Hardwood lumber manufacturers and hardwood plywood 
manufacturers.
    Estimated Number of Respondents: 56.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 14 hours.

(3) Nomination Ballot

    Estimate of Burden: Public recordkeeping burden for this collection 
of information is estimated to average 0.25 hour per application.
    Respondents: Hardwood lumber manufacturers and hardwood plywood 
manufacturers.
    Estimated Number of Respondents: 250.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 62.5 hours.

(4) Background Information Form AD-755 (OMB Form No. 0505-0001)

    Estimate of Burden: Public reporting for this collection of 
information is estimated to average 0.5 hour per response for each 
Board nominee.
    Respondents: Hardwood lumber manufacturers and hardwood plywood 
manufacturers.
    Estimated number of Respondents: 19 (56 for initial nominations to 
the Board, 0 for the second year, and up to 19 annually thereafter).
    Estimated number of Responses per Respondent: 1 every 3 years. 
(0.3)
    Estimated Total Annual Burden on Respondents: 28 hours for the 
initial nominations to the Board, 0 hours for the second year of 
operation, and up to 9.5 hours annually thereafter.

(5) Application for Exemption from Assessments

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.25 hour per hardwood lumber 
manufacturer or hardwood plywood manufacturer reporting on hardwood 
lumber or hardwood plywood sold. Upon approval of an application, 
hardwood lumber or hardwood plywood manufacturers would receive 
exemption certification.
    Respondents: Hardwood lumber manufacturers and hardwood plywood 
manufacturers who have sales of $2 million or less and $10 million or 
less, respectively, annually.
    Estimated number of Respondents: 1490.
    Estimated number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 372.5 hours.

(6) Sales Report

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.5 hour per manufacturer.
    Respondents: Hardwood lumber manufacturers who sales are more than 
$2 million (1340) and hardwood plywood manufacturers who sales are more 
than $10 million (10).
    Estimated number of Respondents: 1350.
    Estimated number of Responses per Respondent: 4.
    Estimated Total Annual Burden on Respondents: 2,700 hours.

[[Page 68310]]

(7) Organic Exemption Form

    Estimate of Burden: Public recordkeeping burden for this collection 
of information is estimated to average 0.5 hours per exemption form.
    Respondents: Organic hardwood lumber manufacturers and hardwood 
plywood manufacturers.
    Estimated Number of Respondents: 1.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 0.5 hour.

(8) Refund of Assessments Paid on Hardwood Lumber

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.25 hour.
    Respondents: Hardwood lumber manufacturers and hardwood plywood 
manufacturers.
    Estimated Number of Respondents: 1.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 0.25 hour.

(9) A Requirement To Maintain Records Sufficient To Verify Reports 
Submitted Under the Order

    Estimate of Burden: Public recordkeeping burden for keeping this 
information is estimated to average 0.5 hours per record keeper 
maintaining such records.
    Recordkeepers: Hardwood lumber and plywood manufacturers 2,840.
    Estimated number of recordkeepers: 2,840.
    Estimated total recordkeeping hours: 1,420 hours.
    As noted above, under the proposed program, hardwood lumber 
manufacturers and hardwood plywood manufacturers would be required to 
pay assessments and file reports with and submit assessments to the 
Board. While the proposed Order would impose certain recordkeeping 
requirements on hardwood lumber manufacturers and hardwood plywood 
manufacturers, information required under the proposed Order could be 
compiled from records currently maintained. Such records shall be 
retained for at least two years beyond the fiscal year of their 
applicability.
    An estimated 2,840 respondents would provide information to the 
Board. The estimated cost of providing the information to the Board by 
respondents would be $152,196. This total has been estimated by 
multiplying 4,612 total hours required for reporting and recordkeeping 
by $38, the average mean hourly earnings of various occupations 
involved in keeping this information. Data for computation of this 
hourly wage were obtained from the U.S. Department of Labor, Bureau of 
Labor Statistics, publication, ``May 2011 National Occupational 
Employment and Wage Estimates in the United States'', updated March 29, 
2012.
    The proposed Order's provisions have been carefully reviewed, and 
every effort has been made to minimize any unnecessary recordkeeping 
costs or requirements, including efforts to utilize information already 
submitted under other programs administered by USDA and other state 
programs.
    The proposed forms would require the minimum information necessary 
to effectively carry out the requirements of the program, and their use 
is necessary to fulfill the intent of the 1996 Act. Such information 
can be supplied without data processing equipment or outside technical 
expertise. In addition, there are no additional training requirements 
for individuals filling out reports and remitting assessments to the 
Board. The forms would be simple, easy to understand, and place as 
small a burden as possible on the person required to file the 
information.
    Collecting information quarterly would coincide with normal 
industry business practices. The timing and frequency of collecting 
information are intended to meet the needs of the industry while 
minimizing the amount of work necessary to fill out the required 
reports. The requirement to keep records for two years is consistent 
with normal industry practices. In addition, the information to be 
included on these forms is not available from other sources because 
such information relates specifically to individual hardwood lumber 
manufacturers and hardwood plywood manufacturers who are subject to the 
provisions of the 1996 Act. Therefore, there is no practical method for 
collecting the required information without the use of these forms.

Request for Public Comment Under the Paperwork Reduction Act

    Comments are invited on: (a) Whether the proposed collection of 
information is necessary for the proper performance of functions of the 
proposed Order and USDA's oversight of the proposed Order, including 
whether the information would have practical utility; (b) the accuracy 
of USDA's estimate of the burden of the proposed collection of 
information, including the validity of the methodology and assumptions 
used; (c) the accuracy of USDA's estimate of the principal 
manufacturing areas in the United States for hardwood lumber and 
plywood; (d) the accuracy of USDA's estimate of the number of hardwood 
lumber manufacturers and hardwood plywood manufacturers of hardwood 
lumber that would be covered under the program; (e) ways to enhance the 
quality, utility, and clarity of the information to be collected; and 
(f) ways to minimize the burden of the collection of information on 
those who are to respond, including the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology.
    Comments concerning the information collection requirements 
contained in this action should reference OMB No. 0581-NEW. In 
addition, the docket number, date, and page number of this issue of the 
Federal Register also should be referenced. Comments should be sent to 
the same addresses referenced in the ADDRESSES section of this rule.
    OMB is required to make a decision concerning the collection of 
information contained in this rule between 30 and 60 days after 
publication. Therefore, a comment to OMB is best assured of having its 
full effect if OMB receives it within 30 days of publication.

Request for Public Comment in Accordance With Executive Order 13175

    This rule invites comments on its effect of the requirements of 
Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments. Comments should be directed as to whether this regulation 
would or would not have substantial and direct effects on Tribal 
governments and would not have significant Tribal implications.
    USDA made minor modifications to the proponent's proposal to 
conform with other similar national research and promotion programs 
implemented under the 1996 Act.
    While the proposal set forth below has not received the approval of 
USDA, it is determined that this proposed Order is consistent with and 
would effectuate the purposes of the 1996 Act.
    As previously mentioned, for the proposed Order to become 
effective, it must be approved by hardwood manufacturers and hardwood 
plywood manufacturers who represent a majority of the volume of covered 
hardwood lumber represented in the referendum who, during a 
representative period determined by the Secretary, were engaged in the 
manufacturing of covered hardwood lumber.
    Referendum procedures will be published separately in this issue of 
the Federal Register.

[[Page 68311]]

    A 60-day comment period is provided to allow interested persons to 
respond to this proposal. All written comments received in response to 
this rule by the date specified will be considered prior to finalizing 
this action.

List of Subjects in 7 CFR Part 1211

    Administrative practice and procedure, Advertising, Consumer 
information, Marketing agreements, Hardwood lumber promotion, Hardwood 
plywood promotion, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, it is proposed that 
Title 7, Chapter XI of the Code of Federal Regulations be amended by 
adding part 1211 to read as follows:

PART 1211--HARDWOOD LUMBER AND HARDWOOD PLYWOOD PROMOTION, RESEARCH 
AND INFORMATION ORDER

Subpart A--Hardwood Lumber and Hardwood Plywood Promotion, Research 
and Information Order

Definitions

Sec.
1211.1 Act.
1211.2 Blue Ribbon Committee.
1211.3 Board.
1211.4 Brokered sale.
1211.5 Concentration yard.
1211.6 Conflict of interest.
1211.7 Covered hardwood.
1211.8 Department or USDA.
1211.9 Fair market value.
1211.10 Fiscal period or fiscal year.
1211.11 Green hardwood lumber.
1211.12 Hardwood lumber.
1211.13 Hardwood lumber manufacturer.
1211.14 Hardwood lumber products.
1211.15 Hardwood lumber value-added product manufacturer.
1211.16 Hardwood lumber value-added products.
1211.17 Hardwood plywood.
1211.18 Hardwood plywood manufacturer.
1211.19 Information.
1211.20 Kiln dried.
1211.21 Market or marketing.
1211.22 Manufacturer.
1211.23 Manufacturing.
1211.24 Member.
1211.25 Order.
1211.26 Part and subpart.
1211.27 Person.
1211.28 Programs, plans and projects.
1211.29 Promotion.
1211.30 Research.
1211.31 Sale.
1211.32 Secretary.
1211.33 State.
1211.34 Suspend.
1211.35 Terminate.
1211.36 Transfer.
1211.37 United States or U.S.

Hardwood Lumber and Hardwood Plywood Promotion, Research and 
Information Board

1211.41 Establishment and membership.
1211.42 Nominations and appointments.
1211.43 Term of office.
1211.44 Removal and vacancies.
1211.45 Procedure.
1211.46 Reimbursement and attendance.
1211.47 Powers and duties of the Board.
1211.48 Prohibited activities.

Expenses and Assessments

1211.50 Budget and expenses.
1211.51 Financial statements.

Assessments

1211.52 Assessments.
1211.53 Exemption from assessment.

Promotion, Research and Information

1211.60 Programs, plans, and projects.
1211.61 Independent evaluation.
1211.62 Patents, copyrights, trademarks, information, publications, 
and product formulations.

Reports, Books and Records

1211.70 Reports.
1211.71 Books and records.
1211.72 Confidentiality of information.

Miscellaneous

1211.80 Right of the Secretary.
1211.81 Referenda.
1211.82 Suspension and termination.
1211.83 Proceedings after termination.
1211.84 Effect of termination or amendment.
1211.85 Personal liability.
1211.86 Separability.
1211.87 Amendments.
1211.88 OMB control number.

Subpart B--[Reserved]

    Authority: 7 U.S.C. 7411-7425, 7 U.S.C. 7401.

Subpart A--Hardwood Lumber and Hardwood Plywood Promotion, Research 
and Information Order

Definitions


Sec.  1211.1  Act.

    Act means the Commodity Promotion, Research and Information Act of 
1996 (7 U.S.C. 7411-7425), and any amendments thereto.


Sec.  1211.2  Blue Ribbon Committee.

    Blue Ribbon Committee means the 14-member committee representing 
businesses that manufacture hardwood lumber, hardwood lumber products, 
hardwood lumber value-added products and hardwood plywood in the United 
States formed to pursue an industry promotion, research and information 
program.


Sec.  1211.3  Board.

    Board or Hardwood Lumber and Hardwood Plywood Promotion, Research 
and Information Board means the administrative body established 
pursuant to this part. It may be referred to by such other name as the 
Board recommends and the Secretary approves.


Sec.  1211.4  Brokered sale.

    Brokered sale is a sale in which product is purchased from a person 
and resold to a different person without taking physical possession of 
the product.


Sec.  1211.5  Concentration yard.

    Concentration yard means an operation with kilns that purchases 
hardwood lumber from sawmills, or wholesalers by means of a brokered 
sale, and may grade, sort, dry and/or surface the hardwood lumber. It 
excludes distribution yards that do not have kilns.


Sec.  1211.6  Conflict of interest.

    Conflict of interest means a situation in which a member or 
employee of the Board has a direct or indirect financial interest in an 
entity that performs a service for, or enters into a contract with, the 
Board for anything of economic value.


Sec.  1211.7  Covered hardwood.

    Covered hardwood means hardwood lumber, hardwood lumber products, 
hardwood lumber value-added lumber products, and hardwood plywood to 
which an assessment has been or may be levied pursuant to the Order.


Sec.  1211.8  Department or USDA.

    Department or USDA means the United States Department of 
Agriculture or any officer or employee of the Department to whom 
authority has been delegated, or to whom authority may hereafter be 
delegated, to act for the Secretary.


Sec.  1211.9   Fair market value.

    Fair market value means, with respect to covered hardwood, the 
value of the hardwood lumber as determined by a source approved by the 
Secretary.


Sec.  1211.10  Fiscal period or fiscal year.

    Fiscal period or year means a calendar year from January 1 through 
December 31, or such other period as recommended by the Board and 
approved by the Secretary.


Sec.  1211.11  Green hardwood lumber.

    Green hardwood lumber means hardwood lumber that has not been kiln 
dried.


Sec.  1211.12  Hardwood lumber.

    Hardwood lumber means timber from the wood of a cypress tree or a

[[Page 68312]]

deciduous, broad-leafed tree (including but not limited to aspen, 
birch, cypress, poplar, maple, cherry, walnut and oak) that has been 
sawn into boards or blocks by a sawmill in the United States.


Sec.  1211.13  Hardwood lumber manufacturer.

    Hardwood lumber manufacturer means a person who cuts (raw) green 
hardwood logs into hardwood lumber or hardwood lumber products or a 
person who kiln dries green hardwood lumber to create hardwood lumber, 
hardwood lumber products or hardwood lumber value-added products in the 
United States.


Sec.  1211.14  Hardwood lumber products.

    Hardwood lumber products means hardwood lumber that has been 
transformed into surfaced boards, ties, cants, strips, or pallet stock. 
For purposes of this Order, hardwood lumber products do not mean 
products which are transformed from boards or blocks of lumber into 
products such as furniture, cabinetry, and pallets.


Sec.  1211.15  Hardwood lumber value-added product manufacturer.

    Hardwood lumber value-added product manufacturer means a person who 
operates a sawmill or a kiln to dry hardwood lumber that is then used 
to manufacture hardwood lumber value-added products.


Sec.  1211.16  Hardwood lumber value-added products.

    Hardwood lumber value-added products means products which remain in 
the general shape of hardwood lumber boards, but have undergone 
additional processing beyond surfacing or cutting to a particular size. 
Hardwood lumber value-added products include products such as solid 
wood unfinished strip flooring, all-sides surfaced boards, finger-
jointed strips ripped to width, and moldings. It does not include 
multi-component or further manufactured products such as furniture, 
cabinets, cabinet doors, prefinished or engineered flooring, pallets, 
or dimension or glued components for cabinets or furniture.


Sec.  1211.17  Hardwood plywood.

    Hardwood plywood means a panel product, the decorative face of 
which is made from hardwood veneer intended for interior use composed 
of an assembly of layers or plies of veneer or veneers in combination 
with lumber core, particleboard, medium density fiberboard core, 
hardboard core, or special core or special back material joined with an 
adhesive.


Sec.  1211.18  Hardwood plywood manufacturer.

    Hardwood plywood manufacturer means a person who utilizes hardwood 
logs, veneer, or lumber to create hardwood plywood.


Sec.  1211.19  Information.

    Information means activities and programs that are designed to 
develop new markets, marketing strategies, increase market efficiency, 
and activities that are designed to enhance the image of hardwood 
lumber, hardwood lumber products, hardwood lumber value-added products, 
and hardwood plywood and the forests from which it comes in the United 
States. These include:
    (a) Consumer information, which means any action taken to provide 
information to the general public regarding the harvesting, 
consumption, use, and care of covered hardwood; and
    (b) Industry information, which means any action taken to provide 
information and programs that will lead to the development of new 
markets, new marketing strategies, or increased efficiency for covered 
hardwood, and activities to enhance the image of the hardwood lumber, 
hardwood lumber products, hardwood lumber value-added products, and 
hardwood plywood industries.


Sec.  1211.20  Kiln dried.

    Kiln dried means hardwood lumber that has been seasoned in a kiln 
by means of artificial heat, humidity and circulation.


Sec.  1211.21  Market or marketing.

    Marketing means the sale or other disposition of covered hardwood 
in any channel of commerce. To market means to sell or otherwise 
dispose of covered hardwood in any channel of commerce.


Sec.  1211.22  Manufacturer.

    Manufacturer means domestic manufacturers of covered hardwood 
lumber as defined in this Order.


Sec.  1211.23  Manufacturing.

    Manufacturing means the process of transforming logs into hardwood 
lumber, or the process of creating hardwood lumber products, hardwood 
lumber value-added products, or hardwood plywood.


Sec.  1211.24  Member.

    Member means a member appointed by the Secretary to the Hardwood 
Lumber and Hardwood Plywood Promotion, Research and Information Board.


Sec.  1211.25  Order.

    Order means an order issued by the Secretary under Section 514 of 
the Act that provides for a program of generic promotion, research and 
information of covered hardwood under the Act.


Sec.  1211.26  Part and subpart.

    Part means the Hardwood Lumber and Hardwood Plywood Promotion, 
Research and Information Order and all rules, regulations, and 
supplemental orders issued pursuant to the Act and the Order. The order 
shall be a subpart of such part.


Sec.  1211.27  Person.

    Person means any individual, group of individuals, partnership, 
corporation, association, joint stock company, cooperative, or any 
other legal entity.


Sec.  1211.28  Programs, plans and projects.

    Programs, plans and projects mean those research, promotion and 
information programs, plans, or projects established pursuant to this 
Order.


Sec.  1211.29  Promotion.

    Promotion means any action taken to present a favorable image of 
hardwood lumber, hardwood lumber products, hardwood lumber value-added 
products, and hardwood plywood to the general public and to any and all 
consumers and those who influence consumption of covered hardwood 
lumber with the intent of improving the perception, markets and 
competitive position of covered hardwood lumber and stimulating sales 
of covered hardwood lumber.


Sec.  1211.30  Research.

    Research means any type of test, study, or analysis designed to 
advance the knowledge, image, desirability, use, marketability, 
production, product development, or quality of covered hardwood. The 
term research includes the communication of the results of any research 
conducted under this part.


Sec.  1211.31  Sale.

    For purposes of calculating the assessment, provided for in Sec.  
1211.52, a sale means the total dollar purchases of hardwood lumber, 
hardwood lumber products, hardwood lumber value-added products, or 
hardwood plywood that are purchased from a hardwood lumber manufacturer 
or hardwood plywood manufacturer. Sales, for purposes of the 
assessment, do not include freight or discounts. Brokered sales are not 
included within the meaning of sale.

[[Page 68313]]

Sec.  1211.32  Secretary.

    Secretary means the Secretary of Agriculture of the United States 
or any officer or employee of the Secretary to whom the Secretary has 
delegated the authority to act on behalf of the Secretary.


Sec.  1211.33  State.

    State means any of the several 50 States of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, and the 
territories and possessions of the United States.


Sec.  1211.34  Suspend.

    Suspend means to issue a rule under 5 U.S.C. 553, to temporarily 
prevent the operation of an order or part thereof during a particular 
period of time specified in the rule.


Sec.  1211.35  Terminate.

    Terminate means to issue a rule under 5 U.S.C. 553, to cancel 
permanently the operation of an order or part thereof beginning on a 
date specified in the rule.


Sec.  1211.36  Transfer.

    Transfer means when a vertically integrated manufacturing plant in 
which post-manufacturing operations turn an assessed hardwood product 
(covered hardwood) into a non-assessed product while remaining under 
the control of the same person.


Sec.  1211.37  United States or U.S.

    United States or U.S. means collectively the 50 states, the 
District of Columbia, the Commonwealth of Puerto Rico, and the 
territories and possessions of the United States.

Hardwood Lumber and Hardwood Plywood Promotion, Research and 
Information Board


Sec.  1211.41  Establishment and membership.

    (a) There is hereby established a Hardwood Lumber and Hardwood 
Plywood Promotion, Research and Information Board composed of 28 
members who are either owners or employees of hardwood lumber 
manufacturers or hardwood plywood manufacturers who are appointed by 
the Secretary. Of the 28 members, 22 shall be hardwood lumber 
manufacturers, one shall be a hardwood lumber value-added manufacturer 
who manufactures flooring products, and five shall be hardwood plywood 
manufacturers.
    (b) The five members designated for hardwood plywood manufacturers 
shall be appointed as follows:
    (1) Three members shall be from the States that are west of the 
Mississippi River; and
    (2) Two members shall be from the States that are east of the 
Mississippi River.
    (c) The one member designated as a hardwood lumber value-added 
products manufacturer of covered hardwood flooring products shall be 
appointed from nominees from any State within the United States.
    (d) The remaining 22 members designated as hardwood lumber 
manufacturers, (exclusive of the hardwood flooring manufacturer) shall 
be apportioned as follows:
    (1) Six members from District 1, which consists of the States of 
Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, 
New Jersey, New York, Pennsylvania, Rhode Island, Vermont, and West 
Virginia and the District of Columbia;
    (2) Four members from District 2, which consists of the States of 
Florida, Georgia, North Carolina, South Carolina, Virginia, the 
Commonwealth of Puerto Rico, and the U.S. territories;
    (3) Five members from District 3, which consists of the States of 
Alabama, Arkansas, Louisiana, Mississippi, Oklahoma, Tennessee, and 
Texas;
    (4) Six members from District 4, which consists of the States of 
Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, 
Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin; 
and
    (5) One member from District 5, which consists of the States of 
Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, 
New Mexico, Oregon, Utah, Washington, and Wyoming.
    (e) Once every five years, the Board will review data, including 
assessment records, government, industry statistics, and other reliable 
data, concerning the manufacturing of covered hardwood lumber. The 
Board shall:
    (1) Review the geographical distribution of the volume of covered 
hardwood produced and sold within the United States by hardwood lumber, 
hardwood lumber products, hardwood lumber value-added products, and 
hardwood plywood manufacturers; and
    (2) If warranted, recommend to the Secretary the reapportionment of 
the Board membership to reflect changes in the geographical 
distribution of the volume of covered hardwood produced and sold within 
the United States by hardwood lumber, hardwood lumber products, 
hardwood lumber value-added products, and hardwood plywood 
manufacturers. Any changes in Board composition shall be implemented by 
the Secretary through rulemaking.


Sec.  1211.42  Nominations and appointments.

    (a) Initial nominations will be submitted to the Secretary by the 
Blue Ribbon Committee (BRC). Before considering any nominations, the 
BRC shall publicize the nomination process, using trade press or other 
means it deems appropriate, and shall outreach to all manufacturers 
with annual sales of more than $2 million of covered hardwood lumber 
and with annual sales of more than $10 million of hardwood plywood per 
fiscal year in order to generate nominees that reflect the different 
operations within the hardwood lumber industry. The BRC may use 
regional caucuses, mail or other methods to elicit potential nominees. 
The BRC shall submit the nominations to the Secretary and recommend two 
nominees for each Board position specified. In addition, nominees for 
the initial Board may be submitted directly to the Secretary if 
accompanied by the signatures of at least 20 persons who pay 
assessments or will pay assessments under the Order. From the 
nominations submitted by the BRC or directly to the Secretary, the 
Secretary shall select the members of the Board.
    (b) Subsequent nominations shall be conducted as follows:
    (1) The Board shall outreach to all segments of the hardwood lumber 
industry. The Board may also solicit nominees using existing regional 
organizations. Initial and subsequent nominees must have annual sales 
of more than $2 million of covered hardwood lumber or have annual sales 
of more than $10 million of hardwood plywood per fiscal year;
    (2) Manufacturer nominees may provide the Board a short background 
statement outlining their qualifications to serve on the Board;
    (3) Manufacturers who manufacture covered hardwood lumber in more 
than one district may seek nomination only in the district in which 
they manufacture the majority of the volume of their covered hardwood 
lumber. The names of hardwood manufacturer nominees shall be placed on 
a ballot by district. The ballots along with the background statements 
shall be mailed to manufacturers in each respective district for a 
vote. Manufacturers who manufacture covered hardwood lumber in more 
than one district may only vote in the district in which they 
manufacture the majority of the volume of their covered hardwood 
lumber. The Board must submit nominations to the Secretary at least six 
months before the new Board term begins. Before considering any 
nominations, the Board shall publicize the nomination process, using 
trade press or other means it

[[Page 68314]]

deems appropriate, and shall outreach to all sizes of manufacturers of 
covered hardwood in order to generate nominees that reflect the 
different size of operations within the hardwood lumber industry. The 
Board may use district caucuses or other methods to elicit potential 
nominees. The votes shall be tabulated for each district with the 
nominee receiving the highest number of votes at the top of the list in 
descending order by vote. The top two candidates for each position 
shall be submitted to the Secretary.
    (4) No two members shall be employed by a single corporation, 
company, partnership, or any other legal entity; and
    (5) The Board may recommend to the Secretary modifications to its 
nomination procedures as it deems appropriate. Any such modifications 
shall be implemented through rulemaking by the Secretary.


Sec.  1211.43  Term of office.

    (a) With the exception of the initial Board, each Board member will 
serve a three-year term or until the Secretary selects his or her 
successor. Each term of office shall begin on January 1 and end on 
December 31, and no member may serve more than two consecutive terms, 
excluding any term of office less than three years.
    (b) For the initial board, the terms of Board members shall be 
staggered for two, three, and four years so that the terms of 
approximately one-third of the board expire in any given year.


Sec.  1211.44  Removal and vacancies.

    (a) In the event that any member of the Board ceases to own or work 
for a hardwood lumber or hardwood plywood manufacturer, or ceases to do 
business in the district he or she represents, such position shall 
become vacant.
    (b) The Board may recommend to the Secretary that a member be 
removed from office if the member consistently refuses to perform his 
or her duties or engages in dishonest acts or willful misconduct. The 
Secretary shall remove the member if he or she finds that the Board's 
recommendation shows adequate cause. Further, without recommendation of 
the Board, a member may be removed by the Secretary upon showing of 
adequate cause, including the failure by a member to submit reports or 
remit assessments required under this part. If the Secretary determines 
that each member's continued service would be detrimental to the 
achievement of the purposes of the Act.
    (c) If a position becomes vacant, nominations to serve the 
unexpired term will be handled using the nominations process set forth 
in this Order. If the unexpired term has less than six months 
remaining, the Secretary may leave the position vacant.


Sec.  1211.45  Procedure.

    (a) At a Board meeting, a majority of the Board members duly 
appointed by the Secretary will constitute a quorum. A member attending 
the meeting by telephone or other electronic means shall be considered 
present for purposes of quorum.
    (b) All votes at meetings of the Board and any committees will be 
cast in person or by electronic voting, including by telephone. Voting 
by proxy will not be allowed.
    (c) Each member of the Board will be entitled to one vote on any 
matter put to the Board and the motion will carry if supported by more 
than 50 percent of the Board members present or participating by 
electronic means.
    (d) The Board must give members and the Secretary timely notice of 
all Board and committee meetings.
    (e) In lieu of voting at a properly convened meeting, and when, in 
the opinion of the Board's chairperson, such action is considered 
necessary, the Board may take action by mail, telephone, electronic 
mail, facsimile, or any other means of communication. Any action taken 
under this procedure is valid only if:
    (1) All members and the Secretary are notified and the members are 
provided the opportunity to vote;
    (2) A majority of the members vote in favor of the action; and
    (3) All votes are promptly confirmed in writing and recorded in the 
Board minutes.


Sec.  1211.46  Reimbursement and attendance.

    Board members will serve without compensation. Board members will 
be reimbursed for reasonable travel expenses, as approved by the Board, 
which they incur when performing Board business.


Sec.  1211.47  Powers and duties of the Board.

    The Board shall have the following powers and duties:
    (a) To administer this Order in accordance with its terms and 
conditions and to collect assessments;
    (b) To develop and recommend to the Secretary for approval such 
bylaws, rules, and regulations as may be necessary for the functioning 
of the Board and for administering the Order, including activities 
authorized to be carried out under the Order;
    (c) To meet, organize, and select from among its members a 
chairperson and such other officers as the Board deems necessary;
    (d) To create any committees, including an executive committee, or 
subcommittees, as the Board deems necessary from its membership. 
Subcommittees may include individuals other than Board members;
    (e) To employ or contract persons, other than the Board members, as 
the Board considers necessary to assist the Board in carrying out its 
duties and to determine the compensation and specify the duties of such 
persons or to contract such services from an organization and to enter 
into contracts or agreements in order to carry out authorized 
functions;
    (f) To provide appropriate notice of meetings to the industry and 
USDA and keep minutes of such meetings;
    (g) To develop and administer programs, plans, and projects and 
enter into contracts or agreements, which must be approved by the 
Secretary before becoming effective, for promotion, research and 
information, including consumer and industry information, research and 
advertising designed to strengthen hardwood lumber industry's position 
in the marketplace and to maintain, develop, and expand markets for 
covered hardwood lumber. The payment of costs for such activities shall 
be with funds collected pursuant to the Order, including funds 
collected pursuant to Sec.  1211.50(f). Each contract or agreement 
shall provide that:
    (1) The contractor or agreeing party shall develop and submit to 
the Board a program, plan, or project together with a budget that 
specifies the cost to be incurred to carry out the activity;
    (2) The contractor or agreeing party shall keep accurate records of 
all of its transactions and make periodic reports to the Board of 
activities conducted, submit accounting for funds received and 
expended, and make such other reports as the Secretary or Board may 
require;
    (3) The Secretary may audit the records of the contracting or 
agreeing party periodically; and
    (4) Any subcontractor who enters into a contract with a Board 
contractor and who receives or otherwise uses funds allocated by the 
Board shall be subject to the same provisions as the contractor.
    (h) To prepare and submit to the Secretary for approval 60 calendar 
days in advance of the beginning of a fiscal period, rates of 
assessment and a budget of the anticipated expenses to be incurred in 
the administration of the Order, including the probable cost of each 
promotion, research and

[[Page 68315]]

information activity proposed to be developed or carried out by the 
Board;
    (i) To maintain such records and books and prepare and submit such 
reports and records from time to time to the Secretary as the Secretary 
may prescribe; to make appropriate accounting with respect to the 
receipt and disbursement of all funds entrusted to it; and to keep 
records that accurately reflect the actions and transactions of the 
Board;
    (j) To act as an intermediary between the Secretary and any 
manufacturer;
    (k) To cause its books to be audited by a certified public 
accountant at the end of each fiscal year and at such other times as 
the Secretary may request, and to submit a report of the audit to the 
Secretary;
    (l) To recommend changes to the assessment rate as provided in this 
part;
    (m) To borrow funds necessary for startup expenses of the Order;
    (n) To receive, investigate, and report to the Secretary complaints 
of violations of the Order, including investigating complaints of 
violation, and ensuring consistent, uniform and appropriate application 
of this part;
    (o) To consider and recommend to the Secretary new products and the 
application of the assessment to such products.
    (p) To recommend to the Secretary such amendments to the Order as 
the Board considers appropriate;
    (q) To periodically prepare and make public and to make available 
to manufacturers reports of its activities and, at least once each 
fiscal period, to make public an accounting of funds received and 
expended;
    (r) To invest assessments funds collected but not yet disbursed 
pursuant to this part. Investments shall be in any interest-bearing 
account or certificate of deposit of a bank that is a member of the 
Federal Reserve System, obligations fully guaranteed as to principal 
and interest by the United States or any agency of the United States, 
or general obligations of any State or any political subdivision of a 
State.
    (s) To work to achieve an effective, continuous, and coordinated 
program of promotion, research, consumer information, evaluation, and 
industry information designed to strengthen the hardwood lumber, 
hardwood lumber products, hardwood lumber value-added products, and 
hardwood plywood industry's position in the market; maintain and expand 
existing markets and uses for covered hardwood; and to carry out 
programs, plans, and projects designed to provide maximum benefits to 
the hardwood lumber, hardwood lumber products, hardwood lumber value-
added products and hardwood plywood industries.


Sec.  1211.48  Prohibited activities.

    The Board may not engage in, and shall prohibit the employees and 
agents of the Board from engaging in:
    (a) Any action that is a conflict of interest;
    (b) Using funds collected by the Board under the Order to undertake 
any action for the purpose of influencing legislation or governmental 
action or policy, by local, state, national, and foreign governments, 
other than recommending to the Secretary amendments to this part; and
    (c) No program, plan, or project including advertising shall be 
false or misleading, or disparaging to another agricultural commodity.

Expenses and Assessments


Sec.  1211.50  Budget and expenses.

    (a) At least 60 days before the beginning of each fiscal year, and 
as may be necessary thereafter, the Board shall prepare and submit to 
the Secretary a budget for the fiscal year covering its anticipated 
expenses and disbursements in administering the Order. Each such 
budget, which must be approved by the Secretary before it is 
implemented, shall include:
    (1) A statement of objectives and strategy for each program, plan, 
or project developed and approved by the Boards;
    (2) A summary of anticipated revenue, with comparative data or at 
least one preceding year (except for the initial budget);
    (3) A summary of proposed expenditures for each program, plan, or 
project; and
    (4) Staff and administrative expense breakdowns, with comparative 
data for at least one preceding year (except for the initial budget).
    (b) Each budget shall provide adequate funds to defray its proposed 
expenditures and to provide for a reserve.
    (c) Subject to this section, any amendment or addition to an 
approved budget must be approved by the Department, including shifting 
funds from one program, plan, or project to another. Shifts of funds 
which do not cause an increase in the Board's approved budget and which 
are consistent with governing bylaws need not have prior approval by 
the Secretary.
    (d) The Board may incur such expenses, including provision for a 
reserve, as are reasonable and likely to be incurred for maintenance 
and functioning of the Board, and to enable it to exercise its powers 
and perform its duties in accordance with the provisions of the Order. 
Such expenses shall be paid from funds received by the Board.
    (e) With approval of the Secretary, the Board may borrow money for 
the payment of administrative expenses, subject to the same fiscal, 
budget, and audit controls as other funds of the Board. Any funds 
borrowed by the Board shall be expended only for startup costs and 
capital outlays and are limited to the first year of operation by the 
Board.
    (f) The Board may accept voluntary contributions, and is encouraged 
to seek other appropriate funding sources to carry out activities 
authorized by the Order. Such contributions shall be free from any 
encumbrances by the donor and the Board shall retain complete control 
of their use. The Board may receive funds from outside sources (i.e., 
Federal or State grants, Foreign Agricultural Service funds), with 
approval of the Secretary, for specific authorized projects.
    (g) The Board shall reimburse the Secretary for all expenses the 
Secretary incurs in the implementation, administration, and supervision 
of this part, including all costs relating to the conducting of a 
referendum in connection with this part.
    (h) For fiscal years beginning three years after the establishment 
of the Board, the Board may not expend for administration, maintenance, 
and functioning of the Board in any fiscal year an amount that exceeds 
15 percent of the assessments and other income received by the Board 
for that fiscal year. Reimbursements to the Secretary required under 
this section are excluded from this limitation on spending.
    (i) The Board may establish an operating monetary reserve and may 
carry over to subsequent fiscal periods excess funds in any reserve so 
established: Provided, That, the funds in the reserve do not exceed one 
fiscal period's budget of expenses. Subject to approval by the 
Secretary, such reserve funds may be used to defray any expenses 
authorized under this subpart.
    (j) Pending disbursement of assessments and all other revenue under 
a budget approved by the Secretary, the Board may invest assessments 
and all other revenues collected under this part in:
    (1) Obligations of the United States or any agency of the United 
States;
    (2) General obligations of any State or any political subdivision 
of a State;
    (3) Interest bearing accounts or certificates of deposit of 
financial

[[Page 68316]]

institutions that are members of the Federal Reserve System;
    (4) Obligations fully guaranteed as to principal interest by the 
United States; or
    (5) Other investments as authorized by the Secretary.


Sec.  1211.51  Financial statements.

    (a) Upon the Secretary's request, the Board shall prepare and 
submit financial statements to the Secretary on a monthly or quarterly 
basis, or at any other time as requested by the Secretary. Each such 
financial statement shall include, but not be limited to, a balance 
sheet, income statement, and expense budget. The expense budget shall 
show expenditures during the time period covered by the report, year-
to-date expenditures, and the unexpended budget.
    (b) Each financial statement shall be submitted to the Secretary 
within 30 days after the end of the time period to which it applies.
    (c) The Board shall submit to the Secretary an annual financial 
statement within 90 days after the end of the fiscal year to which it 
applies.

Assessments


Sec.  1211.52  Assessments.

    (a) The Board's programs and expenses shall be paid by assessments 
on manufacturers of covered hardwood, other income of the Board, and 
other funds available to the Board. This section authorizes hardwood 
lumber manufacturers to be assessed on hardwood plywood and hardwood 
lumber, both in its green (raw) form and as it is kiln dried to create 
hardwood lumber products and hardwood lumber value-added products.
    (b) Subject to the exemption specified in Sec.  1211.53, each 
manufacturer shall pay the following assessment:

----------------------------------------------------------------------------------------------------------------
                                             Description              Assessment rate      Allowable deductions
----------------------------------------------------------------------------------------------------------------
Hardwood lumber....................  --hardwood logs turned into  $1/$1,000 in sales....  N/A.
                                      lumber (raw green lumber).
Hardwood lumber product............  --stays a board or block (a  $1/$1,000 in sales....  --deduct the hardwood
                                      little more processed than                           lumber purchase.
                                      green lumber).
Hardwood lumber value-added          --flooring and molding       $0.75/$1,000 in sales.  --deduct the hardwood
 products.                            (stays the shape of a                                lumber purchase.
                                      board but has undergone
                                      additional processing--
                                      does NOT include multi-
                                      component or further
                                      manufactured products such
                                      as furniture, cabinets,
                                      cabinet doors, prefinished
                                      or engineered flooring,
                                      pallets, or dimension or
                                      glued components for
                                      cabinets or furniture.
Hardwood plywood...................  --plywood..................  $3/$1,000 in sales....  N/A.
----------------------------------------------------------------------------------------------------------------

    (1) Hardwood lumber manufacturers that cut (raw) green hardwood 
logs into hardwood lumber or kiln dry hardwood lumber to create 
hardwood lumber that can be further processed into hardwood lumber 
products shall pay at the rate of $1.00 per $1,000.00 in sales of (raw) 
green hardwood lumber.
    (2) Hardwood lumber manufacturers that manufacture hardwood lumber 
products shall pay at a rate of $1.00 per $1,000 in sales of hardwood 
lumber minus the dollar value of (raw) green lumber purchases.
    (3) Hardwood lumber value-added product manufacturers shall pay a 
rate of $0.75 per $1,000.00 in sales of hardwood lumber value-added 
products: Provided, That, hardwood lumber value-added product 
manufacturers would deduct covered hardwood lumber purchases from their 
sales figures to take into account the assessment that was already paid 
on the (raw) green covered hardwood lumber.
    (4) Hardwood plywood manufacturers shall pay at the rate of $3.00 
per $1,000 in sales of hardwood plywood lumber.
    (5) Brokered sales of hardwood lumber or hardwood lumber products 
are excluded from the calculation of assessments. For an integrated 
pallet manufacturer that manufactures hardwood lumber then transfers 
within the same company to manufacture constructed pallets or crane 
mats, the hardwood lumber manufacturer shall pay at this rate on fair 
market value of the hardwood pallet lumber, pallet cants, pallet stock 
or crane mat material produced and transferred within the same company. 
The assessment rate would be based on the amount of green, kiln dried 
and pallet sales that they cut and transferred or sold to themselves. 
The dollar sales of green or kiln dried lumber is subtracted from the 
above value. Also subtracted from that value are annual green hardwood 
purchases times $.001. This formula is necessary to take into account 
covered hardwood lumber that is cut and transferred within the same 
company and covered hardwood lumber purchases from other manufacturers 
used in the manufacturing of pallets. Brokered sales of covered 
hardwood are excluded from the calculation of assessments.
    (c) Assessments shall be remitted to the Board on a quarterly 
basis, accompanied by a form that the Board shall develop, no later 
than thirtieth calendar day of the month following the end of the 
quarter in which the covered hardwood lumber was marketed. Any 
information collected pursuant to the collection of assessments, shall 
be kept confidential as specified in Sec.  1211.72 so that no Board 
member or person subject to assessment shall have access to such 
information.
    (d) The assessment rate specified in this section may be changed 
only upon a recommendation by the Board to the Secretary for 
implementation through rulemaking.
    (e) If the assessment is not paid within 60 calendar days of the 
date it is due, the Board may impose a late payment charge and 
interest. The late payment charge and rate of interest shall be 
recommended by the Board to the Secretary through informal rulemaking. 
Persons failing to remit total assessments due in a timely manner may 
also be subject to actions under federal debt collection procedures.
    (f) The Board may accept advance payment of assessments that will 
be credited toward any amount for which that person may become liable. 
The Board may not pay interest on any advance payment.
    (g) If the Board is not in place by the date the first assessments 
are to be collected, the Secretary shall receive assessments and invest 
them on behalf of the Board, and shall pay such assessments and any 
interest earned to the Board when it is established.
    (h) The Board may authorize other organizations to collect 
assessments on its behalf with the approval of the Secretary.

[[Page 68317]]

Sec.  1211.53  Exemption from assessment.

    (a) Small hardwood lumber manufacturers and small hardwood plywood 
manufacturers shall be exempt from paying assessments as follows:
    (1) Hardwood lumber manufacturers, hardwood lumber product 
manufacturers, and hardwood lumber value-added products manufacturers 
with sales of any assessed product combined to be less than $2 million 
are exempt from paying assessments.
    (2) Hardwood plywood manufacturers with annual sales of less than 
$10 million are exempt from paying assessments.
    (b) Hardwood lumber manufacturers and hardwood plywood 
manufacturers who meet the exemption threshold shall apply for an 
exemption, on a form provided by the Board. This is an annual exemption 
and manufacturers must reapply each year. Upon receipt of an 
application for exemption, the Board shall determine whether an 
exemption may be granted. The Board will then issue, if deemed 
appropriate, a certificate of exemption to each manufacturer who is 
eligible to receive one. Each person shall retain a copy of the 
certificate of exemption. The Board may develop additional procedures 
to administer this exemption as appropriate. Such procedures shall be 
implemented through rulemaking by the Secretary.
    (c) Hardwood lumber manufacturers who did not apply to the Board 
for an exemption and have annual sales of less than $2 million or 
hardwood plywood manufacturers that have annual sales of less than $10 
million during the fiscal year shall receive a refund from the Board 
for the applicable assessments within 30 calendar days after the end of 
the fiscal year. Board staff shall determine the assessments paid and 
refund the amount due to the manufacturer accordingly.
    (d) Hardwood lumber manufacturers who received an exemption 
certificate from the Board but have annual sales of more than $2 
million or hardwood plywood manufacturers that have annual sales of 
more than $10 million during the fiscal year shall pay the Board the 
applicable assessments owed on the annual sales of the covered hardwood 
within 30 calendar days after the end of the fiscal year and submit any 
necessary reports to the Board pursuant to Sec.  1211.70.
    (e) Organic.
    (1) Organic Act means section 2103 of the Organic Foods Production 
Act of 1990 (7 U.S.C. 6502).
    (2) A hardwood lumber or hardwood plywood manufacturer who operates 
under an approved National Organic Program (NOP) (7 CFR part 205) 
system plan, only manufactures and has annual sales of covered hardwood 
lumber that is eligible to be labeled as 100 percent organic under the 
NOP and is not a split operation shall be exempt from payment of 
assessments. To obtain an organic exemption, an eligible manufacturer 
shall submit a request for exemption to the Board, on a form provided 
by the Board, at any time initially and annually thereafter on or 
before the start of the fiscal year as long as such manufacturer 
continues to be eligible for the exemption. The request shall include 
the following: The manufacturer's name and address; a copy of the 
organic operation certificate provided by a USDA-accredited certifying 
agent as defined in the Organic Act, a signed certification that the 
applicant meets all of the requirements specified for an assessment 
exemption, and such other information as may be required by the Board 
and with the approval of the Secretary. The Board shall have 30 
calendar days to approve the exemption request. If the exemption is not 
granted, the Board will notify the applicant and provide reasons for 
the denial within the same time frame.
    (f) The Board may develop additional procedures to administer this 
exemption as appropriate. Such procedures shall be implemented through 
rulemaking by the Secretary.

Promotion, Research and Information


Sec.  1211.60  Programs, plans, and projects.

    (a) The Board shall develop and submit to the Secretary for 
approval programs, plans, and projects authorized under this part. Such 
programs, plans, or projects shall provide for the establishment, 
issuance, implementation, and administration of appropriate programs 
for promotion, research and information with respect to covered 
hardwood.
    (b) No program, plan, or project shall be implemented prior to its 
approval by the Secretary. Once the Secretary approves a program, plan, 
or project, the Board shall take appropriate steps to implement it.
    (c) The Board shall periodically review or evaluate each program, 
plan, or project implemented under this subpart to ensure that it 
contributes to an effective program of promotion, research or 
information. If the Board finds that any such program, plan, or project 
does not contribute to an effective program of promotion, research or 
information, then the Board shall terminate such program, plan, or 
project.


Sec.  1211.61  Independent evaluation.

    Within four years of the first Board meeting and at least once 
every five years thereafter, the Board shall authorize and fund an 
independent evaluation of the effectiveness of the Order and programs 
conducted by the Board pursuant to the Act. The Board shall submit to 
the Secretary and make available to the public the results of each 
periodic independent evaluation conducted under this section.


Sec.  1211.62  Patents, copyrights, trademarks, information, 
publications, and product formulations.

    Patents, copyrights, trademarks, information, publications, and 
product formulations developed through the use of funds received by the 
Board under this part shall be the property of the U.S. Government, as 
represented by the Board, and shall, along with any rents, royalties, 
residual payments, or other income from the rental, sales, leasing, 
franchising, or other uses of such patents, copyrights, trademarks, 
information, publications, or product formulations, inure to the 
benefit of the Board; shall be considered income subject to the same 
fiscal, budget, and audit controls as other funds of the Board; and may 
be licensed subject to approval by the Secretary. Upon termination of 
this part, Sec.  1211.83 shall apply to determine disposition of all 
such property.

Reports, Books and Records


Sec.  1211.70  Reports.

    (a) Each hardwood lumber manufacturer and hardwood lumber plywood 
manufacturer will be required to provide periodically to the Board 
staff such information as the Board, with the approval of the 
Secretary, may require. Such information may include, but not be 
limited to:
    (1) The name, address and telephone number of the manufacturer;
    (2) The annual sales of covered hardwood lumber; and
    (3) The annual sales of covered hardwood lumber for which 
assessments were paid.
    (b) Such information shall accompany the collected payment of 
assessments on a quarterly basis specified in Sec.  1211.52.


Sec.  1211.71  Books and records.

    Each manufacturer, including those exempt under Sec.  1211.53, 
shall maintain any books and records necessary to carry out the 
provisions of this subpart and regulations issued thereunder, including 
such records as are necessary to verify any required reports. Such 
books and records must be made available during normal business hours

[[Page 68318]]

for inspection by the Board's or Secretary's employees or agents. A 
manufacturer must maintain the books and records for two years beyond 
the fiscal period to which they apply.


Sec.  1211.72  Confidentiality of information.

    All information obtained from books, records, or reports under the 
Act, this subpart and the regulations issued thereunder shall be kept 
confidential by all persons, including all employees and former 
employees of the Board, all officers and employees and former officers 
and employees of contracting and subcontracting agencies or agreeing 
parties having access to such information. Such information shall not 
be available to Board members or other manufacturers. Only those 
persons having a specific need for such information solely to 
effectively administer the provisions of this subpart shall have access 
to such information. Only such information so obtained as the Secretary 
deems relevant shall be disclosed by them, and then only in a judicial 
proceeding or administrative hearing brought at the direction, or at 
the request, of the Secretary, or to which the Secretary or any officer 
of the United States is a party, and involving this subpart. Nothing in 
this section shall be deemed to prohibit:
    (a) The issuance of general statements based upon the reports of 
the number of persons subject to this subpart or statistical data 
collected therefrom, which statements do not identify the information 
furnished by any person; and
    (b) The publication, by direction of the Secretary, of the name of 
any person who has been adjudged to have violated this part, together 
with a statement of the particular provisions of this part violated by 
such person.

Miscellaneous


Sec.  1211.80  Right of the Secretary.

    All fiscal matters, programs, plans, or projects, rules or 
regulations, reports, or other substantive actions proposed and 
prepared by the Board shall be submitted to the Secretary for approval.


Sec.  1211.81  Referenda.

    (a) Initial referendum. The Order shall not become effective unless 
the Order is approved by a majority of the volume of covered hardwood 
lumber, represented in the referendums by those who, during a 
representative period determined by the Secretary, are engaged in the 
manufacture of covered hardwood lumber.
    (b) Subsequent referenda. Five years after the initial meeting of 
the Board, the Secretary shall hold a referendum to determine whether 
hardwood lumber and hardwood plywood manufacturers favor the 
continuation of the Order. Thereafter, the Secretary shall conduct a 
referendum at least every seven years. The Order shall continue if it 
is favored by a majority of the volume of covered hardwood lumber, 
represented in the referendum by those who, during a representative 
period determined by the Secretary, are engaged in the manufacture of 
covered hardwood lumber. The Secretary will also conduct a referendum 
if requested by the Board or if 10 percent or more of all non-exempt 
hardwood lumber manufacturers, hardwood plywood manufacturers paying an 
assessment. In addition, the Secretary may hold a referendum at any 
time.


Sec.  1211.82  Suspension and termination.

    (a) The Secretary shall suspend or terminate this part or subpart 
or a provision thereof, if the Secretary finds that this part or 
subpart or a provision thereof obstructs or does not tend to effectuate 
the purposes of the Act, or if the Secretary determines that this 
subpart or a provision thereof is not favored by persons voting in a 
referendum conducted pursuant to the Act.
    (b) The Secretary shall suspend or terminate this subpart at the 
end of the fiscal period whenever the Secretary determines that its 
suspension or termination is favored by a majority of the volume 
represented in the referendum by those who, during a representative 
period determined by the Secretary, have been engaged in the 
manufacturing of covered hardwood lumber.
    (c) If, as a result of a referendum the Secretary determines that 
this subpart is not approved, the Secretary shall:
    (1) Not later than one hundred and eighty (180) calendar days after 
making the determination, suspend or terminate, as the case may be, the 
collection of assessments under this subpart.
    (2) As soon as practical, suspend or terminate, as the case may be, 
activities under this subpart in an orderly manner.


Sec.  1211.83  Proceedings after termination.

    (a) Upon the termination of this subpart, the Board shall recommend 
to the Secretary not more than five of its members to serve as trustees 
for the purpose of liquidating the affairs of the Board. Such persons, 
upon designation by the Secretary, shall become trustees of all of the 
funds and property then in the possession or under control of the 
Board, including claims for any funds unpaid or property not delivered, 
or any other claim existing at the time of such termination.
    (b) The said trustees shall:
    (1) Continue in such capacity until discharged by the Secretary;
    (2) Carry out the obligations of the Board under any contracts or 
agreements entered into pursuant to the Order;
    (3) From time to time, account for all receipts and disbursements 
and deliver all property on hand, together with all books and records 
of the Board and the trustees, to such person or persons as the 
Secretary may direct; and
    (4) Upon request of the Secretary, execute such assignments or 
other instruments necessary and appropriate to vest in such persons' 
title and right to all funds, property and claims vested in the Board 
or the trustees pursuant to the Order.
    (c) Any person to whom funds, property or claims have been 
transferred or delivered pursuant to the Order shall be subject to the 
same obligations imposed upon the Board and upon the trustees.
    (d) Any residual funds not required to defray the necessary 
expenses of liquidation shall be turned over to the Secretary to be 
disposed of, to the extent practical, to one or more hardwood lumber 
and hardwood plywood industry organizations in the interest of 
continuing hardwood lumber and hardwood plywood promotion, Research and 
information programs.


Sec.  1211.84  Effect of termination or amendment.

    Unless otherwise expressly provided by the Secretary, the 
termination or amendment of this part or any subpart thereof, shall 
not:
    (a) Affect or waive any right, duty, obligation or liability which 
shall have arisen or which may thereafter arise in connection with any 
provision of this part; or
    (b) Release or extinguish any violation of this part; or
    (c) Affect or impair any rights or remedies of the United States, 
or of the Secretary, or of any other persons with respect to any such 
violation.


Sec.  1211.85  Personal liability.

    No member or employee of the Board shall be held personally 
responsible, either individually or jointly with others, in any way 
whatsoever, to any person for errors in judgment, mistakes, or other 
acts, either of commission or omission, as such member or employee, 
except for acts of dishonesty or willful misconduct.

[[Page 68319]]

Sec.  1211.86  Separability.

    If any provision of this subpart is declared invalid or the 
applicability thereof to any person or circumstances is held invalid, 
the validity of the remainder of this subpart or the applicability 
thereof to other persons or circumstances shall not be affected 
thereby.


Sec.  1211.87  Amendments.

    Amendments to this subpart may be proposed from time to time by the 
Board or by any interested person affected by the provisions of the 
Act, including the Secretary.


Sec.  1211.88  OMB control number.

    The control numbers assigned to the information collection 
requirements of this part by the Office of Management and Budget 
pursuant to the Paperwork Reduction Act of 1995, 44 U.S.C. chapter 35, 
are OMB control number 0505-0001 (Board nominee background statement) 
and OMB control number 0581--NEW.

Subpart B--[Reserved]

    Dated: November 6, 2013.
Rex A. Barnes,
Associate Administrator.
[FR Doc. 2013-27108 Filed 11-12-13; 8:45 am]
BILLING CODE 3410-02-P