Softwood Lumber Research, Promotion, Consumer Education and Industry Information Order; De Minimis Quantity Exemption Threshold, 49485-49492 [2017-23094]
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49485
Rules and Regulations
Federal Register
Vol. 82, No. 206
Thursday, October 26, 2017
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 1217
[Document Number AMS–SC–16–0066]
Softwood Lumber Research,
Promotion, Consumer Education and
Industry Information Order; De Minimis
Quantity Exemption Threshold
Agricultural Marketing Service,
USDA.
ACTION: Final rule.
AGENCY:
This rule establishes a de
minimis quantity exemption threshold
under the U.S. Department of
Agriculture’s (USDA) Agricultural
Marketing Service (AMS) regulations
regarding a national research and
promotion program for softwood
lumber. In response to a 2016 federal
district court decision, the U.S.
Department of Agriculture (USDA)
conducted a new analysis to determine
a reasonable and appropriate de
minimis threshold. Based on that
analysis, this rule establishes the de
minimis quantity threshold at 15
million board feet (mmbf) and entities
manufacturing (and domestically
shipping) or importing less than 15
mmbf per year will be exempt from
paying assessments under the
regulations.
DATES: Effective Date: November 27,
2017.
FOR FURTHER INFORMATION CONTACT:
Maureen T. Pello, Marketing Specialist,
Promotion and Economics Division,
Specialty Crops Program, AMS, USDA,
P.O. Box 831, Beavercreek, Oregon,
97004; telephone: (503) 632–8848;
facsimile (503) 632–8852; or electronic
mail: Maureen.Pello@ams.usda.gov.
SUPPLEMENTARY INFORMATION: This rule,
affecting 7 CFR part 1217, is authorized
under the Commodity Promotion,
Research and Information Act of 1996
(1996 Act) (7 U.S.C. 7411–7425).
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SUMMARY:
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Executive Order 12866 and Executive
Order 13563
Executive Orders 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, reducing costs,
harmonizing rules and promoting
flexibility. This action falls within a
category of regulatory actions that the
Office of Management and Budget
(OMB) exempted from Executive Order
12866 review. Additionally, because
this rule does not meet the definition of
a significant regulatory action it does
not trigger the requirements contained
in Executive Order 13771. See OMB’s
Memorandum titled ‘‘Interim Guidance
Implementing Section 2 of the Executive
Order of January 30, 2017, titled
‘Reducing Regulation and Controlling
Regulatory Costs’ ’’ (February 2, 2017).
Executive Order 13175
This action has been reviewed in
accordance with the requirements of
Executive Order 13175, Consultation
and Coordination with Indian Tribal
Governments. The review reveals that
this rule will not have substantial and
direct effects on Tribal governments and
will not have significant Tribal
implications.
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 (7 U.S.C. 7423) 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 (7
U.S.C. 7418), a person subject to an
order may file a written petition with
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
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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 establishes a de minimis
quantity exemption threshold under the
Softwood Lumber Research, Promotion,
Consumer Education and Industry
Information Order (Order), codified at 7
CFR part 1217. This part is administered
by the Softwood Lumber Board (Board)
with oversight by USDA’s Agricultural
Marketing Service (AMS). In Resolute
Forest Products Inc., v. USDA, et al.
(Resolute), the court found that, on the
basis of the estimates and information
submitted by the government to the
court for review, the selection of 15
mmbf as the de minimis quantity (to be
exempted) under part 1217 was
arbitrary and capricious and that part
1217 was therefore promulgated
unlawfully. The court did not vacate (or
terminate) part 1217; the court
remanded the matter to USDA and
program requirements remain in effect.
To address the court’s decision,
USDA conducted a new analysis to
determine a reasonable and appropriate
de minimis quantity exemption. USDA
analyzed various thresholds of
exemption: 10, 15, 20, 25, and 30 mmbf.
USDA also considered proposing no de
minimis exemption. USDA’s analysis of
the data resulted in a determination that
a de minimis level of 15 mmbf is
reasonable and appropriate. The
analysis was published in a proposed
rule on May 30, 2017 (82 FR 24583).
This final rule establishes the de
minimis quantity threshold under part
1217 at 15 mmbf.
Authority in the 1996 Act
The 1996 Act authorizes USDA to
establish agricultural commodity
research and promotion orders which
may include a combination of
promotion, research, industry
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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 softwood
lumber.
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. Section 516 states that an order
may include an exemption of de
minimis quantities of an agricultural
commodity. Further, section 516(g) of
the 1996 Act provides authority for
other action that is consistent with the
purpose of the statute and necessary to
administer a program.
Overview of the Softwood Lumber
Program
The softwood lumber program took
effect in August 2011 (76 FR 46185) and
assessment collection began in January
2012. Under part 1217, assessments are
collected from domestic (U.S.)
manufacturers and importers and are
used by the Board for projects that
promote market growth for softwood
lumber products used in single and
multi-family dwellings as well as
commercial construction. The Board is
composed of 19 industry members
(domestic manufacturers and importers)
who are appointed by the Secretary of
Agriculture. The purpose of the program
is to strengthen the position of softwood
lumber in the marketplace, maintain
and expand markets for softwood
lumber, and develop new uses for
softwood lumber within the United
States.
Relevant Order Provisions
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Domestic Manufacturers
The term ‘domestic manufacturer’ is
defined in § 1217.8 to mean any person
who is a first handler engaged in the
manufacturing, sale and shipment of
softwood lumber in the United States
during a fiscal period and who owns, or
shares in the ownership and risk of loss
of manufacturing of softwood lumber or
a person who is engaged in the business
of manufacturing, or causes to be
manufactured, sold and shipped such
softwood lumber in the United States
beyond personal use. The term does not
include persons who re-manufacture
softwood lumber that has already been
subject to assessment. The term
‘manufacture’ is defined in § 1217.13 to
mean the process of transforming (or
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turning) softwood logs into softwood
lumber.
Domestic manufacturers are
essentially sawmills that turn softwood
logs into lumber. A domestic
manufacturer may be a company that is
a single sawmill, or it may be a
company that is composed of multiple
sawmills.
Importers
The term ‘importer’ is defined in
§ 1217.11 to mean any person who
imports softwood lumber from outside
the United States for sale in the United
States as a principal or as an agent,
broker, or consignee of any person who
manufactures softwood lumber outside
the United States for sale in the United
States, and who is listed in the import
records as the importer of record for
such softwood lumber. Import records
are maintained by the U.S. Customs and
Border Protection (Customs or CBP).
Both domestic manufacturers and
importers may be referred to in this
rulemaking as ‘‘entities.’’
Expenses and Assessments
Pursuant to § 1217.50, the Board is
authorized to incur expenses for
research and promotion projects as well
as administration. The Board’s expenses
are paid by assessments upon domestic
manufacturers and importers. Pursuant
to § 1217.52(b), and subject to the
exemptions specified in § 1217.53, each
domestic manufacturer and importer
must pay an assessment to the Board at
the rate of $0.35 per thousand board feet
of softwood lumber, except that no
entity has to pay an assessment on the
first 15 mmbf of softwood lumber
otherwise subject to assessment in a
fiscal year. Domestic manufacturers pay
assessments based on the volume of
softwood lumber shipped within the
United States and importers pay
assessments based on the volume of
softwood lumber imported to the United
States. Pursuant to paragraphs (d) and (j)
in § 1217.52, respectively, domestic
manufacturers and importers who pay
their assessments to the Board must do
so no later than the 30th calendar day
of the month following the end of the
quarter in which the softwood lumber
was shipped or imported.
Exemptions
Section 1217.53 prescribes
exemptions from assessment. Pursuant
to paragraph (a) of that section, the
original de minimis quantity exemption
threshold under part 1217 was 15 mmbf.
Thus, U.S. manufacturers and importers
that domestically ship and/or import
less than 15 mmbf feet annually have
been exempt from paying assessments.
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Domestic manufacturers and importers
that ship or import less than the de
minimis quantity of softwood lumber
must apply to the Board each year for
a certificate of exemption and provide
documentation as appropriate to
support their request.
Pursuant to paragraph (b) of
§ 1217.53, domestic manufacturers and
importers that ship or import 15 mmbf
or more annually do not pay
assessments on their first 15 mmbf
domestically shipped or imported. This
exemption is intended for the purpose
of creating an equality amongst those
within the industry with regard to the
program’s assessment. Just as those that
manufacture or import under 15 mmbf
do not have to pay assessments, those at
or above this level may reduce their
assessable volume by 15 mmbf.1 For
example, an entity that ships or imports
20 mmbf annually only has to pay
assessments on 5 mmbf of softwood
lumber. This exemption creates fairness;
it levels the playing field because all
entities, regardless of size, do not have
to pay assessments on their first 15
mmbf shipped or imported. For
purposes of this document, this
exemption is referred to as the ‘‘equity
exemption.’’ Pursuant to paragraphs (c)
and (d) of § 1217.53, respectively,
exports of softwood lumber from the
United States and organic softwood
lumber are also exempt from
assessment.
Reports and Records
Pursuant to § 1217.70, domestic
manufacturers and importers who pay
their assessments directly to the Board
must submit with their payment a report
that specifies the quantity of softwood
lumber domestically shipped or
imported. Pursuant to § 1217.71, all
domestic manufacturers and importers
must maintain books and records
necessary to verify reports for a period
of 2 years beyond the fiscal year to
which they apply, including those
exempt. These records must be made
available during normal business hours
for inspection by Board staff or USDA.
Other Relevant Order Provisions
The original 15 mmbf quantity
exemption threshold is referenced in
other Order provisions. Section 1217.40
specifies that the Board is composed of
domestic manufacturers and importers
who domestically ship or import 15
mmbf or more of softwood lumber
annually. Section 1217.41 specifies that
1 USDA notes that the de minimis level and the
equity exemption are purposefully aligned and any
change in the de minimis would result in a
corresponding modification to the equity
exemption.
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which includes continuing education
courses for architects and engineers; and
a construction and design program that
provides technical support to architects
and structural engineers about using
wood.
persons interested in serving on the
Board must also domestically ship or
import 15 mmbf or more softwood
lumber annually. Finally, § 1217.101
regarding referendum procedures
specifies that eligible domestic
manufacturers and importers that can
vote in referenda must domestically
ship or import 15 mmbf or more of
softwood lumber annually.
Summary of USDA’s Analysis of the De
Minimis Quantity Under the Softwood
Lumber Program
Initial Referendum and Summary of
Board Activities
The softwood lumber program was
implemented after notice and comment
rulemaking and a May 2011 referendum
demonstrating strong support for the
program. Pursuant to § 1217.81(a), the
program had to pass by a majority of
those voting in the referendum who also
represented a majority of the volume
voted. Sixty-seven percent of the
entities who voted, who together
represented 80 percent of the volume, in
the referendum favored implementation
of the program. Entities that
domestically shipped or imported 15
mmbf or more of softwood lumber
annually were eligible to vote in the
referendum. As previously mentioned,
the program took effect in August 2011
and assessment collection began in
January 2012.
The softwood lumber program has
continued to operate at the 15 mmbf
exemption threshold since its inception.
During these years, the Board has
funded a variety of activities designed to
increase the demand for softwood
lumber. The Board funded a U.S. Tall
Wood Building Prize Competition that
is helping to showcase the benefits of
building tall structures with wood. The
Board also funds research on wood
standards; a communications program,
The Secretary has authority under
section 516 of the 1996 Act to exempt
any de minimis quantity of an
agricultural commodity otherwise
covered by an order: ‘‘An order issued
under this subchapter may contain . . .
authority for the Secretary to exempt
from the order any de minimis quantity
of an agricultural commodity otherwise
covered by the order. . . .’’ 7 U.S.C.
7415(a). A de minimis quantity
exemption allows an industry to exempt
from assessment small entities that
could be unduly burdened from an
order’s requirements (i.e., assessment
and quarterly reporting obligations).
Because the 1996 Act does not prescribe
the methodology or formula for
computing a de minimis quantity, the
Secretary has discretion to determine a
reasonable and appropriate quantity and
establish this level through notice and
comment rulemaking. Pursuant to
section 525 of the 1996 Act, 7 U.S.C.
7424, the Secretary may issue such
regulations as may be necessary to carry
out an order.
In evaluating the merits of a de
minimis quantity for the softwood
lumber program, USDA considered
several factors. These factors include: an
estimate of the total quantity of
softwood lumber covered under part
1217 (quantity assessed and quantity
exempted); available funding to support
49487
a viable program; free rider
implications; and the impact of program
requirements on entities (above and
below a de minimis threshold). USDA
reviewed such factors in light of all
available data and information to
determine whether a de minimis
quantity is reasonable. USDA balanced
the multiple factors to assess whether
one exemption threshold would work
better than another when the factors are
considered collectively. The analysis
was based on the current assessment
rate of $0.35 per thousand board feet.2
The following tables are republished
from USDA’s analysis of the de minimis
quantity under the softwood lumber
program contained in the May 2017
proposed rule (82 FR 24583).
Table 1 shows the estimate of the
supply of U.S. softwood lumber used in
the analysis, accounting for both U.S.
shipments and imports. U.S. shipments
were estimated using capacity3 data
from Forest Economic Advisors (FEA).
Total imports was estimated using data
from CBP.
TABLE 1—SUPPLY OF SOFTWOOD
LUMBER IN THE U.S. (MMBF)
Shipments 1
Imports 2
28,754 ...............
1 FEA; 2 CBP; 3 The
12,495
Supply 3
41,249
sum of U.S. Shipments
and Imports.
Table 2 shows assessable volume and
revenue at exemption levels of 30, 25,
20, 15 and 10 mmbf, as well as with no
exemptions. The table accounts for both
the de minimis and equity exemptions
under part 1217, and an assessment rate
of $0.35 per thousand board feet.
TABLE 2—ASSESSABLE VOLUME AND ASSESSMENT REVENUE AT EXEMPTION LEVELS (MMBF) 1
De minimis
exemption
only
Volume equal to or greater than
30
25
20
15
10
No
.................................................................................................................................................
.................................................................................................................................................
.................................................................................................................................................
.................................................................................................................................................
.................................................................................................................................................
exemptions .............................................................................................................................
37,965
38,319
38,990
39,679
40,013
41,249
De minimis
and equity
exemptions
32,805
33,694
34,690
35,854
37,183
41,249
Assessment
revenue
($) 2
$11,481,698
11,792,941
12,141,349
12,548,792
13,014,059
14,437,099
1 2015
data from FEA and CBP were used to construct this table.
product of total assessable volume, accounting for both de minimis and equity exemptions, and the assessment rate of $0.35 per thousand board feet.
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2 The
2 If the assessment rate changes significantly,
USDA could revisit the de minimis threshold.
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3 A sawmill’s operating capacity is the total
amount of softwood lumber that it could
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manufacture (or produce) if fully utilizing all of its
resources (such as labor and equipment).
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Table 3 is the inverse of Table 2 in
that it shows exempt volume at de
minimis and equity exemptions of 30,
25, 20, 15 and 10 mmbf.
TABLE 3—EXEMPT VOLUME AT EXEMPTION LEVELS (MMBF) 1
De minimis exemption only
De minimis and equity
exemptions
Volume less than
% Exempt 2
Volume
30
25
20
15
10
.....................................................................................................................
.....................................................................................................................
.....................................................................................................................
.....................................................................................................................
.....................................................................................................................
3,284
2,930
2,259
1,570
1,236
% Exempt 2
Volume
8
7
5
4
3
8,444
7,555
6,559
5,395
4,066
20
18
16
13
10
1 2015
2 The
data from FEA and CBP were used to construct this table.
quotient of total exempt volume and total 2015 U.S. supply (the sum of U.S. shipments and U.S. imports) of 41,249 MMBF.
Table 4 shows the number of entities
(domestic manufacturers and importers)
that would be assessed and the number
of entities that would be exempt at the
exemption thresholds of 30, 25, 20, 15
and 10 mmbf.
TABLE 4—ASSESSED AND EXEMPT ENTITIES AT EXEMPTION LEVELS (MMBF) 1
Assessed
Volume (MMBF)
Number of
entities
30 .....................................................................................................................
25 .....................................................................................................................
20 .....................................................................................................................
15 .....................................................................................................................
10 .....................................................................................................................
None ................................................................................................................
Exempt
% Assessed 2
172
185
215
255
283
1,054
16
18
20
24
26
100
Number of
entities
882
869
839
799
771
........................
% Exempt 2
84
82
80
76
73
0
1 2015
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2 The
data from FEA and CBP were used to construct this table.
quotient of No. of Entities and total domestic manufacturers and importers recorded in the industry (1,054) in 2015.
Based on its analysis, USDA
determined the following: Exemption
thresholds of 10 to 15 mmbf would
exempt 10 to 13 percent of the total
volume of softwood lumber (taking into
account both the de minimis and equity
exemptions). This is close to the range
exempt under other research and
promotion programs. While all of the
exemption thresholds analyzed would
generate sufficient revenue for a viable
program, the additional revenue that
could be collected if the de minimis
level were reduced much lower than 15
mmbf would likely not be worth the
additional costs. At this threshold, free
rider implications would be minimal
because only 4 percent of the volume of
softwood lumber would be exempted as
de minimis. Applying both the de
minimis and equity exemptions at 15
mmbf would allow the program to
assess almost 90 percent of the total
volume of softwood lumber.
Further, the program functioned
successfully in 2015 with assessment
revenue of $12.905 million with de
minimis and equity exemptions of 15
mmbf. The Board has conducted
activities at this level of funding that
have helped build demand for softwood
lumber, including a prize competition
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for tall wood buildings, research on
wood standards, and an education
program for architects and engineers on
building with wood. An independent
evaluation completed in 2016
concluded that activities of the Board
increased sales of softwood lumber
between 2011 and 2015 by 1.683 bbf or
$596 million. This equates to a return
on investment of $15.55 of additional
sales for every $1 spent on promotion by
the Board.4
Therefore, when considering all of the
factors collectively, USDA concludes
that 15 mmbf is a reasonable and most
appropriate de minimis quantity under
part 1217.5 Accordingly, this rule
establishes the de minimis quantity
threshold under part 1217 at 15 mmbf.
Thus, no amendment to part 1217 is
necessary.
Final Regulatory Flexibility Act
Analysis
In accordance with the Regulatory
Flexibility Act (RFA) (5 U.S.C. 601–
4 Prime
Consulting, Softwood Lumber Board,
Comprehensive Program ROI, 2012–2015, February
2016.
5 As stated previously, the de minimis level and
the equity exemption are purposefully aligned, and
therefore this conclusion accounts for the equity
exemption at 15 mmbf.
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612), AMS is required to examine the
impact of this final rule on small
entities as defined by the Small
Business Administration (SBA). The
classification of a business as small, as
defined by the SBA, varies by industry.
If a business is defined as ‘‘small’’ by
SBA size standards, then it is ‘‘eligible
for government programs and
preferences reserved for ‘small business’
concerns.’’ 6 Accordingly, AMS has
considered the economic impact of this
action on such 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 SBA
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 (domestic manufacturers and
importers) as those having annual
receipts of no more than $7.5 million.7
6 https://www.sba.gov/contracting/getting-startedcontractor/make-sure-you-meet-sba-size-standards/
small-business-size-regulations.
7 SBA does have a small business size standard
for ‘‘Sawmills’’ of 500 employees (see https://
www.sba.gov/sites/default/files/files/Size_
Standards_Table.pdf). Based on USDA’s
understanding of the lumber industry, using this
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Using an average price of $330 per
thousand board feet,8 a domestic
manufacturer or importer who ships less
than about 23 mmbf per year would be
considered a small entity for purposes
of the RFA. As shown in Table 4, there
were 1,054 domestic manufacturers and
importers of softwood lumber based on
2015 data. Of these, 864 entities shipped
or imported less than 23 mmbf and
would be considered to be small entities
under the SBA definition. Thus, based
on the $7.5 million threshold, the
majority of domestic manufacturers and
importers of softwood lumber would be
considered small entities for purposes of
the RFA.
This action establishes a de minimis
quantity exemption threshold under
part 1217. Part 1217 is administered by
the Board with oversight by USDA. In
response to a federal district court
decision in Resolute, USDA conducted
a new analysis to determine a
reasonable and appropriate de minimis
threshold. Based on this analysis, this
final rule establishes the de minimis
quantity threshold at 15 mmbf and
entities manufacturing (and
domestically shipping) or importing less
than 15 mmbf per year would be exempt
from paying assessments under part
1217. Authority for this action is
provided in sections 516(a)(2), 516(g)
and 525 of the 1996 Act.
Regarding the economic impact of the
de minimis exemption, the exemption
allows the Board to exempt from
assessment small entities that would be
unduly burdened by the program’s
obligations. At the 15 mmbf exemption
threshold, small manufacturers and
importers that domestically ship or
import less than 15 mmbf of softwood
lumber will not have to pay assessments
under the program.
Additionally, larger manufacturers
and importers will not have to pay
assessments on the first 15 mmbf of
softwood lumber domestically shipped
or imported each year. This exemption
is intended for the purpose of equity,
whereby all entities who must pay
assessments may reduce their assessable
volume by 15 mmbf. This exemption
benefits smaller manufacturers and
importers whose annual shipments or
imports are above the de minimis
threshold of 15 mmbf. With this
exemption, an entity that ships or
imports a quantity of softwood lumber
criteria would be impractical as sawmills often use
contractors rather than employees to operate and,
therefore, many mills would fall under this criteria
while being, in reality, a large business. Therefore,
USDA used agricultural service firm as a more
appropriate criteria for this analysis.
8 Random Lengths Publications, Inc.;
www.randomlengths.com.
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equal to the RFA-small business
definition of 23 mmbf, would only pay
assessments on no more than 8 mmbf of
softwood lumber.
To calculate the impact of the
assessment rate on the revenue of an
assessment payer, the assessment rate is
divided by an average price. Using an
average 2015 price of $330 per thousand
board feet, the assessment rate as a
percentage of price could range from
0.106 percent at the current assessment
rate to 0.151 percent at the maximum
assessment rate. This analysis helps
identify the impact of the assessment
rate on the revenues of assessment
payers. At the current assessment rate of
$0.35 per thousand board feet to the
maximum assessment rate of $0.50 per
thousand board feet, assessment payers
would owe between 0.106 percent and
0.151 percent of their revenues,
respectively.
In its analysis of alternatives, USDA
evaluated five different exemption
thresholds—30, 25, 20, 15 and 10 mmbf
using 2015 data—accounting for both
the de minimis and equity exemptions,
as well as having no exemptions under
the program. USDA evaluated these
alternatives based on the following
factors: an estimate of quantity of
softwood lumber covered under the
program (quantity assessed and quantity
exempted); available funding to support
a viable program; free rider
implications; and the impact of program
requirements on entities (above and
below a de minimis threshold). USDA
conducted a balancing test among these
factors to assess whether one exemption
threshold works better than another
when the factors are considered
collectively.
In reviewing the quantity of
assessable versus exempt softwood
lumber at the alternative exemption
thresholds, USDA found that at an
exemption threshold of 30 mmbf, a total
of 32.805 bbf would be assessed with
3.284 bbf, or 8 percent, exempt as de
minimis, plus an additional 5.16 bbf
exempt as equity for 20 percent of total
volume exempt; at 25 mmbf, a total of
33.694 bbf would be assessed with 2.93
bbf, or 7 percent, exempt as de minimis,
plus an additional 4.625 bbf exempt as
equity for 18 percent total volume
exempt; at a threshold of 20 mmbf, a
total of 34.69 bbf would be assessed
with 2.259 bbf, or 5 percent, exempt as
de minimis, plus an additional 4.3 bbf
exempt as equity for 16 percent total
volume exempt; at a threshold of 15
mmbf, a total of 35.854 bbf would be
assessed with 1.57 bbf, or 4 percent,
exempt as de minimis, plus an
additional 3.825 bbf exempt as equity
for 13 percent total volume exempt; at
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49489
a threshold of 10 mmbf, a total of 37.183
bbf would be assessed, with 1.236 bbf,
or 3 percent, exempt as de minimis,
plus an additional 2.83 bbf exempt as
equity for 10 percent total volume
exempt; and with no exemptions, a total
of 41.249 bbf would be assessed. In
reviewing the total volume exempt
under the softwood lumber program
(taking into account both the de
minimis and equity exemptions),
thresholds of 10 to 15 mmbf exempt
between 10 and 13 percent of the
volume, which is close to the range
exempt under other programs.
In reviewing available funding to
support a viable program at the
alternative exemption thresholds, at an
exemption threshold of 30 mmbf,
estimated assessment revenue is
$11.482 million; at 25 mmbf, estimated
assessment revenue is $11.793 million
(an additional $311,243); at a threshold
of 20 mmbf, estimated assessment
revenue is $12.141 million (an
additional $348,408); at a threshold of
15 mmbf, estimated assessment revenue
is $12.549 million (an additional
$407,444); at a threshold of 10 mmbf,
estimated assessment revenue is
$13.014 million (an additional
$465,267); and with no exemptions,
estimated assessment revenue is
$14.437 million (an additional $1.423
million).
Assessment revenue under the current
softwood lumber program has ranged
from about $10.638 million in 2012 to
$12.905 million in 2015. At this level of
revenue, the current program has seen
success. The revenues reviewed at the
different exemption thresholds are
comparable to these levels or higher.
Thus, all of the exemption thresholds
analyzed would generate sufficient
revenue for a viable program.
Regarding free riders, USDA notes
that the key to assessing the free rider
implications of a de minimis quantity is
not the number of entities exempt under
a program but rather the volume of
product exempt. This is because
assessments are based on volume
shipped or imported and not on the
number of entities; assessments are not
paid by entities on a pro rata basis. In
evaluating free rider implications at the
alternative exemption thresholds, at an
exemption threshold of 30 mmbf, 84
percent of the number of entities (or
882) would be exempt but only 8
percent of the volume would be exempt
as de minimis; at a threshold of 25
mmbf, 82 percent of the number of
entities (or 869) would be exempt, but
only 7 percent of the volume would be
exempt as de minimis; at a threshold of
20 mmbf, 80 percent of the number of
entities (or 839) would be exempt, but
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only 5 percent of the volume would be
exempt as de minimis; at a threshold of
15 mmbf, 76 percent of the number of
entities (or 799) would be exempt, but
only 4 percent of the volume would be
exempt as de minimis; and at a
threshold of 10 mmbf, 73 percent of the
number of entities (or 771) would be
exempt, but only 3 percent of the
volume would be exempt as de minimis.
In evaluating the impact of the
program’s requirements at the
alternative exemption thresholds,
entities that ship or import at or above
the de minimis threshold must pay
assessments to the Board. Assessment
payers must also submit a report to the
Board each quarter of the volume of
softwood lumber shipped or imported
for the respective quarter. Entities that
ship or import below the de minimis
threshold must apply to the Board each
year for a certificate of exemption and
provide documentation as appropriate
to support their request. The reporting
and recordkeeping requirements are
detailed in the section below titled
Paperwork Reduction Act.
At an exemption threshold of 30
mmbf, 172 entities would pay
assessments and 882 would be exempt;
at 25 mmbf, 185 entities would pay
assessments and 869 would be exempt;
at 20 mmbf, 215 entities would pay
assessments and 839 would be exempt;
at 15 mmbf, 255 entities would pay
assessments and 799 would be exempt;
at 10 mmbf, 283 entities would pay
assessments and 771 would be exempt.
Thus, as the exemption threshold is
reduced, more entities would be subject
to the assessment and quarterly
reporting obligation under part 1217.
Further, in considering program
compliance costs, USDA estimates the
cost of an on-site audit of a single entity
at $5,000 or more. Thus, the cost to
pursue a compliance case against an
entity that shipped less than 10 mmbf,
9 mmbf for example, would outweigh
the revenue that would be collected
from that entity of $3,150. Similarly, the
assessment revenue that would be
collected from an entity that shipped
less than 15 mmbf, 12 mmbf for
example, would amount to $4,200. The
benefit of assessing smaller
manufacturers, $3,150 at 9 mmbf and
$4,200 at 12 mmbf, does not outweigh
the cost of pursuing compliance cases
against them at $5,000 per entity. The
point at which the assessment revenue
that would be collected from an entity
outweighs the estimated cost of $5,000
to pursue a compliance case is an entity
with volume equal to or greater than
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18:08 Oct 25, 2017
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14.3 mmbf.9 This level is close to 15
mmbf. By this analysis, the selection of
15 mmbf as the de minimis quantity is
reasonable.
Analysis of the 23 mmbf–RFA small
business threshold as a reasonable
option for de minimis shows that 190
entities would be subject to assessment
and 864 entities would be exempt. In
terms of volume, 38.44 bbf would be
assessed, or 93 percent of total volume,
and 2.809 bbf would be exempt, or 7
percent of total volume.
Based upon the analysis contained
herein, any of the exemption thresholds
reviewed would be reasonable because
they would exempt from 3 to 8 percent
of the volume of softwood lumber as de
minimis. However, when the total
volume exempt under the softwood
lumber program is considered (taking
into account both the de minimis and
equity exemptions), thresholds of 10 to
15 mmbf exempt between 10 and 13
percent of the volume, which is close to
the range exempt under other programs.
While all of the exemption thresholds
analyzed would generate sufficient
revenue for a viable program, the
additional revenue that could be
collected if the de minimis level were
reduced much lower than 15 mmbf
would likely not be worth the additional
costs. The softwood lumber program
operated successfully since its inception
at an exemption threshold of 15 mmbf.10
Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C.
Chapter 35), the information collection
and recordkeeping requirements
imposed by part 1217 have been
approved previously under OMB
control number 0581–0093. This rule
imposes no additional reporting and
recordkeeping burden on domestic
manufacturer and importers of softwood
lumber. The reporting requirements
pertaining to this rule are described in
the following paragraphs.
As previously mentioned, pursuant to
§ 1217.53(a), domestic manufacturers
and importers who domestically ship or
import less than the de minimis
threshold must apply to the Board each
year for a certificate of exemption and
9 This figure is computed by dividing the
estimated cost to pursue a compliance case against
an entity of $5,000 by the assessment rate of $0.35
per thousand board feet.
10 An independent evaluation of the softwood
lumber program showed that the activities of the
Board increased sales of softwood lumber between
2011 and 2015 by 1.683 bbf or $596 million. This
equates to a return on investment of $15.55 of
additional sales for every $1 spent on promotion by
the Board. By this metric, part 1217 to date has been
effective. USDA therefore finds that 15 mmbf is a
reasonable exemption level for de minimis.
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provide documentation as appropriate
to support their request. The reporting
burden for this collection of information
is estimated to average 0.25 hours per
domestic manufacturer or importer per
report, or 0.25 hours per year (1 request
per year per exempt entity). This
computes to a total annual burden of
199.75 hours (0.25 hours times 799
exempt entities at the 15 mmbf de
minimis exemption threshold from
Table 4).
Further, pursuant to § 1217.70,
domestic manufacturers and importers
that ship or import at or over the de
minimis exemption level and pay their
assessments directly to the Board must
submit a shipment/import report for
each quarter when assessments are due.
The reporting burden for this collection
of information is estimated to average
0.5 hours per domestic manufacturer or
importer per report, or 2 hours per year
(4 reports per year times 0.5 hours per
report). This computes to a total annual
burden of 510 hours (255 assessed
entities (from Table 4—No. of Assessed
Entities at 15 mmbf) at 2 hours each
equals 510 hours).
All domestic manufacturers and
importers must also maintain records
sufficient to verify their reports. The
recordkeeping burden for keeping this
information is estimated to average 0.5
hours per record keeper maintaining
such records, or 527 hours (1,054 total
entities assessed (from Table 4—No. of
Assessed Entities at no exemption)
times 0.5 hours).
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.
USDA 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, USDA
initiated this action in response to a
May 2016 federal court decision in
Resolute. This rule establishes the de
minimis quantity exemption under part
1217.
A proposed rule concerning this
action was published in the Federal
Register on May 30, 2017 (82 FR 24583).
The Board distributed copies of the
proposed rule via email to domestic
manufacturers and importers. The
proposal was also made available
through the internet by USDA and the
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Office of the Federal Register. A 60-day
comment period ending July 31, 2017,
was provided to allow interested
persons to submit comments.
Analysis of Comments
Thirty-three comments were received
in response to the proposed rule. Of
those 33 comments, one was outside the
scope of the rulemaking and the
remaining 32 supported the 15 mmbf
exemption threshold. The following is
an analysis of those 32 comments.
Several commenters reiterated the
data presented in the proposed rule.
They cited Table 3 which shows that, at
the 15 mmbf threshold, entities that pay
into the program account for 96 percent
of the U.S. softwood lumber market
volume. Thus, free rider concerns are
minimal. Reducing the exemption level
by a third (down to 10 mmbf) would
only increase that number to 97 percent
of the U.S. market and would not be
worth the additional effort. There are a
large number of small manufacturers
and importers who account for a small
percentage of the softwood lumber
shipped in the United States. The
commenters opined that the cost of
collecting an assessment from such a
large number of entities outweighs the
revenue that could be collected from
such a small amount of volume. They
agreed that Board staff time would be
better spent on promotion activities
than trying to collect a small amount of
revenue from several small entities.
One commenter opined that the
methodology used by USDA to
determine the de minimis threshold was
comprehensive and explored tradeoffs
involved in setting a threshold below
which it is counterproductive to the
collection of assessments to further the
program. The commenter stated that
‘‘. . . USDA dealt with a large amount
of data on imports that it appropriately
scrubbed to exclude obvious errors and
outliers.’’ Within the populations of
domestic manufacturers and importers
categorized based on volume, USDA
conducted a series of ‘‘what if’’ analyses
to determine the impact of various de
minimis levels on revenue in terms of
‘‘. . . administrative costs, the
compliance burden on respondents and
the potential for ‘‘free rider’’ benefits.’’
The commenter also observed that
USDA compared the results to other
federal promotion programs authorized
under the 1996 Act and overseen by
USDA where it found that 8 of 10
programs exempt a de minimis quantity
from assessment, and that half of those
programs exempt between 3 and 11
percent of the total quantity covered by
the program as de minimis. Among the
range of alternatives that USDA
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18:08 Oct 25, 2017
Jkt 244001
analyzed, the 10 and 15 mmbf
thresholds came closest to this range.
The commenter stated that USDA also
compared the benefits derived from
these thresholds with the likely
compliance costs incurred, which
USDA estimated at $5,000 per entity.
The point at which revenues collected
from entities that would fall below the
compliance cost was found to be at 14.3
mmbf, which is closest to the 15 mmbf
threshold. The combination of these
results led USDA to conclude that 15
mmbf is the most appropriate
benchmark between volumes assessed
and not assessed. The commenter
concluded that, ‘‘. . . while there is no
special formula for computing a de
minimis threshold . . . ,’’ the
commenter believes that USDA selected
a reasonable exemption amount based
on the industry’s structure and the
program’s benefits and costs.
Six commenters opined that the 15
mmbf threshold appropriately separates
the high production manufacturers from
small entities that manufacture specialty
products and sell into mostly local and
niche markets. They agreed that
specialty products do not benefit as
much from a national promotion
program, and that growth in market
share benefits entities that manufacture
larger volumes to a greater degree than
those that fall below the 15 mmbf
threshold.
Several commenters expressed
concern with the administrative burden
that complying with a mandatory
promotion program could place on
small entities below the 15 mmbf
threshold. One commenter stated that,
on a per board foot ratio, the costs to
participate in the program are lower for
larger entities than smaller entities.
Many small entities still record their
shipments by hand. Larger entities, on
the other hand, can afford to invest in
automated computer reporting systems
and can have personnel dedicated to
efficiently analyzing their reporting.
Thus, the administrative costs for
smaller entities to participate in the
program are higher than the costs for
larger entities.
Two commenters also referenced the
part’s 8 percent cap on administrative
expenses. They opined that the revenue
gained from collecting assessments from
numerous small entities would not be
sufficient to justify the additional costs
and administrative complexities.
Three commenters expressed support
for the equity exemption. They opined
that the equity exemption makes the
program fair for everyone. One
commenter opined that the equity
exemption mitigates the free rider
problem because larger entities do not
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49491
have to pay assessments on their first 15
mmbf shipped. Without the equity
exemption, assessment payers would
pay more, thereby increasing the free
rider impact.11
Two commenters discussed the efforts
of the Blue Ribbon Commission (BRC),
the proponent group, in promulgating
the program. They stated that the BRC
surveyed the industry on issues related
to the program, including the de
minimis exemption threshold. They
stated that the BRC sought a level that
would generate maximum revenue for
the program while being mindful of the
cost of administering the program and
collecting assessments. The BRC’s
survey found that 15 mmbf was the
appropriate level that was broadly
accepted by the industry.
Several commenters also expressed
their overall support for the softwood
lumber program. They agreed that the
program provides a strong, unified voice
for the industry. One commenter stated
that the program has contributed
significantly to strengthening the
position of softwood lumber in the
market place as well as expanding and
developing new markets for softwood
lumber. The commenters also agreed
that funding for the program has been
appropriate since assessment collection
began in 2012. None of the commenters
supported increasing the exemption
threshold thereby reducing funding for
the program.
No changes have been made to the
proposed rule based on the comments
received.
After consideration of all relevant
matters presented, including the
available information and comments
received, it is hereby found that this
rule, is consistent with and will
effectuate the purposes of the 1996 Act.
List of Subjects in 7 CFR Part 1217
Administrative practice and
procedure, Advertising, Consumer
information, Marketing agreements,
Promotion, Reporting and
recordkeeping requirements, Softwood
lumber.
11 For example, as explained in the May 2017
proposed rule, if the thresholds for de minimis and
equity exemptions were 10 mmbf, Company A that
ships 8 mmbf annually would pay no assessments,
and Company B that ships 30 mmbf annually would
have to pay assessments on 20 mmbf of softwood
lumber. At an assessment rate of $0.35 per thousand
board feet, this would compute to $7,000 in
assessments. Without the equity exemption,
Company A would still pay no assessments but
Company B would have to pay assessments on 30
mmbf. This would compute to $10,500 in
assessments, which is an additional burden of
$3,500. Thus, the equity exemption reduces the
burden of free riders on entities funding the
program. It creates fairness because it exempts from
assessment an equal volume from all entities,
regardless of their size.
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The authority citation for 7 CFR part
1217 continues to read as follows:
Authority: 7 U.S.C. 7411–7425; 7 U.S.C.
7401.
Dated: October 19, 2017.
Bruce Summers,
Acting Administrator.
[FR Doc. 2017–23094 Filed 10–25–17; 8:45 am]
BILLING CODE 3410–02–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 25
[Docket No. FAA–2017–0862; Special
Conditions No. 25–703–SC]
Special Conditions: Boeing Model 777–
300ER Airplanes; Passenger-Cabin
High-Wall Suites
Federal Aviation
Administration (FAA), DOT.
ACTION: Final special conditions; request
for comments.
AGENCY:
These special conditions are
issued for Boeing Model 777–300ER
airplanes with high-wall suites installed
in the passenger cabin. This installation
is novel or unusual, and the applicable
airworthiness regulations do not contain
adequate or appropriate safety standards
for this interior configuration. These
special conditions contain the
additional safety standards that the
Administrator considers necessary to
establish a level of safety equivalent to
that established by the existing
airworthiness standards.
DATES: This action is effective on Boeing
on October 26, 2017. Send your
comments by December 11, 2017.
ADDRESSES: Send comments identified
by docket number FAA–2017–0862
using any of the following methods:
D Federal eRegulations Portal: Go to
https://www.regulations.gov/ and follow
the online instructions for sending your
comments electronically.
D Mail: Send comments to Docket
Operations, M–30, U.S. Department of
Transportation (DOT), 1200 New Jersey
Avenue SE., Room W12–140, West
Building Ground Floor, Washington, DC
20590–0001.
D Hand Delivery or Courier: Take
comments to Docket Operations in
Room W12–140 of the West Building
Ground Floor at 1200 New Jersey
Avenue SE., Washington, DC, between 9
a.m. and 5 p.m., Monday through
Friday, except Federal holidays.
D Fax: Fax comments to Docket
Operations at 202–493–2251.
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SUMMARY:
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18:08 Oct 25, 2017
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Privacy: The FAA will post all
comments it receives, without change,
to https://www.regulations.gov/,
including any personal information the
commenter provides. Using the search
function of the docket Web site, anyone
can find and read the electronic form of
all comments received into any FAA
docket, including the name of the
individual sending the comment (or
signing the comment for an association,
business, labor union, etc.). DOT’s
complete Privacy Act Statement can be
found in the Federal Register published
on April 11, 2000 (65 FR 19477–19478).
Docket: Background documents or
comments received may be read at
https://www.regulations.gov/ at any time.
Follow the online instructions for
accessing the docket or go to Docket
Operations in Room W12–140 of the
West Building Ground Floor at 1200
New Jersey Avenue SE., Washington,
DC, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
John
Shelden, Airframe and Cabin Safety
Section, AIR–675, Transport Standards
Branch, Policy and Innovation Division,
Aircraft Certification Service, 1601 Lind
Avenue SW., Renton, Washington
98057–3356; telephone 425–227–2785;
facsimile 425–227–1232; email
john.shelden@faa.gov.
FOR FURTHER INFORMATION CONTACT:
The
substance of these special conditions
has been subject to the notice and
comment period in several prior
instances and has been derived without
substantive change from those
previously issued. It is unlikely that
prior public comment would result in a
significant change from the substance
contained herein. Therefore, because a
delay would significantly affect the
certification of the airplane, the FAA
has determined that prior public notice
and comment are unnecessary and
impracticable.
In addition, since the substance of
these special conditions has been
subject to the public comment process
in several prior instances with no
substantive comments received, the
FAA finds it unnecessary to delay the
effective date and finds that good cause
exists for adopting these special
conditions upon publication in the
Federal Register.
SUPPLEMENTARY INFORMATION:
Comments Invited
We invite interested people to take
part in this rulemaking by sending
written comments, data, or views. The
most helpful comments reference a
specific portion of the special
conditions, explain the reason for any
PO 00000
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recommended change, and include
supporting data.
We will consider all comments we
receive by the closing date for
comments. We may change these special
conditions based on the comments we
receive.
Background
On December 19, 2014, Boeing
applied for a type certificate design
change to Type Certificate (TC) No.
T00001SE to install high-wall suites in
the passenger compartment of Boeing
Model 777–300ER airplanes.
The Model 777 series airplane is a
swept-wing, conventional-tail, twinengine, turbofan- powered, transportcategory airplane. The airplane has
seating for 365 passengers and a
maximum takeoff weight of 775,000
pounds.
Type Certification Basis
Under the provisions of title 14, Code
of Federal Regulations (14 CFR) 21.101,
Boeing must show that the Model 777–
300ER airplane, as changed, continues
to meet the applicable provisions of the
regulations listed in Type Certificate No.
T00001SE or the applicable regulations
in effect on the date of application for
the change, except for earlier
amendments as agreed upon by the
FAA.
If the Administrator finds that the
applicable airworthiness regulations
(i.e., 14 CFR part 25) do not contain
adequate or appropriate safety standards
for the Boeing Model 777–300ER
airplane because of a novel or unusual
design feature, special conditions are
prescribed under the provisions of
§ 21.16.
Special conditions are initially
applicable to the model for which they
are issued. Should the type certificate
for that model be amended later to
include any other model that
incorporates the same novel or unusual
design feature, or should any other
model already included on the same
type certificate be modified to
incorporate the same novel or unusual
design feature, these special conditions
would also apply to the other model
under § 21.101.
In addition to the applicable
airworthiness regulations and special
conditions, the Boeing Model 777–
300ER airplane must comply with the
fuel-vent and exhaust-emission
requirements of 14 CFR part 34, and the
noise-certification requirements of 14
CFR part 36.
The FAA issues special conditions, as
defined in 14 CFR 11.19, in accordance
with § 11.38, and they become part of
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]]>Agencies
[Federal Register Volume 82, Number 206 (Thursday, October 26, 2017)]
[Rules and Regulations]
[Pages 49485-49492]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23094]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 82, No. 206 / Thursday, October 26, 2017 /
Rules and Regulations
[[Page 49485]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 1217
[Document Number AMS-SC-16-0066]
Softwood Lumber Research, Promotion, Consumer Education and
Industry Information Order; De Minimis Quantity Exemption Threshold
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule establishes a de minimis quantity exemption
threshold under the U.S. Department of Agriculture's (USDA)
Agricultural Marketing Service (AMS) regulations regarding a national
research and promotion program for softwood lumber. In response to a
2016 federal district court decision, the U.S. Department of
Agriculture (USDA) conducted a new analysis to determine a reasonable
and appropriate de minimis threshold. Based on that analysis, this rule
establishes the de minimis quantity threshold at 15 million board feet
(mmbf) and entities manufacturing (and domestically shipping) or
importing less than 15 mmbf per year will be exempt from paying
assessments under the regulations.
DATES: Effective Date: November 27, 2017.
FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Marketing
Specialist, Promotion and Economics Division, Specialty Crops Program,
AMS, USDA, P.O. Box 831, Beavercreek, Oregon, 97004; telephone: (503)
632-8848; facsimile (503) 632-8852; or electronic mail:
[email protected].
SUPPLEMENTARY INFORMATION: This rule, affecting 7 CFR part 1217, is
authorized under 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 Orders 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, reducing costs, harmonizing rules and promoting flexibility.
This action falls within a category of regulatory actions that the
Office of Management and Budget (OMB) exempted from Executive Order
12866 review. Additionally, because this rule does not meet the
definition of a significant regulatory action it does not trigger the
requirements contained in Executive Order 13771. See OMB's Memorandum
titled ``Interim Guidance Implementing Section 2 of the Executive Order
of January 30, 2017, titled `Reducing Regulation and Controlling
Regulatory Costs' '' (February 2, 2017).
Executive Order 13175
This action has been reviewed in accordance with the requirements
of Executive Order 13175, Consultation and Coordination with Indian
Tribal Governments. The review reveals that this rule will not have
substantial and direct effects on Tribal governments and will not have
significant Tribal implications.
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 (7 U.S.C. 7423) 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 (7 U.S.C. 7418), a person subject
to an order may file a written petition with 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 establishes a de minimis quantity exemption threshold
under the Softwood Lumber Research, Promotion, Consumer Education and
Industry Information Order (Order), codified at 7 CFR part 1217. This
part is administered by the Softwood Lumber Board (Board) with
oversight by USDA's Agricultural Marketing Service (AMS). In Resolute
Forest Products Inc., v. USDA, et al. (Resolute), the court found that,
on the basis of the estimates and information submitted by the
government to the court for review, the selection of 15 mmbf as the de
minimis quantity (to be exempted) under part 1217 was arbitrary and
capricious and that part 1217 was therefore promulgated unlawfully. The
court did not vacate (or terminate) part 1217; the court remanded the
matter to USDA and program requirements remain in effect.
To address the court's decision, USDA conducted a new analysis to
determine a reasonable and appropriate de minimis quantity exemption.
USDA analyzed various thresholds of exemption: 10, 15, 20, 25, and 30
mmbf. USDA also considered proposing no de minimis exemption. USDA's
analysis of the data resulted in a determination that a de minimis
level of 15 mmbf is reasonable and appropriate. The analysis was
published in a proposed rule on May 30, 2017 (82 FR 24583). This final
rule establishes the de minimis quantity threshold under part 1217 at
15 mmbf.
Authority in the 1996 Act
The 1996 Act authorizes USDA to establish agricultural commodity
research and promotion orders which may include a combination of
promotion, research, industry
[[Page 49486]]
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 softwood lumber.
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. Section 516 states
that an order may include an exemption of de minimis quantities of an
agricultural commodity. Further, section 516(g) of the 1996 Act
provides authority for other action that is consistent with the purpose
of the statute and necessary to administer a program.
Overview of the Softwood Lumber Program
The softwood lumber program took effect in August 2011 (76 FR
46185) and assessment collection began in January 2012. Under part
1217, assessments are collected from domestic (U.S.) manufacturers and
importers and are used by the Board for projects that promote market
growth for softwood lumber products used in single and multi-family
dwellings as well as commercial construction. The Board is composed of
19 industry members (domestic manufacturers and importers) who are
appointed by the Secretary of Agriculture. The purpose of the program
is to strengthen the position of softwood lumber in the marketplace,
maintain and expand markets for softwood lumber, and develop new uses
for softwood lumber within the United States.
Relevant Order Provisions
Domestic Manufacturers
The term `domestic manufacturer' is defined in Sec. 1217.8 to mean
any person who is a first handler engaged in the manufacturing, sale
and shipment of softwood lumber in the United States during a fiscal
period and who owns, or shares in the ownership and risk of loss of
manufacturing of softwood lumber or a person who is engaged in the
business of manufacturing, or causes to be manufactured, sold and
shipped such softwood lumber in the United States beyond personal use.
The term does not include persons who re-manufacture softwood lumber
that has already been subject to assessment. The term `manufacture' is
defined in Sec. 1217.13 to mean the process of transforming (or
turning) softwood logs into softwood lumber.
Domestic manufacturers are essentially sawmills that turn softwood
logs into lumber. A domestic manufacturer may be a company that is a
single sawmill, or it may be a company that is composed of multiple
sawmills.
Importers
The term `importer' is defined in Sec. 1217.11 to mean any person
who imports softwood lumber from outside the United States for sale in
the United States as a principal or as an agent, broker, or consignee
of any person who manufactures softwood lumber outside the United
States for sale in the United States, and who is listed in the import
records as the importer of record for such softwood lumber. Import
records are maintained by the U.S. Customs and Border Protection
(Customs or CBP). Both domestic manufacturers and importers may be
referred to in this rulemaking as ``entities.''
Expenses and Assessments
Pursuant to Sec. 1217.50, the Board is authorized to incur
expenses for research and promotion projects as well as administration.
The Board's expenses are paid by assessments upon domestic
manufacturers and importers. Pursuant to Sec. 1217.52(b), and subject
to the exemptions specified in Sec. 1217.53, each domestic
manufacturer and importer must pay an assessment to the Board at the
rate of $0.35 per thousand board feet of softwood lumber, except that
no entity has to pay an assessment on the first 15 mmbf of softwood
lumber otherwise subject to assessment in a fiscal year. Domestic
manufacturers pay assessments based on the volume of softwood lumber
shipped within the United States and importers pay assessments based on
the volume of softwood lumber imported to the United States. Pursuant
to paragraphs (d) and (j) in Sec. 1217.52, respectively, domestic
manufacturers and importers who pay their assessments to the Board must
do so no later than the 30th calendar day of the month following the
end of the quarter in which the softwood lumber was shipped or
imported.
Exemptions
Section 1217.53 prescribes exemptions from assessment. Pursuant to
paragraph (a) of that section, the original de minimis quantity
exemption threshold under part 1217 was 15 mmbf. Thus, U.S.
manufacturers and importers that domestically ship and/or import less
than 15 mmbf feet annually have been exempt from paying assessments.
Domestic manufacturers and importers that ship or import less than the
de minimis quantity of softwood lumber must apply to the Board each
year for a certificate of exemption and provide documentation as
appropriate to support their request.
Pursuant to paragraph (b) of Sec. 1217.53, domestic manufacturers
and importers that ship or import 15 mmbf or more annually do not pay
assessments on their first 15 mmbf domestically shipped or imported.
This exemption is intended for the purpose of creating an equality
amongst those within the industry with regard to the program's
assessment. Just as those that manufacture or import under 15 mmbf do
not have to pay assessments, those at or above this level may reduce
their assessable volume by 15 mmbf.\1\ For example, an entity that
ships or imports 20 mmbf annually only has to pay assessments on 5 mmbf
of softwood lumber. This exemption creates fairness; it levels the
playing field because all entities, regardless of size, do not have to
pay assessments on their first 15 mmbf shipped or imported. For
purposes of this document, this exemption is referred to as the
``equity exemption.'' Pursuant to paragraphs (c) and (d) of Sec.
1217.53, respectively, exports of softwood lumber from the United
States and organic softwood lumber are also exempt from assessment.
---------------------------------------------------------------------------
\1\ USDA notes that the de minimis level and the equity
exemption are purposefully aligned and any change in the de minimis
would result in a corresponding modification to the equity
exemption.
---------------------------------------------------------------------------
Reports and Records
Pursuant to Sec. 1217.70, domestic manufacturers and importers who
pay their assessments directly to the Board must submit with their
payment a report that specifies the quantity of softwood lumber
domestically shipped or imported. Pursuant to Sec. 1217.71, all
domestic manufacturers and importers must maintain books and records
necessary to verify reports for a period of 2 years beyond the fiscal
year to which they apply, including those exempt. These records must be
made available during normal business hours for inspection by Board
staff or USDA.
Other Relevant Order Provisions
The original 15 mmbf quantity exemption threshold is referenced in
other Order provisions. Section 1217.40 specifies that the Board is
composed of domestic manufacturers and importers who domestically ship
or import 15 mmbf or more of softwood lumber annually. Section 1217.41
specifies that
[[Page 49487]]
persons interested in serving on the Board must also domestically ship
or import 15 mmbf or more softwood lumber annually. Finally, Sec.
1217.101 regarding referendum procedures specifies that eligible
domestic manufacturers and importers that can vote in referenda must
domestically ship or import 15 mmbf or more of softwood lumber
annually.
Initial Referendum and Summary of Board Activities
The softwood lumber program was implemented after notice and
comment rulemaking and a May 2011 referendum demonstrating strong
support for the program. Pursuant to Sec. 1217.81(a), the program had
to pass by a majority of those voting in the referendum who also
represented a majority of the volume voted. Sixty-seven percent of the
entities who voted, who together represented 80 percent of the volume,
in the referendum favored implementation of the program. Entities that
domestically shipped or imported 15 mmbf or more of softwood lumber
annually were eligible to vote in the referendum. As previously
mentioned, the program took effect in August 2011 and assessment
collection began in January 2012.
The softwood lumber program has continued to operate at the 15 mmbf
exemption threshold since its inception. During these years, the Board
has funded a variety of activities designed to increase the demand for
softwood lumber. The Board funded a U.S. Tall Wood Building Prize
Competition that is helping to showcase the benefits of building tall
structures with wood. The Board also funds research on wood standards;
a communications program, which includes continuing education courses
for architects and engineers; and a construction and design program
that provides technical support to architects and structural engineers
about using wood.
Summary of USDA's Analysis of the De Minimis Quantity Under the
Softwood Lumber Program
The Secretary has authority under section 516 of the 1996 Act to
exempt any de minimis quantity of an agricultural commodity otherwise
covered by an order: ``An order issued under this subchapter may
contain . . . authority for the Secretary to exempt from the order any
de minimis quantity of an agricultural commodity otherwise covered by
the order. . . .'' 7 U.S.C. 7415(a). A de minimis quantity exemption
allows an industry to exempt from assessment small entities that could
be unduly burdened from an order's requirements (i.e., assessment and
quarterly reporting obligations). Because the 1996 Act does not
prescribe the methodology or formula for computing a de minimis
quantity, the Secretary has discretion to determine a reasonable and
appropriate quantity and establish this level through notice and
comment rulemaking. Pursuant to section 525 of the 1996 Act, 7 U.S.C.
7424, the Secretary may issue such regulations as may be necessary to
carry out an order.
In evaluating the merits of a de minimis quantity for the softwood
lumber program, USDA considered several factors. These factors include:
an estimate of the total quantity of softwood lumber covered under part
1217 (quantity assessed and quantity exempted); available funding to
support a viable program; free rider implications; and the impact of
program requirements on entities (above and below a de minimis
threshold). USDA reviewed such factors in light of all available data
and information to determine whether a de minimis quantity is
reasonable. USDA balanced the multiple factors to assess whether one
exemption threshold would work better than another when the factors are
considered collectively. The analysis was based on the current
assessment rate of $0.35 per thousand board feet.\2\
---------------------------------------------------------------------------
\2\ If the assessment rate changes significantly, USDA could
revisit the de minimis threshold.
---------------------------------------------------------------------------
The following tables are republished from USDA's analysis of the de
minimis quantity under the softwood lumber program contained in the May
2017 proposed rule (82 FR 24583).
Table 1 shows the estimate of the supply of U.S. softwood lumber
used in the analysis, accounting for both U.S. shipments and imports.
U.S. shipments were estimated using capacity\3\ data from Forest
Economic Advisors (FEA). Total imports was estimated using data from
CBP.
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\3\ A sawmill's operating capacity is the total amount of
softwood lumber that it could manufacture (or produce) if fully
utilizing all of its resources (such as labor and equipment).
Table 1--Supply of Softwood Lumber in the U.S. (MMBF)
------------------------------------------------------------------------
Shipments \1\ Imports \2\ Supply \3\
------------------------------------------------------------------------
28,754........................................ 12,495 41,249
------------------------------------------------------------------------
\1\ FEA; \2\ CBP; \3\ The sum of U.S. Shipments and Imports.
Table 2 shows assessable volume and revenue at exemption levels of
30, 25, 20, 15 and 10 mmbf, as well as with no exemptions. The table
accounts for both the de minimis and equity exemptions under part 1217,
and an assessment rate of $0.35 per thousand board feet.
Table 2--Assessable Volume and Assessment Revenue at Exemption Levels (MMBF) \1\
----------------------------------------------------------------------------------------------------------------
De minimis and Assessment
Volume equal to or greater than De minimis equity revenue ($)
exemption only exemptions \2\
----------------------------------------------------------------------------------------------------------------
30.............................................................. 37,965 32,805 $11,481,698
25.............................................................. 38,319 33,694 11,792,941
20.............................................................. 38,990 34,690 12,141,349
15.............................................................. 39,679 35,854 12,548,792
10.............................................................. 40,013 37,183 13,014,059
No exemptions................................................... 41,249 41,249 14,437,099
----------------------------------------------------------------------------------------------------------------
\1\ 2015 data from FEA and CBP were used to construct this table.
\2\ The product of total assessable volume, accounting for both de minimis and equity exemptions, and the
assessment rate of $0.35 per thousand board feet.
[[Page 49488]]
Table 3 is the inverse of Table 2 in that it shows exempt volume at
de minimis and equity exemptions of 30, 25, 20, 15 and 10 mmbf.
Table 3--Exempt Volume at Exemption Levels (MMBF) \1\
----------------------------------------------------------------------------------------------------------------
De minimis exemption only De minimis and equity
-------------------------------- exemptions
Volume less than -------------------------------
Volume % Exempt \2\ Volume % Exempt \2\
----------------------------------------------------------------------------------------------------------------
30.............................................. 3,284 8 8,444 20
25.............................................. 2,930 7 7,555 18
20.............................................. 2,259 5 6,559 16
15.............................................. 1,570 4 5,395 13
10.............................................. 1,236 3 4,066 10
----------------------------------------------------------------------------------------------------------------
\1\ 2015 data from FEA and CBP were used to construct this table.
\2\ The quotient of total exempt volume and total 2015 U.S. supply (the sum of U.S. shipments and U.S. imports)
of 41,249 MMBF.
Table 4 shows the number of entities (domestic manufacturers and
importers) that would be assessed and the number of entities that would
be exempt at the exemption thresholds of 30, 25, 20, 15 and 10 mmbf.
Table 4--Assessed and Exempt Entities at Exemption Levels (MMBF) \1\
----------------------------------------------------------------------------------------------------------------
Assessed Exempt
---------------------------------------------------------------
Volume (MMBF) Number of Number of
entities % Assessed \2\ entities % Exempt \2\
----------------------------------------------------------------------------------------------------------------
30.............................................. 172 16 882 84
25.............................................. 185 18 869 82
20.............................................. 215 20 839 80
15.............................................. 255 24 799 76
10.............................................. 283 26 771 73
None............................................ 1,054 100 .............. 0
----------------------------------------------------------------------------------------------------------------
\1\ 2015 data from FEA and CBP were used to construct this table.
\2\ The quotient of No. of Entities and total domestic manufacturers and importers recorded in the industry
(1,054) in 2015.
Based on its analysis, USDA determined the following: Exemption
thresholds of 10 to 15 mmbf would exempt 10 to 13 percent of the total
volume of softwood lumber (taking into account both the de minimis and
equity exemptions). This is close to the range exempt under other
research and promotion programs. While all of the exemption thresholds
analyzed would generate sufficient revenue for a viable program, the
additional revenue that could be collected if the de minimis level were
reduced much lower than 15 mmbf would likely not be worth the
additional costs. At this threshold, free rider implications would be
minimal because only 4 percent of the volume of softwood lumber would
be exempted as de minimis. Applying both the de minimis and equity
exemptions at 15 mmbf would allow the program to assess almost 90
percent of the total volume of softwood lumber.
Further, the program functioned successfully in 2015 with
assessment revenue of $12.905 million with de minimis and equity
exemptions of 15 mmbf. The Board has conducted activities at this level
of funding that have helped build demand for softwood lumber, including
a prize competition for tall wood buildings, research on wood
standards, and an education program for architects and engineers on
building with wood. An independent evaluation completed in 2016
concluded that activities of the Board increased sales of softwood
lumber between 2011 and 2015 by 1.683 bbf or $596 million. This equates
to a return on investment of $15.55 of additional sales for every $1
spent on promotion by the Board.\4\
---------------------------------------------------------------------------
\4\ Prime Consulting, Softwood Lumber Board, Comprehensive
Program ROI, 2012-2015, February 2016.
---------------------------------------------------------------------------
Therefore, when considering all of the factors collectively, USDA
concludes that 15 mmbf is a reasonable and most appropriate de minimis
quantity under part 1217.\5\ Accordingly, this rule establishes the de
minimis quantity threshold under part 1217 at 15 mmbf. Thus, no
amendment to part 1217 is necessary.
---------------------------------------------------------------------------
\5\ As stated previously, the de minimis level and the equity
exemption are purposefully aligned, and therefore this conclusion
accounts for the equity exemption at 15 mmbf.
---------------------------------------------------------------------------
Final 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 this final rule on
small entities as defined by the Small Business Administration (SBA).
The classification of a business as small, as defined by the SBA,
varies by industry. If a business is defined as ``small'' by SBA size
standards, then it is ``eligible for government programs and
preferences reserved for `small business' concerns.'' \6\ Accordingly,
AMS has considered the economic impact of this action on such entities.
---------------------------------------------------------------------------
\6\ https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/small-business-size-regulations.
---------------------------------------------------------------------------
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 SBA 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 (domestic manufacturers
and importers) as those having annual receipts of no more than $7.5
million.\7\
---------------------------------------------------------------------------
\7\ SBA does have a small business size standard for
``Sawmills'' of 500 employees (see https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf). Based on USDA's
understanding of the lumber industry, using this criteria would be
impractical as sawmills often use contractors rather than employees
to operate and, therefore, many mills would fall under this criteria
while being, in reality, a large business. Therefore, USDA used
agricultural service firm as a more appropriate criteria for this
analysis.
---------------------------------------------------------------------------
[[Page 49489]]
Using an average price of $330 per thousand board feet,\8\ a
domestic manufacturer or importer who ships less than about 23 mmbf per
year would be considered a small entity for purposes of the RFA. As
shown in Table 4, there were 1,054 domestic manufacturers and importers
of softwood lumber based on 2015 data. Of these, 864 entities shipped
or imported less than 23 mmbf and would be considered to be small
entities under the SBA definition. Thus, based on the $7.5 million
threshold, the majority of domestic manufacturers and importers of
softwood lumber would be considered small entities for purposes of the
RFA.
---------------------------------------------------------------------------
\8\ Random Lengths Publications, Inc.; www.randomlengths.com.
---------------------------------------------------------------------------
This action establishes a de minimis quantity exemption threshold
under part 1217. Part 1217 is administered by the Board with oversight
by USDA. In response to a federal district court decision in Resolute,
USDA conducted a new analysis to determine a reasonable and appropriate
de minimis threshold. Based on this analysis, this final rule
establishes the de minimis quantity threshold at 15 mmbf and entities
manufacturing (and domestically shipping) or importing less than 15
mmbf per year would be exempt from paying assessments under part 1217.
Authority for this action is provided in sections 516(a)(2), 516(g) and
525 of the 1996 Act.
Regarding the economic impact of the de minimis exemption, the
exemption allows the Board to exempt from assessment small entities
that would be unduly burdened by the program's obligations. At the 15
mmbf exemption threshold, small manufacturers and importers that
domestically ship or import less than 15 mmbf of softwood lumber will
not have to pay assessments under the program.
Additionally, larger manufacturers and importers will not have to
pay assessments on the first 15 mmbf of softwood lumber domestically
shipped or imported each year. This exemption is intended for the
purpose of equity, whereby all entities who must pay assessments may
reduce their assessable volume by 15 mmbf. This exemption benefits
smaller manufacturers and importers whose annual shipments or imports
are above the de minimis threshold of 15 mmbf. With this exemption, an
entity that ships or imports a quantity of softwood lumber equal to the
RFA-small business definition of 23 mmbf, would only pay assessments on
no more than 8 mmbf of softwood lumber.
To calculate the impact of the assessment rate on the revenue of an
assessment payer, the assessment rate is divided by an average price.
Using an average 2015 price of $330 per thousand board feet, the
assessment rate as a percentage of price could range from 0.106 percent
at the current assessment rate to 0.151 percent at the maximum
assessment rate. This analysis helps identify the impact of the
assessment rate on the revenues of assessment payers. At the current
assessment rate of $0.35 per thousand board feet to the maximum
assessment rate of $0.50 per thousand board feet, assessment payers
would owe between 0.106 percent and 0.151 percent of their revenues,
respectively.
In its analysis of alternatives, USDA evaluated five different
exemption thresholds--30, 25, 20, 15 and 10 mmbf using 2015 data--
accounting for both the de minimis and equity exemptions, as well as
having no exemptions under the program. USDA evaluated these
alternatives based on the following factors: an estimate of quantity of
softwood lumber covered under the program (quantity assessed and
quantity exempted); available funding to support a viable program; free
rider implications; and the impact of program requirements on entities
(above and below a de minimis threshold). USDA conducted a balancing
test among these factors to assess whether one exemption threshold
works better than another when the factors are considered collectively.
In reviewing the quantity of assessable versus exempt softwood
lumber at the alternative exemption thresholds, USDA found that at an
exemption threshold of 30 mmbf, a total of 32.805 bbf would be assessed
with 3.284 bbf, or 8 percent, exempt as de minimis, plus an additional
5.16 bbf exempt as equity for 20 percent of total volume exempt; at 25
mmbf, a total of 33.694 bbf would be assessed with 2.93 bbf, or 7
percent, exempt as de minimis, plus an additional 4.625 bbf exempt as
equity for 18 percent total volume exempt; at a threshold of 20 mmbf, a
total of 34.69 bbf would be assessed with 2.259 bbf, or 5 percent,
exempt as de minimis, plus an additional 4.3 bbf exempt as equity for
16 percent total volume exempt; at a threshold of 15 mmbf, a total of
35.854 bbf would be assessed with 1.57 bbf, or 4 percent, exempt as de
minimis, plus an additional 3.825 bbf exempt as equity for 13 percent
total volume exempt; at a threshold of 10 mmbf, a total of 37.183 bbf
would be assessed, with 1.236 bbf, or 3 percent, exempt as de minimis,
plus an additional 2.83 bbf exempt as equity for 10 percent total
volume exempt; and with no exemptions, a total of 41.249 bbf would be
assessed. In reviewing the total volume exempt under the softwood
lumber program (taking into account both the de minimis and equity
exemptions), thresholds of 10 to 15 mmbf exempt between 10 and 13
percent of the volume, which is close to the range exempt under other
programs.
In reviewing available funding to support a viable program at the
alternative exemption thresholds, at an exemption threshold of 30 mmbf,
estimated assessment revenue is $11.482 million; at 25 mmbf, estimated
assessment revenue is $11.793 million (an additional $311,243); at a
threshold of 20 mmbf, estimated assessment revenue is $12.141 million
(an additional $348,408); at a threshold of 15 mmbf, estimated
assessment revenue is $12.549 million (an additional $407,444); at a
threshold of 10 mmbf, estimated assessment revenue is $13.014 million
(an additional $465,267); and with no exemptions, estimated assessment
revenue is $14.437 million (an additional $1.423 million).
Assessment revenue under the current softwood lumber program has
ranged from about $10.638 million in 2012 to $12.905 million in 2015.
At this level of revenue, the current program has seen success. The
revenues reviewed at the different exemption thresholds are comparable
to these levels or higher. Thus, all of the exemption thresholds
analyzed would generate sufficient revenue for a viable program.
Regarding free riders, USDA notes that the key to assessing the
free rider implications of a de minimis quantity is not the number of
entities exempt under a program but rather the volume of product
exempt. This is because assessments are based on volume shipped or
imported and not on the number of entities; assessments are not paid by
entities on a pro rata basis. In evaluating free rider implications at
the alternative exemption thresholds, at an exemption threshold of 30
mmbf, 84 percent of the number of entities (or 882) would be exempt but
only 8 percent of the volume would be exempt as de minimis; at a
threshold of 25 mmbf, 82 percent of the number of entities (or 869)
would be exempt, but only 7 percent of the volume would be exempt as de
minimis; at a threshold of 20 mmbf, 80 percent of the number of
entities (or 839) would be exempt, but
[[Page 49490]]
only 5 percent of the volume would be exempt as de minimis; at a
threshold of 15 mmbf, 76 percent of the number of entities (or 799)
would be exempt, but only 4 percent of the volume would be exempt as de
minimis; and at a threshold of 10 mmbf, 73 percent of the number of
entities (or 771) would be exempt, but only 3 percent of the volume
would be exempt as de minimis.
In evaluating the impact of the program's requirements at the
alternative exemption thresholds, entities that ship or import at or
above the de minimis threshold must pay assessments to the Board.
Assessment payers must also submit a report to the Board each quarter
of the volume of softwood lumber shipped or imported for the respective
quarter. Entities that ship or import below the de minimis threshold
must apply to the Board each year for a certificate of exemption and
provide documentation as appropriate to support their request. The
reporting and recordkeeping requirements are detailed in the section
below titled Paperwork Reduction Act.
At an exemption threshold of 30 mmbf, 172 entities would pay
assessments and 882 would be exempt; at 25 mmbf, 185 entities would pay
assessments and 869 would be exempt; at 20 mmbf, 215 entities would pay
assessments and 839 would be exempt; at 15 mmbf, 255 entities would pay
assessments and 799 would be exempt; at 10 mmbf, 283 entities would pay
assessments and 771 would be exempt. Thus, as the exemption threshold
is reduced, more entities would be subject to the assessment and
quarterly reporting obligation under part 1217.
Further, in considering program compliance costs, USDA estimates
the cost of an on-site audit of a single entity at $5,000 or more.
Thus, the cost to pursue a compliance case against an entity that
shipped less than 10 mmbf, 9 mmbf for example, would outweigh the
revenue that would be collected from that entity of $3,150. Similarly,
the assessment revenue that would be collected from an entity that
shipped less than 15 mmbf, 12 mmbf for example, would amount to $4,200.
The benefit of assessing smaller manufacturers, $3,150 at 9 mmbf and
$4,200 at 12 mmbf, does not outweigh the cost of pursuing compliance
cases against them at $5,000 per entity. The point at which the
assessment revenue that would be collected from an entity outweighs the
estimated cost of $5,000 to pursue a compliance case is an entity with
volume equal to or greater than 14.3 mmbf.\9\ This level is close to 15
mmbf. By this analysis, the selection of 15 mmbf as the de minimis
quantity is reasonable.
---------------------------------------------------------------------------
\9\ This figure is computed by dividing the estimated cost to
pursue a compliance case against an entity of $5,000 by the
assessment rate of $0.35 per thousand board feet.
---------------------------------------------------------------------------
Analysis of the 23 mmbf-RFA small business threshold as a
reasonable option for de minimis shows that 190 entities would be
subject to assessment and 864 entities would be exempt. In terms of
volume, 38.44 bbf would be assessed, or 93 percent of total volume, and
2.809 bbf would be exempt, or 7 percent of total volume.
Based upon the analysis contained herein, any of the exemption
thresholds reviewed would be reasonable because they would exempt from
3 to 8 percent of the volume of softwood lumber as de minimis. However,
when the total volume exempt under the softwood lumber program is
considered (taking into account both the de minimis and equity
exemptions), thresholds of 10 to 15 mmbf exempt between 10 and 13
percent of the volume, which is close to the range exempt under other
programs. While all of the exemption thresholds analyzed would generate
sufficient revenue for a viable program, the additional revenue that
could be collected if the de minimis level were reduced much lower than
15 mmbf would likely not be worth the additional costs. The softwood
lumber program operated successfully since its inception at an
exemption threshold of 15 mmbf.\10\
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\10\ An independent evaluation of the softwood lumber program
showed that the activities of the Board increased sales of softwood
lumber between 2011 and 2015 by 1.683 bbf or $596 million. This
equates to a return on investment of $15.55 of additional sales for
every $1 spent on promotion by the Board. By this metric, part 1217
to date has been effective. USDA therefore finds that 15 mmbf is a
reasonable exemption level for de minimis.
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Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Chapter 35), the information collection and recordkeeping requirements
imposed by part 1217 have been approved previously under OMB control
number 0581-0093. This rule imposes no additional reporting and
recordkeeping burden on domestic manufacturer and importers of softwood
lumber. The reporting requirements pertaining to this rule are
described in the following paragraphs.
As previously mentioned, pursuant to Sec. 1217.53(a), domestic
manufacturers and importers who domestically ship or import less than
the de minimis threshold must apply to the Board each year for a
certificate of exemption and provide documentation as appropriate to
support their request. The reporting burden for this collection of
information is estimated to average 0.25 hours per domestic
manufacturer or importer per report, or 0.25 hours per year (1 request
per year per exempt entity). This computes to a total annual burden of
199.75 hours (0.25 hours times 799 exempt entities at the 15 mmbf de
minimis exemption threshold from Table 4).
Further, pursuant to Sec. 1217.70, domestic manufacturers and
importers that ship or import at or over the de minimis exemption level
and pay their assessments directly to the Board must submit a shipment/
import report for each quarter when assessments are due. The reporting
burden for this collection of information is estimated to average 0.5
hours per domestic manufacturer or importer per report, or 2 hours per
year (4 reports per year times 0.5 hours per report). This computes to
a total annual burden of 510 hours (255 assessed entities (from Table
4--No. of Assessed Entities at 15 mmbf) at 2 hours each equals 510
hours).
All domestic manufacturers and importers must also maintain records
sufficient to verify their reports. The recordkeeping burden for
keeping this information is estimated to average 0.5 hours per record
keeper maintaining such records, or 527 hours (1,054 total entities
assessed (from Table 4--No. of Assessed Entities at no exemption) times
0.5 hours).
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.
USDA 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, USDA initiated this action in response
to a May 2016 federal court decision in Resolute. This rule establishes
the de minimis quantity exemption under part 1217.
A proposed rule concerning this action was published in the Federal
Register on May 30, 2017 (82 FR 24583). The Board distributed copies of
the proposed rule via email to domestic manufacturers and importers.
The proposal was also made available through the internet by USDA and
the
[[Page 49491]]
Office of the Federal Register. A 60-day comment period ending July 31,
2017, was provided to allow interested persons to submit comments.
Analysis of Comments
Thirty-three comments were received in response to the proposed
rule. Of those 33 comments, one was outside the scope of the rulemaking
and the remaining 32 supported the 15 mmbf exemption threshold. The
following is an analysis of those 32 comments.
Several commenters reiterated the data presented in the proposed
rule. They cited Table 3 which shows that, at the 15 mmbf threshold,
entities that pay into the program account for 96 percent of the U.S.
softwood lumber market volume. Thus, free rider concerns are minimal.
Reducing the exemption level by a third (down to 10 mmbf) would only
increase that number to 97 percent of the U.S. market and would not be
worth the additional effort. There are a large number of small
manufacturers and importers who account for a small percentage of the
softwood lumber shipped in the United States. The commenters opined
that the cost of collecting an assessment from such a large number of
entities outweighs the revenue that could be collected from such a
small amount of volume. They agreed that Board staff time would be
better spent on promotion activities than trying to collect a small
amount of revenue from several small entities.
One commenter opined that the methodology used by USDA to determine
the de minimis threshold was comprehensive and explored tradeoffs
involved in setting a threshold below which it is counterproductive to
the collection of assessments to further the program. The commenter
stated that ``. . . USDA dealt with a large amount of data on imports
that it appropriately scrubbed to exclude obvious errors and
outliers.'' Within the populations of domestic manufacturers and
importers categorized based on volume, USDA conducted a series of
``what if'' analyses to determine the impact of various de minimis
levels on revenue in terms of ``. . . administrative costs, the
compliance burden on respondents and the potential for ``free rider''
benefits.'' The commenter also observed that USDA compared the results
to other federal promotion programs authorized under the 1996 Act and
overseen by USDA where it found that 8 of 10 programs exempt a de
minimis quantity from assessment, and that half of those programs
exempt between 3 and 11 percent of the total quantity covered by the
program as de minimis. Among the range of alternatives that USDA
analyzed, the 10 and 15 mmbf thresholds came closest to this range. The
commenter stated that USDA also compared the benefits derived from
these thresholds with the likely compliance costs incurred, which USDA
estimated at $5,000 per entity. The point at which revenues collected
from entities that would fall below the compliance cost was found to be
at 14.3 mmbf, which is closest to the 15 mmbf threshold. The
combination of these results led USDA to conclude that 15 mmbf is the
most appropriate benchmark between volumes assessed and not assessed.
The commenter concluded that, ``. . . while there is no special formula
for computing a de minimis threshold . . . ,'' the commenter believes
that USDA selected a reasonable exemption amount based on the
industry's structure and the program's benefits and costs.
Six commenters opined that the 15 mmbf threshold appropriately
separates the high production manufacturers from small entities that
manufacture specialty products and sell into mostly local and niche
markets. They agreed that specialty products do not benefit as much
from a national promotion program, and that growth in market share
benefits entities that manufacture larger volumes to a greater degree
than those that fall below the 15 mmbf threshold.
Several commenters expressed concern with the administrative burden
that complying with a mandatory promotion program could place on small
entities below the 15 mmbf threshold. One commenter stated that, on a
per board foot ratio, the costs to participate in the program are lower
for larger entities than smaller entities. Many small entities still
record their shipments by hand. Larger entities, on the other hand, can
afford to invest in automated computer reporting systems and can have
personnel dedicated to efficiently analyzing their reporting. Thus, the
administrative costs for smaller entities to participate in the program
are higher than the costs for larger entities.
Two commenters also referenced the part's 8 percent cap on
administrative expenses. They opined that the revenue gained from
collecting assessments from numerous small entities would not be
sufficient to justify the additional costs and administrative
complexities.
Three commenters expressed support for the equity exemption. They
opined that the equity exemption makes the program fair for everyone.
One commenter opined that the equity exemption mitigates the free rider
problem because larger entities do not have to pay assessments on their
first 15 mmbf shipped. Without the equity exemption, assessment payers
would pay more, thereby increasing the free rider impact.\11\
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\11\ For example, as explained in the May 2017 proposed rule, if
the thresholds for de minimis and equity exemptions were 10 mmbf,
Company A that ships 8 mmbf annually would pay no assessments, and
Company B that ships 30 mmbf annually would have to pay assessments
on 20 mmbf of softwood lumber. At an assessment rate of $0.35 per
thousand board feet, this would compute to $7,000 in assessments.
Without the equity exemption, Company A would still pay no
assessments but Company B would have to pay assessments on 30 mmbf.
This would compute to $10,500 in assessments, which is an additional
burden of $3,500. Thus, the equity exemption reduces the burden of
free riders on entities funding the program. It creates fairness
because it exempts from assessment an equal volume from all
entities, regardless of their size.
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Two commenters discussed the efforts of the Blue Ribbon Commission
(BRC), the proponent group, in promulgating the program. They stated
that the BRC surveyed the industry on issues related to the program,
including the de minimis exemption threshold. They stated that the BRC
sought a level that would generate maximum revenue for the program
while being mindful of the cost of administering the program and
collecting assessments. The BRC's survey found that 15 mmbf was the
appropriate level that was broadly accepted by the industry.
Several commenters also expressed their overall support for the
softwood lumber program. They agreed that the program provides a
strong, unified voice for the industry. One commenter stated that the
program has contributed significantly to strengthening the position of
softwood lumber in the market place as well as expanding and developing
new markets for softwood lumber. The commenters also agreed that
funding for the program has been appropriate since assessment
collection began in 2012. None of the commenters supported increasing
the exemption threshold thereby reducing funding for the program.
No changes have been made to the proposed rule based on the
comments received.
After consideration of all relevant matters presented, including
the available information and comments received, it is hereby found
that this rule, is consistent with and will effectuate the purposes of
the 1996 Act.
List of Subjects in 7 CFR Part 1217
Administrative practice and procedure, Advertising, Consumer
information, Marketing agreements, Promotion, Reporting and
recordkeeping requirements, Softwood lumber.
[[Page 49492]]
The authority citation for 7 CFR part 1217 continues to read as
follows:
Authority: 7 U.S.C. 7411-7425; 7 U.S.C. 7401.
Dated: October 19, 2017.
Bruce Summers,
Acting Administrator.
[FR Doc. 2017-23094 Filed 10-25-17; 8:45 am]
BILLING CODE 3410-02-P
