Softwood Lumber Research, Promotion, Consumer Education and Industry Information Order; Assessment Rate Increase, 49281-49284 [2020-16554]

Agencies

• Agricultural Marketing Service
• DEPARTMENT OF AGRICULTURE

[Federal Register Volume 85, Number 157 (Thursday, August 13, 2020)]
[Proposed Rules]
[Pages 49281-49284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16554]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / 
Proposed Rules

[[Page 49281]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1217

[Document Number AMS-SC-20-0014]


Softwood Lumber Research, Promotion, Consumer Education and 
Industry Information Order; Assessment Rate Increase

AGENCY: Agricultural Marketing Service.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposal invites comments on amending the Softwood Lumber 
Research, Promotion, Consumer Education and Industry Information Order 
(Order) to increase the assessment rate from $0.35 to $0.41 per 
thousand board feet (mbf). The Order is administered by the Softwood 
Lumber Board (Board) with oversight by the U.S. Department of 
Agriculture (USDA). Under the program, assessments are collected from 
domestic manufacturers and importers and used for research and 
promotion projects designed to strengthen the position of softwood 
lumber in the marketplace. This proposal would also add the conversion 
factor for square meters to board feet and make one conforming change.

DATES: Comments must be received by October 13, 2020.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule. All comments must be submitted through 
the Federal e-rulemaking portal at https://www.regulations.gov and 
should reference the document number and the date and page number of 
this issue of the Federal Register. All comments submitted in response 
to this proposed rule will be included in the rulemaking record and 
will be made available to the public. Please be advised that the 
identity of the individuals or entities submitting comments will be 
made public on the internet at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Andrea Ricci, Marketing Specialist, 
Promotion and Economics Division, Specialty Crops Program, AMS, USDA, 
1400 Independence Avenue SW, Room 1406-S, Stop 0244, Washington, DC 
20250-0244; telephone: (202) 572-1442; facsimile: (202) 205-2800; or 
electronic mail: [email protected].

SUPPLEMENTARY INFORMATION: This proposal affecting 7 CFR part 1217 
(herein the ``Order'') is authorized under the Commodity Promotion, 
Research, and Information Act of 1996 (1996 Act) (7 U.S.C. 7411-7425).

Executive Orders 12866, 13563, and 13771

    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 regulation would not 
have substantial and direct effects on Tribal governments and would not 
have significant Tribal implications.

Executive Order 12988

    This proposal 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, must 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 proposal invites comments on a proposal to amend the Order by 
increasing the assessment rate from $0.35 to $0.41 per mbf of softwood 
lumber shipped within or imported into the United States. The Order is 
administered by the Board with oversight by the USDA. Under the 
program, assessments are collected from domestic manufacturers and 
importers and used for research and promotion projects designed to 
strengthen the position of softwood lumber in the marketplace. The 
additional funds would enable the Board to maintain its existing 
programs, while supporting new programs that would help maintain and 
expand markets for softwood lumber. This proposal would also add the 
conversion factor for square meters to board feet and make one 
conforming change.
    The Order specifies that the funds to cover the Board's expenses 
shall be paid by assessments on manufacturers for the U.S. market, 
other income of the Board, and other funds available to the Board. 
Domestic manufacturers pay assessments based on the volume of

[[Page 49282]]

softwood lumber shipped within the United States and importers pay 
assessments based on the volume of softwood lumber imported to the 
United States. Assessments are collected per mbf of softwood lumber, 
except that no entity shall pay an assessment on the first 15 million 
board feet (mmbf) of softwood lumber otherwise subject to assessments 
in a fiscal year. Domestic manufacturers are required to remit to the 
Board assessments owed no later than 30 calendar days of the month 
following the end of the quarter in which the softwood lumber was 
shipped. Importers are responsible for paying assessments to the Board 
on softwood lumber imported into the United States through the U.S. 
Customs and Border Protection (CBP). If CBP does not collect an 
assessment from the importer, the importer is responsible for paying 
the assessment to the Board no later than 30 calendar days of the month 
following the end of the quarter in which the softwood lumber was 
imported. Domestic manufactures and importers must also remit to the 
Board required reports. The Order also provides for exemptions from 
assessments. Section 1217.53 specifies that U.S. manufacturers and 
importers that domestically ship and/or import less than 15 mmbf 
annually, exports of softwood lumber from the United States, and 
shipments and imports of organic softwood lumber are exempt from the 
Order's assessment requirements.
    Pursuant to Sec.  1217.52, and subject to the exemptions specified 
in Sec.  1217.53, each domestic manufacturer and importer shall pay an 
assessment rate of $0.35 per mbf of softwood lumber, except that no 
entity shall pay an assessment on the first 15 mmbf of softwood lumber 
otherwise subject to assessment in a fiscal year. The Board may 
recommend to the Secretary a change in the assessment rate as it deems 
appropriate by at least a majority of Board members plus two (exclusive 
of vacant seats). The assessment rate may not be less than $0.35 per 
mbf nor more than $0.50 per mbf.
    The $0.35 per mbf assessment rate has been in effect since the 
program's inception in 2011. The Board's fiscal year runs from January 
1 through December 31. Board expenditures for the five-year period from 
2014-2018 have ranged from a low of $12.35 million in 2014 to a high of 
$15.32 million in 2016; expenditures in 2018 were $14.23 million. 
Program expenditures averaged $12.96 million during those five years, 
with annual expenditures averaging $3.29 million (24 percent) for 
research conducted on wood standards; $4.06 million (29 percent) on a 
communications program, which includes continuing education courses for 
architects and engineers; and $3.94 million (28 percent) on a 
construction and design program that provides technical support to 
architects and structural engineers about using wood. Pursuant to Sec.  
1217.50(h), administrative expenditures have been under 8 percent of 
the assessments collected and other income received by and available to 
the Board for the fiscal year.
    Board assessment income has ranged from $12.55 million in 2014 to 
$13.74 million in 2018. About 70 percent of the assessment income is 
from domestic manufacturers and 30 percent is from importers. 
Additionally, pursuant to Sec.  1217.50(i), the Board maintains a 
monetary reserve with funds that do not exceed one fiscal period's 
budget. This proposal would also amend Sec.  1217.52(h) to add the 
conversion factor for square meters to board feet. Currently, the Order 
provides a factor used to convert cubic meters of imported softwood 
lumber into the equivalent volume of thousands of board feet, thus 
enabling the Board to calculate appropriate assessments. Softwood 
lumber is also being imported in square meters. Adding a conversion 
factor for square meters would better reflect current industry 
practices and facilitate the administration of the program.
    Finally, this proposed rule would make a conforming change to Sec.  
1217.52(c) to reflect previously revised voting requirements in Sec.  
1217.44. In a final rule published in the Federal Register on September 
25, 2019 (84 FR 50294), voting requirements prescribed in Sec.  1217.44 
were revised to specify that recommendations to change the assessment 
rate require affirmation by at least a majority of Board members plus 
two (exclusive of vacant seats). Currently, corresponding language in 
Sec.  1217.52(c) specifies that an affirmative vote of at least two-
thirds of Board members is required for assessment rate 
recommendations. A conforming change in this proposed rule would revise 
Sec.  1217.52(c) to require affirmation of assessment rate 
recommendations by a Board majority plus two, thus harmonizing the 
language in the two sections related to assessment recommendations.

Board Recommendation

    The Board met on November 20, 2019 and recommended increasing its 
assessment rate from $0.35 to $0.41 per mbf. The additional funds would 
enable the Board to maintain its existing programs, while supporting 
new programs that would help maintain and expand markets for softwood 
lumber. For the 2016-2018 fiscal years, the Board has used reserve 
funds to bridge the deficit between income and expenses. In 2019, the 
Board kept expenditures in line with income and had to make cuts to its 
programs, primarily its communications program. The Board discussed the 
deficit spending that occurred from 2016-2018 and the funding cuts in 
2019, along with the impacts of inflation, and determined that without 
the increase it would not be able to maintain its current programs nor 
be able to address gaps that limit the Board's ability to expand the 
market for softwood lumber. Continuing at the current funding level 
would limit its ability to capitalize on new opportunities or address 
challenges and maintain the impact the Board has achieved for the 
softwood lumber industry in prior years. Additionally, the current 
funding level restricts the ability to accelerate softwood lumber's 
increase in market share and lumber usage in the non-residential 
sector.
    The Board's funding of research on wood standards has facilitated 
interest in using wood-based building systems in non-traditional 
markets, such as tall wood building. The 2021 International Code 
Council building standards will recognize the construction of mass 
timber buildings up to 18 stories in height. These new opportunities 
require a more comprehensive approach, particularly in outreach and 
education initiatives. The Board recognized that its funded programs 
must go beyond inspiring professionals to think about building with 
wood. These individuals need resources and technical assistance.
    The Board estimated the proposed increased assessment rate of $0.41 
per mbf would generate additional revenues as shown in Table 1. The 
consumption forecast and assessable board feet figures are shown in 
billion board feet (bbf).

              Table 1--Additional Assessment Revenue at the Proposed $0.41 per mbf Assessment Rate
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                                       2021            2022            2023            2024            2025
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Consumption Forecast (bbf) \1\..           49.69           49.39           52.72           55.64           57.52

[[Page 49283]]

 
Assessable Board Feet (bbf) \2\.           40.30           40.05           42.76           45.13           46.65
Estimated Assessment Revenue         $14,104,640     $14,018,162     $14,965,761     $15,794,788     $16,326,618
 ($0.35/mbf)....................
Estimated Assessment Revenue         $16,522,578     $16,421,276     $17,531,320     $18,502,466     $19,125,466
 ($0.41/mbf)....................
Additional Assessment Revenue at      $2,417,938      $2,403,114      $2,565,559      $2,707,678      $2,798,849
 $0.41/mbf) \3\.................
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\1\ Source: Forest Economic Advisors (https://www.getfea.com/data-center); data frequently revised; pulled 2/21/
  2020.
\2\ Assumes 18.9 percent exemption rate.
\3\ Difference of estimated assessment revenue at $0.41/mbf and estimated assessment revenue at $0.35/mbf.

    The additional funds would support programs targeting contractors 
and developers to address installer training and skills development; 
establish an education program that would target architecture and 
engineering students, as well as professionals; and restore the Board's 
communications program budget so that by 2025 it would be equivalent to 
2018 expenditures. Therefore, the Board recommended increasing the 
assessment rate in the Order from $0.35 to $0.41 per mbf. USDA accepts 
and agrees with the Board's reasoning for increasing the assessment 
rate. Accordingly, USDA proposes to amend Sec.  1217.52(b) to specify a 
$0.41 per mbf assessment rate.

Initial Regulatory Flexibility Act Analysis

    In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 
601-612), the Agricultural Marketing Service (AMS) is required to 
examine the impact of the proposed rule on small entities. Accordingly, 
AMS has considered the economic impact of this action on such entities.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to the actions so that small businesses will not be 
disproportionately burdened. The Small Business Administration (SBA) 
defines, in 13 CFR part 121, small agricultural service firms (domestic 
manufacturers and importers) as those having annual receipts of no more 
than $8 million.\1\
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    \1\ SBA does have a small business size standard for 
``Sawmills'' of 500 employees (see https://www.sba.gov/sites/default/files/2019-08/SBA%20Table%20of%20Size%20Standards_Effective%20Aug%2019%2C%202019_Rev.pdf). Based on USDA's understanding of the lumber industry, using 
this criterion would be impractical as sawmills often use 
contractors rather than employees to operate and, therefore, many 
mills would fall under this criterion while being, in reality, a 
large business. Therefore, USDA used agricultural service firm as a 
more appropriate criterion for this analysis.
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    The Random Lengths Publications, Inc.'s yearly average framing 
lumber composite price was $356 per mbf in 2019. Dividing the $8 
million threshold that defines an agricultural service firm as small by 
this price results in a maximum threshold of 22.5 million board feet 
(mmbf) of softwood lumber per year that a domestic manufacturer or 
importer may ship to be considered a small entity for purposes of the 
RFA. Table 2 shows the number of entities and the amount of volume they 
represent that may be categorized as small or large based on the SBA 
definition.

                                        Table 2--Domestic Manufacturers and Importers by SBA Size Standards, 2019
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                                                              Domestic manufacturers                 Importers                        Totals
                                                         -----------------------------------------------------------------------------------------------
                                                             Entities      Volume (MMBF)     Entities      Volume (MMBF)     Entities      Volume (MMBF)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small...................................................             226           1,991             774           1,257           1,000           3,248
Large...................................................             290          32,229             106          32,582             396          64,811
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................             516          34,220             880          33,839           1,396          68,059
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Sources: Forest Economic Advisors; Customs and Border Protection.

    As shown in Table 2, there are a total of 1,396 domestic 
manufacturers and importers of softwood lumber based on 2019 data. Of 
these, 1,000 entities, or 72 percent, shipped or imported less than 
22.5 mmbf and would be considered small under the SBA definition. These 
1,000 entities domestically manufactured or imported 3.25 billion board 
feet (bbf) in 2019, less than 5 percent of total volume.
    While this action would increase the assessment obligation on 
domestic manufacturers and importers from $0.35 per mbf to $0.41 per 
mbf, the impact on these entities would be minimal and uniform. The 
current assessment rate of $0.35 per mbf represents 0.1 percent of the 
Random Lengths 2019 average framing lumber composite price of $356 per 
mbf. The proposed assessment rate of $0.41 per mbf is 0.12 percent of 
this price. The increase in assessment rate represents an increase in 
cost to domestic manufacturers and importers of two-thousandth of one 
percentage point relative to their average received price. This cost, 
though minimal, would also be offset by the benefits derived from the 
program.
    The 1996 Farm Bill requires that Research and Promotion programs be 
evaluated every five years with the specific goal of measuring the 
economic impact of commodity promotion on demand for the commodity. The 
Board completed its first five-year evaluation of program effectiveness 
in 2016. The five-year evaluation, conducted by Prime Consulting, found 
that softwood lumber use per square foot increased nearly 23 percent 
among architects and structural engineers from the program's inception 
in 2011 to 2015. The evaluation also found a cumulative return on 
investment (ROI) of more than $15 in increased sales of softwood lumber 
per $1 spent on promotion by the program between 2012 and 2015. The 
cumulative ROI was updated in 2019 to reflect the time period of 2012 
to 2018. The result was a return of more than $23 in increased sales 
per $1 spent on promotion.
    This proposal invites comments on amending Sec.  1217.52(b) to 
increase the assessment rate from $0.35 to $0.41 per

[[Page 49284]]

mbf. The Order is administered by the Board with oversight by the USDA. 
Under the program, assessments are collected from domestic 
manufacturers and importers and used for research and promotion 
projects designed to strengthen the position of softwood lumber in the 
marketplace. The additional funds collected at the proposed rate would 
enable the Board to maintain its existing programs, while supporting 
new programs that would help maintain and expand markets for softwood 
lumber. This proposal would also amend Sec.  1217.52(h) to add the 
conversion factor for square meters to board feet and make one 
conforming change to section 1217.52(c) regarding voting requirements.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the information collection and recordkeeping requirements 
that are imposed by the Order have been approved previously under OMB 
control number 0581-0093. This proposed rule would not result in a 
change to the information collection and recordkeeping requirements 
previously approved and would impose no additional reporting and 
recordkeeping burden on domestic manufacturers and importers of 
softwood lumber.
    As with all Federal promotion programs, reports and forms are 
periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies. USDA has not 
identified any relevant Federal rules that duplicate, overlap, or 
conflict with this proposed rule.
    Regarding alternatives, the Board considered maintaining the 
current assessment rate. However, a majority of Board members 
determined that an increase was needed to adequately support existing 
programs and fund new initiatives. The Board discussed increasing the 
assessment at its meeting in November 2018, but after much 
consideration it determined it was not the right time for the industry 
to make such a recommendation. In 2019, with the reduction of 
assessment revenue and the program cuts that were made, the Board again 
considered the merits of increasing the assessment rate. This was 
discussed at several Board committee meetings, including meetings of 
the Executive Committee on September 17, 2019 and November 19, 2019, 
and the Finance Committee on November 19, 2019. The Board also 
considered rates of $0.39 and $0.50 per mbf. After much discussion at 
committee meetings and with the full Board, the Board recommended 
increasing the rate from $0.35 to $0.41 per mbf.
    AMS has performed this initial RFA analysis regarding the impact of 
this proposed action on small entities and invites comments concerning 
potential effects of this action.
    USDA has determined that this proposed rule is consistent with and 
would effectuate the purposes of the 1996 Act.
    A 60-day comment period is provided to allow interested persons to 
respond to this proposal. All written comments received in response to 
this proposed rule by the date specified will be considered prior to 
finalizing this action.

List of Subjects in 7 CFR Part 1217

    Administrative practice and procedure, Advertising, Consumer 
information, Marketing agreements, Softwood Lumber promotion, Reporting 
and recordkeeping requirements.

    For the reasons set forth in the preamble, 7 CFR part 1217, is 
proposed to be amended as follows:

PART 1217--SOFTWOOD LUMBER RESEARCH, PROMOTION, CONSUMER EDUCATION 
AND INDUSTRY INFORMATION ORDER

0
1. 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.


Sec.  1217.52  [Amended]

0
2. In Sec.  1217.52, paragraphs (b), (c), and (h) are revised to read 
as follows:


Sec.  1217.52  Assessments.

* * * * *
    (b) Subject to the exemptions specified in Sec.  1217.53, each 
manufacturer for the U.S. market shall pay an assessment to the Board 
at the rate of $0.41 per thousand board feet of softwood lumber, except 
that no person shall pay an assessment on the first 15 million board 
feet of softwood lumber otherwise subject to assessment in a fiscal 
year. Domestic manufacturers shall pay assessments based on the volume 
of softwood lumber shipped within the United States and importers shall 
pay assessments based on the volume of softwood lumber imported to the 
United States.
    (c) At least 24 months after the Order becomes effective and 
periodically thereafter, the Board shall review and may recommend to 
the Secretary, upon an affirmative vote by at least a majority of Board 
members plus two (exclusive of vacant seats), a change in the 
assessment rate. In no event may the rate be less than $0.35 per 
thousand board feet nor more than $0.50 per thousand board feet. A 
change in the assessment rate is subject to rulemaking by the 
Secretary.
* * * * *
    (h) The HTSUS categories and assessment rates on imported softwood 
lumber are listed in the following table. The assessment rates are 
computed using the following conversion factors: one cubic meter (m3) 
equals 0.423776001 thousand board feet, and one square meter (m2) 
equals 0.010763104 thousand board feet. Accordingly, the assessment 
rate per cubic meter and square meter is as follows.

                        Table 1 to Paragraph (H)
------------------------------------------------------------------------
                                          Assessment  $/  Assessment  $/
      Softwood lumber (by HTUS No.)         cubic meter    square meter
------------------------------------------------------------------------
4407.11.00..............................          0.1737        0.004412
4407.12.00..............................          0.1737        0.004412
4407.19.05..............................          0.1737        0.004412
4407.19.06..............................          0.1737        0.004412
4407.19.10..............................          0.1737        0.004412
4409.10.05..............................          0.1737        0.004412
4409.10.10..............................          0.1737        0.004412
4409.10.20..............................          0.1737        0.004412
4409.10.90..............................          0.1737        0.004412
4418.99.10..............................          0.1737        0.004412
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* * * * *

Bruce Summers,
Administrator.
[FR Doc. 2020-16554 Filed 8-12-20; 8:45 am]
BILLING CODE 3410-02-P