Softwood Lumber Research, Promotion, Consumer Education and Industry Information Order; Assessment Rate Increase
| Published date | 13 August 2020 |
| Citation | 85 FR 49281 |
| Record Number | 2020-16554 |
| Section | Proposed rules |
| Court | Agricultural Marketing Service,Agriculture Department |
Federal Register, Volume 85 Issue 157 (Thursday, August 13, 2020)
[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.
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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 http://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 http://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
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Entities Volume (MMBF) Entities Volume (MMBF) Entities Volume (MMBF)
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Small................................................... 226 1,991 774 1,257 1,000 3,248
Large................................................... 290 32,229 106 32,582 396 64,811
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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)
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Assessment $/ Assessment $/
Softwood lumber (by HTUS No.) cubic meter square meter
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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
