[Federal Register Volume 63, Number 144 (Tuesday, July 28, 1998)]
[Proposed Rules]
[Pages 40193-40200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20156]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 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. 63, No. 144 / Tuesday, July 28, 1998 / 
Proposed Rules  

[[Page 40193]]


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DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

7 CFR Part 319

[Docket No. 96-031-1]
RIN 0579-AA82


Importation of Wood Chips From Chile

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Proposed rule.

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SUMMARY: We are proposing to amend the regulations for importing logs, 
lumber, and other unmanufactured wood articles. We believe that a 
surface pesticide treatment is effective in rendering large shipments 
of Pinus radiata wood chips from Chile free of plant pests. Therefore, 
we are proposing to allow the importation of Pinus radiata wood chips 
from Chile if the surfaces of the wood chips are treated with a 
specified pesticide mixture for use on wood chips from Chile. This 
change would provide more alternatives for persons interested in 
importing wood chips from Chile while continuing to protect against the 
introduction of dangerous plant pests.

DATES: Consideration will be given only to comments received on or 
before September 28, 1998.

ADDRESSES: Please send an original and three copies of your comments to 
Docket No. 96-031-1, Regulatory Analysis and Development, PPD, APHIS, 
suite 3C03, 4700 River Road Unit 118, Riverdale, MD 20737-1238. Please 
state that your comments refer to Docket No. 96-031-1. Comments 
received may be inspected at USDA, room 1141, South Building, 14th 
Street and Independence Avenue SW., Washington, DC, between 8 a.m. and 
4:30 p.m., Monday through Friday, except holidays. Persons wishing to 
inspect comments are requested to call ahead on (202) 690-2817 to 
facilitate entry into the comment reading room.

FOR FURTHER INFORMATION CONTACT: Mr. Ronald Campbell, Operations 
Officer, Program Support Staff, PPQ, APHIS, 4700 River Road Unit 60, 
Riverdale, MD 20737-1236, (301) 734-8295; or e-mail: 
[email protected].

SUPPLEMENTARY INFORMATION: Analyses.

Background

    Logs, lumber, and other unmanufactured wood articles imported into 
the United States could pose a significant hazard of introducing plant 
pests and pathogens detrimental to agriculture and to natural, 
cultivated, and urban forest resources. The regulations in 7 CFR 
319.40-1 through 319.40-11 (referred to below as the regulations) 
contain provisions to eliminate any significant plant pest risk 
presented by the importation of logs, lumber, and other unmanufactured 
wood articles.

Wood Chips and Proposed Treatment

    Approximately $40 million worth of wood chips is imported into the 
United States each year for use in making pulp for paper production. 
Section 319.40-6(c) of the regulations requires that wood chips from 
any place except certain places in Asia may be imported if, among other 
things, they were (1) derived from live, healthy, tropical species of 
plantation-grown trees grown in tropical areas; or, (2) fumigated with 
methyl bromide, heat treated, or heat treated with moisture reduction, 
in accordance with the regulations in Sec. 319.40-7. (Section 319.40-7 
of the regulations, ``Treatments and safeguards,'' sets forth the 
methods by which certain treatments and safeguards required by the 
regulations must be conducted.)
    We propose to establish a new set of requirements for importing 
Monterey pine wood chips from Chile. Pinus radiata (also known as 
Monterey pine) wood chips from Chile are in demand in the United States 
for use in making high quality paper pulp. Several commercial 
processors of wood chips in the United States have requested that the 
Animal and Plant Health Inspection Service (APHIS) consider allowing 
the importation of Pinus radiata wood chips from Chile if they are 
treated with a surface pesticide. Since February 1995, APHIS has 
supervised approximately 16 trial shipments to the United States of 
Pinus radiata wood chips from Chile that were treated with a surface 
pesticide. The surface pesticide consisted of a mixture of a fungicide 
containing 64.8 percent of the active ingredient didecyl dimethyl 
ammonium chloride and 7.6 percent of the active ingredient 3-Iodo-2-
propynl butylcarbamate, and an insecticide containing 44.9 percent of 
the active ingredient chlorphrifos phosphorothioate. At a facility 
located at a port in Chile, the wood chips were sent through a chute as 
they were loaded onto the ship. As the chips were passing through the 
chute, they were sprayed with the pesticide from all sides, so that 
each chip was coated with the pesticide. All of the shipments arrived 
in the United States apparently free from any live plant pests.
    Based on the success of the trial shipments, we have determined 
that wood chips from Chile can be imported with negligible risk into 
the United States after treatment in the manner described above with 
any pesticide mixture consisting of a fungicide containing 64.8 percent 
of the active ingredient didecyl dimethyl ammonium chloride and 7.6 
percent of the active ingredient 3-Iodo-2-propynl butylcarbamate, and 
an insecticide containing 44.9 percent of the active ingredient 
chlorphrifos phosphorothioate.
    Section 319.40-6 of the regulations contains universal importation 
provisions for the importation of specified articles, including wood 
chips. We are proposing to revise Sec. 319.40-6(c) to allow Pinus 
radiata wood chips from Chile to be imported after receiving the 
surface pesticide treatment described above.
    At this time, we would add provisions for surface pesticide 
treatment only for Pinus radiata wood chips from Chile. There have been 
no requests for allowing the use of a surface pesticide treatment on 
any wood chips other than Pinus radiata wood chips from Chile. Further, 
we cannot conclude that the method of treatment used in the trial 
shipments from Chile would be effective on any species other than Pinus 
radiata. APHIS conducted a pest risk assessment for Pinus radiata in 
Chile in September 1993. New Zealand is the only other country for 
which a pest risk assessment has been conducted concerning Pinus 
radiata. The pests determined by the pest risk assessment to attack 
Pinus

[[Page 40194]]

radiata in New Zealand are not the same as the pests of concern in 
Chile. Therefore, even though the species would be the same, we cannot 
conclude that the method of treatment used for Pinus radiata wood chips 
from Chile would be effective on the pests that attack Pinus radiata in 
New Zealand. In addition, New Zealand does not have the facilities 
necessary to treat large amounts of wood chips with a surface 
pesticide. If, in the future, there appears to be a demand for wood 
chips other than Pinus radiata or from a country other than Chile to be 
imported using a surface pesticide treatment, APHIS would determine at 
that time what kind of research would be necessary to assess whether or 
not such treatment would be effective on that particular commodity.
    However, the pest risk assessment conducted in 1993 for Pinus 
radiata in Chile is still valid as the basis for the following 
regulatory controls designed to mitigate to a negligible level the 
risks of importing Pinus radiata wood chips from Chile.
    To help ensure the Pinus radiata wood chips from Chile are free 
from pests, we are proposing that several conditions be met in addition 
to the surface pesticide treatment. We would require that the wood 
chips be accompanied by a certificate stating that the wood chips were 
derived from logs from live, healthy, plantation-grown trees that were 
apparently free of plant pests, plant pest damage, and decay organisms, 
and that the logs were debarked in accordance with Sec. 319.40-7(b) 
before being chipped. (Section 319.40-7(b) sets forth tolerance levels 
for amounts of bark that may be retained on a regulated article after 
debarking.) These conditions are the same as current requirements for 
the importation of Pinus radiata logs from Chile, with the exception of 
the stipulation that the chips be from ``plantation-grown'' trees. We 
would require that the wood chips be from plantation-grown trees 
because the pest risk in a managed forest area is lower than in an 
unmanaged forest.
    We would also require that the certificate state that no more than 
45 days elapsed from the time the trees used to make the chips were 
felled to the time the wood chips were exported. This requirement would 
reduce the opportunities for exposure of the logs to plant pests.
    Additionally, we would require that the wood chips be consigned to 
a facility in the United States operating under a compliance agreement 
with APHIS, in accordance with Sec. 319.40-8 of the regulations. 
(Section 319.40-8 concerns facilities that operate under compliance 
agreements.) The compliance agreement would further ensure the safe 
importation of the treated wood chips from Chile by specifying 
safeguards and requirements to ensure that the processing method would 
effectively destroy any plant pests, and by stating that APHIS 
inspectors must be allowed access to the facility to monitor compliance 
with the requirements of the compliance agreement and the regulations.
    We would require that, during shipment to the United States, no 
other regulated articles (other than solid wood packing materials) 
would be permitted in the holds or sealed containers carrying the wood 
chips, and that wood chips on the vessel's deck would have to be in a 
sealed container. These requirements would control possible movement of 
plant pests from other regulated articles.
    We would also require that certain safeguards be applied upon 
arrival of the wood chips in the United States. First, the wood chips 
would have to be unloaded upon arrival by a conveyor which is covered, 
to prevent the chips from being blown by the wind and from accidental 
spillage. The facility receiving the wood chips would have to have a 
procedure in place to retrieve any chips that fall during unloading. If 
the chips must be transported after arrival, we would require that they 
must be covered or safeguarded in a manner that prevents the chips from 
spilling or falling off the means of conveyance, or from being blown 
off the means of conveyance by wind. Once at the facility, the wood 
chips would have to be stored on a paved surface and be kept segregated 
from other regulated articles from the time of discharge from the means 
of conveyance until the chips are processed. The storage area could not 
be adjacent to wooded areas. Finally, the wood chips would have to be 
processed, and any fines or unusable wood chips would have to be 
disposed of by burning, within 60 days of arrival at the facility. 
``Fines'' are small particles or fragments of wood, slightly larger 
than sawdust, that result from chipping, sawing, or processing wood. 
These safeguards would help remove any opportunities for movement of 
plant pests from the wood chips, should there be any plant pests 
present on the chips.
    We also are proposing to revise Sec. 319.40-7(e), concerning 
surface pesticide treatments, to allow for the use of any surface 
pesticide treatment to qualify Pinus radiata wood chips from Chile for 
importation that is a mixture of a fungicide containing 64.8 percent of 
the active ingredient didecyl dimethyl ammonium chloride and 7.6 
percent of the active ingredient 3-Iodo-2-propynl butylcarbamate and an 
insecticide containing 44.9 percent of the active ingredient 
chlorphrifos phosphorothioate. We would require that the fungicide and 
insecticide be mixed using the proportions called for on the label 
requirements.
    We would further stipulate in Sec. 319.40-7(e) that the wood chips 
must be sprayed with the surface pesticide treatment so that all the 
chips are exposed to the chemical on all sides. The treatment method 
used on the trial shipments from Chile would be acceptable under this 
provision. Any other treatment method that accomplishes the goal of 
spraying the chips so that they are exposed to the pesticide on all 
sides would also be acceptable. Finally, we would require that, during 
the interval between treatment and export, the wood chips would have to 
be stored, handled, or safeguarded in a manner that prevents any 
infestation of the wood chips by plant pests.
    In the future, if we determine the pesticide mixture described in 
this document, or any other pesticide treatment, is effective on plant 
pests that could be carried on wood chips, we will propose amendments 
to the regulations to allow for the importation of wood chips from that 
country after receiving the surface pesticide treatment.

Executive Order 12866

    This proposed rule has been reviewed under Executive Order 12866. 
The rule has been determined to be significant for the purposes of 
Executive Order 12866 and, therefore, has been reviewed by the Office 
of Management and Budget.
    Benefits from allowing Pinus radiata wood chips to be imported from 
Chile include lower priced wood chips for pulp mills in the Pacific 
Northwest, and lower priced products to consumers if lower input prices 
are reflected in lower retail prices. Greater choice among species for 
wood chip raw material is another benefit. Costs associated with risks 
of introducing pests are negligible because the procedures required to 
import Chilean wood chips under this rule are designed to keep the risk 
of importing pests to a negligible level. Since imports will be 
concentrated in the Pacific Northwest, impacts will be felt mainly by 
wood chip producers and purchasers in the region. Wood chip producers 
may bear revenue losses if they are unable to compete with lower cost 
imports or adjust their product mix.
    Test shipments of Pinus radiata wood chips from Chile to the 
Pacific Northwest during recent years have demonstrated the 
effectiveness of

[[Page 40195]]

phytosanitary safeguards proposed in this rule, as well as the economic 
feasibility of chip imports from Chile for the region's pulp mills. 
Chile's large and expanding forestry plantations are expected to 
provide a reliable source for future wood chip imports when there is 
sufficient demand. At present, the abundant supply of wood chips in the 
Pacific Northwest precludes imports, a market situation that differs 
dramatically from that of three years ago when wood chip prices reached 
an all-time high. Pacific Northwest pulp mills depend primarily on 
domestic wood chip suppliers, but turn to overseas sources when 
domestic wood chip prices are high. Chilean imports can be expected to 
be competitively marketed when the domestic wood chip supply is low, 
since Pinus radiata wood chips can substitute for most other softwood 
chips. Some domestic wood chip producers may be adversely affected by 
Chilean imports, but the impact is not likely to be widespread; most 
domestic wood chip producers that cannot compete may adjust their 
product mix away from wood chips to other mill products.

Discussion

    Under the Federal Plant Pest Act (7 U.S.C. 150aa-150jj), the 
Secretary of Agriculture is authorized to promulgate regulations 
requiring inspection of products and articles as a condition of their 
movement into or through the United States, and imposing other 
conditions upon such movement, in order to prevent the dissemination 
into the United States of plant pests.
    This proposed rule would amend the regulations for importing wood 
chips to allow the importation of Pinus radiata wood chips from Chile 
if the surfaces of the wood chips are treated with a pesticide approved 
by the Administrator for use on wood chips from Chile. Allowing the use 
of a surface pesticide treatment would make it possible to effectively 
treat large shipments of wood chips. Wood chips are used for making 
pulp used in the production of paper. U.S. pulp producers want to 
import Pinus radiata wood chips from Chile because these wood chips 
produce a high quality pulp. However, there is no treatment in the 
regulations that is both practical and effective in treating large 
shipments of these wood chips.
    Current APHIS regulations call for, along with other requirements, 
heat treatment or fumigation of imported wood materials. While these 
safeguards are appropriate for solid wood products, they are less 
useful for wood chips. Heating of wood chips is time consuming, and 
fumigation of wood chips in ship holds can result in insufficient 
treatment. Therefore, it is being proposed that importation of Pinus 
radiata wood chips from Chile be allowed following their surface 
treatment with a specified pesticide mixture. As discussed above, the 
efficacy of this treatment is demonstrated by 16 trial shipments of 
surface-treated Pinus radiata wood chips from Chile that have arrived 
without pests since February 1995.
    Approximately $40 million worth of wood chips is imported into the 
United States each year for use in making pulp for paper production. 
Coniferous wood chip imports by the U.S. comprise less than one percent 
of domestic production.1 About 30 percent of U.S. wood chip 
production takes place in the Pacific Northwest.2 Wood chip 
imports to the United States have been mainly to the Pacific Northwest, 
although there have been recent shipments of Caribbean pine from Brazil 
that have entered through the port at Mobile, AL.
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    \1\ Robert Flynn, private wood industry consultant, personal 
communication, drawing in part on information from ``Southern 
Pulpwood Production, 1996,'' by Tony Johnson, USDA Forest Service, 
Southern Research Station, Resource Bulletin SRS-21.
    \2\ Richard Haynes, USDA Forest Service, personal communication.
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    Wood chips are used mainly in the manufacture of pulp, that is then 
used to make paper and panel products.3 Test shipments of 
Pinus radiata wood chips from Chile during the last three years have 
been so utilized, and it is expected that future shipments facilitated 
by the surface pesticide treatment proposed in this rule change would 
also be used to make pulp.4
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    \3\ Chris Twarok, Department of Commerce, personal 
communication. Landscaping is a secondary use.
    \4\ J.J. Morrell, Department of Forest Products, Oregon State 
University, personal communication.
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    The demand for wood chips used by pulp mills is a derived demand, 
depending on the market for pulp.5 While the long-term 
demand for pulp in the United States and internationally is expected to 
continue to expand (with increasing reliance on wood from plantation 
forests), pulp and wood chip prices can be volatile in the short term, 
causing relatively abrupt market changes. The variable demand for wood 
chips during the few years the Chilean test shipments have taken place 
illustrates how rapidly market conditions can change. Coniferous wood 
chip imports in 1995 by the United States nearly tripled those of 1994, 
with imports from Canada rising more than threefold, and test shipments 
from Chile doubling and displacing 1994 imports from 
Mexico.6 The increase in demand was reflected in a 60 
percent increase in the price paid in the United States for Chilean 
wood chips, from $42 per ton in 1994, to $67 per ton in 
1995.7 Comparable U.S. prices for domestically produced wood 
chips in these two years were $56 per ton in 1994 and $72 per ton in 
1995.8 Since then, prices have receded due to the current 
abundant supply of wood chips.
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    \5\ The pulp fiber industry has traditionally been a softwood 
chip market, but this has been changing in recent years in the 
eastern United States. Pulp mills in the southeastern United States 
are relying increasingly on hardwood chips, where only softwood 
chips were once used. Long-term rising demand for wood chips is also 
reflected in an increasing number of ``chipping'' mills producing 
only wood chips; at least 100 of more than 140 wood chip mills in 
the southeastern United States have been constructed within the past 
decade. (Dennis Haldeman and Doug Sloane, personal communications)
    \6\ U.S. wood chip import and export statistics from Department 
of Commerce, Bureau of the Census.
    \7\ FAS Global Agricultural Trade System, using data from the 
United Nations Statistical Office.
    \8\ Richard Haynes, USDA Forest Service, personal communication. 
Domestic prices based on export prices for the Columbia-Snake 
Customs District, adjusted to ``green'' metric tons. Without 
consideration of transportation costs, these quoted prices may 
overestimate the price realized at a Pacific Northwest pulp mill for 
U.S. chips and underestimate the price realized for Chilean chips. 
Moreover, average yearly prices conceal seasonal variations.
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    Chile's coniferous wood chip exports to the United States, 1994-
1996, and Chile's share of coniferous wood chip imports by the United 
States, are as follows: 9
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    \9\ FAS Global Agricultural Trade System, using data from the 
United Nations Statistical Office

1994.................................  168 metric tons..............  00.05 percent of imports.                 
1995.................................  339,665 metric tons..........  48.29 percent of imports.                 
1996.................................  329,387 metric tons..........  44.06 percent of imports.                 
                                                                                                                

    In 1994, 57 percent of coniferous wood chip imports by the United 
States were from Mexico and 43 percent were from Canada. In 1995, pulp 
prices reached record levels, with U.S. coniferous wood chip imports 
more than doubling from the year before, to 703,000 metric tons from 
331,000 metric tons. That year, no coniferous wood

[[Page 40196]]

chips were imported from Mexico, 48 percent of imports came from Chile, 
49 percent came from Canada, and 3 percent came from Brazil. In 1996, 
Canada's share of U.S. coniferous wood chip imports increased to 56 
percent, 44 percent came from Chile, and none was received from Brazil.
    Production of Pinus radiata wood chips in the United States is 
essentially nil, due to the relatively small region in which it grows 
well, about six miles inland along the coastal fog belt of central 
California (hence its common name, the Monterey pine). There may be 
some production from sawmill residues, but the quantity, if any, is 
negligible. No pulp mills are currently using domestically produced 
Pinus radiata wood chips.10
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    \10\ Robert Rummel, American Pulpwood Association; Robert Flynn, 
Robert Flynn and Associates, personal communications.
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    Impacts on the U.S. wood chip industry of potential Chilean 
imports, therefore, depend on the substitutability of Pinus radiata 
wood chips for other softwood or for hardwood chips. Instances in which 
Pinus radiata and hardwood chips might substitute for each other are 
relatively few. However, Pinus radiata wood chips can generally be used 
in place of other coniferous chips such as lodgepole pine and ponderosa 
pine, although milling adjustments may be required--and costs 
incurred--due to differences in resin content 11. We invite 
public comments on the magnitude of adjustment costs which would be 
required to substitute Pinus radiata chips for those of species 
commercially grown in the Pacific Northwest. We also invite comments on 
the extent to which such costs would inhibit substitution, and the 
economic consequences of such substitution.
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    \11\ Chris Twarok, Department of Commerce, personal 
communication.
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    The test shipments of Chilean wood chips were received by pulp 
mills in the Pacific Northwest. This region is expected to continue to 
be the destination of future shipments, given the additional 
transportation costs that would be incurred by pulp mills in the 
eastern and southeastern United States. With sales regionally 
concentrated, little impact from this rule is expected outside the 
Pacific Northwest.
    In sum, the test shipments from Chile have shown the value to 
Pacific Northwest pulp mills of Chilean wood chips in supplementing 
domestic and Canadian wood chip supplies when the price of pulp makes 
such shipments economically feasible. Pulp mills able to adjust milling 
processes to utilize Pinus radiata wood chips can benefit by making 
profitable use of Chilean imports when other sources are insufficient 
or more costly. As now described, Chile has the production capacity to 
be a reliable source of Pinus radiata wood chips to the United States.
    Chile's wood chip industry grew significantly during the 1980s, 
with production increasing more than tenfold, from 0.44 million tons in 
1984, to 5.03 million tons in 1990.12 Chile's wood chip 
exports during this period rose from none in 1984, to 2.23 million tons 
(44 percent of production) in 1990. During the first half of the 1990s, 
both production and export levels fluctuated, but without the dramatic 
increases of the 1980s. Annual production between 1990 and 1995 
averaged about 5.80 million tons, and exports averaged about 3.05 
million tons (about 53 percent of production).
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    \12\ Information on Chile's wood chip production and exports 
taken from Wood Products: International Trade and Foreign Markets, 
FAS Circular Series WP 3-97, August 1997, Table 15.
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    Pinus radiata wood chips comprise a minor share of Chile's wood 
chip exports.13 Of the approximately 3 million tons of wood 
chips exported annually between 1990 and 1996, Pinus radiata's share 
averaged 12 percent. Between January and August, 1997, 10 percent of 
Chile's wood chip exports were Pinus radiata.
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    \13\ Information on Chile's Pinus radiata wood chip exports 
compiled from data provided by APHIS-International Services.
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    Japan was, by far, the principal importer of Chilean wood chips 
from 1990 to 1996. (Country destinations by species are not known for 
these years.) From 1990 to 1994, an average of 96 percent of Chile's 
wood chip exports were received by Japan. With the test shipments of 
Pinus radiata to the United States in 1995 and 1996, Japan's share of 
Chile's wood chip exports fell to 87 percent and 83 percent, 
respectively, and the United States' share for these two years was 9 
percent and 11 percent.
    From January to August, 1997, Japan's share of Chile's wood chip 
exports was 89 percent. The United States and Japan each received about 
one-half of Chile's Pinus radiata wood chip exports during this eight-
month period.
    Chile's development of its forest products sector rests to a large 
degree on the success of Pinus radiata; its share of Chile's wood chip 
exports is expected to increase. By 1996 there were approximately 
1,387,000 hectares planted in Pinus radiata, representing 75 percent of 
plantation plantings, and 15 percent of Chile's forest resources 
including native forest.14 This pine species matures at 20 
to 24 years in Chile (thinnings are available for use after 15 years), 
compared to 30 years in New Zealand and Australia, and 40 to 60 years 
in North America and Europe. Production and exports are expected to 
peak during the coming decade, when trees on most of the Pinus radiata 
plantations will be ready to be harvested.
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    \14\ ``Forest Products, Annual Report,'' Office of Agricultural 
Affairs, American Embassy, Santiago, AGR Number CI7033, 1997.
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    One set of projections describing the volume of Pinus radiata wood 
chips that could be exported to the United States over the coming five 
years, assuming favorable prices, is as follows: 15
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    \15\ Fernando Hartwig, Inversiones Forestales C.C.A., personal 
communication.

------------------------------------------------------------------------
                                           Potential Pinus radiata wood 
                  Year                    chip exports from Chile to the
                                           United States (million tons) 
------------------------------------------------------------------------
1998...................................  0.56 to 0.70.                  
1999...................................  0.60 to 1.00.                  
2000...................................  1.00 to 1.20.                  
2001...................................  0.90 to 1.00.                  
2002...................................  0.85 to 0.90.                  
------------------------------------------------------------------------

    Realization of these export levels will depend on the demand for 
Pinus radiata wood chips by U.S. pulp mills. As has been described, 
international short-term demand for pulp fibers can be volatile. When 
prices fell between 1995 and 1996, Chile's forestry sector exports 
declined by 24 percent, mainly because of reduced sales to Japan.
    Chile's stock of Pinus radiata available for harvest will enable 
Pacific Northwest importers to take advantage of a ready source as wood 
chip prices rebound. In 1996, all coniferous wood chip imports by the 
United States totaled about 0.75 million tons, of which 0.33 million 
tons were imported from Chile.16 Projected export levels 
shown above would increase U.S. wood chip imports above current levels, 
and establish Chile as a major foreign supplier. Wood chip prices in 
the United States will determine whether these projections are overly 
optimistic.
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    \16\ The United States is a net exporter of coniferous and 
nonconiferous wood chips. Compared to coniferous wood chip imports 
of 0.75 million tons in 1996, the United States exported 1.78 
million tons. Nonconiferous wood chip imports and exports by the 
United States exhibit an even larger difference, with 1996 imports 
totaling about 55,000 tons and exports at 4.29 million tons. 
(Department of Commerce, Bureau of the Census)

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[[Page 40197]]

Regulatory Flexibility Act

    In accordance with 5 U.S.C. 603, we have performed an Initial 
Regulatory Flexibility Analysis, which is set out below, regarding the 
impact of this rule on small entities. However, we do not currently 
have all the data necessary for a comprehensive analysis of the effects 
of this rule on small entities. Therefore, we are inviting comments 
concerning potential effects. In particular, we are interested in 
determining the number of small entities that would be impacted by this 
proposed rule, positively or negatively, in regards to the provisions 
for allowing the importation of Pinus radiata wood chips from Chile. We 
are also interested in information concerning the volume of wood chips 
that may be imported from Chile under this proposed rule, and whether 
or not the wood chips from Chile would be in competition with wood 
chips produced in the United States.
    The Regulatory Flexibility Act requires consideration of potential 
impacts of rule changes on small businesses, organizations, and 
governmental jurisdictions. In this instance, small entities directly 
affected would be U.S. wood chip producers and pulp mills in the 
Pacific Northwest.
    Wood chip production is included in the SIC category for firms 
operating sawmills and planing mills. In most cases, wood chips are a 
by-product of lumber production. A mill will vary its level of wood 
chip production (compared to other products) based on whether wood chip 
prices are high or low at a particular point in time. In the Pacific 
Northwest, about 150 mills produce wood chips (90 in Oregon and 60 in 
Washington), but more than one may be owned by the same 
firm.17 Data on the exact number of firms is not available. 
Sawmills and planing mills that employ 500 people or fewer are 
designated by the Small Business Administration as ``small.'' In 1994, 
there were 5,241 firms operating sawmills and planing mills in the 
United States, of which 5,149 (more than 98 percent) were 
small.18 Estimated annual receipts of these 5,149 ``small'' 
firms totaled about $14.88 billion, which was 62 percent of total 
annual receipts of about $23.93 billion earned by all sawmills and 
planing mills. In the absence of information on mill firm sizes 
specific to Oregon and Washington, it is assumed that most sawmills in 
the Pacific Northwest are also small entities.
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    \17\ Richard Haynes, USDA Forest Service, personal 
communication.
    \18\ This is the latest year for which data is available from 
the ``SBA Office of Advocacy, Statistics on Small Business'' Web 
home page.
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    Adverse impacts on most ``small'' U.S. wood chip producers due to 
this rule change will be minor. The Chilean imports are expected to be 
sold in the Pacific Northwest, thereby affecting a geographical subset 
of all wood chip producers. Adverse impacts on Pacific Northwest wood 
chip producers will depend on the ability of such producers to find 
lower priced raw materials to produce wood chips or otherwise reduce 
cost, and the extent of their reliance on wood chips for their net 
revenues. Producers of those wood chips that are substitutes for Pinus 
radiata chips will find their net returns reduced when import prices 
are low. As raw materials used for wood chip production grow 
increasingly scarce and expensive in the Pacific Northwest, those wood 
chip producers that compete with lower priced imports will face 
adjustment pressures. However, U.S. wood chip producers already feel 
competition from other international sources.
    It is estimated that less than 5 percent of wood chip producers in 
the Pacific Northwest are ``chipping'' mills devoted solely to wood 
chip production.19 However, during periods of high wood chip 
demand such as three years ago, many sawmills may be converted largely 
to wood chip production.
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    \19\ Richard Haynes, USDA Forest Service, personal 
communication.
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    Turning to the pulp mills, themselves, there were 37 firms 
operating pulp mills in the United States in 1994. Often more than one 
pulp mill is owned by a single firm. Pulp mill firms employing 750 
people or fewer are designated by the Small Business Administration as 
``small.'' In 1994, between 20 and 25 of the 37 firms were small, that 
is, between 54 and 68 percent of the total number of firms. Estimated 
annual receipts of these 20 to 25 ``small'' firms totaled between about 
$383 million and about $1.12 billion, which represented between 7 
percent and 21 percent of total annual receipts by all pulp mills of 
about $5.30 billion. About 10 percent of U.S. pulp mills are in the 
Pacific Northwest.
    Due to resin-content differences, pulp mills cannot use various 
species of wood chips indiscriminately. Pulp mills designed to process 
wood chips of Pinus radiata or similar species would therefore be the 
only ones directly affected by this rule. It is estimated that less 
than one-half of U.S. pulp mills could use Pinus radiata wood 
chips.20 Assuming an equal distribution of these pulp mills 
among all pulp mills, size-wise, ``small'' pulp mill firms directly 
affected would then number between 10 and 13, based on 1994 data. These 
numbers are likely to be an overestimation, since not all of the 
``small'' firms that could utilize Pinus radiata wood chips are 
necessarily located in the Pacific Northwest. Regardless of the number 
of affected ``small'' pulp mill firms, having Chile as a source of 
Pinus radiata wood chips would be beneficial to pulp mills and their 
customers, to the extent lower chip prices would be reflected in lower 
product prices.
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    \20\ Byron Lundi, Georgia-Pacific, personal communication.
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    Test shipments of Pinus radiata wood chips from Chile have been 
successfully imported by pulp mills in the Pacific Northwest. This rule 
change will enable such shipments, using a surface pesticide treatment, 
to continue to take place when economically feasible. Although Pinus 
radiata wood chip production in the United States is negligible, this 
species can substitute for other species as a pulp fiber, given certain 
milling adjustments. Off-shore wood chip sources to supplement domestic 
supply are advantageous to pulp mills, given the volatility of pulp 
prices. Chile's wood products industry has a large export component, 
and is expected to be a reliable source when pulp prices prompt wood 
chip exports to the United States. Adverse effects for wood chip 
producers in the Pacific Northwest will be felt by those producers who 
are unable to reduce costs to meet import competition and who rely 
heavily on revenues from wood chips.
    No figures are available concerning potential costs of pest 
introductions through importation of Pinus radiata wood chips from 
Chile. A pest risk assessment for the importation of Pinus radiata logs 
from Chile (``Pest Risk Assessment of the Importation of Pinus radiata, 
Nothofagus dombeyi, and Laurelia philippiana Logs from Chile,'' USDA 
Forest Service, Miscellaneous Publication No. 1517, September 1993) 
provides the phytosanitary basis for allowing the wood chips to be 
imported if they are treated as prescribed. The pest risk assessment 
supports our determination that Pinus radiata wood chips may be 
imported from Chile with negligible risk.
    The pest risk assessment reported that in sharp contrast to native 
forests in Chile, that country's Pinus radiata plantations are 
relatively free of major insect and disease problems. Exceptions 
include the recently introduced European pine shoot moth (Rhyaccionia 
buoliana), Hylurgus ligniperda and two

[[Page 40198]]

other species of European bark beetles, several needle disease fungi 
(Dothistroma pini and Lophodermium spp., among others), diplodia shoot 
blight (Sphaeropsis sapinea), and two species of blue stain fungi 
(Ophiostoma picea and O. piliferum). The wood wasp Sirex noctilio 
(considered to be the most important pest on Pinus radiata logs 
exported from New Zealand) and pine wood nematodes (Bursaphelenchus 
spp.) have yet to be found in Chile.
    Among the insect pests of Pinus radiata analyzed in detail in the 
pest risk assessment, only the bark beetle Hylurgus ligniperda was 
considered to have a high pest risk potential. Moderate pest risk 
potentials were assigned to Rhyephenes spp., Ernobius mollis, Urocerus 
gigas gigas, Neotermes chilensis, Porotermes quadricollis, Colobura 
alboplagiata, and Buprestis novemmaculata. Among the pathogens, the 
stain fungi (Ophiostoma spp.) were found to merit a moderate to high 
pest risk potential, whereas the complex of needle diseases 
(Dothistroma pini and other species) and diplodia shoot blight 
(Sphaeropsis sapinea) were rated as moderate risks. Other pathogens 
were considered to be of low risk. One weed of concern (Imperata 
condensata, considered a variety of I. cylindrica or cogongrass) was 
identified.
    Pests potentially affecting untreated Pinus radiata wood chips are 
a subset of those identified in the pest risk assessment, since wood 
chip production would physically remove or destroy most pests that 
could be present in the logs. Treatment with the surface pesticide 
proposed by this rule change would prevent entry into the United States 
of any harmful insects or fungi that might remain.
    The Pacific Northwest's coastal ranges and Cascade Mountains have 
some of the highest quality natural and planted conifer forests in the 
world, producing commodities ranging from pulp and paper, to lumber for 
construction, to ornamentals and Christmas trees. Introduced pests such 
as those described could affect forestry industries directly by causing 
damage, or indirectly by curtailing commerce through quarantines.
    Some potential costs of foreign timber pests have been estimated in 
other instances. For example, a pest risk assessment concerning 
Siberian timber imports estimated that the introduction of a single 
pest, larch canker, could cause direct timber losses of $129 million 
annually. The same study estimated that a worst-case scenario involving 
heavy establishment of exotic defoliators in the United States could 
cost $58 billion.21
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    \21\ ``Importation of Logs, Lumber, and Other Unmanufactured 
Wood Articles: Final Supplement to the Environmental Impact 
Statement, May 1998,'' USDA, APHIS.
---------------------------------------------------------------------------

    Concerning consumer and producer impacts of allowing Pinus radiata 
wood chips to be imported from Chile, data is insufficient to permit 
confident estimation of welfare changes. Time-series data for the 
estimation of elasticities of supply and demand are not available. 
Circumstantial evidence, however, would suggest that pulp producers and 
pulp product consumers benefit from Pinus radiata wood chip imports 
from Chile, when their relative price is low compared to that of other 
wood chip species or sources. The test shipments from Chile resulted in 
U.S. wood chip imports worth $22.8 million and $19.3 million in 1995 
and 1996, respectively. These shipments represented over 48 and 44 
percent of all U.S. coniferous wood chip imports in those two 
years.22
---------------------------------------------------------------------------

    \22\ FAS Global Agricultural Trade System, using data from the 
United Nations Statistical Office.
---------------------------------------------------------------------------

    The continuing reduction in timber sources in the Pacific Northwest 
will encourage more wood imports in the future, and Chile's expanded 
commercial forestry plantings promise a prominent role for that country 
as a wood products exporter. Price impacts, if any, from imports for 
U.S. wood chip producers should be very small, since coniferous wood 
chip imports are less than one percent of U.S. production.
    Moreover, trade statistics indicate that U.S. coniferous wood chip 
producers are finding overseas markets as profitable as their Chilean 
counterparts. U.S. coniferous wood chip exports in 1995 were valued at 
more than $222 million, and in 1996, at more than $181 million. As is 
true for Chile, the principal overseas coniferous wood chip market for 
the United States is Japan.23
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    \23\ FAS Global Agricultural Trade System, using data from the 
United Nations Statistical Office.
---------------------------------------------------------------------------

    This proposed rule includes the following reporting and 
recordkeeping requirement: We would require that wood chips imported 
from Chile be accompanied by a certificate issued by the Government of 
Chile, and stating that all the applicable requirements of the 
regulations have been met.
    An alternative to this proposed rule would be to take no action. 
This proposed rule provides an alternative treatment for pulp 
manufacturers who cannot import wood chips from Chile using currently 
allowed treatments, and relieves restrictions concerning other 
requirements of the regulations. The no action alternative was rejected 
because we believe that the provisions of this proposed rule will make 
compliance easier for regulated individuals without increasing the risk 
of introducing a plant pest into the United States.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. If this proposed rule is adopted: (1) All State 
and local laws and regulations that are inconsistent with this rule 
will be preempted; (2) no retroactive effect will be given to this 
rule; and (3) administrative proceedings will not be required before 
parties may file suit in court challenging this rule.

National Environmental Policy Act

    An environmental assessment and finding of no significant impact 
have been prepared for this proposed rule. The assessment provides a 
basis for the conclusion that the importation of Pinus radiata wood 
chips from Chile under the conditions specified in this proposed rule 
would not present a risk of introducing or disseminating plant pests 
and would not have a significant impact on the quality of the human 
environment. Based on the finding of no significant impact, the 
Administrator of the Animal and Plant Health Inspection Service has 
determined that an environmental impact statement need not be prepared.
    The environmental assessment and finding of no significant impact 
were prepared in accordance with: (1) The National Environmental Policy 
Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.), (2) Regulations of the 
Council on Environmental Quality for implementing the procedural 
provisions of NEPA (40 CFR parts 1500-1508), (3) USDA regulations 
implementing NEPA (7 CFR part 1b), and (4) APHIS' NEPA Implementing 
Procedures (7 CFR part 372).
    Copies of the environmental assessment and finding of no 
significant impact are available for public inspection at USDA, room 
1141, South Building, 14th Street and Independence Avenue SW., 
Washington, DC, between 8 a.m. and 4:30 p.m., Monday through Friday, 
except holidays. Persons wishing to inspect copies are requested to 
call ahead on (202) 690-2817 to facilitate entry into the reading room. 
In addition, copies may be obtained by writing to the individual listed 
under FOR FURTHER INFORMATION CONTACT.

Paperwork Reduction Act

    In accordance with section 3507(d) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501 et seq.), the information collection or 
recordkeeping

[[Page 40199]]

requirements included in this proposed rule have been submitted for 
approval to the Office of Management and Budget (OMB). Please send 
written comments to the Office of Information and Regulatory Affairs, 
OMB, Attention: Desk Officer for APHIS, Washington, DC 20503. Please 
state that your comments refer to Docket No. 96-031-1. Please send a 
copy of your comments to: (1) Docket No. 96-031-1, Regulatory Analysis 
and Development, PPD, APHIS, suite 3C03, 4700 River Road Unit 118, 
Riverdale, MD 20737-1238, and (2) Clearance Officer, OCIO, USDA, room 
404-W, 14th Street and Independence Avenue SW., Washington, DC 20250. A 
comment to OMB is best assured of having its full effect if OMB 
receives it within 30 days of publication of this proposed rule.
    This rule would require that wood chips entering the United States 
from Chile be accompanied by a certificate, issued by an official 
authorized by the national government of Chile, stating that the wood 
chips meet the proposed requirements for importation. This rule would 
also require that wood chips entering the United States from Chile must 
be consigned to a facility in the United States that operates under a 
compliance agreement with APHIS. This agreement would help ensure the 
safe importation of wood chips from Chile by specifying various 
safeguards necessary to prevent the spread of plant pests from the 
facility, specifying requirements to ensure that the processing method 
would affectively destroy any plant pests, and specifying that APHIS 
inspectors must be allowed access to the facility to monitor compliance 
with the regulations. It should be noted that the certificate and 
compliance agreement described above are information-containing 
documents that need not be completed by participating personnel, but 
they must be signed by them to attest that various requirements 
outlined in the documents are being satisfied.
    We are soliciting comments from the public (as well as affected 
agencies) concerning our proposed information collection and 
recordkeeping requirements. We need this outside input to help us:
    (1) Evaluate whether the proposed information collection is 
necessary for the proper performance of our agency's functions, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of our estimate of the burden of the 
proposed information collection, including the validity of the 
methodology and assumptions used;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected;
    (4) Minimize the burden of the information collection on those who 
are to respond (such as through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses).
    Estimate of burden: Public reporting burden for this collection of 
information is estimated to average .28 hours per response.
    Respondents: Plant protection authorities in Chile and designated 
personnel at wood chip processing facilities in the United States.
    Estimated number of respondents: 4.
    Estimated number of responses per respondent: 10.
    Estimated total annual number of responses: 40.
    Estimated total annual burden on respondents: 11.2.
    Copies of this information collection can be obtained from: 
Clearance Officer, OCIO, USDA, room 404-W, 14th Street and Independence 
Avenue SW., Washington, DC 20250.

List of Subjects in 7 CFR Part 319

    Bees, Coffee, Cotton, Fruits, Honey, Imports, Incorporation by 
reference, Nursery Stock, Plant diseases and pests, Quarantine, 
Reporting and recordkeeping requirements, Rice, Vegetables.

    Accordingly, 7 CFR part 319 would be amended as follows:

PART 319--FOREIGN QUARANTINE NOTICES

    1. The authority citation for part 319 would continue to read as 
follows:

    Authority: 7 U.S.C. 150dd, 150ee, 150ff, 151-167, 450, 2803, and 
2809; 21 U.S.C. 136 and 136a; 7 CFR 2.22, 2.80, and 371.2(c).


Sec. 319.40-1  [Amended]

    2. In Sec. 319.40-1, a definition of the word fines would be added 
in alphabetical order to read as follows:
* * * * *
    Fines. Small particles or fragments of wood, slightly larger than 
sawdust, that result from chipping, sawing, or processing wood.
* * * * *
    3. In Sec. 319.40-6, paragraph (c) would be revised to read as 
follows:


Sec. 319.40-6  Universal importation options.

* * * * *
    (c) Wood chips and bark chips. (1) From Chile. Wood chips from 
Chile that are derived from Monterey or Radiata pine (Pinus radiata) 
logs may be imported in accordance with Sec. 319.40-6(c)(2) or in 
accordance with the following requirements:
    (i) The wood chips must be accompanied by a certificate stating 
that the wood chips meet the requirements in paragraphs (c)(1)(i)(A) 
through (c)(1)(i)(C) of this section.
    (A) The wood chips were treated with a surface pesticide treatment 
in accordance with Sec. 319.40-7(e) prior to arrival in the United 
States.
    (B) The wood chips were derived from logs from live, healthy, 
plantation-grown trees that were apparently free of plant pests, plant 
pest damage, and decay organisms, and the logs used to make the wood 
chips were debarked in accordance with Sec. 319.40-7(b) before being 
chipped.
    (C) No more than 45 days elapsed from the time the trees used to 
make the wood chips were felled to the time the wood chips were 
exported.
    (ii) During shipment to the United States, no other regulated 
articles (other than solid wood packing materials) are permitted in the 
holds or sealed containers carrying the wood chips. Wood chips on the 
vessel's deck must be in a sealed container.
    (iii) The wood chips must be consigned to a facility in the United 
States that operates under a compliance agreement in accordance with 
Sec. 319.40-8. The following requirements apply upon arrival of the 
wood chips in the United States:
    (A) Upon arrival in the United States, the wood chips must be 
unloaded by a conveyor that is covered to prevent the chips from being 
blown by the wind and from accidental spillage. The facility receiving 
the wood chips must have a procedure in place to retrieve any chips 
that fall during unloading.
    (B) If the wood chips must be transported after arrival, the chips 
must be covered or safeguarded in a manner that prevents the chips from 
spilling or falling off the means of conveyance, or from being blown 
off the means of conveyance by wind.
    (C) The wood chips must be stored at the facility on a paved 
surface and must be kept segregated from other regulated articles from 
the time of discharge from the means of conveyance until the chips are 
processed. The storage area must not be adjacent to wooded areas.
    (D) The wood chips must be processed within 60 days of arrival at 
the facility. Any fines or unusable wood chips must be disposed of by 
burning within 60 days of arrival at the facility.
    (2) From places other than certain places in Asia. Wood chips and 
bark chips from any place except places in

[[Page 40200]]

Asia that are east of 60 deg. East Longitude and north of the Tropic of 
Cancer may be imported in accordance with this paragraph.
    (i) The wood chips or bark chips must be accompanied by an importer 
document stating that the wood chips or bark chips were either:
    (A) Derived from live, healthy, tropical species of plantation-
grown trees grown in tropical areas; or
    (B) Fumigated with methyl bromide in accordance with Sec. 319.40-
7(f)(3), heat treated in accordance with Sec. 319.40-7(c), or heat 
treated with moisture reduction in accordance with Sec. 319.40-7(d).
    (ii) During shipment to the United States, no other regulated 
articles (other than solid wood packing materials) are permitted in the 
holds or sealed containers carrying the wood chips or bark chips. Wood 
chips or bark chips on the vessel's deck must be in a sealed container; 
Except that: If the wood chips or bark chips are derived from live, 
healthy, plantation-grown trees in tropical areas, they may be shipped 
on deck if no other regulated articles are present on the vessel, and 
the wood chips or bark chips are completely covered by a tarpaulin 
during the entire journey directly to the United States.
    (iii) The wood chips or bark chips must be free from rot at the 
time of importation, unless accompanied by an importer document stating 
that the entire lot was fumigated with methyl bromide in accordance 
with Sec. 319.40-7(f)(3), heat treated in accordance with Sec. 319.40-
7(c), or heat treated with moisture reduction in accordance with 
Sec. 319.40-7(d).
    (iv) Wood chips or bark chips imported in accordance with this 
paragraph must be consigned to a facility operating under a compliance 
agreement in accordance with Sec. 319.40-8. The wood chips or bark 
chips must be burned, heat treated in accordance with Sec. 319.40-7(c), 
heat treated with moisture reduction in accordance with Sec. 319.40-
7(d), or otherwise processed in a manner that will destroy any plant 
pests associated with the wood chips or bark chips, within 30 days of 
arrival at the facility. If the wood chips or bark chips are to be used 
for mulching or composting, they must first be fumigated in accordance 
with Sec. 319.40-7(f)(3), heat treated in accordance with Sec. 319.40-
7(c), or heat treated with moisture reduction in accordance with 
Sec. 319.40-7(d).
    4. In Sec. 319.40-7, paragraph (e) would be revised to read as 
follows.


Sec. 319.40-7  Treatments and safeguards.

* * * * *
    (e) Surface pesticide treatments. All United States Environmental 
Protection Agency registered surface pesticide treatments are 
authorized for regulated articles imported in accordance with this 
subpart, except that Pinus radiata wood chips from Chile must be 
treated in accordance with Sec. 319.40-7(e)(2). Surface pesticide 
treatments must be conducted in accordance with label directions 
approved by the United States Environmental Protection Agency. Under 
the following circumstances, surface pesticide treatments must also be 
conducted as follows:
    (1) Heat treated logs. When used on heat treated logs, a surface 
pesticide treatment must be first applied within 48 hours following 
heat treatment. The surface pesticide treatment must be repeated at 
least every 30 days during storage of the regulated article, with the 
final treatment occurring no more than 30 days prior to departure of 
the means of conveyance that carries the regulated articles to the 
United States.
    (2) Pinus radiata wood chips from Chile. When used on Pinus radiata 
wood chips from Chile, a surface pesticide consisting of the following 
must be used: A mixture of a fungicide containing 64.8 percent of the 
active ingredient didecyl dimethyl ammonium chloride and 7.6 percent of 
the active ingredient 3-Iodo-2-propynl butylcarbamate, and an 
insecticide containing 44.9 percent of the active ingredient 
chlorphrifos phosphorothioate. The fungicide and insecticide must be 
mixed using the proportions called for in the label requirements. The 
wood chips must be sprayed with the pesticide so that all the chips are 
exposed to the chemical on all sides. During the entire interval 
between treatment and export, the wood chips must be stored, handled, 
or safeguarded in a manner that excludes any infestation of the wood 
chips by plant pests.
* * * * *
    Done in Washington, DC, this 22nd day of July 1998.
Charles P. Schwalbe,
Acting Administrator, Animal and Plant Health Inspection Service.
[FR Doc. 98-20156 Filed 7-27-98; 8:45 am]
BILLING CODE 3410-34-P