[Federal Register Volume 78, Number 1 (Wednesday, January 2, 2013)]
[Proposed Rules]
[Pages 187-210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-30923]



[[Page 187]]

Vol. 78

Wednesday,

No. 1

January 2, 2013

Part III





Department of Agriculture





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Agricultural Marketing Service





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7 CFR Part 1222





Paper and Paper-Based Packaging Promotion, Research and Information 
Order; Proposed Rule

Federal Register / Vol. 78 , No. 1 / Wednesday, January 2, 2013 / 
Proposed Rules

[[Page 188]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1222

[Document Number AMS-FV-11-0069 PR-A1]
RIN 0581-AD21


Paper and Paper-Based Packaging Promotion, Research and 
Information Order

AGENCY: Agricultural Marketing Service, Department of Agriculture.

ACTION: Proposed rule.

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SUMMARY: This proposed rule invites comments on a proposed Paper and 
Paper-Based Packaging Promotion, Research and Information Order 
(Order). The purpose of the program would be to maintain and expand 
markets for paper and paper-based packaging. A referendum would be held 
among eligible manufacturers and importers to determine whether they 
favor implementation of the program prior to it going into effect. The 
program would be financed by an assessment on paper and paper-based 
packaging manufacturers (domestic producers) and importers and would be 
administered by a board of industry members appointed by the Secretary 
of Agriculture (Secretary). The assessment rate would initially be 
$0.35 per short ton. This proposed rule also announces the Agricultural 
Marketing Service's (AMS) intent to request approval by the Office of 
Management and Budget (OMB) of new information collection requirements 
to implement the program.

DATES: Comments must be received by March 4, 2013. Pursuant to the 
Paperwork Reduction Act (PRA), comments on the information collection 
burden that would result from this proposal must be received by March 
4, 2013.

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

FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Marketing 
Specialist, Promotion and Economics Division, Fruit and Vegetable 
Program, AMS, USDA, P.O. Box 831, Beavercreek, Oregon 97004; telephone: 
(503) 632-8848; facsimile (503) 632-8852; or electronic mail: 
[email protected].

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

Background

    This proposed rule invites comments on a proposed industry-funded 
research, promotion and information program for paper and paper-based 
packaging. The program would cover four types of paper and paper-based 
packaging--printing, writing and related paper (used to make products 
for printing, writing and other communication purposes), kraft 
packaging paper (used for products like grocery bags and sacks), 
containerboard (used to make corrugated boxes, shipping containers and 
related products), and paperboard (used for food and beverage 
packaging, tubes and other miscellaneous products). The program would 
be financed by an assessment on U.S. manufacturers and importers of 
paper and paper-based packaging and would be administered by a board of 
industry members appointed by the Secretary. The assessment rate would 
initially be $0.35 per short ton. (One short ton equals 2,000 pounds.) 
Entities that manufacture or import less than 100,000 short tons per 
marketing year would be exempt from the payment of assessments. The 
purpose of the program would be to maintain and expand markets for 
paper and paper-based packaging.
    A referendum would be held among eligible U.S. manufacturers and 
importers to determine whether they favor implementation of the program 
prior to it going into effect. The proposal was submitted to USDA by 
the Paper and Paper-Based Packaging Panel (Panel). The Panel is a group 
of 14 industry members that was formed in May 2010 to oversee 
development of the program. The American Forest & Paper Association 
(AF&PA), a national trade association, provided technical assistance to 
the Panel. This rule also announces AMS's intent to request approval by 
the OMB of new information collection requirements to implement the 
program.

Authority in 1996 Act

    The proposed Order is authorized under the 1996 Act which 
authorizes USDA to establish agricultural commodity research and 
promotion orders which may include a combination of promotion, 
research, industry information and consumer information activities 
funded by mandatory assessments. Commodity promotion programs provide a 
unique opportunity for an industry to inform consumers about their 
particular commodity and have the ability to provide significant 
conservation benefits to producers and the public. These programs are 
designed to strengthen the position of agricultural commodity 
industries in the marketplace, maintain and expand markets and uses for 
agricultural commodities, develop new uses for agricultural commodities 
and assist producers in meeting their conservation objectives. As 
defined under section 513(1)(D) of the 1996 Act, agricultural 
commodities include the products of forestry, which includes paper and 
paper-based packaging.
    The 1996 Act provides for a number of optional provisions that 
allow the tailoring of orders for different commodities. Section 516 of 
the 1996 Act provides permissive terms for orders, and other sections 
provide for alternatives. For example, section 514 of the 1996 Act 
provides for orders applicable to (1) Producers, (2) first handlers and 
others in the marketing chain as appropriate, and (3) importers (if 
imports are subject to assessments). Section 516 states that an order 
may include an exemption of de minimis quantities of an agricultural 
commodity; different payment and reporting schedules; coverage of 
research, promotion, and information activities to expand, improve, or 
make more efficient the marketing or use of an agricultural commodity 
in both domestic and foreign markets; provision for reserve funds; 
provision for credits for generic

[[Page 189]]

and branded activities; and assessment of imports.
    In addition, section 518 of the 1996 Act provides for referenda to 
ascertain approval of an order to be conducted either prior to its 
going into effect or within three years after assessments first begin 
under the order. An order also may provide for its approval in a 
referendum based upon different voting patterns. Section 515 provides 
for establishment of a board or council from among producers, first 
handlers and others in the marketing chain as appropriate, and 
importers, if imports are subject to assessment.

Industry Background

    Paper and paper-based packaging is produced from pulp. Pulp is made 
by chemically or mechanically separating fibers from wood or by 
recycling recovered paper and paper-based packaging products. The 
separated, moist fibers are then pressed together and dried into 
flexible sheets.

U.S. Pulpwood Production \1\
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    \1\ Johnson, Tony G., Ronald J., Walters, Brian F., Sorenson, 
Colin, Woodall, Christopher W., Morgan, Todd A., National Pulpwood 
Production, 2008, USDA, p. 15 (www.treesearch.fs.fed.us/pubs/37960).
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    Wood used to make pulp is known as pulpwood. Total pulpwood 
production includes roundwood chipped at mills and other primary 
industry mill residues. Roundwood includes both softwood and hardwood. 
Roundwood pulpwood continues to be the primary fiber source used in 
pulp manufacturing in the United States. Wood residues consist 
primarily of mill residue chips, a byproduct of sawmilling and veneer 
mill operations.
    According to U.S. Forest Service statistics, in 2008, U.S. pulpwood 
production totaled 89.2 million cords. Of that total, softwood 
roundwood and residues accounted for 69 percent (61.4 million cords). 
Hardwood roundwood and residues accounted for 31 percent (27.7 million 
cords). By region, the South accounted for 76.4 percent of total U.S. 
pulpwood production (68.1 million cords). The West accounted for 9.9 
percent (8.8 million cords), the Midwest accounted for 7.1 percent (6.3 
million cords), and the Northeast accounted for 6.6 percent (5.9 
million cords) of total U.S. pulpwood production.

Manufacturers and Converting Operations

    The U.S. paper industry encompasses two broad segments--primary 
producers/manufacturers (mills) and converters. Primary manufacturers 
make rolls of paper and paper-based packaging (commonly referred to as 
roll stock) from pulp produced in the same mill or pulp supplied by 
another mill. Primary manufacturers would be covered under the program.
    Converters turn roll stock into final products such as boxes, 
corrugated boxes, shipping containers, envelopes, magazines, catalogs, 
copy paper and bags/sacks. Converting operations can take place in a 
primary producer mill or off-site. When converting is done in a primary 
producer mill, the roll produced before it is converted into a final 
product or sold to an off-site converter would be covered under the 
program. Converting operations (and thus converted products) would not 
be covered under the program. An exception is the case of cut-size 
printing and writing papers (including folio sheets) made by primary 
producers that are cut prior to leaving the mill.\2\ These are 
classified as primary products (not converted products) under the 
Harmonized Tariff Schedule of the United States (HTSUS) and would, 
therefore, be assessed under the program.
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    \2\ Cut-size office papers are used in office machines and are 
sold in sheet form typically 8.5 x 11, 
8.5 x 14 or 11 x 11. 
Folio sheets are cut-size papers sold in sheet form in sizes of 
17 x 22 or larger. These would be included in 
the printing, writing and related paper category.
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Types of Paper and Paper-Based Packaging

    There are six major types of paper and paper-based packaging 
produced by manufacturers: (1) Printing, writing and related paper; (2) 
kraft packaging paper; (3) containerboard; 4) paperboard; (5) tissue 
paper; and (6) newsprint. The proposed Order would cover the first four 
of the six types mentioned above.
    Printing, writing and related paper is coated or uncoated paper, 
including thermal but excluding carbonless paper, which is subsequently 
converted into products used for printing, writing and other 
communication purposes, such as file folders, envelopes, catalogues, 
magazines and brochures. Demand for carbonless paper has declined 
significantly due to other technologies. Thus, the Panel concluded that 
the carbonless segment of the industry would not be able to absorb the 
cost of a promotion program at this time.
    Kraft packaging paper is coarse, unbleached, semi-bleached or fully 
bleached grades of paper that are subsequently converted into products 
such as grocery bags, multiwall sacks, waxed paper and other products. 
``Kraft'' refers to a process for transforming wood into a high 
quality, strong pulp for making paper and paper-based packaging. 
Bleaching is the chemical processing of pulp to remove the natural 
brown color and thus make the pulp and pulp products whiter.
    Containerboard includes all forms of linerboard, which is used as 
the facing material in the production of corrugated or solid fiber 
shipping boxes, and medium, which is used as the inner fluting material 
in the manufacture of such boxes. Containerboard is used to manufacture 
corrugated boxes, shipping containers, point-of-sale displays, pallets 
and other products.
    Paperboard is solid bleached kraft board, recycled board and 
unbleached kraft board, which is converted into products such as 
folding boxes, tubes, cans and drums. Paperboard is also used to 
package food, beverages and other nondurable consumer products such as 
pharmaceuticals, clothing, footwear and cosmetics. Nondurable goods are 
used immediately or have a lifespan of 3 years or less.
    The two types of paper and paper-based packaging that would not be 
covered under the program are tissue paper and newsprint. With the 
exception of restroom hand-dryers versus paper towels, tissue paper 
products are not facing competition from alternative products. The 
opposite is true for newsprint. Demand for newsprint has drastically 
declined due to the shift toward digital communications. However, the 
Panel concluded that the newsprint segment of the industry would not be 
able to incur the cost of a promotion program at this time.

U.S. Manufacturing by Region \3\
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    \3\ Manufacturing data was compiled by the AF&PA from its 51st 
Annual Survey of Paper, Paperboard and Pulp, 2011.
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    In 2011, about 68.5 million short tons of U.S. paper and paper-
based packaging to be covered under the program were produced. Of the 
68.5 million short tons, 63.2 percent was manufactured in the South, 
17.1 percent was manufactured in the Midwest, 10.5 percent was 
manufactured in the Northeast, and 9.2 percent was manufactured in the 
West. In terms of type, 50.1 percent was containerboard, 29.1 percent 
was printing, writing and related paper, 18.3 percent was paperboard, 
and 2.5 percent was kraft packaging paper.

Export Markets

    According to U.S. Census data, in 2011, exports of the four types 
of paper and paper-based packaging to be covered under the proposed 
Order

[[Page 190]]

totaled about 11.5 million short tons, or 17 percent of domestic 
production. In terms of major export markets in 2011, 18.0 percent went 
to Western Europe, 16.0 percent each went to Canada and Mexico, 11.0 
percent went to the Far East and Oceania, 9.0 percent went to South 
America and 8.0 percent went to China. Of the 11.5 million short tons, 
46.0 percent was containerboard, 26.0 percent was paperboard, 22.0 
percent was printing, writing and related paper, and 6.0 percent was 
kraft packaging paper.

Imports

    According to U.S. Customs and Border Protection (Customs) data, in 
2011, imports to be covered under the program totaled 7.5 million short 
tons. Of that total, about 58.6 percent was from Canada, 22.2 percent 
from Western Europe, 9.8 percent was from China, Japan and the Far 
East, 2.7 percent was from South America and the remainder was from 
other countries. In terms of type, 72.0 percent of the imports were 
printing, writing and related paper, 13.1 percent was paperboard, 10.1 
percent was containerboard and 4.8 percent was kraft packaging paper.

Need for a Program

    According to AF&PA data, markets for paper and paper-based 
packaging that would be covered under the program declined by 15 
percent between 2000 and 2010. U.S. shipments of cut-size office papers 
(one sector of the printing and writing category) grew with employment 
in white collar-intensive industries between 2000 and 2006. However, 
between 2006 and 2010, shipments fell 20 percent \4\ while employment 
in white collar-intensive industries declined by 5 percent. Moreover, 
in 2010, while employment in white collar-intensive industries 
stabilized,\5\ office paper shipments declined another 5 percent.\6\ 
This is illustrated in the following chart.
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    \4\ AF&PA's Statistics of Pulp, Paper and Paperboard, p. 7.
    \5\ Employment data was compiled by the AF&PA from the U.S. 
Bureau of Labor Statistics, http://www.bls.gov/data.
    \6\ AF&PA's Statistics, p. 7.
    [GRAPHIC] [TIFF OMITTED] TP02JA13.005
    
    Markets for other printing and writing papers (exclusive of cut-
size office papers) declined 27 percent between 2006 and 2010.\7\ 
Digital forms of communication such as Internet advertising and the 
widespread availability of news, books and other digital information 
have contributed to this displacement. This is illustrated in the 
following chart.\8\
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    \7\ AF&PA's Statistics, p. 7 and 12.
    \8\ Printing activity index is from http://www.federalreserve.gov/releases/g17/ipdisk/ip_nsa.txt. The Federal 
Reserve Board reports production of nondurable goods, as well as 
other items, as indexes rather than in terms of tons, pounds or 
units. The base year is 2007, which means that if the index reaches 
105 in 2008, production has increased 5 percent relative to the 2007 
level. If the index falls to 95, it means that production has 
declined 5 percent relative to the 2007 level.

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[GRAPHIC] [TIFF OMITTED] TP02JA13.006

    According to AF&PA data, kraft paper markets declined 23 percent 
between 2000 and 2010,\9\ even as food store sales rose by 1 
percent.\10\
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    \9\ AF&PA monthly Kraft Paper Statistical Reports.
    \10\ Retail food and beverage store sales data is from the U.S. 
Census Bureau (http://www.census.gov/retail) and was adjusted for 
inflation by the AF&PA using U.S. Bureau of Labor Statistics' 
consumer price index for food and beverages (http://www.bls.gov/data/#prices).
[GRAPHIC] [TIFF OMITTED] TP02JA13.007

    Paperboard markets also have declined over the past decade.\11\ 
Paperboard is mainly facing competition from plastics, but also from 
foils and, to a lesser extent, glass. Between 2000 and 2010, U.S. 
paperboard markets contracted 10 percent as compared with a fairly 
stable demand (i.e., a 1 percent increase) for nondurable consumer 
goods. Additionally, paperboard markets stagnated when nondurable 
consumer goods demand grew in the mid-2000s.\12\ This is illustrated 
below.
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    \11\ AF&PA's Statistics, p. 9.
    \12\ http://www.federalreserve.gov/releases/g17/ipdisk/ip_nsa.txt.

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[GRAPHIC] [TIFF OMITTED] TP02JA13.008

    AF&PA data show that containerboard markets have remained fairly 
steady as compared to the other four types of paper and paper-based 
packaging to be covered under the program. U.S. containerboard markets 
declined 2 percent between 2000 and 2010,\13\ while demand for 
nondurable consumer goods, which accounts for most of the demand for 
corrugated boxes, rose 1 percent. As shown below, from 2000 through 
2007, containerboard markets largely kept pace with nondurable consumer 
goods, with containerboard demand growing 4 percent and nondurable 
goods up 5 percent.\14\ This is illustrated in the following chart.
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    \13\ AF&PA's Statistics, p. 9 and 20.
    \14\ http://www.federalreserve.gov/releases/g17/ipdisk/ip_nsa.txt.
[GRAPHIC] [TIFF OMITTED] TP02JA13.009

    In light of these market conditions, the Panel was formed in May 
2010 to assess the merits of a national promotion program. While there 
have been a number of ongoing campaigns designed to promote specific 
sectors of the paper industry, the impact of these programs has been 
limited due to funding. Additionally, while the programs have been 
useful, their messages have been tailored to specific segments of the 
industry. Ultimately, the Panel concluded that a national program that 
would generate about $25 million annually with a unified message that 
crosses all segments would benefit the entire industry.

Provisions of Proposed Program

Definitions

    Pursuant to section 513 of the 1996 Act, sections 1222.1 through 
1222.29 of the proposed Order would define certain terms that would be 
used throughout the Order. Several of the terms are common to all 
research and promotion programs authorized under

[[Page 193]]

the 1996 Act while other terms are specific to the proposed paper and 
paper-based packaging Order.
    Section 1222.1 would define the term ``Act'' to mean the Commodity 
Promotion, Research and Information Act of 1996 (7 U.S.C. 7411-7425), 
and any amendments thereto.
    Section 1222.2 would define the term ``Board'' to mean the Paper 
and Paper-Based Packaging Board established pursuant to section 
1222.40, or such other name as recommended by the Board and approved by 
the Department.
    Section 1222.4 would define the term ``converted products'' to mean 
products made from paper and paper-based packaging.
    Section 1222.5 would define the term ``Customs'' or ``CBP'' to mean 
the U.S. Customs and Border Protection, an agency of the U.S. 
Department of Homeland Security.
    Section 1222.7 would define the term ``fiscal period'' and 
``marketing year'' to mean the 12-month period ending on December 31 or 
such other period as recommended by the Board and approved by the 
Secretary.
    Section 1222.9 would define the term ``information'' to mean 
information and programs for consumers, customers and industry, 
including educational activities, information and programs designed to 
enhance and broaden the understanding of the use and attributes of 
paper and paper-based packaging, increase efficiency in manufacturing 
paper and paper-based packaging, maintain and expand existing markets, 
and develop new markets and marketing strategies. These include:
    (a) Consumer education and information, which means any action 
taken to provide information to, and broaden the understanding of, the 
general public regarding paper and paper-based packaging; and
    (b) Industry information, which means information and programs that 
would enhance the image of the paper and paper-based packaging 
industry.
    Section 1222.12 would define the term ``manufacture'' or 
``produce'' to mean the process of transforming pulp into paper and 
paper-based packaging.
    Section 1222.13 would define the term ``manufacturer or producer'' 
to mean any person who manufactures paper and paper-based packaging in 
the United States.
    Section 1222.16 would define the term ``Panel'' to mean the Paper 
and Paper-Based Packaging Panel formed to oversee development of a 
paper and paper-based packaging promotion, research and information 
program. As specified in section 1222.41, the Panel would conduct the 
initial nominations for the Board and submit them to the Secretary. 
This would be the only role of the Panel under the program.
    Section 1222.17 would define the term ``paper and paper-based 
packaging'' to mean:
    (1) Printing, writing and related paper, which is coated or 
uncoated paper, including thermal but excluding carbonless paper, that 
is subsequently converted into products used for printing, writing and 
other communication purposes, such as file folders, envelopes, 
catalogues, magazines and brochures;
    (2) Kraft packaging paper, which is coarse unbleached, semi-
bleached or fully bleached grades of paper that is subsequently 
converted into products such as grocery bags, multiwall sacks, waxed 
paper and other products;
    (3) Containerboard, which is all forms of linerboard and medium, 
that is used to manufacture corrugated boxes, shipping containers and 
related products; and
    (4) Paperboard, which is solid bleached kraft board, recycled board 
and unbleached kraft board that is subsequently converted into a wide 
variety of end uses, including folding boxes, food and beverage 
packaging, tubes, cans, and drums, and other miscellaneous products. 
Paperboard does not include construction-related products such as 
gypsum wallboard facings and panel board.
    As previously mentioned, the Order would cover only the four types 
of paper and paper-based packaging as defined above, not tissue, 
newsprint or converted products.
    Sections 1222.10, 1222.11, 1222.14 and 1222.22 would define the 
terms ``kraft process,'' ``linerboard,'' ``medium,'' and ``pulp,'' 
respectively. These terms are used in the definition of paper and 
paper-based packaging specified in section 1222.17.
    Section 1222.20 would define the term ``programs, plans and 
projects'' to mean those research, promotion and information programs, 
plans or projects established pursuant to the Order.
    Section 1222.21 would define the term ``promotion'' to mean any 
action, including paid advertising and the dissemination of 
information, utilizing public relations or other means, to enhance and 
broaden the understanding of the use and attributes of paper and paper-
based packaging for the purpose of maintaining and expanding markets 
for paper and paper-based packaging.
    Section 1222.23 would define the term ``research'' to mean any type 
of test, study, or analysis designed to enhance the image, 
desirability, use, marketability, manufacturing, recyclability, 
reusability or quality of paper and paper-based packaging, including 
research directed to product characteristics and product development, 
including new uses of existing products, new products or improved 
technology in the manufacturing of paper and paper-based packaging.
    Section 1222.25 would define the term ``short ton'' or ``ton'' to 
mean a measure of weight equal to 2,000 pounds.
    Sections 1222.3, 1222.6, 1222.8, 1222.15, 1222.19, 1222.24, 
1222.26, 1222.27, 1222.28 and 1222.29 would define the terms ``conflict 
of interest,'' ``Department or UDSA,'' ``importer,'' ``Order,'' 
``person,'' ``Secretary,'' ``State,'' ``suspend,'' ``terminate,'' and 
``United States,'' respectively. The definitions are the same as those 
specified in section 513 of the Act.

Establishment of the Board

    Pursuant to section 515 of the 1996 Act, sections 1222.40 through 
1222.47 of the proposed Order would detail the establishment and 
membership of the proposed Paper and Paper-Based Packaging Board, 
nominations and appointments, the term of office, removal and 
vacancies, procedure, reimbursement and attendance, powers and duties, 
and prohibited activities.
    Section 1222.40 would specify the Board establishment and 
membership. The Board would be composed of domestic manufacturers and 
importers who manufacture or import to the United States 100,000 short 
tons or more of paper and paper-based packaging during a fiscal period. 
Seats on the Board would be apportioned based on the geographic 
distribution of the quantity of paper and paper-based packaging 
manufactured in the United States and the quantity of paper and paper-
based packaging imported to the United States.
    The Board would be composed of 12 members. Eleven members would be 
manufacturers and 1 member would be an importer. Of the 11 domestic 
manufacturers, 10 would be allocated to four regions within the United 
States based on the quantity of paper and paper-based packaging 
manufactured within the respective region. Of the 10 members, 6 would 
be from the South, two would be from the Midwest, and one each would be 
from the Northeast and the West. Specific areas within each domestic 
region would be specified in section 1222.40(b)(1). One manufacturer 
representative may be from any region (``at large'') and must produce 
at least 100,000 short tons but no more than 250,000 short tons of 
paper and paper-

[[Page 194]]

based packaging annually. This is to help ensure that the views of 
smaller entities that are subject to assessments are represented on the 
Board. If there are no eligible nominees, this seat would be allocated 
to the largest producing region.
    The Panel also opted to have no alternate Board members. It wants 
to ensure that industry members who seek representation and serve on 
the Board are committed to their service and participate in all Board 
meetings.
    Every 5 years, but no more often than once every 3 years, the Board 
must review the geographical distribution of the quantity of paper and 
paper-based packaging manufactured within the United States and the 
quantity of paper and paper-based packaging imported to the United 
States. If warranted, the Board would recommend to the Secretary that 
the Board membership be reapportioned appropriately to reflect such 
changes, which could include an increase in the number of importer 
seats. The distribution of quantities between domestic regions would 
also be considered as well as changes in the size of the Board. Any 
changes in Board composition would be implemented by the Secretary 
through rulemaking.
    Section 1222.41 of the proposed Order would specify Board 
nominations and appointments. The initial nominations would be 
submitted to the Secretary by the Panel. The Panel would publicize the 
nomination process, using trade press or other means it deems 
appropriate, and outreach to all known manufacturers and importers who 
manufacture or import 100,000 short tons or more of paper and paper-
based packaging in a marketing year. The Panel would use regional 
caucuses, mail or other methods to solicit potential nominees and would 
work with USDA to help ensure that all interested persons are apprised 
of the nomination process. The Panel would submit the nominations to 
the Secretary and recommend two nominees for each Board position. The 
Secretary would select the members of the Board from the nominations 
submitted by the Panel.
    Regarding subsequent nominations, the Board would solicit 
nominations as described in the preceding paragraph. Eligible persons 
may nominate themselves or other eligible candidates. Nominees would 
have the opportunity to provide the Board a short background statement 
outlining their qualifications to serve on the Board. Nominees must 
domestically produce or import 100,000 short tons or more of paper and 
paper-based packaging annually. Entities that are both a domestic 
manufacturer and an importer could seek nomination to the Board as 
either a domestic manufacturer or an importer, but not both.
    For the domestic seats allocated by region, manufacturers must 
produce paper and paper-based packaging in the region for which they 
seek nomination. Domestic manufacturers who manufacture paper and 
paper-based packaging in more than one region could seek nomination in 
only one region of their choice. The names of domestic manufacturer 
nominees would be placed on a ballot by region. The ballots along with 
the background statements would be mailed to manufacturers who produce 
100,000 short tons or more annually for a vote. Manufacturers may vote 
in each region in which they manufacture paper and paper-based 
packaging. The votes would be tabulated for each region with the 
nominee receiving the highest number of votes at the top of the list in 
descending order by vote. The top two candidates for each position 
would be submitted to the Secretary.
    The names of nominees for the ``at large'' domestic manufacturer 
seat would also be placed on a ballot. The ballots along with the 
background statements would be mailed to all manufacturers who 
manufacture 100,000 short tons or more of paper and paper-based 
packaging annually. The votes would be tabulated and the nominees 
receiving the highest number of votes would be placed at the top of the 
list in descending order by vote. The top two candidates would be 
submitted to the Secretary.
    The names of importer nominees would also be placed on a ballot. 
The ballots along with the background statements would be mailed to 
importers who import 100,000 short tons or more annually for a vote. 
The votes would be tabulated with the nominee receiving the highest 
number of votes at the top of the list in descending order by vote. The 
top two candidates for each position would then be submitted to the 
Secretary.
    The Board would submit nominations to the Secretary at least 6 
months before the new Board term begins. The Secretary would select the 
members of the Board from the nominations submitted by the Board.
    The Panel also recommended that no two Board members be employed by 
a single corporation, company, partnership or any other legal entity. 
This is to help ensure that representation on the Board is balanced.
    In order to provide the Board flexibility, the Board could 
recommend to the Secretary modifications to its nomination procedures. 
Any such modifications would be implemented through rulemaking by the 
Secretary.
    Section 1222.42 of the proposed Order would specify the term of 
office. With the exception of the initial Board, each Board member 
would serve a three-year term or until the Secretary appointed his or 
her successor. Each term of office would begin on January 1 and end on 
December 31. No member could serve more than two consecutive terms, 
excluding any term of office less than three years. For the initial 
board, the terms of Board members would be staggered for two, three and 
four years and would be recommended to the Secretary by the Panel.
    Section 1222.43 of the proposed Order would specify criteria for 
the removal of members and for filling vacancies. If a Board member 
ceased to work for or be affiliated with a domestic manufacturer or 
importer or ceased to do business in the region he or she represented, 
such position would become vacant. Additionally, the Board could 
recommend to the Secretary that a member be removed from office if the 
member consistently refused to perform his or her duties or engaged in 
dishonest acts or willful misconduct. The Secretary could remove the 
member if he or she finds that the Board's recommendation shows 
adequate cause. The Secretary could also remove a member due to 
adequate cause absent a Board recommendation. If a position became 
vacant, nominations to fill the vacancy would be conducted using the 
nominations process as proposed in section 1222.41 of the Order. A 
vacancy would not be required to be filled if the unexpired term is 
less than six months.
    Section 1222.44 of the proposed Order would specify procedures of 
the Board. A majority of the Board members would constitute a quorum. 
Thus, for the 12-member Board, 7 members would constitute a quorum. If 
the Board had two vacancies and consisted of only 10 members, 6 members 
would constitute a quorum. A motion would carry if supported by a 
majority of Board members, except for recommendations to change the 
assessment rate or to adopt a budget, both of which would require 
affirmation by at least two-thirds of the Board members. Thus, for a 
12-member Board, 8 members would have to vote in favor of a budget for 
it to pass. For a 10-member Board (two vacancies), 7 members would have 
to vote in favor of a budget for it to pass. Proxy voting would not be 
permitted.
    The proposed Order would also provide for the Board to take action 
by mail, telephone, electronic mail, facsimile, or any other electronic 
means when the chairperson believes it is

[[Page 195]]

necessary. Actions taken under these procedures would be valid only if 
all members and the Secretary were notified of the meeting and all 
members were provided the opportunity to vote and at least a majority 
of Board members voted in favor of the action (unless two-thirds vote 
were required under the Order). Additionally, all votes would have to 
be confirmed in writing and recorded in Board minutes.
    The proposed Order would specify that Board members would serve 
without compensation. However, Board members would be reimbursed for 
reasonable travel expenses, as approved by the Board, incurred when 
performing Board business. Similarly, persons who serve on 
subcommittees or other committees who may not be Board members would 
also be reimbursed for reasonable travel expenses, as approved by the 
Board, incurred when performing Board business.
    Section 1222.46 of the proposed Order would specify powers and 
duties of the Board. These are similar in promotion programs authorized 
under the 1996 Act. They include, among other things, to administer the 
Order and collect assessments; to develop bylaws and recommend 
regulations necessary to administer the Order; to select a chairperson 
and other Board officers; to form committees and subcommittees as 
necessary; to hire staff or contractors; to provide appropriate notice 
of meetings to the industry and USDA and keep minutes of such meetings; 
to develop programs and enter into contracts to implement programs; to 
submit fiscal year budgets to USDA in accordance with section 1222.50; 
to borrow funds necessary to cover startup costs of the Order; to 
invest Board funds appropriately; to recommend changes in the 
assessment rate as appropriate and within the limits of the Order; to 
have its books audited by an outside certified public accountant at the 
end of each fiscal period and at other times as requested by the 
Secretary; to report and make public reports of its program activities; 
to make public an accounting of funds received and expended at least 
once each fiscal year; to receive, investigate and report to the 
Secretary complaints of violations of the Order; to recommend 
amendments to the Order as appropriate; and to work to achieve an 
effective, continuous and coordinated program of promotion, research 
and information and to carry out programs, plans and projects designed 
to provide maximum benefits to the paper and paper-based packaging 
industry.
    Section 1222.47 of the proposed Order would specify prohibited 
activities that are common to all promotion programs authorized under 
the 1996 Act. In summary, neither the Board nor its employees and 
agents could engage in actions that would be a conflict of interest; 
use Board funds to lobby (influencing legislation or governmental 
action or policy, by local, state, national, and foreign governments or 
subdivision thereof, other than recommending to the Secretary 
amendments to the Order); and engage in any advertising or activities 
that may be false, misleading or disparaging to another agricultural 
commodity. Additionally, paper and paper-based packaging from all 
origins would be treated equally.

Expenses and Assessments

    Pursuant to sections 516 and 517 of the 1996 Act, sections 1222.50 
through 1222.53 of the proposed Order detail requirements regarding the 
Board's budget and expenses, financial statements, assessments, and 
exemption from assessments. At least 60 calendar days before the start 
of the fiscal period, and as necessary during the year, the Board would 
submit a budget to USDA covering its projected expenses. The budget 
must include a summary of anticipated revenue and expenses for each 
program along with a breakdown of staff and administrative expenses. 
Except for the initial budget, the Board's budgets should include 
comparative data for at least one preceding fiscal period.
    Each budget must provide for adequate funds to cover the Board's 
anticipated expenses. Any amendment or addition to an approved budget 
must be approved by USDA, including shifting of funds from one program, 
plan or project to another. Shifts of funds that do not result in an 
increase in the Board's approved budget would not have to have prior 
approval from USDA. For example, if the Board's approved budget 
provided for $1 million in consumer advertising and $500,000 in 
research projects, a shift of $50,000 from consumer advertising to 
research would require USDA approval. However, a shift within the $1 
million consumer advertising line item would not require prior USDA 
approval.
    The Board would be authorized to incur reasonable expenses for its 
maintenance and functioning. During its first year of operation, the 
Board could borrow funds for startup costs and capital outlay. Any 
borrowed funds would be subject to the same fiscal, budget and audit 
controls as other funds of the Board.
    The Board could also accept voluntary contributions. Any 
contributions received by the Board would be free from encumbrances by 
the donor and the Board would retain control over use of the funds. The 
Board would also be required to reimburse USDA for costs incurred by 
USDA in overseeing the Order's operations, including all costs 
associated with referenda.
    The Board would be limited to spending no more than 15 percent of 
its available funds for administration, maintenance, and the 
functioning of the Board. This limitation would begin three fiscal 
years after the Board's first meeting. As an example, if the Board 
received $20 million in assessments during fiscal year 5, and had 
available $1 million in reserve funds, the Board's available funds 
would be $21 million. In this scenario, the Board would be limited to 
spending no more than $3.2 million (.15 x $21 million) on 
administrative costs. Reimbursements to USDA would not be considered 
administrative costs.
    The Board could also maintain a monetary reserve and carry over 
excess funds from one fiscal period to the next. However, such reserve 
funds could not exceed one fiscal year's budgeted expenses. For 
example, if the Board's budgeted expenses for a fiscal year were $20 
million, it could carry over no more than $20 million in reserve. With 
approval of the Secretary, reserve funds could be used to pay expenses.
    The Board could invest its revenue collected under the Order in the 
following: (1) Obligations of the United States or any agency of the 
United States; (2) General obligations of any State or any political 
subdivision of a State; (3) Interest bearing accounts or certificates 
of deposit of financial institutions that are members of the Federal 
Reserve; and (4) Obligations fully guaranteed as to principal interest 
by the United States.
    The Board would be required to submit to USDA financial statements 
on a quarterly basis, or at any other time as requested by the 
Secretary. Financial statements should include, at a minimum, a balance 
sheet, an income statement and an expense budget.

Assessments

    The Board's programs and expenses would be funded through 
assessments on U.S. manufacturers and importers, other income, and 
other funds available to the Board. The Order would provide for an 
initial assessment rate of $0.35 per short ton of paper and paper-based 
packaging domestically manufactured or imported. Domestic manufacturers 
would pay assessments based on the quantity of paper and paper-based 
packaging manufactured or produced;

[[Page 196]]

the assessment would be on the rollstock. An exception previously 
mentioned is the case of cut-size printing and writing papers 
(including folio sheets) in which case the assessment would be on the 
cut-size paper. Importers would pay assessments based on the quantity 
of paper and paper-based packaging imported to the United States.
    Two years after the Order becomes effective and periodically 
thereafter, the Board would review the assessment rate and, if 
appropriate, recommend a change in the rate. At least two-thirds of the 
Board members would have to favor a change in the assessment rate. Any 
change in the assessment rate would be subject to rulemaking by the 
Secretary. Anticipated income generated at the $0.35 per short ton 
assessment rate is addressed in the section titled ``Initial Regulatory 
Flexibility Act Analysis.''
    Domestic manufacturers would be required to pay their assessments 
owed to the Board by the 30th calendar day of the month following the 
end of the quarter in which the paper and paper-based packaging was 
manufactured. Thus, the January to December fiscal year would have four 
quarters ending the last day of March, June, September, and December, 
respectively. Assessments would be due April 30th, July 30th, October 
30th and January 30th. As an example, assessments for paper and paper-
based packaging produced in January, February or March would be due to 
the Board by April 30th.
    Importer assessments would be collected through Customs. If Customs 
did not collect the assessment from an importer, then the importer 
would be responsible for paying the assessment directly to the Board 
within 30 calendar days after the end of the quarter in which the paper 
and paper-based packaging was imported. Imported paper and paper-based 
packaging identified by the numbers of the HTSUS listed in sections 
1222.52(e) would be covered under the Order. The majority of the paper 
and paper-based packaging imports are in kilograms. One kilogram is 
equal to 2.20462262 pounds and one short ton is equal to 2,000 pounds. 
Thus, the $0.35 per short ton assessment rate is equal to a rate of 
$.000386 per kilogram ($0.35/2,000 pounds times 2.20462262 pounds/
kilogram).
    The Order would provide authority for the Board to impose a late 
payment charge and interest for assessments overdue to the Board by 60 
calendar days. The late payment charge and rate of interest would be 
prescribed in the Order's regulations issued by the Secretary.

Exemptions

    The Order would provide for two exemptions. First, U.S. 
manufacturers and importers who domestically produce or import less 
than 100,000 short tons during a marketing year would be exempt from 
paying assessments. If an entity is a U.S. manufacturer and an 
importer, such entity's combined quantity of paper and paper-based 
packaging manufactured and imported annually would count towards the 
100,000 short ton exemption. Manufacturers and importers would apply to 
the Board for an exemption prior to the start of the fiscal year. This 
would be an annual exemption; entities would have to reapply each year. 
They would have to certify that they expect to domestically manufacture 
or import less than 100,000 short tons for the applicable fiscal year. 
The Board could request past production or import data to support the 
exemption request. The Board would then issue, if deemed appropriate, a 
certificate of exemption to the eligible manufacturer or importer.
    Once approved, domestic manufacturers would not have to pay 
assessments to the Board for the applicable fiscal year. Approved 
importers would have their assessments as collected by Customs refunded 
by the Board within 60 calendar days after receipt of such assessments 
by the Board. No interest would be paid on the assessments collected by 
Customs.
    Manufacturers and importers who did not apply to the Board for an 
exemption and domestically manufactured or imported less than 100,000 
short tons during the fiscal year would receive a refund from the Board 
for the applicable assessments within 30 calendar days after the end of 
the fiscal year. The Board would determine the assessments paid and 
refund the manufacturer or importer accordingly. On the other hand, 
manufacturers and importers who receive an exemption certificate but 
domestically manufacture or import 100,000 short tons or more of paper 
and paper-based packaging during the fiscal year would have to pay the 
Board the applicable assessments owed within 30 calendar days after the 
end of the fiscal year and submit any necessary reports to the Board.
    The Board could recommend additional procedures to administer the 
exemption as appropriate. Any procedures would be implemented through 
rulemaking by the Secretary.
    The second exemption under the proposed Order would be for organic 
paper and paper-based packaging. A domestic manufacturer who operates 
under an approved National Organic Program (NOP) (7 CFR part 205) 
system plan, only manufactures paper and paper-based packaging that is 
eligible to be labeled as 100 percent organic under the NOP and is not 
a split operation would be exempt from the payment of assessments. 
Likewise, an importer who imports only paper and paper-based packaging 
that is eligible to be labeled as 100 percent organic under the NOP, is 
not a split operation and who does not import any nonorganic paper and 
paper-based packaging would be exempt from the payment of assessments.

Promotion, Research and Information

    Pursuant to section 516 of the 1996 Act, sections 1222.60 through 
1222.62 of the proposed Order would detail requirements regarding 
promotion, research and information programs, plans and projects 
authorized under the Order. The Board would develop and submit to the 
Secretary for approval programs, plans and projects regarding 
promotion, research, education and other activities, including consumer 
and industry information and advertising. The Board would be required 
to evaluate each plan and program to ensure that it contributes to an 
effective promotion program. The Order would also require that, at 
least once every five years, the Board fund an independent evaluation 
of the effectiveness of the Order and programs conducted by the Board.
    Finally, the Order would specify that any patents, copyrights, 
trademarks, inventions, product formulations and publications developed 
through the use of funds received by the Board would be the property of 
the U.S. Government, as represented by the Board. These along with any 
rents, royalties and the like from their use would be considered income 
subject to the same fiscal, budget, and audit controls as other funds 
of the Board, and could be licensed with approval of the Secretary.

Reports, Books, and Records

    Pursuant to section 515 of the 1996 Act, sections 1222.70 through 
1222.72 would specify the reporting and recordkeeping requirements 
under the proposed Order as well as requirements regarding 
confidentiality of information.
    Manufacturers and importers would be required to submit 
periodically to the Board certain information as the Board may request. 
Specifically, domestic manufacturers would submit a report to the Board 
that would include, but not be limited to, the manufacturer's name, 
address, and telephone number; and the quantity of paper and paper-
based packaging manufactured by type.

[[Page 197]]

Manufacturers would submit this report by the 30th calendar day of the 
month following the end of the quarter in which the paper and paper-
based packaging was manufactured. The report would accompany the 
payment of assessments as specified in section 1222.52. Manufacturers 
who received a certificate of exemption from the Board would not have 
to submit such a report to the Board. However, exempt manufacturers who 
produced 100,000 short tons or more during the fiscal year would have 
to submit such reports to the Board as specified in section 
1222.53(a)(6).
    Likewise, importers who pay their assessments directly to the Board 
would be required to submit a report to the Board that would include, 
but not be limited to, the importer's name, address, and telephone 
number; the quantity of paper and paper-based packaging imported to the 
United States by type; and country of export for such paper and paper-
based packaging. Importers would submit this report at the same time 
they remit their assessments to the Board. Importers who paid their 
assessments through Customs would not have to submit such reports to 
the Board because Customs would collect this information upon entry.
    Additionally, manufacturers and importers, including those who were 
exempt, would be required to maintain books and records needed to 
verify any required reports. Such books and records must be made 
available during normal business hours for inspection by the Board's or 
USDA's employees or agents. Manufacturers and importers would be 
required to maintain such books and records for two years beyond the 
applicable fiscal period.
    The Order would also require that all information obtained from 
persons subject to the Order as a result of proposed recordkeeping and 
reporting requirements would be kept confidential by all officers, 
employees, and agents of the Board and USDA. Such information could 
only be disclosed if the Secretary considered it relevant, and the 
information were revealed in a judicial proceeding or administrative 
hearing brought at the direction or at the request of the Secretary or 
to which the Secretary or any officer of USDA were a party. Other 
exceptions for disclosure of confidential information would include the 
issuance of general statements based on reports or on information 
relating to a number of persons subject to the Order, if the statements 
did not identify the information furnished by any person, or the 
publication, by direction of the Secretary, of the name of any person 
violating the Order and a statement of the particular provisions of the 
Order violated.

Miscellaneous Provisions

Referenda

    Pursuant to section 518 of the 1996 Act, section 1222.81(a) of the 
proposed Order specifies that the program would not go into effect 
unless it is approved by a majority of U.S. manufacturers and importers 
voting in a referendum who also represent a majority of the volume of 
paper and paper-based packaging represented in the referendum who, 
during a representative period determined by the Secretary, were 
engaged in the manufacturing or importation of paper and paper-based 
packaging into the United States. For example, if 50 U.S. manufacturers 
and importers representing 50 million short tons of paper and paper-
based packaging voted in a referendum, 26 manufacturers and importers 
representing over 26 million short tons would have to vote in favor of 
the Order for it to pass in the referendum.
    Section 1222.81(b) of the proposed Order specifies criteria for 
subsequent referenda. Under the Order, a referendum would be held to 
ascertain whether the program should continue, be amended, or be 
terminated. This section specifies that a referendum would be held 7 
years after the Order becomes effective, and every 7 years thereafter, 
to determine whether manufacturers and importers favor continuation of 
the Order. The Order would continue if favored by a majority of 
manufacturers and importers voting in the referendum that also 
represented a majority of the volume of paper and paper-based packaging 
represented in the referendum.
    Additionally, a referendum could be conducted at the request of the 
Board. A referendum could also be conducted at the request of 10 
percent or more of the number of persons eligible to vote in a 
referendum under the Order. Finally, a referendum could be conducted at 
any time as determined by the Secretary.

Other Miscellaneous Provisions

    Sections 1222.80 and sections 1222.82 through 1222.88 describe the 
rights of the Secretary; authorize the Secretary to suspend or 
terminate the Order when deemed appropriate; prescribe proceedings 
after termination; address personal liability, separability, and 
amendments; and provide OMB control numbers. These provisions are 
common to all research and promotion program authorized under the 1996 
Act.

Executive Order 12866 and Executive Order 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule is not a significant regulatory action under 
section 3(f) of Executive Order 12866, Regulatory Planning and Review, 
as supplemented by Executive Order 13563. The Office of Management and 
Budget has not reviewed it under that Order.
    We expect the economic impact of this rule to be minimal. The 
program is intended to include broad, fact-based messages highlighting 
the renewability, recyclability and reusability of paper and paper-
based packaging. Paper produced in the United States relies on fiber 
from sustainably managed forests and fiber recovered for recycling as 
its raw material. Broad messages about the recyclability of paper 
should enhance recovery efforts. Increasing paper recovering for 
recycling would increase the amount of paper diverted from landfills. 
Messaging to encourage the use of renewable and recyclable paper and 
paper-based packaging could help increase the use of bio-based 
products; paper and paper-based packaging are considered bio-based 
products because they are composed of wood fiber.
    The industry could also educate the public about the sustainability 
of paper and paper-based packaging. In the United States, more trees 
are grown than harvested. Between 1953 and 2006, the standing inventory 
of trees (i.e., the volume of growing trees) in U.S. forests increased 
by 49 percent and has increased by more than 20 percent since 1970.\15\
---------------------------------------------------------------------------

    \15\ National Report of Sustainable Forests (2010), Page II-112, 
U.S. Forest Service (www.fs.fed.us/research/sustain/).
---------------------------------------------------------------------------

    Additionally, many paper products are manufactured using renewable 
energy. In 2008, an estimated 65 percent of the energy needed to 
operate U.S. pulp and paper mills was generated from renewable fuels 
derived largely from biomass.\16\ Broad campaigns to educate consumers 
about these factors

[[Page 198]]

should help all segments of the industry.
---------------------------------------------------------------------------

    \16\ This is based on a 2008 survey of AF&PA member companies 
that produced pulp, paper and paperboard.
---------------------------------------------------------------------------

    The program would also help the forest products industry maintain 
870,000 jobs across the nation and begin to create new jobs.\17\ In 
addition to these jobs, numerous other jobs in related sectors are 
dependent upon the economic health of this industry.
---------------------------------------------------------------------------

    \17\ Forest products industry employment was calculated by 
summing March 2012 Bureau of Labor Statistics employment data for 
the following categories: Paper and paper products, logging, wood 
products, wood kitchen cabinets and countertops.
---------------------------------------------------------------------------

    The proposed program would be funded by industry through an 
assessment. The program would collect approximately $25 million in 
assessments from the top producing U.S. manufacturers and importers to 
conduct marketing and educate consumers about a variety of paper 
products, thus, benefiting all paper manufacturers and importers, 
including many small operations that would be exempt from the 
assessment. While the benefits of the program are difficult to 
quantify, they are expected to outweigh program costs. If the new 
program preserves just 0.24 percent of the paper and allied products 
industry sales by slowing demand declines for some grades and/or 
increasing demand growth for other grades, the economy could experience 
3,360 additional jobs.\18\ For example, the Cotton Board has seen a 
Benefit-Cost Ratio for producers and the government of $8.80 return for 
each dollar invested; and since 1990, the Benefit-Cost Ratio for 
importers is a $14.80 return for each dollar invested. Other research 
and promotion programs have seen similar benefits.
---------------------------------------------------------------------------

    \18\ This is an AF&PA estimate and was computed as follows. The 
paper and paper products industry currently employs 395,000 people, 
according to the Bureau of Labor Statistics. The grades of paper and 
paper-based packaging to be covered by the proposed program 
accounted for about 83.3 percent of total paper and paper-based 
packaging in 2011. Hence, an estimated 329,000 direct jobs (83.3 
percent of 395,000) are associated with grades that would be covered 
by the program. Multipliers compiled by the Economic Policy 
Institute indicate that 100 jobs in the paper industry support an 
additional 325 jobs outside the industry (supplier industries, 
government entities and schools, and local communities where paper 
industry employees spend their wages). Thus, 329,000 paper industry 
jobs support 1.4 million jobs throughout the economy ((329,000 jobs) 
+ (329,000 jobs x 3.25)). If the proposed program preserves just 
0.24 percent of the paper and allied products industry sales by 
slowing demand declines for some grades and/or increasing demand 
growth for other grades, the economy will have 3,360 additional jobs 
(0.24 percent x 1.4 million).
---------------------------------------------------------------------------

    The assessments collected from U.S. manufacturers and importers are 
expected to be relatively small compared to U.S. manufacturer revenue 
and the value of paper and paper-based packaging imports. Many 
businesses make the decision to not pass these costs to consumers and 
instead keep it as a cost to do business because the costs are so small 
compared to the total revenue. To calculate the percentage of revenue 
represented by the assessment rate, the $0.35 per short ton assessment 
rate is divided by the average price, and that number is multiplied by 
100. For domestic manufacturers, using a 2011 average price of $760 per 
short ton,\19\ the percentage of revenue represented by the assessment 
rate would be .046 percent. For importers, using an average price of 
$824 per short ton ($6.2 billion in 2011 imports divided by 7.5 million 
short tons of imports x 100),\20\ the percentage revenue represented by 
the assessment rate would be .042 percent. Thus, for both domestic 
manufacturers and importers covered under the proposed program, the 
percentage revenue represented by the assessment rate would be well 
under 1 percent (just under 5/100ths of a percent) of the average value 
per ton produced or imported.
---------------------------------------------------------------------------

    \19\ Industry sources do not publish information on average 
price for paper and paper-based packaging. A reasonable estimate for 
average price of paper and paper-based packaging is the value per 
ton of paper and paper-based packaging exports. According to U.S. 
Census data, the average value of paper and paper-based packaging 
exports in 2011 was approximately $760 per short ton.
    \20\ U.S. Customs and Border Protection data.
---------------------------------------------------------------------------

Initial Regulatory Flexibility Act Analysis

    In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 
601-612), AMS is required to examine the impact of the proposed rule on 
small entities. Accordingly, AMS has considered the economic impact of 
this action on small entities.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions so that small businesses will not be 
disproportionately burdened. The Small Business Administration defines, 
in 13 CFR part 121, small agricultural producers as those having annual 
receipts of no more than $750,000 and small agricultural service firms 
(manufacturers and importers) as those having annual receipts of no 
more than $7.0 million.
    According to the AF&PA, in 2011, there were 84 manufacturers in the 
United States that produced one or more of the four types of paper and 
paper-based packaging to be covered under the proposed Order. Using an 
average price of $760 per short ton, a manufacturer who produced less 
than 9,210 short tons of paper and paper-based packaging per year would 
be considered a small entity. It is estimated that no more than four 
manufacturers produced less than 9,210 short tons in 2011. Thus, the 
majority of manufacturers would not be considered small businesses.
    According to Customs data, it is estimated that, in 2011, there 
were about 2,612 importers of paper and paper-based packaging. Eighty-
five importers, or about 3.2 percent, imported more than $7.0 million 
worth of paper and paper-based packaging. Thus, the majority of 
importers would be considered small entities. However, no importer who 
imported 100,000 short tons or more (the Order's proposed exemption 
threshold) imported less than $7.0 million worth of paper and paper-
based packaging (19 importers). Therefore, none of the 19 importers to 
be covered under the proposed Order would be considered small 
businesses.
    Regarding value of the commodity, with domestic production at about 
68.5 million short tons in 2011, and using an average price of $760 per 
short ton, the value of domestic paper and paper-based packaging in 
2011 was about $52 billion. According to Customs data, the value of 
imported paper and paper-based packaging imports for 2011 was about 
$6.2 billion.
    This rule invites comments on a proposed industry-funded research, 
promotion, and information program for paper and paper-based packaging. 
The program would be financed by an assessment on domestic 
manufacturers and importers and would be administered by a board of 
industry members appointed by the Secretary. The initial assessment 
rate would be $0.35 per short ton. Entities that domestically 
manufacture or import less than 100,000 short tons per marketing year 
would be exempt from the payment of assessments. The purpose of the 
program would be to maintain and expand markets for paper and paper-
based packaging. A referendum would be held among eligible 
manufacturers and importers to determine whether they favor 
implementation of the program prior to it going into effect. A majority 
of entities by both number and volume would have to support the program 
for it to be implemented. The program is authorized under the 1996 Act.
    The Order would provide for an exemption for domestic manufacturers 
and importers who manufacture or import less than 100,000 short tons 
annually. Of the 84 domestic manufacturers in 2011, it is estimated 
that about 33, or 39 percent, produced less than 100,000 short tons per 
year and would thus be exempt from paying

[[Page 199]]

assessments under the proposed Order. Of the 2,612 importers in 2011, 
it is estimated that about 2,593, or 99 percent, imported less than 
100,000 short tons per year and would also be exempt from paying 
assessments. Thus, about 51 domestic manufacturers and 19 importers 
would pay assessments under the Order. Using 2011 data and deducting 
exempt tonnage, it is estimated that if 72.5 million short tons of 
paper and paper-based packaging (67.2 million short tons domestic and 
5.3 million short tons imported) were assessed at a rate of $0.35 per 
short ton, about $25.4 million would be collected in assessments. Of 
that $25.4 million, 92.5 percent ($23.5 million) would be paid by 
domestic manufacturers and 7.5 percent ($1.9 million) would be paid by 
importers.
    Regarding alternatives, the Panel considered various options to the 
program's coverage, the proposed assessment rate and exemption 
threshold. The Panel considered the merits of assessing all U.S. 
production of the four types of paper and paper-based packaging to be 
covered under the program, whether imports should be included, and 
different assessment rates to generate a range in income from $10 
million to $30 million. The Panel also considered the merits of a 
25,000 short ton versus a 100,000 short ton exemption. The table below 
details various rates of assessment and approximate income generated 
using 2011 data and the 100,000 short ton-exemption threshold.

        Approximate Assessment Income at Various Assessment Rates
------------------------------------------------------------------------
                                                        U.S. production
                                                        and imports with
                                                        a 100,000 short
            Approximate assessment income                ton-exemption
                                                         (72.5 million
                                                          short tons)
------------------------------------------------------------------------
$10.0 million........................................             $0.138
$20.0 million........................................             $0.276
$25.4 million........................................             $0.350
$30.0 million........................................             $0.413
------------------------------------------------------------------------

    After much consideration, the Panel concluded that an exemption 
threshold of 100,000 short tons would be appropriate with imports 
covered under the program as well. The Panel concluded that this 
exemption level would help reduce the financial and reporting burden on 
smaller entities but provide the Board sufficient income to administer 
the program and conduct research and promotion activities.
    This action would impose additional reporting and recordkeeping 
burdens on manufacturers and importers of paper and paper-based 
packaging. Manufacturers and importers interested in serving on the 
Board would be asked to submit a nomination form to the Board 
indicating their desire to serve or nominating another industry member 
to serve on the Board. Interested persons could also submit a 
background statement outlining their qualifications to serve on the 
Board. Except for the initial Board nominations, manufacturers and 
importers would have the opportunity to cast a ballot and vote for 
candidates to serve on the Board. Manufacturer and importer nominees to 
the Board would have to submit a background form to the Secretary to 
ensure they are qualified to serve on the Board.
    Additionally, manufacturers and importers who manufacture or import 
less than 100,000 short tons annually could submit a request to the 
Board for an exemption from paying assessments on this volume. 
Manufacturers and importers would also be asked to submit a report to 
the Board regarding their production/imports. Manufacturers and 
importers who would qualify as 100 percent organic under the NOP could 
submit a request to the Board for an exemption from assessments. 
Importers could also request a refund of any assessments paid to 
Customs.
    Finally, manufacturers and importer who wanted to participate in a 
referendum to vote on whether the Order should become effective would 
have to complete a ballot for submission to the Secretary. These forms 
are being submitted to the OMB for approval under OMB Control No. 0581-
NEW. Specific burdens for the forms are detailed later in this document 
in the section titled ``Paperwork Reduction Act''. As with all Federal 
promotion programs, reports and forms are periodically reviewed to 
reduce information requirements and duplication by industry and public 
sector agencies. Finally, USDA has not identified any relevant Federal 
rules that duplicate, overlap, or conflict with this rule.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    Regarding outreach efforts, the Panel represents a broad cross-
section of manufacturers and importers that would be covered under the 
program. Of the 14 Panel members, 11 are AF&PA members and 3 are non-
AF&PA members. According to the Panel, Panel and AF&PA members 
represent about 81 percent of the domestic industry that would be 
covered by the program. Panel members representing 69 percent of the 
domestic production have signed forms indicating their support for the 
program. Over the past year, the Panel, and AF&PA staff and industry 
company employees, on behalf of the Panel, have made presentations on 
the proposed Order to all three major associations representing paper-
based packaging and many of the associations representing the printing 
and writing paper segment of the industry. In September 2011, the Panel 
mailed information regarding the program to all Panel-known companies 
that would pay assessments under the program. This included 
manufacturers and importers and both AF&PA members and non-members. The 
Panel also mailed a letter to other parties in the supply chain to 
continue to educate them about the program. The AF&PA continues to 
communicate to its members and non-members about the program. Finally, 
Panel members plan to continue outreach to the CEOs of their industry 
peers to explain the program and help garner support.
    While USDA has performed this initial RFA analysis regarding the 
impact of the proposed rule on small entities, in order to have as much 
data as possible for a more comprehensive analysis, we invite comments 
concerning potential effects. USDA is also requesting comments 
regarding the number and size of entities covered under the proposed 
Order.

Civil Rights Impact Analysis

    Consideration has been given to the potential civil rights 
implications of this proposed rule on affected parties to ensure that 
no person or group shall be discriminated against on the basis of race, 
color, national origin, gender, religion, age, disability, sexual 
orientation, marital or family status, political beliefs, parental 
status or protected genetic information. Although detailed information 
is not available on the domestic manufacturers and importers who would 
be subject to the program or the users of paper and paper-based 
packaging, broad consideration was given to the employees of such 
entities and those individuals who wish to use information collected 
under this mandatory program. This proposed rule does not require 
affected entities to relocate or alter their operations in ways that 
could adversely affect such persons or groups. Moreover, the program 
would not exclude from participation any persons or groups, deny any 
persons or groups the benefits of the program, or

[[Page 200]]

subject any persons or groups to discrimination.

Executive Order 13175

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

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), AMS announces its intention to request an approval of a 
new information collection and recordkeeping requirements for the 
proposed paper and paper-based packaging program.
    Title: Advisory Committee or Research and Promotion Background 
Information.
    OMB Number for background form AD-755: (Approved under OMB No. 
0505-0001).
    Expiration Date of Approval: May 31, 2015.
    Title: Paper and Paper-Based Packaging Promotion, Research and 
Information Order.
    OMB Number: 0581-NEW.
    Expiration Date of Approval: 3 years from approval date.
    Type of Request: New information collection for research and 
promotion programs.
    Abstract: The information collection requirements in the request 
are essential to carry out the intent of the 1996 Act. The information 
collection concerns a proposal received by USDA for a national research 
and promotion program for the paper and paper-based packaging industry. 
The program would be financed by an assessment on domestic 
manufacturers and importers and would be administered by a board of 
industry members appointed by the Secretary. The program would provide 
for an exemption for manufacturers and importers who manufacture or 
import less than 100,000 short tons of paper and paper-based packaging 
during the year. A referendum would be held among eligible 
manufacturers and importers to determine whether they favor 
implementation of the program prior to it going into effect. The 
purpose of the program would be to maintain and expand markets for 
paper and paper-based packaging.
    In summary, the information collection requirements under the 
program concern Board nominations, the collection of assessments, and 
referenda. For Board nominations, manufacturers and importers 
interested in serving on the Board would be asked to submit a 
``Nomination Form'' to the Board indicating their desire to serve or to 
nominate another industry member to serve on the Board. Interested 
persons could also submit a background statement outlining 
qualifications to serve on the Board. Except for the initial Board 
nominations, manufacturers and importers would have the opportunity to 
submit a ``Nomination Ballot'' to the Board where they would vote for 
candidates to serve on the Board. Nominees would also have to submit a 
background information form, ``AD-755,'' to the Secretary to ensure 
they are qualified to serve on the Board.
    Regarding assessments, manufacturers and importers who manufacture 
or import less than 100,000 short tons annually could submit a request, 
``Application for Exemption from Assessments,'' to the Board for an 
exemption from paying assessments. Manufacturers and importers would be 
asked to submit a ``Production/Import Report'' that would be submitted 
to the Board on a quarterly basis that would specify the quantity of 
paper and paper-based packaging manufactured or imported during the 
applicable period and the country of export (for imports). 
Manufacturers who manufacture less than 100,000 short tons annually 
would be exempt from paying assessments and would not be required to 
submit this report. Additionally, only importers who pay their 
assessments directly to the Board would be required to submit this 
report. If the importer assessments are collected by Customs, Customs 
would remit the funds to the Board and the other information would be 
available from Customs (i.e., country of export, quantity imported). 
Finally, domestic manufacturers and importers who would qualify as 100 
percent organic under the NOP could submit an ``Organic Exemption 
Form'' to the Board and request an exemption from assessments.
    There would also be an additional burden on manufacturers and 
importers voting in referenda. The referendum ballot, which represents 
the information collection requirement relating to referenda, is 
addressed in a proposed rule on referendum procedures which is 
published separately in this issue of the Federal Register.
    Information collection requirements that are included in this 
proposal include:

(1) Nomination Form

    Estimate of Burden: Public recordkeeping burden for this collection 
of information is estimated to average 0.25 hour per application.
    Respondents: Manufacturers and importers.
    Estimated Number of Respondents: 20.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 5 hours.

(2) Background Statement

    Estimate of Burden: Public recordkeeping burden for this collection 
of information is estimated to average 0.25 hour per application.
    Respondents: Manufacturers and importers.
    Estimated Number of Respondents: 20.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 5 hours.

(3) Nomination Ballot

    Estimate of Burden: Public recordkeeping burden for this collection 
of information is estimated to average 0.25 hour per application.
    Respondents: Domestic manufacturers and importers.

[[Page 201]]

    Estimated Number of Respondents: 75 (56 manufacturers and 19 
importers who manufacture/import 100,000 short tons or more annually).
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 18.75 hours.

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

    Estimate of Burden: Public reporting for this collection of 
information is estimated to average 0.5 hour per response for each 
Board nominee.
    Respondents: Manufacturers and importers.
    Estimated Number of Respondents: 12 (24 for initial nominations to 
the Board, 0 for the second year, and up to 8 annually thereafter).
    Estimated Number of Responses per Respondent: 1 every 3 years. 
(0.3)
    Estimated Total Annual Burden on Respondents: 12 hours for the 
initial nominations to the Board, 0 hours for the second year of 
operation, and up to 4 hours annually thereafter.

(5) Application for Exemption From Assessments

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.25 hour per manufacturer or 
importer reporting on paper and paper-based packaging manufactured or 
imported. Upon approval of an application, manufacturers and importers 
would receive exemption certification.
    Respondents: Domestic manufacturers (33) and importers (2,593) who 
manufacture or import less than 100,000 short tons of paper and paper-
based packaging annually.
    Estimated number of Respondents: 2,626.
    Estimated number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 656.50 hours.

(6) Production/Import Report

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.5 hour per manufacturer or 
importer.
    Respondents: Manufacturers who manufacture 100,000 short tons or 
more annually (51) and importers who remit their assessments directly 
to the Board (computation is based on the scenario where all 19 
importers pay their assessments to the Board).
    Estimated number of Respondents: 70.
    Estimated number of Responses per Respondent: 4.
    Estimated Total Annual Burden on Respondents: 140 hours.

(7) Refund Of Assessments

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.25 hour.
    Respondents: Manufacturers and importers.
    Estimated Number of Respondents: 10.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 2.5 hours.

(8) Organic Exemption Form

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

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

    Estimate of Burden: Public recordkeeping burden for keeping this 
information is estimated to average 0.5 hours per recordkeeper 
maintaining such records.
    Recordkeepers: Manufacturers (84) and importers (2,612).
    Estimated number of recordkeepers: 2,696.
    Estimated total recordkeeping hours: 1,348 hours.
    As noted above, under the proposed program, manufacturers and 
importers would be required to pay assessments and file reports with 
and submit assessments to the Board (importers through Customs). While 
the proposed Order would impose certain recordkeeping requirements on 
manufacturers and importers, information required under the proposed 
Order could be compiled from records currently maintained. Such records 
shall be retained for at least two years beyond the fiscal year of 
their applicability.
    An estimated 2,696 respondents would provide information to the 
Board (84 domestic manufacturers and 2,612 importers). The estimated 
cost of providing the information to the Board by respondents would be 
$72,204. This total has been estimated by multiplying 2,188 total hours 
required for reporting and recordkeeping by $33, the average mean 
hourly earnings of various occupations involved in keeping this 
information. Data for computation of this hourly rate was obtained from 
the U.S. Department of Labor, Bureau of Labor Statistics.
    The proposed Order's provisions have been carefully reviewed, and 
every effort has been made to minimize any unnecessary recordkeeping 
costs or requirements, including efforts to utilize information already 
submitted under other programs administered by USDA and other state 
programs.
    The proposed forms would require the minimum information necessary 
to effectively carry out the requirements of the program, and their use 
is necessary to fulfill the intent of the 1996 Act. Such information 
can be supplied without data processing equipment or outside technical 
expertise. In addition, there are no additional training requirements 
for individuals filling out reports and remitting assessments to the 
Board. The forms would be simple, easy to understand, and place as 
small a burden as possible on the person required to file the 
information.
    Collecting information quarterly would coincide with normal 
industry business practices. The timing and frequency of collecting 
information are intended to meet the needs of the industry while 
minimizing the amount of work necessary to fill out the required 
reports. The requirement to keep records for two years is consistent 
with normal industry practices. In addition, the information to be 
included on these forms is not available from other sources because 
such information relates specifically to individual manufacturers and 
importers who are subject to the provisions of the 1996 Act. Therefore, 
there is no practical method for collecting the required information 
without the use of these forms.

Request for Public Comment Under the Paperwork Reduction Act

    Comments are invited on: (a) Whether the proposed collection of 
information is necessary for the proper performance of functions of the 
proposed Order and USDA's oversight of the proposed Order, including 
whether the information would have practical utility; (b) the accuracy 
of USDA's estimate of the burden of the proposed collection of 
information, including the validity of the methodology and assumptions 
used; (c) the accuracy of USDA's estimate of the principal 
manufacturing areas in the United States for paper and paper-based 
packaging; (d) the accuracy of USDA's estimate of the number of 
manufacturers and importers of paper and paper-based packaging that 
would be covered under the program; (e) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (f) ways

[[Page 202]]

to minimize the burden of the collection of information on those who 
are to respond, including the use of appropriate automated, electronic, 
mechanical, or other technological collection techniques or other forms 
of information technology.
    Comments concerning the information collection requirements 
contained in this action should reference OMB No. 0581-NEW. In 
addition, the docket number, date, and page number of this issue of the 
Federal Register also should be referenced. Comments should be sent to 
the same addresses referenced in the ADDRESSES section of this rule.
    OMB is required to make a decision concerning the collection of 
information contained in this rule between 30 and 60 days after 
publication. Therefore, a comment to OMB is best assured of having its 
full effect if OMB receives it within 30 days of publication.
    USDA made modifications to the proponent's proposal to conform with 
other similar national research and promotion programs implemented 
under the 1996 Act.
    While the proposal set forth below has not received the approval of 
USDA, it is determined that this proposed Order is consistent with and 
would effectuate the purposes of the 1996 Act.
    As previously mentioned, for the proposed Order to become 
effective, it must be approved by a majority of manufacturers and 
importers voting for approval in a referendum who also represent a 
majority of the volume of paper and paper-based packaging represented 
in the referendum. Referendum procedures will be published separately 
in this issue of the Federal Register.
    A 60-day comment period is provided to allow interested persons to 
respond to this proposal. All written comments received in response to 
this rule by the date specified will be considered prior to finalizing 
this action.

List of Subjects in 7 CFR Part 1222

    Administrative practice and procedure, Advertising, Consumer 
information, Marketing agreements, Paper and Paper-Based-Packaging 
promotion, Reporting and recordkeeping requirements.


0
For the reasons set forth in the preamble, it is proposed that Title 7, 
Chapter XI of the Code of Federal Regulations, be amended by adding 
Part 1222 to read as follows:

PART 1222--PAPER AND PAPER-BASED PACKAGING PROMOTION, RESEARCH AND 
INFORMATION ORDER

Subpart A--Paper and Paper-Based Packaging Promotion, Research and 
Information Order

Definitions

Sec.
1222.1 Act.
1222.2 Board.
1222.3 Conflict of interest.
1222.4 Converted products.
1222.5 Customs or CBP.
1222.6 Department or USDA.
1222.7 Fiscal period and marketing year.
1222.8 Importer.
1222.9 Information.
1222.10 Kraft process.
1222.11 Linerboard.
1222.12 Manufacture or produce.
1222.13 Manufacturer or producer.
1222.14 Medium.
1222.15 Order.
1222.16 Panel.
1222.17 Paper and paper-based packaging.
1222.18 Part and subpart.
1222.19 Person.
1222.20 Program, plans and projects.
1222.21 Promotion.
1222.22 Pulp.
1222.23 Research.
1222.24 Secretary.
1222.25 Short ton or ton.
1222.26 State.
1222.27 Suspend.
1222.28 Terminate.
1222.29 United States.

Paper and Paper-Based Packaging Board

1222.40 Establishment and membership.
1222.41 Nominations and appointments.
1222.42 Term of office.
1222.43 Removal and vacancies.
1222.44 Procedure.
1222.45 Reimbursement and attendance.
1222.46 Powers and duties.
1222.47 Prohibited activities.

Expenses and Assessments

1222.50 Budget and expenses.
1222.51 Financial statements.
1222.52 Assessments.
1222.53 Exemption from assessment.

Promotion, Research and Information

1222.60 Programs, plans and projects.
1222.61 Independent evaluation.
1222.62 Patents, copyrights, trademarks, inventions, product 
formulations, and publications.

Reports, Books, and Records

1222.70 Reports.
1222.71 Books and records.
1222.72 Confidential treatment.

Miscellaneous

1222.80 Right of the Secretary.
1222.81 Referenda.
1222.82 Suspension or termination.
1222.83 Proceedings after termination.
1222.84 Effect of termination or amendment.
1222.85 Personal liability.
1222.86 Separability.
1222.87 Amendments.
1222.88 OMB control numbers.

Subpart B--[Reserved]

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

Subpart A--Paper and Paper-Based Packaging Promotion, Research and 
Information Order

Definitions


Sec.  1222.1  Act.

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


Sec.  1222.2  Board.

    Board means the Paper and Paper-Based Packaging Board established 
pursuant to Sec.  1222.40, or such other name as recommended by the 
Board and approved by the Department.


Sec.  1222.3  Conflict of interest.

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


Sec.  1222.4  Converted products.

    Converted products means products made from paper and paper-based 
packaging.


Sec.  1222.5  Customs or CBP.

    Customs or CBP means the U.S. Customs and Border Protection, an 
agency of the U.S. Department of Homeland Security.


Sec.  1222.6  Department or USDA.

    Department or USDA means the U.S. Department of Agriculture, or any 
officer or employee of the Department to whom authority has heretofore 
been delegated, or to whom authority may hereafter be delegated, to act 
in the Secretary's stead.


Sec.  1222.7  Fiscal period and marketing year.

    Fiscal and marketing year means the 12-month period ending on 
December 31 or such other period as recommended by the Board and 
approved by the Secretary.


Sec.  1222.8  Importer.

    Importer means any person who imports paper and paper-based 
packaging from outside the United States for sale in the United States 
as a principal or as an agent, broker, or consignee of any person who

[[Page 203]]

manufactures paper and paper-based packaging outside the United States 
for sale in the United States, and who is listed in the import records 
as the importer of record for such paper and paper-based packaging.


Sec.  1222.9  Information.

    Information means information and programs for consumers, customers 
and industry, including educational activities, information and 
programs designed to enhance and broaden the understanding of the use 
and attributes of paper and paper-based packaging, increase efficiency 
in manufacturing paper and paper-based packaging, maintain and expand 
existing markets, and develop new markets and marketing strategies. 
These include:
    (a) Consumer education and information, which means any action 
taken to provide information to, and broaden the understanding of, the 
general public regarding paper and paper-based packaging; and
    (b) Industry information, which means information and programs that 
would enhance the image of the paper and paper-based packaging 
industry.


Sec.  1222.10  Kraft process.

    Kraft process means a process that transforms wood into a high 
quality strong pulp for making paper and paper-based packaging.


Sec.  1222.11  Linerboard.

    Linerboard means a grade of containerboard that is used as facing 
material in the manufacture of corrugated or solid fiber shipping 
boxes.


Sec.  1222.12  Manufacture or produce.

    Manufacture or produce means the process of transforming pulp into 
paper and paper-based packaging.


Sec.  1222.13  Manufacturer or producer.

    Manufacturer or producer means any person who manufactures paper 
and paper-based packaging in the United States.


Sec.  1222.14  Medium.

    Medium means a grade of containerboard used as the inner fluting 
material in the manufacture of corrugated or solid fiber shipping 
boxes.


Sec.  1222.15  Order.

    Order means an order issued by the Secretary under section 514 of 
the Act that provides for a program of generic promotion, research, and 
information regarding agricultural commodities authorized under the 
Act.


Sec.  1222.16  Panel.

    Panel means the Paper and Paper-Based Packaging Panel formed to 
pursue development of a paper and paper-based packaging promotion, 
research and information program.


Sec.  1222.17  Paper and paper-based packaging.

    (a) Paper and paper-based packaging means:
    (1) Printing, writing and related paper, which is coated or 
uncoated paper that is subsequently converted into products used for 
printing, writing and other communication purposes, such as file 
folders, envelopes, catalogues, magazines and brochures. For purposes 
of this Order, printing, writing and related paper includes thermal 
paper but does not include carbonless paper;
    (2) Kraft packaging paper, which is coarse unbleached, semi-
bleached or fully bleached grades of paper that are subsequently 
converted into products such as grocery bags, multiwall sacks, waxed 
paper and other products;
    (3) Containerboard, which is all forms of linerboard and medium 
that is used to manufacture corrugated boxes, shipping containers and 
related products; and
    (4) Paperboard, which is solid bleached kraft board, recycled board 
and unbleached kraft board that is subsequently converted into a wide 
variety of end uses, including folding boxes, food and beverage 
packaging, tubes, cans, and drums, and other miscellaneous products. 
Paperboard does not include construction-related products such as 
gypsum wallboard facings and panel board.
    (b) For purposes of this Order, paper and paper-based packaging 
does not include tissue paper, newsprint or converted products.


Sec.  1222.18  Part and subpart.

    Part means the Paper and Paper-Based Packaging Promotion, Research 
and Information Order and all rules, regulations, and supplemental 
orders issued pursuant to the Act and the Order. The Order shall be a 
subpart of such part.


Sec.  1222.19  Person.

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


Sec.  1222.20  Programs, plans and projects.

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


Sec.  1222.21  Promotion.

    Promotion means any action, including paid advertising and the 
dissemination of information, utilizing public relations or other 
means, to enhance and broaden the understanding of the use and 
attributes of paper and paper-based packaging for the purpose of 
maintaining and expanding markets for paper and paper-based packaging.


Sec.  1222.22  Pulp.

    Pulp means the material that is produced by chemically or 
mechanically separating cellulose fibers from wood or recycling 
recovered fiber.


Sec.  1222.23  Research.

    Research means any type of test, study, or analysis designed to 
enhance the image, desirability, use, marketability, manufacturing, 
recyclability, reusability or quality of paper and paper-based 
packaging, including research directed to product characteristics and 
product development, including new uses of existing products, new 
products or improved technology in the manufacturing of paper and 
paper-based packaging.


Sec.  1222.24  Secretary.

    Secretary means the Secretary of Agriculture of the United States, 
or any other officer or employee of the Department to whom authority 
has been delegated, or to whom authority may hereafter be delegated, to 
act in the Secretary's stead.


Sec.  1222.25  Short ton or ton.

    Short ton or ton means a measure of weight equal to 2,000 pounds.


Sec.  1222.26  State.

    State means any of the 50 States of the United States, the District 
of Columbia, the Commonwealth of Puerto Rico, or any territory or 
possession of the United States.


Sec.  1222.27  Suspend.

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


Sec.  1222.28  Terminate.

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


Sec.  1222.29  United States.

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

[[Page 204]]

Paper and Paper-Based Packaging Board


Sec.  1222.40  Establishment and membership.

    (a) Establishment of the Board. There is hereby established a Paper 
and Paper-Based Packaging Board to administer the terms and provisions 
of this Order. The Board shall be composed of manufacturers and 
importers of paper and paper-based packaging that manufacture or import 
100,000 short tons or more of paper and paper-based packaging during a 
marketing year. Seats on the Board shall be apportioned as set forth in 
paragraph (b) of this section based on the geographical distribution of 
the quantity of paper and paper-based packaging manufactured in the 
United States and the quantity of paper and paper-based packaging 
imported to the United States.
    (b) The Board shall be composed of 12 members and shall be 
established as follows:
    (1) Manufacturers. Eleven members shall be manufacturers. Of the 11 
manufacturers, 10 shall be from the following four regions:
    (i) Six members shall be from the South, which consists of the 
states of Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, 
Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South 
Carolina, Tennessee, Texas, Virginia, West Virginia, and all other 
parts of the United States not listed in paragraphs (b)(1)(ii), 
(b)(1)(iii), and (b)(1)(iv) of this section;
    (ii) One member shall be from the Northeast, which consists of the 
states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, 
New York, Pennsylvania, Rhode Island and Vermont;
    (iii) Two members shall be from the Midwest, which consists of the 
states of Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, 
Minnesota, Missouri, North Dakota, Ohio, South Dakota, Wisconsin and 
Wyoming; and
    (iv) One member shall be from the West, which consists of the 
states of Alaska, Arizona, California, Hawaii, Idaho, Montana, New 
Mexico, Nevada, Oregon, Utah, and Washington.
    (v) One manufacturer member at large may be from any region and 
shall manufacture at least 100,000 short tons but no more than 250,000 
short tons of paper and paper-based packaging annually. If there are no 
eligible nominees, this seat shall be allocated to the largest 
producing region specified in paragraphs (b)(1)(i) through (b)(1)(iv).
    (2) Importers. One member shall be an importer.
    (c) At least once in every five-year period, but not more 
frequently than once in every three-year period, the Board will review 
the geographical distribution of the quantity of paper and paper-based 
packaging manufactured within the United States and the quantity of 
paper and paper-based packaging imported to the United States. The 
review will be conducted using the Board's annual assessment receipts 
and, if available, other reliable reports from the industry. If 
warranted, the Board will recommend to the Secretary that the 
membership or size of the Board be adjusted to reflect changes in 
geographical distribution of the quantity of paper and paper-based 
packaging manufactured in the United States and the quantity of paper 
and paper-based packaging imported to the United States. Any changes in 
Board composition shall be implemented by the Secretary through 
rulemaking.


Sec.  1222.41  Nominations and appointments.

    (a) Nominees must manufacture or import 100,000 short tons or more 
of paper and paper-based packaging in a marketing year.
    (b) Initial nominations shall be submitted to the Secretary by the 
Panel. Before considering any nominations, the Panel shall publicize 
the nomination process, using trade press or other means it deems 
appropriate, and shall conduct outreach to all known manufacturers and 
importers manufacturing or importing 100,000 short tons or more of 
paper and paper-based packaging in a marketing year to generate 
nominees that reflect the range of operations within the paper and 
paper-based packaging industry. The Panel may use regional caucuses, 
mail or other methods to elicit potential nominees. The Panel shall 
work with USDA to ensure that all eligible candidates are aware of the 
opportunity to serve on the Board. The Panel shall submit the 
nominations to the Secretary and recommend two nominees for each Board 
position specified in Sec.  1222.40(b). The Secretary shall select the 
initial members of the Board from the nominations submitted by the 
Panel.
    (c) Subsequent nominations shall be conducted as follows:
    (1) The Board shall conduct outreach to all known manufacturers and 
importers manufacturing or importing 100,000 short tons or more of 
paper and paper-based packaging in a marketing year. Manufacturers and 
importers may submit nominations to the Board;
    (2) Manufacturer and importer nominees may provide the Board a 
short background statement outlining their qualifications to serve on 
the Board;
    (3) Nominees that are both a manufacturer and an importer may seek 
nomination to the Board as either a manufacturer or an importer, but 
not both;
    (4) For the domestic seats allocated by region, domestic 
manufacturers must manufacture paper and paper-based packaging in the 
region for which they seek nomination. Nominees that manufacture in 
more than one region may seek nomination in one region of their choice. 
Nominees must specify for which region they are seeking nomination. The 
names of manufacturer nominees shall be placed on a ballot by region. 
The ballots along with the background statements shall be mailed to all 
manufacturers who manufacture 100,000 short tons or more of paper and 
paper-based packaging per marketing year. Manufacturers may vote in 
each region in which they manufacture paper and paper-based packaging. 
The votes shall be tabulated for each region and the nominees receiving 
the highest number of votes shall be placed at the top of the list in 
descending order by vote. The top two candidates for each position 
shall be submitted to the Secretary;
    (5) The names of nominees for at large domestic manufacturers shall 
be placed on a ballot. The ballots along with the background statements 
shall be mailed to all manufacturers who manufacture 100,000 short tons 
or more of paper and paper-based packaging per marketing year. The 
votes shall be tabulated and the nominees receiving the highest number 
of votes shall be placed at the top of the list in descending order by 
vote. The top two candidates shall be submitted to the Secretary;
    (6) The names of importer nominees shall be placed on a ballot. The 
ballots along with background statements shall be mailed to importers 
who import 100,000 short tons or more of paper and paper-based 
packaging per marketing year. The votes shall be tabulated and the 
nominees receiving the highest number of votes shall be placed at the 
top of the list in descending order by vote. The top two candidates for 
each position shall be submitted to the Secretary;
    (7) The Board must submit nominations to the Secretary at least six 
months before the new Board term begins;
    (8) Any manufacturer or importer nominated to serve on the Board 
shall file with the Secretary at the time of the nomination a 
background questionnaire;
    (9) From the nominations made pursuant to this section, the 
Secretary shall appoint the members of the Board on the basis of 
representation provided in Sec.  1222.40(b);

[[Page 205]]

    (10) No two members shall be employed by a single corporation, 
company, partnership or any other legal entity; and
    (11) The Board may recommend to the Secretary modifications to its 
nomination procedures as it deems appropriate. Any such modifications 
shall be implemented through rulemaking by the Secretary.


Sec.  1222.42  Term of office.

    (a) With the exception of the initial Board, each Board member 
shall serve for a term of three years or until the Secretary selects 
his or her successor. Each term of office shall begin on January 1 and 
end on December 31. No member may serve more than two full consecutive 
three-year terms, except as provided in paragraph (b) of this section.
    (b) For the initial Board, the terms of the Board members shall be 
staggered for two, three and four years. Determination of which of the 
initial members shall serve a term of two, three or four years shall be 
recommended to the Secretary by the Panel.


Sec.  1222.43  Removal and vacancies.

    (a) The Board may recommend to the Secretary that a member be 
removed from office if the member consistently fails or refuses to 
perform his or her duties properly or engages in dishonest acts or 
willful misconduct. If the Secretary determines that any person 
appointed under this subpart consistently fails or refuses to perform 
his or her duties properly or engages in acts of dishonesty or willful 
misconduct, the Secretary shall remove the person from office. A person 
appointed under this subpart or any employee of the Board may be 
removed by the Secretary if the Secretary determines that the person's 
continued service would be detrimental to the purposes of the Act.
    (b) If a member resigns, is removed from office, or in the event of 
death of any member or if any member of the Board ceases to work for or 
be affiliated with a manufacturer or importer, or if a manufacturer 
ceases to do business in the region he or she represents, such position 
shall become vacant.
    (c) If a position becomes vacant nominations to fill the vacancy 
will be conducted using the nominations process set forth in this Order 
or the Board may recommend to the Secretary that he or she appoint a 
successor from the most recent list of nominations for the position.
    (d) A vacancy will not be required to be filled if the unexpired 
term is less than six months.


Sec.  1222.44  Procedure.

    (a) A majority of the Board members shall constitute a quorum.
    (b) Each member of the Board shall be entitled to one vote on any 
matter put to the Board and the motion will carry if supported by a 
majority of Board members, except for recommendations to change the 
assessment rate or to adopt a budget, both of which require affirmation 
by two-thirds of the total number of Board members.
    (c) At an assembled meeting, all votes shall be cast in person.
    (d) In lieu of voting at an assembled meeting and, when in the 
opinion of the chairperson of the Board such action is considered 
necessary, the Board may take action if supported by a majority of 
members (unless two-thirds is required under the Order) by mail, 
telephone, electronic mail, facsimile, or any other means of 
communication. In that event, all members must be notified and provided 
the opportunity to vote. Any action so taken shall have the same force 
and effect as though such action had been taken at an assembled 
meeting. All votes shall be recorded in Board minutes.
    (e) There shall be no proxy voting.


Sec.  1222.45  Reimbursement and attendance.

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


Sec.  1222.46  Powers and duties.

    The Board shall have the following powers and duties:
    (a) To administer this subpart in accordance with its terms and 
conditions and to collect assessments;
    (b) To develop and recommend to the Secretary for approval such 
bylaws as may be necessary for the functioning of the Board, and such 
rules and regulations as may be necessary to administer the Order, 
including activities authorized to be carried out under the Order;
    (c) To meet not less than annually, organize, and select from among 
the members of the Board a chairperson, vice chairperson, secretary/
treasurer, other officers, and committees and subcommittees, as the 
Board determines to be appropriate. The committee and subcommittees may 
include persons other than Board members, including representatives of 
Board members, as the Board deems necessary and appropriate, provided 
Board members or their representative constitute a majority of all 
committees and subcommittees;
    (d) To employ or contract with persons, other than the Board 
members, as the Board considers necessary to assist the Board in 
carrying out its duties, and to determine the compensation and specify 
the duties of the persons;
    (e) To notify manufacturers and importers of all Board meetings 
through a press release or other means and to give the Secretary the 
same notice of meetings of the Board (including committee, 
subcommittee, and the like) as is given to members so that the 
Secretary's representative(s) may attend such meetings, and to keep and 
report minutes of each meeting of the Board to the Secretary;
    (f) To develop and submit programs, plans and projects to the 
Secretary for the Secretary's approval, and enter into contracts or 
agreements related to such programs, plans and projects, which must be 
approved by the Secretary before becoming effective, for the 
development and carrying out of programs, plans or projects of 
promotion, research and information. The payment of costs for such 
activities shall be from funds collected pursuant to this Order. Each 
contract or agreement shall provide that:
    (1) The contractor or agreeing party shall develop and submit to 
the Board a program, plan or project together with a budget or budgets 
that shall show the estimated cost to be incurred for such program, 
plan or project;
    (2) The contractor or agreeing party shall keep accurate records of 
all its transactions and make periodic reports to the Board of 
activities conducted, submit accounting for funds received and 
expended, and make such other reports as the Secretary or the Board may 
require;
    (3) The Secretary may audit the records of the contracting or 
agreeing party periodically; and
    (4) Any subcontractor who enters into a contract with a Board 
contractor and who receives or otherwise uses funds allocated by the 
Board shall be subject to the same provisions as the contractor.
    (g) To prepare and submit for the approval of the Secretary fiscal 
year budgets in accordance with Sec.  1222.50;
    (h) To borrow funds necessary for startup expenses of the Order 
during the first year of operation by the Board;
    (i) To invest assessments collected and other funds received 
pursuant to the Order and use earnings from invested assessments to pay 
for activities carried out pursuant to the Order;
    (j) To recommend changes to the assessment rates as provided in 
this part;

[[Page 206]]

    (k) To cause its books to be audited by an independent auditor at 
the end of each fiscal year and at such other times as the Secretary 
may request, and to submit a report of the audit directly to the 
Secretary;
    (l) To periodically prepare and make public reports of program 
activities and, at least once each fiscal year, to make public an 
accounting of funds received and expended;
    (m) To maintain such minutes, books and records and prepare and 
submit such reports and records from time to time to the Secretary as 
the Secretary may prescribe; to make appropriate accounting with 
respect to the receipt and disbursement of all funds entrusted to it; 
and to keep records that accurately reflect the actions and 
transactions of the Board;
    (n) To act as an intermediary between the Secretary and any 
manufacturer or importer;
    (o) To receive, investigate, and report to the Secretary complaints 
of violations of the Order;
    (p) To recommend to the Secretary such amendments to the Order as 
the Board considers appropriate; and
    (q) To work to achieve an effective, continuous, and coordinated 
program of promotion, research, and information and to carry out 
programs, plans, and projects designed to provide maximum benefits to 
the paper and paper-based packaging industry.


Sec.  1222.47  Prohibited activities.

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

Expenses and Assessments


Sec.  1222.50  Budget and expenses.

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


Sec.  1222.51  Financial statements.

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


Sec.  1222.52  Assessments.

    (a) The Board's programs and expenses shall be paid by assessments 
on manufacturers and importers, other income of the Board, and other 
funds available to the Board.
    (b) Subject to the exemptions specified in Sec.  1222.53, each

[[Page 207]]

manufacturer and importer shall pay an assessment to the Board in the 
amount of 35 cents per short ton or its equivalent manufactured and 
imported. The assessment shall be on the roll of paper and paper-based 
packaging manufactured or imported, except that the assessment for cut-
size printing and writing paper imported or made by domestic 
manufacturers prior to leaving the manufacturer's mill shall be on the 
cut-size paper.
    (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 of at least two-thirds of the 
Board, a change in the assessment rate. A change in the assessment rate 
is subject to rulemaking by the Secretary.
    (d) Domestic manufacturers shall remit to the Board the amount due 
no later than the 30th calendar day of the month following the end of 
the quarter in which the paper and paper-based packaging was 
manufactured.
    (e) Each importer of paper and paper-based packaging shall pay 
through Customs to the Board an assessment on the paper and paper-based 
packaging imported into the United States identified in the Harmonized 
Tariff Schedule of the United States (HTSUS) numbers listed in the 
table below.

------------------------------------------------------------------------
                                                              Assessment
              Paper and paper-based  packaging                   $/kg
------------------------------------------------------------------------
4802.54.1000...............................................      .000386
4802.54.3100...............................................      .000386
4802.54.5000...............................................      .000386
4802.54.6100...............................................      .000386
4802.55.1000...............................................      .000386
4802.55.2000...............................................      .000386
4802.55.4000...............................................      .000386
4802.55.6000...............................................      .000386
4802.55.7020...............................................      .000386
4802.55.7040...............................................      .000386
4802.56.1000...............................................      .000386
4802.56.2000...............................................      .000386
4802.56.4000...............................................      .000386
4802.56.6000...............................................      .000386
4802.56.70.................................................      .000386
4802.57.1000...............................................      .000386
4802.57.2000...............................................      .000386
4802.57.4000...............................................      .000386
4802.58.1000...............................................      .000386
4802.58.20.................................................      .000386
4802.58.5000...............................................      .000386
4802.58.60.................................................      .000386
4802.61.1000...............................................      .000386
4802.61.2000...............................................      .000386
4802.61.30.................................................      .000386
4802.61.5000...............................................      .000386
4802.61.60.................................................      .000386
4802.62.1000...............................................      .000386
4802.62.2000...............................................      .000386
4802.62.3000...............................................      .000386
4802.62.5000...............................................      .000386
4802.62.60.................................................      .000386
4802.69....................................................      .000386
4804.11.0000...............................................      .000386
4804.19.0000...............................................      .000386
4804.21.0000...............................................      .000386
4804.29.0000...............................................      .000386
4804.31.40.................................................      .000386
4804.31.6000...............................................      .000386
4804.39.4020...............................................      .000386
4804.39.4049...............................................      .000386
4804.39.60.................................................      .000386
4804.41.2000...............................................      .000386
4804.41.4000...............................................      .000386
4804.42.00.................................................      .000386
4804.49.0000...............................................      .000386
4804.51.0000...............................................      .000386
4804.52.00.................................................      .000386
4804.59.0000...............................................      .000386
4805.11.0000...............................................      .000386
4805.12....................................................      .000386
4805.19....................................................      .000386
4805.24....................................................      .000386
4805.25.0000...............................................      .000386
4805.91.1010...............................................      .000386
4805.91.9000...............................................      .000386
4805.92.4010...............................................      .000386
4805.92.4030...............................................      .000386
4805.93.4010...............................................      .000386
4805.93.4030...............................................      .000386
4805.93.4050...............................................      .000386
4805.93.4060...............................................      .000386
4807.00.9100...............................................      .000386
4807.00.9400...............................................      .000386
4810.13.11.................................................      .000386
4810.13.1900...............................................      .000386
4810.13.20.................................................      .000386
4810.13.5000...............................................      .000386
4810.13.6000...............................................      .000386
4810.13.70.................................................      .000386
4810.14.11.................................................      .000386
4810.14.1900...............................................      .000386
4810.14.20.................................................      .000386
4810.14.5000...............................................      .000386
4810.14.6000...............................................      .000386
4810.14.70.................................................      .000386
4810.19.1100...............................................      .000386
4810.19.1900...............................................      .000386
4810.19.20.................................................      .000386
4810.22.1000...............................................      .000386
4810.22.50.................................................      .000386
4810.22.6000...............................................      .000386
4810.22.70.................................................      .000386
4810.29.10.................................................      .000386
4810.29.5000...............................................      .000386
4810.29.6000...............................................      .000386
4810.29.70.................................................      .000386
4810.31.1020...............................................      .000386
4810.31.1040...............................................      .000386
4810.31.3000...............................................      .000386
4810.31.6500...............................................      .000386
4810.32.10.................................................      .000386
4810.32.3000...............................................      .000386
4810.32.6500...............................................      .000386
4810.39.1200...............................................      .000386
4810.39.1400...............................................      .000386
4810.39.3000...............................................      .000386
4810.39.6500...............................................      .000386
4810.92.12.................................................      .000386
4810.92.65.................................................      .000386
4810.99.1050...............................................      .000386
4810.99.6500...............................................      .000386
4811.51.2010...............................................      .000386
4811.51.2020...............................................      .000386
4811.51.2030...............................................      .000386
4811.59.4020...............................................      .000386
4811.90.8030...............................................      .000386
------------------------------------------------------------------------

     (f) If Customs does not collect an assessment from an importer, 
the importer is responsible for paying the assessment directly to the 
Board within 30 calendar days after the end of the quarter in which the 
paper and paper-based packaging was imported.
    (g) When a manufacturer or importer fails to pay the assessment 
within 60 calendar days of the date it is due, the Board may impose a 
late payment charge and interest. The late payment charge and rate of 
interest shall be prescribed in regulations issued by the Secretary. 
All late assessments shall be subject to the specified late payment 
charge and interest. Persons failing to remit total assessments due in 
a timely manner may also be subject to actions under federal debt 
collection procedures.
    (h) The Board may accept advance payment of assessments from any 
manufacturer or importer that will be credited toward any amount for 
which that person may become liable. The Board may not pay interest on 
any advance payment.
    (i) If the Board is not in place by the date the first assessments 
are to be collected, the Secretary shall receive assessments and shall 
pay such assessments and any interest earned to the Board when it is 
formed.


Sec.  1222.53  Exemption from assessment.

    (a) Minimum quantity exemption.
    (1) Manufacturers that manufacture less than 100,000 short tons of 
paper and paper-based packaging in a marketing year are exempt from 
paying assessments. Such manufacturers must apply to the Board, on a 
form provided by the Board, for a certificate of exemption prior to the 
start of the marketing year. This is an annual exemption and 
manufacturers must reapply each year. Such manufacturers shall certify 
that they will manufacture less than 100,000 short tons of paper and 
paper-based packaging during the marketing year for which the exemption 
is claimed. Upon receipt of an application for exemption, the Board 
shall determine whether an exemption may be granted. The Board may 
request past manufacturing data to support the exemption request. The 
Board will issue, if deemed appropriate, a certificate of exemption to 
the eligible manufacturer. It is the responsibility of the manufacturer 
to retain a copy of the certificate of exemption.
    (2) Importers that import into the United States less than 100,000 
short tons of paper and paper-based packaging in a marketing year are 
exempt from paying assessments. Such importers must apply to the Board, 
on

[[Page 208]]

a form provided by the Board, for a certificate of exemption prior to 
the start of the fiscal year. This is an annual exemption and importers 
must reapply each year. Such imports shall certify that they will 
import less than 100,000 short tons of paper and paper-based packaging 
during the marketing year for which the exemption is claimed. Upon 
receipt of an application for exemption, the Board shall determine 
whether an exemption may be granted. The Board may request past import 
data to support the exemption request. The Board will issue, if deemed 
appropriate, a certificate of exemption to the eligible importer. It is 
the responsibility of the importer to retain a copy of the certificate 
of exemption. The Board shall refund such importers their assessments 
as collected by Customs no later than 60 calendar days after receipt of 
such assessments by the Board. No interest shall be paid on the 
assessments collected by Customs.
    (3) Manufacturers that did not apply to the Board for an exemption 
and that manufactured less than 100,000 short tons of paper and paper-
based packaging during the marketing year shall automatically receive a 
refund from the Board for the applicable assessments within 30 calendar 
days after the end of the marketing year. Board staff shall determine 
the assessments paid and refund the amount due to the manufacturer 
accordingly.
    (4) Importers that did not apply to the Board for an exemption and 
that imported less than 100,000 short tons of paper and paper-based 
packaging during the marketing year shall automatically receive a 
refund from the Board for the applicable assessments within 30 calendar 
days after the end of the marketing year.
    (5) If an entity is a manufacturer and an importer, such entity's 
combined quantity of paper and paper-based packaging manufactured and 
imported during a marketing year shall count towards the 100,000 short 
ton-exemption.
    (6) Manufacturers and importers that received an exemption 
certificate from the Board but manufactured or imported 100,000 short 
tons or more of paper and paper-based packaging during the marketing 
year shall pay the Board the applicable assessments owed on the 
quantity manufactured or imported within 30 calendar days after the end 
of the marketing year and submit any necessary reports to the Board 
pursuant to Sec.  1222.70.
    (7) The Board may develop additional procedures to administer this 
exemption as appropriate. Such procedures shall be implemented through 
rulemaking by the Secretary.
    (b) Organic.
    (1) Organic Act means section 2103 of the Organic Foods Production 
Act of 1990 (7 U.S.C. 6501-6522).
    (2) A manufacturer who operates under an approved National Organic 
Program (NOP) (7 CFR part 205) system plan, only manufactures paper and 
paper-based packaging that is eligible to be labeled as 100 percent 
organic under the NOP and is not a split operation shall be exempt from 
payment of assessments. To obtain an organic exemption, an eligible 
manufacturer shall submit a request for exemption to the Board, on a 
form provided by the Board, at any time initially and annually 
thereafter on or before the start of the fiscal year as long as such 
manufacturer continues to be eligible for the exemption. The request 
shall include the following: The manufacturer's name and address; a 
copy of the organic operation certificate provided by a USDA-accredited 
certifying agent as defined in the Organic Act, a signed certification 
that the applicant meets all of the requirements specified for an 
assessment exemption, and such other information as may be required by 
the Board and with the approval of the Secretary. The Board shall have 
30 calendar days to approve the exemption request. If the exemption is 
not granted, the Board will notify the applicant and provide reasons 
for the denial within the same time frame.
    (3) An importer who imports only paper and paper-based packaging 
that is eligible to be labeled as 100 percent organic under the NOP and 
is not a split operation shall be exempt from the payment of 
assessments. To obtain an organic exemption, an eligible importer must 
submit documentation to the Board and request an exemption from 
assessment on 100 percent of organic paper and paper-based packaging, 
on a form provided by the Board, at any time initially and annually 
thereafter on or before the beginning of the fiscal year as long as the 
importer continues to be eligible for the exemption. This documentation 
shall include the same information as required by manufacturers in 
paragraph (b)(2) of this section. If the importer complies with the 
requirements of this section, the Board will grant the exemption and 
issue a Certificate of Exemption to the importer. The Board will also 
issue the importer a 9-digit alphanumeric number valid for 1 year from 
the date of issue. This alphanumeric number should be entered by the 
importer to Customs at entry summary. Any line item entry of 100 
percent organic paper and paper-based packaging bearing this 
alphanumeric number assigned by the Board will not be subject to 
assessments.
    (4) Importers who are exempt from assessment in paragraph (d)(3) of 
this section shall also be eligible for reimbursement of assessments 
collected by Customs and may apply to the Board for a reimbursement. 
The importer would be required to submit satisfactory proof to the 
Board that the importer paid the assessment on exempt organic products.
    (5) The exemption will apply immediately following the issuance of 
the exemption certificate.

Promotion, Research and Information


Sec.  1222.60  Programs, plans and projects.

    (a) The Board shall develop and submit to the Secretary for 
approval programs, plans and projects authorized by this subpart. Such 
programs, plans and projects shall provide for promotion, research, 
information and other activities including consumer and industry 
information and advertising.
    (b) No program, plan or project shall be implemented prior to its 
approval by the Secretary. Once a program, plan or project is so 
approved, the Board shall take appropriate steps to implement it.
    (c) The Board must evaluate each program, plan and project 
authorized under this subpart to ensure that it contributes to an 
effective and coordinated program of research, promotion and 
information. The Board must submit the evaluations to the Secretary. If 
the Board finds that a program, plan or project does not contribute to 
an effective program of promotion, research, or information, then the 
Board shall terminate such program, plan or project.


Sec.  1222.61  Independent evaluation.

    At least once every five years, the Board shall authorize and fund 
from funds otherwise available to the Board, an independent evaluation 
of the effectiveness of the Order and the programs conducted by the 
Board pursuant to the Act. The Board shall submit to the Secretary, and 
make available to the public, the results of each periodic independent 
evaluation conducted under this paragraph.


Sec.  1222.62  Patents, copyrights, trademarks, inventions, product 
formulations, and publications.

    Any patents, copyrights, trademarks, inventions, product 
formulations, and publications developed through the use of funds 
received by the Board under this subpart shall be the property of the 
U.S. Government, as represented by the

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Board, and shall along with any rents, royalties, residual payments, or 
other income from the rental, sales, leasing, franchising, or other 
uses of such patents, copyrights, trademarks, inventions, product 
formulations, or publications, inure to the benefit of the Board, shall 
be considered income subject to the same fiscal, budget, and audit 
controls as other funds of the Board, and may be licensed subject to 
approval by the Secretary. Upon termination of this subpart, Sec.  
1222.83 shall apply to determine disposition of all such property.

Reports, Books, and Records


Sec.  1222.70  Reports.

    (a) Manufacturers and importers will be required to provide 
periodically to the Board such information as the Board, with the 
approval of the Secretary, may require. Such information may include, 
but not be limited to:
    (1) For manufacturers:
    (i) The name, address and telephone number of the manufacturer; and
    (ii) The quantity of paper and paper-based packaging manufactured 
by type.
    (2) For importers:
    (i) The name, address and telephone number of the importer;
    (ii) The quantity of paper and paper-based packaging imported by 
type; and
    (iii) The country of export.
    (b) For manufacturers, such information shall be reported to the 
Board no later than the 30th calendar day of the month following the 
end of the quarter in which the paper and paper-based packaging was 
manufactured and shall accompany the collected payment of assessments 
as specified in Sec.  1222.52. First quarter data (January-March) shall 
be reported to the Board no later than the 30th calendar day of April; 
second quarter data (April-June) shall be reported no later than the 
30th calendar day of July; third quarter data (July-September) shall be 
reported no later than the 30th calendar day of October; and fourth 
quarter data (October-December) shall be reported no later than the 
30th calendar day of January of the following marketing year.
    (c) For importers who pay their assessments directly to the Board, 
such information shall accompany the payment of collected assessments 
within 30 calendar days after the end of the quarter in which the paper 
and paper-based packaging was imported specified in Sec.  1222.52.


Sec.  1222.71  Books and records.

    Each manufacturer and importer shall maintain any books and records 
necessary to carry out the provisions of this subpart and regulations 
issued thereunder, including such records as are necessary to verify 
any required reports. Such books and records must be made available 
during normal business hours for inspection by the Board's or 
Secretary's employees or agents. Manufacturers and importers must 
maintain the books and records for two years beyond the fiscal year to 
which they apply.


Sec.  1222.72  Confidential treatment.

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

Miscellaneous


Sec.  1222.80  Right of the Secretary.

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


Sec.  1222.81  Referenda.

    (a) Initial referendum. The Order shall not become effective unless 
the Order is approved by a majority of manufacturers and importers 
voting in the referendum who also represent a majority of the volume of 
paper and paper-based packaging represented in the referendum and who, 
during a representative period determined by the Secretary, have been 
engaged in the manufacturing or importation of paper and paper-based 
packaging. A single entity who domestically manufactures and imports 
paper and paper-based packaging may cast one vote in the referendum.
    (b) Subsequent referenda. The Secretary shall conduct subsequent 
referenda:
    (1) For the purpose of ascertaining whether manufacturers and 
importers favor the amendment, continuation, suspension, or termination 
of the Order;
    (2) Not later than seven years after this Order becomes effective 
and every seven years thereafter, to determine whether manufacturers 
and importers favor the continuation of the Order. The Order shall 
continue if it is favored by a majority of manufacturers and importers 
voting in the referendum who also represent a majority of the volume of 
paper and paper-based packaging represented in the referendum and who, 
during a representative period determined by the Secretary, have been 
engaged in the manufacturing or importation of paper and paper-based 
packaging;
    (3) At the request of the Board established in this Order;
    (4) At the request of 10 percent or more of the number of persons 
eligible to vote in a referendum as set forth under the Order; or
    (5) At any time as determined by the Secretary.


Sec.  1217.82  Suspension or termination.

    (a) The Secretary shall suspend or terminate this part or subpart 
or a provision thereof, if the Secretary finds that this part or 
subpart or a provision thereof obstructs or does not tend to effectuate 
the purposes of the Act, or if the Secretary determines that this 
subpart or a provision thereof is not favored by persons voting in a 
referendum conducted pursuant to the Act.
    (b) The Secretary shall suspend or terminate this subpart at the 
end of the fiscal year whenever the Secretary determines that its 
suspension or termination is favored by a majority of manufacturers and 
importers voting in the referendum who also represent a majority of the 
volume represented in the referendum who, during a representative 
period determined by the Secretary, have been engaged in the 
manufacturing or importation of paper and paper-based packaging.

[[Page 210]]

    (c) If, as a result of a referendum the Secretary determines that 
this subpart is not approved, the Secretary shall:
    (1) Not later than one hundred and eighty (180) calendar days after 
making the determination, suspend or terminate, as the case may be, the 
collection of assessments under this subpart.
    (2) As soon as practical, suspend or terminate, as the case may be, 
activities under this subpart in an orderly manner.


Sec.  1222.83  Proceedings after termination.

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


Sec.  1222.84  Effect of termination or amendment.

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


Sec.  1222.85  Personal liability.

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


Sec.  1222.86  Separability.

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


Sec.  1222.87  Amendments.

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


Sec.  1222.88  OMB control numbers.

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

Subpart B--[Reserved]

    Dated: December 18, 2012.
David R. Shipman,
Administrator.
[FR Doc. 2012-30923 Filed 12-31-12; 8:45 am]
BILLING CODE 3410-02-P