[Federal Register Volume 86, Number 36 (Thursday, February 25, 2021)]
[Rules and Regulations]
[Pages 11387-11391]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03467]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
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  Federal Register / Vol. 86, No. 36 / Thursday, February 25, 2021 / 
Rules and Regulations  

[[Page 11387]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1217

[Document Number AMS-SC-20-0014]


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

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule amends the Softwood Lumber Research, Promotion, 
Consumer Education and Industry Information Order (Order) to increase 
the assessment rate from $0.35 to $0.41 per thousand board feet (mbf). 
The Order is administered by the Softwood Lumber Board (Board) with 
oversight by the U.S. Department of Agriculture (USDA). This rule will 
also add the conversion factor for square meters to board feet and 
makes one conforming change.

DATES: Effective Date: April 1, 2021.

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

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

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules and promoting flexibility. 
This action falls within a category of regulatory actions that the 
Office of Management and Budget (OMB) exempted from Executive Order 
12866 review.

Executive Order 13175

    This action has been reviewed in accordance with the requirements 
of Executive Order 13175, Consultation and Coordination with Indian 
Tribal Governments. The review reveals that this regulation will not 
have substantial and direct effects on Tribal governments and will not 
have significant Tribal implications.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. It is not intended to have retroactive effect. Section 
524 of the 1996 Act (7 U.S.C. 7423) provides that it shall not affect 
or preempt any other Federal or State law authorizing promotion or 
research relating to an agricultural commodity.
    Under section 519 of the 1996 Act (7 U.S.C. 7418), a person subject 
to an order may file a written petition with USDA stating that an 
order, any provision of an order, or any obligation imposed in 
connection with an order, is not established in accordance with the 
law, and request a modification of an order or an exemption from an 
order. Any petition filed challenging an order, any provision of an 
order, or any obligation imposed in connection with an order, must be 
filed within two years after the effective date of an order, provision, 
or obligation subject to challenge in the petition. The petitioner will 
have the opportunity for a hearing on the petition. Thereafter, USDA 
will issue a ruling on the petition. The 1996 Act provides that the 
district court of the United States for any district in which the 
petitioner resides or conducts business shall have the jurisdiction to 
review a final ruling on the petition, if the petitioner files a 
complaint for that purpose not later than 20 days after the date of the 
entry of USDA's final ruling.

Background

    This rule amends the Order by increasing the assessment rate from 
$0.35 to $0.41 per mbf of softwood lumber shipped within or imported 
into the United States. The Order is administered by the Board with 
oversight by the USDA. Under the program, assessments are collected 
from domestic manufacturers and importers and used for research and 
promotion projects designed to strengthen the position of softwood 
lumber in the marketplace. The additional funds will enable the Board 
to maintain its existing programs, while supporting new programs that 
will help maintain and expand markets for softwood lumber. This rule 
will also add the conversion factor for square meters to board feet and 
make one conforming change.
    The Order specifies that the funds to cover the Board's expenses 
shall be paid by assessments on manufacturers for the U.S. market, 
other income of the Board, and other funds available to the Board. 
Domestic manufacturers pay assessments based on the volume of softwood 
lumber shipped within the United States and importers pay assessments 
based on the volume of softwood lumber imported to the United States. 
Assessments are collected per mbf of softwood lumber, except that no 
entity shall pay an assessment on the first 15 million board feet 
(mmbf) of softwood lumber otherwise subject to assessments in a fiscal 
year. Domestic manufacturers are required to remit to the Board 
assessments owed no later than 30 calendar days of the month following 
the end of the quarter in which the softwood lumber was shipped. 
Importers are responsible for paying assessments to the Board on 
softwood lumber imported into the United States through the U.S. 
Customs and Border Protection (CBP). If CBP does not collect an 
assessment from the importer, the importer is responsible for paying 
the assessment to the Board no later than 30 calendar days of the month 
following the end of the quarter in which the softwood lumber was 
imported. Domestic manufacturers and importers must also remit to the 
Board required reports.
    The Order also provides for exemptions from assessments. Section 
1217.53 specifies that U.S. manufacturers and importers that 
domestically ship and/or import less

[[Page 11388]]

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

Board Recommendation

    The Board met on November 20, 2019, and recommended increasing its 
assessment rate from $0.35 to $0.41 per mbf. The additional funds will 
enable the Board to maintain its existing programs, while supporting 
new programs that will help maintain and expand markets for softwood 
lumber. For the 2016-2018 fiscal years, the Board has used reserve 
funds to bridge the deficit between income and expenses. In 2019, the 
Board kept expenditures in line with income and had to make cuts to its 
programs, primarily its communications program. The Board discussed the 
deficit spending that occurred from 2016-2018 and the funding cuts in 
2019, along with the impacts of inflation, and determined that without 
the increase it would not be able to maintain its current programs nor 
be able to address gaps that limit the Board's ability to expand the 
market for softwood lumber. Continuing at the current funding level 
would limit its ability to capitalize on new opportunities or address 
challenges and maintain the impact the Board has achieved for the 
softwood lumber industry in prior years. Additionally, the current 
funding level restricts the ability to accelerate softwood lumber's 
increase in market share and lumber usage in the non-residential 
sector.
    The Board's funding of research on wood standards has facilitated 
interest in using wood-based building systems in non-traditional 
markets, such as tall wood building. The 2021 International Code 
Council building standards will recognize the construction of mass 
timber buildings up to 18 stories in height. These new opportunities 
require a more comprehensive approach, particularly in outreach and 
education initiatives. The Board recognized that its funded programs 
must go beyond inspiring professionals to think about building with 
wood. These individuals need resources and technical assistance.
    The Board estimated the increased assessment rate of $0.41 per mbf 
would generate additional revenues as shown in Table 1. The consumption 
forecast and assessable board feet figures are shown in billion board 
feet (bbf).
[GRAPHIC] [TIFF OMITTED] TR25FE21.000

    The additional funds will support programs targeting contractors 
and developers to address installer training and skills development; 
establish an education program that will target architecture and 
engineering students,

[[Page 11389]]

as well as professionals; and restore the Board's communications 
program budget so that by 2025 it will be equivalent to 2018 
expenditures. Therefore, the Board recommended increasing the 
assessment rate in the Order from $0.35 to $0.41 per mbf.

Final Regulatory Flexibility Act Analysis

    In accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 
601-612), the Agricultural Marketing Service (AMS) is required to 
examine the impact of the action on small entities. Accordingly, AMS 
has considered the economic impact of this action on such entities.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to the actions so that small businesses will not be 
disproportionately burdened. The Small Business Administration (SBA) 
defines, in 13 CFR part 121, small agricultural service firms (domestic 
manufacturers and importers) as those having annual receipts of no more 
than $8 million.\1\
---------------------------------------------------------------------------

    \1\ SBA does have a small business size standard for 
``Sawmills'' of 500 employees (see https://www.sba.gov/sites/default/files/2019-08/SBA%20Table%20of%20Size%20Standards_Effective%20Aug%2019%2C%202019_Rev.pdf). Based on USDA's understanding of the lumber industry, using 
this criterion would be impractical as sawmills often use 
contractors rather than employees to operate and, therefore, many 
mills would fall under this criterion while being, in reality, a 
large business. Therefore, USDA used agricultural service firm as a 
more appropriate criterion for this analysis.
---------------------------------------------------------------------------

    The Random Lengths Publications, Inc.'s yearly average framing 
lumber composite price was $356 per mbf in 2019. Dividing the $8 
million threshold that defines an agricultural service firm as small by 
this price results in a maximum threshold of 22.5 million board feet 
(mmbf) of softwood lumber per year that a domestic manufacturer or 
importer may ship to be considered a small entity for purposes of the 
RFA. Table 2 shows the number of entities and the amount of volume they 
represent that may be categorized as small or large based on the SBA 
definition.
[GRAPHIC] [TIFF OMITTED] TR25FE21.001

    As shown in Table 2, there are a total of 1,396 domestic 
manufacturers and importers of softwood lumber based on 2019 data. Of 
these, 1,000 entities, or 72 percent, shipped or imported less than 
22.5 mmbf and would be considered small under the SBA definition. These 
1,000 entities domestically manufactured or imported 3.25 billion board 
feet (bbf) in 2019, less than 5 percent of total volume.
    While this action increases the assessment obligation on domestic 
manufacturers and importers from $0.35 per mbf to $0.41 per mbf, the 
impact on these entities will be minimal and uniform. The current 
assessment rate of $0.35 per mbf represents 0.1 percent of the Random 
Lengths 2019 average framing lumber composite price of $356 per mbf. 
The assessment rate of $0.41 per mbf is 0.12 percent of this price. The 
increase in assessment rate represents an increase in cost to domestic 
manufacturers and importers of two-thousandth of one percentage point 
relative to their average received price. This cost, though minimal, 
will also be offset by the benefits derived from the program.
    The 1996 Farm Bill requires that Research and Promotion programs be 
evaluated every five years with the specific goal of measuring the 
economic impact of commodity promotion on demand for the commodity. The 
Board completed its first five-year evaluation of program effectiveness 
in 2016. The five-year evaluation, conducted by Prime Consulting, found 
that softwood lumber use per square foot increased nearly 23 percent 
among architects and structural engineers from the program's inception 
in 2011 to 2015. The evaluation also found a cumulative return on 
investment (ROI) of more than $15 in increased sales of softwood lumber 
per $1 spent on promotion by the program between 2012 and 2015. The 
cumulative ROI was updated in 2019 to reflect the time period of 2012 
to 2018. The result was a return of more than $23 in increased sales 
per $1 spent on promotion.
    This rule amends Sec.  1217.52(b) to increase the assessment rate 
from $0.35 to $0.41 per mbf. The Order is administered by the Board 
with oversight by the USDA. Under the program, assessments are 
collected from domestic manufacturers and importers and used for 
research and promotion projects designed to strengthen the position of 
softwood lumber in the marketplace. The additional funds collected at 
the increased rate will enable the Board to maintain its existing 
programs, while supporting new programs that will help maintain and 
expand markets for softwood lumber. This rule also amends Sec.  
1217.52(h) to add the conversion factor for square meters to board feet 
and make one conforming change to section 1217.52(c) regarding voting 
requirements.
    Regarding alternatives, the Board considered maintaining the 
current assessment rate. However, a majority of Board members 
determined that an increase was needed to adequately support existing 
programs and fund new initiatives. The Board discussed increasing the 
assessment at its meeting in November 2018, but after much 
consideration it determined it was not the right time for the industry 
to make such a recommendation. In 2019, with the reduction of 
assessment revenue and the program cuts that were made, the Board again 
considered the merits of increasing the assessment rate. This was 
discussed at several Board committee meetings, including meetings of 
the Executive Committee on September 17, 2019, and November 19, 2019, 
and the Finance Committee on November 19, 2019. The Board also 
considered rates of $0.39 and $0.50 per mbf. After much discussion at 
committee meetings and with the full Board, the Board recommended 
increasing the rate from $0.35 to $0.41 per mbf.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the information collection and recordkeeping requirements 
that are imposed by the Order have been approved previously under OMB 
control number 0581-0093. This rule will not result in a change to the

[[Page 11390]]

information collection and recordkeeping requirements previously 
approved and will impose no additional reporting and recordkeeping 
burden on domestic manufacturers and importers of softwood lumber.
    As with all Federal promotion programs, reports and forms are 
periodically reviewed to reduce information requirements and 
duplication by industry and public sector agencies. USDA has not 
identified any relevant Federal rules that duplicate, overlap, or 
conflict with this 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.
    A proposed rule concerning this action was published in the Federal 
Register on August 13, 2020 (85 FR 49281). A 60-day comment period 
ending October 13, 2020, was provided to allow interested persons to 
submit comments.

Analysis of Comments

    Twenty-nine comments were received in response to the proposed 
rule. Of those 29 comments, 22 supported the proposed assessment 
increase, six opposed the action, and one was outside the scope of the 
rulemaking.
    Overall, commenters in support of the proposal expressed that 
increasing market share by developing new markets and uses for softwood 
lumber products while addressing the continued pressures from 
competitors is paramount to the continued success of the softwood 
lumber industry. They contend this may only be accomplished by the 
increased investment in the softwood lumber program. One commenter, who 
identified as a small sawmill, argued that the proposed increase was 
not enough, and an assessment rate of $0.50 per mfb or more was 
warranted to continue promoting and developing new markets and uses for 
softwood lumber products. Commenters expressed the need for continued 
work on wood standards and the adoption of using wood-based products in 
non-traditional markets. They emphasized the importance of educational 
programs and continued technical assistance for builders, designers, 
developers, architects and engineers. Several commenters discussed the 
benefit of being able to work collaboratively as an industry to drive 
demand for softwood lumber, noting that the efforts of the program are 
critical to the long-term success of the softwood lumber industry. 
Commenters noted the return on investment and incremental demand 
results from the most recent program evaluation as evidence of the 
success of the program thus far. And two commenters mentioned the 
results of the 2018 continuance referendum (78 percent of manufacturers 
and importers voting, who represented 94 percent of the volume of 
softwood lumber, were in favor of continuing the program) to 
demonstrate the continued support of the industry for the program.
    Out of the six comments in opposition, three commenters noted that 
the industry is currently seeing record demand and historically high 
prices, and that the need for an increase in the assessment to fund 
programming geared towards creating additional demand is not necessary. 
Two commenters noted that the Board should be able to create demand at 
the current funding levels. One commenter simply opposed the increase, 
but did not provide further detail. In its discussion of the proposed 
increase, the Board determined that continuing at the current funding 
level would limit its ability to maintain the impact it has achieved 
for the softwood lumber industry in prior years. It reviewed its 
revenues and expenditures for the past several fiscal periods and 
agreed that without the increase it would not be able to maintain its 
current programs nor be able to address gaps that limit the Board's 
ability to expand the market for softwood lumber. Additionally, it 
believed current funding levels restricts its ability to accelerate 
softwood lumber's increase in market share and lumber usage in the non-
traditional markets. In formulating the proposed increase, the Board 
reviewed several different rate options, including not increasing the 
rate, but ultimately decided that additional funds generated by the 
increase are needed to maintain and expand markets for softwood lumber. 
None of the commenters provided comments on the addition of the 
conversion factor and the conforming change. Accordingly, no changes 
will be made to the rule as proposed, based on the comments received.
    After consideration of all relevant material presented, including 
the information and recommendations submitted by the Board, the 
comments received, and other available information, it is hereby found 
that this rule, as hereinafter set forth, is consistent with and will 
effectuate the purposes of the 1996 Act.

List of Subjects in 7 CFR Part 1217

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

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

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

0
1. The authority citation for 7 CFR part 1217 continues to read as 
follows:

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


0
2. Amend Sec.  1217.52 by revising paragraphs (b), (c), and (h) to read 
as follows:


Sec.  1217.52  Assessments.

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

[[Page 11391]]



                        Table 1 to Paragraph (h)
------------------------------------------------------------------------
                                                 Assessment   Assessment
       Softwood lumber (by HTSUS number)          $/cubic      $/square
                                                   meter        meter
------------------------------------------------------------------------
4407.11.00....................................       0.1737     0.004412
4407.12.00....................................       0.1737     0.004412
4407.19.05....................................       0.1737     0.004412
4407.19.06....................................       0.1737     0.004412
4407.19.10....................................       0.1737     0.004412
4409.10.05....................................       0.1737     0.004412
4409.10.10....................................       0.1737     0.004412
4409.10.20....................................       0.1737     0.004412
4409.10.90....................................       0.1737     0.004412
4418.99.10....................................       0.1737     0.004412
------------------------------------------------------------------------

* * * * *

Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2021-03467 Filed 2-24-21; 8:45 am]
BILLING CODE P