[Federal Register Volume 82, Number 206 (Thursday, October 26, 2017)]
[Rules and Regulations]
[Pages 49485-49492]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-23094]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 82, No. 206 / Thursday, October 26, 2017 / 
Rules and Regulations

[[Page 49485]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1217

[Document Number AMS-SC-16-0066]


Softwood Lumber Research, Promotion, Consumer Education and 
Industry Information Order; De Minimis Quantity Exemption Threshold

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule establishes a de minimis quantity exemption 
threshold under the U.S. Department of Agriculture's (USDA) 
Agricultural Marketing Service (AMS) regulations regarding a national 
research and promotion program for softwood lumber. In response to a 
2016 federal district court decision, the U.S. Department of 
Agriculture (USDA) conducted a new analysis to determine a reasonable 
and appropriate de minimis threshold. Based on that analysis, this rule 
establishes the de minimis quantity threshold at 15 million board feet 
(mmbf) and entities manufacturing (and domestically shipping) or 
importing less than 15 mmbf per year will be exempt from paying 
assessments under the regulations.

DATES: Effective Date: November 27, 2017.

FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Marketing 
Specialist, Promotion and Economics Division, Specialty Crops Program, 
AMS, USDA, P.O. Box 831, Beavercreek, Oregon, 97004; telephone: (503) 
632-8848; facsimile (503) 632-8852; or electronic mail: 
<a href="/cdn-cgi/l/email-protection#337e52464156565d1d63565f5f5c73525e401d464057521d545c45"><span class="__cf_email__" data-cfemail="266b4753544343480876434a4a4966474b55085355424708414950">[email protected]</span></a>.

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

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, reducing costs, harmonizing rules and promoting flexibility. 
This action falls within a category of regulatory actions that the 
Office of Management and Budget (OMB) exempted from Executive Order 
12866 review. Additionally, because this rule does not meet the 
definition of a significant regulatory action it does not trigger the 
requirements contained in Executive Order 13771. See OMB's Memorandum 
titled ``Interim Guidance Implementing Section 2 of the Executive Order 
of January 30, 2017, titled `Reducing Regulation and Controlling 
Regulatory Costs' '' (February 2, 2017).

Executive Order 13175

    This action has been reviewed in accordance with the requirements 
of Executive Order 13175, Consultation and Coordination with Indian 
Tribal Governments. The review reveals that this rule 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, 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.

Background

    This rule establishes a de minimis quantity exemption threshold 
under the Softwood Lumber Research, Promotion, Consumer Education and 
Industry Information Order (Order), codified at 7 CFR part 1217. This 
part is administered by the Softwood Lumber Board (Board) with 
oversight by USDA's Agricultural Marketing Service (AMS). In Resolute 
Forest Products Inc., v. USDA, et al. (Resolute), the court found that, 
on the basis of the estimates and information submitted by the 
government to the court for review, the selection of 15 mmbf as the de 
minimis quantity (to be exempted) under part 1217 was arbitrary and 
capricious and that part 1217 was therefore promulgated unlawfully. The 
court did not vacate (or terminate) part 1217; the court remanded the 
matter to USDA and program requirements remain in effect.
    To address the court's decision, USDA conducted a new analysis to 
determine a reasonable and appropriate de minimis quantity exemption. 
USDA analyzed various thresholds of exemption: 10, 15, 20, 25, and 30 
mmbf. USDA also considered proposing no de minimis exemption. USDA's 
analysis of the data resulted in a determination that a de minimis 
level of 15 mmbf is reasonable and appropriate. The analysis was 
published in a proposed rule on May 30, 2017 (82 FR 24583). This final 
rule establishes the de minimis quantity threshold under part 1217 at 
15 mmbf.

Authority in the 1996 Act

    The 1996 Act authorizes USDA to establish agricultural commodity 
research and promotion orders which may include a combination of 
promotion, research, industry

[[Page 49486]]

information, and consumer information activities funded by mandatory 
assessments. These programs are designed to maintain and expand markets 
and uses for agricultural commodities. As defined under section 
513(1)(D) of the 1996 Act, agricultural commodities include the 
products of forestry, which includes softwood lumber.
    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. Section 516 states 
that an order may include an exemption of de minimis quantities of an 
agricultural commodity. Further, section 516(g) of the 1996 Act 
provides authority for other action that is consistent with the purpose 
of the statute and necessary to administer a program.

Overview of the Softwood Lumber Program

    The softwood lumber program took effect in August 2011 (76 FR 
46185) and assessment collection began in January 2012. Under part 
1217, assessments are collected from domestic (U.S.) manufacturers and 
importers and are used by the Board for projects that promote market 
growth for softwood lumber products used in single and multi-family 
dwellings as well as commercial construction. The Board is composed of 
19 industry members (domestic manufacturers and importers) who are 
appointed by the Secretary of Agriculture. The purpose of the program 
is to strengthen the position of softwood lumber in the marketplace, 
maintain and expand markets for softwood lumber, and develop new uses 
for softwood lumber within the United States.

Relevant Order Provisions

Domestic Manufacturers

    The term `domestic manufacturer' is defined in Sec.  1217.8 to mean 
any person who is a first handler engaged in the manufacturing, sale 
and shipment of softwood lumber in the United States during a fiscal 
period and who owns, or shares in the ownership and risk of loss of 
manufacturing of softwood lumber or a person who is engaged in the 
business of manufacturing, or causes to be manufactured, sold and 
shipped such softwood lumber in the United States beyond personal use. 
The term does not include persons who re-manufacture softwood lumber 
that has already been subject to assessment. The term `manufacture' is 
defined in Sec.  1217.13 to mean the process of transforming (or 
turning) softwood logs into softwood lumber.
    Domestic manufacturers are essentially sawmills that turn softwood 
logs into lumber. A domestic manufacturer may be a company that is a 
single sawmill, or it may be a company that is composed of multiple 
sawmills.

Importers

    The term `importer' is defined in Sec.  1217.11 to mean any person 
who imports softwood lumber 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 manufactures softwood lumber 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 softwood lumber. Import 
records are maintained by the U.S. Customs and Border Protection 
(Customs or CBP). Both domestic manufacturers and importers may be 
referred to in this rulemaking as ``entities.''

Expenses and Assessments

    Pursuant to Sec.  1217.50, the Board is authorized to incur 
expenses for research and promotion projects as well as administration. 
The Board's expenses are paid by assessments upon domestic 
manufacturers and importers. Pursuant to Sec.  1217.52(b), and subject 
to the exemptions specified in Sec.  1217.53, each domestic 
manufacturer and importer must pay an assessment to the Board at the 
rate of $0.35 per thousand board feet of softwood lumber, except that 
no entity has to pay an assessment on the first 15 mmbf of softwood 
lumber otherwise subject to assessment in a fiscal year. 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. Pursuant 
to paragraphs (d) and (j) in Sec.  1217.52, respectively, domestic 
manufacturers and importers who pay their assessments to the Board must 
do so no later than the 30th calendar day of the month following the 
end of the quarter in which the softwood lumber was shipped or 
imported.

Exemptions

    Section 1217.53 prescribes exemptions from assessment. Pursuant to 
paragraph (a) of that section, the original de minimis quantity 
exemption threshold under part 1217 was 15 mmbf. Thus, U.S. 
manufacturers and importers that domestically ship and/or import less 
than 15 mmbf feet annually have been exempt from paying assessments. 
Domestic manufacturers and importers that ship or import less than the 
de minimis quantity of softwood lumber must apply to the Board each 
year for a certificate of exemption and provide documentation as 
appropriate to support their request.
    Pursuant to paragraph (b) of Sec.  1217.53, domestic manufacturers 
and importers that ship or import 15 mmbf or more annually do not pay 
assessments on their first 15 mmbf domestically shipped or imported. 
This exemption is intended for the purpose of creating an equality 
amongst those within the industry with regard to the program's 
assessment. Just as those that manufacture or import under 15 mmbf do 
not have to pay assessments, those at or above this level may reduce 
their assessable volume by 15 mmbf.\1\ For example, an entity that 
ships or imports 20 mmbf annually only has to pay assessments on 5 mmbf 
of softwood lumber. This exemption creates fairness; it levels the 
playing field because all entities, regardless of size, do not have to 
pay assessments on their first 15 mmbf shipped or imported. For 
purposes of this document, this exemption is referred to as the 
``equity exemption.'' Pursuant to paragraphs (c) and (d) of Sec.  
1217.53, respectively, exports of softwood lumber from the United 
States and organic softwood lumber are also exempt from assessment.
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    \1\ USDA notes that the de minimis level and the equity 
exemption are purposefully aligned and any change in the de minimis 
would result in a corresponding modification to the equity 
exemption.
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Reports and Records

    Pursuant to Sec.  1217.70, domestic manufacturers and importers who 
pay their assessments directly to the Board must submit with their 
payment a report that specifies the quantity of softwood lumber 
domestically shipped or imported. Pursuant to Sec.  1217.71, all 
domestic manufacturers and importers must maintain books and records 
necessary to verify reports for a period of 2 years beyond the fiscal 
year to which they apply, including those exempt. These records must be 
made available during normal business hours for inspection by Board 
staff or USDA.

Other Relevant Order Provisions

    The original 15 mmbf quantity exemption threshold is referenced in 
other Order provisions. Section 1217.40 specifies that the Board is 
composed of domestic manufacturers and importers who domestically ship 
or import 15 mmbf or more of softwood lumber annually. Section 1217.41 
specifies that

[[Page 49487]]

persons interested in serving on the Board must also domestically ship 
or import 15 mmbf or more softwood lumber annually. Finally, Sec.  
1217.101 regarding referendum procedures specifies that eligible 
domestic manufacturers and importers that can vote in referenda must 
domestically ship or import 15 mmbf or more of softwood lumber 
annually.

Initial Referendum and Summary of Board Activities

    The softwood lumber program was implemented after notice and 
comment rulemaking and a May 2011 referendum demonstrating strong 
support for the program. Pursuant to Sec.  1217.81(a), the program had 
to pass by a majority of those voting in the referendum who also 
represented a majority of the volume voted. Sixty-seven percent of the 
entities who voted, who together represented 80 percent of the volume, 
in the referendum favored implementation of the program. Entities that 
domestically shipped or imported 15 mmbf or more of softwood lumber 
annually were eligible to vote in the referendum. As previously 
mentioned, the program took effect in August 2011 and assessment 
collection began in January 2012.
    The softwood lumber program has continued to operate at the 15 mmbf 
exemption threshold since its inception. During these years, the Board 
has funded a variety of activities designed to increase the demand for 
softwood lumber. The Board funded a U.S. Tall Wood Building Prize 
Competition that is helping to showcase the benefits of building tall 
structures with wood. The Board also funds research on wood standards; 
a communications program, which includes continuing education courses 
for architects and engineers; and a construction and design program 
that provides technical support to architects and structural engineers 
about using wood.

Summary of USDA's Analysis of the De Minimis Quantity Under the 
Softwood Lumber Program

    The Secretary has authority under section 516 of the 1996 Act to 
exempt any de minimis quantity of an agricultural commodity otherwise 
covered by an order: ``An order issued under this subchapter may 
contain . . . authority for the Secretary to exempt from the order any 
de minimis quantity of an agricultural commodity otherwise covered by 
the order. . . .'' 7 U.S.C. 7415(a). A de minimis quantity exemption 
allows an industry to exempt from assessment small entities that could 
be unduly burdened from an order's requirements (i.e., assessment and 
quarterly reporting obligations). Because the 1996 Act does not 
prescribe the methodology or formula for computing a de minimis 
quantity, the Secretary has discretion to determine a reasonable and 
appropriate quantity and establish this level through notice and 
comment rulemaking. Pursuant to section 525 of the 1996 Act, 7 U.S.C. 
7424, the Secretary may issue such regulations as may be necessary to 
carry out an order.
    In evaluating the merits of a de minimis quantity for the softwood 
lumber program, USDA considered several factors. These factors include: 
an estimate of the total quantity of softwood lumber covered under part 
1217 (quantity assessed and quantity exempted); available funding to 
support a viable program; free rider implications; and the impact of 
program requirements on entities (above and below a de minimis 
threshold). USDA reviewed such factors in light of all available data 
and information to determine whether a de minimis quantity is 
reasonable. USDA balanced the multiple factors to assess whether one 
exemption threshold would work better than another when the factors are 
considered collectively. The analysis was based on the current 
assessment rate of $0.35 per thousand board feet.\2\
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    \2\ If the assessment rate changes significantly, USDA could 
revisit the de minimis threshold.
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    The following tables are republished from USDA's analysis of the de 
minimis quantity under the softwood lumber program contained in the May 
2017 proposed rule (82 FR 24583).
    Table 1 shows the estimate of the supply of U.S. softwood lumber 
used in the analysis, accounting for both U.S. shipments and imports. 
U.S. shipments were estimated using capacity\3\ data from Forest 
Economic Advisors (FEA). Total imports was estimated using data from 
CBP.
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    \3\ A sawmill's operating capacity is the total amount of 
softwood lumber that it could manufacture (or produce) if fully 
utilizing all of its resources (such as labor and equipment).

          Table 1--Supply of Softwood Lumber in the U.S. (MMBF)
------------------------------------------------------------------------
                 Shipments \1\                  Imports \2\   Supply \3\
------------------------------------------------------------------------
28,754........................................       12,495       41,249
------------------------------------------------------------------------
\1\ FEA; \2\ CBP; \3\ The sum of U.S. Shipments and Imports.

    Table 2 shows assessable volume and revenue at exemption levels of 
30, 25, 20, 15 and 10 mmbf, as well as with no exemptions. The table 
accounts for both the de minimis and equity exemptions under part 1217, 
and an assessment rate of $0.35 per thousand board feet.

                Table 2--Assessable Volume and Assessment Revenue at Exemption Levels (MMBF) \1\
----------------------------------------------------------------------------------------------------------------
                                                                                  De minimis and    Assessment
                 Volume equal to or greater than                    De minimis        equity        revenue ($)
                                                                  exemption only    exemptions          \2\
----------------------------------------------------------------------------------------------------------------
30..............................................................          37,965          32,805     $11,481,698
25..............................................................          38,319          33,694      11,792,941
20..............................................................          38,990          34,690      12,141,349
15..............................................................          39,679          35,854      12,548,792
10..............................................................          40,013          37,183      13,014,059
No exemptions...................................................          41,249          41,249      14,437,099
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\1\ 2015 data from FEA and CBP were used to construct this table.
\2\ The product of total assessable volume, accounting for both de minimis and equity exemptions, and the
  assessment rate of $0.35 per thousand board feet.


[[Page 49488]]

    Table 3 is the inverse of Table 2 in that it shows exempt volume at 
de minimis and equity exemptions of 30, 25, 20, 15 and 10 mmbf.

                              Table 3--Exempt Volume at Exemption Levels (MMBF) \1\
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                                                     De minimis exemption only         De minimis and equity
                                                 --------------------------------           exemptions
                Volume less than                                                 -------------------------------
                                                      Volume       % Exempt \2\       Volume       % Exempt \2\
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30..............................................           3,284               8           8,444              20
25..............................................           2,930               7           7,555              18
20..............................................           2,259               5           6,559              16
15..............................................           1,570               4           5,395              13
10..............................................           1,236               3           4,066              10
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\1\ 2015 data from FEA and CBP were used to construct this table.
\2\ The quotient of total exempt volume and total 2015 U.S. supply (the sum of U.S. shipments and U.S. imports)
  of 41,249 MMBF.

    Table 4 shows the number of entities (domestic manufacturers and 
importers) that would be assessed and the number of entities that would 
be exempt at the exemption thresholds of 30, 25, 20, 15 and 10 mmbf.

                      Table 4--Assessed and Exempt Entities at Exemption Levels (MMBF) \1\
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                                                             Assessed                         Exempt
                                                 ---------------------------------------------------------------
                  Volume (MMBF)                      Number of                       Number of
                                                     entities     % Assessed \2\     entities      % Exempt \2\
----------------------------------------------------------------------------------------------------------------
30..............................................             172              16             882              84
25..............................................             185              18             869              82
20..............................................             215              20             839              80
15..............................................             255              24             799              76
10..............................................             283              26             771              73
None............................................           1,054             100  ..............               0
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\1\ 2015 data from FEA and CBP were used to construct this table.
\2\ The quotient of No. of Entities and total domestic manufacturers and importers recorded in the industry
  (1,054) in 2015.

    Based on its analysis, USDA determined the following: Exemption 
thresholds of 10 to 15 mmbf would exempt 10 to 13 percent of the total 
volume of softwood lumber (taking into account both the de minimis and 
equity exemptions). This is close to the range exempt under other 
research and promotion programs. While all of the exemption thresholds 
analyzed would generate sufficient revenue for a viable program, the 
additional revenue that could be collected if the de minimis level were 
reduced much lower than 15 mmbf would likely not be worth the 
additional costs. At this threshold, free rider implications would be 
minimal because only 4 percent of the volume of softwood lumber would 
be exempted as de minimis. Applying both the de minimis and equity 
exemptions at 15 mmbf would allow the program to assess almost 90 
percent of the total volume of softwood lumber.
    Further, the program functioned successfully in 2015 with 
assessment revenue of $12.905 million with de minimis and equity 
exemptions of 15 mmbf. The Board has conducted activities at this level 
of funding that have helped build demand for softwood lumber, including 
a prize competition for tall wood buildings, research on wood 
standards, and an education program for architects and engineers on 
building with wood. An independent evaluation completed in 2016 
concluded that activities of the Board increased sales of softwood 
lumber between 2011 and 2015 by 1.683 bbf or $596 million. This equates 
to a return on investment of $15.55 of additional sales for every $1 
spent on promotion by the Board.\4\
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    \4\ Prime Consulting, Softwood Lumber Board, Comprehensive 
Program ROI, 2012-2015, February 2016.
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    Therefore, when considering all of the factors collectively, USDA 
concludes that 15 mmbf is a reasonable and most appropriate de minimis 
quantity under part 1217.\5\ Accordingly, this rule establishes the de 
minimis quantity threshold under part 1217 at 15 mmbf. Thus, no 
amendment to part 1217 is necessary.
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    \5\ As stated previously, the de minimis level and the equity 
exemption are purposefully aligned, and therefore this conclusion 
accounts for the equity exemption at 15 mmbf.
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Final 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 this final rule on 
small entities as defined by the Small Business Administration (SBA). 
The classification of a business as small, as defined by the SBA, 
varies by industry. If a business is defined as ``small'' by SBA size 
standards, then it is ``eligible for government programs and 
preferences reserved for `small business' concerns.'' \6\ Accordingly, 
AMS has considered the economic impact of this action on such entities.
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    \6\ https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/small-business-size-regulations.
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    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 SBA 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 (domestic manufacturers 
and importers) as those having annual receipts of no more than $7.5 
million.\7\
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    \7\ SBA does have a small business size standard for 
``Sawmills'' of 500 employees (see https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf). Based on USDA's 
understanding of the lumber industry, using this criteria would be 
impractical as sawmills often use contractors rather than employees 
to operate and, therefore, many mills would fall under this criteria 
while being, in reality, a large business. Therefore, USDA used 
agricultural service firm as a more appropriate criteria for this 
analysis.

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[[Page 49489]]

    Using an average price of $330 per thousand board feet,\8\ a 
domestic manufacturer or importer who ships less than about 23 mmbf per 
year would be considered a small entity for purposes of the RFA. As 
shown in Table 4, there were 1,054 domestic manufacturers and importers 
of softwood lumber based on 2015 data. Of these, 864 entities shipped 
or imported less than 23 mmbf and would be considered to be small 
entities under the SBA definition. Thus, based on the $7.5 million 
threshold, the majority of domestic manufacturers and importers of 
softwood lumber would be considered small entities for purposes of the 
RFA.
---------------------------------------------------------------------------

    \8\ Random Lengths Publications, Inc.; www.randomlengths.com.
---------------------------------------------------------------------------

    This action establishes a de minimis quantity exemption threshold 
under part 1217. Part 1217 is administered by the Board with oversight 
by USDA. In response to a federal district court decision in Resolute, 
USDA conducted a new analysis to determine a reasonable and appropriate 
de minimis threshold. Based on this analysis, this final rule 
establishes the de minimis quantity threshold at 15 mmbf and entities 
manufacturing (and domestically shipping) or importing less than 15 
mmbf per year would be exempt from paying assessments under part 1217. 
Authority for this action is provided in sections 516(a)(2), 516(g) and 
525 of the 1996 Act.
    Regarding the economic impact of the de minimis exemption, the 
exemption allows the Board to exempt from assessment small entities 
that would be unduly burdened by the program's obligations. At the 15 
mmbf exemption threshold, small manufacturers and importers that 
domestically ship or import less than 15 mmbf of softwood lumber will 
not have to pay assessments under the program.
    Additionally, larger manufacturers and importers will not have to 
pay assessments on the first 15 mmbf of softwood lumber domestically 
shipped or imported each year. This exemption is intended for the 
purpose of equity, whereby all entities who must pay assessments may 
reduce their assessable volume by 15 mmbf. This exemption benefits 
smaller manufacturers and importers whose annual shipments or imports 
are above the de minimis threshold of 15 mmbf. With this exemption, an 
entity that ships or imports a quantity of softwood lumber equal to the 
RFA-small business definition of 23 mmbf, would only pay assessments on 
no more than 8 mmbf of softwood lumber.
    To calculate the impact of the assessment rate on the revenue of an 
assessment payer, the assessment rate is divided by an average price. 
Using an average 2015 price of $330 per thousand board feet, the 
assessment rate as a percentage of price could range from 0.106 percent 
at the current assessment rate to 0.151 percent at the maximum 
assessment rate. This analysis helps identify the impact of the 
assessment rate on the revenues of assessment payers. At the current 
assessment rate of $0.35 per thousand board feet to the maximum 
assessment rate of $0.50 per thousand board feet, assessment payers 
would owe between 0.106 percent and 0.151 percent of their revenues, 
respectively.
    In its analysis of alternatives, USDA evaluated five different 
exemption thresholds--30, 25, 20, 15 and 10 mmbf using 2015 data--
accounting for both the de minimis and equity exemptions, as well as 
having no exemptions under the program. USDA evaluated these 
alternatives based on the following factors: an estimate of quantity of 
softwood lumber covered under the program (quantity assessed and 
quantity exempted); available funding to support a viable program; free 
rider implications; and the impact of program requirements on entities 
(above and below a de minimis threshold). USDA conducted a balancing 
test among these factors to assess whether one exemption threshold 
works better than another when the factors are considered collectively.
    In reviewing the quantity of assessable versus exempt softwood 
lumber at the alternative exemption thresholds, USDA found that at an 
exemption threshold of 30 mmbf, a total of 32.805 bbf would be assessed 
with 3.284 bbf, or 8 percent, exempt as de minimis, plus an additional 
5.16 bbf exempt as equity for 20 percent of total volume exempt; at 25 
mmbf, a total of 33.694 bbf would be assessed with 2.93 bbf, or 7 
percent, exempt as de minimis, plus an additional 4.625 bbf exempt as 
equity for 18 percent total volume exempt; at a threshold of 20 mmbf, a 
total of 34.69 bbf would be assessed with 2.259 bbf, or 5 percent, 
exempt as de minimis, plus an additional 4.3 bbf exempt as equity for 
16 percent total volume exempt; at a threshold of 15 mmbf, a total of 
35.854 bbf would be assessed with 1.57 bbf, or 4 percent, exempt as de 
minimis, plus an additional 3.825 bbf exempt as equity for 13 percent 
total volume exempt; at a threshold of 10 mmbf, a total of 37.183 bbf 
would be assessed, with 1.236 bbf, or 3 percent, exempt as de minimis, 
plus an additional 2.83 bbf exempt as equity for 10 percent total 
volume exempt; and with no exemptions, a total of 41.249 bbf would be 
assessed. In reviewing the total volume exempt under the softwood 
lumber program (taking into account both the de minimis and equity 
exemptions), thresholds of 10 to 15 mmbf exempt between 10 and 13 
percent of the volume, which is close to the range exempt under other 
programs.
    In reviewing available funding to support a viable program at the 
alternative exemption thresholds, at an exemption threshold of 30 mmbf, 
estimated assessment revenue is $11.482 million; at 25 mmbf, estimated 
assessment revenue is $11.793 million (an additional $311,243); at a 
threshold of 20 mmbf, estimated assessment revenue is $12.141 million 
(an additional $348,408); at a threshold of 15 mmbf, estimated 
assessment revenue is $12.549 million (an additional $407,444); at a 
threshold of 10 mmbf, estimated assessment revenue is $13.014 million 
(an additional $465,267); and with no exemptions, estimated assessment 
revenue is $14.437 million (an additional $1.423 million).
    Assessment revenue under the current softwood lumber program has 
ranged from about $10.638 million in 2012 to $12.905 million in 2015. 
At this level of revenue, the current program has seen success. The 
revenues reviewed at the different exemption thresholds are comparable 
to these levels or higher. Thus, all of the exemption thresholds 
analyzed would generate sufficient revenue for a viable program.
    Regarding free riders, USDA notes that the key to assessing the 
free rider implications of a de minimis quantity is not the number of 
entities exempt under a program but rather the volume of product 
exempt. This is because assessments are based on volume shipped or 
imported and not on the number of entities; assessments are not paid by 
entities on a pro rata basis. In evaluating free rider implications at 
the alternative exemption thresholds, at an exemption threshold of 30 
mmbf, 84 percent of the number of entities (or 882) would be exempt but 
only 8 percent of the volume would be exempt as de minimis; at a 
threshold of 25 mmbf, 82 percent of the number of entities (or 869) 
would be exempt, but only 7 percent of the volume would be exempt as de 
minimis; at a threshold of 20 mmbf, 80 percent of the number of 
entities (or 839) would be exempt, but

[[Page 49490]]

only 5 percent of the volume would be exempt as de minimis; at a 
threshold of 15 mmbf, 76 percent of the number of entities (or 799) 
would be exempt, but only 4 percent of the volume would be exempt as de 
minimis; and at a threshold of 10 mmbf, 73 percent of the number of 
entities (or 771) would be exempt, but only 3 percent of the volume 
would be exempt as de minimis.
    In evaluating the impact of the program's requirements at the 
alternative exemption thresholds, entities that ship or import at or 
above the de minimis threshold must pay assessments to the Board. 
Assessment payers must also submit a report to the Board each quarter 
of the volume of softwood lumber shipped or imported for the respective 
quarter. Entities that ship or import below the de minimis threshold 
must apply to the Board each year for a certificate of exemption and 
provide documentation as appropriate to support their request. The 
reporting and recordkeeping requirements are detailed in the section 
below titled Paperwork Reduction Act.
    At an exemption threshold of 30 mmbf, 172 entities would pay 
assessments and 882 would be exempt; at 25 mmbf, 185 entities would pay 
assessments and 869 would be exempt; at 20 mmbf, 215 entities would pay 
assessments and 839 would be exempt; at 15 mmbf, 255 entities would pay 
assessments and 799 would be exempt; at 10 mmbf, 283 entities would pay 
assessments and 771 would be exempt. Thus, as the exemption threshold 
is reduced, more entities would be subject to the assessment and 
quarterly reporting obligation under part 1217.
    Further, in considering program compliance costs, USDA estimates 
the cost of an on-site audit of a single entity at $5,000 or more. 
Thus, the cost to pursue a compliance case against an entity that 
shipped less than 10 mmbf, 9 mmbf for example, would outweigh the 
revenue that would be collected from that entity of $3,150. Similarly, 
the assessment revenue that would be collected from an entity that 
shipped less than 15 mmbf, 12 mmbf for example, would amount to $4,200. 
The benefit of assessing smaller manufacturers, $3,150 at 9 mmbf and 
$4,200 at 12 mmbf, does not outweigh the cost of pursuing compliance 
cases against them at $5,000 per entity. The point at which the 
assessment revenue that would be collected from an entity outweighs the 
estimated cost of $5,000 to pursue a compliance case is an entity with 
volume equal to or greater than 14.3 mmbf.\9\ This level is close to 15 
mmbf. By this analysis, the selection of 15 mmbf as the de minimis 
quantity is reasonable.
---------------------------------------------------------------------------

    \9\ This figure is computed by dividing the estimated cost to 
pursue a compliance case against an entity of $5,000 by the 
assessment rate of $0.35 per thousand board feet.
---------------------------------------------------------------------------

    Analysis of the 23 mmbf-RFA small business threshold as a 
reasonable option for de minimis shows that 190 entities would be 
subject to assessment and 864 entities would be exempt. In terms of 
volume, 38.44 bbf would be assessed, or 93 percent of total volume, and 
2.809 bbf would be exempt, or 7 percent of total volume.
    Based upon the analysis contained herein, any of the exemption 
thresholds reviewed would be reasonable because they would exempt from 
3 to 8 percent of the volume of softwood lumber as de minimis. However, 
when the total volume exempt under the softwood lumber program is 
considered (taking into account both the de minimis and equity 
exemptions), thresholds of 10 to 15 mmbf exempt between 10 and 13 
percent of the volume, which is close to the range exempt under other 
programs. While all of the exemption thresholds analyzed would generate 
sufficient revenue for a viable program, the additional revenue that 
could be collected if the de minimis level were reduced much lower than 
15 mmbf would likely not be worth the additional costs. The softwood 
lumber program operated successfully since its inception at an 
exemption threshold of 15 mmbf.\10\
---------------------------------------------------------------------------

    \10\ An independent evaluation of the softwood lumber program 
showed that the activities of the Board increased sales of softwood 
lumber between 2011 and 2015 by 1.683 bbf or $596 million. This 
equates to a return on investment of $15.55 of additional sales for 
every $1 spent on promotion by the Board. By this metric, part 1217 
to date has been effective. USDA therefore finds that 15 mmbf is a 
reasonable exemption level for de minimis.
---------------------------------------------------------------------------

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the information collection and recordkeeping requirements 
imposed by part 1217 have been approved previously under OMB control 
number 0581-0093. This rule imposes no additional reporting and 
recordkeeping burden on domestic manufacturer and importers of softwood 
lumber. The reporting requirements pertaining to this rule are 
described in the following paragraphs.
    As previously mentioned, pursuant to Sec.  1217.53(a), domestic 
manufacturers and importers who domestically ship or import less than 
the de minimis threshold must apply to the Board each year for a 
certificate of exemption and provide documentation as appropriate to 
support their request. The reporting burden for this collection of 
information is estimated to average 0.25 hours per domestic 
manufacturer or importer per report, or 0.25 hours per year (1 request 
per year per exempt entity). This computes to a total annual burden of 
199.75 hours (0.25 hours times 799 exempt entities at the 15 mmbf de 
minimis exemption threshold from Table 4).
    Further, pursuant to Sec.  1217.70, domestic manufacturers and 
importers that ship or import at or over the de minimis exemption level 
and pay their assessments directly to the Board must submit a shipment/
import report for each quarter when assessments are due. The reporting 
burden for this collection of information is estimated to average 0.5 
hours per domestic manufacturer or importer per report, or 2 hours per 
year (4 reports per year times 0.5 hours per report). This computes to 
a total annual burden of 510 hours (255 assessed entities (from Table 
4--No. of Assessed Entities at 15 mmbf) at 2 hours each equals 510 
hours).
    All domestic manufacturers and importers must also maintain records 
sufficient to verify their reports. The recordkeeping burden for 
keeping this information is estimated to average 0.5 hours per record 
keeper maintaining such records, or 527 hours (1,054 total entities 
assessed (from Table 4--No. of Assessed Entities at no exemption) times 
0.5 hours).
    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.
    USDA 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, USDA initiated this action in response 
to a May 2016 federal court decision in Resolute. This rule establishes 
the de minimis quantity exemption under part 1217.
    A proposed rule concerning this action was published in the Federal 
Register on May 30, 2017 (82 FR 24583). The Board distributed copies of 
the proposed rule via email to domestic manufacturers and importers. 
The proposal was also made available through the internet by USDA and 
the

[[Page 49491]]

Office of the Federal Register. A 60-day comment period ending July 31, 
2017, was provided to allow interested persons to submit comments.

Analysis of Comments

    Thirty-three comments were received in response to the proposed 
rule. Of those 33 comments, one was outside the scope of the rulemaking 
and the remaining 32 supported the 15 mmbf exemption threshold. The 
following is an analysis of those 32 comments.
    Several commenters reiterated the data presented in the proposed 
rule. They cited Table 3 which shows that, at the 15 mmbf threshold, 
entities that pay into the program account for 96 percent of the U.S. 
softwood lumber market volume. Thus, free rider concerns are minimal. 
Reducing the exemption level by a third (down to 10 mmbf) would only 
increase that number to 97 percent of the U.S. market and would not be 
worth the additional effort. There are a large number of small 
manufacturers and importers who account for a small percentage of the 
softwood lumber shipped in the United States. The commenters opined 
that the cost of collecting an assessment from such a large number of 
entities outweighs the revenue that could be collected from such a 
small amount of volume. They agreed that Board staff time would be 
better spent on promotion activities than trying to collect a small 
amount of revenue from several small entities.
    One commenter opined that the methodology used by USDA to determine 
the de minimis threshold was comprehensive and explored tradeoffs 
involved in setting a threshold below which it is counterproductive to 
the collection of assessments to further the program. The commenter 
stated that ``. . . USDA dealt with a large amount of data on imports 
that it appropriately scrubbed to exclude obvious errors and 
outliers.'' Within the populations of domestic manufacturers and 
importers categorized based on volume, USDA conducted a series of 
``what if'' analyses to determine the impact of various de minimis 
levels on revenue in terms of ``. . . administrative costs, the 
compliance burden on respondents and the potential for ``free rider'' 
benefits.'' The commenter also observed that USDA compared the results 
to other federal promotion programs authorized under the 1996 Act and 
overseen by USDA where it found that 8 of 10 programs exempt a de 
minimis quantity from assessment, and that half of those programs 
exempt between 3 and 11 percent of the total quantity covered by the 
program as de minimis. Among the range of alternatives that USDA 
analyzed, the 10 and 15 mmbf thresholds came closest to this range. The 
commenter stated that USDA also compared the benefits derived from 
these thresholds with the likely compliance costs incurred, which USDA 
estimated at $5,000 per entity. The point at which revenues collected 
from entities that would fall below the compliance cost was found to be 
at 14.3 mmbf, which is closest to the 15 mmbf threshold. The 
combination of these results led USDA to conclude that 15 mmbf is the 
most appropriate benchmark between volumes assessed and not assessed. 
The commenter concluded that, ``. . . while there is no special formula 
for computing a de minimis threshold . . . ,'' the commenter believes 
that USDA selected a reasonable exemption amount based on the 
industry's structure and the program's benefits and costs.
    Six commenters opined that the 15 mmbf threshold appropriately 
separates the high production manufacturers from small entities that 
manufacture specialty products and sell into mostly local and niche 
markets. They agreed that specialty products do not benefit as much 
from a national promotion program, and that growth in market share 
benefits entities that manufacture larger volumes to a greater degree 
than those that fall below the 15 mmbf threshold.
    Several commenters expressed concern with the administrative burden 
that complying with a mandatory promotion program could place on small 
entities below the 15 mmbf threshold. One commenter stated that, on a 
per board foot ratio, the costs to participate in the program are lower 
for larger entities than smaller entities. Many small entities still 
record their shipments by hand. Larger entities, on the other hand, can 
afford to invest in automated computer reporting systems and can have 
personnel dedicated to efficiently analyzing their reporting. Thus, the 
administrative costs for smaller entities to participate in the program 
are higher than the costs for larger entities.
    Two commenters also referenced the part's 8 percent cap on 
administrative expenses. They opined that the revenue gained from 
collecting assessments from numerous small entities would not be 
sufficient to justify the additional costs and administrative 
complexities.
    Three commenters expressed support for the equity exemption. They 
opined that the equity exemption makes the program fair for everyone. 
One commenter opined that the equity exemption mitigates the free rider 
problem because larger entities do not have to pay assessments on their 
first 15 mmbf shipped. Without the equity exemption, assessment payers 
would pay more, thereby increasing the free rider impact.\11\
---------------------------------------------------------------------------

    \11\ For example, as explained in the May 2017 proposed rule, if 
the thresholds for de minimis and equity exemptions were 10 mmbf, 
Company A that ships 8 mmbf annually would pay no assessments, and 
Company B that ships 30 mmbf annually would have to pay assessments 
on 20 mmbf of softwood lumber. At an assessment rate of $0.35 per 
thousand board feet, this would compute to $7,000 in assessments. 
Without the equity exemption, Company A would still pay no 
assessments but Company B would have to pay assessments on 30 mmbf. 
This would compute to $10,500 in assessments, which is an additional 
burden of $3,500. Thus, the equity exemption reduces the burden of 
free riders on entities funding the program. It creates fairness 
because it exempts from assessment an equal volume from all 
entities, regardless of their size.
---------------------------------------------------------------------------

    Two commenters discussed the efforts of the Blue Ribbon Commission 
(BRC), the proponent group, in promulgating the program. They stated 
that the BRC surveyed the industry on issues related to the program, 
including the de minimis exemption threshold. They stated that the BRC 
sought a level that would generate maximum revenue for the program 
while being mindful of the cost of administering the program and 
collecting assessments. The BRC's survey found that 15 mmbf was the 
appropriate level that was broadly accepted by the industry.
    Several commenters also expressed their overall support for the 
softwood lumber program. They agreed that the program provides a 
strong, unified voice for the industry. One commenter stated that the 
program has contributed significantly to strengthening the position of 
softwood lumber in the market place as well as expanding and developing 
new markets for softwood lumber. The commenters also agreed that 
funding for the program has been appropriate since assessment 
collection began in 2012. None of the commenters supported increasing 
the exemption threshold thereby reducing funding for the program.
    No changes have been made to the proposed rule based on the 
comments received.
    After consideration of all relevant matters presented, including 
the available information and comments received, it is hereby found 
that this rule, 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, Promotion, Reporting and 
recordkeeping requirements, Softwood lumber.


[[Page 49492]]


    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.

    Dated: October 19, 2017.
Bruce Summers,
Acting Administrator.
[FR Doc. 2017-23094 Filed 10-25-17; 8:45 am]
 BILLING CODE 3410-02-P


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