Source: https://www.federalregister.gov/documents/2019/06/26/2019-13450/softwood-lumber-research-promotion-consumer-education-and-industry-information-order-change-in
Timestamp: 2020-08-03 17:23:00
Document Index: 609915967

Matched Legal Cases: ['art 1217', 'art 121', '§\u20091217', '§\u20091217', '§\u20091217', '§\u20091217', '§\u20091217', '§\u20091217', '§\u20091217', '§\u20091217', '§\u20091217']

Federal Register :: Softwood Lumber Research, Promotion, Consumer Education and Industry Information Order; Change in Membership, Nominations, Procedures, and Continuance Referenda Period
A Proposed Rule by the Agricultural Marketing Service on 06/26/2019
30040-30047 (8 pages)
Document Number AMS-SC-19-0015
AMS-SC-19-0015
Board Membership and Geographical Distribution
Continuance Referenda Period
https://www.federalregister.gov/d/2019-13450
Start Further Info Start Printed Page 30041
Sue Coleman, Marketing Specialist, Promotion and Economics Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, Room 1406-S, Washington, DC 20250; telephone: (202) 378-2569; facsimile (202) 205-2800; or electronic mail: Sue.Coleman@usda.gov.
This proposal 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).
This proposal invites comments on changing the Board's membership, nominations, procedures, and continuance referenda period under the Order. The Board administers the Order with oversight by USDA. Under the Order, assessments are collected from U.S. manufacturers and importers and used for projects to promote softwood lumber within the United States. This proposal would reduce the number of Board members from 19 to 14, revise the nomination procedures, and revise the quorum and voting procedures. This proposal would also revise the time frame for periodic continuance referenda from five to seven years. Finally, this proposal would make clarifying and conforming changes to other provisions of the Order. All of these changes would help facilitate program operations and were recommended to the Secretary by the Board at its November 28, 2018 meeting.
Pursuant to section 1217.40(b), the Board is composed of 18 or 19 members, depending upon whether an additional importer member is appointed to the Board. Seats on the Board are apportioned based on the volume of softwood lumber manufactured and shipped within the United States by domestic manufacturers and the volume of softwood lumber imported into the United States. Seats are also apportioned based on size of operation within each geographic region as specified herein. Large manufacturers are those who account for the top two-thirds of the total annual volume of assessable softwood lumber and small manufacturers are those who account for the remaining one-third of the total annual volume of assessable softwood lumber, based on a three-year average.
Table 1 shows the current structure of the Board. Of the 19 total Board seats, 12 are held by domestic manufacturers and seven are held by importers, six of whom are Canadian. Of the 12 domestic manufacturers, six represent the U.S. South (two large and four small), five represent the U.S. West (four large and one small), and one represents the Northeast and Lake States. Of the six Canadian importers, four represent Canada West (three large and one small) and two represent Canada East (one large and one small). An additional importer member may be appointed to represent all other importing countries other than Canada.
Section 1217.40(c)(1) requires that, in each five-year period, the Board review, based on a three-year average, the geographical distribution of the volume of softwood lumber manufactured and shipped within the United States by domestic manufacturers and the volume of softwood lumber imported into the United States. Section 1217.40(c)(2) requires that the Board also review, based on a three-year average, the distribution of the size of operations within each region. Section 1217.40(c)(3) specifies that, if warranted, the Board may recommend to the Secretary the reapportionment of its membership to reflect changes in the geographical distribution of the volume of softwood lumber manufactured and shipped within the United States by domestic manufacturers and the volume of softwood lumber imported into the United States. The number of Board members may also be changed. Any changes in Board composition shall be implemented by the Secretary through rulemaking.
Pursuant to section 1217.40, the Board evaluated the geographic distribution of softwood lumber by region, based on a three-year average (2015-2017). The Board utilized data from Forest Economic Advisors [1] to evaluate the regional distribution of assessable softwood lumber. The results of this evaluation are shown in Table 2. Based on a three-year average (2015-2017), the volume of assessed softwood lumber was largest in the U.S. South and U.S. West regions, at 36 percent and 30 percent, respectively, of the total assessed volume over all regions. Canada West followed with 20 percent of the total assessed volume. In these three regions, assessed volume by large entities made up the majority of assessed regional volume. In all other regions, assessed volume by small entities was either equal to or greater than the assessed volume by large entities.
From this evaluation, the Board recommended revising the Board membership from 19 current seats to 14 seats for the 2021 term of office, of which six members must represent large manufacturers or importers, four must represent small manufacturers or importers, and four may represent any size manufacturers or importers. Of the four representing any size manufacturer or importer, at least two of these members must represent small manufacturers or importers. The Board recommended adding more flexibility to the Order in terms of certain seats being open to representatives of any size manufacturer or importer. This will allow the Board to better adjust in the future to shifts in the size of operations within a region.Start Printed Page 30043
The Board also took into consideration the consolidation in the softwood lumber industry since the inception of the Order. The Board has indicated that the number of companies eligible to be represented on the Board has declined. According to the Board, there were about 290 entities eligible to be represented on the Board in 2013, and about 210 entities in 2018. The Board has faced challenges securing enough nominees for membership on the Board. This compelled the Board to consider a reduction in Board membership.
The Board recommended the seats be revised as follows: Domestic manufacturers would hold 10 seats, of which five members must be from the U.S. South Region (two large, two small, and one manufacturer of any size), four members must be from the U.S. West Region (two large, one small, and one manufacturer of any size), and one member from the Northeast and Lake States Region. Importers would have four seats on the Board (two large, one small, and one importer of any size) with a minimum of two from Canada West Region, a minimum of one from Canada East Region and the remaining member may be from Canada West, Canada East or offshore Regions. Table 3 illustrates this categorization of seats in the proposed Board structure.
As the Board conducted the evaluation pursuant to section 1217.40, it also made a recommendation to align sections 1217.40(a), (c)(1) and (c)(3) with section 515(b)(3) of the 1996 Act. (7 U.S.C. 7414(b)(3)). Section 1217.40(a) would clarify that the Board shall be apportioned based on the volume of softwood lumber production that is manufactured and shipped within the United States by domestic manufacturers. Sections 1217.40(c)(1) and (3), respectively, would specify that the Board shall review, based on a three-year average, the geographical distribution of the volume of softwood lumber produced and shipped within the United States by domestic manufacturers, and that the Board shall make recommendations to revise its structure based on this review.
Additionally, the Board recommended that U.S. Board members reside in the region they represent. This would ensure that entities from outside the U.S. that own softwood lumber entities within the U.S. could represent a U.S. region on the Board only if the individual seeking nomination resides in the respective region. The Board would review the USDA Advisory Committee on Research and Promotion Background Information Form AD-755 to determine in which Region each nominee resides.
According to the Board, this proposed action should make the reduced number of seats easier to fill and reflect the current distribution of the industry.
The Board has recommended a transitional approach to reduce the Board from 19 members to 14 members over a three-year period. The 2019 Board currently has 19 members. The 2020 Board would have 16 members consisting of five domestic manufacturer members representing the U.S. South Region (two large and three small), five representing the U.S. West Region (four large and one small) and one representing the Northeast and Lake States. Of the five Canadian importers (three large and two small), there would be three from the Canada West Region and two from the Canada East Region. The non-Canadian importer seat would not be filled in 2020 (when the current member reaches tenure).
The 2021 Board would have 14 members consisting of five domestic manufacturer members representing the U.S. South Region (two large, two small and one manufacturer of any size), four members representing the U.S. West Region (two large, one small and one manufacturer of any size) and one representing the Northeast and Lake States. Of the four Canadian importers (two large, one small and one importer of any size), there would be two from the Canada West Region and one from the Canada East Region. The remaining member may be from Canada West, Canada East or offshore Regions.
Section 1217.41 establishes the procedures for the conduct of nominations to obtain Board nominees for appointment by the Secretary. The Board has recommended to remove the procedures in section 1217.41(a) regarding the initial nominations to select the nominees for the initial Board in 2011. Section 1217.41(b) establishes an election process for nominations. In order to secure more nominees for Board seats, the Board has recommended removing the election process from its nomination procedures.
The nomination procedure provides that the Board conduct outreach and solicit nominees who are interested in serving on the Board. A nominee could seek nomination to the Board for all seats for which he or she is qualified. The Board would evaluate all nominees and submit one recommended candidate for each open seat and one additional nominee for each open seat to the Secretary for consideration. Other qualified persons interested in serving in the open seats but not recommended by the Board would be designated as other nominees for consideration by the Secretary. From the nominations made, the Secretary would appoint members of the Board.
Finally, the Board recommended a clarification to section 1217.41(b)(7) that specifies no two members shall be employed by a single corporation, company, partnership, or any other legal entity, should also include subsidiaries and affiliates thereof. Section 1217.41 would be revised accordingly.Start Printed Page 30044
Section 1217.44 specifies the quorum and voting procedures for the Board based on the current 19 Board members. The Board's recommendation is to revise these provisions from specific number requirements needed for a quorum and for votes to a general term “majority” that could apply to any size Board. Thus, the Board recommended these conforming changes to complement the reduction in Board membership. Section 1217.44 would be revised accordingly.
Section 1217.81(b) specifies that the Secretary conduct a referendum of the industry for the purpose of ascertaining whether manufacturers for the U.S. market favor the continuation of the Order. The first continuance referendum was held in 2018, and 78 percent of the voters representing 94 percent of the volume voted supported continuance of the Order. The Board recommended that the period between referenda be extended from five to seven years for the purpose of efficiency. The Board would incur costs associated with referenda once every seven years rather than every five years. The Order would still permit referenda to be held at the request of the Board; at the request of 10 percent or more of the number of persons eligible to vote in a referendum; and at any time as determined by the Secretary, pursuant to section 1217.81(b)(3), (4) and (5), respectively. Section 1217.81(b) would be revised accordingly.
This proposal would also make minor changes to sections 1217.52(h) and 1217.101(l), by updating the Harmonized Tariff Schedule (HTS) number codes. The HTS number codes are periodically updated by the United States Internal Trade Commission. Finally, this proposal would change the OMB control number assigned to the previously approved information collection referenced in sections 1217.88 and 1217.108 from 0581-0264 to 0581-0093, the correct control number assigned by OMB.
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 (SBA) defines, in 13 CFR part 121, small agricultural service firms (domestic manufacturers and importers) as those having annual receipts of no more than $7.5 million.[2] The Random Lengths yearly average framing lumber composite price was $460 per thousand board feet in 2018.[3] Dividing the $7.5 million threshold that defines an agricultural service firm as small by this price results in a maximum threshold of 16.3 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 4 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.
As shown in Table 4, there were a total of 1,383 domestic manufacturers and importers of softwood lumber based on 2018 data. Of these, 931 entities, or 67 percent, shipped or imported less than 16.3 mmbf and would be small entities under the SBA definition. These 931 entities domestically manufactured or imported 2.07 billion board feet (bbf) in 2018, less than 3 percent of total volume. The reduction in Board seats and other administrative changes will not disproportionately burden small domestic manufacturers and importers of softwood lumber.
This proposal invites comments on three major changes to the Board's membership, nominations, procedure, and continuance referenda period provisions under the Order. Section 1217.40 would be revised to reduce the number of Board members from 19 to 14 and would reflect the diversity of the industry in terms of geographical distribution and size of operation. An additional change to this section would require that U.S. Board members reside in the region they represent. Section 1217.41 would be revised by eliminating the election process in the nomination procedures. In section 1217.44 the quorum and voting procedures for the Board would be revised to complement the reduction in board membership. Section 1217.81 would be revised to instruct that subsequent continuance referenda to be conducted every seven years rather than five. These changes were recommended by the Board and are authorized under sections 1217.40(c)(3), 1217.41(b)(8), 1217.46(b), and 1217.87 of the Order and section 515(b)(3) of the 1996 Act.
Regarding the economic impact of this proposed rule on affected entities, these changes are administrative in nature and would have no economic impact on entities covered under the program. These changes would help in securing nominees to fill seats on the Board, address the concerns of the softwood lumber industry not securing enough nominees to be submitted to the Secretary for selection, make conforming changes necessary to complement the reduction in board membership, and improve efficiency with regard to continuance referenda.
The Board's Industry Relations and Governance Committee (Committee) reviewed various alternatives to the Board's current 19-member make-up. Start Printed Page 30045The Committee considered a 12 and 13-member Board. The committee also considered maintaining the status quo at 19 members. Regarding the referenda period, one option the Board considered would be to maintain the status quo. However, the Board recommended changing the period from five to seven years to improve the operating efficiency of the Board.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the Order's information collection and recordkeeping requirements have been approved previously under OMB control number 0581-0093. This proposed rule would not result in a change to the information collection and recordkeeping requirements previously approved and would impose no additional reporting requirements or recordkeeping burden on domestic manufacturers and importers of softwood lumber.
As with all Federal promotion programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public-sector agencies. USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this proposed rule.
Regarding outreach efforts, the actions were discussed by the Board's Industry Relations and Governance Committee at meetings on May 30, 2018, August 15, 2018, and October 26, 2018. The full Board discussed outreach efforts at meetings on May 31, 2018, August 15, 2018. The Board then made its recommendation to the Secretary on November 28, 2018. All of the Board's meetings, including meetings held via teleconference, are open to the public and interested persons are invited to participate and express their views.
AMS has performed this initial RFA analysis regarding the impact of this proposed action on small entities and invites comments concerning potential effects of this action.
2. Revise § 1217.40 to read as follows:
(a) Establishment of the Board. There is hereby established a Softwood Lumber Board to administer the terms and provisions of this Order and promote the use of softwood lumber. The Board shall be composed of manufacturers for the U.S. market who manufacture and domestically ship or import 15 million board feet or more of softwood lumber in the United States during a fiscal period. Seats on the Board shall be apportioned based on the volume of softwood lumber production that is manufactured and shipped within the United States by domestic manufacturers and the volume of softwood lumber imported into the United States. Seats on the Board shall also be apportioned based on size of operation within each geographic region, as specified in paragraphs (b)(1)(i), (b)(1)(ii), (b)(2), and (b)(3) of this section. For purposes of this section, “large” means manufacturers for the U.S. market who account for the top two-thirds of the total annual volume of assessable softwood lumber and “small” means those who account for the remaining one-third of the total annual volume of assessable softwood lumber. If there are no eligible nominees for a large or small seat within a region, that seat may be filled by a nominee representing an eligible manufacturer for the U.S. market of any size. Should the size of a manufacturer for the U.S. market change during a member's term of office, that member may serve for the remainder of the term.
(b) The 2020 Board shall be composed of 16 members. The 2021 Board and each subsequent Board shall be composed of 14 members. The Board shall be established as follows:
(iii) One member shall reside in the Northeast and Lake States Region, which consists of the states of Connecticut, Delaware, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, Wisconsin and all other parts of the United States not listed in paragraphs (b)(1)(i), (b)(1)(ii), or (b)(1)(iii) of this section. This member may represent domestic manufacturers of any size.
(ii) Two members must import softwood lumber from the Canadian East Region, which consists of the Start Printed Page 30046Canadian territories and all other Canadian provinces not listed in paragraph (b)(2)(i) of this section that import softwood lumber into the United States. Of these two members, one must represent large and one must represent small importers.
3. Revise § 1217.41 to read as follows:
4. Revise § 1217.44 to read as follows:
5. Revise § 1217.52(h) to read as follows:
(h) The HTSUS categories and assessment rates on imported softwood lumber are listed in the table below. A factor shall be used to determine the equivalent volume of softwood lumber in thousand board feet. The factor used to convert one cubic meter to one thousand board feet is 0.423776001. Accordingly, the assessment rate per cubic meter is as follows.
Softwood lumber (by HTUS No.)
Assessment $/cubic meter
6. In § 1217.81 revise paragraphs (b)(1) and (2) to read as follows:
(1) For the purpose of ascertaining whether manufacturers for the U.S. market favor the continuation, suspension, or termination of the Order;Start Printed Page 30047
(2) No later than seven years after this Order becomes effective and every seven years thereafter, to determine whether softwood lumber manufacturers for the U.S. market favor the continuation of the Order. The Order shall continue if it is favored by a majority of domestic manufacturers and importers voting in the referendum who also represent a majority of the volume of softwood lumber represented in the referendum who, during a representative period determined by the Secretary, have been engaged in the domestic manufacturing or importation of softwood lumber;
7. Revise § 1217.88 to read as follows:
8. Revise § 1217.101(l) to read as follows:
§ 1217.101
(l) Softwood lumber means and includes softwood lumber and products manufactured from softwood as described in section 804(a) within Title VIII (Softwood Lumber Act of 2008 or SLA of 2008) of the Tariff Act of 1930 (19 U.S.C. 1202-1677g), as amended by section 3301 of the Food, Conservation and Energy Act of 2008 (Pub. L. 110-246, enacted June 18, 2008) and categorized in the following Harmonized Tariff Schedule of the United States (HTSUS) numbers—4407.11.00, 4407.12.00, 4407.19.05, 4407.19.06, 4407.19.10, 4409.10.05, 4409.10.10, 4409.10.20, 4409.10.90, and 4418.99.10. Domestic product that cannot be categorized in the referenced HTSUS numbers if it were an import is not covered under this order. Further, softwood lumber originating in the United States that is exported to another country and shipped back to the United States is also covered under this Order, provided it can be categorized in the referenced HTSUS numbers. Additionally, articles brought into the United States temporarily and for which an exemption is claimed under subchapter XIII of chapter 98 of the HTSUS are exempted from the SLA of 2008 and are not covered under this Order.
9. Revise § 1217.108 to read as follows:
1. Forest Economic Advisors, LLC. FEA is an owner-operated company comprised of experienced and informed analysts covering the forest products industry. FEA applies rigorous economic analysis and delivers actionable information though their third-party forecasts and monthly advisors.
2. 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 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.
3. Random Lengths Publications, Inc.; www.randomlengths.com.
[FR Doc. 2019-13450 Filed 6-25-19; 8:45 am]