Vote Set for New Tax on Imported Softwood Lumber/Products, Etc.

AMS also issued a final rule, effective April 23, 2011, establishing procedures for both the initial referendum and for future referendums.

Softwood Lumber Subject to Tax Would Match Scope of SLA 2008

Softwood lumber would be defined as softwood lumber and softwood lumber products described in the Softwood Lumber Act of 2008 (SLA 2008), as amended by the Food, Conservation and Energy Act of 2008, and categorized under the following HTS numbers: 4407.10.01, 4409.10.05, 4409.10.10, 4409.10.20, 4409.10.90, and 4418.90.25.

(Softwood lumber is used in products like flooring, siding and framing.)

(See ITT’s Online Archives or 08/26/10 news, 10082612, for BP summary of U.S. Customs and Border Protection final rule, which adopted its 2008 interim final rule without change, on the SLA 2008 requirements.)

USDA to Conduct Referendum to Determine if Order Will be Implemented

USDA is conducting an initial referendum to ascertain whether the persons to be covered by and assessed under the pending order favor its implementation. The Order will be implemented if it is approved by a majority of domestic manufacturers and importers of softwood lumber voting in the referendum, who also represent a majority of the volume of softwood lumber represented in the referendum.

Only eligible entities may vote. The referendum will be conducted among eligible domestic softwood lumber manufacturers and importers. To be eligible to vote, softwood lumber domestic manufacturers and importers must have domestically manufactured and/or imported 15 million board feet or more of softwood lumber during the representative period from January 1 through December 31, 2010.

Ballots must be received by June 10. Ballots will be mailed to all known domestic manufacturers and importers of softwood lumber on or before May 16, 2011. Ballots must be received by the referendum agents no later than the close of business 4:30 p.m. (Eastern Standard Time) on June 10, 2011.

Initial Tax Rate would be 35 Cents per Thousand Board Feet

Under the pending order, initial assessment rate would be $0.35 per thousand board feet of softwood lumber shipped within or imported to the U.S., and could be increased up to a maximum of $0.50 per thousand board feet.

There Would be Four Exemptions from the Tax

Under the pending order, the following four exemptions from the tax are proposed:

15 MBF small shipper exemption. Manufacturers (domestic manufacturers and importers) for the U.S. market who domestically ship or import less than 15 million board feet during a fiscal year would be exempt from paying assessments, and would apply to the and Softwood Lumber Board (composed of industry members selected by the Secretary of Agriculture) prior to the start of the fiscal year for a Certificate of Exemption.

1st 15 MBF large shipper exemption. Another exemption under the proposed Order would be for manufacturers for the U.S. market who domestically ship and/or import more than 15 million board feet of softwood lumber annually.

Domestic manufacturers would not pay assessments on their first 15 million board feet of softwood lumber shipped during the applicable fiscal year. Importers would receive a refund from the Board for the applicable assessments collected by Customs on their first 15 million board feet of softwood lumber imported during the applicable fiscal year.

Export exemption. The third exemption under the proposed Order would be for exports, or shipments of softwood lumber by domestic manufacturers to locations outside of the U.S. The Board would develop procedures for approval by USDA for refunding assessments that may be inadvertently paid on such shipments, and establish any necessary safeguards as appropriate by rulemaking.

Organic exemption. The fourth exemption under the proposed Order would be for organic lumber. A domestic manufacturer who operates under an approved National Organic Program (NOP) system plan, only manufactures and ships softwood lumber that is eligible to be labeled as 100 percent organic under the NOP and is not a split operation would be exempt from payment of assessments. Likewise, an importer who imports only softwood lumber that is eligible to be labeled as 100 percent organic under the NOP and is not a split operation shall be exempt from the payment of assessments.

Fee on Imported Softwood Lumber Would be Collected at Time of Entry

Importer assessments would be collected through CBP. If CBP did not collect the assessment from an importer, then the importer would be responsible for paying the assessment directly to the Board within 30 calendar days after importation.

Domestic manufacturers would be required to pay their assessments owed to the Board by the 30th calendar day of the month following the end of the quarter in which the softwood lumber was shipped. Assessments would be due April 30th, July 30th, October 30th, and January 30th.

AMS Responses to Comments

AMS states it received 55 comments on its proposed rule, 7 of which opposed the rule. Forty-one commenters stated they supported the rule, 27 with no changes and 14 with recommended changes. The following are highlights of AMS responses to comments:

U.S. Lumber Exported for Minor Processing & Brought Back Would be Subject to Tax

Two comments raised concerns that softwood lumber produced domestically that is exported for minor processing and subsequently re-imported would avoid assessment. To address these concerns, AMS states it would modify 7 CFR 1217.52 on the collection of assessments on imports, to specify that U.S. origin softwood lumber that is exported and re-imported to the U.S. would be covered under this Order and subject to assessments, provided it could be categorized in the HTS numbers listed in paragraph (h) of section 1217.52.

Softwood Lumber Origins Clarified to Refer to Geo. Regions and Not Species

One commenter suggested AMS clarify section 1217.47(c) (on prohibited activities), that softwood lumber origins refer to geographic regions and not species. AMS agrees and would modify this paragraph to read as follows: “No program, plan or project including advertising shall be false or misleading or disparaging to another agricultural commodity. Softwood lumber of all geographic origins shall be treated equally.”

AMS Wants Better Exemption Process (so that Payment/Refund not Needed)

In response to a comment on exemption procedures, AMS states it is working to develop a process whereby an importer could provide CBP a copy of the exemption certificate issued by the Board. However, the only available alternative at this time is for CBP to collect the assessment, and the Board to refund such importers their assessments no later than 60 calendar days after receipt of by the Board. Section 1217.53(a) has been revised accordingly.

¹Called a “proposed rule and referendum order” by AMS; however the Order was proposed in October 2010, has been modified in response to comments and is now pending the initial referendum vote. (See ITT’s Online Archives or 10/01/10 news, 10100125, for BP summary of the proposed Order.)

AMS contact -- Maureen Pello (503) 632-8848 or maureen.pello@ams.usda.gov