Importation of Wood Chips From Chile

DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection Service

7 CFR Part 319

[Docket No. 96-031-1]

RIN 0579-AA82

Importation of Wood Chips From Chile

AGENCY: Animal and Plant Health Inspection Service, USDA.

ACTION: Proposed rule.

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SUMMARY: We are proposing to amend the regulations for importing logs,

lumber, and other unmanufactured wood articles. We believe that a

surface pesticide treatment is effective in rendering large shipments

of Pinus radiata wood chips from Chile free of plant pests. Therefore,

we are proposing to allow the importation of Pinus radiata wood chips

from Chile if the surfaces of the wood chips are treated with a

specified pesticide mixture for use on wood chips from Chile. This

change would provide more alternatives for persons interested in

importing wood chips from Chile while continuing to protect against the

introduction of dangerous plant pests.

DATES: Consideration will be given only to comments received on or

before September 28, 1998.

ADDRESSES: Please send an original and three copies of your comments to

Docket No. 96-031-1, Regulatory Analysis and Development, PPD, APHIS,

suite 3C03, 4700 River Road Unit 118, Riverdale, MD 20737-1238. Please

state that your comments refer to Docket No. 96-031-1. Comments

received may be inspected at USDA, room 1141, South Building, 14th

Street and Independence Avenue SW., Washington, DC, between 8 a.m. and

4:30 p.m., Monday through Friday, except holidays. Persons wishing to

inspect comments are requested to call ahead on (202) 690-2817 to

facilitate entry into the comment reading room.

FOR FURTHER INFORMATION CONTACT: Mr. Ronald Campbell, Operations

Officer, Program Support Staff, PPQ, APHIS, 4700 River Road Unit 60,

Riverdale, MD 20737-1236, (301) 734-8295; or e-mail:

[email protected].

SUPPLEMENTARY INFORMATION: Analyses.

Background

Logs, lumber, and other unmanufactured wood articles imported into

the United States could pose a significant hazard of introducing plant

pests and pathogens detrimental to agriculture and to natural,

cultivated, and urban forest resources. The regulations in 7 CFR

319.40-1 through 319.40-11 (referred to below as the regulations)

contain provisions to eliminate any significant plant pest risk

presented by the importation of logs, lumber, and other unmanufactured

wood articles.

Wood Chips and Proposed Treatment

Approximately $40 million worth of wood chips is imported into the

United States each year for use in making pulp for paper production.

Section 319.40-6(c) of the regulations requires that wood chips from

any place except certain places in Asia may be imported if, among other

things, they were (1) derived from live, healthy, tropical species of

plantation-grown trees grown in tropical areas; or, (2) fumigated with

methyl bromide, heat treated, or heat treated with moisture reduction,

in accordance with the regulations in Sec. 319.40-7. (Section 319.40-7

of the regulations, ``Treatments and safeguards,'' sets forth the

methods by which certain treatments and safeguards required by the

regulations must be conducted.)

We propose to establish a new set of requirements for importing

Monterey pine wood chips from Chile. Pinus radiata (also known as

Monterey pine) wood chips from Chile are in demand in the United States

for use in making high quality paper pulp. Several commercial

processors of wood chips in the United States have requested that the

Animal and Plant Health Inspection Service (APHIS) consider allowing

the importation of Pinus radiata wood chips from Chile if they are

treated with a surface pesticide. Since February 1995, APHIS has

supervised approximately 16 trial shipments to the United States of

Pinus radiata wood chips from Chile that were treated with a surface

pesticide. The surface pesticide consisted of a mixture of a fungicide

containing 64.8 percent of the active ingredient didecyl dimethyl

ammonium chloride and 7.6 percent of the active ingredient 3-Iodo-2-

propynl butylcarbamate, and an insecticide containing 44.9 percent of

the active ingredient chlorphrifos phosphorothioate. At a facility

located at a port in Chile, the wood chips were sent through a chute as

they were loaded onto the ship. As the chips were passing through the

chute, they were sprayed with the pesticide from all sides, so that

each chip was coated with the pesticide. All of the shipments arrived

in the United States apparently free from any live plant pests.

Based on the success of the trial shipments, we have determined

that wood chips from Chile can be imported with negligible risk into

the United States after treatment in the manner described above with

any pesticide mixture consisting of a fungicide containing 64.8 percent

of the active ingredient didecyl dimethyl ammonium chloride and 7.6

percent of the active ingredient 3-Iodo-2-propynl butylcarbamate, and

an insecticide containing 44.9 percent of the active ingredient

chlorphrifos phosphorothioate.

Section 319.40-6 of the regulations contains universal importation

provisions for the importation of specified articles, including wood

chips. We are proposing to revise Sec. 319.40-6(c) to allow Pinus

radiata wood chips from Chile to be imported after receiving the

surface pesticide treatment described above.

At this time, we would add provisions for surface pesticide

treatment only for Pinus radiata wood chips from Chile. There have been

no requests for allowing the use of a surface pesticide treatment on

any wood chips other than Pinus radiata wood chips from Chile. Further,

we cannot conclude that the method of treatment used in the trial

shipments from Chile would be effective on any species other than Pinus

radiata. APHIS conducted a pest risk assessment for Pinus radiata in

Chile in September 1993. New Zealand is the only other country for

which a pest risk assessment has been conducted concerning Pinus

radiata. The pests determined by the pest risk assessment to attack

Pinus

[[Page 40194]]

radiata in New Zealand are not the same as the pests of concern in

Chile. Therefore, even though the species would be the same, we cannot

conclude that the method of treatment used for Pinus radiata wood chips

from Chile would be effective on the pests that attack Pinus radiata in

New Zealand. In addition, New Zealand does not have the facilities

necessary to treat large amounts of wood chips with a surface

pesticide. If, in the future, there appears to be a demand for wood

chips other than Pinus radiata or from a country other than Chile to be

imported using a surface pesticide treatment, APHIS would determine at

that time what kind of research would be necessary to assess whether or

not such treatment would be effective on that particular commodity.

However, the pest risk assessment conducted in 1993 for Pinus

radiata in Chile is still valid as the basis for the following

regulatory controls designed to mitigate to a negligible level the

risks of importing Pinus radiata wood chips from Chile.

To help ensure the Pinus radiata wood chips from Chile are free

from pests, we are proposing that several conditions be met in addition

to the surface pesticide treatment. We would require that the wood

chips be accompanied by a certificate stating that the wood chips were

derived from logs from live, healthy, plantation-grown trees that were

apparently free of plant pests, plant pest damage, and decay organisms,

and that the logs were debarked in accordance with Sec. 319.40-7(b)

before being chipped. (Section 319.40-7(b) sets forth tolerance levels

for amounts of bark that may be retained on a regulated article after

debarking.) These conditions are the same as current requirements for

the importation of Pinus radiata logs from Chile, with the exception of

the stipulation that the chips be from ``plantation-grown'' trees. We

would require that the wood chips be from plantation-grown trees

because the pest risk in a managed forest area is lower than in an

unmanaged forest.

We would also require that the certificate state that no more than

45 days elapsed from the time the trees used to make the chips were

felled to the time the wood chips were exported. This requirement would

reduce the opportunities for exposure of the logs to plant pests.

Additionally, we would require that the wood chips be consigned to

a facility in the United States operating under a compliance agreement

with APHIS, in accordance with Sec. 319.40-8 of the regulations.

(Section 319.40-8 concerns facilities that operate under compliance

agreements.) The compliance agreement would further ensure the safe

importation of the treated wood chips from Chile by specifying

safeguards and requirements to ensure that the processing method would

effectively destroy any plant pests, and by stating that APHIS

inspectors must be allowed access to the facility to monitor compliance

with the requirements of the compliance agreement and the regulations.

We would require that, during shipment to the United States, no

other regulated articles (other than solid wood packing materials)

would be permitted in the holds or sealed containers carrying the wood

chips, and that wood chips on the vessel's deck would have to be in a

sealed container. These requirements would control possible movement of

plant pests from other regulated articles.

We would also require that certain safeguards be applied upon

arrival of the wood chips in the United States. First, the wood chips

would have to be unloaded upon arrival by a conveyor which is covered,

to prevent the chips from being blown by the wind and from accidental

spillage. The facility receiving the wood chips would have to have a

procedure in place to retrieve any chips that fall during unloading. If

the chips must be transported after arrival, we would require that they

must be covered or safeguarded in a manner that prevents the chips from

spilling or falling off the means of conveyance, or from being blown

off the means of conveyance by wind. Once at the facility, the wood

chips would have to be stored on a paved surface and be kept segregated

from other regulated articles from the time of discharge from the means

of conveyance until the chips are processed. The storage area could not

be adjacent to wooded areas. Finally, the wood chips would have to be

processed, and any fines or unusable wood chips would have to be

disposed of by burning, within 60 days of arrival at the facility.

``Fines'' are small particles or fragments of wood, slightly larger

than sawdust, that result from chipping, sawing, or processing wood.

These safeguards would help remove any opportunities for movement of

plant pests from the wood chips, should there be any plant pests

present on the chips.

We also are proposing to revise Sec. 319.40-7(e), concerning

surface pesticide treatments, to allow for the use of any surface

pesticide treatment to qualify Pinus radiata wood chips from Chile for

importation that is a mixture of a fungicide containing 64.8 percent of

the active ingredient didecyl dimethyl ammonium chloride and 7.6

percent of the active ingredient 3-Iodo-2-propynl butylcarbamate and an

insecticide containing 44.9 percent of the active ingredient

chlorphrifos phosphorothioate. We would require that the fungicide and

insecticide be mixed using the proportions called for on the label

requirements.

We would further stipulate in Sec. 319.40-7(e) that the wood chips

must be sprayed with the surface pesticide treatment so that all the

chips are exposed to the chemical on all sides. The treatment method

used on the trial shipments from Chile would be acceptable under this

provision. Any other treatment method that accomplishes the goal of

spraying the chips so that they are exposed to the pesticide on all

sides would also be acceptable. Finally, we would require that, during

the interval between treatment and export, the wood chips would have to

be stored, handled, or safeguarded in a manner that prevents any

infestation of the wood chips by plant pests.

In the future, if we determine the pesticide mixture described in

this document, or any other pesticide treatment, is effective on plant

pests that could be carried on wood chips, we will propose amendments

to the regulations to allow for the importation of wood chips from that

country after receiving the surface pesticide treatment.

Executive Order 12866

This proposed rule has been reviewed under Executive Order 12866.

The rule has been determined to be significant for the purposes of

Executive Order 12866 and, therefore, has been reviewed by the Office

of Management and Budget.

Benefits from allowing Pinus radiata wood chips to be imported from

Chile include lower priced wood chips for pulp mills in the Pacific

Northwest, and lower priced products to consumers if lower input prices

are reflected in lower retail prices. Greater choice among species for

wood chip raw material is another benefit. Costs associated with risks

of introducing pests are negligible because the procedures required to

import Chilean wood chips under this rule are designed to keep the risk

of importing pests to a negligible level. Since imports will be

concentrated in the Pacific Northwest, impacts will be felt mainly by

wood chip producers and purchasers in the region. Wood chip producers

may bear revenue losses if they are unable to compete with lower cost

imports or adjust their product mix.

Test shipments of Pinus radiata wood chips from Chile to the

Pacific Northwest during recent years have demonstrated the

effectiveness of

[[Page 40195]]

phytosanitary safeguards proposed in this rule, as well as the economic

feasibility of chip imports from Chile for the region's pulp mills.

Chile's large and expanding forestry plantations are expected to

provide a reliable source for future wood chip imports when there is

sufficient demand. At present, the abundant supply of wood chips in the

Pacific Northwest precludes imports, a market situation that differs

dramatically from that of three years ago when wood chip prices reached

an all-time high. Pacific Northwest pulp mills depend primarily on

domestic wood chip suppliers, but turn to overseas sources when

domestic wood chip prices are high. Chilean imports can be expected to

be competitively marketed when the domestic wood chip supply is low,

since Pinus radiata wood chips can substitute for most other softwood

chips. Some domestic wood chip producers may be adversely affected by

Chilean imports, but the impact is not likely to be widespread; most

domestic wood chip producers that cannot compete may adjust their

product mix away from wood chips to other mill products.

Discussion

Under the Federal Plant Pest Act (7 U.S.C. 150aa-150jj), the

Secretary of Agriculture is authorized to promulgate regulations

requiring inspection of products and articles as a condition of their

movement into or through the United States, and imposing other

conditions upon such movement, in order to prevent the dissemination

into the United States of plant pests.

This proposed rule would amend the regulations for importing wood

chips to allow the importation of Pinus radiata wood chips from Chile

if the surfaces of the wood chips are treated with a pesticide approved

by the Administrator for use on wood chips from Chile. Allowing the use

of a surface pesticide treatment would make it possible to effectively

treat large shipments of wood chips. Wood chips are used for making

pulp used in the production of paper. U.S. pulp producers want to

import Pinus radiata wood chips from Chile because these wood chips

produce a high quality pulp. However, there is no treatment in the

regulations that is both practical and effective in treating large

shipments of these wood chips.

Current APHIS regulations call for, along with other requirements,

heat treatment or fumigation of imported wood materials. While these

safeguards are appropriate for solid wood products, they are less

useful for wood chips. Heating of wood chips is time consuming, and

fumigation of wood chips in ship holds can result in insufficient

treatment. Therefore, it is being proposed that importation of Pinus

radiata wood chips from Chile be allowed following their surface

treatment with a specified pesticide mixture. As discussed above, the

efficacy of this treatment is demonstrated by 16 trial shipments of

surface-treated Pinus radiata wood chips from Chile that have arrived

without pests since February 1995.

Approximately $40 million worth of wood chips is imported into the

United States each year for use in making pulp for paper production.

Coniferous wood chip imports by the U.S. comprise less than one percent

of domestic production.1 About 30 percent of U.S. wood chip

production takes place in the Pacific Northwest.2 Wood chip

imports to the United States have been mainly to the Pacific Northwest,

although there have been recent shipments of Caribbean pine from Brazil

that have entered through the port at Mobile, AL.

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\1\ Robert Flynn, private wood industry consultant, personal

communication, drawing in part on information from ``Southern

Pulpwood Production, 1996,'' by Tony Johnson, USDA Forest Service,

Southern Research Station, Resource Bulletin SRS-21.

\2\ Richard Haynes, USDA Forest Service, personal communication.

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Wood chips are used mainly in the manufacture of pulp, that is then

used to make paper and panel products.3 Test shipments of

Pinus radiata wood chips from Chile during the last three years have

been so utilized, and it is expected that future shipments facilitated

by the surface pesticide treatment proposed in this rule change would

also be used to make pulp.4

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\3\ Chris Twarok, Department of Commerce, personal

communication. Landscaping is a secondary use.

\4\ J.J. Morrell, Department of Forest Products, Oregon State

University, personal communication.

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The demand for wood chips used by pulp mills is a derived demand,

depending on the market for pulp.5 While the long-term

demand for pulp in the United States and internationally is expected to

continue to expand (with increasing reliance on wood from plantation

forests), pulp and wood chip prices can be volatile in the short term,

causing relatively abrupt market changes. The variable demand for wood

chips during the few years the Chilean test shipments have taken place

illustrates how rapidly market conditions can change. Coniferous wood

chip imports in 1995 by the United States nearly tripled those of 1994,

with imports from Canada rising more than threefold, and test shipments

from Chile doubling and displacing 1994 imports from

Mexico.6 The increase in demand was reflected in a 60

percent increase in the price paid in the United States for Chilean

wood chips, from $42 per ton in 1994, to $67 per ton in

1995.7 Comparable U.S. prices for domestically produced wood

chips in these two years were $56 per ton in 1994 and $72 per ton in

1995.8 Since then, prices have receded due to the current

abundant supply of wood chips.

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\5\ The pulp fiber industry has traditionally been a softwood

chip market, but this has been changing in recent years in the

eastern United States. Pulp mills in the southeastern United States

are relying increasingly on hardwood chips, where only softwood

chips were once used. Long-term rising demand for wood chips is also

reflected in an increasing number of ``chipping'' mills producing

only wood chips; at least 100 of more than 140 wood chip mills in

the southeastern United States have been constructed within the past

decade. (Dennis Haldeman and Doug Sloane, personal communications)

\6\ U.S. wood chip import and export statistics from Department

of Commerce, Bureau of the Census.

\7\ FAS Global Agricultural Trade System, using data from the

United Nations Statistical Office.

\8\ Richard Haynes, USDA Forest Service, personal communication.

Domestic prices based on export prices for the Columbia-Snake

Customs District, adjusted to ``green'' metric tons. Without

consideration of transportation costs, these quoted prices may

overestimate the price realized at a Pacific Northwest pulp mill for

U.S. chips and underestimate the price realized for Chilean chips.

Moreover, average yearly prices conceal seasonal variations.

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Chile's coniferous wood chip exports to the United States, 1994-

1996, and Chile's share of coniferous wood chip imports by the United

States, are as follows: 9

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\9\ FAS Global Agricultural Trade System, using data from the

United Nations Statistical Office

1994................................. 168 metric tons.............. 00.05 percent of imports.

1995................................. 339,665 metric tons.......... 48.29 percent of imports.

1996................................. 329,387 metric tons.......... 44.06 percent of imports.

In 1994, 57 percent of coniferous wood chip imports by the United

States were from Mexico and 43 percent were from Canada. In 1995, pulp

prices reached record levels, with U.S. coniferous wood chip imports

more than doubling from the year before, to 703,000 metric tons from

331,000 metric tons. That year, no coniferous wood

[[Page 40196]]

chips were imported from Mexico, 48 percent of imports came from Chile,

49 percent came from Canada, and 3 percent came from Brazil. In 1996,

Canada's share of U.S. coniferous wood chip imports increased to 56

percent, 44 percent came from Chile, and none was received from Brazil.

Production of Pinus radiata wood chips in the United States is

essentially nil, due to the relatively small region in which it grows

well, about six miles inland along the coastal fog belt of central

California (hence its common name, the Monterey pine). There may be

some production from sawmill residues, but the quantity, if any, is

negligible. No pulp mills are currently using domestically produced

Pinus radiata wood chips.10

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\10\ Robert Rummel, American Pulpwood Association; Robert Flynn,

Robert Flynn and Associates, personal communications.

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Impacts on the U.S. wood chip industry of potential Chilean

imports, therefore, depend on the substitutability of Pinus radiata

wood chips for other softwood or for hardwood chips. Instances in which

Pinus radiata and hardwood chips might substitute for each other are

relatively few. However, Pinus radiata wood chips can generally be used

in place of other coniferous chips such as lodgepole pine and ponderosa

pine, although milling adjustments may be required--and costs

incurred--due to differences in resin content 11. We invite

public comments on the magnitude of adjustment costs which would be

required to substitute Pinus radiata chips for those of species

commercially grown in the Pacific Northwest. We also invite comments on

the extent to which such costs would inhibit substitution, and the

economic consequences of such substitution.

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\11\ Chris Twarok, Department of Commerce, personal

communication.

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The test shipments of Chilean wood chips were received by pulp

mills in the Pacific Northwest. This region is expected to continue to

be the destination of future shipments, given the additional

transportation costs that would be incurred by pulp mills in the

eastern and southeastern United States. With sales regionally

concentrated, little impact from this rule is expected outside the

Pacific Northwest.

In sum, the test shipments from Chile have shown the value to

Pacific Northwest pulp mills of Chilean wood chips in supplementing

domestic and Canadian wood chip supplies when the price of pulp makes

such shipments economically feasible. Pulp mills able to adjust milling

processes to utilize Pinus radiata wood chips can benefit by making

profitable use of Chilean imports when other sources are insufficient

or more costly. As now described, Chile has the production capacity to

be a reliable source of Pinus radiata wood chips to the United States.

Chile's wood chip industry grew significantly during the 1980s,

with production increasing more than tenfold, from 0.44 million tons in

1984, to 5.03 million tons in 1990.12 Chile's wood chip

exports during this period rose from none in 1984, to 2.23 million tons

(44 percent of production) in 1990. During the first half of the 1990s,

both production and export levels fluctuated, but without the dramatic

increases of the 1980s. Annual production between 1990 and 1995

averaged about 5.80 million tons, and exports averaged about 3.05

million tons (about 53 percent of production).

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\12\ Information on Chile's wood chip production and exports

taken from Wood Products: International Trade and Foreign Markets,

FAS Circular Series WP 3-97, August 1997, Table 15.

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Pinus radiata wood chips comprise a minor share of Chile's wood

chip exports.13 Of the approximately 3 million tons of wood

chips exported annually between 1990 and 1996, Pinus radiata's share

averaged 12 percent. Between January and August, 1997, 10 percent of

Chile's wood chip exports were Pinus radiata.

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\13\ Information on Chile's Pinus radiata wood chip exports

compiled from data provided by APHIS-International Services.

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Japan was, by far, the principal importer of Chilean wood chips

from 1990 to 1996. (Country destinations by species are not known for

these years.) From 1990 to 1994, an average of 96 percent of Chile's

wood chip exports were received by Japan. With the test shipments of

Pinus radiata to the United States in 1995 and 1996, Japan's share of

Chile's wood chip exports fell to 87 percent and 83 percent,

respectively, and the United States' share for these two years was 9

percent and 11 percent.

From January to August, 1997, Japan's share of Chile's wood chip

exports was 89 percent. The United States and Japan each received about

one-half of Chile's Pinus radiata wood chip exports during this eight-

month period.

Chile's development of its forest products sector rests to a large

degree on the success of Pinus radiata; its share of Chile's wood chip

exports is expected to increase. By 1996 there were approximately

1,387,000 hectares planted in Pinus radiata, representing 75 percent of

plantation plantings, and 15 percent of Chile's forest resources

including native forest.14 This pine species matures at 20

to 24 years in Chile (thinnings are available for use after 15 years),

compared to 30 years in New Zealand and Australia, and 40 to 60 years

in North America and Europe. Production and exports are expected to

peak during the coming decade, when trees on most of the Pinus radiata

plantations will be ready to be harvested.

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\14\ ``Forest Products, Annual Report,'' Office of Agricultural

Affairs, American Embassy, Santiago, AGR Number CI7033, 1997.

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One set of projections describing the volume of Pinus radiata wood

chips that could be exported to the United States over the coming five

years, assuming favorable prices, is as follows: 15

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\15\ Fernando Hartwig, Inversiones Forestales C.C.A., personal

communication.

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Potential Pinus radiata wood

Year chip exports from Chile to the

United States (million tons)

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1998................................... 0.56 to 0.70.

1999................................... 0.60 to 1.00.

2000................................... 1.00 to 1.20.

2001................................... 0.90 to 1.00.

2002................................... 0.85 to 0.90.

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Realization of these export levels will depend on the demand for

Pinus radiata wood chips by U.S. pulp mills. As has been described,

international short-term demand for pulp fibers can be volatile. When

prices fell between 1995 and 1996, Chile's forestry sector exports

declined by 24 percent, mainly because of reduced sales to Japan.

Chile's stock of Pinus radiata available for harvest will enable

Pacific Northwest importers to take advantage of a ready source as wood

chip prices rebound. In 1996, all coniferous wood chip imports by the

United States totaled about 0.75 million tons, of which 0.33 million

tons were imported from Chile.16 Projected export levels

shown above would increase U.S. wood chip imports above current levels,

and establish Chile as a major foreign supplier. Wood chip prices in

the United States will determine whether these projections are overly

optimistic.

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\16\ The United States is a net exporter of coniferous and

nonconiferous wood chips. Compared to coniferous wood chip imports

of 0.75 million tons in 1996, the United States exported 1.78

million tons. Nonconiferous wood chip imports and exports by the

United States exhibit an even larger difference, with 1996 imports

totaling about 55,000 tons and exports at 4.29 million tons.

(Department of Commerce, Bureau of the Census)

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[[Page 40197]]

Regulatory Flexibility Act

In accordance with 5 U.S.C. 603, we have performed an Initial

Regulatory Flexibility Analysis, which is set out below, regarding the

impact of this rule on small entities. However, we do not currently

have all the data necessary for a comprehensive analysis of the effects

of this rule on small entities. Therefore, we are inviting comments

concerning potential effects. In particular, we are interested in

determining the number of small entities that would be impacted by this

proposed rule, positively or negatively, in regards to the provisions

for allowing the importation of Pinus radiata wood chips from Chile. We

are also interested in information concerning the volume of wood chips

that may be imported from Chile under this proposed rule, and whether

or not the wood chips from Chile would be in competition with wood

chips produced in the United States.

The Regulatory Flexibility Act requires consideration of potential

impacts of rule changes on small businesses, organizations, and

governmental jurisdictions. In this instance, small entities directly

affected would be U.S. wood chip producers and pulp mills in the

Pacific Northwest.

Wood chip production is included in the SIC category for firms

operating sawmills and planing mills. In most cases, wood chips are a

by-product of lumber production. A mill will vary its level of wood

chip production (compared to other products) based on whether wood chip

prices are high or low at a particular point in time. In the Pacific

Northwest, about 150 mills produce wood chips (90 in Oregon and 60 in

Washington), but more than one may be owned by the same

firm.17 Data on the exact number of firms is not available.

Sawmills and planing mills that employ 500 people or fewer are

designated by the Small Business Administration as ``small.'' In 1994,

there were 5,241 firms operating sawmills and planing mills in the

United States, of which 5,149 (more than 98 percent) were

small.18 Estimated annual receipts of these 5,149 ``small''

firms totaled about $14.88 billion, which was 62 percent of total

annual receipts of about $23.93 billion earned by all sawmills and

planing mills. In the absence of information on mill firm sizes

specific to Oregon and Washington, it is assumed that most sawmills in

the Pacific Northwest are also small entities.

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\17\ Richard Haynes, USDA Forest Service, personal

communication.

\18\ This is the latest year for which data is available from

the ``SBA Office of Advocacy, Statistics on Small Business'' Web

home page.

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Adverse impacts on most ``small'' U.S. wood chip producers due to

this rule change will be minor. The Chilean imports are expected to be

sold in the Pacific Northwest, thereby affecting a geographical subset

of all wood chip producers. Adverse impacts on Pacific Northwest wood

chip producers will depend on the ability of such producers to find

lower priced raw materials to produce wood chips or otherwise reduce

cost, and the extent of their reliance on wood chips for their net

revenues. Producers of those wood chips that are substitutes for Pinus

radiata chips will find their net returns reduced when import prices

are low. As raw materials used for wood chip production grow

increasingly scarce and expensive in the Pacific Northwest, those wood

chip producers that compete with lower priced imports will face

adjustment pressures. However, U.S. wood chip producers already feel

competition from other international sources.

It is estimated that less than 5 percent of wood chip producers in

the Pacific Northwest are ``chipping'' mills devoted solely to wood

chip production.19 However, during periods of high wood chip

demand such as three years ago, many sawmills may be converted largely

to wood chip production.

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\19\ Richard Haynes, USDA Forest Service, personal

communication.

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Turning to the pulp mills, themselves, there were 37 firms

operating pulp mills in the United States in 1994. Often more than one

pulp mill is owned by a single firm. Pulp mill firms employing 750

people or fewer are designated by the Small Business Administration as

``small.'' In 1994, between 20 and 25 of the 37 firms were small, that

is, between 54 and 68 percent of the total number of firms. Estimated

annual receipts of these 20 to 25 ``small'' firms totaled between about

$383 million and about $1.12 billion, which represented between 7

percent and 21 percent of total annual receipts by all pulp mills of

about $5.30 billion. About 10 percent of U.S. pulp mills are in the

Pacific Northwest.

Due to resin-content differences, pulp mills cannot use various

species of wood chips indiscriminately. Pulp mills designed to process

wood chips of Pinus radiata or similar species would therefore be the

only ones directly affected by this rule. It is estimated that less

than one-half of U.S. pulp mills could use Pinus radiata wood

chips.20 Assuming an equal distribution of these pulp mills

among all pulp mills, size-wise, ``small'' pulp mill firms directly

affected would then number between 10 and 13, based on 1994 data. These

numbers are likely to be an overestimation, since not all of the

``small'' firms that could utilize Pinus radiata wood chips are

necessarily located in the Pacific Northwest. Regardless of the number

of affected ``small'' pulp mill firms, having Chile as a source of

Pinus radiata wood chips would be beneficial to pulp mills and their

customers, to the extent lower chip prices would be reflected in lower

product prices.

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\20\ Byron Lundi, Georgia-Pacific, personal communication.

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Test shipments of Pinus radiata wood chips from Chile have been

successfully imported by pulp mills in the Pacific Northwest. This rule

change will enable such shipments, using a surface pesticide treatment,

to continue to take place when economically feasible. Although Pinus

radiata wood chip production in the United States is negligible, this

species can substitute for other species as a pulp fiber, given certain

milling adjustments. Off-shore wood chip sources to supplement domestic

supply are advantageous to pulp mills, given the volatility of pulp

prices. Chile's wood products industry has a large export component,

and is expected to be a reliable source when pulp prices prompt wood

chip exports to the United States. Adverse effects for wood chip

producers in the Pacific Northwest will be felt by those producers who

are unable to reduce costs to meet import competition and who rely

heavily on revenues from wood chips.

No figures are available concerning potential costs of pest

introductions through importation of Pinus radiata wood chips from

Chile. A pest risk assessment for the importation of Pinus radiata logs

from Chile (``Pest Risk Assessment of the Importation of Pinus radiata,

Nothofagus dombeyi, and Laurelia philippiana Logs from Chile,'' USDA

Forest Service, Miscellaneous Publication No. 1517, September 1993)

provides the phytosanitary basis for allowing the wood chips to be

imported if they are treated as prescribed. The pest risk assessment

supports our determination that Pinus radiata wood chips may be

imported from Chile with negligible risk.

The pest risk assessment reported that in sharp contrast to native

forests in Chile, that country's Pinus radiata plantations are

relatively free of major insect and disease problems. Exceptions

include the recently introduced European pine shoot moth (Rhyaccionia

buoliana), Hylurgus ligniperda and two

[[Page 40198]]

other species of European bark beetles, several needle disease fungi

(Dothistroma pini and Lophodermium spp., among others), diplodia shoot

blight (Sphaeropsis sapinea), and two species of blue stain fungi

(Ophiostoma picea and O. piliferum). The wood wasp Sirex noctilio

(considered to be the most important pest on Pinus radiata logs

exported from New Zealand) and pine wood nematodes (Bursaphelenchus

spp.) have yet to be found in Chile.

Among the insect pests of Pinus radiata analyzed in detail in the

pest risk assessment, only the bark beetle Hylurgus ligniperda was

considered to have a high pest risk potential. Moderate pest risk

potentials were assigned to Rhyephenes spp., Ernobius mollis, Urocerus

gigas gigas, Neotermes chilensis, Porotermes quadricollis, Colobura

alboplagiata, and Buprestis novemmaculata. Among the pathogens, the

stain fungi (Ophiostoma spp.) were found to merit a moderate to high

pest risk potential, whereas the complex of needle diseases

(Dothistroma pini and other species) and diplodia shoot blight

(Sphaeropsis sapinea) were rated as moderate risks. Other pathogens

were considered to be of low risk. One weed of concern (Imperata

condensata, considered a variety of I. cylindrica or cogongrass) was

identified.

Pests potentially affecting untreated Pinus radiata wood chips are

a subset of those identified in the pest risk assessment, since wood

chip production would physically remove or destroy most pests that

could be present in the logs. Treatment with the surface pesticide

proposed by this rule change would prevent entry into the United States

of any harmful insects or fungi that might remain.

The Pacific Northwest's coastal ranges and Cascade Mountains have

some of the highest quality natural and planted conifer forests in the

world, producing commodities ranging from pulp and paper, to lumber for

construction, to ornamentals and Christmas trees. Introduced pests such

as those described could affect forestry industries directly by causing

damage, or indirectly by curtailing commerce through quarantines.

Some potential costs of foreign timber pests have been estimated in

other instances. For example, a pest risk assessment concerning

Siberian timber imports estimated that the introduction of a single

pest, larch canker, could cause direct timber losses of $129 million

annually. The same study estimated that a worst-case scenario involving

heavy establishment of exotic defoliators in the United States could

cost $58 billion.21

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\21\ ``Importation of Logs, Lumber, and Other Unmanufactured

Wood Articles: Final Supplement to the Environmental Impact

Statement, May 1998,'' USDA, APHIS.

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Concerning consumer and producer impacts of allowing Pinus radiata

wood chips to be imported from Chile, data is insufficient to permit

confident estimation of welfare changes. Time-series data for the

estimation of elasticities of supply and demand are not available.

Circumstantial evidence, however, would suggest that pulp producers and

pulp product consumers benefit from Pinus radiata wood chip imports

from Chile, when their relative price is low compared to that of other

wood chip species or sources. The test shipments from Chile resulted in

U.S. wood chip imports worth $22.8 million and $19.3 million in 1995

and 1996, respectively. These shipments represented over 48 and 44

percent of all U.S. coniferous wood chip imports in those two

years.22

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\22\ FAS Global Agricultural Trade System, using data from the

United Nations Statistical Office.

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The continuing reduction in timber sources in the Pacific Northwest

will encourage more wood imports in the future, and Chile's expanded

commercial forestry plantings promise a prominent role for that country

as a wood products exporter. Price impacts, if any, from imports for

U.S. wood chip producers should be very small, since coniferous wood

chip imports are less than one percent of U.S. production.

Moreover, trade statistics indicate that U.S. coniferous wood chip

producers are finding overseas markets as profitable as their Chilean

counterparts. U.S. coniferous wood chip exports in 1995 were valued at

more than $222 million, and in 1996, at more than $181 million. As is

true for Chile, the principal overseas coniferous wood chip market for

the United States is Japan.23

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\23\ FAS Global Agricultural Trade System, using data from the

United Nations Statistical Office.

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This proposed rule includes the following reporting and

recordkeeping requirement: We would require that wood chips imported

from Chile be accompanied by a certificate issued by the Government of

Chile, and stating that all the applicable requirements of the

regulations have been met.

An alternative to this proposed rule would be to take no action.

This proposed rule provides an alternative treatment for pulp

manufacturers who cannot import wood chips from Chile using currently

allowed treatments, and relieves restrictions concerning other

requirements of the regulations. The no action alternative was rejected

because we believe that the provisions of this proposed rule will make

compliance easier for regulated individuals without increasing the risk

of introducing a plant pest into the United States.

Executive Order 12988

This proposed rule has been reviewed under Executive Order 12988,

Civil Justice Reform. If this proposed rule is adopted: (1) All State

and local laws and regulations that are inconsistent with this rule

will be preempted; (2) no retroactive effect will be given to this

rule; and (3) administrative proceedings will not be required before

parties may file suit in court challenging this rule.

National Environmental Policy Act

An environmental assessment and finding of no significant impact

have been prepared for this proposed rule. The assessment provides a

basis for the conclusion that the importation of Pinus radiata wood

chips from Chile under the conditions specified in this proposed rule

would not present a risk of introducing or disseminating plant pests

and would not have a significant impact on the quality of the human

environment. Based on the finding of no significant impact, the

Administrator of the Animal and Plant Health Inspection Service has

determined that an environmental impact statement need not be prepared.

The environmental assessment and finding of no significant impact

were prepared in accordance with: (1) The National Environmental Policy

Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.), (2) Regulations of the

Council on Environmental Quality for implementing the procedural

provisions of NEPA (40 CFR parts 1500-1508), (3) USDA regulations

implementing NEPA (7 CFR part 1b), and (4) APHIS' NEPA Implementing

Procedures (7 CFR part 372).

Copies of the environmental assessment and finding of no

significant impact are available for public inspection at USDA, room

1141, South Building, 14th Street and Independence Avenue SW.,

Washington, DC, between 8 a.m. and 4:30 p.m., Monday through Friday,

except holidays. Persons wishing to inspect copies are requested to

call ahead on (202) 690-2817 to facilitate entry into the reading room.

In addition, copies may be obtained by writing to the individual listed

under FOR FURTHER INFORMATION CONTACT.

Paperwork Reduction Act

In accordance with section 3507(d) of the Paperwork Reduction Act

of 1995 (44 U.S.C. 3501 et seq.), the information collection or

recordkeeping

[[Page 40199]]

requirements included in this proposed rule have been submitted for

approval to the Office of Management and Budget (OMB). Please send

written comments to the Office of Information and Regulatory Affairs,

OMB, Attention: Desk Officer for APHIS, Washington, DC 20503. Please

state that your comments refer to Docket No. 96-031-1. Please send a

copy of your comments to: (1) Docket No. 96-031-1, Regulatory Analysis

and Development, PPD, APHIS, suite 3C03, 4700 River Road Unit 118,

Riverdale, MD 20737-1238, and (2) Clearance Officer, OCIO, USDA, room

404-W, 14th Street and Independence Avenue SW., Washington, DC 20250. A

comment to OMB is best assured of having its full effect if OMB

receives it within 30 days of publication of this proposed rule.

This rule would require that wood chips entering the United States

from Chile be accompanied by a certificate, issued by an official

authorized by the national government of Chile, stating that the wood

chips meet the proposed requirements for importation. This rule would

also require that wood chips entering the United States from Chile must

be consigned to a facility in the United States that operates under a

compliance agreement with APHIS. This agreement would help ensure the

safe importation of wood chips from Chile by specifying various

safeguards necessary to prevent the spread of plant pests from the

facility, specifying requirements to ensure that the processing method

would affectively destroy any plant pests, and specifying that APHIS

inspectors must be allowed access to the facility to monitor compliance

with the regulations. It should be noted that the certificate and

compliance agreement described above are information-containing

documents that need not be completed by participating personnel, but

they must be signed by them to attest that various requirements

outlined in the documents are being satisfied.

We are soliciting comments from the public (as well as affected

agencies) concerning our proposed information collection and

recordkeeping requirements. We need this outside input to help us:

(1) Evaluate whether the proposed information collection is

necessary for the proper performance of our agency's functions,

including whether the information will have practical utility;

(2) Evaluate the accuracy of our estimate of the burden of the

proposed information collection, including the validity of the

methodology and assumptions used;

(3) Enhance the quality, utility, and clarity of the information to

be collected;

(4) Minimize the burden of the information collection on those who

are to respond (such as through the use of appropriate automated,

electronic, mechanical, or other technological collection techniques or

other forms of information technology, e.g., permitting electronic

submission of responses).

Estimate of burden: Public reporting burden for this collection of

information is estimated to average .28 hours per response.

Respondents: Plant protection authorities in Chile and designated

personnel at wood chip processing facilities in the United States.

Estimated number of respondents: 4.

Estimated number of responses per respondent: 10.

Estimated total annual number of responses: 40.

Estimated total annual burden on respondents: 11.2.

Copies of this information collection can be obtained from:

Clearance Officer, OCIO, USDA, room 404-W, 14th Street and Independence

Avenue SW., Washington, DC 20250.

List of Subjects in 7 CFR Part 319

Bees, Coffee, Cotton, Fruits, Honey, Imports, Incorporation by

reference, Nursery Stock, Plant diseases and pests, Quarantine,

Reporting and recordkeeping requirements, Rice, Vegetables.

Accordingly, 7 CFR part 319 would be amended as follows:

PART 319--FOREIGN QUARANTINE NOTICES

1. The authority citation for part 319 would continue to read as

follows:

Authority: 7 U.S.C. 150dd, 150ee, 150ff, 151-167, 450, 2803, and

2809; 21 U.S.C. 136 and 136a; 7 CFR 2.22, 2.80, and 371.2(c).

Sec. 319.40-1 [Amended]

2. In Sec. 319.40-1, a definition of the word fines would be added

in alphabetical order to read as follows:

* * * * *

Fines. Small particles or fragments of wood, slightly larger than

sawdust, that result from chipping, sawing, or processing wood.

* * * * *

3. In Sec. 319.40-6, paragraph (c) would be revised to read as

follows:

Sec. 319.40-6 Universal importation options.

* * * * *

(c) Wood chips and bark chips. (1) From Chile. Wood chips from

Chile that are derived from Monterey or Radiata pine (Pinus radiata)

logs may be imported in accordance with Sec. 319.40-6(c)(2) or in

accordance with the following requirements:

(i) The wood chips must be accompanied by a certificate stating

that the wood chips meet the requirements in paragraphs (c)(1)(i)(A)

through (c)(1)(i)(C) of this section.

(A) The wood chips were treated with a surface pesticide treatment

in accordance with Sec. 319.40-7(e) prior to arrival in the United

States.

(B) The wood chips were derived from logs from live, healthy,

plantation-grown trees that were apparently free of plant pests, plant

pest damage, and decay organisms, and the logs used to make the wood

chips were debarked in accordance with Sec. 319.40-7(b) before being

chipped.

(C) No more than 45 days elapsed from the time the trees used to

make the wood chips were felled to the time the wood chips were

exported.

(ii) During shipment to the United States, no other regulated

articles (other than solid wood packing materials) are permitted in the

holds or sealed containers carrying the wood chips. Wood chips on the

vessel's deck must be in a sealed container.

(iii) The wood chips must be consigned to a facility in the United

States that operates under a compliance agreement in accordance with

Sec. 319.40-8. The following requirements apply upon arrival of the

wood chips in the United States:

(A) Upon arrival in the United States, the wood chips must be

unloaded by a conveyor that is covered to prevent the chips from being

blown by the wind and from accidental spillage. The facility receiving

the wood chips must have a procedure in place to retrieve any chips

that fall during unloading.

(B) If the wood chips must be transported after arrival, the chips

must be covered or safeguarded in a manner that prevents the chips from

spilling or falling off the means of conveyance, or from being blown

off the means of conveyance by wind.

(C) The wood chips must be stored at the facility on a paved

surface and must be kept segregated from other regulated articles from

the time of discharge from the means of conveyance until the chips are

processed. The storage area must not be adjacent to wooded areas.

(D) The wood chips must be processed within 60 days of arrival at

the facility. Any fines or unusable wood chips must be disposed of by

burning within 60 days of arrival at the facility.

(2) From places other than certain places in Asia. Wood chips and

bark chips from any place except places in

[[Page 40200]]

Asia that are east of 60 deg. East Longitude and north of the Tropic of

Cancer may be imported in accordance with this paragraph.

(i) The wood chips or bark chips must be accompanied by an importer

document stating that the wood chips or bark chips were either:

(A) Derived from live, healthy, tropical species of plantation-

grown trees grown in tropical areas; or

(B) Fumigated with methyl bromide in accordance with Sec. 319.40-

7(f)(3), heat treated in accordance with Sec. 319.40-7(c), or heat

treated with moisture reduction in accordance with Sec. 319.40-7(d).

(ii) During shipment to the United States, no other regulated

articles (other than solid wood packing materials) are permitted in the

holds or sealed containers carrying the wood chips or bark chips. Wood

chips or bark chips on the vessel's deck must be in a sealed container;

Except that: If the wood chips or bark chips are derived from live,

healthy, plantation-grown trees in tropical areas, they may be shipped

on deck if no other regulated articles are present on the vessel, and

the wood chips or bark chips are completely covered by a tarpaulin

during the entire journey directly to the United States.

(iii) The wood chips or bark chips must be free from rot at the

time of importation, unless accompanied by an importer document stating

that the entire lot was fumigated with methyl bromide in accordance

with Sec. 319.40-7(f)(3), heat treated in accordance with Sec. 319.40-

7(c), or heat treated with moisture reduction in accordance with

Sec. 319.40-7(d).

(iv) Wood chips or bark chips imported in accordance with this

paragraph must be consigned to a facility operating under a compliance

agreement in accordance with Sec. 319.40-8. The wood chips or bark

chips must be burned, heat treated in accordance with Sec. 319.40-7(c),

heat treated with moisture reduction in accordance with Sec. 319.40-

7(d), or otherwise processed in a manner that will destroy any plant

pests associated with the wood chips or bark chips, within 30 days of

arrival at the facility. If the wood chips or bark chips are to be used

for mulching or composting, they must first be fumigated in accordance

with Sec. 319.40-7(f)(3), heat treated in accordance with Sec. 319.40-

7(c), or heat treated with moisture reduction in accordance with

Sec. 319.40-7(d).

4. In Sec. 319.40-7, paragraph (e) would be revised to read as

follows.

Sec. 319.40-7 Treatments and safeguards.

* * * * *

(e) Surface pesticide treatments. All United States Environmental

Protection Agency registered surface pesticide treatments are

authorized for regulated articles imported in accordance with this

subpart, except that Pinus radiata wood chips from Chile must be

treated in accordance with Sec. 319.40-7(e)(2). Surface pesticide

treatments must be conducted in accordance with label directions

approved by the United States Environmental Protection Agency. Under

the following circumstances, surface pesticide treatments must also be

conducted as follows:

(1) Heat treated logs. When used on heat treated logs, a surface

pesticide treatment must be first applied within 48 hours following

heat treatment. The surface pesticide treatment must be repeated at

least every 30 days during storage of the regulated article, with the

final treatment occurring no more than 30 days prior to departure of

the means of conveyance that carries the regulated articles to the

United States.

(2) Pinus radiata wood chips from Chile. When used on Pinus radiata

wood chips from Chile, a surface pesticide consisting of the following

must be used: A mixture of a fungicide containing 64.8 percent of the

active ingredient didecyl dimethyl ammonium chloride and 7.6 percent of

the active ingredient 3-Iodo-2-propynl butylcarbamate, and an

insecticide containing 44.9 percent of the active ingredient

chlorphrifos phosphorothioate. The fungicide and insecticide must be

mixed using the proportions called for in the label requirements. The

wood chips must be sprayed with the pesticide so that all the chips are

exposed to the chemical on all sides. During the entire interval

between treatment and export, the wood chips must be stored, handled,

or safeguarded in a manner that excludes any infestation of the wood

chips by plant pests.

* * * * *

Done in Washington, DC, this 22nd day of July 1998.

Charles P. Schwalbe,

Acting Administrator, Animal and Plant Health Inspection Service.

[FR Doc. 98-20156 Filed 7-27-98; 8:45 am]

BILLING CODE 3410-34-P