View Rule

View EO 12866 Meetings Printer-Friendly Version     Download RIN Data in XML
USDA/FS RIN: 0596-AC79 Publication ID: Fall 2008 
Title: Market-Related Contract Term Additions Regulations 
Abstract: Revise the Market-Related Contract Term Additions regulations at 36 CFR 223.52 to allow contracts to be extended for more than three years during prolonged periods of drastic reduction in wood product prices provided the additional time does not result in a total contract length greater than 10 years. The Market-Related Contract Term Additions (MRCTA) regulations (36 CFR 223.52) were first adopted in 1990 to prevent widespread contract defaults by providing additional contract time when adverse market conditions resulted in a drastic reduction in wood product prices. By providing additional contract time purchasers can shift operations from high priced sales purchased when markets were up to lower priced sales purchased when the market is down. As markets recover, purchasers can go back to their higher priced sales as they become economical to operate again. The MRCTA regulations limit the total additional contract time to the lesser of twice the original contract length or 3 years and can’t result in the total contract length exceeding 10 years. The 10 year limit for total contract length is set in the National Forest Management Act of 1976, and this limit will not be considered for change under this proposed action. The other limits were established in the MRCTA regulations as an estimate of how much time was needed for markets to recover enough for operations to resume based on historical trends. However, the softwood lumber index peaked in August 2004 and has been declining since then. During this sustained decline it has triggered for 10 consecutive quarters beginning with September 2005 and it is expected to continue triggering through much if not all of 2008. Until the current event MRCTA has been working as intended for sales of softwood lumber. This sustained decline exceeds any prior declines since the MRCTA regulations were adopted and with no end in sight the 3-year limit on MRCTA needs to be extended to avert widespread defaults. As recently as the fall of 2007 lumber markets were predicted to begin improving by mid-2008. Had this occurred no change in the regulation would have been needed. Instead the mortgage crisis worsened resulting in a glut of homes on the market and new home construction which drives much of the lumber markets continues to decline. In a December 2007 the Federal Timber Purchasers Committee (FTPC) wrote the Forest Service that the North American lumber and panel industry was operating at approximately 70 percent of capacity, new curtailments and mill closures were being announced weekly, and production curtailments were expected to continue into 2008. The FTPC requested the Forest Service implement several short term relief measures needed for the existing manufacturing infrastructure to survive the current downturn and at the top of their list was relief on the 3-year limit for MRCTA. Maintaining the forest products infrastructure is critical to achieving national forest land management objectives and in many places critical to the local economy. Once lost this infrastructure is rarely replaced. This rule will benefit the industry, the forest service and local dependent communities at risk of loosing manufacturing facilities. Because of the potential dire consequences associated with delay the proposed changes in the MRCTA regulations will be implemented as an interim final rule and request for comments. The Forest Service does not anticipate negative responses that would preclude quickly finalizing the rule. 
Agency: Department of Agriculture(USDA)  Priority: Substantive, Nonsignificant 
RIN Status: Previously published in the Unified Agenda Agenda Stage of Rulemaking: Final Rule Stage 
Major: Undetermined  Unfunded Mandates: Undetermined 
CFR Citation: 36 CFR 223.52   
Legal Authority: Not Yet Determined   
Legal Deadline:  None
Timetable:
Action Date FR Cite
NPRM  09/03/2008  73 FR 51388   
NPRM Comment Period End  10/03/2008    
Interim Final Rule  11/00/2008    
Regulatory Flexibility Analysis Required: Undetermined  Government Levels Affected: Undetermined 
Federalism: Undetermined 
Included in the Regulatory Plan: No 
RIN Data Printed in the FR: No 
Agency Contact:
Lorrie Parker
Regulatory Analyst
Department of Agriculture
Forest Service
ATTN: ORMS, D&R Branch, 1400 Independence Avenue SW,
Washington, DC 20250-0003
Phone:202 205-6560
Fax:202 205-6539
Email: lsparker@fs.fed.us