U.S. Hardwood Log Exports Japan, Taiwan, Korea (1980-89)

Japan

Taiwan

South Korea

Chart 7.

Inter-Industry Log Export Action Committee (4-18-90)

REGULATION OF TIMBER EXPORTS: LEGISLATIVE OPTIONS

SUMMARY

Traditionally an area with extensive logging and domestic milling operations, the Pacific Northwest has in recent years also become a major exporter of unprocessed timber to foreign countries such as Japan. Although more wood from the Pacific Northwest is being sold than at any time in recent history, high prices driven by a variety of factors have put domestic milling operations at a disadvantage in bidding for unprocessed timber. The result has been that some local mills have been unable to fill orders for processed lumber because of their economic inability to purchase the necessary timber, which in turn has resulted in the loss of jobs in these mills.

Various suggestion have been made for federal legislation which would restrict the export of unprocessed logs from the United States, thus arguably increasing the volume of logs available to domestic milling. Various options which have been suggested include the following: 1) making permanent an existing ban on the export of unprocessed logs from federal lands; 2) granting states the authority to ban the sale of unprocessed logs taken from state lands; 3) granting the states the ability to impose a duty on unprocessed logs exported from the United States; and 4) establishing an executive branch mechanism which could limit exports from public lands. Apparently, no proposals have been made directly restricting the export of timber from private lands.

This report examines various constitutional and international law considerations which should be reviewed in regard to these proposed legislative options. The United States Constitution may in some instances limit the ability of the several states or the federal government to impose export duties or export bans. Further, the General Agreement on Tariffs and Trade (GATT), an international agreement to which the United States is a charter member, places restrictions on the use of duties and the imposition of quantitative limitations on exports. Finally, as it is not clear that each of the Pacific Northwest states would or could act so as to restrict the export of unprocessed logs from state lands, the question arises as to what extent the federal government can act unilaterally in this area.

This report concludes that of the options discussed, legislation which sanctioned state export duties on unprocessed logs originating in that state would be consistent with both the Constitution and GATT. Although the Congress may not itself impose export duties, it is explicitly authorized by the Constitution to allow the states to impose export duties, as long as all duty revenues are deposited into the United States Treasury. If necessary, the Congress could also constitutionally authorize the states to tax unprocessed timber leaving the state. Such an imposition of a tax on unprocessed logs exported from a state might be inconsistent with the state's trust duties over certain of its lands. However, the states could use their discretion to exempt such lands from taxation. Finally, although export duties are not encouraged, the GATT does not presently restrict their imposition. Consequently, such federally-sanctioned state duties might not raise a complaint under the GATT.

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REGULATION OF TIMBER EXPORTS: LEGISLATIVE OPTIONS

Traditionally an area with extensive logging and domestic milling operations, the Pacific Northwest has in recent years also become a major exporter of unprocessed timber to foreign countries such as Japan.' Although more wood from the Pacific Northwest is being sold than at any time in recent history, high prices driven by a variety of factors have put domestic milling operations at a disadvantage in bidding for unprocessed timber. The result has been that some local mills have been unable to fill orders for processed lumber because of their economic inability to purchase the necessary timber, which in turn has resulted in the loss of jobs in these mills.

There are three types of lands on which timber is currently cut in the Pacific Northwest: federally-owned, state-owned, and privately-owned. Presently, there are some federal restrictions on the export of unprocessed logs cut from federal lands. Similar laws passed by various states restricting the export of logs taken from state lands were either struck down or brought into question by the Supreme Court's 1984 opinion in South-Central Timber Development, Inc. v. Wunnicke, which held that such state laws imposed an unconstitutional burden on commerce. The export of timber from privatelyowned lands appears, however, to be unhindered by similar legislative restrictions.

Various suggestions have been made for federal legislation which would accomplish the purpose of decreasing the export of unprocessed logs from the United States, thus arguably resulting in the increase of the domestic milling

1 New York Times, at 8, col. 1 (April 23, 1988).

2

Reportedly, high prices may be a result not only of high demand, but of higher prices for lumber in the Japanese construction industry, and from the relative strength of the Japanese yen against the American dollar. Id. at col 1-2.

Id.

See infra notes 12-16 and accompanying text. It should be noted that historically, most restrictions which have been imposed on the exportation of logs do not extend to the lumber products which are produced by the milling operations. See South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82 (1984).

CRS-2

of such logs. The various options' which have been suggested include the following: 1) making permanent the existing ban on the export of unprocessed logs from federal lands; 2) granting states the authority to ban the sale of unprocessed logs taken from state lands; 3) granting states the ability to impose duties unprocessed logs exported from the United States; and 4) establishing an executive branch mechanism which could limit log exports from public lands. No proposals appear to have been made that directly address the export of timber from private lands.

There are various constitutional and international law considerations which should be examined in regards to these proposed legislative options. The United States Constitution may in some instances limit the ability of the several states or the federal government to impose export duties or export bans. Further, the General Agreement on Tariffs and Trade (GATT), an international agreement to which the United States is a charter member, also places restrictions on the imposition of quantitative limitations on exports. Finally, as it is not clear that each of the Pacific Northwest states, because of certain trust obligations, would or could act so as to restrict the export of unprocessed logs from certain lands, the question arises as to what extent the federal government can act unilaterally in this area.

Constitutional Limitations on Export Restrictions

The U.S. Constitution provides that the Congress shall have the power to regulate commerce with foreign nations and among the several states. The power of Congress to prohibit the flow of commerce between the United States and a foreign political entity arises from the Commerce Clause of the

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While these proposals would directly affect the export of unprocessed logs from certain lands, it should be noted that the impact of the legislation on the overall use of timber in the Pacific Northwest is unclear. While the ultimate effect of the different legislative proposals on the amount of timber milled in Northwest is beyond the scope of this report, there would appear to be a variety of factors which might be relevant to making this evaluation, including: 1) whether the industry responds to the loss of an export option by varying the amount of timber cut; 2) whether exports from private land holdings will increase to replace timber not exported due to restriction on exports from state and federal lands; 3) whether domestic mills will reconfigure to cut their lumber for export to the lucrative Japanese markets, or whether the mills will fill domestic orders instead; and 4) whether the Japanese would find alternative sources of unprocessed logs and continue their own processing.

This paper does not examine possible action by the Executive Branch to restrict the exportation of unprocessed logs under existing legal authority. It should be noted, however, that a petition has reportedly been filed with the Commerce Department seeking a temporary ban on the exportation of certain unprocessed logs, citing 50 U.S.C. App. §2406(g), the short supply provision of the Export Administration Act relating to agricultural commodities.