Federal Timber Sales: Forest Service and BLM Should Review Their Regulations and Policies Related to Timber Export and Substitution

Each year, the federal government sells millions of dollars of timber from federal forests. Federal law generally prohibits the export of unprocessed logs harvested from federal lands in the western United States. It also prohibits substitution of federal logs for privately sourced timber in domestic mills when the privately sourced timber is exported without processing.

GAO was asked to examine the issue of illegal federal timber export and substitution. This report (1) describes the extent to which the Forest Service and BLM identified violations of the timber export and substitution ban that occurred from 2007 through 2017 and the likelihood of violations and (2) examines the agencies' regulations, policies, and practices to help prevent, detect, and respond to illegal timber export and substitution.

GAO reviewed laws, regulations, and policies regarding illegal timber export and substitution; compared agency regulations with laws, and agency policies with federal internal control standards; and interviewed agency officials and stakeholders—such as trade groups and state officials— selected to provide a range of perspectives.

The Forest Service, within the Department of Agriculture, and the Bureau of Land Management (BLM), within the Department of the Interior, found no violations of the ban on federal timber export and substitution from 2007 through 2017, according to agency documents and officials. All agency officials and stakeholders GAO interviewed said the likelihood of illegal timber export and substitution is low, citing several reasons, including economic factors associated with log markets, which have changed over the years. For example, many officials and stakeholders said the timber harvested from federal lands is smaller and of lower quality compared to what was harvested in the 1990s, making it less likely to be exported.

The Forest Service and BLM did not issue new regulations related to illegal federal timber export and substitution, and some agency policies related to export and substitution are outdated or unclear. The agencies did not issue regulations to implement the Forest Resources Conservation and Shortage Relief Act of 1997, as required by the act. Without issuing new regulations or obtaining legislative relief from this requirement, the agencies will continue to be out of compliance with the act. The agencies have policies to help prevent, detect, and respond to illegal timber export and substitution, such as policies that require the marking of logs to identify them as coming from federal lands. However, the agencies have not reviewed their policies for continued relevance and effectiveness as called for by federal standards for internal control, and some policies are outdated or unclear. For example, Forest Service policy calls for the collection of a certification form to help determine whether timber purchasers are engaged in export or substitution, but the form expired in 1999. Also, it is unclear what BLM considers a violation of the export ban because agency policy does not define what constitutes a violation. Forest Service officials said the agency has not reviewed its policies since 1997, largely due to competing priorities, but agreed it would be beneficial to do so. BLM officials said they reviewed the agency's export regulations in 2010, but this effort did not include a review of timber export policies. By reviewing agency policies and making changes as necessary, the agencies will have better assurance that their policies are relevant and effective for addressing the risk of illegal timber export and substitution.

GAO recommends that the Forest Service and BLM issue new regulations or seek legislative relief from the requirement to do so, and review their policies for relevance and effectiveness and issue new policies as necessary. The agencies generally agreed with GAO's recommendations.

Each year, the federal government sells millions of dollars of timber from  federally managed forests. In fiscal year 2017, about $253 million of  timber was sold from these lands, according to agency documents.  Federal law generally prohibits the export of unprocessed logs—that is,  logs not processed into end products such as lumber—harvested from  federal lands in the western United States. The law also prohibits  purchasers from using timber harvested from federal lands in their  processing facilities while exporting nonfederal unprocessed timber that  could have been used in those facilities—known as substitution.

Restrictions on federal timber export and substitution were put in place  decades ago to help sustain the domestic timber-processing industry at a  time when large volumes of timber were being exported from the United  States. For example, the Foreign Assistance Act of 1968 restricted the  volume of timber that could be harvested and exported in unprocessed  form from federal lands. The Forest Resources Conservation and  Shortage Relief Act of 1997 updated the export restrictions and currently  governs federal log exports. The Forest Service, within the Department  of Agriculture, and the Bureau of Land Management (BLM), within the  Department of the Interior, implement and enforce the restrictions. We  last reported on the federal timber export and substitution ban in 1998.

You asked us to examine the issue of illegal federal timber export and  substitution. This report (1) describes the extent to which the Forest  Service and BLM identified violations of the timber export and substitution  ban that occurred from 2007 through 2017 and the likelihood of violations,  and (2) examines the agencies’ regulations, policies, and practices to  help prevent, detect, and respond to illegal timber export and substitution.

To address our first objective, we requested documentation about timber  export and substitution violations for calendar years 2007 through 2017  from the Forest Service and BLM. The agencies reported that they had no  documentation of violations. The Forest Service provided documentation  about potential violations it had investigated but not substantiated, which  we reviewed. To obtain background information and corroborate agency  information, we searched various databases, such as ProQuest, to  identify articles on illegal timber export and substitution. Based on our  review of these articles, we did not identify violations of the ban that had  occurred during this time period. We performed these searches from June  2017 to August 2017.

In addition, we interviewed Forest Service and BLM officials about the  number of timber export and substitution violations or potential violations  during calendar years 2007 through 2017, agency actions taken in  response, and officials’ views about the likelihood of illegal timber export  and substitution. Specifically, we interviewed Forest Service and BLM  headquarters officials, regional officials in the six Forest Service regions  with forests subject to the 1997 act, and officials at one national forest in  each region. We selected these forests after discussions with regional  officials about the forests they viewed as having the greatest potential risk  of export or substitution because of proximity to export facilities, the  amount of timber sold, or other factors. We also interviewed officials from  the BLM Oregon/Washington State Office and the five western Oregon  BLM districts where most of BLM’s timber program is concentrated.  Table 1 provides a list of Forest Service and BLM offices included in our  review.

To gain a broader perspective about the likelihood of illegal timber export  and substitution, we also interviewed nonfederal stakeholders, including  state forestry officials, academic researchers, and representatives of  trade associations representing federal timber purchasers, loggers, and  mill owners. We selected these stakeholders to provide a range of  perspectives on the issue of timber export and substitution. Table 2 lists  the stakeholder organizations we interviewed.

To address our second objective, we reviewed federal laws to identify  relevant legal provisions regarding the prohibition on the export and  substitution of unprocessed federal timber. We also reviewed agency  regulations and policies related to illegal federal timber export and  substitution. We interviewed agency officials described above to identify  key policies and practices to help prevent, detect, and respond to illegal  timber export and substitution.

In addition, we reviewed each agency’s implementation of those policies  that require the agency to collect forms or conduct inspections. To  determine the extent to which BLM collected required contract forms  certifying that purchasers had not illegally exported or substituted federal  timber, we requested contract forms for a random sample of timber sale  contracts that closed in fiscal year 2017 from each of the five western  Oregon BLM districts included in our review, for a total of 22 contracts.  We reviewed contract forms included in each timber sale contract to  determine whether each district collected and maintained the required  forms. Because the Forest Service does not collect certification forms, we  did not perform a similar review of Forest Service contracts.

To determine the extent to which the agencies conducted surveillance at  log export facilities, we requested agency inspection reports for  surveillance conducted in 2017 for the 14 log export facilities in California,  Oregon, and Washington that were identified as operational at the time of  our review. Forest Service regional officials identified and provided  reports for 6 facilities in California. For Oregon and Washington  combined, Forest Service regional officials identified 6 log export facilities  and provided reports for 1 facility. BLM officials identified and provided  reports for 2 facilities in Oregon. We reviewed the inspection reports for  each facility to determine the number of inspections that were conducted,  and, where applicable, to determine whether the number of inspections  conformed with agency policy.

To gain a broader perspective about agency implementation of timber  sale program activities, we reviewed Forest Service “Timber and Log  Accountability Audits”—internal evaluations of regional and forest-level  timber sale activities. We reviewed the most recent evaluation of each  of the six regions with forests subject to the federal timber export and  substitution ban and the most recent evaluation of at least one national  forest in five of these regions, selected as described above. We also  reviewed the agencies’ general timber sale administration policies to gain  a better understanding of the extent to which these policies address the  issue of export and substitution. We compared agency policies and  practices with relevant portions of the Standards for Internal Control in the  Federal Government to assess the extent to which agency policies and  practices aligned with the standards.

In addition, to address both objectives, we conducted a site visit to Coos  Bay, Oregon in September 2017. We selected this location due to its  proximity to a BLM field office, active logging sites on federal lands, and  log export facilities. During this site visit, we met with agency officials at  BLM’s Coos Bay district; traveled to an active logging site where we  observed a timber harvesting operation and met with logging operators;  and visited a log export facility, where we observed logs being prepared  for export and met with the export facility manager and a timber company  official.

We also reviewed reports and studies related to timber export and  substitution, including reports from the Forest Service’s Pacific Northwest  Research Station, the Department of Agriculture’s Foreign Agricultural  Service, and Oregon State University. We reviewed these studies’  methodologies, assumptions, and limitations and determined them to be  sufficiently credible for our purposes.

We conducted this performance audit from June 2017 to August 2018 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

This section describes agency responsibilities, the history of the federal  timber export and substitution ban, and changes to the timber economy  since restrictions on timber export and substitution were first  implemented.

Federal Land Management Agency Responsibilities

Under the National Forest Management Act and the Federal Land Policy  and Management Act of 1976, respectively, the Forest Service and BLM  manage federal lands under their jurisdiction for various uses such as  protection of fish and wildlife habitat, recreation, mineral production, and  timber harvesting. As part of the agencies’ management of timber  harvesting on public lands, both the Forest Service and BLM conduct  timber sales. Timber sale activities include identifying the sale area,  conducting the required environmental analyses, soliciting bids, preparing  the timber sale contract, marking the sale boundary and the trees to be  cut or left, and monitoring the harvest operations and reforestation  activities. The agencies monitor harvest operations to help ensure that,  for example, the trees are harvested from the agreed-upon area and the  logs are hauled on the route agreed upon in the timber sale contract. The  agencies have developed policies for general timber sale activities, as  well as policies specific to preventing, detecting, and responding to illegal  federal timber export and substitution.

History of the Federal Timber Export and Substitution Ban

Since the late 1960s, four primary laws have been enacted prohibiting  federal timber export and substitution: the Foreign Assistance Act of  1968, the Interior and Related Agencies Appropriations Act of 1974, the  Forest Resources Conservation and Shortage Relief Act of 1990, and the  Forest Resources Conservation and Shortage Relief Act of 1997.

In 1968, an amendment to the Foreign Assistance Act of 1968— commonly referred to as the “Morse Amendment”—restricted the volume  of timber that could be harvested and exported from federal lands in  unprocessed form. This legislation was enacted after the Secretaries of  Agriculture and the Interior issued joint orders calling for this restriction,  deeming it necessary to maintain a viable domestic wood-processing  industry. As we previously found, in the early 1960s, export of federal  timber was generally not viewed as a concern, but as exports of federal,  private, and other timber increased, public and private concerns grew  about the effect of unrestricted log exports on the domestic wood- processing industry. For example, the percentage of timber harvested in  Oregon and Washington that was exported grew from approximately 6  percent in 1965 to about 18 percent in 1972.

In 1973, a provision was included in the Interior and Related Agencies  Appropriations Act of 1974 that, in effect, prohibited the export of  unprocessed timber harvested from federal lands west of the 100th  meridian in the contiguous 48 states. (Figure 1 shows the location of the  100th meridian and Forest Service- and BLM-managed lands.) The 1973  provision also prohibited purchasers from using timber harvested from  federal lands in their processing facilities while exporting nonfederal  unprocessed timber that could have been used in those facilities, an  activity referred to as substitution. The provision also stated that the  limitation on export and substitution did not apply to species of timber the  agencies have determined to be surplus to domestic lumber and plywood  manufacturing needs.

In 1990, the Forest Resources Conservation and Shortage Relief Act of  1990 made permanent the ban on exporting unprocessed logs from  western federal lands and provided for greater restrictions on  substitution. Under the 1990 act, however, it is not considered  substitution if a company purchases federal timber from within a particular  “sourcing area” and exports nonfederal timber harvested from areas  outside the sourcing area. For example, firms with timber operations in  both Oregon and Washington could purchase federal timber from a  sourcing area in eastern Oregon for manufacture while also purchasing  private timber in Washington for export. The 1990 act required the Forest  Service and Interior to issue, in consultation with each other, coordinated  and consistent regulations implementing the act on the lands under their  respective jurisdictions.

The Forest Service issued a series of regulations to implement the 1990  act, the most comprehensive of which was issued September 8, 1995.  In a provision contained in the act providing appropriations to the Forest  Service for fiscal year 1996, Congress effectively suspended  implementation of the 1995 regulation to allow the administration,  Congress, and affected parties more time to address policy issues with  respect to the 1990 act. The Forest Service’s fiscal year 1997  appropriation act contained a similar provision. BLM did not issue  regulations implementing the 1990 act.

In 1997, Congress amended the 1990 act. Among other things, the  Forest Resources Conservation and Shortage Relief Act of 1997 relaxed  substitution restrictions in Washington State and allowed the Forest  Service and BLM to reduce the penalties imposed for violating the act by  taking into account “all relevant mitigating factors, including mistake,  inadvertence, and error.” The 1997 act also suspended the Forest  Service’s 1995 regulations implementing the 1990 act and directed the  agencies to issue new coordinated and consistent regulations  implementing the act by June 1998. The law requires the agencies to  implement their regulations in effect prior to September 8, 1995, until new  regulations are issued.

Changes to the Timber Economy since the 1960s

Since restrictions on timber export and substitution were first  implemented in the late 1960s, the timber economy has continued to  change. Domestically, the volume of timber harvested from Forest  Service lands each year has declined from about 12.4 billion board feet in  1973 to 2.6 billion board feet in 2017. The number of domestic mills  along the Pacific Coast has also decreased, mostly through mill closures.  For example, from 1996 to 2016, the number of mills in Washington State  declined from 186 to 88. In addition, since the 1990s, the structure of  the corporate timber industry has changed. For example, many of the  corporate timber companies that once owned both mills and the private  lands to supply those mills have divested some or all of their private  timberlands. Additionally, the value of U.S. softwood log exports has  grown since 2007, with China, Japan, and Canada the three largest  importers of these logs. According to information from the Foreign  Agricultural Service, the value of U.S. softwood log exports grew from  approximately $949 million in 2007 to approximately $1.4 billion in 2017  (in constant 2017 dollars).

Forest Service and BLM Found No Violations of the Export and Substitution Ban from 2007 through 2017, and Officials and Stakeholders Said the Likelihood of Violations is Low

According to Forest Service and BLM officials, the agencies found no  violations of the ban on federal timber export and substitution from 2007  through 2017. Forest Service officials described instances in which the  agency responded to reports of potential violations, but the reports were  not substantiated. All agency officials and stakeholders we interviewed  said that the likelihood of illegal timber export and substitution is low.  However, several officials acknowledged that some risk of violations  exists under certain circumstances.

From 2007 through 2017, the Forest Service and BLM found no violations  of the federal timber export and substitution ban. Forest Service officials  identified four instances in which the agency investigated potential  violations. For example, in one instance, the Forest Service’s Pacific  Southwest region investigated an incident in 2017 at the Port of  Richmond near Oakland, California. According to the associated  investigation report, an employee at the port’s export facility noticed four  logs were marked as coming from a federal timber sale and reported it to  the Forest Service. Forest Service law enforcement officials conducted an  investigation and determined that the logs came from the Sierra National  Forest and were placed at the facility in error. The purchaser  subsequently delivered the logs to the intended recipient and the agency  took no further action. Forest Service officials said that because the logs  had not been exported, but had been placed at the facility in error with no  intent to export them, the agency determined that there was no violation  of the export ban. In another instance, officials from the agency’s  Southwestern Region said that, in 2010, they identified a case in which a  purchaser cut federal logs, removed the bark, and then exported the logs  to Mexico for use as telephone poles. The officials investigated to  determine whether that type of exporting was legal. The Forest Service  concluded that the purchaser’s activities constituted processing the logs  into end products and therefore the logs were being legally exported.  BLM officials we interviewed did not describe any instances in which they  identified, or were made aware of, potential violations.

All Forest Service and BLM officials and stakeholders we interviewed said  the likelihood of timber export and substitution violations is low due to a  combination of several factors, including economic factors associated  with log markets and changes in the organizational structure of timber  companies. However, several officials acknowledged that some risk of  violations exists under certain circumstances.

Economic factors within log markets. Several agency officials and  stakeholders said smaller trees of a lower quality are being harvested  from federal lands compared to the trees harvested in the 1990s.  Several of these officials and stakeholders said there is less demand  and lower value in overseas markets for logs with such  characteristics. A senior official from the Klamath National Forest in  California, for example, said that trees harvested from the forest in the  1980s had log diameters of 35 to 42 inches, but by 2017 the diameter  had decreased to 14 to 18 inches. Additionally, according to statistics  from the State of California, old-growth trees—generally, trees more  than 150 years old—represented nearly 70 percent of timber  harvested in California in 1979, but by 1999 the proportion had fallen  to less than 10 percent. As we have found, old-growth trees can  have more attractive grain characteristics and can be used for higher- value products compared to young-growth trees, which may make the  former more attractive for export. Several officials and stakeholders  also said that the decrease over time in the amount of federal timber  available for sale has made violations less likely. For example,  Oregon Department of Forestry information shows that the volume of  timber harvested on BLM-managed lands in Oregon declined from  about 1.5 billion board feet in 1973 to 182 million board feet in 2016.  Some of these officials and stakeholders said that federal timber is an  important part of domestic sawmill operators’ timber supply, and,  given the reduced amount of federal timber available, sawmill  operators would have little incentive to export logs because doing so  would further reduce their own timber supply.

Changes in timber company organizational structure. Several  officials and stakeholders said that changes in timber company  organizational structure have also made substitution less likely.  Several officials and stakeholders noted that many Pacific Northwest  timber companies once owned both sawmills and timberland from  which they harvested timber to supply their mills. According to some  officials, under those conditions, the likelihood of substitution was  greater because these companies could have benefitted by exporting  logs from their own lands for a high price while supplying their sawmill  operation with federal timber purchased at a lower price. However,  many timber companies have sold or reorganized over the past 2  decades, resulting in few companies now owning both sawmills and  timberlands, according to some agency officials. In 2009, Oregon  State University reported on this change, noting that “almost all large,  publicly traded forest product companies have shed their timber lands  in the past 20 years, a reflection of global economic pressures, new  tax laws, and other forces.” A 2014 report from the Department of  Agriculture likewise noted this change. Some agency officials said  that, as a result, sawmills generally must buy all of their timber— whether privately sourced or federal—on the open market, which  provides less incentive for substitution than if these sawmills were  using timber they already owned.

Several officials also said, however, that some risk of violations remains,  particularly under certain circumstances. For example, some Forest  Service regional officials said that some national forests could be  vulnerable to illegal timber export if log prices or demand for certain tree  species increase in the future. Additionally, several Forest Service  officials expressed concern about having sufficient staff to monitor timber  sales for compliance with relevant requirements, including the ban on  export and substitution, especially in light of potential increases in timber  sales. In particular, officials from four of the six national forests included in  our review said the Forest Service increased the volume of timber their  national forest is expected to offer for sale beginning in fiscal year 2018.  For example, a Boise National Forest official said the forest’s timber sale  target increased from 50 million board feet per year, which has been  consistent over the last decade, to 74 million board feet in fiscal year  2018, with a goal of 96 million board feet per year by fiscal year 2021.  According to some Forest Service officials, higher timber sale targets could reduce the ability of agency staff to carry out timber sale  responsibilities, including monitoring, that help guard against illegal timber  export and substitution. Several Forest Service “Timber and Log  Accountability Audits”—internal evaluations of regional and forest-level  timber sale activities—also noted that reduced staffing levels and  experience were areas of concern in carrying out forests’ timber sale  programs.

The Forest Service and BLM Did Not Issue New Regulations Required by Law and Some Policies are Outdated or Unclear

The Forest Service and BLM neither issued new regulations as required  by the Forest Resources Conservation and Shortage Relief Act of 1997  nor obtained legislative relief from the requirement. The agencies have  policies and practices to help prevent, detect, and respond to illegal  timber export and substitution. However, some policies are outdated or  unclear, and the agencies have not reviewed their policies for continued  relevance and effectiveness.

The Agencies Did Not Issue New Regulations As Required by the 1997 Act

As noted previously, in 1997, Congress amended the Forest Resources  Conservation and Shortage Relief Act of 1990 to, among other things,  relax substitution restrictions in Washington State. The 1997 act included  other provisions such as allowing the agencies to reduce the penalties  imposed for violating the ban. The act also states that the agencies “shall,  in consultation, each prescribe new coordinated and consistent  regulations to implement the act” and required the agencies to issue  these regulations by June 1, 1998. The act also states that, until new  regulations are issued, regulations that were in effect prior to September  8, 1995, are to remain in effect. However, because neither agency issued  regulations as required by the act, their regulations currently in use do not  reflect changes made by the 1997 act.

Forest Service. The Forest Service drafted regulations to implement  the 1997 act, but as of June 2018, the agency had not finalized them.

According to Forest Service headquarters officials, the agency did not  finalize the draft regulations because of competing priorities. The  officials did not provide an estimate as to when the draft regulations  would be made final. Because the draft regulations have not been  made final, Forest Service regulations from the early 1990s remain in  effect but do not reflect the changes made by the 1997 act.

BLM. According to BLM headquarters officials, BLM began drafting  regulations in 2010 to implement the 1997 act, but did not complete  that effort because of insufficient resources and competing priorities.  Because BLM did not issue new regulations, BLM is required by law  to rely on its regulations issued prior to September 8, 1995. BLM  regulations reflect timber export and substitution laws from the 1970s  because BLM did not issue regulations implementing the 1990 act  because of competing priorities at that time, according to officials.  Consequently, BLM regulations currently in use do not reflect the  changes made by the 1997 act.

Forest Service officials said their agency did not seek legislative relief  from the requirement to issue new regulations, and BLM officials said  they have no record that their agency sought legislative relief but could  not be certain that the agency had not done so. Without issuing new  coordinated and consistent regulations as required by the 1997 act, or  obtaining legislative relief, the agencies will continue to be out of  compliance with this provision of the act.

Some Agency Policies Related to Illegal Export and Substitution are Outdated or Unclear, and the Agencies Have Not Reviewed Their Policies for Relevance and Effectiveness

We identified several areas in which either the Forest Service or BLM or  both have policies to help prevent, detect, and respond to illegal federal  timber export and substitution. For example:

Timber sale contract provisions. Both agencies have policies that  require timber sale contracts to include a statement about the  prohibition on federal timber export and substitution, which can help  ensure timber purchasers are aware of the prohibition. We reviewed  the standard timber sale contract forms used by both agencies at the  time of our review and found that the forms include provisions with  this statement.

Marking of unprocessed logs. Both agencies generally require  purchasers to mark unprocessed logs originating from federal lands  subject to the ban with a spot of yellow paint and an identifying mark  known as a hammer brand before the logs are removed from the  timber sale area. According to the agencies’ policies, marking the logs  is intended to help identify them as being prohibited from export.  Figure 2 shows an example of marked federal logs.

Forest Service regulations generally require that both ends of each  unprocessed log be marked, but agency policy allows agency officials  to waive the requirement under certain circumstances if officials  determine that the risk of export or substitution is low. For example,  for certain timber sales the Pacific Southwest Region does not require  that logs smaller than 10 inches in diameter be painted and branded.

BLM policy directs that one end of most unprocessed logs be painted  and branded. Specifically, it calls for painting and branding one end of  each log with a diameter of more than 10 inches. Likewise, when a  log truck carries 10 or fewer logs (regardless of the logs’ diameter), all  logs on the truck are to be painted and branded. For truckloads of 11  logs or more, a minimum of 10 logs must be painted and branded on  one end, regardless of the logs’ diameter. BLM policy allows  contracting officers to implement more stringent requirements, such  as requiring purchasers to paint and brand all logs harvested on an  individual timber sale regardless of size or number, but it does not  allow contracting officers to waive the marking requirement.

Penalizing violators. Both agencies have penalties for violating the  export and substitution ban. Forest Service penalties are described in  agency policy and in agency contract provisions, and include  imposing penalties, cancelling contracts, and debarring purchasers  from bidding on future Forest Service timber sales. BLM penalties  are described in agency contract provisions only, and include contract  cancellation and recovery of damages.

In addition, many Forest Service and BLM officials said that general  timber sale administration policies—those aimed at managing timber  sales generally, regardless of export issues—help address the risk of  illegal federal timber export and substitution. Both agencies’ policies for  timber sale administration include mechanisms for monitoring various  activities associated with federal timber sales, including periodically  inspecting timber harvest operations at active logging sites and observing  log trucks carrying cut timber from logging sites to ensure they follow  designated haul routes. Many officials we spoke with from both agencies  said that such periodic inspections and consistent contact with logging  operators help prevent and detect illegal export or substitution of federal  timber.

However, Forest Service and BLM policies related to three areas— surveillance, certification requirements, and investigating potential  violations—are outdated or unclear, or in some cases have not been fully  implemented. The agencies also have not reviewed their policies for  continued relevance and effectiveness as called for by federal internal  control standards.

Surveillance. Forest Service policy directs each Forest Service  region with forests subject to the export ban to conduct surveillance  and establish procedures, training, and other controls for the  surveillance program in the region—stating that, at a minimum,  regional standards must include monthly surveillance. However,  three of the six regions subject to the ban have not established  surveillance procedures because, according to regional officials, they  have no access to ports and therefore the policy is not relevant to  them. However, Forest Service headquarters officials said the  requirement is relevant to all regions having forests subject to the ban,  because federal logs originating from regions without ports could be  transported across regions and exported from another region. These  headquarters officials said that more clarity in the agency’s policy  about establishing regional surveillance procedures may be helpful to  the regions.

The remaining Forest Service regions subject to the ban—the Pacific  Southwest, Pacific Northwest, and Northern regions, each of which  contains log export facilities—established procedures as called for by  national policy but do not conduct surveillance on a monthly basis.  The Pacific Southwest Region’s procedures call for monthly  surveillance of export facilities in accordance with national policy.  However, the Pacific Northwest Region’s procedures call for quarterly  surveillance rather than monthly surveillance. The Northern Region  delegates responsibility for surveillance to a national forest in the  Pacific Northwest Region. We reviewed surveillance inspection  reports from calendar year 2017 and found that, during that year, the  Pacific Southwest Region conducted from one to nine inspections of  each of the six facilities regional officials identified as exporting logs— less than the monthly surveillance called for by regional and national  policy. Officials from the Pacific Northwest Region provided us  calendar year 2017 surveillance information for one of the region’s six  facilities that exported logs that year. For that facility, Forest Service  officials conducted surveillance seven times in 2017, including at least  one inspection per quarter, which is in accordance with regional policy  but not national policy. Officials from both regions said they view the  frequency with which they conduct surveillance to be appropriate. For  example, officials from the Pacific Southwest Region said that when a  port is actively exporting timber, they conduct surveillance at least  once per month, as required by policy. Officials from the Pacific  Northwest Region said they view their frequency of surveillance to be  appropriate, since they view the likelihood of export violations to be  low and they have competing agency priorities.

BLM policy does not call for surveillance of log export facilities.  However, officials from BLM’s Coos Bay District, which has two log  export facilities, have conducted surveillance since the 1970s as a  way to help detect illegal timber export, according to BLM documents  and officials. Based on our review of 2017 surveillance inspection  reports, BLM officials inspected one export facility twice and the other  facility seven times during that year. Figure 3 shows an example of  unprocessed logs at one of the export facilities in Coos Bay, Oregon.

Some officials from both agencies said they may in some cases be  unable to conduct surveillance within export facilities because they do  not have clear authority to enter these facilities. BLM headquarters  officials said BLM did not develop a policy calling for surveillance  because the agency did not know whether it had the authority to enter  log export facilities and therefore was not confident that such a policy  could be carried out. Some officials from both agencies said they  generally have been granted access but noted that this is subject to  the willingness of the facility owners. Forest Service and BLM  headquarters officials similarly said the agencies generally do not  have legal authority to board ships or to inspect closed shipping  containers to look for federal logs.

Certification Requirements. Both agencies’ policies direct the  agencies to collect certification forms to help them determine whether  timber purchasers are engaged in export or substitution. However, the  agencies’ forms are outdated—the Forest Service’s certification form  expired, and some BLM forms reflect legal requirements that are no  longer in effect. Nevertheless, the agencies have not updated their  forms or changed their policies requiring collection of these forms.

Forest Service policy states that “Prior to award, during the life of the  contract, and for a period of 3 years from the termination date, the  purchaser must furnish, upon request, the volume and geographic  origin of unprocessed timber from private lands that was exported or  sold for export.” The purchaser may submit the information on a  specified Forest Service certification form or “other appropriate  forms.” Forest Service regional officials from three of the six regions  subject to the ban said they do not collect this information because  the certification form, approved by the Office of Management and  Budget, expired in 1999. Some Forest Service officials said updating  and collecting the form could help prevent and detect illegal timber  export and substitution by providing agency officials with information  about purchasers’ activities. One senior headquarters official,  however, noted that the information provided on the form relies on the  purchaser’s self-certification, making it difficult for agency officials to  verify.

BLM policy requires agency staff to collect a minimum of two  certification forms for each timber sale. One is to be collected before  the sale is approved, to determine whether the timber sale purchaser  has substituted federal timber for exported unprocessed private timber  within a specified time frame. The other is to be collected after the  harvest is completed and before the contract is terminated, to  determine whether purchasers are exporting BLM timber. Two  additional certification forms may be collected when applicable—one  prior to the sale and the other after the harvest is completed—but are  not required for all sales. We reviewed documentation from a sample  of 22 BLM timber sale contracts that closed in 2017 in the five western  Oregon BLM districts and found that BLM collected the required  certification forms for 21 of the 22 contracts. The remaining contract  file was missing a required form. BLM officials said the missing form  could not be located.

However, the two certification forms BLM can collect before approving  a timber sale reflect legal requirements that are no longer in effect.  According to the 1997 act, a purchaser may not purchase  unprocessed federal timber if “such person has, during the preceding  24-month period, exported unprocessed timber originating from  private lands.” However, the two BLM certification forms instruct the  purchaser to provide this information for the preceding 12-month  period. Senior BLM officials acknowledged the inconsistency between  these forms and the current legal requirement. They said that the 12- month time frame specified in the certification forms reflects the BLM  regulations issued to implement the appropriations act export  restrictions in the 1970s.

Investigating Potential Violations. Both agencies have policies for  investigating potential export violations. The Forest Service’s policy  for investigating export violations states that, upon finding a violation,  the contracting officer should contact law enforcement and prepare a  report about the violation, including any planned follow-up actions.  Forest Service headquarters officials said that it is unclear whether  this policy applies only in cases where export violations have been  substantiated or is to be used in instances where violations are  suspected but not confirmed. BLM headquarters officials said that  their personnel are to use policies detailed in the agency’s standard  contract administration procedures, which cover all timber sale  administration violations, to investigate potential and substantiated  export violations. These procedures provide officials discretion in the  actions they take. For example, the procedures state that “many such  violations may simply be corrected with good verbal communications  between the BLM and purchaser representatives. Other violations  require more forceful action and complete documentation of such  actions.”

The agencies differ in the extent to which they define what conduct  constitutes an export violation. Forest Service policies do not define  export; however, its regulations do, stating that export can occur at  any of several points—when a person enters into an agreement to  convey logs to another country, when logs are placed in an export  facility in preparation for shipment outside the United States, or when  logs are placed on a ship, train, or other transport destined for a  foreign country. BLM policies and regulations do not define the term  export or state what constitutes an export violation. Officials from both  agencies said that determining whether a violation has occurred  requires judgment on the part of agency staff. For example, according  to these officials, finding logs in an export facility may constitute a  violation, but would require the agency to determine whether the logs  were being prepared for shipment outside the United States. Officials  from both agencies said they would benefit from a clear definition of  export violation.

In addition, the agencies do not have up-to-date information about  sourcing areas, which is used to determine substitution violations.  Under the 1997 act, manufacturers may not engage in substitution— that is, exporting timber from private lands while purchasing federal  timber to supply their mills. However, it is not considered substitution if  a company purchases federal timber from within a particular “sourcing  area” and exports nonfederal timber harvested from areas outside the  sourcing area. Sourcing areas outside Washington State are subject  to Forest Service or BLM approval, and the agencies are required by  law to review them at least every 5 years. Forest Service  headquarters officials said they had not reviewed sourcing areas for at  least 20 years, and said that over this time, many timber companies  with approved sourcing areas have gone out of business or no longer  purchase national forest timber. Forest Service headquarters officials  said that they did not maintain lists of sourcing areas, and none of the  six Forest Service regions subject to the ban had information about  sourcing areas. BLM provided us a list of sourcing areas identified by  the Forest Service, but the list dates to 1992. Moreover, many Forest  Service and BLM officials we interviewed said they were unfamiliar  with the concept of substitution and sourcing areas. A few officials  said identifying sourcing areas may no longer be relevant given the  changes in the organizational structure of timber companies and the  resulting lower likelihood of substitution.

According to the Standards for Internal Control in the Federal  Government, management should implement control activities through  policies, including by periodically reviewing policies, procedures, and  related control activities for continued relevance and effectiveness in  achieving an entity’s objectives or addressing related risks. Forest  Service officials said the agency has not reviewed its policies specific to  export and substitution since the enactment of the 1997 act, largely  because of competing priorities and the officials’ view that the likelihood  of illegal export or substitution is low. Nevertheless, these officials agreed  that it would be beneficial for the Forest Service to review and update its  policies, especially in light of the significant changes to the timber  economy in the past 2 decades. BLM officials said they reviewed the  agency’s export regulations in 2010, but this effort did not include a  review of log export policies. They said they did not believe such a review  would be useful until new regulations are issued, since it is important that  policies conform with regulations. These officials noted that BLM’s  Oregon/Washington State Office updated some of its policies in 2016, but  the officials did not indicate the extent to which the policies were reviewed  for relevance and effectiveness—and, as noted, some BLM policies  appear unclear or are inconsistent with the 1997 act. By reviewing agency  policies and making changes to them as necessary, in accordance with  applicable regulations, the Forest Service and BLM will have better  assurance that their policies are relevant and effective for addressing the  risk of illegal timber export and substitution.

For 50 years, Congress has restricted the export and substitution of  federal timber from the western United States. Since the restrictions were  put in place, substantial changes to the timber economy have occurred,  and agency officials and stakeholders view the likelihood of illegal timber  export and substitution as low. The Forest Service and BLM have various  regulations, policies, and procedures to carry out the ban. However, the  agencies did not issue new regulations as required by the Forest  Resources Conservation and Shortage Relief Act of 1997 and have not  obtained legislative relief from this requirement. As a result, the agencies  are relying on regulations issued before 1995. Without issuing new  coordinated and consistent regulations or obtaining legislative relief, the  Forest Service and BLM will continue to be out of compliance with the  regulation provisions of the 1997 act.

Further, some agency policies are outdated or unclear. For example,  Forest Service policy calls for collecting a certification form that expired in  1999, and BLM policy does not clearly define what constitutes a violation  of the export ban. The Forest Service and BLM have not reviewed their  policies for continued relevance and effectiveness, consistent with federal  internal control standards. By reviewing agency policies and making  changes to them as necessary, the Forest Service and BLM will have  better assurance that their policies are relevant and effective for  addressing the risk of illegal timber export and substitution.

We are making four recommendations, including two to the Forest  Service and two to the BLM:

The Chief of the Forest Service should determine whether new  regulations governing timber export and substitution are appropriate.  If the agency determines new regulations are appropriate, it should  issue them in accordance with the 1997 act, in consultation with BLM.  Otherwise, the agency should seek legislative relief from the act’s  requirement. (Recommendation 1)

The Director of the BLM should determine whether new regulations  governing timber export and substitution are appropriate. If the  agency determines new regulations are appropriate, it should issue  them in accordance with the 1997 act, in consultation with the Forest  Service. Otherwise, the agency should seek legislative relief from the  act’s requirement. (Recommendation 2)

The Chief of the Forest Service should review agency policies for  continued relevance and effectiveness in addressing the risk of illegal  timber export and substitution, and based on that review—and in  accordance with applicable regulations—should issue new policies as  necessary. (Recommendation 3)

The Director of the BLM should review agency policies for continued  relevance and effectiveness in addressing the risk of illegal timber  export and substitution, and based on that review—and in accordance  with applicable regulations—should issue new policies as necessary.  (Recommendation 4)

We provided a draft of this report for review and comment to the  Departments of Agriculture and the Interior. The departments provided  written comments, which are reproduced in appendixes I and II of this  report. The Forest Service, responding on behalf of the Department of  Agriculture, stated in its written comments, and in a subsequent e-mail  from the Forest Service audit liaison, that it generally concurred with our  findings and recommendations. The Forest Service stated that it will  coordinate with BLM to determine the next best steps in moving ahead in  administering the export law.

In its written comments, the Department of the Interior concurred with the  recommendations we directed to BLM. Regarding our recommendation  related to regulations, Interior stated that BLM will review its regulations to  identify inconsistencies with the 1997 act, and if it determines new  regulations are appropriate, will begin consultation with the Forest Service  to maximize consistency between the agencies to minimize the impact to  federal timber purchasers. Regarding our recommendation related to  policies, Interior stated that BLM will review its export and substitution  policies as well as its relevant contracts and forms for any immediate  updates needed to conform with the 1997 act, and will ensure the policies  are updated in conjunction with any new regulations.

As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretaries of Agriculture and the Interior,  the Chief of the Forest Service, the Director of the BLM, and other  interested parties. In addition, the report will be available at no charge on  the GAO website at http://www.gao.gov.

If you or your staff members have any questions regarding this report,  please contact me at (202) 512-3841 or fennella@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. GAO staff who made  contributions to this report are listed in appendix III.

Appendix I: Comments from the Department of Agriculture

Appendix II: Comments from the Department of the Interior

Appendix III: GAO Contact and Staff Acknowledgments

In addition to the individual named above, Steve Gaty (Assistant  Director), Ulana M. Bihun (Analyst-In-Charge), Mark Braza, Justin Fisher,  Richard P. Johnson, and Kyle Stetler made key contributions to this  report. Important contributions were also made by Tara Congdon, Barb El  Osta, Kimberly Gianopoulos, and Dan Royer.

The Forest Service and Bureau of Land Management sell millions of dollars of timber from federal forests each year. Federal law bans buyers from exporting unprocessed timber from western federal lands, along with related practices. Some agency policies to implement the ban are outdated or unclear. The agencies have also not issued required regulations.

While the agencies found no violations of the ban in the past decade, several officials said there might be a risk of future violations if, for example, log prices go up or demand increases.

We recommended that the agencies review their regulations and policies related to timber export.