2409.22_71-74 Page 1 of 13 FOREST SERVICE HANDBOOK DENVER, CO

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2409.22_71-74
Page 1 of 13
FOREST SERVICE HANDBOOK
DENVER, CO
FSH 2409.22 - TIMBER APPRAISAL HANDBOOK
Region 2 Amendment No. 2409.22-96-4
Effective June 29, 1996
POSTING NOTICE: Amendments are numbered consecutively by Handbook
number and calendar year. Post by document name. Remove entire document and
replace with this amendment. Retain this transmittal as the first page of this
document. The last amendment to this Handbook was Amendment 2409.22-96-3 to
2409.22,70 Contents.
This amendment supersedes Amendment 2409.22-94-10 to 2409.22,70-74.
Document Name
2409.22,71-74
2409.22,72,Ex.01-02
Superseded New
(Number of Pages)
16
-
13
2
Digest:
71.1 - Modifies definition of Appraisal Point locations, allowing use of other known
appraisal points where POL manufacture is located.
71.72 - Expands move-in unusual adjustment for small volume sales. Adds an
unusual adjustment for sorting of products when sawtimber and POL products are
being appraised on the same scale. Removes section dealing with POL share of
specified road costs.
72 - Revises direction regarding application of timber property values in Timber
Settlement sales.
73 - Revises direction for appraisal of dead volume eliminating the need for two
volume groups.
Removes Exhibit 3 from the handbook.
ELIZABETH ESTILL
Regional Forester
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FSH 2409.22 - TIMBER APPRAISAL HANDBOOK
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CHAPTER 70 - SPECIAL APPRAISALS
71 - APPRAISING ROUNDWOOD PRODUCTS OTHER THAN LOGS (POL). See
section 50.5 for definitions of terms applied in this chapter.
71.1 - Introduction. Traditionally, the method for appraising products other than
logs (POL) such as posts, poles, pilings, fuelwood, and other roundwood products in
Region 2 has been by the Standard Rate or Comparison method of appraisal.
Except for the Black Hills National Forest in certain situations, Transaction
Evidence Appraisal (TEA) method is approved for all sales $2,000 total value or
greater in order to sustain a defensible appraisal method. Forests are encouraged
to use TEA on all sales greater than $2,000; however, sales with a total value of
$10,000 or less may be offered at standard rates. See FSH 2409.18 and FSM 2431
parent text for proper use of standard rates. Do not use standard rates for POL if
sawtimber and POL are to be appraised together in the same sale.
Do not use POL TEA for material that could qualify as sawlog material.
Use TEA, Standard Rate, Comparison or other approved appraisal method used in
the original sale for extension and damage appraisals unless the residual value
method was used. TEA is the approved method for extension and damage
appraisals if the original sale was appraised using the Residual Value appraisal
method.
The initial POL database contained only aspen standard rate or comparison with
standard rate appraisals. With the November 2, 1992, update, all species of POL
sales were included in the database. As a minimum, the database will be updated
semi-annually within 30 days after the end of the 1st and 3rd calender year quarter,
and contain only POL or POL/Sawtimber mixed sales that were appraised and sold
using the POL TEA method. The database shall contain sales and index
information for the two previous six month periods.
Appraise all POL sales using CCF as the unit of measure. This will prevent errors
in the intended appraised price due to conversions between units of measure.
Major appraisal points for POL are: Longmont, Mancos, Walden, and Olathe,
Colorado; Whitewood, South Dakota; and Encampment, Laramie, and Manderson,
Wyoming. Other appraisal points are approved provided there is reasonable
assurance that such POL sale is economically viable to that point (sale will sell at or
above advertised rates), and the appraisal point is the nearest facility capable of
manufacturing the intended product being appraised within the contract period.
Adjustments included in the POL TEA system are similar to comparison with
standard rates. Adjust for the following:
1. Difference in Haul Mileage.
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2. Maintenance Deposits.
3. Slash Deposits.
4. Temporary Road Costs (other than stump roads).
5. Unusual Adjustment (In specific cases).
6. Specified Road Costs.
7. There is no Log Cost Adjustment for POL.
Appraise costs for treating residual trees, C(T)2.13#, in the slash plan and include
as a specific sale adjustment for slash in addition to any slash deposit required.
Offer all POL sales as flat rate as there is no basis for an index for this material.
Prepare one appraisal summary regardless of the number and kinds of products
involved. Appraise sawtimber and POL on one summary when sawtimber is
included as a minor component of the sale.
71.4 - Current TE POL Appraisal Data. See Current Appraisal Data Bulletin (sec.
50.5) published semi-annually for updated values and average costs.
71.5 - Adjusted Base Period Price. This is the rate resulting from the average bid
adjusted for market conditions and is with roads in place. The following procedure
is used to arrive at the published value.
The high bid for each sale within the database is weighted by its corresponding
volume, and divided by the total volume in the database to arrive at the average
high bid. This is considered the Base Period Price.
The Market Adjustment is based on Random Lengths - Oriented Strand Board;
North Central - 7/16" Index (Random Length Index). Market Price Adjustments are
based on the difference between the weighted average Sale Price Index in the
database compared to the Current Price Index. The index difference is multiplied
by a factor of 0.2 to convert from $/thousand square feet (board measure) to $/CCF
(log measure).
The sale index entered in the database for each sale sold shall be the index used for
developing the database. Example: Sale is advertised on 10/15/92 (Bid Date is
11/17/92), the index in use during the 4/92 - 9/92 period is used. This index is the
six month average of 10/91 - 3/92.
The Current Price Index is the average of the six monthly prices from the Random
Lengths Index for the most recent six month period of the database.
The Random Length Price Index for each month is the price listed in the chart
entitled "Monthly Averages" which is published in the last weekly issue for each
month of Random Lengths. The Random Length Index for each sale within the
database is weighted by volume, and divided by the total volume to arrive at the
weighted average Random Length Index (Base Period Index). The Base Period
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Index is subtracted from the Current Price Index to arrive at the difference between
the indicies. This difference may be positive or negative. The difference in indicies
is multiplied by an adjustment factor (0.2) to convert the Random Length Index
value of 1000 square feet of paneling to 100 cubic feet for POL products. The
Market Adjustment is added to the Average Bid to arrive at the Base Period Price
adjusted for market.
An example of the market adjusted Base Period Price (BPP) calculation is:
Weighted Ave.
High Bid + [(Current Index - Base Per. Index) X Adj.]
=
BPP
$14.20 + [($244.00 - $249.53) X 0.2], or $14.20 + [-1.11] = $13.09
The Adjusted Base Period Price is further modified by the difference between
weighted average haul miles for all sales in the database and the base 52 miles. An
example of this calculation is:
BPP
+ (Wt'd Haul - Base Ave Mi. X Cost/Mi.)
$13.09
+
(82
-
52
X 0.17)
=
= Adj. BPP
$18.19
This places the Adjusted Base Period Price (BPP) on an equivalent haul basis of 52
miles, determined to be the balance point where no adjustment is necessary for a
given BPP.
Upward and downward adjustment to Base Period Price shall be capped at an
equivalent of no more than +/- 16 percent of the Current Base Period Price listed in
the previous update.
71.6 - Sale Base Period Adjustments. The Adjusted Base Period Price reflects
average sale conditions (Sale Base Period Adjustments) to which the specific sale
can be compared. The Sale Base Period Adjustments are published in the Current
Appraisal Data Bulletin by category. The sale cost categories for road maintenance
deposit, slash disposal deposit including treatment of residual trees, and temporary
roads are considered within this basis. Haul cost is calculated from the deviation
about a base distance; therefore, the Sale Base Period Adjustment is zero. By
category, the sale cost for each sale within the database is weighted by volume and
divided by the total volume to arrive at the Sale Base Period Adjustments cost for
that category.
71.7 - Sale Cost Adjustments. Sale Cost Adjustments to be made for comparison to
the average sale in the database fall into two categories, Specific Sale Adjustments
and Other Sale Adjustments. These costs need the same level of accuracy as any
other appraisal method. Since the database is composed of the sale costs, the
accuracy of the future database is dependent upon the accuracy of calculating the
sale costs.
71.71 - Specific Sale Adjustments. Specific Sale Adjustments are those sale costs
which relate to the Sale Base Period Adjustments (sec. 71.6). The sale cost
categories for haul, road maintenance deposit, slash disposal deposit including
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treatment of residual trees, temporary roads, and unusual adjustments are Specific
Sale Adjustments. Refer to section 51.6 and related sections in chapter 40 for
direction in calculating these cost categories.
The only variance from these sections occurs in the calculation of temporary roads.
Section 44.3, exhibit 01 states that, "Since no felling, bucking, and skidding costs
are calculated for Transaction Evidence Appraisals, the appraiser must use the sum
of the Zone Cost Center for fell and buck; and skid costs located in section 42."
Otherwise, the instructions for calculating temporary road costs remain the same.
Subtract the average haul mileage from the sale haul mileage and multiply by the
haul rate of .1700/CCF/mile. This haul rate will remain in force without change
until revised. The haul is calculated as a variance from an average based upon
mileage. The database average haul distance for POL appraisal purposes is a
constant 52 miles.
71.72 - Other Sale Adjustments. Included within this category of Sale Cost
Adjustments are Unusual Adjustments and Specified Developments. Although
these items do not relate to the Sale Base Period Adjustments in section 71.6, a
relationship is established indirectly through the Average Bid.
1. Unusual Adjustments. Sale adjustments may be necessary for cost items
not incorporated within the normal confines of the database and are normally
needed in extraordinary situations only.
a. Consider a need for an unusual adjustment in cases where volumes
are small and move-in costs may not be properly amortized.
Use a rate of $5.00/CCF for POL sales of 100 CCF or less. For sales 101 CCF to 500
CCF, use a proportioned rate based on where the sale volume lies within the range.
b. Consider a sorting cost involved in separating products to different
markets for sales where POL and sawtimber is mixed. Use an unusual
adjustment to reflect this cost. Refer to section 51.6 for a similar
procedure for sawtimber; however, the component of the volume to which
the adjustment is applied differs as follows.
POL sale, sawtimber removal is required:
Apply the sorting cost equally among all species and product groups (Sale as a
whole).
POL sale, sawtimber optional removal at time of bidding:
Apply the adjustment to the sawtimber to encourage bidding on this material.
Use of this adjustment requires experience and knowledge of logging systems, and
intuitive reasoning. Be as objective as possible. If the appraiser does not have
experience, it is recommended that consultation with a Sale Administrator or a
person experienced in logging systems and appraisals be sought for advice on this
adjustment.
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Use the Load Cost in section 42 of this handbook for average cost on which
adjustment is to be made. For the adjustment, the appraiser must consider
uniformity of POL distribution on the sale area, uniformity of sawtimber
distribution, and other factors such as sizes, the volume being served by each
landing, and so forth. Document the need for such an adjustment and include
reasoning on how the percent adjustment was selected in the appraisal report.
Use the following table for sorting:
If POL Volume % is:
100%
50% - 99%
Use % of Load Cost:
0%
5% - 75%
For example, assume load cost in section 42 to be $5.43. POL volume is 85% of sale
volume and sawtimber is required to be removed. POL is uniform but sawtimber is
concentrated where about 30% of the landings will require sorting. Best judgement
indicates a load adjustment of 25%. Because only 30% of the landings will require
sorting, apply this percentage to the percent sorting adjustment for sale-as-a-whole
and distribute equally to all species groups appraised.
$5.43/CCF X .25 adjustment X .30 = $0.41/CCF Unusual Adjustment
(sale-as-a-whole)
This is the added cost for sorting compared to a normal sale of pure POL and is
entered as an unusual adjustment.
Use the same approach for calculating the sorting cost on a sale where sawtimber is
optional bidding except multiply the same rate per CCF by total sale volume, divide
by the sawtimber volume and apply only to the sawtimber component. Example:
Sale volume = 1,000 CCF; therefore sawtimber = 150 CCF;
thus: $0.41 x 1,000/150(sawtimber volume) = $2.73/CCF for sawtimber
2. Specified Developments. The sale adjustment for specified developments is
normally limited to specified road costs. Refer to section 44.5 for direction.
The rate entered for Specified Road Cost is the total Purchaser Credit Limit divided
by the total volume and the cost per CCF is shared equally among all species and
products. Prior requirements to separate purchaser credit between POL and
sawtimber no longer applies. Because appraisals make the assumption of roads
being in place, and purchaser credit earned is used to pay for stumpage above base
for all products.
71.8 - Competition Factor. The Predicted Bid is the high bid which is expected to be
received if the sale receives average competition. To allow for competition and
minor sale differences not considered within the appraisal, the Predicted Bid is
adjusted downward by the competition amount. The amount of adjustment is
published in the Current Appraisal Data Bulletin and is based upon the bidding
competition within each individual National Forest. When a sale is unadvertised,
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normal competition does not exist. Therefore, it is not appropriate to apply a factor.
Any appraisal for unadvertised sales shall not include a competition factor amount.
Noncompetitive forests have a Base Period Bid Ratio in the database which is less
than five percent. The Competition Factor for noncompetitive forests will be five
percent.
Competitive forests have a Base Period Bid Ratio in the database which is five
percent or greater. The Competition Factor for competitive forests is ten percent.
The Competition Factor is used to calculate the Competition Amount which is the
Adjusted Base Period multiplied by the Competition Factor. The following
calculation is an example of calculating the Competition Factor Amount.
Adjusted Base Period Price X Competition Factor) = Competition
Factor Amount
Assuming an Adjusted Base Period Price of $17.18 and a Base Period Bid Ratio
(Competition Factor) of 10%:
$17.18 X .10 = $1.72/CCF Competition Amount
72 - TIMBER PROPERTY. (FSM 2469, FSH 2409.18, sec. 47.3). Determine timber
property value by using appropriate cost data (local collected costs or constructed
costs). Local collected costs are preferred over constructed costs. Rates for logging
costs in section 42 of this handbook may be used. Timber property values may be
included with any approved appraisal method.
Do not include timber property value for standing timber sold and cut as a result of
land clearing under an approved Special Use Permit. As a rule of thumb, timber
property value is not included on timber settlement sales if the trees remain on the
stump at the time of appraisal.
Prepare an appraisal with timber property values in a manner similar to sales
without timber property. This will show log value on the stump without any
additional processing. Include the cost of processing to the condition at which the
sale is made separately and add this cost to the stumpage value and base rates to
determine the advertised rate and advertised base rates. In the case of trespass or
theft, the condition at which the sale is made could include timber in the form of
logs discovered in a mill deck or even lumber that has been produced from trespass
or stolen trees.
Use caution not to include items that pertain to development of a site which would
further reduce stumpage values. Such items as erosion control, roads used for other
purposes in addition to timber removal, slash disposal, removal of cull trees, and so
forth, should not be included in the appraisal. These items have normally been a
requirement as part of a contract or permit; therefore, the costs have already been
amortized through being a cost of doing business or direct compensation.
Use Form FS-2400-17, Report of Timber Sale-Convertible and Nonconvertible
Products, to calculate and summarize values for Timber Property Sales. Exhibit 01
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is a sample of a Transaction Evidence Appraisal for a Timber Property Sale where
some of the sale volume is on the stump, some has been felled and bucked, and some
has been decked (skidded).
Column A shows the procedure when the Indicated Advertised Rate (Line 30) is less
than minimum rate. The Indicated Advertised Rate must be adjusted to the normal
Base Rate (Line 31) as it is the minimum rate which we will accept regardless of
type of sale. Use of Paradox to appraise the sale will automatically make the
adjustment. Timber Property Value (Line 36) is shown separately and must be
added to the calculated Advertised Rate (Line 33) to determine the sale advertised
rate. Timber property value must also be added the base rates to assure full
recovery of the timber property value of $11.35. The total of the addition of timber
property value to Advertised Rates and Base Rates results in the contract rates to
charged and are the advertised rates reflected in the prospectus and bid forms as
well as the contract.
Column B shows the procedure when the Indicated Advertised Rate is greater than
minimum rates. The same procedure for determining the contract advertised rate
for Column A applies here, except no Adjustment to Base Rates is required as the
Indicated Advertised Rate is greater than Base Rate.
If some of the sale volume is on the stump and some of the sale volume is timber
property, the total timber property value shall be spread over the total sale volume
rather than having a special column just for timber property. Line 12, Skid/Yard
Cost Adj, illustrates the total cost of fell, buck, skid, load and overhead as if the
entire volume was still on the stump. These unit costs are taken from section 42.
The figures in parentheses are the costs already spent to deck the sawlogs.
The example sale (ex. 01) has a total of 210 CCF, 105 CCF remains on the stump
and 105 CCF has been felled and bucked. Of the 105 CCF that has been felled and
bucked, 52.6 CCF has also been skidded and decked. No volume has been loaded,
hauled or removed. The calculations for the timber property value is as follows
(costs displayed are not current costs from section 42 of this handbook):
Value of Timber Felled and Bucked:
105 CCF X $8.99 (Felled and Buck Costs) / 210 CCF
= $4.50
Value of Timber Skidded:
52.6 CCF X $14.88 (That Portion of Skid & load Costs) /
= $3.73
Timber Purchaser Overhead (Timber Purchaser Overhead on the Fell, Buck & Skid
Costs):
$8.23 X $0.1993 (section 42)
= $1.64
P&R Margin of Total Costs:
$9.87 X 15 % (Use this percent as reasonable)
= $1.48
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Timber Property Value:
= $11.35
The sum of all timber property values will be included on an added line at the
bottom of TE Appraisal Summary Form, R2-2400-17 (11/93) if still being used.
Document the actual contract advertised rates and base rates in the appraisal
report and be sure the appropriate rates are shown in all sale documents prior to
advertisement.
For Paradox appraisal users, the timber property value is entered into appropriate
block on the Species Information screen. When the FS-2400-17 is calculated, the
timber property value is displayed as a separate item on Line 36. Add the timber
property value to the Advertised Rate (Line 33) and Base Rate (Line 31) to obtain
the actual Advertised Rates and Base Rates for the sale.
Exhibit 02 is for a standard rate appraisal of the same sale as exhibit 01. The same
procedures are followed except no Sale Conditions costs are applied.
Timber property value is deducted from high bid rate to obtain statistical high bid.
However, statistical high bid will not be reduced to less than minimum rate, which
includes property value. The Paradox appraisal system will perform this operation
on statistical high bid automatically.
Refer to FSM 2469 and FSM 6530 for instructions on reporting collection of timber
property value on the timber sale statement of account.
72.1 - Timber Settlement. (FSM 2464, FSH 2409.18, sec. 47.4). Use timber
settlement to sell and remove timber products from a permit area when a
commercial timber sale will not meet the objectives of the permittee or the
government. This is the only authority which permits the sale of timber over
$10,000.00 in value by direct negotiation without advertisement.
Payment is required at appraised value for timber products that will be removed
from the permit area. Appraise these sales using the same procedure as for normal
commercial timber sales. Use TEA whenever possible; however, special
requirements may effect the appraisal situation. For example, permit provisions
may restrict timing of operation, require unusual prescriptions, or place limits not
otherwise experienced in routine timber sales. Appraisers must use careful
judgement in such appraisals to recognize costs associated with meeting permit
requirements versus costs associated with removal of the timber. In these cases,
special cost allowances (plus or minus) and unusual adjustments may be
appropriate. The appraiser must document these adjustments.
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72 - EXHIBIT 01
72 - EXHIBITS 01-02 ARE SEPARATE DOCUMENTS.
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72 - EXHIBIT 02
72 - EXHIBITS 01-02 ARE SEPARATE DOCUMENTS.
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73 - DEAD VOLUME. Dead timber is used for a wide variety of products with
fluctuating market values, which makes selling value hard to establish. Dead
sawtimber may be sold at standard rates if it is the sole product on the sale and (1)
has a value less than $10,000; (2) meets criteria listed in chapter 10 and (3) does not
include any items listed in section 11.3. If Dead timber meets the criteria of section
11.3 and has a value less than $10,000, Comparison with Standard Rates (sec. 21.2)
appraisal methods may also be used if being offered as the sole product.
Appraise all dead whenever present on a sale unless the volume is so minor that it
may be combined with the lowest value live species group. Appraise dead and live
sawtimber using the Transaction Evidence Appraisal method regardless of value
when both product forms are being appraised on the same sale. Appraise dead
sawtimber to the same appraisal point as live sawtimber unless there are sound
reasons to appraise to a different point with a well established history in the use of
this product.
For Paradox appraisal users: dead sawtimber being appraised to a different location
than live sawtimber currently require a separate appraisal unless the difference in
haul cost between live and dead is included as an unusual adjustment and noted in
the "Remarks" block.
Where merchantable dead sawtimber (product code 01) is being appraised, it will be
on a "gross" basis to enable selling values, costs and cost adjustments to be applied
directly to the volume without the need of adjusting appraisal data on a net and
gross volume basis. Determine dead sawtimber volume as the gross volume X (1 total defect left in the woods). This places tree measurement volume for dead on the
same basis as dead volume scaled on a gross basis described in C6.823 - Scaling as
Presented - Dead Timber and basic scaling practices described in FSH 2409.11a,
National Forest Cubic Scaling Handbook. The appraised volume and value of dead
is also the volume and value for entry in the advertisement, bid form and contract.
Appraise volume of dead products other than logs (POL) using transaction evidence
appraisal method (TEA) on a gross volume basis without consideration for defect.
All material suitable for manufacture of lumber must be appraised and offered as
sawlogs (FSH 2409.22, sec. 06). See section 71 for appraising sales of POL.
Calculate dead unit costs on the same basis as live when live and dead volume are
being appraised and sold on the same sale. Costs shall be carried evenly by both
live and dead volume.
Treat dead sawtimber as though it were another live species when dead is
appraised with live sawtimber so that adjustments (such as adjustments to base
rates if either appraises deficit) may be made equally and for determining the Sale
Total or Average column on the FS-2400-17. The Paradox Appraisal System is
designed to appraise these two products accordingly.
73.1 - Specified Development Cost. The specified road cost for dead is determined
no differently than live sawtimber. Dead volume is included with the volume of
other species and products when dividing specified road costs by sale volume for the
cost per CCF. This procedure is for live and dead sawlogs when dead is mandatory
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removal. When dead is optional, the live sawlogs carry all of the above costs, and
the dead volume must be appraised separately so that no offset due to possible
deficit situations occurs.
A separate appraisal must be used when standard rates or a comparison appraisal
is used. When live and dead are appraised separately, there can be no adjustments
between the two appraisals.
Advertise dead material as being subject to bidding whenever removal is
mandatory. Allow bidding on dead sawtimber if advertised as optional material,
and it exceeds 10% of the sale volume. Consider advertising dead sawtimber at a
Fixed Rate amount for volumes less than 10% of total sale volume.
74 - ASPEN. Region 2 does not have an established aspen sawlog market,
therefore, all aspen in Region 2 shall be appraised and sold as products other than
logs (POL). Like dead sawtimber, appraise aspen as a separate species. Do not
include aspen with a sawlog species unless it is so minor that normal cruise design
did not pick it up in sampling.
Transaction evidence appraisal for POL is approved for use on all aspen sales, and
is recommended for sales equal to or greater than $2,000 in value. (Refer to sec.
71.1)
Aspen may be appraised using standard rate or comparison with standard rate
appraisal methods when the sale is less than $10,000 in value. Sell as POL and use
TE POL base period price or a higher rate as determined by Forest Supervisors
(subject to limitations in FSH 2409.18 chapter 10). If the sale involves a small
amount of specified road costs, and the difference between standard rate and base
rate will carry road costs, it may still be a standard rate appraisal.
Consider road costs for aspen equally with sawtimber when included in the same
sale. In this case, appraise both products on the same Appraisal Summary using
the TEA method.
The product and unit codes for products other than logs (POL) are: POL, Code 3 and
CCF, Code 09. The contract can be 2400-6T, 2400-6, 2400-3T or 2400-3. For scaled
sales, loads shall be weighed using C6.824# Scaling as Presented - Sale by Weight.
A factor of .3478 CCF per Ton may be used where there is no local data available.
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