As a general rule, when you cut lumber to length, the lumber grade is unchanged. In those cases, care should be taken to transfer that grade verification along with the cut lumber. This can be done with a lumber crayon, segregation, tagging, or many other suitable ways.
Ripping lumber, however, can impact the grade. Because lumber grading is dependent on the width as to what knots or defects are allowed, ripping lumber can have a significant effect on the lumber grade. In fact, when lumber is ripped, a new grading process must occur in order to determine if the grade marks should be changed.
Prescriptive codes sometimes allow for ripping. An example might be tapering a floor member to provide slope on an exterior floor. The framer is required to evaluate the tapered member and determine suitability. In some municipalities, however, this tapering is not allowed. The joist would have to be installed at an angle to provide drainage.
A similar situation can occur when manufacturing trusses. In the diagram below, a notch is created in a wall vertical in this attic frame. This notch is not allowed without specific engineering, so it cannot be done without a proper analysis. The trusses manufactured in the photo have this specific instruction; however, in the engineering, the engineer purposely specifies that the notch should not be over cut. A good method of making this notch would be to drill a smooth hole at the point of intersection of the edges of the notches. This hole helps to eliminate surface defect concentrations. The cuts are made to the hole taking special care not to score or cut the opposite side of the hole.
Most importantly, the general rule you should always follow is – keep in mind your common sense. If something looks like it may have affected the lumber grade, then look more closely at it! Being careful and observant will help you avoid potential problems before they happen.