Illegal Logging Update and Stakeholder Consultation

Chatham House, 10 St. James’ Square, London SW1.

Thursday 20th – Friday 21st July 2006

Chairs: Duncan Brack, Jade Saunders, Richard Tarasofsky (Chatham House); John Hudson, Hugh Speechly (DFID)

Thursday 20 July

Hugh Speechly opened the meeting. Duncan Brack explained that the purpose of the Chatham House update meetings is to provide a focus for debate on illegal logging. He reminded participants about the website: www.illegal-logging.info, which will shortly be restructured, and asked for any relevant reports or documents to be sent to either him or Jade Saunders.

FLEGT Action Plan

FLEGT progress – John Bazill, DG Environment, European Commission

The purpose of the presentation was to provide an update on the period since the last meeting.

The EU FLEGT Action Plan comprises a package of themes, which are mutually supportive. At the heart of this are partnerships with timber-exporting countries and procurement initiatives. The key recent developments are:

Council: The FLEGT regulation has been adopted, governing EU implementation of the FLEGT licensing scheme. The negotiating mandate for FLEGT partnership agreements has been agreed, providing a framework for the European Commission to negotiate with partner countries. ‘Conclusions’, associating the EU with the ENA FLEG declaration, were also adopted in June 2006.

FLEGT partnership consultations: Informal consultations have taken place on FLEGT partnerships with Cameroon, Indonesia, Malaysia and Ghana, and smaller-scale meetings have also taken place in Congo-Brazzaville and Gabon.

European Parliament: A resolution on FLEGT was adopted in July 2006 There has been much debate about the legal base of the regulation, ie. trade or environment and development, as this affects the relative influence of the Council and Parliament. The Parliament called for legislative measures to be introduced to make it illegal to import illegal timber into the EU.

International Tropical Timber Agreement (ITTA), agreed in January 2006: The objectives have been simplified to focus on the import of sustainably managed timber; the agreement includes references to illegal logging; and the need for accurate information on trade flows was agreed, although there are difficulties in negotiating sanctions for those not producing reliable statistics.

EC development assistance: A workshop to plan development assistance was held in December 2005 and the Commission and member states have earmarked substantial resources around the FLEGT Action Plan, including 15 million euros to Indonesia and 10 million euros to the ACP countries (Africa, Caribbean and Pacific). The Commission is now developing strategies for future budget expenditure; a number of budgets, including the Tropical Forest Budget, are being replaced by a thematic programme on natural resources and it will be crucial to ensure that the focus is kept on forests.

A series of programmes on forest governance are now ending their first year, and the new 2006 projects include a governance initiative in Colombia and a study on illegal logging in the Balkans and Caucasus. There are also early discussions taking place about developing a capacity-building process around CITES-listed timber species.

Additional options: There are a number of other options for additional legislation that could be introduced to deal with potential loopholes in the FLEGT licensing system – for example, timber produced in one country and processed in another.

A recent workshop held in Brussels under the auspices of Chatham House was successful in bringing national perspectives on possible additional legislation to the discussion, and current discussions within the Commission are likely to lead to formal consultations in the autumn.

The remainder of 2006 will therefore see work on negotiating FLEGT partnership agreements, planning development assistance to support these agreements, examining additional legislative options, engaging with China (now a major player in the timber trade), and work on ENA FLEG and East Asia FLEG. It will be crucial not to lose the momentum in the partnership discussions and miss opportunities, particularly in the ACP countries.

The full PowerPoint file of this presentation is available at: www.illegal-logging.info/presentations/200706/bazill.ppt (119k)

Assessment of Additional Measures to Exclude Illegal Timber from EU Markets – Duncan Brack, Chatham House

There are a number of potential loopholes in the FLEGT system:

· The number of countries signing Voluntary Partnership Agreements (VPAs) may be limited.

· It will therefore be possible for illegal timber from VPA countries to be shipped to the EU via non-VPA countries, thereby evading the licensing scheme. If there were universal coverage for the licensing system, this would cease to be a problem.

· It is not clear whether VPA countries will be under any obligation to control imports; if they are not, they may be able to import illegal timber from elsewhere and then ship it to the EU under a FLEGT license, as no illegality would have taken place in the VPA country itself.

Therefore, there is interest in developing other legal instruments –‘ additional options’ – to plug the loopholes as part of the FLEGT Action Plan.

Studies have been carried out of existing legislation in Estonia, Germany, Italy, Netherlands, Spain and the UK, and a number of practical problems have been identified, such as a lack of cooperation with foreign enforcement agencies, continuity of evidence in tracking individual loads, and the definition of ‘illegal timber’. It may be possible to use domestic legislation to tackle illegal timber, but probably only for timber that has been ‘stolen’ (excluding, e.g., timber exported without payment of export duties) and the most useful route is likely to be a civil case against whoever ends up on possession of the timber. New legislation will only be helpful if it can address these problems.

Two approaches for tackling these loopholes would be the use of trade measures or the introduction of new criminal legislation.

Trade measures: a requirement of proof of legality for all timber imports to the EU regardless of origin, and a ban on the import of unlicensed products, covering VPA and non-VPA countries. Proving legality would require certification, a FLEGT license or equivalent documentation. There are, however, problems with this approach:

· It would require the licensing of 85-90% of trade that is not illegal.

· It would be highly effective, but highly disruptive and costly, and may have an effect on the demand for timber – though it would put already certified timber in an advantageous position.

· It could cause a WTO problem due to discrimination between domestic products and imports, unless there was also a requirement for domestic products to be licensed.

· In addition, the WTO may view the impacts of such measures as disproportionate to the achievement of the objective of reducing illegal logging.

This kind of trade measure was proposed in December 2004 by FERN/Greenpeace/WWF. This would require ‘valid and verifiable’ documents demonstrating legality, and would cover all movement of timber and timber products within the EU. This may satisfy the WTO in terms of discrimination, but may still be viewed as disproportionate.

Another potential trade option could be reciprocal export and import bans, such as a request from Indonesia to the EU to ban the import of logs and sawn timber. This may have some value in particular regions and could be applied in the EU through the FLEGT license scheme, but extensive export bans do not discriminate between legal and illegal timber and are not a realistic long-term option.

New criminal legislation: a prohibition on the import (and purchase, sale, possession and transport) of illegal products, along similar lines to the US Lacey Act, which makes it unlawful to ‘import, export, transport, sell, receive, acquire or purchase in … foreign commerce … any fish or wildlife taken, possessed, transported or sold … in violation of any foreign law’.

The Lacey Act is frequently used by US prosecutors, is regarded as useful legislation, and does not require cooperation with foreign countries, although cooperation is helpful. However, proving illegality is not always straightforward. It has been used widely to combat illegal, unreported and unregulated (IUU) fishing and a similar principle has been incorporated into the legislation of some south Pacific countries, and is encouraged under the UN Food and Agriculture Organisation (FAO) Plan of Action on IUU Fishing, the EU Community Action Plan on IUU fishing (2002) and the conclusions of the High Seas Task Force (March 2006). The UK is currently considering including such measures in the forthcoming Marine Bill.

The benefits of legislation modelled on the Lacey Act for the EU could include:

· Clear advantages compared with national criminal legislation.

· A wide range of triggers, not restricted to theft, but anything that makes the timber illegal.

· It does not require proof beyond reasonable doubt; and effectively creates requirement for due diligence on the part of the importer.

· Legislation does not have to be identical to the Lacey Act; though the experience of implementation in US is important.

· Contracts would be negotiated which shift the risk on to suppliers.

The EU does appear to have the competence to introduce such legislation, which would probably take the form of a Directive (penalties for infringement would be set at member state level). In the absence of EU legislation, member states could introduce their own national legislation; there would need to be consideration as to whether this would create a barrier to trade within the EU, although previous dispute cases suggest it would be acceptable.

In conclusion, this analysis suggests that existing national legislation is unlikely to be very useful in plugging the loopholes in the FLEGT system. A requirement for proof of legality for all imports at the border would be highly effective, but the cost of, in effect, a universal licensing scheme would be very high. The introduction of Lacey Act-style legislation has advantages, but is not a panacea. The ideal solution in the long term is a world-wide licensing system, but this is simply not feasible now. Therefore, the introduction of EU legislation modelled on the Lacey Act would appear to be the most effective measure available to underpin the FLEGT licensing scheme.

The full PowerPoint file of this presentation is available at: www.illegal-logging.info/presentations/200706/brack.ppt (327k)

Discussion

Cost of trade measures: A point was raised about the rise in costs and the impact on profits of trade measures. There is no easy way to only target illegal timber; certified or FLEGT licensed products would be unaffected, but all other products would be – and only 10-20% of timber traded in the EU is thought to be illegal. Therefore a blanket requirement would have too much of an impact on trade to be acceptable, and may lead to a shortage of wood or significant price increases. It was suggested that if a scheme with a guarantee equivalent to certification existed it would enable suppliers to gain a FLEGT license and avoid a double burden.

Lacey Act and the EU: The EU is considering Lacey Act-type legislation for timber, though there is a debate about whether it is a proportional approach. Prosecutors would have to prove that the timber had been illegally produced at the point of origin, which is often difficult, particularly where the products have a complicated supply chain. However, the burden of proof gives traders a degree of risk and insecurity and should encourage greater use of certificates of legality. A universal licensing system is the long-term answer.

Timber supply chain: it was suggested that companies could attempt to cut their risks by reducing the number of stages in the supply chain. Additional measures ought to provide that incentive in the absence of a licensing scheme.

EU budget and forests: A question was asked about the prospects for securing money for forestry projects under new budgetary arrangements. Forests and FLEGT are not major elements in the EU budget. The total ‘pot’ for forests will be less as forests will become one theme in a wider environmental ‘pocket’. However FLEGT will receive earmarked money, potentially 8-10 million euros per year. There is pressure within the EU, from citizens and the European Parliament who seek assurances about imports and provide the EU with justification for taking action.

Public Procurement

Belgian Policy Update – Christophe Van Orshoven, Federal Public Service, Health, Food Chain Safety and Environment

In 2003 there was a federal government agreement in Belgium on a green public procurement policy on timber. This was followed in 2004 by a Federal Plan on Sustainable Development. However, neither of these was translated into concrete action. However, in 2005, timber procurement became a government priority in a policy note from the Minister for Environment.

The Belgian procurement policy is based on the advice received from the Federal Council on Sustainable Development, whose members include representatives from the Belgian Woodworking and Furniture Industry, the National Timber Trade Organisation, academia, the employers’ organisation, unions, NGOs and the consumers’ organisation.

The policy became operational on 18 March 2006 and is compulsory for all federal administrative bodies and public organisations, such as the buildings agency, federal planning bureau and the Belgian Institute for Standardisation.

The policy requires the use of ‘wood from sustainable forest management as certified by an independent body based on internationally recognised criteria’. It does not include paper.

The certification systems that fulfil the criteria are:

· FSC certification.

· PEFC country certification, only if there exists a strongly developed social dialogue and respect for the rights of indigenous populations.

· Equivalent certification (involving an independent body, international criteria and guaranteed sustainable forest management).

The assessment of PEFC and the equivalent certifications is undertaken by a group of independent experts from the Belgian Woodworking and Furniture Industry, the Belgian federation of wood importers, environmental organisations and trade unions, with the cooperation of the federal ministry of foreign affairs and development, and the federal ministry of environment.

However, no consensus was reached within the expert group on the certification criteria between the passage of the legislation and it becoming law; therefore a ministerial decision was taken on an interim compromise policy. FSC certification is accepted and two country lists have been drawn up under the PEFC scheme, with a stated preference for the countries in the first list. There will be an annual update of the country lists and a full evaluation of all criteria in 2007-08.

The procurement policy is being supported by a public awareness campaign about sustainable timber and a guide for purchasers.