Background Study of
Tropical Timber Export and Import
Trade Statistics
August 2003
Jade Saunders Associate Fellow
Duncan Brack, Programme Head
Sustainable Development Programme
Royal Institute of International Affairs
10 St James’ Square
London SW1Y 4LE
UK
Tel: +44 (0)20 7975 5711
Email:
Contents
Executive Summary 3
Introduction 4
1 Issues relating to UK data gathering 5
1.1 The UK timber trade data collection system and capacity 5
1.2 Classification of timber imports through commodity codes 7
1.3 Misclassification/simplifications 8
1.4 Financial disincentives for correct classification – duty irrationalities 9
1.5 Conversion factors 10
1.6 UK timber supply industry 10
2 Issues relating to data set collation 11
3 Trade via third countries 12
3.1 Triangular trade 13
4 Proposals for improved national data gathering 13
4.1 UK timber data collection and capacity 13
4.2 Classification 14
4.3 Misclassification 14
4.4 Complex forestry product use in the UK 15
5 Topics requiring further in-depth studies 16
5.1 Customs capacity 16
5.2 Improved customs communications 16
5.3 Additional data collection systems 16
5.4 Duty rationalisation 16
5.5 HS code assessment 17
5.6 Understanding the UK timber import market 17
Appendix 1 18
Appendix 2 – list of consultees 19
Appendix 3 HS Code Chapter 44 Exceptions 20
Executive Summary
· National data collection methods involve the potential for significant inaccuracies that are unlikely to be removed without unrealistic increases in resources and capacity or a chain of custody system for timber products.
· Customs authorities are primarily concerned with keeping contraband goods out of their country and collecting duty, accurate data collection is not emphasised or incentivised.
· Attempting to collect and collate absolutely accurate international trade data, particularly in a market that is as un-integrated as the timber trade, is not a practical way to highlight the size of the illegal forestry sector. Changes in trade data can give an idea about the direction in which a market is moving, but inaccuracies in forestry data, even significant ones, are pragmatically accepted by all analysts that were interviewed as part of this study.
· National data collection could be improved to varying degrees by the recommended policy options detailed in Section 4. While the results would still not constitute a totally accurate and comparable set of data, there may be other benefits related to the increased attention to the trade in forestry products and improved communication between customs authorities.
· A new organisation or role for the WCO in improving communication between national customs authorities and observer groups would both potentially improve data collection and give significantly improved defences against unwanted illegal goods entering consumer countries.
· There is a limit, however, to how much one can expect existing customs structures and procedures to be modified to collect significantly better data. The potential for additional systems (such as permits or licenses) could usefully be assessed.
Introduction
This consultancy is part of work being conducted under the International Tropical Timber Organisation (ITTO) Decision 6(XXXI) Forest Law Enforcement in the Context of Sustainable Timber Production and Trade passed by the ITTO Council in November 2001.
Tropical timber and timber product trade statistics available to ITTO from exporting and importing countries often appear to show substantial divergences between the two sets of figures. It has been suggested that this at least part of this discrepancy may derive from illegal forestry activity; so, in order to isolate possible illegality from simple statistical inaccuracies, it is first necessary to understand the way in which this data is generated, collected and collated.
The purpose of the present study is therefore, within the context of Decision 6(XXXI), to analyse the situation concerning partner countries that appear to show substantial differences in the statistics reported. The aim is to determine the reasons for these differences, and propose approaches for developing a more accurate and comparable set of data where appropriate. In the case of the United Kingdom, the commodities and trade partners indicated in Appendix 1 are the main focus: industrial roundwood, sawnwood and plywood from Cameroon, Brazil, Malaysia and Indonesia.
It has not, however, been possible to make direct comparisons with export regimes in those trade partner countries, as, despite efforts, there has been no clear or substantial contact with their customs personnel or anyone with direct experience of their systems.
ITTO has stated that the analysis carried out in these studies will be used to help build an international timber trade data set of improved accuracy and comparability. This report will also suggests ways to expand or clarify the collection and collation of data in order to produce a more accurate and comprehensive picture of the ongoing international trade in timber.
Improved data sets on the trade in timber and wood products may have the potential to help the international timber trade to police itself, to help governments combat illegal activities and to support and encourage legal and sustainable timber, and allow consumer countries committed to sustainable forestry at the international level to better understand the possible leverage that they can have in producer countries. Although the terms of reference for this report do not focus specifically on illegality, but rather concern themselves with the accuracy of current data sets, this report also touches on some issues of relevance to current international efforts to tackle trade in illegal timber.
The current data set of intra- and extra-EU trade has been designed to collect information about the flow of goods and money between countries, rather than to produce detailed information about goods traded in any particular sector. Statistics are collected and collated in a manner that satisfies the broad aim of identifying trends in these flows and capturing a general picture of trade between partners. It has become increasingly clear that the national trade data collection system that currently exists is not appropriately directed or resourced to be of use in capturing data detailed enough to highlight reliably any specifics of illegal activity within the forestry sector. There are, however, various strategies, detailed below, that could lead to an improved understanding of the forestry sector as a whole. Based on the research undertaken, however, it seems unlikely that the level of potential additional understanding to be gained would make these cost-effective to implement.
The report is divided into five sections. The first deals with the way in which data is collected in the UK, the second with the way that that data is collated and compared in international data sets such as EUROSTAT and those collected by the ITTO, and the third looks at issues arising where goods traded between producer countries and consumer countries involves another country. The fourth section identifies key problems in data collection and collation and proposes strategies for improving the collection of data relating to the trade in forestry products, specifically hardwood commodities. The final section identifies potential further work arising from this research.
1 Issues relating to UK data gathering
This section examines the procedures used in the UK to gather and collate information on timber imports as well as assessing the accuracy of these processes.
The ITTO study’s terms of reference ask for a reasonably straightforward analysis of available customs data; however, in carrying out this project we have found that analyses of import data do not necessarily yield information about the imports to which the data relates. For example, it is not possible to verify whether a shipment is in fact plywood with a single tropical veneer from Cameroon, say, just by looking at in import record that says it is. In addition to data analysis we have therefore focused closely on interviewing officers of Her Majesty’s Customs and Excise (HMCE) and a range of timber analysts and representatives of the UK timber import industry in order to develop an analysis of the strengths and weaknesses of the current system of collecting data (a list of consultees is attached in Appendix 2). This process was extremely useful, and most of the insights and recommendations in this report are based on these interviews, rather than on a simple analysis of the basic UK data sets.
Representatives of the UK timber trade, and trade analysts, appear to consider the UK timber trade data set to be relatively reliable in terms of value, due to the efficiency of HMCE in collecting duty and related information. There were, however, differing views relating to the collection of data on volume and weight. It was felt that the general reliability of the UK data was, at least in part, due to the fact that a significant majority of the wood imported into the UK is softwood grown in EU partner countries. Despite the reliability of data about the majority of UK imports, however, the discrepancies between import and export data related to the commodities and trade partners focused on in this study are important, as they may indicate the magnitude of UK imports that is unrecorded and possibly illegal, and as such are worthy of scrutiny.
1.1 The UK timber trade data collection system and capacity
Data relating to imports into the UK is, in the main, entered directly on to a publicly accessible computer database by the importer, or a shipping agent appointed by them. The primary units of information supplied depend on the source of the goods. For those entering the UK from outside the EU, commodity code, value, weight, source of trade, a description and the details of the importer are required. If the goods imported do not appear to warrant an examination, the computer system (called CHIEF) can automatically clear them to be collected from the port.
Profiles are established on the system to search for suspect imports by local customs officers or national HMCE headquarters. These suspicions are based on background intelligence deriving from central HMCE and officers on the ground, and form a central part of the process by which illegal imports are stopped and correct information is collected. The profiles can highlight all fields entered in the system: value, commodity code, VAT number of importer, etc., as well as a free search on key words in any description given. If a profile is triggered by an import entry then customs officers are alerted to its presence and an examination can take place.
Although the HMCE CHIEF system is effective in data collection for trade statistics organisations such as EUROSTAT, the statistical office of the European Commission, it was not established for that reason and neither is data collection a primary aim of the customs teams who examine imported cargo. Priorities in HMCE are to collect duty and taxes where necessary and to detect and prevent illegal goods, such as firearms and drugs, entering the UK. These priorities are clearly reflected in the lack of resources allocated to capturing misclassification unless this is aimed at duty evasion (see Section 1.3 below). Analysts have suggested that it is not uncommon for weight and volume data to be wildly incorrect – often out by whole decimal places – due to uncorrected administrative errors. Such errors go uncorrected and often unreported because the primary unit of information collected about commodities is their financial value. The greater efforts put into ensuring the accuracy of value information collected is related to HMCE’s primary objective: collecting duty on imports.
As a result of the relatively low priority given by HMCE to collection of volume and classification data, there appears to be a lack of resources and capacity allocated to accuracy of timber trade statistics, although this may not necessarily be restricted to the timber trade. At Felixstowe, for example, one officer currently has the job of overseeing over three million annual timber shipments in and out of the UK. (Felixstowe is one of the five main ports for timber imports into the UK; the others are Tilbury, Liverpool, Southampton and Ipswich. In 2002 Felixstowe accounted for around a third of the total volume of timber imports into the UK.) The individual officer is also responsible for all imports brought into the port under the Convention on International Trade in Endangered Species of Wild Fauna and Flora) (CITES), and battled for the resources he needed to identify wood species – such as a magnifying glass and identification manuals.
In addition to the lack of resources on the ground at Felixstowe, it also appears that there is little or no communication between HMCE officials in the UK and their equivalent numbers in trade partner countries outside the EU. Such communication, both between officers in different countries and with other observers such as Global Witness, particularly in the light of the huge recent advances in information technology, could be a cheap and efficient way of sharing intelligence about shipments which may be avoiding duty, as well as potentially misclassified timber or systemic issues that may encourage misclassification.
Structures such as the one used by Interpol, whereby national offices are established in each member state to serve as a point of contact with police forces in other member states, could be used as a model for increasing such contact, without the potential loss of accountability that direct interaction between individual officers in ports may represent. There is currently a limited procedure established for interaction between national customs offices but it is apparently slow and irregular.[1] If a more efficient model for sharing information, such as the one used by Interpol, was deemed useful it may be possible to develop it under the auspices of the World Customs Organisation (WCO, formerly the Customs Cooperation Council), an independent intergovernmental organisation responsible for promoting an efficient and predictable customs environment in each of its 152 member states.
1.2 Classification of timber imports through commodity codes
The most common way of identifying goods for customs officers is the use of customs codes, which are designed and applied primarily for the collection, comparison and analysis of trade statistics. The vast majority of countries now use the United Nations Harmonised Commodity Description and Coding System (Harmonised System, or HS, for short), administered by the WCO. The UK uses a ten-digit system of commodity codes, based on the HS. The HS is also the basis of the codes used in almost all UK trade partner countries, though harmonisation only currently exists to six digits. The harmonised six-digit codes are assigned to each product or group of products subject to trade; more than 5,000 codes are currently provided in ninety-six chapters. The HS is subject to regular review and revision over a five- or six-year cycle. The latest edition came into effect from 1 January 2002, including the amendments approved by the contracting parties in 2000. The next review cycle has already started; it is expected to be completed in 2004 and implemented in 2007.