10 Things You Should Know

3. Have the products been legally produced?

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Have your products been legally produced?

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Chapter 3: Have the products been legally produced?

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CITES

Legality

Factors to Consider

There is no universally accepted definition of illegal logging and associated trade. Strictly speaking, illegality is anything that occurs in violation of the legal framework of a country. However, over the past few years several countries have created definitions of illegal logging within public procurement policies and trade regulations (see Table 6: Selected public procurement policies and Box 6: The U.S. Lacey Act, the EU Illegal Timber Regulation and the Australian Illegal Logging Prohibition), including:

  • European Timber Regulation (2010) - Timber logged illegally under the laws of the country of origin. Legal timber must meet the following criteria: legal rights to harvest; taxes and fees related to the harvesting; compliance with timber harvesting laws including forest management and biodiversity conservation laws; respect for third parties' legal rights and tenure; and, compliance with relevant trade and customs laws.
  • U.S. Lacey Act (amended, 2008) - It is unlawful to trade, receive, or acquire plants taken, harvested, possessed, transported, sold or exported in violation of underlying laws in a foreign country or in the U.S. The scope of laws is limited to plant protection laws, or laws to regulate: plant theft; taking plants from officially protected areas; taking plants from an officially designated area; taking plants without, or contrary to, required authorizations; failure to pay appropriate taxes or fees associated with the plant’s harvest, transport, or trade; laws governing export or transshipment.
  • Australian Illegal Logging Prohibition, Proposed (approved by Parliament’s House of Representatives in 2011; being considered by the Senate at the time of writing, 2012) - Illegal logging occurs when: timber is stolen; timber is harvested without the required approvals or in breach of a harvesting license or law; timber is bought, sold, exported or imported and processed in breach of law; and/or, timber is harvested or trade is authorized through corrupt practices.
  • Example of illegal logging are provided in Box 4: Examples of illegal logging.

    Legality is not a synonym for sustainable forest management. What is “sustainable” may not always be legal (World Bank, 2006; Contreras-Hermosilla et al., 2007), and what is legal may not be sustainable.

    Illegal logging of wood and paper-based products results from a complex set of legal, historical, political, social, and economic issues. Illegal logging is a fundamental problem in certain nations suffering from corruption and/or weak governance. Poverty, limited education, financial issues, economic instability and population growth are enabling factors for illegal activity as well.

    Illegal activity has many drivers that make it challenging to address. Government officials at local and national levels, companies, and local people can all have a role to play in illegal forest activities:

    • Local (and also national) government officials, often with very modest official salaries, may receive additional income in bribes to allow illegal logging. It can also be easier for local officials to “turn a blind eye” to powerful actors engaged in illegal acts than to enforce the law.
    • Companies trading illegally logged wood may have a market advantage over their competitors because illegally logged wood can be sold at lower prices, depressing the profitability of legally harvested wood (Tacconi et al., 2004; Seneca Creek and Wood Resources International, 2004).
    • Local people may derive direct income from illegal forest activities (Tacconi et al., 2004).

    Illegal logging and illegal trade can create serious problems:

    • Illegal logging and organized crime – organized crime syndicates are largely responsible for illegal logging in many countries. These groups employ a wide range of unlawful and sophisticated schemes to evade detection of illegal timber entering the market. Schemes include mixing illegal timber with legal timber from plantations or with logging permits, bribing officials to obtain permits or pass inspections, and even hacking into government computer systems to obtain or manipulate information on permits (Nellemann, INTERPOL, 2012; World Bank 2012).
    • Government revenue losses – a joint report by INTERPOL and UNEP estimates that organized crime
      groups launder $30-100 billion worth of illegal timber annually (Nellemann, INTERPOL, 2012). Most of this
      money is untaxed, controlled by organized crime, and used to pay bribes at all levels of government(Pereira Goncalves et al, 2012).
    • Poverty – indirectly. Governments deprived of revenue by illegal logging have fewer resources to invest in social and public policies.
    • Unfair competition – market distortion and reduction of profitability for legal goods; the World Bank puts this cost at more than US$ 10 billion per year (World Bank, 2002A).
    • Conflict – when the proceeds of illegal logging are used to support and fund conflict (Thomson, J., and R. Kanaan. 2004).
    • Unplanned, uncontrolled and unsustainable forest management.
    • Forest destruction – areas important for biological conservation, ecosystem services, and local livelihoods.

    Between 8-10% of global wood production is estimated to be illegally produced, although it is acknowledged that there is uncertainty in these estimates (Seneca Creek and Wood Resources International, 2004). Estimates of illegal logging in specific countries and regions vary, depending on the nature of the activity, and the variability of laws and regulations (Figure 5).

    Most of the illegally produced wood is used domestically, although a significant portion enters the international trade, either as finished products or raw materials (Seneca Creek and Wood Resources International, 2004).

    Efforts to Address Illegal Logging and Associated Trade

    During the last five to ten years, addressing illegal logging and illegal trade has risen to the top of the international forestry agenda. Several international processes1 have taken up this issue. Demand for legally-sourced wood and paper-based products in global markets has also increased, as a result of changes in public and private procurement policies (Table 6: Selected public procurement policies, Table 7: Selected legality requirements in the private sector, and Table 8: Examples of Trade Associations' demand for legal wood products). Trade regulations such as the 2008 amendment of the U.S. Lacey Act, and the European Union Illegal Timber Regulation, have become the most recent instruments to address illegal logging (Box 6: The U.S. Lacey Act, the EU Illegal Timber Regulation (EUTR), and the Australian Illegal Logging Prohibition).

    In Switzerland, the Ordinance on Declaring Wood and Wood Products (Ordonnance sur la Declaration Concernant le Bois et les Produits en Bois) from 2010, requires any party selling timber or timber products to consumers to disclose information about the species used in the product, including whether or not the species is listed in CITES, and the place of harvest. Timber and timber products covered include firewood, roundwood and wood in the rough, pickets and stakes of wood, railway sleepers, sawmill products, sheets for veneering, carpentry, joinery, furniture made entirely of solid wood, and other solid wood items (Federal Department of Economic Affairs, 2010; Schweizerische Eidgenossenschaft, 2010).

    In response to the emergence of legality requirements in the marketplace, a number of voluntary systems and schemes have emerged to help assess and verify the legality of wood and paper-based products (Table 9: Voluntary legality verification systems).

    Bilateral cooperation between consumer and producer markets and free trade agreements are other efforts to address illegal logging. The European Union, through Voluntary Partnership Agreements, works with a select number of countries to build their capacity and support reforms in the governance of their forest sectors, to reduce the production of illegally harvested timber (Box 8: The European Union Forest Law Enforcement, Governance and Trade (FLEGT) Process and the Voluntary Partnership Agreements).

    Other examples of bilateral cooperation include:

    • U.S.-Indonesia Memorandum of Understanding on Combating Illegal Logging (signed 2006) – Among other things, the agreement seeks to complement and support efforts to combat illegal logging and associated trade, and to promote transparent timber markets and trade in legally produced timber and other forest products. The agreement established a working group to guide implementation of the memorandum with respect to information exchange, law enforcement cooperation, regional and international cooperation, and partnerships with nongovernmental actors (U.S. Government, Government of the Republic of Indonesia, 2006).
    • U.S. – China Memorandum of Understanding on Combating Illegal Logging and Associated Trade (signed in 2008) – Among other things, the memorandum establishes a bilateral forum to increase cooperation between government agencies to combat illegal logging by setting priorities for cooperation, promoting trade of legally sourced forest products, facilitating information sharing, and encouraging public-private partnerships (U.S. Government, Government of the People’s Republic of China, 2008).
    • Japan – Indonesia Cooperation Agreement in Combating Illegal Logging and the Trade in Illegally Logged Timber and Wood Products (signed 2003) – The agreement focuses on developing, testing and implementing legality verification systems for timber and wood products; encouraging civil society involvement in combating illegal logging; developing a forest-trade data collection and exchange system; and building capacity to promote sustainable forest management (Government of Japan, Government of the Republic of Indonesia, 2003).
    • U.S. – Peru Trade Promotion Agreement (signed 2006) – The agreement includes a special annex to address illegal logging through improved governance in the Peruvian forest sector. Among other things, the agreement seeks to strengthen forest law compliance in Peru; increase transparency in the sector, and develop and strengthen supply-chain control mechanisms (U.S. Government, Government of the Republic of Peru, 2006). Governments, civil society organizations and the private sector may be having a significant impact on illegal logging. A 2010 study of producer, processing and consumer countries suggests that illegal logging might have decreased significantly in Cameroon, the Brazilian Amazon and Indonesia over the last decade (Lawson and MacFaul, 2010). However, given the varying estimates of the amount of illegal activity previously, it is very hard to judge how much of an improvement there may have been. The amount of illegal logging is still significant in many countries.

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    1Prominent international initiatives include the G8 Forestry Action Programme, agreed by G8 foreign ministers in 1998, and the Gleneagles Declaration in 2005. The European Union in 2003 adopted an Action Plan on Forest Law Enforcement, Governance and Trade (EU FLEGT). The US launched the President’s Initiative against Illegal Logging, also in 2003. Regional intergovernmental processes on Forest Law Enforcement and Governance (FLEG) have been established in Southeast Asia, Central Africa, Europe and Northern Asia, each on the basis of a Ministerial Declaration.

    Factors to consider regarding legality

    • Legality is not a serious issue in every country. A pragmatic approach may be to begin by identifying regions/countries at higher risk, and then focusing efforts on aspects of concern within those areas (e.g., corruption, lack of law enforcement, social conflict, ignoring land rights and so on). A number of resources are available to assist in this process (below).
    • Different levels of caution may be needed, based on the place of origin of the wood. More information, verification and due care are needed for areas with higher risk of illegal activity in order to manage and eliminate the risk of having illegally logged wood in the supply chain.
    • Legality is not equivalent to sustainable forest management. Just because a forest product is produced legally does not necessarily mean it has been produced in an environmentally sustainable or socially responsible manner.
    • Lack of compliance with minor administrative regulations may not have a significant impact on the overall sustainability of the product. It might be more strategic to focus on blatant, significant infractions such as trafficking and systematically harvesting valuable timber species without proper authorization.
    • In some cases, the law is not seen by everyone as equitable or fair (e.g. people with traditional claims to the land), or laws protecting customary rights may not be enforced, or ignored.
    • Verification of compliance with all national laws can be challenging. A pragmatic way to address this is to establish whether violations are single oversights, or form a pattern of major violations.
    • The proof of legality is normally based on legal documentation, which can be forged. Transfer of ownership of wood is commonly documented through purchase orders, invoices and other negotiable instruments. Even for title, however, the risk of forged documents can be significant in some places. At a minimum, documents should carry all appropriate stamps and seals from the relevant governmental agencies. Follow up by pursuing additional information when proof of legality is in doubt.
    • Consider actively supporting government and civil society actions to address illegal logging and international trade in illegally-produced wood-based products.
    • In the context of international climate change negotiations, improving legality in the forest sector at national and sub-national levels is being considered more and more as an important step to ensure the effectiveness of financial investments that are designed to prevent deforestation and forest degradation under REDD systems (see section on climate change).