Assessment Report / Checklist - Global Forestry Services, Inc. · planting material of Acacia mangium, ... forms part of the Forest Timber License (1st ... certified by SFD according

GLOBAL FORESTRY SERVICES Registered Office: Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands.

Contact Address: C10-6E, Kiara 9, Jalan Kiara 3, Mont Kiara, 50480 Kuala Lumpur, Malaysia Tel: +6019 380 6778 / +6012 310 6007 Fax: +603 5635 7564

Email: [email protected] Website: www.gfsinc.biz

LEGAL VERIFICATION SERVICES

Document Control Doc #: LVS 012a Title: Checklist Verified Legal - Sarawak Issue: 07 Date: 14 February 2014

Assessment Report / Checklist Verified Legal - Sarawak

Organization Details

Company: Pasin Sdn. Bhd. (73540-K) Ref #: GFSS 019-002

Address: No. 6, Lot 9, Lorong 20A2, Jalan Pedada, 96000 Sibu, Sarawak. Contact: Ta Ann Holdings Berhad - Mr. Nicholas Ting Kang Hwa - Senior General Manager Ta Ann Plywood Sdn. Bhd. - Mr. Ling Tiing Tchin - General Manager

Email: [email protected] [email protected] [email protected]

[email protected]

Tel: +6084 312 299 Fax: +6084 349 813 Statement of Compliance GFS LVS # GFS 021 LVS Issuance Date 01 November 2016 Expiration Date 31 October 2017

Assessment Details

Scope of Assessment Pasin Sdn. Bhd. (Forest Timber License No. T/3135)

Assessment Dates 08-12 August 2016 (in conjunction with field test for STLVS)

GFS Lead Assessor Dr. Bernd Hahn-Schilling

GFS assessor & experts Lai Jia Woei and Paramjit S. Gill

Organization Staff Eddie Tay Kwoil Hock (General Manager-Hariwood Sdn. Bhd.), Wong Teck Ing (Camp Manager-Hariwood Sdn. Bhd.), Cheu Teck Kong (Insurance In-charge-Hariwood Sdn. Bhd.) Nelson Bijack (Forest Certification Manager-Ta Ann Holdings Bhd), Elton Tonie (Environmental Auditor-Ta Ann Holdings Bhd), Thomas Richard (Safety & Health Training Manager-Ta Ann Holdings Bhd).

Report Date 26 October 2016






Summary Information

Overview of Licensee Organization Information: The license holder Pasin Sdn. Bhd. (Registered Company No. 73540-K) is a 100 % subsidiary of Ta Ann Holdings Berhad, a public company listed on the Main Board of Bursa Malaysia (then Kuala Lumpur Stock Exchange) on 23rd November 2009. Ta Ann Holdings Berhad is a timber resource-based company based in Sibu, Sarawak, Malaysia. It was founded in the mid 1980’s as a small trading company by the main founders Datuk Abdul Hamed Bin Haji Sepawi, Datuk Wahab Bin Haji Dolah and Dato Wong Kuo Hea, starting as a forest concession licensee, including timber harvesting, shipping operations and downstream wood-based industries. Ta Ann Holdings Berhad was then incorporated as a public limited company in February 1997 and listed on the main market of Bursa Malaysia on 23 November 1999. The principal activities of Ta Ann Holdings Berhad (Ta Ann) are centred around sustainable harvesting of timber resources and value adding downstream activities such as the manufacturing of veneer, plywood, coated plywood, eco plywood, laminated veneer lumber and pachinko plywood, sawn timber and laminated moulding products. Ta Ann is one of the pioneers in reforestation in Sarawak and actively operates its reforestation programmes on which the Group places a strong emphasis. From the commitment to ensure sustainability of its forest resources, Ta Ann has embarked on Research and development programmes to produce improved tree planting material of Acacia mangium, Superbulk and Acacia hybrid, which return higher quality and yield for veneer production. Currently, Ta Ann’s plan to gradually shift to plantation-based resources is based on using local species such as Kelampayan (Neolamarckia cadamba) planted in system termed Zebra Planting, through planting operations conducted at about 50 m intervals following the terrain contour alignment. Ta Ann emphasises on environmental friendly forestry practices as an important requirement to meet the needs of its customers who are becoming increasingly environmentally conscious. Due diligence surveys are carried out by independent consultants prior to commencement of ground operations to ensure that area containing High Conservation Values are protected. By 30th June 2015, the Group employed 7,041 staff and forest workers, including contractors of subsidiary companies. Ta Ann operates five natural forest concession areas comprising a total area of 359,180 ha. In addition, Ta Ann holds three licenses for Planted Forests area in Sarawak of which LPF 0040 total area was reduced to 194,855 to excise NCR land (Ref# WPO/P/106 (Melekun-Raplex) III - 27). The current total area of each concession is 308,935 ha. All LPF licenses come with a 60 year tenure.






Key regulations for legal origin: The legal framework is provided in the following laws (ordinances), rules and regulations:

- Statement of Forest Policy (1954) - Forests Ordinance (1954, 2003, 2006) - Forest Rules (1954) - National Parks Ordinance (1956) - National Parks and Nature Reserves Ordinance (1998) - Natural Resources and Environment Ordinance (1993) - Natural Resources and Environment (Prescribed Activities) (Amendment) Order (1997) - Wildlife Protection Ordinance (1958) - Labour Ordinance Sarawak Cap 76, 2005 - Sarawak Timber Industry Development Corporation Ordinance (1973) - Sarawak Timber Industry (Registration) Regulations (2008) - Sarawak Forestry Cooperation Ordinance (1995) - State of Sarawak Forest Timber License (FTL) - Inter-agency Standard Operating Procedures (SOPs) for Performance of Forestry Functions in Sarawak

(Ministry of Resource Planning and Environment, 2012)

Description & Licenses: Pasin Sdn. Bhd. has been issued a Forest Timber License T/3135 which is located to the South of Song town, in the Kapit and Song Districts of the 7th Division of the State of Sarawak. The northern license boundaries are determined by Sungai Katibas and Sungai Bangkit; to the east by cut line common boundary with Rejang Wood Sdn. Bhd. to the South by the international border to Indonesia and to the West by Sungai Bloh and Sungai Katibas. The forest area covers the Katibas-Bangkit Stateland Forest and parts of Balleh Protect Forest, comprising a gross area of 49,858 ha (revised from 104,251 ha following transfer of the balance area to License for Planted Forests LPF 0010). The area is dominated by mixed Dipterocarp Forest with some minor occurrence of shifting agriculture areas and non-commercial forests, such as Kerangas. Note: The company’s internal area statistics differ from the official figures reported in the Working Plan. Management / Land Tenure: The licensee, Pasin Sdn. Bhd. holds Forest Timber License T/3135 issued by the Sarawak Forest Department (FDS), initially valid from 14th Jan 1985 to 13th Jan 2000 (WPO.628.345-12 dd. 28 Nov 1984), extended to 13 Jan 2016 on 9 January 2015 (Doc. Ref. WPO.628.345(V)-19). A further extension by one year was approved by FDS on 13 January 2016 to 13 January 2017 (Doc. Ref. WPO.628.345 (V0-28).






Management planning (FMP): The Working Plan (equivalent to Forest Management Plan) forms part of the Forest Timber License (1st Schedule), covering the entire Forest Management Unit (FMU). It was approved by the Director of Forests of the Sarawak Forest Department on 21st June 1997. The total estimated net industrial stem wood volume has not been determined in the FMP (no overall resource assessment was carried out). The allowable cut is regulated through a monthly volume production limit. Pre-felling tree enumeration data and timber inventory volumes are only available for individual blocks of currently worked harvesting coupes.

- The yield regulation follows an area control method, with annual harvesting areas derived from total productive (operable) areas, divided by the duration of the license period of 15 years.

- According to the Working Plan, the minimum diameter for harvesting of commercial timber species in the Katibas-Bangkit Stateland Forest has been set at 45 cm DBH for both Dipterocarp and Non-Dipterocarp species. For Balleh Protected Forest the cutting limits are 60 cm DBH for Dipterocarp species and 45 cm DBH for non-Dipterocarp species.

- With effect of 15th July 2010, DF Circular No. 4/2010 the Royalty Rates for individual timber species groups as per 1stSchedule of the FMP were changed to a single flat rate per m3.

- Through SFD Circular 03/2015 of 17 February 2015, SFD has imposed a ban on felling and export of Menggris species for all Forest Timber Licences.

Operational activities: The licensee has appointed Hariwood Sdn. Bhd. as its main contractor for road construction and maintenance, timber harvesting and log transportation. Hariwood Sdn. Bhd. is a registered logging contractor certified by SFD according to the provisions of the Forests Ordinance. The Certificate of Registration as logging contractor (No. R.0001/939(II)) is valid until 6thJanuary 2017, by approval letter of Director of Forests. The forest land use classification is shown in the table below.

Area category Area (ha)

Total license area, consisting of: 49,858* a. Natural Forest Management Area / Operable area

= estimated net production area T/3135 (Coupe 1 to 11): 37,438 b. Protected Areas: Terrain Class IV, Conservation Areas, buffer zones,

shifting cultivation areas: 16,853 c. Infrastructure, Roads, Buildings, etc N/A

Note: Previous gross license area of 104,251 ha was revised (54,393 ha partial area was transferred from license T/3135 to LPF 0010. Figures are based upon the Company’s GIS database. All figures will be amended by next surveillance audit, due to restructuring of license areas currently in progress.






Description of forest area: First harvesting operations in this area commenced in the year 1985. The forest area mainly consists of Mixed Dipterocarp Forest Classes MDF, and shifting cultivation areas, as mapped and quantified in the Forest Type Map ‘B’ of the WP (subsequently updated by the company). The original cutting cycle was 15 years (1985-2000). Gross annual Coupe areas of T/3135 range from 3,515 ha to 7,194 ha, consisting of a total of 11 Coupes. Each Coupe is subdivided into 38 to 67 individual logging blocks, typically ranging from about 50 to 100 ha in size. No overall resource data exist for the license area. Forest inventory data (10% intensity) are only available for currently worked Blocks within a Coupe. Estimated commercial volumes in Coupe 7AR average 11.0 trees per ha with a commercial volume of 25.4 m3/ha, consisting of Dipterocarp species (47% of the total estimated commercial volume) and commercial non-Dipterocarp species (53%). Estimated volumes for Coupe 8AR have not been finalized yet. Environmental Impact Assessment: An Environmental Impact Assessment (EIA) is available which has been approved by the Natural Resources and Environment Board Sarawak (NREB) on 15th May 2014, Doc. Ref. No. (15) NREB/6-3/2F/59. It covers the re-entry harvesting operations to be implemented in Coupes 07AR to 11AR of Timber License T/3135. On 24th July, 2014, a letter of undertaking between the Pasin Sdn. Bhd. and the EIA Consultant Ecosol Consultancy Services Sdn. Bhd. was signed in accordance with Section 6(b) of the Natural Resources and Environment (prescribed Activities) Order, 1994 to develop and operate Coupes 07AR to 11AR in compliance with all terms and conditions prescribed in the EIA approval document. As part of the conditions, the company has to provide Environmental Monitoring Reports (EMR) to NREB on a quarterly basis. The last two EMR for the 1st and 2nd Quarter of year 2016 have been presented. Key EIA Findings: According to the EIA report, dominant commercial timber species occurring within the license area include Shorea parvifolia (Meranti sarang punai), S. laxa (Lun); S. beccariana (Meranti langgai), S. macrobalanus (Melapi), D. verrucosus (Keruing), Vatica spp. (Resak), Hopea spp. (Luis), Palaquium spp. (Nyatoh), and Madhuca spp. (Nyatoh). The EIA Report identified a range of endemic flora, such as Dipterocarpus pachyphyllus (Keruing sol padi), Shorea rubra (Meranti merah kasumba, critically endangered), S. flaviflora (Selangan merah bukit), Shorea macroptera (Meranti melantai), Shorea brunnescens (Selangan batu tenting, endangered). Protected species found include Koompassia malaccensis (Menggris) and K. excelsa (Tapang), Shorea macrophylla (Engkabang jantong), as well as several Ficus and Orchid species. The fauna occurring in the license area categorized as totally protected species under the Wildlife Protection Ordinance Sarawak 1998 includes the Great Argus pheasant, Rhinoceros Hornbill, Helmeted Hornbill, and Borneon Gibbon. Other protected species found were the Clouded Leopard, Pig-tailed and Long-tailed






macaques, Pangolin, White-rumped shama and the Asian Paradise Flycatcher. Common reptiles found include the python, Wagler’s Viper, Pit Viper, Whip-snake, Bronzeback tree snake, Elaphids, Craits, and Paradise tree snakes. Some of the other reptile species located in the FMU include the spiny hill terrapin, flat-shelled turtle, crown turtle and soft shell turtle (labi-labi, totally protected). Also present were various species of frogs and river toads. Common fishes of the larger waterways were Semah, Seluang, Lajong, Adong, Bantak and Patin. Environmental Protection & Monitoring: The company is still in the process of setting up a more comprehensive monitoring and protection system and is working towards the implementation of recommended activities based on Environmental Monitoring Reports submitted to EPD by the Ecosol Consultants Sdn. Bhd. A 1-km wide buffer zone has been established along the southern license boundary which also forms part of the international boundary with Kalimantan, Indonesia. The southern license boundary borders the Betung-Kerihun National Park across the Sarawak-Kalimantan border. Social Assessment: The Company has conducted a brief social impact assessment which is part of the EIA requirements. Key Findings of Social Assessment: There are 2 settlements (longhouses) in the vicinity of the license area, comprising a total estimated population of 148 inhabitants with 37 longhouse doors. Typical activities of the population include farming (shifting cultivation, rubber, pepper, fruits and vegetables), livestock rearing, fishing and hunting. There are no primary schools but there is one medical clinic (Ng Bangkit) serving the settlements near the license area. Pasin Sdn. Bhd. has employed some of the villagers as truck drivers, machine operators and general workers. The vast majority (90%) of the households interviewed by Ecosol Consultancy Sdn. Bhd. agree to the project operations implemented by Pasin Sdn. Bhd., since it will bring along some benefits for them in terms of employment and general support provided by the company. Social Monitoring: Ta Ann Plywood Sdn. Bhd. has established a Corporate Social Responsibility program. In line with the National Guideline for Forest Plantations, the management policy of the company needs to be oriented towards exploiting the full potential of assisting the communities, especially the poverty affected groups. The draft SIA has stated mitigation measures and practices to minimise or avoid the potentially adverse impacts of forest operations, and to achieve positive impacts, as follow: Ø Develop company policy to give priority to employment and training to the local workforce within and

adjacent to the LPF license area,






Ø Address the issues of land claims and crop loss, especially shifting cultivation areas, areas planted with rubber and other perennial crops. When necessary, local customs (Adat) will be referred to. Any agreement of compensation will be signed in the presence of a third party, i.e. the Senior Community Leader (Penghulu / Pemanca) or a Government Officer (District Officer / Sarawak Administrative Officer),

Ø Address immediate issues regarding maintenance and repairs of roads jointly used by licensees and the local communities and

Ø Ta Ann shall establish a grievance mechanism to ensure that the concerns and grievances of the affected households and village communities are properly addressed and resolved in a timely and satisfactory manner. This should include Licensee, Land & Survey Department, District Officer, Ketua Kaum / Tuai Rumah concerned.

A system to resolve community claims is in place: Standard Procedure for Managing NCR Claim Issues, 05/07/2010. This procedure is currently being applied to any claims forwarded by affected local communities. Itinerary of Assessment

Date Activity 08 Aug 2016

Monday Morning: Travel Kota Kinabalu to Sibu (Dr. Bernd Hahn-Schilling), briefing session at Ta Ann Sibu Headquarters. Start document review. Afternoon: Travel by Express Boat from Sibu to Song. Land transport from Song to Camp Mile 42 (LPF 0010). Overnight at Camp Mile 42.

09 Aug 2016 Tuesday

Morning: Check license and coupe boundary signage/marking Coupes 02AR, 07AR and 08AR. Visit timber harvesting operations at Blocks 33 to 53, inspect block marking and stream buffer zones. Afternoon: Inspection of facilities at Camp Mile 62: staff quarters, oil and fuel depot, generator house, workshop. Document review and start compilation of report. Overnight at Camp Mile 42.

10 Aug 2016 Wednesday

Morning: Inspect log transit point near Camp Mile 42, record log samples. Visit to Long house Rumah Enggong, interview with village head (Tuai Rumah) and Chairman of JKKK. Afternoon: Proceed to Sungai Manari (Log pond) at Sungai Rajang, south of Song. Check log production records, take samples of logs assessed for royalty payment. Collect related documentation. Overnight at Song.

11 Aug 2016 Thursday

Morning: Return travel Song to Sibu. Continue document review and report compilation. Afternoon: Report compilation.

12 Aug 2016 Friday

Morning: Continue document review and report compilation. Afternoon: Work on Draft Report and hold debriefing session.

13 Aug 2016 Saturday

Collect remaining information, work on Draft Report.






Highlights of Assessment

(GAPS: Major = 0; Minor = 2)

Pasin Sdn. Bhd. has complied with the Sarawak Legality Standard (Principles 1-4) as no non-compliance was identified during the assessment carried out during the period 08 to 12 August 2016. Summary of current status of operations against each principle: Principle 1: Forest Concession & Use Rights. The company complies with the legal regulatory framework including the approval of the GP DP and PEC for active coupes. Native rights to forest resources are respected by the company through signing and observing written agreements with the concerned local community on compensation for impacts on the forest environment caused by forest operations. Claims on forest land for current Coupe 08AR are acknowledged as the audit team gained the impression of a friendly and mutually trustful relationship between company managers and the community. A system for communication with communities and resolving claims has been developed and is applied into practice for any claims forwarded by any affected local communities. Formal agreements are based on a standard agreement for compensation to the long-house communities for timber harvested within the licensed area. Principle 2: Legal Requirements of Operations, The licensee has complied with legal requirements and presented a summary of all such regulations. During the discussions held with the staff of managerial and operational level, they demonstrated sound knowledge of the relevant national and state regulations pertaining to forest management and harvesting. Copies of these regulations are kept in the company headquarters in Sibu. Principle 3: Management & Harvesting. General Harvesting Plan for the license area was initially approved on 28 October 2002 and revisions were approved on 17th August 2006, Doc. Ref. SF&C628.345-48, and on 5th May 2014,

- Detailed Harvesting Plans on Coupe basis have been approved by the Sarawak Forestry Corporation (SFC) for all currently worked Coupes.

- Permits to Enter Coupe (PEC Operations 1-5) for the currently operated harvesting coupes have all been approved by SFC.

Ta Ann Plywood has closed out Minor Gap 001/2013 regarding to overlapping of working maps as Ta Ann Group license areas have been restructured and approved by the Ministry of Resource Planning and FDS. Overlaps with LPF 0010 area were removed. Principle 4: Implementation. Inspection of forest operations on the ground observed that buffer zones are now identified on DP and working maps to address Gap 008/2014 & Gap 009/2014 (Closed).






Highlights of Assessment However, there was inconsistency in protection of stream buffer zones had not been fully observed by harvesting team, requiring rehabilitation works (Gap 014/2016 minor). Forest monitoring and detection of illegal activities require improvements to ensure forest resource integrity. Reduced Impact Logging practices have not been implemented yet (Gap 015/2016 Minor). Observation 001 - Testing and training of Reduced Impact Logging methods in trial areas has not been implemented yet. Observation 002 - No training on forest fire prevention and suppression has been held for forest workers. Observation 003 - No First Aid training has been held for forest workers. Observation 004 - Insufficient warning signage at bridges and dangerous road sections. Observation 005 - Waste segregation and recycling of recyclable waste were not adequately implemented. Some littering was observed behind staff quarters next to the Workshop at Camp Mile 62 Principle 5: Registration; Identification & Traceability of Material. The company has tagged all logs with LPI numbers that identify each log produced in each block using LPI tags. Verified eleven (11) logs that matched the daily production records, The logs sampled are marked with LPI and company tags, royalty tags, company and FDS property hammer marks. Logs can be traced back to the daily production return records and consignment notes (from logging blocks to log pond). Principle 6: Payment of Fees, Royalties and Taxes. The company fully meets its obligations to pay statutory charges (royalties, premium, timber cess, etc.).

GAPs: 08 – 12 August 2016

GAP # Type Checklist Status Description

014/2016 Minor 4.3.1 New Several stream buffer zones had been disturbed by

pushing soil into waterways during culvert and bridge construction or road maintenance works.

015/2016 Minor 4.3.3

New

No systematic monitoring and reporting system has been established to control access and prohibit illegal activities and ensure forest security within the license area.

*Note : Major Gap = Non-Compliance / Minor Gap raised will be upgraded to Major Gap if not addressed by the next surveillance audit. Outstanding Gaps: 2013 to 2015

GAP # Type Checklist Status Description

008/2014 Minor 4.3.1 Closed August 2016: Prescribed river buffer zones as recommended by NREB have been identified on working






maps.

009/2014 Minor 4.3.1 Closed August 2016: Prescribed river buffer zones have been

consistently marked on the ground.

001/2013 Minor 3.1.2 Closed

August 2016: Ta Ann Group license areas have been restructured and approved by the Ministry of Resource Planning and FDS. Overlaps with LPF 0010 area were removed. All related area map and plan figures will be updated by last quarter 2016.

Recommendations Pasin Sdn Bhd. has demonstrated compliance with the Sarawak Legality Standard (Principles 1-4) for Forest Timber License T/3135 and is recommended to receive a GFS Audit Statement and STLVS Certificate of Compliance from FDS. All minor gaps must be addressed by the next surveillance visit scheduled in October 2017. Actions required to address the gaps identified include the following:

Minor Gap 014/2016 - Avoid future disturbance of river and stream buffer zones. - Train and deploy qualified supervisors to instruct and guide machine operators during road/bridge/culvert

construction, with the objective of minimizing soil movement and disturbance near rivers and streams. - Wherever possible, avoid direct discharge of water into rivers and streams. Design water runoff towards

vegetated areas away from rivers and streams. - Where disturbance is unavoidable, carry out instant re-greening of affected areas using quick spreading

cover crops. Minor Gap 015/2016 - Develop comprehensive monitoring and control system to prevent, detect and report illegal activities within

and adjacent to the license area. - Focus on complete license boundary monitoring as well as prevention, detection, and suppression of illegal

logging and hunting activities. Recommendations on observations:

Obs. 001 - Speed-up efforts on establishment of trial areas for implementation of RIL system. Obtain necessary expertise from FDS, SFC or private consulting sector. Ensure sound RIL planning and formal training of timber harvesting teams according to prevailing RIL standards. Support ground teams through permanent on-site supervision and guidance. Obs. 002 - Hold training course on forest fire prevention and suppression for all forest workers. Obs. 003 - Hold training course on provision of First Aid for all staff and forest workers. Obs. 004 - Erect or repair and refresh existing road safety signage at hazardous road sections, such as sharp curves, steep sections and blind spots. Include main hauling route from license area to Sungai Manari Logpond. Install warning signage near bridges and improve safeguards to avoid slipping of vehicle into waterways.






Obs. 005 - Provide waste separation bins at strategic camp sites and staff quarters. Implement waste segregation and recycling of recyclable waste. Develop disposal plan and logistics for recyclable waste, start implementation and provide evidence of functional disposal system. Clean up littered areas behind staff quarters next to Camp Mile 62 Workshop. Note: Observation raised can be upgraded to Minor Gap if not addressed by the next surveillance audit. The next surveillance visit is scheduled for October 2017.

End of Summary Report






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Assessment Report / Checklist - Global Forestry Services, Inc. · planting material of Acacia mangium, ... forms part of the Forest Timber License (1st ... certified by SFD according