Markets for Verified Legal - EU-Japan · 2014. 7. 22. · Global Timber Trade Flows Markets for Verified Legal Timber Products Kerstin Canby Forest Trends March 23, 2012

Global Timber Trade FlowsGlobal Timber Trade Flows Markets for Verified LegalMarkets for Verified Legal

Timber ProductsTimber Products

Kerstin CanbyForest TrendsForest TrendsMarch 23, 2012

Which major market req…Which major market requirements are changing?

How important are their consumer markets to global trade?(net imports RWE)

Which major market are requiring proof of legality / sustainability?Which major market req…Japan’s Support for FLEG Initiatives

(net imports, RWE)proof of legality / sustainability?

•G‐8 policy commitments in Gleneagles

•Supporter of the Bali FLEG Ministerial Declaration: Supporter of the Bali FLEG Ministerial Declaration: • Producer and consumer countries agreed to joint responsibility to

address illegal logging and associated trade through supply and demand side measures demand‐side measures

•MoUs with trading partners to jointly combat illegal logging and i d d h h j i l d d d id associated trade through joint supply and demand‐side measures

•Key contributor to FLEG programs, such as at the International Tropical Timber Organization (ITTO)

•One of the first countries to initiate a green purchasing policy on legal g p g p y gtimber (2006) and putting timber on the Eco‐Friendly Goods List



Which major market are requiring proof of legality / sustainability?Which major market req…Domestic vs Imported Wood Products




Which major market are requiring proof of legality / sustainability?Which major market req…Important Japanese Suppliers


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Which major market are requiring proof of legality / sustainability?Which major market req…The evolution of demand-side initiatives to address trade in illegally sourced wood products(net imports, RWE)proof of legality / sustainability?in illegally sourced wood products

•Since mid‐2000s, many countries have followed Japan’s example by introducing demand‐side mechanisms. Some are similar, and some go further than Japan’s GoHo policy further than Japan s GoHo policy.

•Many of these initiatives now have several years of experience and we see th l i g ti t fl t l l dthem evolving over time to reflect lessons learned

•Objective of this presentation is to review these initiatives and some of their lessons learned, and examine the reasons why they have evolved over time.



Which major market are requiring proof of legality / sustainability?Which major market req…Evolution of Demand for Legally Verified

Wood Products(net imports, RWE)proof of legality / sustainability?Wood Products

1990s – in the beginning1990s in the beginning•Voluntary certification of sustainability (FSC, PEFC, many national and regional standards) which included independent 3rd party verification and chain‐of‐custody (COC)•European (and to a lesser extent US) retailers interested in safeguarding reputation and corporate social responsibilitysafeguarding reputation and corporate social responsibility•Still a major requirement for many retailers

Early 2000s – shift towards “legality”•Difficulty in defining “sustainability” >> focus on systems which help governments enforce their own laws: ‘forest law help governments enforce their own laws: ‘forest law enforcement, governance and trade’ (FLEGT)•2001 Bali FLEGT Ministerial Declaration





Several industry association voluntary standards•International Wood Producers Associoation (IWPA), UK Timber T d F d ti thTrade Federation, many others

•Some good some not so good Some good, some not so good. • Characteristics of better codes: credible 3rd party verification (no conflict of interest) and repercussions for infractions (e.g. kicked out of association)

A i ti d i d t i ith t i g t it i ld •Associations and industries with more stringent criteria could be undercut by those who did not.





Mid 2000s timber public procurement and green building Mid 2000s – timber public procurement and green building policies•Japan, UK, Denmark, Netherlands Germany, France…..Japan, UK, Denmark, Netherlands Germany, France…..•Most but not all require 3rd party evidence of legal compliance•A few require 3rd party evidence of sustainability•Created a level playing field for companies bidding for public projects – all had to abide by same criteria and requirements•Resulted in certification standards coming closer together•Resulted in certification standards coming closer together•But did not eliminate the “bottom” actors who were not bidding for public worksfor public works•Still in place today, and many are gradually increasing their requirements to sustainability and becoming harmonized with other initiatives (e.g. FLEGT licensed timber)





EU FLEGT Voluntary Partnership Agreements & licensed timberEU FLEGT Voluntary Partnership Agreements & licensed timber•Voluntary bilateral trade agreements to EC and partner country will only export and accept (respectively) timber that has been will only export and accept (respectively) timber that has been licensed under FLEGT.

•Indonesia SLVK is considered FLEGT‐licensed timber





2008 – US Lacey Act amendments•Unlawful to import, export, transport, sell …. any plant taken in violation of the laws of the US or relevant foreign laws in violation of the laws of the US or relevant foreign laws. Requires declaration of origin and species, etc. Introduces concept of “due care” in ensuring legal origin. Jail time, p g g g ,forfeiture, fines depending on degree to which company knew / should have known it was handling illegal products

l d d d l•US environmental and domestic producer support critical to passing Lacey, who felt domestic products were being undercut by imported illegally sourced productsundercut by imported illegally sourced products•No international or national verification or certification standard will be acknowledged as automatically “Lacey g y ycompliant” however….





2008 US Lacey Act amendments2008 – US Lacey Act amendments•Major impact not in the number of prosecutions, but response of US retailers wishing to reduce vulnerability to prosecutions of US retailers wishing to reduce vulnerability to prosecutions >> increasingly asking for documentation of origin, proof of legality

• Walmart now expects suppliers to produce documentation that is more stringent than Lacey Act itselfdocumentation that is more stringent than Lacey Act itself

• Creates level playing field for all players: everyone has to Creates level playing field for all players: everyone has to abide by the same rules.





2010 – EU Timber Regulation (active March 2013)•Requires operators who first place timber products on the EU

k t t d t k d dili d k it ff t market to undertake due diligence and makes it an offense to place illegal forest products on the EU market. Details of implementation to be released in June 2012implementation to be released in June 2012

•Like US Lacey, no specific certification or verification standard gets a “green light” except FLEGT licensed timber.

I t ti l tifi ti t d d h FSC d PEFC •International certification standards such as FSC and PEFC are now working to make sure their standards are recognized as meeting requirements under national FLEGT licensesmeeting requirements under national FLEGT licenses





Australia Australia

• likely to soon to have their own legislative requirements y g qagainst import and processing of both domestic and imported timbert ki b t f l l d f th ti l d • taking best from lessons learned from other national and

private sector experiences

• 1st phase: government must prove wrong‐doing• 2nd phase: importer must conduct risk assessments and ensure legality• analysis of which timber products to be regulated – based i l i bi d ith i k ton economic analysis combined with risk assessment



Which major market are requiring proof of legality / sustainability?Which major market req…Third Party Verification

(net imports, RWE)proof of legality / sustainability?y

Why the emphasis on independent 3rd party verification?y p p 3 p y

•National level:• Where forest governance is weak where national governments • Where forest governance is weak, where national governments are unwilling or unable to enforce their own laws, 3rd party verification is needed to ensure credibility of the standard

•Industry and association level• Credibility is the core of reassuring customers that no conflict of • Credibility is the core of reassuring customers that no conflict of interest is allowing for weakness in systems.

• Some companies are well regarded (e.g. IKEA), others are not• Some associations are well regarded and put “bite” into their requirements. Other associations may rely on membership for their revenue and will be hesistant to enforce their own codes of their revenue and will be hesistant to enforce their own codes of conduct.



Which major market are requiring proof of legality / sustainability?Which major market req…Cost of Verification / Certification


Harmonization?Harmonization?

•Is there one way that an operator can ensure compliance with Is there one way that an operator can ensure compliance with these similar, but different, requirements?

•All include some form of “due care” or “due diligence” usually implying independent verification of legal origin and legal compliance throughout the supply chaincompliance throughout the supply chain



Which major market are requiring proof of legality / sustainability?Which major market req…Cost of Verification / Certification


Economies of Scale As more companies engage:Economies of Scale – As more companies engage:•New companies can find suppliers more easily reducing the need for each company to work through entire supply chainneed for each company to work through entire supply chain•Increase in availability of experts and systems•Increased ability of trade associations to help•Increased number & competition of auditors and certification bodies available, lowering cost

Small & Medium Sized Enterprises (incl farmers & communities)•Smaller, more complex supply chainSmaller, more complex supply chain•Possible solutions of group certification, associations and networks, customized outreach



Which major market are requiring proof of legality / sustainability?Which major market req…Costs and Benefits


Harmonization of requirements?Harmonization of requirements?•Is there one way that an operator can ensure compliance with these similar, but different, requirements?q•All include some form of “due care” or “due diligence” usually implying independent verification of legal origin and legal

li th h t th l h icompliance throughout the supply chain

Incentives of individual companiesIncentives of individual companies•FSC 2010 Annual Market Survey

• 3,500 companies across 29 countries• Overwhelming positive:

• 75% say increase in client retention & increased sales% i d t li t• 35% increased access to new clients

• Higher prices





Competitiveness of Japan’s domestic industryCompetitiveness of Japan s domestic industry•US and New Zealand did comprehensive reviews of economic impact of distortions in the global market caused by illegal p g y glogging and associated trade

I d d d f l ll ifi d d d d •Increased demand for legally verified wood reduced competition for those countries such as NZ and the US which are known as low risk source countries Increases in production are known as low risk source countries. Increases in production, export and prices for their product

• NZ exports prices 10.6% higherg• NZ log exports to Japan & China higher• NZ industry benefited $178 million / year





Trans‐ Pacific Partnership (TPP)• Free Trade Agreement type of mechanism between selected

t i d th P ificountries around the Pacific• Tarrifs already low for many of Japan’s imported wood materials – unsure how much lower tariffs could go Some materials unsure how much lower tariffs could go. Some fear negative impact on Japan’s domestic producers

• US has proposed a TPP green chapter for discussion: an obligation to maintain in national laws, regulations of measures, prohibitions against trading across TPP borders in

d t h t d t d i i l ti f ti l l products harvested or exported in violation of national laws. • This could impact Japanese industries major competitors (e.g. 60% of imported plywood is from “high risk” China, Indonesia 60% of imported plywood is from high risk China, Indonesia and Malaysia (Sarawak)

A Work inA Work in Progress!

Thank youThank you

Documents

Markets for Verified Legal - EU-Japan · 2014. 7. 22. · Global Timber Trade Flows Markets for Verified Legal Timber Products Kerstin Canby Forest Trends March 23, 2012