How the new European Union Timber Regulation will affect everyone involved in the supply chain of exporting & importing timber to the EU, and how it is dealing a serious blow to illegal logging.
Illegal logging has a devastating effect on local communities and the hope of sustainable profits from African and Asian timber. The illegal trade of timber contributes to keeping poor countries in a dangerous and damaging cycle of poverty and corruption, as well as demonstrating a complete disregard for the equally damaging effects suffered by the environment and bio-diversity of the earth’s natural resources.
Unaware of their timber is sourced, consumers and companies are often unwittingly responsible for sustaining profits for illegal logging. Interpol estimates that illegal logging contributes up to 30 per cent of the global market, in excess of US$20billion a year.
In light of the serious environmental, economic and social consequences of illegal logging, the European Union published the EU FLEGT Action Plan in 2003. The action plan encourages EU members to actively participate against illegal logging by establishing rigid importing policies that promote the use of legal and sustainably produced timber.
The newest and possibly most dramatic of the landmark events that are shaping emerging sawmilling markets has been the formation of the European Union Timber Regulation (EUTR), introduced in March 2013 to effectively control illegal timber imports into Europe. The EUTR is the policing arm of FLEGT, and it is already moving quickly to see that the specifics of the action plan are more aggressively implemented by any countries involved in the timber trade to the EU.
Primary timber processors, timber traders and secondary processors need to be aware on how the action plan will affect their operations going forward. Changes are underway, not only in how trading will be affected, but also new opportunities for increased profitability for local markets are emerging with new models of processing becoming available.
What is FLEGT? The EU FLEGT Action Plan sets out actions to prevent the importation of illegal wood into the EU, to improve the supply of legal timber and to increase demand for wood coming from responsibly managed forests. The long-term aim of the Action Plan is sustainable forest management.
Taken as a single market, the EU is one of the largest consumers of timber products in the world, accounting for 35 per cent of the world's primary timber consumption. The behaviour of European companies and governments purchasing wood and wood products from suppliers in Africa, Asia or South America has a significant impact on illegal logging. By unwittingly buying illegal wood, companies and consumers are creating profitable markets for illegal loggers, and undermining efforts to enforce forest law in many wood-exporting countries.
If buyers actively purchase wood from producers that comply with local law, this will help to drive illegal logging out of business. The FLEGT Action Plan will make it easier for operators in the timber supply chain to know whether their timber is legally sourced or not.
By forming agreements on a national level with exporting countries, the Action Plan will help them ensure that policies are in place that comply with the new EU timber standards - stemming the tide of illegal timber entering the EU.
The FLEGT Action Plan focuses on these main areas: 1) Support to timber exporting countries to help them create solutions to the illegal logging problem. 2) Promote trade in legal timber by developing mutual agreements (VPAs) between the EU and timber exporting countries. 3) Public procurement policies that can guide contracting authorities so they can be confident they are sourcing legal timber. 4) Support for private companies involved in the supply chain, encouraging good practices and establishment of voluntary codes of conduct they can adhere to. 5) Support for banks and financial institutions investing in the forest sector to develop safeguards to ensure their monies are not supporting illegal logging enterprises. 6) Use of existing laws and new laws to support the plan, including the EU Timber Regulation.
Two of these Action Plan are as give direction to the successful execution of FLEGT.
The first are the voluntary partnership agreements (VPAs) that ensure that all forest operators of the signatory country meet the terms of the agreement. Since VPAs are voluntary and agreed at a national level, all forest operators of the signatory country are expected to comply with the terms of the VPA.
The second is the EU Timber Regulation (EUTR), which lays down the obligations of operators who place timber and timber products on the market. Facing a prohibition to place illegal timber on the market, timber importers must exercise due diligence, meaning they must make sure timber and timber products and their supply chain are legal.
VPAs between African countries and the EU Voluntary Partnership Agreements (VPAs) result from a national level to guarantee commitment from all involved in the timber supply chain. This ensures that the bulk of timber products listed in the agreement meet the bulk of the legal requirements, which is required in order to procure FLEGT licenses and export authorizations.
Currently, nine VPA partner countries in Africa are at various stages of the FLEGT development process. Cote D‘Ivoire and Sierra Leone are in the preliminary negotiations phase.
The Democratic Republic of Congo (DRC) and Gabon are in the negotiation phase of FLEGT, while Ghana, Cameroon, Liberia, Republic of the Congo (Brazzaville) and the Central African Republic are already implementing their FLEGT licensing systems.
EUTR Since March of 2013, the EU Timber Regulation (EUTR) prohibits illegally harvested timber and timber products to be placed on the EU market. The regulation requires EU traders for the first time to exercise "due diligence" to ensure that their products comply. "Due diligence" is a term used for a number of concepts, involving either an investigation of a business or a person, prior to signing a contract, or to act with a certain standard of care. It applies commonly to voluntary investigation. (Wikipedia).
This requires the operator to have access to information describing the timber and timber products, country of harvest, species, quantity, details of the supplier and information on compliance with national legislation.
The operator should assess the risk of illegal timber in his supply chain, based on the information identified above and taking into account criteria set out in the EUTR.
When the assessment shows that there is a risk of illegal timber in the supply chain, the timber supplier in question will be requested to give additional information and verification regarding the legality of their timber. Timber traders have an obligation to keep records of their suppliers and customers so that compliance can be demonstrated. The EUTR covers a wide range of timber products and includes solid wood products, flooring, plywood, pulp and paper. Recycled products are excluded.
Timber and timber products covered by valid FLEGT or CITES (the Convention on International Trade in Endangered Species (of wild fauna and flora)) licences are considered to comply with the requirements of the EUTR. The EUTR is legally binding on all 28 EU member states, which are responsible for laying down effective, proportionate and dissuasive penalties and for enforcing the EUTR.
The EUTR provides for "Monitoring organisations" to be recognised by the European Commission. These private organisations will provide EU traders with operational due diligence systems. As these, and other measures are instituted, the window of opportunity for the trade of illegal timber to the EU will shut quite quickly. In November of 2013, German authorities seized two batches of illegal timber from the DRC that had been sold to three German companies, demonstrating that the regulations are real and that enforcement in the future will be carried out.
The resulting changes in the sawmilling landscape All members of the timber trade industry should take a proactive approach by ensuring that they are prepared for the additional levels of accountability that will soon be implemented. Starting to make changes now by confirming that illegally logged timber is non-existent in supply chains will make it much easier to comply with new regulations.
The other side of the coin is that the export market will be in a state of tremendous change and adjustment in the near future. A business model with a sole reliance on exports will be at the mercy of those changes, and businesses who rely heavily on exports for their profits should consider diversifying to reduce this risk.
Although intensely competitive and limited to low margins, exporting is often considered to be the only profitable venue for timber in many African and Asian countries. High costs of timber production, coupled with little buying power of local timber consumers has maintained this perception. However, this model is rapidly changing with the introduction of better methods primary processing, championed by narrow band sawmill machinery.
In the export model, as no value-addition is done at source, income generated from log volumes exported remains low. The net effect is limited financial capacity in such communities to fund sustainable business units. As such, these communities are not able to rise beyond the export led model to a point where local value addition can happen and greater attention ultimately given to re-afforestation.
Wood-Mizer, the world’s foremost leader in thin-kerf sawmilling equipment, envisions a new sawmilling style as integral to decreasing tropical timber’s reliance on exports. The log optimisation potential, precision, high output and affordability that narrow band saw capacity provides, is part of the answer to unlocking socio-economic potential and sustainable resource management practices. As sawmilling enterprises have started to adopt this model, whether completely or partially at first, they are reporting significant changes that can now include less reliance on foreign exports for company profitability.
Seeing the potential that the narrow band equipment holds for sawmillers around the world to contribute more benefits locally, and reduce reliance on the exporting model, a significant percentage of Wood-Mizer’s marketing activities are devoted to bringing home the message that sawmilling capacity, in conjunction with ecologically sound resource management, is the responsible and sustainable route to achieving balance between human activities and natural resources.
Better processing models, coupled with such regulatory initiatives as FLEGT are pointing the outlook for the future of timber trade in a positive direction, one where the forests of the world become a dynamic driver for the economic prospect for the populations as a whole.
This vision would ultimately see Wood-Mizer providing sawmilling capacity together with business and resource management skills that would allow sawmilling companies to become viable enterprises. The companies would form the bedrock of sustainable business into the future with a vibrant resource base being the foundation of this.
Etienne Nagel is Media Liaison for Wood-Mizer Africa.