Executive Summary*

Asia Forest Partnership – AFP

Work Plan on Legality

Developing Minimum Standards of Legality,
Timber Tracking and Chain of Custody Systems,
Verification Systems Among
Asia Forest Partnership (AFP) Partners

Prepared by
The Global Forestry Services (GFS) under the coordination of the Center for International Forestry Research (CIFOR)
31 March 2005

1. Background

The forests in Asia have been declining at an exponential rate for several decades. Large areas of forest are either being lost to conversion for agriculture or degraded through poor logging practices without regard for sustainability of the timber resource and uncontrolled illegal logging activities. These illegal activities contribute to increased poverty and land/social conflicts, foster a vicious circle of poor governance, pose a significant threat to the sustainability of forest ecosystems, and cause significant losses of tax revenues for forest country governments -- at least $10 billion to $15 billion a year, according to the World Bank. Countries that have reported over 70% illegal logging include Indonesia and Brazil, while many other developing countries may have similar problems with illegal logging and its associated trade. Internationally, timber is readily traded without proper documentation to trace the raw material to the original forest, or even possibly the country of origin. Therefore, there is a need for a harmonized timber tracking system to reduce illegal timber trade, strengthening the cooperation between producer and consumer countries. To this end, it is essential to create a system to verify timber legality to help countries halt the import of illegally harvested timber.

There are currently two initiatives for the Asia region, the East Asia Forest Law Enforcement Governance (FLEG) process and the Asia Forest Partnership (AFP), which specifically address illegal logging and its associated trade. Other initiatives in the region, such as the Nature Conservancy (TNC)-WWF Alliance, the Indonesia Ecolabelling Institute (LEI), the Malaysian Timber Certification Council (MTCC), the World Business Council, the Forest Dialogue (TFD) on Illegal Logging, and the World Bank-WWF Alliance, are working to reduce illegal logging as well. The AFP aims to support and promote initiatives across the spectrum to help combat illegal logging.

This report examines the status of the major existing regional initiatives to facilitate understanding of the definition of legality, as it relates to timber origin and legal compliance in forestry operations.

2. Asia Forest Partnership and Illegal logging

The Asia Forest Partnership (AFP) is a regional forum for cooperation involving various governments, intergovernmental and non-governmental organizations, and private businesses. The goal is to promote sustainable forest management in Asia by addressing urgent issues that include good governance and forest law enforcement, controlling illegal logging, forest fires, rehabilitation and reforestation of degraded forest lands. The partnership acts as a catalyst for already existing initiatives by increasing synergies and reducing duplication between programs. The partners meet at least once a year to exchange information, identify further work and consult on ongoing activities.

At the 2nd AFP meeting held in Yogyakarta, Indonesia, in July 2003, the Working Group (WG) on “the forest and timber certification as a means to verify legality” identified a common understanding of how AFP could address the problem of illegal logging. Following the WG discussions, the Government of Japan identified that

“developing minimum standards of legality, timber tracking and chain of custody (CoC) systems, verification systems among the AFP partners” are essential steps to combat or reduce the illegal logging and proposed this as an AFP Work Plan (legality) at the 3rd AFP Meeting in November 2003.
This report provides the AFP partners the platform to discuss the next steps for harmonization and/or coordination of a timber tracking system to facilitate the control of illegal timber.

3. Built on a Legality Standard Developed by the Indonesia-UK MOU

The most prominent initiative, in terms of establishing a legality standard, is the agreement between the Government of Indonesia and the United Kingdom to work together to reduce illegal logging and to discourage international trade in illegally-logged timber and timber products. The Memorandum of Understanding (MOU) sets forth provisions for the development, testing and implementation of systems of verification of legal compliance based on independently verified chain-of-custody and identification systems (Article 1). Under the MOU, the development of a legality standard was carried out under the auspices of the Indonesian Ministry of Forestry in close partnership with TNC, and with contractors SGS and URS Forestry.

The Stakeholder Consultation held in Jakarta, June 2003, identified that “Timber is legal when the validity of its origin, logging permit, logging system and procedures, administration and transport documentation, processing, and trade or transfer are verified as meeting all applicable legal requirements.”

This report examines the legality standard for timber products based on the “Principles, Criteria and Indicators of Legality for Forestry Operations and Timber Processing in Indonesia” as prepared by the TNC with the endorsement of both governments. The legality standard for timber products from Indonesia comprises seven principles, each supported by several criteria and indicators linking the principle to existing forest law and related legislation.

The principles are:

• Principle 1 Land Tenure and Use Rights
• Principle 2 Physical and Social Environment Impact
• Principle 3 Community Relations and Workers Rights
• Principle 4 Timber Harvesting Laws and Regulations
• Principle 5 Forest Taxes
• Principle 6 Log Identification, Transfer and Delivery
• Principle 7 Timber Processing and Shipping

4. Matrix for Comparison of Legal Requirements

In order to provide a system to consider legality, “the Principles, Criteria and Indicators for Forestry Operations and Timber Processing in Indonesia” were structured in the form of a matrix. This matrix is designed to evaluate country regulations and timber tracking systems with respect to the critical elements that are considered in determining the legality of forest management, forestry operations and timber processing.

This generic matrix has been applied to evaluate forestry regulations among different countries and regions, and among voluntary schemes. As for forestry regulations, Peninsular Malaysia, States of Sabah and Sarawak were selected as examples of how the matrix could be used to compare similarities and differences within a country. The principles and criteria have been adapted to the legal requirements specific to these regions. As for the voluntary schemes, the Forest Stewardship Council (FSC), the MTCC, the Global Forest and Trade Network (GFTN), the Global Forestry Services (GFS), and the Tropical Forest Trust (TFT) were selected among schemes that are currently being used to verify legality of forest management practices and traceability of timber from a forest to processing and sales.

The matrix is comprised of general principles, followed by criteria and indicators to better define and guide the principles. Principles 1 through 6 followed the elements identified as critical for Indonesia to evaluate legality. Principle 7 has been revised to reflect the requirements used by the voluntary schemes as a means to identify critical elements for the chain-of-custody, to ensure the traceability of timber.

Each indicator is scored for compliance to verify the degree to which the criteria of a particular scheme comply with the legal requirements. The compliance score ranges from 0 to 2: Adequate = 2; Inadequate = 1; and Not Addressed = 0.

For the analysis of government regulations, each indicator in the matrix is further classified into three categories to verify the “Clarity of Laws,” “Level of Enforcement” and “Level of Knowledge.” In this case, the compliance score also ranges from 0 to 2: Adequate = 2; Inadequate = 1; and Not Addressed = 0.

5. Framework for the Legality Standards

The key elements for verification of legal compliance identified in this report can be broadly divided into two categories: (1) the legality for forest management; and (2) the legality for timber processing industries. The first category refers to the basic elements needed to demonstrate legality in forest management. The second category refers to the elements needed to trace the legal route of timber from extraction to a processing industry. These include the proof of purchase of the raw material and the tracking of it through to its final product form. These key elements are supported by subsets of evidences, which are presented as simple steps to demonstrate legal compliance with government regulations and timber traceability.

(1) Legality for Forest Management

Element 1. Verification of Landownership Status and Use Rights

• Evidence that the forest management area is legally classified for commercial production, conversion and plantation.
• Evidence that the company holds a license or permit to manage or harvest trees within a defined forest area. The license should be valid for the period being managed or harvested.
• Evidence that the forest area is free of contested third party claims to the land tenure or use rights.

Element 2. Compliance with Forestry Laws and Other Related Regulations

• Evidence of compliance with relevant local and national forestry laws and regulation and codes of practice for harvesting or conditions for land clearing as applicable.
• Evidence of compliance with relevant local and national environmental, social, and labor–related regulations. These include: evidence of environmental impact assessment and measures for the protection of endangered species; recognition of the traditional rights of communities and respect of their customary laws; compliance with the workers’ safety, health and employment conditions.
• Evidence that payments of all applicable concession fees and taxes for forest operations and timber harvested are current.
• Evidence that measures to mitigate the social and environmental impacts of forestry operations are incorporated in the approved forest management/harvesting plan.

Element 3. Approval of Forestry Planning and Operations

• Evidence that the forest management or harvest plan has been approved by the appropriate government authority.
• Evidence that the harvest plan defines total and net production areas, as well as protected areas, harvesting volumes, species to be harvested, diameter limits, and other requirements as appropriate.
• Evidence that harvesting and field operations strictly follow the approved plan.

Element 4. Identification of Material and Traceability

• Evidence of a proper physical identification of logs to trace each log back to the licensed harvesting area.
• Evidence of records for the transport of logs, which quantify their volumes from harvesting areas to wood processing facilities in accordance to government regulations.

(2) Legality for Timber Processing Industries

Element 1. Operation of Timber Processing Industries

• Evidence of the required and valid permits to operate business.
• Evidence of legal license to operate based on its current capacity.
• Evidence of proper registration at the appropriate government authority, in the case of organizations engaged in trading of forest products.
• Evidence of compliance with relevant local and national environmental, and labor–related regulations. These include the compliance with environmental standards regulations and the compliance with the workers’ safety, health and employment conditions.

Element 2. Purchasing and Receiving of Raw Material

• Evidence of records of raw material received and allocated to production.
• Evidence of records that all timber purchased has adequate timber identification and records to trace the material to a licensed harvest area.
• Evidence of records that each log is checked and identified at the gate of the processing site, before the logs are unloaded.

Element 3. Processing, Planning and Controlling the Material Flow

• Evidence of records of the volume of raw material used and final products produced for each unit of production (work order).
• Evidence of records for the allocation of raw material used in a unit, and a defined unit of production.
• Evidence of records and identification of material transferred from one production unit to another unit.
• Evidence of identification of all working-in-progress, as to work order number and legal status.

Element 4. Transport of Logs and Timber Products

• Evidence of valid log transportation documents that detail the origin of the material and correspond to the physical identification of each log.
• Evidence of valid licenses for timber products transportation.

Element 5. Sales and Shipping

• Evidence of records that identify all finished goods produced under a production unit.
• Evidence of records of sales of finished goods produced under each production unit.
• Evidence of valid shipping documents, such as sales invoice and packing list.
• Evidence of export license for timber and timber products, if applicable.

6. A Way Forward: Next Steps and Cooperation

There is no perfect system in operation to verify the legality of timber harvesting and to trace the material to the market. Empirical analysis of the government regulations and voluntary schemes applied to the matrix in this study identified the key elements required in a system, as a practical means to assure legal origin of the timber, compliance with forestry operations and timber traceability. Having common standards to evaluate the legal requirements in different countries and different schemes would facilitate assuring that any logging is legal.

The next challenge is for the AFP to decide upon concrete actions to harmonize existing initiatives to combat illegal logging in the region. To this end, some steps are necessary; each AFP Partner may:

• Conduct a self-review of its own regulations and/or voluntary schemes in light of the key elements for legality identified in this report;
• Examine to what extent the AFP Partners could adapt the key elements of legal compliance to their current regulations or voluntary schemes;
• Identify which elements can be followed;
• Identify any gaps in the practical application;
• Strengthen cooperation on the development of a legality standard by promoting exchange of information and sharing of experiences among the AFP Partners.

Suggestions for implementation:

• Prioritize the key elements;
• Determine regionally acceptable principles and criteria: harmonized definitions, interaction and synergies;
• Adopt a phased-approach;
• Implement a newly-agreed system regionally.

In short, the combination of verification of legality of timber origin and traceability of the material depend upon smooth interplay between government regulations and voluntary schemes. The AFP objective is to help AFP Partners to refine their forest policies and to reform their legal frameworks. This then improves the compliance with forest law and related legislation and ensures that timber comes from legal sources. By ascertaining the common elements needed to evaluate the legal requirements in different countries, the AFP can assist the producer and consumer countries to develop a cooperative and effective working relation.

　

*Prepared by Takeshi Toma and Sofia R. Hirakuri based on the report provided by the Global Forestry Services, March 2005.

¹ AFP currently has 17 governments, 8 Intergovernmental Organizations, and 9 civil societies as its partners. Among these, the Governments of Japan and Indonesia, the TNC and CIFOR are the leading partners, who help to facilitate and coordinate the AFP.

² The Memorandum of Understanding (MOU) between the two Governments on illegal logging was signed on 18 April 2002.

³ This draft Standard is the outcome of stakeholder consultations carried out in East Kalimantan and Riau in 2003. In addition, provincial (Samarinda and Pekan Baru) and national (Jakarta) workshops were held in 2003. Furthermore, several individuals and organizations have contributed to the standard and guidance that accompanies it in preparation for field testing of the system in Berau, started in July 2004.

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