Work Plan on Legality

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

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.

Asia Forest Partnership and Illegal Logging

The Asia Forest Partnership (AFP)¹ 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.

Defining Legality

Progress on defining legality is constrained by a lack of empirical study. Despite a few attempts to define it, there is no comprehensive definition of legality. This lack of definition is due to the complexity of the issue itself. Does legality refer only to the harvesting permits or to all operations in the forest? Does include the transportation of timber and timber products? Would it also need to include the processing of timber products? Illegal logging has no single definition. Some possible definitions worth reviewing are:

“Illegal logging takes place when timber is harvested, transported, bought or sold in violation of national laws."²

“Legal logging is the logging that possesses its validity regarding the origin of the logging, license of log cut, system and the procedure of the cutting, administration and document, transportation, mutation, trade transaction or the transfer.” ³

WWF defines it as:

“Illegal logging occurs when forest products are bought or sold in violation or circumvention of national or sub-national laws relating to harvesting, transportation, processing. These include large and small-scale timber theft, transfer pricing, breaching of tax rules, illegal aspects of timber sourcing, circumvention of agreements through bribery or deception.”⁴

A definition used under the TNC project in East Kalimantan is:

“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”⁵

The definitions above involve all phases of the forest industry, including harvesting, transport, processing and trade, which may not be associated with the actual forestry operations. These phases require independent evaluation. The WWF definition encompasses other elements, such as bribery, deception, and breaching of tax rules, which would be difficult to audit since they are subjective. In other words, illegal logging is any illegal act that may occur anywhere from the harvesting of a tree to the final timber products. So, tracking the wood from tree stump to the final buyer would be necessary to ensure the products are not contaminated by uncertified material from other sources.

There are a number of initiatives attempting to establish a legality standard for forestry operations and timber processing at the regional level. The Société Générale de Surveillance (SGS) has a program to verify legality of timber sources and to monitor forest and timber trade activities. The SGS legality standard is based on their own Independent Validation of Legal Timber (IVLT) program. This is a two-stage process for improving forest management. The first step is the Verification of Legal Origin (VLO) of timber, including timber production rights, ownership, and taxes. It demonstrates that timber and timber products come from a legal source and are legally owned at all points in the supply chain. The second step is the Verification of Legal Compliance (VLC) with any relevant national forest management-related legislation. It demonstrates that timber is managed in accordance with forest legislation and other relevant specified laws. Once VLO and VLC are achieved, a statement of legal origin or a state of legal compliance will be issued, respectively⁶. SGS Malaysia has established a Certification Support Programme (CSP) as a step-wise approach for forest managers to demonstrate progress towards forest certification. The CSP was designed to assist companies to develop a forest management system that meets national regulations and international forest certification standards (FSC). It also provides a certification-of-origin system to track material originating from forests to aid forest management⁷.

The WWF “responsible purchasing” concept involves the market by creates a market demand for legally-verified timber products. The WWF’s Global Forest & Trade Network (GFTN) guidelines for responsible purchasing highlight the use of a step-wise approach to identify materials of uncertain origin in degrees towards a credible certified source. This involves a progression through four categories: 1) known source that complies with policy; 2) legal source; 3) source in progress to certification; and, 4) credibly certified source. The types of documentation to demonstrate the compliance with legal requirements will vary from one country to another. Nevertheless, there are basic requirements to show legal source, such as evidence of the legal right to harvest (land tenure and resource rights), revenue payments, a timber harvesting plan or equivalent document, compliance with forest operations’ requirements, timber transport and timber processing, and export permission, if appropriate. ⁸

These schemes suggest a step-wise approach makes it easier for loggers and timber companies to comply with forestry regulations. The rationale is that these types of gradual compliance systems would lead to more sustainable forest management practices.

The first step towards standardizing the definition of legality has been the work carried out by the TNC, based on the MOU between the governments of Indonesia and the UK. According to the TNC, a “Certificate of Legal Origin” will be provided at the export point when a company and its products meet the criteria. This certificate could be used for marketing purposes and customer assurance that the material comes from legal sources. This initiative is particularly important since these three actors are leading partners of AFP.

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