Australian Developments in

Trade of Legal Timber

Stephen MitchellSustainability Programme Manager

stephen.mitchell@tdansw.asn.au

www.timber.net.au www.tdansw.as.au www.illegallogging.com.au

This presentation

• Who is Timber Development Association?

• Australian economy and some stats

• Illegal Logging Prohibition legislation

• Key issues for Aust. importers and domestic

• Drivers for legal timber

• Promoting use of timber in Australia

Timber Development Association

• Established: 1938

• Objective: Develop markets for timber products in

construction

• Represent: Supply chain – forest growers,

manufactures, wholesale (inc. importers)

and merchants

• Focus: Technical and market research projects and

education to specifiers

• Work with: Other industry associations, timber

companies, governments

Australian economy

• Annual GDP growth: 3.8% and

rising

• Unemployment rate: 5.2% and

steady

• Dwelling investment: AUD $71

billion

– New res. construction (60% of exp.):

below av. - expect to rise

– Alts and adds (40% of exp.): steady

Sawn wood & ply: consumption

Source: ABARE (2012) Australian forest and wood products statistics: September/December quarters 2011. Published 22 May 2012. Available at

http://www.daff.gov.au/abares/publications

Sources of sawn wood 2010/2011 - by volume

Sources of plywood 2010/2011 - by volume

Hardwood & ply import: trendsQuarterly hardwood timber imports 2004-2012 –

volume by source

Quarterly imports of wood panels and

engineered wood products 2004-2012 –

volume by source

Australian domestic supply

• Only ~10% of Australian forests SFM certified

(PEFC/AFS, FSC or both)

• All major sawmills, pulp mills and most (~75%)

timber wholesalers (inc. importers) have CoC

certification

• ~90% of domestic sawn wood and 100% of supply of

domestic plywood from COC certified sources

• Major imports of sawn wood (NZ, Europe, Nth

America) also mostly SFM certified

• About 50% of Australian hardwood and most

hardwood imports are not SFM certified.

Furniture imports: trends

0

50 000

100 000

150 000

200 000

250 000

300 000

2007

2007

2007

2007

2008

2008

2008

2008

2009

2009

2009

2009

2010

2010

2010

2010

2011

2011

2011

2011

AU

D $

,000

Furniture imports, select countries 2007-2011

China Indonesia Malaysia

Thailand Vietnam

Source: ABARE (2012) Australian forest and wood products statistics: September/December quarters 2011. Published 22 May 2012. Available at

http://www.daff.gov.au/abares/publications

Illegal Logging Prohibition (ILP)

Legislation:

• Action supported by all major parties

• Govt. wanted voluntary approach – code of conduct for importers

• Major domestic industry and ENGOs – wanted sustainability certification (FSC or PEFC) of all imports

• Importers wanted due diligence for legality mandatory for all importers

• Hence → legislation

• Passed Australian lower house – expected to pass upper house “late 2012”

• Does not impose any requirements or restrictions on sovereign nations or exporters

• However importers may be seeking information about suppliers and request further assurance if not low risk

ILP Legislation - Key Elements

A. Illegal Logging Prohibition Act

1. Prohibition (two parts)

2. Due diligence requirements (importers)

3. Customs declaration (importers)

4. Due diligence requirements (Aust. processors)

5. Annual statement to DAFF (Aust, processors)

6. Govt. monitoring, inspection and enforcement

B. Supporting Regulations

1. Prohibition (part 1)

• Applies from day one (late 2012)

• Prohibited to:

– Import illegally logged wood products

– Process domestic logs that have been

illegally logged

• Penalty - Up to 5 years jail and/or

fine ($55k for individual, $275k for company)

+ forfeiture

• Level of proof - must have done it

knowingly, intentionally or recklessly.

1. Prohibition (part 2)

• Applies to importers and processors of

regulated timber products after 2 years

(late 2014)

• Prohibited to:

– import illegally logged wood products

– process domestic logs that have been illegally logged

• Penalty - Up to 5 years jail and/or fine ($55k for

individual, $275k for company) + forfeiture

• Level of proof - must have imported/processed

negligently

Definition of illegally logged

“means harvested in contravention of laws in force

in the place (whether or not in Australia) where

the timber was harvested.”

2. Due Diligence: Importers

• 2 years after enactment (late

2014)

• All importers of regulated timber

products

• Must undertake due diligence

– Defined in regulations, probably:

• Gather information

• Risk identification

• Risk mitigation

• If DD not undertaken →

– Fines $33k for individual or $165k for company

– Easier to prove negligent

3. Customs Declaration

• After 2 years (late 2014)

• Required for all importers of regulated timber

products for each consignment

• Requires importers to declare they have

undertaken due diligence requirements in

accordance with the Act

• Fines up to $11k for individual or $55k for

company

4. Due Diligence:

Australian Processors

• After 2 years (late 2014)

• All processors of domestic

raw logs must also undertake the

due diligence requirements

• Specifics in regulations

• Must make statement of

compliance

• Fines up to $11k for individual or

$55k for company

Supporting Regulations:

Priorities

1. List of regulated timber products

2. Specific due diligence requirements

3. Form of customs dec. and statement of

compliance

4. Recognition of existing Australian state and

territory processes to align with the ILP Act

“Regulated Timber Products”

• Based on Harmonised Tariff System codes

• What’s definitely in:

– Sawn timber, plywood, mouldings

• What’s “maybe” in:

– Veneer, doors, window joinery

– Pulp and paper products

– Wood furniture

ILP: Key issues for importers

• Major importers:

– Most comfortable with due-diligence but concerned

about details. E.g.

• What are low risk / not low risk sources?

• What are acceptable mitigation/legality assurance?

– Concerned about additional costs and paperwork

– Want to make it tougher for irregular importers

• Irregular (and furniture) importers:

– Don’t know (or want to know) anything about

legislation

Drivers for legal timber

Drivers for legal timber (cont)

ILP: Identifying supply chain risk

• Aust. Govt have said they don’t want to decide -

up to market / industry (and courts)

• Resources:

– Aust Govt. funded Pöyry report and

criteria (on DAFF website)

– FSC & PEFC bodies and auditors

– FSC controlled wood country-wide

assessments

– ENGO reports

– EU/FLEGT VPA countries

– Trade Federations’ reports / guidance

ILP: Acceptable legal assurance

• Aust. Govt have said they don’t want to decide

• Up to the market/industry (and courts)

• Resources:

– Aust Govt. funded URS report and criteria (on DAFF

website)

– FSC & PEFC auditors

– EU/FLEGT/VPA acceptance

– TDA reports / guidance (forthcoming)

– Trade Federations’ reports / guidance

– Proforest assessment?

Acceptable legal assurance?

Legality assurance guidance

-

1.0

2.0

3.0

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AF

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SG

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SW

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F L

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Level o

f assu

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Verif ication Audit Governance

High

Moderate

Low

Source: URS (2010) A framework for differentiating legality verification and chain of custody schemes. Prepared for Australian Government

http://www.daff.gov.au/forestry/international/illegal-logging

Assessment of legal compliance schemes in Asia Pacific

FSC Controlled wood risk

assessment for Australia

• Six independent members

• Classified Australia low risk for all four

indicators for illegal harvesting

Source: FSC Australia (2009) Approved Controlled Wood Risk Assessment Matrix for Australia. http://www.fscaustralia.org/policies-and-standards/controlled-wood

Current and future work - TDA

• Stage I - Understanding current due-diligence

practices:

– Interviewing ~60 importers and dom. processors

– Report for Forest and Wood Products Australia

• Stage II - When legislation passes into law:

– Develop tools and guidance for importers and

domestic processors

Marketing Timber in Australia (Australian and

imported timber products)

Wood. Naturally Better™

Make it Wood. Planet Ark

WoodSolutions™

Terima kasih

Project :: Kooyong Residence

Architect:: Matt Gibson Architecture + Design

Image :: Shannon McGrath