China is a fairly big player in timber markets in the US, Europe and Australia but new Forest Trends research shows these markets may be looking for alternative suppliers as government agencies enforcing laws prohibiting trade in illegal wood are indeed taking action, and wood products from China carry a high risk of illegality.
28 June 2016 | This month, Forest Trends released the results of the first survey of government agencies responsible for the implementation of the EU Timber Regulation (EUTR), US Lacey Act, and Australian Illegal Logging Prohibition Act (ILPA). The survey quantifies the extent and nature of enforcement activity of these regulations, which aim to combat the global trade in illegal wood. The results of this survey demonstrate in quantitative terms that there is concerted effort on the part of the US, EU, and Australia to tackle trade in wood illegally sourced from the world’s remaining forest estate, using due diligence strategies.
Responses were collected from government agencies in 14 European countries, three US agencies and the Department of Agriculture and Water Resources in Australia. EU Member States who responded to the survey were: Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Ireland, Latvia, Luxemburg, Malta, the Netherlands, Sweden, the UK, and one Member State that prefers not to be identified. Several countries have strict privacy laws that limit the publication of information about their enforcement activities, so the total figures are, in fact, considerably higher than those reported.
Importance of US, EU, and Australian Markets for Chinese Wood Product Exports
Half (50%) of China’s wood product exports are bound for markets in the US, EU, or Australia by value (40% by volume), and the trend has been an upward trajectory for the past 15 years. In some categories of wood products, the percentage is even higher: nearly two thirds of China’s furniture exports and three quarters of flooring exports were destined for the US, EU, or Australia last year.
These enforcement agencies reported that between September 2015 and March 2016:
- 495 inspections of company sites were undertaken.
- 955 Due Diligence Systems were reviewed.
- Where non-compliance was found, these agencies reported that the following were issued:
Survey Data Finds Chinese Wood Products Imports High on List of Infractions
Notably, the survey showed that wood product imports from China were associated with more non-compliance actions than any other country. If high volumes of Chinese wood products continue to be found unable to provide the evidence necessary for customers to demonstrate compliance with these timber regulatory legislations, US, EU, and Australian buyers may begin to search for alternative suppliers — and in fact the survey shows that this may already be happening.
Out of the 18 agencies reporting, six cited China in association with CARs, injunctions, or sanctions issued to companies between September 2015 and March 2016. Six agencies also reported that companies in their jurisdictions had decided to stop buying from individual Chinese suppliers who were unable to provide full documentation and independently verified chain-of-custody in favor of others who could. China was cited three times as frequently as Russia and Brazil in this regard. Other countries highly associated with CARs, injunctions, sanctions, or changes in suppliers included Gabon, Cameroon, Myanmar, Russia, and Vietnam — all of which are major source countries for raw material to China and are considered at high risk for extensive illegal logging, established illicit trade networks, and other factors.
This data comes shortly after the conclusions of the Lumber Liquidators case with the largest Lacey Act penalty in history and the groundbreaking prosecution of a case of domestic broadleaf maple theft from a national park in Washington State.
Officials were also asked to identify the numbers of enforcement activities that were focused on domestic forest producers, timber importers, furniture importers, or pulp/paper importers. Not all agencies were able to disaggregate their data in this way, but those that were able to could provide an indication of where enforcement resources have been focused in the last 6 months, and where non-compliances have most frequently been found.
Responsible Enterprises in China Need Support
Responsible enterprises in China are increasingly vocal about the need for support to ensure their production systems can meet the needs of buyers regulated by the EUTR, Lacey, and ILPA; a survey of 53 Chinese enterprises conducted by the Chinese Academy of Forestry found that these companies consider the new requirements to be challenging, but are willing to invest in supply-chain transparency to maintain market access.
The Government of China can play a crucial role in arming enterprises with the necessary information to meet consumer country standards, including information and training on developing Due Diligence Systems and conducting supplier evaluations. Ultimately, mandatory legislation requiring these steps of all companies importing wood to China, and particularly those in sectors that export to consumer countries, would go far to level the playing field among Chinese enterprises (particularly small and medium-sized companies), assure US, EU, and Australian buyers that finished products processed in China meet the new global norm for legality, and solidify China’s reputation abroad as a country that acts decisively to combat environmental harm both within and outside of its borders.
Kerstin Canby is the Director of the Forest Trade and Finance program at Forest Trends. She can be reached at [email protected]. Jade Saunders is a Senior Policy Analyst at Forest Trends and an Associate Fellow of the Energy, Environment and Development Programme at Chatham House. She can be reached at [email protected]. Naomi Basik Treanor is the Manager for the Forest Law and Governance workprogram within Forest Trends’ Forest Trade and Finance program. She can be reached at [email protected].
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