The EU Timber Regulation (EUTR) has been in force for two years on 3 March 2015. Is this landmark legislation causing the impacts envisioned by supporters and critics alike? NEPCon takes stock and looks ahead.
When the EUTR went into force on 3 March 2013, it was widely regarded as a key instrument in halting the production and trade of illegal timber in the EU. Meanwhile, parts of the industry expressed concerns over the impact on the European timber trade, and there was a pronounced wish for guidance and clarity.
Two years on, we still do not have the full picture. However, some critical points and patterns are emerging.
Impact on illegal timber harvesting
One of the fundamental objectives of the EUTR is to halt the production and trade in illegally harvested timber. The question is if the regulation is achieving the desired impact.
“There is no data supporting the impact of the EUTR on illegal logging in timber exporting countries. However, it is still early days, and other market and political forces may overshadow any effects,” says NEPCon forest legality expert Christian Sloth.
There is little doubt that illegal timber still finds its way into the EU.
This is confirmed by several NGO reports published in the past year that have uncovered trade routes of illegal timber from South America and Africa ending up in the EU market.
The EUTR is the latest major initiative under the EU Forest Legality Enforcement and Trade (FLEGT) Programme. Another key FLEGT instrument is the Voluntary Partnership Agreements (VPAs) between the EU and key timber producing countries, expected to result in FLEGT licenses guaranteeing legal timber harvesting. However, no FLEGT timber is available on the market yet.
The FLEGT Action Plan including the VPAS and the EUTR is undergoing review this year.
Rachel Butler, an independent advisor and timber industry expert, comments: “I think we are still waiting to see the EUTR and FLEGT pulling together to foster legal timber trade, in particular in terms of linking the EU industry with suppliers in VPA countries. With the FLEGT review underway, the time is right to take stock of what has been achieved so far, what lessons have been learned and how can FLEGT move forward”.
The international trade advisor James Hewitt shares her opinion. “Although the EUTR was conceived in order to support the EU's FLEGT Action Plan, it does not seem to be implemented with this synergy in mind. This undermines not only the efforts of reputable companies to exclude illegal products but also the commendable progress which has been made through multi-stakeholder engagement.”
Timber trade flows
In the lead-up to the implementation of the EUTR, many within the European timber industry predicated a slowdown of imports to the EU.
A series of reports from Chatham House in 2014 on timber imports to key European markets (UK, France and the Netherlands) found signs of a declining trend in imports from countries with a high risk of illegal logging.
A recent report by Fordaq concluded that, to the contrary of pre-EUTR speculations, the plywood trade has remained stable over the past two years.
Fordaq speculated that this might due to adjustments in the timber trade securing responsible supplies. However, recent probes by the UK authorities indicate that the due diligence systems of most Chinese plywood importers in the UK are insufficient, i.e. the EUTR is simply not followed yet for this type of product.
Mr Hewitt comments, “Based on statistics for production and imports, the regulation has not yet had a discernible impact on the scale and sources of supply for wood-based products placed on the EU market. Nevertheless, such qualitative evidence as there is firmly indicates that the regulation is improving practice both up and down the supply chain in the few EU member states which have been proactive.”
Mr Sloth: “Overall, the bark appears to be worse than the bite in terms of negative trade impacts. However, effects of the EUTR on trade flows may only be visible in the longer term. The member states are generally taking a stepwise approach to enforcing the law, and there is a great need for alignment as well. Some of the competent authorities still appear to accept paperwork at face value, which is not in line with the official EU guidelines.”
Mr Sloth also highlights the role of cases of perceived EUTR violations in France, Belgium and Germany raised by NGOs over the past two years. The latest example involves a cargo of Brazilian Ipé impounded by the Belgian authorities in November 2014 based on a Greenpeace report. The timber was released in January 2015 following investigations concluding that the Brazilian authorities’ documentation should be acknowledged. However, the EU importer subsequently cancelled further trade with the supplier as the Brazilian investigators had found the company to be involved in illegalities.
“Although none of those cases has led to any legal actions, they have served to spotlight key issues pertaining to risk countries and species. This has raised awareness, influencing supply chain management in parts of the European industry,” he remarks.
Need for a uniform approach across the member states
One of the most critical issues surrounding the EUTR, often reported to NEPCon from numerous sides, is the uneven enforcement across the EU member states.
The European Commission’s EUTR scorecard shows that whilst 20 countries have competent authorities, penalties and rules for regular checks in place by now, eight are still lagging behind.
A lack of implementing legislation in several EU countries has created a legal limbo where requirements are in place but no means exist to enforce them in the country.
“The EUTR, as a demand side measure, was intended to drive change upstream in timber producing countries. Differential administration of the law across the member states has limited this progress due to confusion, and it has created an uneven playing field. NGOs even speculate that there are ‘safe-havens’ in Europe for illegal timber imports”, says Mr Sloth.
“The scorecard only evaluates the fundamental framework. Equally important is the competence of national staff entrusted with enforcement and their ability to provide a clear and consistent interpretation of the EUTR.”
A uniform approach is in high demand by both the European industry and NGOs. IKEA Global Forestry Manager Anders Hildeman comments: “The EUTR is an important step in the right direction."
“It is one of the elements needed to combat organised crime linked to illegal logging. We now want to see a swift and consistent implementation across the EU.”
Bracing for stricter enforcement
Until now, even the most progressive CAs have used a stepwise approach to issues of non-compliance. No case has yet reached the courtrooms.
However, a change of tack in 2015 can be expected. The CAs in several countries have been engaging with the industry for a long time, providing guidance on grey zone areas. Looking ahead, it seems likely that the authorities will strengthen their approach at least in some member states.
Technology may increase the efficiency of compliance investigations.
“Recently, we’ve seen some CAs using fibre testing as a means of verifying timber species. I think we will see the use of such methods grow and spread within the industry itself and across further member states,” says Mr Sloth. The UK CA recently uncovered false species declarations in 9 out of 13 product samples, using microscopic testing.
Mr Sloth: “The CAs are tasked with a challenging duty, but countries such as the UK, Denmark and Germany are showing that it can be done. They provide good examples of the type of qualified and persistent effort that is needed to communicate and enforce the legislation.”
The EUTR is a tool to support enforcement of forest related legislation in producer countries, as it obliges the European industry to ensure compliance with applicable legislation. It is therefore paradoxical if the EU does not enforce the EUTR.
Additionally, procedures should be put in place to ensure the transparency of the work conducted by CAs and MOs. These might include mandatory public summaries of their evaluations and control audits.
Need for guidance
More extensive EUTR guidance is becoming available, filling important gaps. At this point, there are still frequent misunderstandings about fundamental aspects of the EUTR, such as the role of documents and certification in due diligence.
The industry often reports a lack of specific information about producer countries, such as risk factors and applicable legislation and clear guidance on what is expected from them. NEPCon is currently assessing forest legality risks at country level across 30 countries. Based on these analyses, user-friendly country profiles will be produced over the coming months.
Mr Sloth stresses the need for capacity building also in producer country industries.
“Being closer to the source, the producer can play a key role in providing indicators of legal harvest, trade and transport. This is an obvious area for building synergies between the EUTR and FLEGT,” he says.
Several initiatives are under way to fill this gap. For example, NEPCon is providing due diligence toolkits and training for small and medium enterprises within FLEGT related projects in Vietnam and Cameroon.
The European Commission recently recognised seven EUTR Monitoring Organisations (MOs) in addition to the two existing MOs (Conlegno and NEPCon). Whilst this is a sign that the total pool of EUTR capacity available to help the industry is growing, it also speaks to a growing need for calibration and alignment among the MOs.
There are no requirements for making the MOs' due diligence systems public and little information is available on the contents and functioning of each system. The need for transparency is compounded by the fact that MO-issued certificates stating due diligence compliance have started appearing from markets such as China.
Road map to securing impact
The review process taking place this year will provide important input for the future course of the EUTR.
“We hope the revision will focus on the objectives of the legislation and take the opportunity to remove unnecessary bureaucracy and barriers to trade, especially for small and medium size enterprises”, says Mr Hildeman, explaining that he would like to see a stronger role of certification schemes.
Another key point of discussion will likely centre on the need to clarify the EUTR requirements further.
Some of the obligations have evidently been widely misinterpreted. This has led to overreliance on paperwork and unnecessary collection of documents and information.
The revision process should help to define the road map for achieving necessary improvements, such as:
- A uniform approach to the EUTR across the EU member states and better quality assurance systems to ensure consistent and competent enforcement.
- Greater transparency of the work of CAs and MOs.
- Targeted industry tools and guidance, e.g. on the scope of applicable legislation and risk assessments in producer countries.
- More clarity on the role of certified material.
- Improved linkages between the EUTR and the FLEGT VPA processes.
- Expansion of the EUTR products scope.
“All these points are important, however alignment across member states should be at the top of the agenda. This is necessary to make sure that the gates of the EU market are closed to illegal timber. It is the single most critical barrier to EUTR impact at this point in time,” concludes Mr Sloth.