Etikettarkiv: Due Diligence

EU Timber regulation: How well do you know your supply chain?

One year ago today the Regulation (EU) 995/2010 or just EU Timber Regulation (EUTR) came into force after years of discussions on how to tackle the illegal trade in timber and timber products. According to the World Bank illegal trade costs governments an estimated €10–15 billion each year. Illegal trade on timber also lies behind a number of major environmental problems including deforestation, loss of biodiversity and fuelling climate change.

The EUTR prohibits trading with illegal timber and timber products and it is illegal according to the rules in the country of origin of the timber products. This regulation requires operators to implement a Due Diligence System (DDS) that guaranties that the risk for illegal timber or timber products entering its supply chain is negligible. For traders (buyers or sellers of timber or timber products in the EU) the main obligation is to keep records on their suppliers and customers.

The first nation to take serious action on illegal logging was The US. Their conservation law ´Lacey Act´ of 1900 was amended in 2008 to become the world’s first ban on trade in illegally sourced wood products. The Lacey Act is a fact-based statute with strict liability, which means that no verification schemes can be used to ”prove” legality. This regulation basically requires two things from an organization; to submit a Plant Product Declaration and to demonstrate Due Care (DC) which means that appropriate action to minimize the risk of purchasing illegal plant products was exercised.

If DC is not exercised under the Lacey Act, the FBI can raid your office, seize commercial documentation and inform you about the big trouble you´re in. This happened during a renowned case against Gibson Guitar involving illegally sourced Madagascar ebony that resulted in plenty of bad media attention for the guitar makers between 2009 and 2012. To be able to mitigate the consequences of their illegal timber trading, Gibson signed a criminal enforcement agreement where the US government dropped all charges and in return Gibson accepted responsibility for its actions, paid a large fine and committed to a number of responsibilities to avoid future breaches including annual training for all purchasing staff.

The EU, unlike US, requires operators to implement a Due Diligence System (DDS) to guarantee that the risk for illegal timber entering a supply chain is insignificant. This can be done by the organizations themselves or by someone else on behalf on this organization like “monitoring organizations”.

When it comes to the EUTR it is too early to fully understand the level of enforcement that each country will pursue in the future. The EU national authorities are probably just going to give a fine to companies importing timber that have not implemented a DDS, but if fraud is involved there is an option of prison up to 2 years.

Similar regulations and policies are under implementation in other countries and next in line we have Australia and Japan which means that timber legality is here to stay.

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Get in touch if you have any comments or questions.

/Francisco Ballas