A key question for the long-term future of the EU trade in tropical timber products is the impact of the EU Timber Regulation (EUTR).
This is particularly true of suppliers in those tropical countries, like Indonesia, that have a Voluntary Partnership Agreement (VPA) with the EU and are seeking an assurance that FLEGT licensed timber will benefit in the market from the “green lane” offered by EUTR.
FLEGT licensed and CITES certificated timber products are the only products recognised by EUTR as requiring no further checks by EU importers to ensure their legal status.
For those suppliers of tropical timber products that are not FLEGT licensed, there are key issues surrounding the types of information that the EU importers will accept as assurance that there is a negligible risk of illegal harvest.
These issues have been highlighted in recent weeks by the prosecution of one UK importer for a failure to comply with EUTR in relation to sawnwood imported from Cameroon. The prosecution was solely focused on the company’s due diligence systems relating to its purchases of FSC-certified ayous from Cameroon in January 2017.
Although the prosecution acknowledged that none of the material imported was from an illegal source, the company was found guilty of failing to adequately check the legality of the timber when placing it on the market.
The company was fined £4000 in the second successful EUTR prosecution in the UK. The first was last year when a designer furniture retailer was fined £5000 for importing a sideboard from India without carrying out the required due diligence assessment.
Commenting on the latest prosecution, a representative of the British Woodworking Federation said: “Companies bringing timber products in directly from outside the EU need to have their own due diligence system in place even for one-off transactions and cannot rely on suppliers to carry this out on their behalf.
“This must include information about the supply of timber products, an evaluation of the risk of placing illegally harvested timber and timber products on the market and necessary steps to mitigate this risk; for example additional information and third party verification”.
“Simply bringing in FSC, PEFC or similar Chain of Custody certified timber is not enough to satisfy the due diligence requirements for these importers, although FLEGT licenced timber would suffice.”
In practice, given the extra due diligence steps required to import even FSC certified timber into the EU market, EUTR should offer significant market advantages to tropical suppliers of FLEGT licensed timber.
At present that applies only to Indonesia, which has licensed timber for the EU market since November 2016. The latest data from the FLEGT Independent Market Monitor, hosted by ITTO, suggests that this market advantage may be filtering through into a rise in EU trade with Indonesia for product groups like plywood and decking that have been an immediate focus of EUTR enforcement activity.
There has been quite a sharp increase in EU imports of Indonesian plywood since November 2016, lending support to anecdotal reports of EU plywood importers being encouraged to stock more Indonesian product due to licensing. EU imports of decking products from Indonesia were sliding in the first half of 2017 but recovered in the second half of the year.
However, it would be a mistake to attempt to attribute these trends to a single cause, even one so significant as a regulation applicable to every company placing timber on the market in the EU. An increase in trade can be expected in a year when the EU economy began to grow more strongly after a long period of slow growth following the European debt crises.
It’s also apparent that the rise in trade with Indonesia during 2017 was not universal across product groups. EU imports of wood furniture from Indonesia were flat during the year, while imports of Indonesian flooring and glulam declined.
The combination of EUTR and FLEGT licensing offer an immediate opportunity for Indonesian suppliers to retake share in those sectors – like decking and plywood - where Indonesian products are familiar to EU importers and already favoured for their strong technical performance, but where demand has been dampened by concerns over the legality of wood supply.
However, in isolation, FLEGT licensing is less likely to generate immediate benefits in those high value sectors like furniture and joinery where the specific technical and environmental features of Indonesian wood products have been less significant barriers to competitiveness than wider issues such as labour costs, red tape, logistics, processing efficiency, innovation, and marketing.
In these sectors, increasing share may well be achieved if FLEGT licensing is combined with market development initiatives to improve the international competitiveness of Indonesian wood manufacturers across a wider range of issues, although this is likely to take time.
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