Japan’s Public Timber Procurement Policy

1. Round-table Forum on Trade of Legal and Sustainable Wood in China Beijing, 26 April 2007 Japan’s Public Timber Procurement Policy Dr. Federico Lopez-Casero Forest Conservation Project Institute for Global Environmental Strategies (IGES)

2. Overview • Japan’s role in timber trade • Japan’s response to illegal wood imports • Framework of timber procurement policy • Legal and policy context of PPP reform • Reform of timber procurement policy • Definitions and verification modalities • Policy implementation: a) Domestic; b) Imported timber • Preliminary observations: a) Certification / legality verification schemes and b) Actors • What does this mean for China?

3. 1. Japan’s role in timber trade • Japan’s total wood demand is about 89 million m3 p.a.: Roughly 80% are imported → World’s 3rd largest importer • Largest importer of tropical plywood (4.6 million m3 in 2005) Source: ITTO (2006)

4. 2. Japan’s response to illegal wood imports • Since the G8 Summit in 2002, Japan has repeatedly expressed its commitment to tackleillegal logging • “We will not use timber that has been produced illegally” (Forestry Agency 31.03.2005) • Government stresses financial/administrative support to international organisations and producer countries • Low engagement of private sector prior to PPP reform: • Only 12% of 115 firms claimed to make any effort to assess the legality of the procured timber (survey by JFWIA) • Potential of PPP to represent “hard” policy option: • Public sector: 3% of total wood procurement （estimated) • May prompt a response from the private sector

5. 3. Framework of timber procurement policy Green Purchasing Law For specified items, refers to Basic Policy For wood products, refers to Guideline Specifies 3 Verification Modalities Forest certification/CoC (2) Accreditation under industry associations (3) Company’s own procedure Based on Certification schemes Associations’ or companies’ codes of conduct

6. 4. Legal and policy context of PPP reform • “Green Purchasing Law”:Law Concerning the Promotion of Procurement of Eco-Friendly Goods and Services by the State and Other Entities of 2000 (Law No. 100/2000), enacted January 2001 • Basic Policyfor the Promotion of Procurement of Eco-Friendly Goods and Services: • Identifies specific items for public procurement • Revised on 1 April 2006 by requiring for timber products: • Legality as a “criterion for evaluation” • Sustainability as a “factor for consideration” • Refers to Guideline formulated by the Forestry Agency

7. 5. Reform of timber procurement policy • “Guideline for Verification on Legality and Sustainability of Wood and Wood Products”: • Prescribes modalities to verify legality and sustainability • Aims to “promote verified products as appropriate items for procurement” of the public sector • Is mandatory for central-level ministries/agencies, Diet, courts and independent administrative institutions, but also addresses local government and administration • Gives the suppliers a lot ofleeway when verifying legality • Includes revision process based on multi-stakeholder consultation (exploratory committee)

8. 6. Definitions and verification modalities • Legality (Criterion for evaluation): • Timber “should be harvested in legal manner consistent with procedures in the forest laws of timber producing countries” • Sustainability (Factor for consideration): • “should be harvested from the forest under sustainable management” • 3 different modalities for verification: • Forest certification / chain of custody • Procedures established by codes of conduct of wood industry associations • Self-establishedprocedures of individualcompanies

9. (1) Verification throughforest certification • Wood products certified under a national or international forest certification scheme • Accepted schemes include: • Local scheme: Sustainable Green Ecosystem Council (SGEC) • Overseas schemes: FSC, SFI, CSA, PEFC, LEI, MTCC • No justification, no prior assessment • Very limited availability of certified timber in Japan/Asia: • Less than 1.85 % of total forest area in Japan(461,000 ha) in 2005 • Less than 1% of natural production forests in Asia

10. (2) Verification under accreditation by wood industry associations • Voluntary codes of conduct: • established by wood industry associations • regulating accreditation of manufacturers and suppliers of verified wood and wood products • mandatory for members(incl. monitoring & penalisation) • Leading role of the Japan Federation of Wood Industry Associations (JFWIA) as umbrella organisation: • Established code of conduct in March 2006 • Has served as a template for most other associations • Exception: The Japan Lumber Importers’ Association (JLIA) formulated their code in November 2005

11. (3) Verification through own procedureset up by an individual company • Applies mainly to suppliers, which: • are not members of wood industry associations • prefer handling timber under own code of conduct • Used by chip/pulp importing/processing businesses under the Japan Paper Association (JPA) • In principle it works similarly to modality (2)

12. 7. Policy implementation: a) Domestic timber • Modalities working since October 2006 Number of involved associations & accredited members (2007/03/16):

13. b) Imported timber Main schemes considered by the government as evidence of legality: • Working groups (researchers) under Exploratory Committee for Measures against Illegal Logging investigating options

14. c) Flow under modalities (2) and (3) for JLIA members Modality (2) Modality (3) DOCUMENT FLOW: Segregated Management as in modality (3) DOCUMENT FLOW: Segregated Management: STAGES: Notification & log sales contract (copies) Verifiable timber Logging Unveri-fiable Logging notification or other evidence (copy) Processing & distribution Invoice, shipping account, received documents & photos Invoice & (or incl.) evidence documentation Not procured by gov. Certificate based on evidence from all received documents Invoice & (or incl.) evidence documentation Delivery Public Procurement

15. 8. Preliminary observations:a) Certification/legality verification schemes • Modality (1): • Government has no intention to assess certification schemes • Modalities (2) and (3): • Organised by the private sector in Japan • Key role of industry associations (especially JFWIA) • Initial evidence of policy impact: • National producers & environmental NGOs see new policy as a chance to enhance demand for domestic timber • Importers under pressure to demonstrate legality of imported timber, as domestic timber is increasingly favoured

16. b) Actors • Main focus on the private sector: • Granted wide autonomy to establish their own voluntary codes of conduct for the verification of legality • Considered trustworthy by the Japanese government • Prominent officials used the argument of the “Japanese way” based on the assumption of “the goodness of human nature” (性善説 - theory developed by Mencius [孟子]) • Less focus on the public procurer: • Expected to accept provided documentation for legality verification in accordance with one of the modalities • No independent government/ 3rd party verification required • No major capacity building efforts or advice intended • However, public procurer is free to pay a price premium

17. 9. What does this mean for China? • ChinaandJapanare important timber trade partners • However, presently Chinahasno completetimber tracing and monitoring managementsystemin place • Impossible to identify or verify the origin of timber • Only two ways China’s timber industry can presently supplypublic entitiesinJapan： • Certified wood products • Enterprise able to provide legality evidence throughout supply chain • Need for a timber monitoring system inChina:Presently, in close consultation with its Chinese partners, the JFWIA is exploring options to set up a legality verification system for wood products (re)exported fromChina and procured by public entities in Japan

18. 謝謝。　Thank you! http://www.iges.or.jp/en/fc/index.html Sarawak, Malaysia, 2006