Assessment of additional measures to exclude illegal timber from EU markets

1. Assessment of additional measures to exclude illegal timber from EU markets Outline of potential additional measures Duncan Brack Associate Fellow, Energy, Environment & Development Programme, Chatham House Illegal Logging Update and Stakeholder Consultation Chatham House, 20 July 2006

2. Potential loopholes in FLEGT system • Number of countries signing VPAs may be limited • ‘Circumvention’ – trans-shipment via non-VPA countries to evade scheme • Not clear whether VPA countries will be under any obligation to control imports • So interest in using other legal instruments – ‘additional options’ – to plug loopholes • Part of FLEGT Action Plan

3. National studies • Studies of existing legislation in Estonia, Germany, Italy, Netherlands, Spain, UK • Practical problems identified in national studies: • Lack of cooperation with foreign enforcement agencies • Continuity of evidence • Difficulties with showing intent • Definition of ‘illegal timber’ • New legislation only worthwhile if it can help to solve or short-circuit these problems

4. Options for new legislation • Ban on import of unlicensed products regardless of origin • Prohibition on import (and purchase, sale, possession, transport, etc.) of illegal products (similar to Lacey Act) • Improving international cooperation frameworks (not covered here)

5. 1 Trade measures • Requirement for proof of legality for all timber imports to the EU regardless of origin, and ban on import of unlicensed products • Presumably would require certification, FLEGT license, or equivalent documentation (not existing papers) • Additional requirement on bulk of timber imports

6. 1 Trade measures: problems • Would require licensing of 85–90% of trade that is not illegal • Highly effective, but highly trade-disruptive (impact on demand for timber?) • WTO problem: major problem of discrimination between imports and domestic production – unless domestic products also required to prove legality • WTO problem: impacts may be viewed as disproportionate to achievement of objective (is it ‘necessary’ to reduce illegal logging?)

7. 1 Trade measures: Civil society initiative • FERN / Greenpeace / WWF proposal, December 2004 • Requires ‘valid and verifiable documents’ demonstrating legality • Covers all cases of movement of timber and timber products within the Community • If documentation the same, would possibly survive WTO non-discrimination test • But measure seems excessive

8. 1 Trade measures: other options • Reciprocal export and import bans – e.g. Indonesian request to EU to ban import of logs, sawn timber • May well be of value within particular region • Most easily applied in EU through FLEGT license scheme • Extensive export bans not very realistic as long-term measure

9. 2 New criminal legislation • Prohibition on import (and purchase, sale, possession, transport, etc.) of illegal products • Similar principle as US Lacey Act (mainly fish and wildlife) (highlighted in FLEGT Action Plan)

10. 2 US Lacey Act: trafficking offence • Unlawful to ‘import, export, transport, sell, receive, acquire or purchase in … foreign commerce … any fish or wildlife taken, possessed, transported or sold … in violation of any foreign law’ • Specific intent to knowingly import illegal products: felony (fine up to $250,000, sentence up to 5 years) • Should have known that illegal products: misdemeanour (up to $100,000, 1 year) • Negligent violation: civil penalty (fine up to $10,000) • In all cases: forfeiture of products (no ‘innocent owner’ defence)

11. 2 US Lacey Act: in practice • Often used by US prosecutors • Proving illegality not always straightforward • Does not require cooperation with foreign country (though much easier if does cooperate) • Regarded as useful, and frequently employed

12. 2 Lacey Act and illegal fishing • Lacey Act used widely against IUU fishing • Similar principle incorporated in legislation of some south Pacific countries • FAO International Plan of Action incorporates principle … • … as does EU Community Action Plan (2002) … • … and conclusions of High Seas Task Force (March 2006) • UK considering possibility of including legislation in Marine Bill

13. 2 A Lacey Act for the EU? • Clear advantages compared with national criminal legislation • Wide range of triggers, not restricted to theft • Does not require proof beyond reasonable doubt; effectively creates requirement for due diligence • Legislation doesn’t have to be identical to Lacey Act; experience of implementation in US is important • Impact on suppliers: negotiate contracts which shift risk

14. 2 Legislation within EU • Lacey Act: ‘import, export, transport, sell, receive, acquire or purchase’ • Community competence appears to exist • Probably directive, with e.g. penalties established at member state level • Introduction by individual member state – would need to consider whether created barrier to trade within the EU (Article 30 EC Treaty) • Dispute cases suggest would be acceptable

15. Conclusions • Existing frameworks: not likely to be very useful • Requirement for proof of legality: effectiveness high, but cost of universal licensing scheme also very high • Introduction of Lacey Act-style legislation: does possess advantages, but not panacea – would also impact trade, though much less than previous option • Ideal solution in long-term is world-wide licensing system, but not feasible now • EU legislation modelled on Lacey Act would underpin FLEGT licensing scheme