Explanatory Memorandum to COM(2008)644 - Obligations of operators who place timber and timber products on the market - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2008)644 - Obligations of operators who place timber and timber products on the market. |
|---|---|
| source | COM(2008)644  |
| date | 17-10-2008 |
· Grounds for and objectives of the proposal
The main objective of this proposal is to complement and underpin the EU's current policy framework and support the international fight against illegal logging and its related trade.
· General context
Illegal logging takes place when timber is harvested, processed or traded in violation of national laws applicable in the country of harvest. The reasons are many but they start with the high demand for timber and the weak rules to prevent trade in illegally harvested timber. Illegal logging is part of a larger problem that includes issues of forest governance, law enforcement and corruption.
Its clandestine nature makes its scale and value difficult to estimate but evidence suggests that it is a substantial and growing problem. In many countries, illegal logging is similar in size or even higher than legal logging activities. In Europe it is also present although not at significant rates.
Illegal logging is a major contributor to global deforestation which causes enormous environmental damage. Deforestation is responsible for approximately 20% of global emissions of greenhouse gasses (more than the total global emissions from the transport sector) and is a major cause for global losses of biodiversity.
In addition, illegal logging undercuts the competitiveness of legitimate forest industry operations in exporting and importing countries and costs governments' significant revenue losses. It undermines the rule of law and the principles of democratic governance, hinders sustainable development in many developing countries and can fund armed conflict. The social impact of illegal logging is less well recognised. However, serious human rights abuses have been documented.
The European Union continues to initiate and support initiatives at the national, regional and international level to raise commitment and strengthen work to address illegal logging and associated trade. The European Commission and many Member States are actively involved in many such initiatives, such as the regional FLEG processes. It also engages in bilateral and multilateral discussions with third countries both in multilateral fora such as the UN Forum on Forests and the International Tropical Timber Organisation and in bilateral talks with major timber-consuming countries such as the US, China, Russia and Japan, to discuss the problem. The Commission also uses the opportunity of ongoing negotiations for Partnership and Co-operation Agreements as well as for Free Trade Agreements to raise the issue of the conservation and sustainable management of Forests, including illegal logging and associated trade.
In its 2003 Communication to the European Parliament and the Council, the European Commission proposed an EU Action Plan for Forest Law Enforcement, Governance and Trade (FLEGT) i to address the problem of illegal logging and its related trade. This initiative closely reflected the commitment made by Commissioner Nielson in 2002 at the World Summit on Sustainable Development and the momentum built up in the regional processes organised by the World Bank, notably the high level meeting on Forest Law Enforcement and Governance (FLEG) held in Bali in 2001.
The EU FLEGT Action Plan set out a package of measures including, inter alia, support for timber-producing countries, efforts to develop multilateral collaboration to combat the trade in illegally harvested timber, private sector initiatives as well as measures to avoid investment in activities which encourage illegal logging and conflict timber.
A central element of the EU FLEGT Action Plan was the proposal for a FLEGT licensing scheme, under which exports of timber to the EU from participating countries would be covered by a (FLEGT) licence attesting that the timber has been harvested in conformity with relevant national legislation. The Council adopted the FLEGT Regulation i in 2005 establishing the legal framework for the imports into the EU of timber originating in partner countries and authorised the Commission to launch negotiations with producing countries and regional organisations which expressed an interest in entering in Voluntary Partnership Agreements (FLEGT VPAs) with the EU.
Up to October 2008, five countries – Malaysia, Indonesia, Cameroon, Congo (Brazzaville) and Ghana – have started negotiating such an agreement with the EU and there are informal consultations with a number of other producing countries which have expressed an interest. The first such agreement was initialled with Ghana in September. However, the timeframe as regards the implementation of any VPAs and the risk of circumvention and laundering risk make VPAs alone insufficient to address the problem of illegal logging.
In the FLEGT Action Plan the Commission also recognised that some important timber-producing countries may choose not to enter into FLEGT VPAs with the EU and therefore that, in the absence or slow pace of multilateral progress, the EU should adopt additional measures to fight illegal logging at the global level, including legislation to prevent imports of illegally harvested timber into the EU. The Commission took the commitment to review such options and the European Parliament and the Council have since recalled that commitment in formal resolutions i and conclusions i.
In the intervening period, extensive work has been undertaken by Member States, the Commission, think-tanks and NGOs to identify the best way forward. Taking the results of this comprehensive work into account, at the end of 2006 the Commission launched an assessment of a number of additional measures. The findings of this process are summarised in a public report from the Commission.
Taking into account the results of the assessment performed the Commission believes that the EU policy to fight illegal logging and its associated trade needs to be reinforced. In the absence of a harmonised approach, several Member States have indicated that they would take national measures. However, experience has shown that action at national level could create a barrier to the free circulation of goods and a distortion of competition in the internal market. The Commission thus believes that Community action is necessary. It is proposed that this should be done through a Regulation determining the obligations of operators who place timber and timber products on the Community market.
The proposed Regulation does not preclude Community action to combat deforestation and biodiversity loss through other measures, such as, for example, the establishment of sustainability criteria for biomass.
· Existing provisions in the area of the proposal
Existing provisions are fully explained in the previous section.
· Consistency with the other policies and objectives of the Union
Climate Change policy: There has been in recent years an increasing awareness of the vital role that forests plays in the global carbon cycle, storing roughly half the world's terrestrial carbon. In particular, there is now an ever-increasing consensus that unless the deforestation challenge is addressed, it will simply not be possible to limit global warming to 2°C above the pre-industrial temperature; nor will it be possible to reap the benefits of EU efforts to combat climate change.
Illegal logging is one of the most important direct drivers of deforestation and it also undermines forest governance and sustainable forest management which are essential for the effectiveness of measures in the forestry sector that should be set up under the post-2012 International Climate Agreement.
The low cost timber products that illegal logging generates also hurt European timber operators and the workers they employ. This proposal aims at combating this problem and level the playing field for industry and workers.
The aim of this proposal is in line with the Commission's strategic objectives and better regulation principles notably to provide effective and efficient measures, ensure a high level of legal certainty across the EU, enable operators to be more dynamic without increasing significantly the burden and thus help to strengthen the Community's credibility in the eyes of its citizens.
The proposal, in line with the FLEGT Action Plan, focuses only on the question of legality, and does not address sustainability. However, in many countries forest legislation is based on the premise of sustainable forest management and therefore legality is not totally distinct from sustainability In addition, given that this proposal aims at encouraging better law enforcement and governance it would represent a major step along the road to sustainability particularly in countries affected by illegal logging. The objectives of this proposal have been considered within the context of the Sustainable Development strategy agreed by the European Council in June 2006 and the Strategic European Energy Review presented by the Commission to the European Council in January 2007. The proposal and any implementing measures should be consistent with these objectives.
A broad consultation process was held between December 2006 and June 2008 which included a web-based public consultation and numerous meetings with stakeholders. In addition the Commission carried out an impact assessment of the proposed policy options which led to the publication of a report.
Initially four options were considered:
Option 1: Expanded coverage of the bilateral approach through FLEGT Voluntary Partnership Agreements.
Under this option, the Community would give priority to reinforce the implementation of the VPA approach. This approach however, would have a significant impact only if all major producing, transit and processing countries would enter into FLEGT VPAs or if this would evolve into a multilateral initiative. The former is widely considered to be an impossible task while the latter appears highly unlikely.
Under this option, the Community would encourage the strengthening of private sector measures such as codes of conduct and forest certification schemes by e.g. recognising them in the FLEGT VPAs, making membership in the federations mandatory and by supporting measures such as financial or regulatory incentives.
Codes of conduct have been introduced by timber trade federations and bodies who develop and advice their members on responsible purchasing policies. Private certification schemes have been set up to set forest management standards and accredit forests, products and or managers against those standards. Although these initiatives have merits including their flexibility, powerful motivation and good cost/efficiency balance, their voluntary nature, lack of policing over implementation and lack of sanctions for non-compliance challenged over the years their credibility and sustainability.
This option would consist in declaring illegal under Community law the importation of timber products stemming from illegal logging and making imports of timber into the Community conditional upon proving legality. The prohibition and the requirement would apply to all countries regardless of the level of risk on trading illegally harvested timber. The compliance check would take place at the EU border, on the basis of documentation ascertaining the legality of the timber.
Under this option, the Community would rely on the assumption that illegal logging occurs only outside the EU and therefore trade measures would have a predominant role to play in the combat against illegal logging. The option presents difficulties in terms of WTO-compatibility (discriminatory treatment of timber operators) and its proportionality.
Under this option it would be illegal to place on the EU market illegally harvested timber or products derived from such timber. The option would apply both to imported forest products and to those produced in the EU.
Two alternative approaches could be followed:
Option 4A: Legislation which prohibits the trading and possession of timber and timber products harvested in breach of the laws of the country of origin.
This option would prohibit the placing of illegally harvested timber on the EU market. The responsibility to prove illegality would lie with the enforcement agencies and operators would be requested to demonstrate compliance only when challenged.
The focus of this option would effectively be on high-risk cases and it would thus provide operators with an incentive to source timber with adequate guarantees regarding its legality. However, it would have significant difficulties in its implementation because demonstrating the underlying illegality would be a difficult task as timber products have complicated supply chains, stretching through several countries and operators and would involve European courts adjudicating on infractions having taken place in third countries and in the context of the legislation of those countries. In addition it would not provide the legal certainty necessary for the proper functioning of the market.
This option is similar to the provisions of the Illegal logging amendment to the US Lacey Act, approved on 2 June 2008 which extends protection to plants and trees illegally harvested outside of the US.
Option 4B: Legislation which requires that only legally harvested timber and timber products be placed on the market.
Under this option the marketing of timber and timber products in the Community would be made conditional upon the operator proving legality. For enforcement purposes, such proof would require presentation of written documentation covering every single shipment and as a consequence the option would risk creating a burdensome, expensive and trade-disruptive system.
To a certain extent this option would rely on an approach similar to the one described under option 3; operators would be required to provide documentary evidence of the legality of every shipment of timber and timber products they make available on the EU market, regardless of the origin. Such evidence would have to be provided either on request or systematically and for enforcement purposes it should take the form of documentation proving legality.
The conclusion from the assessment of the four different options set out above was that there were significant drawbacks to each of them that could limit their effectiveness. The specific nature of illegal logging requires a new approach that takes into account the structure of the entire timber sector, which aims at a systematic change of behaviour in operators and customers and which focuses on promoting sector-specific systems that can prevent illegal timber and timber products entering the Community market. With these objectives in mind, a new option emerged.
Option 5: Legislation which requires due diligence by all operators who place timber and timber products on the Community market
This option requires operators to exercise due diligence to ascertain to their best ability that the timber and timber products they place on the Community market were legally harvested. It relies on the principle that an efficient strategy should support the development of robust systems designed to eliminate illegally harvested timber from the Community market.
A major benefit of that option is that it will tend to favour sourcing from countries with reliable forest management practices, in particular, those countries having concluded FLEGT VPAs with the EU, since the FLEGT licence ensures a high degree of certainty in terms of the legality of the timber products concerned. Costs are proportionate to the need for the Community to improve the efficiency of its policy against illegal logging and the related trade. Over time operators will also benefit from the elimination of illegal timber products from the market.
This option would imply that operators covered by it apply systems and procedures to ascertain to their best ability that they only place on the EU market timber and timber products that have been legally harvested.
· Public Consultation
The Commission held a web-based public consultation in early 2007. The consultation sought views on the need for, appropriateness and feasibility of EU policy measures to address the problem of illegal timber and timber products being introduced to the European market. Opinions were only expressed on the initial four options because option 5 was developed in response to the initial assessment. Although the substantive response was not large in terms of numbers (93 contributions) in terms of content and variety of perspectives provided it met the Commission’s expectations. The Commission also received 7.161 emails through a Ban illegal timber campaign launched by Greenpeace.
Most of the respondents felt that the coverage of the bilateral FLEGT approach was insufficient to address the problem of illegal logging. They also felt that further private sector voluntary schemes could be used to complement a robust binding framework. Some respondents felt that a combination of these approaches might allow those areas with the highest risk of illegal logging to be targeted. A significant proportion of the respondents expressed the firm wish for the EU to put an end to ‘business as usual’ and in particular address possible loopholes in a system under FLEGT VPAs. In general these responses favoured a legislative approach although without clearly favouring any particular option. The report summarising the results of the consultation can be found in www.cc.cec/dgintranet/env/i/e2/doc/pdf_docs
· National Studies
In its conclusions the Council called on the Member States to provide the Commission with “relevant information” about the extent to which it is possible to use existing national legislation to stop the trade in illegally produced and traded wood. Several MS carried out that analysis in response to that request. The analysis suggests that there is some potential to address illegal logging through existing legislation such as the laws on theft and trafficking of stolen goods, money-laundering, corruption or smuggling.
· Consultations with third countries
Consultations were held with several international partners. High level meetings were held with other major timber importers e.g. China, Japan and USA. Meetings were organised with countries currently negotiating FLEGT Voluntary partnership Agreements with the Community (e.g. Malaysia, Indonesia, Ghana, and Cameroon) as well as certain other timber exporting countries (Russia, Brazil) and countries that have shown interest in discussing VPAs with the EU.
· Impact Assessment Report
The Commission has produced a report looking into the environmental, economic and social impacts of the different policy options within and outside the EU. This report is accessible on the web site of DG Environment within the European Commission. The Commission contracted a consultancy firm to carry out a study as an input for its report.
· Ad hoc Consultations
In the context of the impact assessment stakeholders were consulted in workshops or through interviews. Stakeholders were invited to rank the additional options from best to worst. As option 5 had not been yet developed at that time views were sought on the four then available options.
When option 5 was developed, the Commission services held a number of meetings with stakeholders to discuss the advantages and disadvantages of this approach. Option 5 received generally a positive feedback. One point of divergence amongst stakeholders was whether domestically produced timber should be covered as there are few incidents of illegal logging within the EU. The technical practicality of applying legislative requirements to composite products was another issue raised although the majority of stakeholders supported a uniform approach that would level the playing field for all players in the timber market.
There were also concerns about the fact that option 5 does in fact not prohibit the placing on the market of illegally harvested timber and derived products but instead requires timber operators to show sufficient care in ensuring that they do not place illegally harvested timber on the market. However it was recognised that the proposed measures, by relying on the responsible operators have the potential to induce permanent and implementable changes in the EU timber market and are therefore able to deliver better solutions to the challenging problem of illegal logging and related trade.
· Summary of the proposed action
The proposal focuses on the first time that timber and timber products are made available on the Community market, regardless of their origin, by determining the obligations of those operators who place timber and timber products on the Community market. The proposal is based on the due diligence principle requiring the operators covered by it to apply a system (due diligence system) to minimize the risk of placing illegally harvested timber and timber products on the Community market. The due diligence system includes measures and procedures which will enable operators to track the timber and timber products, to have access to information concerning compliance with the applicable legislation and to manage the risk of placing illegally harvested timber and timber products on the Community market. The proposed measures aim at deterring operators from placing on the Community market timber and timber products without having a reasonable assurance as regards their legality contributing therefore to the global efforts to fight illegal logging. They also provide consumers with the certainty that by buying timber and timber products they do not contribute to the problem of illegal logging and associated trade.
It is important to note that due diligence is not just a moral duty to care but a legal requirement for a proactive behavior. It obliges operators to show prudence, judgment and positive action in ascertaining the legality of the timber and timber products that enter their supply chain in order to minimize the risk of placing illegally harvested timber and timber products on the Community market.
Legality is defined on the basis of the legislation of the country of harvest, applicable to forest management, timber harvesting and timber trade.
Timber and timber products covered by a FLEGT license or a CITES permit are considered to have been legally harvested.
Operators who should apply a due diligence system can either develop a system on their own or rely on a recognised due diligence system as the proposal provides for the recognition of due diligence systems developed by monitoring organizations. This means that, while setting clearly the principles to be taken into account when applying a due diligence system, the proposal gives operators the flexibility to choose the mechanisms to deliver the required result.
The guiding principles of the proposed Regulation are effectiveness and clarity in terms of the legal obligations. Operators have the responsibility to minimize the risk of placing illegally harvested timber and timber products on the market through the use of a system of measures and procedures. The main elements of this system are set out in the proposal. Further details will be laid down by way of implementing measures in order to facilitate implementation, notably with respect to the identification of the criteria for determining the presence of a high or low risk that illegally harvested timber and timber products are placed on the Community market. In laying down those implementing measures the following principles should be respected: the need to avoid putting any unnecessary burden on the operators; the balance of costs and benefits to operators covered by this Regulation; the need to respect the necessary flexibility in the application of the implementing measures; the need to facilitate the adaptation of small operators to the requirements laid down in this Regulation. Recognizing that the effective implementation of the proposed measures relies on the adoption of complementary measures, its application will begin only when these measures have been adopted.
The most comprehensive approach can not function effectively without the commitment and full collaboration of all stakeholders involved in the implementation. In all aspects related to this proposal it is essential that stakeholders, in particular the industry and the civil society, will be consulted so as to determine the best possible ways of implementation through a structured framework of discussions and information sharing.
· Legal basis
The provisions of this Regulation relate to the protection of the environment. Article 175 i of the Treaty thus provide the appropriate legal basis.
· Choice of instrument
The proposed instrument is a regulation because a regulation is necessary in order to ensure the highest level of harmonization and avoid the coexistence of different standards between Member States.
· The principles of subsidiarity and proportionality
The Subsidiarity principle applies insofar as the proposal does not fall under the exclusive competence of the Community.
Strong evidence suggests that illegal logging is a substantial occurrence, which causes significant environmental damage and contributes to loss of biodiversity, undermines the competitiveness of legitimate forest industry operations while being closely associated with corruption, organised crime and violent conflict. The proposal aims at minimizing the risk of illegally timber and timber products entering the Community market through a set of obligations of operators who place timber and timber products on the Community market. Despite the limited occurrence of illegal logging incidents within the EU and in the absence of Community requirements concerning the marketing of timber and timber products produced within the EU, the proposed regulation also applies to operators who place domestically produced timber and timber products on the Community market. The guiding principle has been non-discrimination to ensure a comprehensive and integrated approach and avoid conflict with international trade rules. At the core of the proposed Community action lies the establishment of common obligations of operators who place timber and timber products on the Community market. The risk based approach allows for reducing the administrative burden on operators and also for a better targeting of controls to cases which present a higher risk. The proposed harmonised approach would simplify the requirements for the operators and therefore stimulate competitiveness, while consumers would be better informed on the applicable standards. The system would also provide the necessary legal certainty and clarity for the proper functioning of the market.
Estimates for the costs involved in the various options were made as part of the impact assessment. Costs to EU importers and producers under the proposed regulation are low when compared to other options investigated in the impact assessment. Important to note is that this proposal takes account of the current private sector practises on legality assurance and respects existing mechanisms. Therefore part of the costs have already been covered in the context of existing systems
It has been argued that measures affecting imports of timber and timber products would only shift trade to non-discriminatory markets. However, the EU is a major player in the international arena and with such an initiative it would set the example and send a clear signal on its commitment in the combat against illegal logging, loss of biodiversity and climate change, encouraging similar initiatives from other major consuming countries
In light of these elements, EU action is justified and proportionate to the problem.
Contents
- BUDGETARY IMPLICATION
- 2. CONSULTATION WITH INTERESTED PARTIES AND IMPACT ASSESSMENT
- Option 2: Voluntary measures by the private sector further developed
- Option 3: Border measures to prevent the importation of illegally harvested timber
- Option 4: Prohibition on the placing on the EU market of illegally harvested timber
- Option 5: Legislation which requires due diligence by all operators who place timber and timber products on the Community market
- 3. ELEMENTS OF THE PROPOSAL
- 5. REVIEW/REVISION/SUNSET CLAUSE
- 6. SIMPLIFICATION
- 7. REPEAL
- 8. RECASTING
- 9. CORRELATION TABLE
- 10. EUROPEAN ECONOMIC AREA (EEA)
The present proposal entails limited financial implications for the Community budget for administrative purposes.
The proposal does not include a review clause.
The proposal does not have a simplification element as it does not touch upon existing legislation.
The proposal does not repeal existing legislation.
The proposal does not involve recasting.
N/A as correlation tables are only required with respect to directives.
The proposal concerns an EEA matter and should therefore extend to the European Economic Area.