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The GFTN Guide to Legal and Responsible Sourcing

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7.3 Source Assessed in the Context of the US Market

Environmental Status of SuppliesMajor marketplaces in Europe and the United States have seen major changes with respect to market access requirements for producers and the role expected of those who import or trade forest products.

United States

In the U.S., the Lacey Act was amended in 2008 and seeks to eradicate trade in illegally sourced forest products—including timber and wood fibre based products (such as paper). The Lacey Act is only enforced within the boundaries of the United States. While the Lacey Act does not apply to other countries, it is of great importance to exporters of forest products who want to trade with US companies—as US-based customers are relying on their trading partners to help them demonstrate compliance with this law.

The Lacey Act has stiff penalties for US companies that commit offences. Penalties for US companies range from: a criminal felony fine (up to $500,000 for a corporation, $250,000 for individual, or twice maximum gain/loss from transaction); to a possible prison sentence of up to five years; forfeiture of goods, a criminal misdemeanor penalty (up to $200,000 for corporation, $100,000 for individual, or twice maximum gain/loss from transaction); to a possible prison sentence of up to one year, or a civil penalty fine from $250 to $10,000. The penalties applicable are linked to the degree of care taken (or not) and the nature of the crime, ranging from direct knowledge of illegal trade and falsified import declarations down to more inadvertent mistakes. What should be clear to all exporters is that US importers are almost entirely reliant upon their suppliers to help them demonstrate due care and are more likely to trade in the future with those who can assist them in this process. Increasingly, legal compliance will feature in contracts between companies and civil penalties may be sought where there are breaches.

U.S.-based forest products importers will be seeking assurances that the products they source from both the domestic market and from overseas have been harvested, possessed, transported, sold or exported without breaking any relevant underlying laws in the country where the tree was grown, even if it was processed in another country.

The laws which are regarded as relevant and which need to be complied with include those that relate but not limited to:

  1. Theft of plants;
  2. Taking plants from an officially protected area, such as a park or reserve;
  3. Taking plants from other types of "officially designated areas" that are recognized by a country's laws and regulations;
  4. Taking plants without, or contrary to, the required authorization;
  5. Failure to pay appropriate royalties, taxes or fees associated with the plant's harvest, transport or commerce; or
  6. Laws governing export or trans-shipment, such as a log-export ban.

Note: The reference to “plants” includes logs, timber, fibre, veneer and all other forms of product later derived from the harvested plant (i.e. a tree).

U.S.-Based Importer Requirements

The Lacey Act requires importers to provide a basic declaration to accompany every shipment of plants or plant products. The purpose of these declarations is to increase transparency about the timber and plant trade and enable the US government to better monitor the trade and assist in enforcing the law.

The declaration must contain:

  1. Scientific name of any species used
  2. Country of harvest
  3. Quantity and measure
  4. Value

Exporters can assist US importers in providing this basic information. This in itself is not enough. Exporters should also ensure that all forest products that are to be exported are compliant with the relevant laws of the countries where the wood was harvested and also with any laws regarding processing, export or taxes within the processing country.

Exercising "Due Care"

U.S. importers need to exercise "due care" when sourcing forest products to ensure that they comply with the Lacey Act. Due care is a flexible concept that has been developed over time by the US legal system. Due care means "that degree of care at which a reasonably prudent person would exercise under the same or similar circumstances. As a result, it is applied differently to different categories of persons with varying degrees of knowledge and responsibility" (Senate Report 97-123). Given the lack of certainty around how the court might view due care with respect to the Lacey Act provisions, for timber harvesting and trade, it would be prudent for companies dealing in forest and paper products to avail themselves of the wide array of tools, technologies and resources available for assessing and eliminating illegal wood from often long and complicated supply chains. Internal company policies and tracking procedures are a critical element.

Understanding and implementing a responsible sourcing programme for forest products is an example of a best practice that can contribute to exercising due care. The key with lacey Act compliance though is that the system should help to increase the confidence of the company in ensuring legal timber throughout its supply chain as prosecutions can brought even if a company felt it had done everything that is reasonable. The nature of the legislation allows penalties for selling illegally harvested or traded timber regardless of how hard a company tried not to do this.

Steps may also include bar-code or other tracing systems; legality verification; certification under third-party schemes; stepwise programs offered by various organizations and other innovative public-private partnership models.

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