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The GFTN Guide to Legal and Responsible Sourcing

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8.5 Strategies for Verifying Legality

Verifying Legality

Low-Risk Suppliers

Low-risk suppliers are those that are unlikely to supply illegal timber. The level of objective evidence supplied for the risk rating process should already have been significant. Little more needs to be requested of these suppliers other than to ask them to complete a new risk-rating questionnaire each year or when you plan to purchase a new product category from them. However, you should ask them to inform you if their own upstream supply chain is altered significantly, and have them complete a new questionnaire. In the longer term, suppliers in the low-risk category need to be encouraged to work toward sourcing all their timber from credibly certified forest sources.

Low-risk suppliers should supply the following documents as evidence that the timber in their products originates from known licensed sources:

  • A copy of the license, lease, or other document with an official boundary map showing that the company has the right to harvest timber from the area in question. Additional information such as log lists that includes species, volumes, and removal passes and receipt of taxes paid before the logs leave the log yard of the forest concession provides further proof of legality.
  • Evidence of full traceability up and down the supply chain

High-Risk Suppliers

Suppliers will fall into the high-risk category because they did not supply sufficient reassurances or objective evidence to prove that they could remove illegal timber from their supply chain. The range and types of objective evidence that suppliers can provide vary greatly from one country to another. The country guides cover the key issues for specific countries and the types of evidence you need from the forest and timber sector in that country. In addition a more general view of documentary requirements for timber from different countries can be found here.

In many cases, official government documentation alone is insufficient to guarantee legality, because the regulatory infrastructure may be corrupt and/or ineffective. In such circumstances, even "official letters" on government department letterheads (such as Certificates of Origin and so forth) claiming the legality of a shipment should be treated with the utmost suspicion. You will need to seek additional reassurances.

For suppliers and product lines rated as high-risk in an initial assessment, you can adopt various strategies to ensure that risk is mitigated to a lesser or greater extent.

Supplier Warranties

If a supplier is not willing to provide you with transparent information about its own suppliers, a way forward might be to obtain a supplier warranty from them. A supplier warranty is a written commitment from your supplier that it will supply you with products in accordance with the warranty. This will form a part of the commercial contract with your supplier.

You can ask the supplier to warrant that the products supplied will comply with your definition of legal timber. Your contract can specify the consequences of the supplier breaching the warranty, including termination of the contract for cause and consequent rights to damages. Genuine suppliers will develop their own Keep it Legal systems to ensure that they comply with this warranty and to keep you as a customer. A less committed supplier might sign the warranty but run a calculated risk that any illegal timber entering their supply chain will go undetected by you or others. Because the promise they make is not checked by an independent organization, the level of risk you would be taking on by relying only on a supplier warranty is relatively high. But it is a step in the right direction and you may be able to claim damages if you find out from a third party that the supplier's products contain illegal timber.

Second-Party Audits

It is entirely possible that you will meet resistance from your supplier with regard to providing information on the business that supplies them. One likely reason for this reluctance is that they will fear that you want to eliminate them from the supply chain. If you are unable to persuade suppliers to provide this information, there are alternative solutions. You can engage an independent organization or second party to gather the appropriate information under strict confidentiality guidelines. This will prevent the revealing of any information that would identify an element of the supply chain. This is a more costly option, but it could prove cost-effective in the long run if it allows you to identify your forest sources and demonstrate that the timber you are using was legally harvested. This information can be used to target markets such as the US to meet the due care requirements of the Lacey Act amendment, the EU Timber Regulation, the Australia Illegal Logging Prohibition Bill, the public procurement sectors in some Western European countries or the US that are now asking for this level of assurance about their timber purchases. Some of the organizations that undertake second-party audits include:

Global Forestry Services - www.gfsinc.biz
ProForest - www.proforest.org
Tropical Forest Trust - www.tropicalforesttrust.com
Other organizations offer similar services.

Other organizations offer similar services and this list is not exclusive or confer a recommendation on any of the above organizations.

Legality and Third-Party Audits

Third-party audits are recommended by WWF’s GFTN for high-risk suppliers and are a key element of the verification requirements for the verified-legal timber classification. The third-party auditor must check both legal compliance in the forest and the integrity of the chain of custody to ensure against mixing with illegal timber.
Several independent verification organizations now offer legal verification services and third-party audits. These companies generally claim that their service is the only truly independent one because they avoid conflicts of interest by either not undertaking any consultancy work or, if they do, by keeping the work entirely functionally separate from their auditing work. To provide additional rigor to their auditing role, many such inspection bodies employ accreditation bodies that inspect them to make sure their independence is not compromised and that their work is of a consistently high standard. Organizations offering a form of legal verification include:
Bureau Veritas - www.bureauveritas.com
Certisource Timber - www.certisource.net
Double Helix - www.doublehelixtracking.net
Rainforest Alliance - www.rainforest-alliance.org
Scientific Certification System (SCS) - http://www.scscertified.com/nrc/legalharvest.php
SGS - http://www.forestry.sgs.com/timber-legality-traceability-verification-tltv
Soil Association - www.soilassociation.org/forestry

Other organizations offer similar services and this list is not exclusive or confer a recommendation on any of the above organizations.

Timber Legality Schemes

Within the forest sector the 1990s saw increasing use of private sector mechanisms to attempt to address deforestation and secure sustainable forest management, most notably forest certification. While certification has had beneficial effects, its uptake has been uneven. Unfortunately certification was least successful in the regions where the need for it was the greatest, in particular the Amazon, Congo Basin and Borneo.

Although a number of international efforts such as the World Bank’s Forest Law Enforcement and Governance (FLEG) and the European Union’s (EU) Forest Law Enforcement Governance and Trade (FLEGT) have been made to address the issues, in particular illegal logging, many countries continue to have major problems within governance, corruption and maladministration. Due to its operational circumstances, the forest sector is often particularly prone to these issues and as a result many tropical timber producing countries are regarded as ‘high-risk’ in relation to forest management and the overall quality of governance.

It has become increasingly clear that while international efforts such as the EU FLEGT Voluntary Partnership Agreements (VPA) offer comprehensive solutions within its scope of agreement, the time when the first VPA-compliant timber is available remains many months or even years away. It will therefore be a very lengthy, process to roll out similar measures across the majority of high-risk countries, and given the voluntary nature of these agreements, it is likely that some countries can decline to participate at any stage.

At the same time, the pressure for responsible timber procurement has increased with measures such as the US Lacey Act and the EU’s Timber Regulation and the Australian Illegal Logging Prohibition Bill. With certified timber supplies from high-risk countries still low, widespread improvement through international governance years away and still few examples of credible national government-led legality verification in high-risk countries, it has fallen to the private sector to develop and implement practical solutions. There has been increasing acceptance among commercial and NGO sectors that while credibly certified responsible forest management should remain as the ultimate goal, the use of ”legal timber” can be a useful interim measure on the road to achieving this.

New Challenges

As with the early days of forest certification, while the market takes time to understand the concept of legality, a number of private sector legality verification schemes have been set up. Similarly, a wide range of credibility, trustworthiness and integrity can be found among them. This means that timber buyers need to understand how these legality verification schemes operate to ensure they do not just automatically verify ”business as usual”, and actually guarantee certain minimum legal requirements are being verified and actually being met in the field.

To provide an acceptable level of reliability legality verification schemes have to operate in a credible manner and operate within a known framework. Key elements of legality verification schemes can be seen as:

  • The Legality Definition – this gives the ”standard” that needs to be met. As well as the content of the definition, what is also important is how the definition has been developed. Who was involved in drafting the definition will really influence its content. Therefore, having a robust multi-stakeholder approach is a key lesson learned from forest certification to ensuring the definition will be comprehensive but practical.
  • Verification – this is checking that the requirements of the legality definition are being met. To make sure it is impartial and credible this is only done by independent professional organizations. Verification has been carried out in other sectors for decades and there is now 20 years of forest certification field experience to build on.
  • Accreditation – this is the process of maintaining the performance of the verifiers. Without overarching scrutiny, it is impossible to judge the credibility of a verifier without lots of research, which is normally beyond timber buyers’ capacities.
  • Chain-of-Custody – there is little point in verifying a forest source as operating legally if the timber from it cannot be traced from the forest floor to the customer. Therefore, the need for chain-of-custody is vital.

Definitions of Legality

At the core of legality verification lies the definition of legality. Preparing a definition of legality can be a challenging task. Ensuring this is done through a multi-stakeholder process will help ensure the definition is credible and fair. However, there are some difficult issues to address nevertheless. Key to these is the scope of the legality definition. If one considers all the laws in force in a country that may be applicable to forestry companies, this can often run into a large number of individual pieces of legislation. When talking about forest legality, do we really mean all laws or just the most important ones for forestry, and which ones would they be?

The ”speeding logging truck” is often used as an example to illustrate the problem. If a logging truck is caught traveling over the speed limit (i.e. it has broken an applicable law), should we consider the logs to be illegal, even if they were harvested and transported in accordance with the laws up until that point? Many people would see this is absurd as it fails to address the core issues of illegal logging.

In reality given the complexity of existing legal frameworks, most legality initiatives have chosen to restrict legality standards to a critical sub-set of laws and regulations. These fall into two broad categories:

  • Definitions of Legal Origin – a very basic set of criteria focusing on the legal right to harvest and often a small suite of laws directly related to forestry, for example tenure, access, authority to harvest and compliance with key forest laws where products are harvested. This scope is commonly referred to as “Verification of Legal Origin” or VLO.
  • Definitions of Legal Compliance – these are a much broader scope, building on the basic VLO requirements to include: legality of harvesting, including compliance with permit conditions, payment of royalties, compliance with forest management regulations, which includes mandatory criteria and indicators for sustainable forest management, as well as laws on environment, labour and welfare and health and safety. This scope is commonly referred to as “Verification of Legal Compliance” or VLC.

In addition, VLC often includes requirements for legal processing, including compliance with domestic processing quotas, guarantees against mixing with non-legal sources and payment of processing levies; and legal trade and export including export licensing, procurement of necessary CITES authorization and customs clearance.

Key Elements of Legality Verification Schemes

Depending on national context and the objectives of verification, a legality definition might include some or all of the above components. Therefore, it is very important to understand the scope of the legality definition used in a particular verification audit. Making sure the key elements are included in the legality definition and how this is verified will ensure the credibility of the verification.

In an effort to support the development of a more consistent and common approach to legality verification, the GFTN and TRAFFIC developed a forest-focused set of principles and criteria covering key legality issues – the Common Framework for Assessing Legality of Forestry Operations, Timber Processing and Trade. This legality framework can help both regulators and companies, particularly GFTN members in countries of export and import, to identify the key legal requirements for VLO and VLC.

Legality Verification in Challenging Conditions

The need for legality verification is derived from the incapacity or failure of governance structures to ensure the rule of law within the forest sector. However, legality verification can never be a substitute for competent forest governance and, to a certain extent, depends on the existence of functioning governance structures in order to operate. It is therefore necessary to always consider the background governance situation, and the weaker these are, the more carefully the verification process should precede. For example, while the legality verification schemes in operation have the potential to address the issue of corruption in the allocation of harvesting rights—uncovering corrupt practices is notoriously difficult, and forest legality verification teams are unlikely to obtain access to necessary information to investigate these.

Similarly, in many cases when conducting a legality verification audit, the objective evidence needed to verify compliance with a law is derived from the national governance system. For example, harvesting block closure authorization by the forest authority may be the means of verifying that harvesting complied with key forest laws. The question arises where forest governance is weak, should the verification body seek some triangulation of evidence from the field or accept the block closure approval as appropriate objective evidence? The weaker the governance, the less likely a verification based solely on this type of evidence will be credible. However, verifiers may find it very difficult to get access to corroborate authority-derived evidence.

Further information regarding governance in forest producer countries is available from Transparency International.

Issues with Audits

Second- and third-party audits are regarded as the best means of determining the legality of a supplier. However, there are issues to consider concerning the level of assurance provided. Auditors are only on site for the duration of the audit, maybe only two or three days. Many observers ask what happens when the auditors are not present, particularly with respect to high-risk suppliers. Evidence suggests that some suppliers put on a special "show" for auditors and then revert to normal practice as soon as the auditors have left the premises.

Your local trade body will probably be able to suggest a certification body with appropriate skills in the timber sector. It is also wise to ask for recommendations from NGOs, including your local GFTN manager.


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