“Verifying legality of timber and wood products”

GFS Legal Verification Services & Wood Tracking Program are designed to mitigate risk of unknown & illegal material entering the supply chain through a formal Chain of Custody / supplier Risk Assessment and site verification to verify wood products originate from a legal forest or plantation areas.

Legal Verification Services (LVS) centers on verifying compliance of forest & plantation management to national and local legal regulations. LVS is a formal system for evaluation of forest or plantation areas for legal compliance using GFS Legality criteria (LVS-005 Legal requirements v07 Feb 2015) or local standards such as the Sabah Legal Standard (Appendix A: Principles 1-4 dated 13 Nov 2013 / G161-001 Sabah Forest Legality Standard P1-4 v01 Nov 2014).

File Download: (LVS-005 Legal requirements v07 March 2015)

File Download: (LVS-005a Legal requirements Sarawak Malaysia v06 Feb 2014)

The Wood Tracking Program (WTP) is designed to verify a structured Chain of Custody system that tracks raw material from forest origin through processing and trade based on WTP-005 CoC requirements v10 March 2015.

File Download: (WTP-005 Chain of Custody requirements v10 March 2015)

GFS provides assessment and monitoring of wood manufacturers and traders under the Wood Tracking Program based on a formal Chain of Custody (CoC) system to track the material used in wood products to a verified legal forest or plantation area. The WTP includes a requirement for a Supplier Risk Assessment for all raw material and wood products to document the origin of all material as low / negligible risk to defined forest or plantation areas. Purchases of raw material and wood products must be vetted through a formal Risk Assessment that documents Low Risk of all material entering supply chain. The Risk Assessment consists of evaluating Country Level Risk; Species Risk & Operational Risk (WTP-015 Risk Assessment v07 Jan 2015). Any material not considered low risk based on the Risk Assessment must undergo site evaluation for legal compliance based on the LVS Standard (LVS-005 v07 Feb 2015) or National / Local Standard for Legality. The GFS LVS & WTP is designed to support system for due care for the Lacey Act and due diligence to meet EU timber trade regulations and the Australian Illegal Logging Act.

“GFS Wood Tracking Program & Legal Verification Services ensures that the products come from verified legal sources to support due diligence requirements of the EU Timber Trade Regulations the USA Lacey Act and the Australian Illegal Logging Act.”

EU Timber Trade Regulations:
The EU has recently established regulations in December 2010 on the import and trade of timber and wood products that officially started on March 3, 2013. The regulation prohibits the placing on the EU market of illegally harvested timber and wood products derived from such timber.

In absence of FLEGT Licensed Timber under VPA, the regulations require due diligence evaluation for legality of timber and wood products. Due diligence is based on 3 elements inherent to risk management: access to information; risk assessment and mitigation of the risk identified. The EU definition of legality is based on national regulations associated with harvesting timber, processing, trade and export of timber and wood products. Thus, the EU Timber Trade Regulations is based on compliance to regulations in both the forest and through the manufacture and supply chain.

Lacey Act (USA):
On May 22, 2008, the U.S. Congress passed an amendment to the Lacey Act banning commerce in illegally sourced plants and their products – including timber and wood products. Violation of the Lacey Act occurs when a plant is taken, harvested, possessed, transported, sol or exported in violation of an underlying law in any foreign country or the USA then subsequently traded in USA interstate or foreign commerce – thus, one must “import, export, transport, sell, receive, acquire or purchase.

Under the amended Lacey Act, importers are required to submit a declaration for certain plants and plant products. The declaration must contain, among other things, the scientific name of the plant, value of the importation, quantity of the plant and name of the country from which the plant was harvested. Violations of the Lacey Act provisions may be prosecuted in three basic ways : (1) Civil-monetary penalties; (2) Criminal-fines, penalties and potential incarceration; or (3) Forfeiture-dispossession of the plant, fish or wildlife in question.

Basic elements of illegality of forest products include :
  • theft of plants.
  • taking plants from an officially protected area such as park or reserve.
  • taking plants from other types of “officially designated areas” that are recognized by a country’s laws and regulations.
  • taking plants without, or contrary to, the required authorization.
  • failure to pay appropriate royalties taxes or fees associated with the plant’s harvest, transport or commerce.
  • failure to comply with laws governing export or trans-shipment such as export log bans.

Australian Illegal Logging Prohibition Act 2012:
The Australian Illegal Logging Prohibition Act 2012 prohibits the importation of illegally logged timber and the processing of illegally logged raw logs. The Act also requires importers of regulated timber products and processors of raw logs to conduct due diligence in order to reduce the risk that illegally logged timber is imported or processed. Importers of regulated timber products must provide declarations, at the time of import, to the Customs Minister about the due diligence that they have undertaken.

How to comply with the current import regulations?
Importers of timber and wood products need to demonstrate due diligence / due care which is basically exercising the requirements discovered under due diligence to protect or mitigate exposure from identified risks. Importer companies need to ensure adequate documentation in respect to legality of imported wood products either directly from their suppliers or through independent verification. The most practical way to undertake due care is to utilize independent systems for verification of legality and full certification.

The GFS Wood Tracking Program & Legal Verification Service are designed to ensure that wood products can be traced to a legal forest or plantation area based on a formal risk assessment and/or field verification of legality of raw material that is not deemed low risk. Companies participating in the GFS WTP must have a formal Chain of Custody system to track material from purchasing through production and sale of wood products that meets the GFS standard (WTP-005 CoC requirements v10 March 2015). All material traded under the GFS WTP must be 100% legal verified through risk assessment and (or) field evaluation of compliance as through the LVS or other 3rd party systems.

All GFS WTP & LVS clients will be posted on the GFS website under the Client Database that will include information on the company, products produced or traded, WTP Statement of Participation / LVS Statement of Compliance and the latest summary audit report. The GFS Wood Tracking Program is transparent to enable importing companies and international organizations to verify the current status of each client and products as listed in the WTP Statement of Participation.

Responsible Purchasing & Legal Verification:
Companies that participate in the GFS WTP must have a formal chain of custody system that includes a risk assessment of all suppliers to evaluate risk and legal origin of raw material (WTP-015 Risk Assessment v07 Feb 2015). The Risk Assessment consists of evaluating Country Level Risk; Species Risk & Operational Risk.

Country Risk: is based on the country of timber origin. Countries that have strong legal compliance in regards to the timber industry will have low / negligible risk of material being harvested and traded illegally. While countries that are considered to have poor rule of law and perceived to have higher corruption levels tend to be higher risk.

Species Risk: is based on the potential for illegal activities occurring based on the timber species. Timber species that are planted and low value are usually not under threat of being harvested and traded illegally. High value species and species from tropical natural forests are considered to be higher risk of being illegally harvested and traded.

Operational System Risk: is based on the presence of 3rd party verification or government verification of compliance to regulations or international standards of certification. Independent verification of forests; plantations and supply chains indicate low risk even when area or species risk is not low risk.

The Risk Assessment includes general methods to evaluate if material can be considered low risk based on simple benchmarks that are evaluated using a Risk Matrix. All material that is not evaluated, as Low Risk must not be used in the manufacture or trade of WTP identified products.

File Download: (WTP-015 Risk Assessment v07 Feb 2015)

Any material from high risk areas following documented Risk Assessment would need field evaluation of compliance against the LVS-005 or the local standard such as Sabah Legality Standard that reflects legal requirements of forestry activities such as harvesting rights, plans, and operations through collection of royalty, transport and sale of logs.

GFS WTP ensures the traceability of forest products from the wood processing facility back through the supply chain to verified forest management / plantation areas. GFS will issue Audit Reports in respect to both field verification of legal harvesting operations (LVS-005) as well as to the Wood processing and trading company that demonstrate traceability for manufacturing and trading based on meeting WTP-005 requirements.

Sabah Timber Legality Monitoring (Sabah; Malaysia):
GFS provides monitoring of legal verification of ALL long-term forest management and licensed harvest areas in Sabah, Malaysia based on compliance to the current Sabah Forest Legality Standard for forest operations developed by the Sabah Forestry Department (FDS). GFS has been operating the FLEGT Timber Legality Assurance System (TLAS) for forests in Sabah, Malaysia since May 2009 that is planned to continue through 2019 supported by the Forestry Department Sabah and Yayasan Sabah Foundation. FDS developed the Sabah Legality Standard for forestry operations (current version: Appendix A: Principles 1-4 dated 13 Nov 2013) for field evaluation of compliance as recorded in this document (GFS ref#: G161-001 v01 Nov 2014). GFS issues a detailed assessment report for each area evaluated along with an Audit Statement if the area complies with the standard. Summary audit reports and Audit Statements are posted on the GFS Website under the Client Database / Legal Verification Services. FDS will also post the assessment report and issue a Compliance Certificate for licensed areas that demonstrate compliance.

File Download: (G161-001 Sabah Forest Legality Standard P1-4 v01 Nov 2014)

Sabah Timber Legality monitoring includes verification of legality through manufacturing and trade based on Appendix A: Principles 5-6 v02 Nov 2014. GFS conducts annual assessment for ALL manufacturers and export companies to document compliance to the Sabah Legality Standard for processing and trade.

File Download: (G162-001 Sabah CoC Standard P5-6 v02 Nov 2014)

GFS issues a detailed assessment report for each company evaluated along with an Audit Statement if the area complies with the standard. Summary audit reports and Audit Statements are posted on the GFS Website under the Client Database / Wood Tracking Program. FDS will also post the assessment report and issue a Compliance Certificate for licensed areas that demonstrate compliance.

Evaluation & Monitoring Compliance:
Wood Processing and trading companies participating in the GFS Wood Tracking Program shall be able to demonstrate compliance to requirements (WTP-005) to be eligible for a GFS WTP Statement of Participation. Companies must address any and all non-compliance prior to being granted a GFS WTP Statement of Participation. Summaries of all monitoring reports will be posted on GFS WTP Client Database for transparency of the program to the market.

Companies under GFS WTP are monitored 2 times annually (or as deemed necessary) to verify continual compliance to the CoC system. Companies that receive a Major GAP during surveillance against the WTP-005 CoC requirements must address it within 1 month or be liable for suspension of trading activities under the GFS WTP in accordance to the Conditions of Participation (WTP 029).

Evaluation of forests areas; manufacturing and export companies under the Sabah Timber Legality system are based on a monthly schedule to cover ALL licensed areas; factories and export companies in Sabah annually.

Forest management areas outside Sabah will be assessed for compliance to the GFS standard LVS-005 v07 Jan 2015 or a localized version of the LVS-005 on an annual basis. Forest Management units that demonstrate compliance to the GFS standard LVS 005 will be issued a Statement of Compliance that is valid for 1 year. Forest areas that do not demonstrate compliance must be re-assessed to close out any Major Gaps prior to receiving a GFS Statement of Compliance. Summary audit reports and Statement of Compliance will be posted on the GFS Client Database / Legal Verification Services.

Trading of Wood Products:
Only timber products that are classified as Verified Legal can be traded using the GFS Wood Tracking registered number under the Statement of Participation. The GFS Wood Tracking Program offers clients a means to support import Due Diligence requirements of the EU Timber Trade Regulations; Australia for Australian Illegal Logging Prohibition Act or due care under the Lacey Act for USA. Companies participating in the GFS Wood Tracking Program have a formal Chain of Custody system to identify and trace verified legal timber products traded. Each shipment traded under the GFS WTP, Statement of Participation will be identified through invoices packing lists and by using a GFS approved Product Declaration form (WTP 021) that summarizes the timber products through the supply chain. All manufacturing and trading companies that desire to trade timber and wooden products under a GFS Wood Tracking Program must continually demonstrate compliance to the requirements for CoC (WTP 005) and the Conditions of Participation (WTP 029). The GFS Wood Tracking Program, Statement of Participation for manufacturing and trading is valid for 5 years.

File Download: (WTP-029 Conditions of Participation v07 March 2015)

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