1
/2 Final Report
3 Legal Forest Products Assurance
4 A framework for differentiating legality verification and chain of custody schemes
5
31 March 2010Prepared for
Department of Agriculture, Fisheries and Forestry
18 Marcus Clarke Street Canberra City ACT 2600
42807483
Framework for differentiating legality verification and chain of custody schemes
Project Manager: / ……………………………Kerri Rusnak
Senior Consultant / URS Australia Pty Ltd
Level 6, 1 Southbank Boulevard
Southbank VIC 3006
Australia
T: 61 3 8699 7500
F: 61 3 8699 7550
Project Director: /
……………………………
Blair Freeman
Project Director
Reviewer: /
……………………………
John Tredinnick
Senior Principal / Date:
Reference:
Status: / 31 March 2010
42807483/01/04
Final
Document delivery
URS Australia provides this document in either printed format, electronic format or both. URS considers the printed version to be binding. The electronic format is provided for the client’s convenience and URS requests that the client ensures the integrity of this electronic information is maintained. Storage of this electronic information should at a minimum comply with the requirements of the Commonwealth Electronic Transactions Act (ETA) 2000.
Where an electronic only version is provided to the client, a signed hard copy of this document is held on file by URS and a copy will be provided if requested.
42807483/01/04 iv
Framework for differentiating legality verification and chain of custody schemes
Table of Contents
Executive Summary v
1 Introduction 10
2 Overview of Schemes 13
2.1 Summary of schemes 13
2.2 Related initiatives 13
3 Assessment Framework 19
3.1 Key elements 19
3.2 Assessment criteria 19
3.3 Rigour and robustness 21
4 Assessment of Schemes 23
4.1 Assessment scorecards 23
4.2 Assessment of schemes 33
4.2.1 Verification requirements 33
4.2.2 Audit requirements 35
4.2.3 Governance arrangements 37
5 Synthesis of Findings 39
5.1 Legal origin 39
5.2 Legal compliance 40
5.3 Chain of custody 40
6 Trade in Verified Products 43
6.1 Traded products 43
6.2 Australian imports 43
6.3 Verified trade 45
6.4 Initiatives impacting verified trade 49
7 Conclusions 51
7.1 Assessment of schemes 51
7.2 Guidance for timber importers 51
7.3 Capacity building initiatives 52
8 References 55
9 Limitations 59
Tables
Table 21 Selected legality and CoC schemes 15
Table 22 Coverage of selected legality and CoC schemes 17
Table 31 Assessment criteria for legality and CoC schemes 20
Table 61 Indicative value of verified wood and paper products, imported to Australia from selected Asia-Pacific countries (2009) 47
Figures
Figure 11 Context for legality and chain of custody schemes for forest products 11
Figure 41 Assessment of verification requirements for legal origin 34
Figure 42 Assessment of verification requirements for legal compliance 34
Figure 43 Assessment of verification requirements for chain of custody 35
Figure 44 Assessment of audit requirements of legality schemes 36
Figure 45 Assessment of audit requirements for chain of custody schemes 36
Figure 46 Assessment of governance for legality schemes 37
Figure 47 Assessment of governance for chain of custody schemes 37
Figure 51 Assessment of legal origin schemes 39
Figure 52 Assessment of legal compliance schemes 40
Figure 53 Assessment of chain of custody schemes 41
Figure 61 Australia’s imports of wood and paper products from selected countries in the AsiaPacific region (2008) 44
Appendices
Appendix A Overview of schemes
Appendix B Relevant studies of verification schemes
Appendix C Assessment of selected schemes
Appendix D Commentary on selected schemes
Appendix E Trade volume imports to Australia
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Framework for differentiating legality verification and chain of custody schemes
Abbreviations
Abbreviation / Description /AFCS / Australian Forest Certification Scheme
AFS / Australian Forestry Standard
ASEAN / Association of South East Asian Nations
CoC / Chain of Custody
CPET / Central Point of Expertise on Timber
DAFF / Department of Agriculture Fisheries and Forestry
DFA / Defined Forest Area
EU / European Union
FLEGT / Forest Law Enforcement, Governance and Trade
FMU / Forest Management Unit
FSC / Forest Stewardship Council
GFS / Global Forestry Services Inc
GFTN / Global Forest Trade Network
ISEAL / International Social and Environmental Accreditation and Labelling Alliance
ISO / International Organization for Standardization
ITTO / International Tropical Timber Organization
LPI / Lembaga Penilai Independen (Mandatory legal compliance)
LC / Legal compliance
LO / Legal origin
LV / Legality verification
MLTV / Mandatory Legal Timber Validation
MoF / Indonesian Ministry of Forestry
MOU / Memorandum of Understanding
MTCC / Malaysian Timber Certification Council
MTCS / Malaysian Timber Certification Scheme
NGO / Non-governmental organisation
ODI / Overseas Development Institute
PEFC / Programme for the Endorsement of Forest Certification schemes
PNG / Papua New Guinea
RAFT / Responsible Asia Forestry and Trade Programme (USAID program)
RAP/CoC / Requirements and Assessment Procedures for Chain-of-Custody Certification
RCoC / Requirements for Chain-of-Custody Certification
SFM / Sustainable Forest Management
SGS / Société Générale de Surveillance
SVLK / Sistem verifikasi legalitas kayu (Indonesia’s Timber Legality Assurance System)
TFF / Tropical Forest Foundation
TFT / Tropical Forest Trust
TLAS / Timber Legality Assurance System (see also SVLK)
TLTV / Timber Legality & Traceability Verification
TTAP / Timber Trade Action Plan
UNFF / United Nations Forum on Forests
URS / URS Australia Pty Ltd, trading as URS Forestry
VLC / Verification of Legal Compliance
VLO / Verification of Legal Origin
VPA / Voluntary Partnership Agreement (under EU FLEGT programme)
WCS / Wood Control System
WTP / Wood Tracking Program
WWF / World Wildlife Fund
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Framework for differentiating legality verification and chain of custody schemes
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Executive Summary
Introduction
URS Forestry (URS) was engaged by the Department of Agriculture, Fisheries and Forestry (DAFF) to:
(i) Describe existing legality verification (legality) and chain of custody (CoC) schemes that are used to verify the legality of timber and wood products exported to Australia from producer countries in the Asia-Pacific region; and
(ii) Provide a framework to differentiate schemes on the basis of the rigour and robustness of their verification and auditing requirements and governance arrangements.
The outcomes of the project are intended to assist importers and domestic producers to identify schemes that have the capacity to provide a level of assurance that timber products are from a legal source. The level of assurance required should be commensurate with the risks of products being derived from illegally harvested sources.
URS has developed an assessment framework through the distillation and synthesis of a broad range of criteria and indicators for verifying legality. This framework applies equal weightings to the assessment criteria and indicators. A more definitive assessment of schemes would require direct inputs from relevant schemes and a broad stakeholder review of the proposed criteria and indicators. The URS framework can be used as the basis for further engagement with government agencies, timber importers, scheme operators and other stakeholders working to combat illegal logging within the region. Key matters to be addressed to support a finer differentiation of schemes would be to consider the criteria and the weightings applied to them.
This review covers schemes that have the broader aim of certifying sustainable forest management (SFM), but has focussed only on the principles and indicators relating specifically to legality verification requirements. The assessment of broader forest management and sustainability aspects of certification schemes was not included in the review.
Key elements and assessment criteria
Based on a review of selected schemes and other relevant studies, three key elements of legality and CoC schemes were identified:
· Verification - The specific standards and other requirements of the scheme against which the legality of wood products or the CoC is assessed;
· Audit - Auditor requirements and the processes for auditors to follow when assessing whether the requirements of the scheme have been met; and
· Governance – The structure and processes for the establishment and ongoing management of standard setting, verification and administration procedures.
Using these elements, the ‘rigour’ and ‘robustness’ of schemes were defined as follows:
· Rigour – The coverage and depth of a scheme’s processes and procedures for verification and audit requirements; and
· Robustness – The capacity of a scheme to withstand external influences and to respond to industry dynamics and drivers for improvement in relation to its governance.
Assessment framework
Assessment criteria were developed for each of the key elements and these are presented in Table 1. These criteria form the basis of a framework that importers and domestic producers can use as part of their due diligence to minimise the risk of illegal timber entering their supply chain.
Table 1 Assessment criteria for legality and CoC schemes
Key element / Schemes / Assessment criteria /Verification / Legal origin / Principle: Legal access and rights to harvest are clearly defined and established
· Legal access and harvest rights are clearly defined and legally established
· Where required, operational plans are approved by the appropriate authority under relevant legislation and specify allowable or otherwise regulated harvest levels
· All royalties, fees and taxes properly due from timber production are paid to land owners, local community and other entities
Legal compliance / Principle: Rights to harvest and compliance in the conduct of forestry operations are clearly defined and established
Same criteria as for Legal origin, plus
· Compliance with all codes of practice for harvesting operations and all relevant social and environmental legislation and regulations relevant to forestry operations
Chain of custody / Principle: Auditable systems are in place for tracking and monitoring the flow of wood products from the forest through the supply chain
· The scheme requires systematic processes to verify the origin of materials and ensure valid documentation matches nominated materials
· The scheme requires a chain of custody system to track certified or verified legal wood along the certification chain, using appropriate inventory methods and documented controls
· The scheme requires effective controls to prevent products from unverified and potentially illegal sources from entering the supply chain
· The scheme has a defined policy for product labelling and processes for managing associated product claims
Audit / All schemes / Principle: Compliance with the scheme is audited regularly and the results are publicly available
· Compliance with all legality verification requirements is documented and maintained for audit
· Stakeholder consultation is undertaken as appropriate during the audit
· Audit reports and certificate holder status for the scheme are publiclyreported
Governance / All schemes / Principle: Robust standard setting processes are in place for verification and audit and for management of non-compliance
· The scheme’s standard has been developed by a nationally or internationally recognised standards authority
· The scheme has been developed with broad stakeholder input
· There is a clear basis for establishing compliance and corrective actions for non-compliance
· Auditors are independent third parties that are accredited by an independent accreditation body
Assessment of schemes
This framework was applied to existing legality and CoC schemes operating within the Asia-Pacific region. Under this framework, a scoring system was developed to compare the schemes and identify key aspects of differentiation. For the purpose of this review, the assessment outcomes were grouped into broad categories relating to the extent to which the schemes provide a level of assurance that timber products are from a legal source.
Based on the assessment framework developed in this project and information currently available, the following schemes ranked highly against the criteria:
Rigour / RobustnessLegal verification / · Australian Forest Certification Scheme - Sustainable Forest Management
· Forest Stewardship Council (FSC) Controlled Wood Systems
· FSC Principles & Criteria for ForestManagement
· Société Générale de Surveillance (SGS) Timber Legality & Traceability Verification
· SmartWood Verification of Legal Origin (VLO) and Verification of Legal Compliance (VLC) / · Australian Forest Certification Scheme - Sustainable Forest Management
· FSC Controlled Wood Systems
· FSC Principles & Criteria for Forest Management
· Malaysian Timber Certification Scheme
· Indonesia’s Sistem verifikasi legalitas kayu (SVLK) - Timber Legality Assurance System
Chain of custody / · Australian Forest Certification Scheme – Chain-of-Custody
· SGS Timber Legality & Traceability Verification
· FSC Chain-of-Custody standard
· Malaysian Timber Certification Scheme – Programme for Endorsement of Forest Certification (PEFC) Chain-of-Custody
· SmartWood Chain of Custody / · Australian Forest Certification Scheme – Chain-of-Custody
· FSC Chain-of-Custody standard
· Malaysian Timber Certification Scheme – Programme for Endorsement of Forest Certification (PEFC) Chain-of-Custody
· Indonesia’s SVLK - Timber Legality Assurance System
· SGS Timber Legality & Traceability Verification
As legality verification and CoC schemes are evolving, it is expected the assessment of schemes will change over time in response to market influences and continuous review and improvement mechanisms.
Two broad conclusions can be drawn from the assessment against the criteria. These are:
· Benefits of scale – the more rigorous and robust schemes tended to be those which have the resources to develop and implement audit procedures and governance structures that support the implementation of schemes on the ground, including national programs and well established global frameworks such as the FSC and PEFC; and
· Improvement of audit and governance elements – in broad terms, verification requirements tended to be stronger than the auditing and governance requirements across a range of schemes. This indicates importers and producers may need to give particular attention to auditing and governance requirements within schemes to minimise risks that the products are from illegally harvested sources.
Guidance for timber importers
The assessment framework developed in this review can assist importers to complete a due diligence assessment of the legal origin of timber and wood products. The key requirements for legality and CoC schemes are as follows: