Legality Standard8: Wood Processing and Trading

LEGALITY STANDARD8: WOOD PROCESSING AND TRADING

[EFI1]Introduction

Wood processing and trading is the main sectorwhich provides valued added to woodenproducts for domestic and export markets. This legality standard involves two main areas of legality namely (i) Requirements and procedures for wood processing and trade, and (ii) Requirements and procedures for export. Wood processing and trade covers primary processing, secondary processing and products trading.

The wood processing and trading sector is operated by large, medium or small scale enterprises, household businesses who havea license for wood processing and/or trade based on laws and regulations. All operators have to apply tothe l principles and criteria under this TLD but the indicators and verifiers mayvary according to the scale of the operator(household businesses or small,medium and large enterprise). More details are available in the matrix of methods of verification.

The MOIC is responsible for formulation and dissemination of policy, strategy and legislation for wood processing and trade. The POIC is in charge of implementation of policy, strategy and legislation for wood processing and trade. The DOIC is responsible for inspection and reporting of wood processing and tradingcompanies.

Glossary

Conversion factor means the ratio between material quantity entering and leaving a given transformation process operated by the operator (wood processing factory). The conversion factor is calculated by dividing the output (volume or weight) by the input (volume or weight) and is applied to each individual component of a product.

Environmental compliance certificate means the official certificate approved by the competent authority of environmental and social impact assessment report and environmental and social management and monitoring plan of the proponent.

Finished product means the timber product which is through the processing by secondary wood processing manufacture (Manufacture of plywood, Manufacture of builders’ carpentry and joinery,

Household business is an industry that uses simple technology, limited investment, operates within the household, labour is mainly family members and that entails no more than 10 persons, or uses machinery that is less than 10 horsepower in the production process;

Input means bringing oflogs, square logs, sawn timber, semi-finished and supplement parts of finished products into transformation processes.

Large scale of enterprise means an enterprise who has a machine power force of 201 horsepower and greater or a quantity of labour greater than 201 persons.

Medium scale of enterprise means an enterprise who has a machine power force of 51-200 horsepower and or a quantity of labour of 51-200 persons.

Operator is an individual, or entity from the country and foreign countries, which have invested or operated business with regard to the activities of wood processing factory and wood trading in Lao PDR.

Output means timber or wood products which have or have not gone through production process into sawn timber, semi-finished products, supplement parts of finished products and finished products, in order to supply to other wood processing factories or sale at domestic market and export.

Primary processingmeansa sawmill, a semi timber manufacture that go through a processing process with an aim to produce saw wood, cut wood, semi wood, construction wood, interior decoration wood and pulp.

Production process means the transformation of raw timber materials into wood products or consumption commodities (e.g. paper, milled wood, sawdust, semi-finished products or finished products).

Recovery ratemeans the ratio between material quantity entering and leaving a given transformation process operated by the operator (wood processing factory). The recovery rate is calculated by dividing the output (volume or weight) by the input (volume or weight) and is applied to each individual component of a product.

Secondary processingmeans a timber manufacture product and furniture that go through a processing process with an aim to produce timber products such as household products (flames, door flames, window flames, stairs, bars and other interior products for buildings), parquet, floor, particle board, containers made from timber (boxes, cargoes, pallets, etc.); paper, products made from paper; and wooden furniture.

Semi-finished product means the product that has been through some level of the manufacturing processes such as plastic sheet, steel, magnet, glass, fabric, synthesis materials and etc. that needs further processing before becoming finished goods or products.

Small scale of enterprise means an enterprise who a machine power force of 10-50 horsepower and or a quantity of labour of 10-50 persons.

Timber and timber product export dossier: by law of Laos PDR the set of documents that shall be prepared for export procedure that include: Sale contract, Packing list, Sales /Tax invoice, certificate of origin, minutes and report of authority inspection, special fee payment records (depends on product group).

Timber input means bringing oflogs, square logs, sawn timber, semi-finished and supplement parts of finished products into transformation processes.

Timber output means timber or wood products which have or have not gone through production process into sawn timber, semi-finished products, supplement parts of finished products and finished products, in order to supply to other wood processing

Value added means the value of wood products gained from the production process

Wood processing factories are facilities, where raw forestry materials are turned into usable products or commodities, including paper, milled wood, sawdust and other forms of finished or partly finished wood.

Wood products mean products that are transformed from raw material (log) or semi-finished wood products through stages or production process in the wood processing factories, in order to turn their original forms into new products which will be able to supply for consumption or distribution for commodities.

Wood trader means an individual, an entity, or an organization, which undertakes action and conducts buying and selling of timber or timber product, but do not take any action of timber processing.

Acronym

CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora

COCChain of Custody

DDTDepartment of Domestic Trade

DIMEXDepartment of Import and Export

DOF Department of Forestry

DOICDistrict Office of Industry and Trade

DOIHDepartment of Industry and Handicraft

ESIAEnvironmental and Social Impact Assessment

ESMMPEnvironmental and Social Management and Monitoring Plan

IEE Initial Environmental Examination

MAFMinistry of Agriculture and Forestry

MOF Ministry of Finance

MOICMinistry of Industry and Commerce

MONREMinistry of Natural Resources and Environment

NANational Assembly

PMPrime Minister

PMOPrime Minister Office

POICProvincial Office of Industry and Commerce

PONRE Provincial Office of Natural Resources and Environment

Matrix of Legality Standard 8

PRINCIPLE8.1 REQUIREMENTS AND PROCEDURES FOR WOOD PROCESSING AND TRADING
Criteria8.1.1 Compliance with the requirements forlegally established wood processing and trade enterprise
Indicators[EFI2] / Verifiers / Legal references
8.1.1.1 The operator has possessed valid license and permits for wood processing and trading operations. / 8.1.1.1.1 Enterprise registration certificate /

Law 46/NA (2013), article 14.
Notification 0530/MOIC, (2002) & Notification 0538/MOIC (2002)

8.1.1.1.2Factory operation certificate /

Law 048/NA (2013), article 11.
Regulation 0719[1][EFI3]/MOIC (2009), article 12.

8.1.1.1.3 Forestry business registration /

Law 06[2][EFI4]/NA (2007), article 45.

Criteria8.1.2 Compliance with supply chain control procedures for wood processing and trade
Indicators / Verifiers / Legal references
8.1.2.1The operator has a system in place to manage and record the received raw materials control input of timber and wood products received to ensure their legal origin. / 8.1.2.1.1Input report on timber and wood products (Form I).
8.1.2.1.2 Balance system in place /

Draft Decision on COC No…. /MOIC, article 6.
DOF Regulation on transport permit
Notice 1429/DDT (2016)

8.1.2.1.2 Balance system in place /

Draft Decision on COC No…. /MOIC, article 6.

8.1.2.2The operator has a system in place to recordand maintaintherecovery rate in its entire production process. / 8.1.2.2.1 Report on implementation of a calculation system by the operator for consumption norms for primary and/or secondary processing. /

Draft Decision on COC No…. /MOIC, article 5.2

8.1.2.3The operator has the system in place to control output and balance of timber and wood products. / 8.1.2.3.1Report on timber output and balance (Form II) /

Draft Decision on COC No…. /MOIC, article 5[3].[EFI5]
Notice 1429/DDT(2016)

8.1.2.4The operator [EFI6](Excludingemption for household businesses)hasfulfilled all obligations related to payment of taxes. payments. / 8.1.2.4.1 Annual tax payment certificate[EFI7][EFI8] /

Law 70/NA (2015), Part VI Tax compliance….
Instruction No: 3281/MoF (2014)

8.1.2.5 Household business[EFI9] has paid fulfilled tax lump sum tax. taw[EFI10] payment. / 8.1.2.5.1 Annual lump sum tax receipt /

Law 70/NA (2015),Chapter 3

Criteria 8.1.3 Compliance with environmental and social impact requirements[EFI11][4][EFI12]
Indicators / Verifiers / Legal references
A. Group 2[EFI13] “Activities with sSignificant or major[EFI14][EFI15] environmental and social impacts”[5]. [EFI16]
8.1.3.1A The operator has conducted completed environmental and social impact assessment (ESIA) report with involving the affected people in a consultation process on impacts of on wood processing and has received environmental certificate from MONREand approved by MONRE. / 8.1.3.1.1 Environmental compliance certificate /

Law 29/NA (2012)
Instruction 8030/ MONRE (2013), article 10.
Law 48/NA (2013), article 11.

8.1.3.1A.2 Attachment of the ESEIA[EFI17] report with comments from concern stakeholders[EFI18] /

Instruction 8030/ MONRE (2013), part II

8.1.3.2AThe operator has implemented mitigation measures in accordance with under the Environmental and social management and monitoring plan (ESMMP). / 8.1.3.2A.1 Approved report of the progress of ESMMP implementation of the operator. /

Law 29/NA (2012)
Instruction 8030/ MONRE (2013), Part II, section 2.10 article 10.

B. Group 1 “Activities with mModerate or minimal[EFI19][EFI20] environmental and social impacts”
8.1.3.1B The operator has completed Initial environmental examination (IEE) report with involving the affected people in a consultation process on impacts of on wood processing and has received the approval of IEE report from PONRE. / 8.1.3.1.1B.1 Environmental compliance certificate. /

Law 29/NA (2012)
Instruction 8029/ MONRE (2013).

8.1.3.1B.2 Attachment of the IEE report with comments from concern stakeholders[EFI21]
8.1.3.2BThe operator has implemented mitigation measures in accordance with under the Environmental and social management and monitoring plan (ESMMP). / 8.1.3.2B.1 Approved report of the progress of ESMMP implementation by of the operator. /

Law 29/NA (2012)
Instruction 8029/ MONRE (2013).

PRINCIPLE8.2 REQUIREMENTS AND PROCEDURES FOR EXPORT[EFI22]
Criteria 8.2.1 Compliance with law and regulations on export [EFI23]
Indicators / Verifiers / Legal references
8.2.1.1 The wood products for export are is in compliance with product scope and standard for products derived from logs from natural or planted forest which are allowed and not allowed for export. / 8.2.1.1.1 Loading certificate (Form “IC01” applied for wooden products from natural forest)
In the case of wWooden pProducts from nNatural fForest, application for eExport “IC 01[EFI24]”
or
Wooden Products from Planted Forest for Export “IC 02[EFI25]” /

Order 15/PM (2016), heading 2.
Decision 18330002/MOIC (20186).
Order 2143/MOIC. DIMEX (2016)
Notification 1161/DOIH (2016).
Draft Decision on COC No…. /MOIC.
Instruction 1765 /MOF (2013), section 3. (Needs to be revised).

8.2.1.1.2 Loading certificate (Form “IC02” applied for wooden products from plantation)
8.2.1.2 The exporter has all required information for wood product export. / 8.2.1.2.1Approved Submitted[EFI26] cCustom declaration form /

Notification 1818/PMO (2016).
Draft Decision on COC No. …/MOIC, article
Order instruction 2143/MOIC. DIMEX (2016)
Notification 1161/DOIH (2016).

Criteria 8.2.2 Compliance with wood product export under CITES Regulation[6]
Indicators / Verifiers / Legal references
8.2.2.1The wood product exporter complies with CITES Convention and its Appendices regulations according toAnnexes I, II and III. / 8.2.2.1.1 CITES certificate. /

Regulation 0141[7]/MAF (2010), article 21.
Law 18/NA (2017), article 6 (4).

2018 02 05 TLD8 on Wood Processing and Trading_v3.0_EN / 1

[1]Gaps: need to be amended of Article 10 to cover legal source of raw materials for household business.

[2]Gaps “Trader regulation needs to be developed further”.

[3]Gap: the existing transport permit from LLIII to anther LLIII should be replaced in the future by approved commercial invoice with part list to reduce admin work for the private sector).

[4]Remarks: In case the Investment Projects and Activities are not categorized in any group in the List of Investment Projects and Activities, the Provincial Department of Natural Resources and Environment shall apply separate criteria to the relevant information as specified in the investment application to conduct further screening which level of the Environmental Impact Assessment such Investment Projects and Activities shall conduct or the Environmental Impact Assessment is not needed at all

[5]Gap: In the Ministerial Agreement No. 8056/MONRE, the type of the investment project for the wood product industry only mention the plywood processing factory.

[6] Gap: No specific regulation for cross-checking for compliance of CITES through timber identification during the grading and auction of timber of conversion areas, confiscated timber at LLII, as well as Input and output at LLIII).

[7]Gap: No specific regulation for cross-checking for compliance of CITES through timber identification during the grading and auction of timber of conversion areas, confiscated timber at LLII, as well as Input and output at LLIII). The mentioned regulation does refer only to wildlife and aquatic animals. It does not mention timber specifically, it needs to be revised.

[EFI1]General comments:

Are there any scale considerations that should be reflected in the TLD, for example what does the verifier “factory operation certificate” mean for an individual furniture maker – does this requirement apply for all scales of operation, or are there provisions which would avoid micro- and small-scale operators being unduly penalized

Please provide a list with full legal references so it’s clearer what each one addresses.

Where a reference is just a ‘law’ please check if this is adequate for identifying the verifier or whether it is more fully described in an implementing regulation

[EFI2]What about proof of tax payment - thisis normally a key requirement for wood processing operations. Wouldn’t verifier ‘8.1.2.4.1 Annual tax payment certificate’apply better here?

[EFI3]Please explain further what is meant by the footnote“Gap: need to be amended of Article 10 to cover legal source of raw materials for household business”

[EFI4]Please explain further the footnote “Gap: Trader regulation needs to be developed further” – is there an existing ‘Trader regulation”, and what would this provide for in relation to the verifier “Forestry business registration”

[EFI5]The verifier doesn’t refer to any transport permit therefore please explain further the footnote “Gap: the existing transport permit from LLIII to anther LLIII should be replaced in the future by approved commercial invoice with part list to reduce admin work for the private sector)”

[EFI6]Consider using here “operators that are not household business” as this formulation would be in line with the formulation used in 8.1.2.5

[EFI7]Does this demonstrate that all taxes referred to in previous draft have been paid – i.e.

Should thi

-Income tax

-Profit tax

-Value added tax

-Royalty payment (which we understand from Laos previous comments applies to all sources of timber except imported timber)

[EFI8]Should this not be under 8.1.1?

[EFI9]Are there any other requirements that apply differently to household businesses?

Should there be any requirements that could apply differently to household businesses to better facilitate their compliance

[EFI10]tax?

[EFI11]Does this apply to all types of operators – i.e. wood processors, traders, household businesses?

[EFI12]An indicator should be developed for those projects that do not fall under the categories below, with a verifier that checks that the level of EIA or exception has been assessed by the Provincial Department of Natural Resources and Environment.

[EFI13]Why ‘2’

[EFI14]It will be necessary to clarify what constitutes a significant or major impact in order to determine whether the following requirements apply or not

[EFI15]Suggest to start with a formulation such as: “for projects XYZ…”

[EFI16]As this separator relates to scale and impact please explain further the footnote which relates to industry type – i.e. “Gap: In the Ministerial Agreement No. 8056/MONRE, the type of the investment project for the wood product industry only mention the plywood processing factory.”

[EFI17]ESIA?

[EFI18]How does the verifier check that this obligation to involve affected people in consultation process has been complied with in a satisfactory way?

The previous TLD included a verifier "Certified document of involvement of affected people in consultation process”, which if it provides evidence of how people have been involved would be better to retain

[EFI19]It will be necessary to clarify what constitutes a moderate or minimalimpact in order to determine whether the following requirements apply or not

[EFI20]Suggest to start with a formulation such as: “for projects XYZ…”

[EFI21]How does the verifier check that this obligation to involve affected people in consultation process has been complied with in a satisfactory way?

[EFI22]The TLD does not include requirements related to transport from LL3 to the point of export. This represents a gap as the TLD for Production Forest and for Conversion only include transport requirements from log landing 2 to 3 –hence further onward transportation will need to be addressed

[EFI23]Previously the TLD included a comprehensive range of supporting documentation for export of which the following should be considered to re-include:

-Invoice

-Packing list

-Wood product certification for export

-Certificate of product origin (CO)

-Contract of export signed between the exporter and the foreign company

[EFI24]The way this verifier is written, it is not clear of whether “Wooden Products from natural Forests for Export IC 01” is or not the name of the application. See suggested formulation

[EFI25]Consider different formulation, in line with previous comment

[EFI26]A submitted declaration would not demonstrate compliance with customs requirements, whereas an approved declaration would