TIMBERCHECK™ Risk Events – July 15, 2019

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8,000 truckloads of logs may have been commercialized illegally

On July 12, Brazil’s Federal Police launched Operation “Paper Forests” (Florestas de Papel) in the Brazilian Amazon states of Roraima, Mato Grosso, Amazonas, Maranhão and Pará.  

Reportedly, 56 search and seizure warrants are being served by 150 agents.

According to the Police, they identified about 91,000 cubic meters of lumber (that’s more than 38 Million board feet!), that could have been commercialized using fraudulent documents of forest origin (DFOs) between 2014 and 2017. They estimate it would have required about 8,000 truckloads of logs to yield this much lumber.

The scheme reportedly involved as many as 22 timber companies.

Species that were allegedly commercialized fraudulently include Ipe, Massaranduba, Cedro and others. 

A business-owner from Manaus who reportedly owns eight of the 22 timber companies was arrested.

Buyers of wood products need to go beyond document collection. Documents without analysis (and other methods of verifying wood flows) do not reduce exposure to legal risks. In many cases, they do the opposite by presenting a false sense of “legality”.

For buyers of Brazilian wood products, one easy step you can take is to automate your monitoring of IBAMA certificates. It’s a simple process that can be completed in minutes.

A second step would be to contact us and discuss ways in which we can help you reduce your risk.

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Header photo: Felipe Werneck/IBAMA

Illegal Rosewood trade increased after CITES listing

ghana forest

A recent study in Ghana found a large increase in the illegal trade of Rosewood (Pterocarpus erinaceus) after the species was listed on CITES Appendices II and III.

According to the study, during the pre-CITES period of 2010-2015, 3,446 cubic meters of Rosewood were potentially traded illegally. During the post-CITES period, this number jumped to 7,574m3 (2016-2018).

How regulations incentivize illegal trade

Regulations can, and often do give rise to criminality. But how?

A regulation, such as a CITES listing, often leads to an increase in price for the regulated good. This stimulates demand. Coupled with corruption, this increase in demand results in an increase in the illegal harvest and trade of the good.

Despite a current ban on the harvest and export of Rosewood in Ghana, in the last two months:

Certificates cannot guarantee legality

CITES certificates cannot guarantee legality. They are supposed too, but at the end of the day, illegal wood can be traded with a CITES document. Just like illegal wood can be traded with an FSC-certificate. Even the FLEGT system which allows the import of FLEGT-licensed timber into the European Union without due diligence requirements increasingly appears to be susceptible to contamination by illegal wood.

Who benefits from timber regulations?

Regulations are important for the long-term good of forests and the forest industry. But there’s a point at which regulation, on top of regulation, becomes an advantage for black market operators and a detriment to forests.

Before additional regulations, verifications, and certifications are applied to forest product markets shouldn’t one question stand out above all… who will benefit?

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Header photo: Francesco Veronesi

 

TIMBERCHECK™ Risk Events – June 12, 2019

Timely information about legal risks in forest product supply chains. Sign-up to receive our newsletter.

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TIMBERCHECK™ Risk Events – May 22, 2019

By timber traders for timber traders, this update provides timely information regarding legal risks in timber supply chains. To receive our weekly newsletter, wood products professionals can sign-up here.

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Can FSC-certified wood be illegal?

Yes, FSC-certified wood can be illegal.

Buying an FSC-certified product does not mean that the wood is legal, and it does not eliminate the need to conduct due diligence on the supply chain from which that product originated. 

In 2018, a U.K. company was fined for failure to conduct adequate due diligence on a shipment that was FSC-certified.

More recently, the case of an FSC-certified exporter in Brazil – charged with various offenses related to illegal logging – demonstrates scenarios in which FSC-certified mills can ship illegal timber.

How can FSC-certified wood be illegal?

The Forest Stewardship Council (FSC) does not track and monitor each unit of wood. Instead, the FSC certifies companies and forest management units.

This means that a unit of wood can carry the FSC logo and be recognized as FSC-certified, but in reality, there is no guarantee that the material in the unit originated from a certified forest, and/or was legally harvested.

Taking a closer look at the recent case in Brazil, the methods for the alleged violations reportedly include: 

  • harvesting beyond concession boundaries;
  • illegal transport of timber;
  • illegal transfer of timber credits; and
  • documentation fraud.

While the vulnerability of the FSC system to contamination by illegal timber is probably not news to many industry professionals, it’s important for buyers to remain aware of the risks, especially given their liability.

How should buyers treat FSC-certified suppliers when conducting due diligence?

On one hand, FSC-certification can be useful for buyers of wood products, in that, for short supply chains, the process of conducting due diligence is a bit easier because much of the data required during the process is more readily available. This lowers the cost of data collection, albeit marginally.

On the other hand, FSC-certification can be misleading and cause buyers to lower their due diligence standards for FSC-certified suppliers.

When buying wood products it’s important to remember that FSC-certified wood can be illegal. From the perspective of legality, buyers should not treat FSC-certified wood any differently than non-FSC.

This article is open source. If you would like to suggest changes to this document, or have concerns with any of the information presented here, please contact us.

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TIMBERCHECK™ Risk Events – May 15, 2019

By timber traders for timber traders, this update provides timely information regarding legal risks in timber supply chains. To receive our weekly newsletter, wood products professionals can sign-up here.

Alerts

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Header photo: Nikolay Maslov