Are the Lacey Act and EUTR Regulations Bad for Tropical Forests?

The Lacey Act and EUTR are regulations that govern the trade of wood products in the United States and European Union. They hold domestic companies liable for wood that has been illegally harvested, processed, transported or traded even when the illegality occurs in foreign countries by foreign entities.

What’s unique about these laws, is that they can be used to punish companies that have not been proven to trade in illegal wood products, but fail to demonstrate adequate procedures during procurement. For example, a Swedish court recently prosecuted a Teak trader not because the Teak in question was proven to be illegal, but because the company could not demonstrate who logged the timber, or from what stand.

This case, along with the disposal of Peruvian lumber in another case, suggest that those enforcing these laws are not prioritizing the legality of wood materials, but instead are focused on increasing the cost of doing business in the tropical wood products sector. In some instances, it even appears that the institutions championing these laws are creating niche industries – promoting regulation and selling certification around these regulations.

Empirical evidence that these laws reduce illegal logging or deforestation is lacking. What the Lacey Act and EUTR definitively do is transfer the costs of governing forests to private enterprises in ways that are immeasurable. By nature, the large extent of illegality occurs between the tree stump and the sawmill in the country of origin. More efforts to tackle illegality at the point of harvest, such as electronic tree tagging in Brazil, and addressing corruption within forestry departments in Myanmar, are needed, but these should not be done at the expense of enterprises that sustain tropical wood product demand.

Forests as a land-use only prevail when they have more cash flow value (net present value) relative to other non-forest land uses. By effectively increasing the costs of doing business in ways that are not measurable (what is adequate due diligence?), over-reach of the Lacey Act and EUTR risk creating a business environment where investments in forests and forest-based businesses are perceived by entrepreneurs as more risky, and less remunerative than non-forest land uses, primarily agricultural land uses.

Instead of creating additional costs, efforts to increase the value of tropical forests should focus on lowering the costs of doing business for forest-based enterprises.

TIMBERCHECK™ is a simple way to reduce risk, increase profits, and build networks of trust.

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