Irregularities in timber sales in the United States (and other parts of the world) often involve large volumes of wood species that are traded commercially in building product markets.
Law enforcement focus on imported wood products
Laws such as the The Lacey Act in the United States, and European Timber Regulation (EUTR) prohibit the trade of wood that has been commercialized illegally.
Over the last decade, these laws have typically been applied to imported wood products.
This focus on imported wood appears unlikely to change.
For example – at the time of this publication – academics, NGOS, and other political organizations in the U.S. are trying to get the Biden administration to focus on laws governing Brazilian wood products.
“The idea is to investigate what are the correct measures that the USA must implement to enforce the laws in force that already prohibit certain irregularities, such as the importation of illegal wood. We also want to evaluate what we can do as a country to respect the Brazilian legislation that it defends the Amazon and is aimed at combating and preventing deforestation, ”he says.James Green, US Network for Democracy in Brazil – DW.com
Illegal timber harvests and trade within the US and EU
That said, timber is illegally harvested and commercialized within the United States and the EU.
And there is evidence that large volumes of US and European wood products enter markets via processes that violate their domestic laws.
Consider the findings of a recent study on bidder collusion and bid suppression in Idaho state timber sales.
Timber sale bid suppression in Idaho
Idaho has a large forest resource.
About 86% of Idaho forestland is managed by federal and state government entities. The public school system, among other institutions, receives significant revenue from the sale of timber from these forests. In 2020, the endowment lands and fund distribution for Idaho schools was $52,586,400.
A study of timber sale data found significant evidence of bidder collusion and bid suppression that may have resulted in a loss of US$ 43 million for the state.
Not only may bid suppression in Idaho state timber sales have posed a substantial loss of revenue for Idaho citizens, but it brings up another problem…
If colluding timber buyers pay less for timber harvest rights, then markets where there is no bid suppression are at a competitive disadvantage.
This is the fundamental problem with illegality in wood product supply chains globally. Illegal operators can place timber on the market at lower costs, creating unfair competition for those acting in good faith and practicing good forest stewardship. Where land markets exist, this reduces the attractiveness of forest management as a land-use and incentivizes deforestation.
But is timber sale bid suppression in Idaho illegal?
Federal and Idaho State Law and Competition
Many jurisdictions have laws intended to protect free and open competition. According to the U.S. Department of Justice…
Price fixing, bid rigging, and other forms of collusion are illegal and are subject to criminal prosecution by the Antitrust Division of the United States Department of Justice.U.S. Department of Justice
According to the website of the Idaho Legislature, Idaho has a specific statute regarding public lands that appears to explicitly prohibit timber sale bid suppression…
58-154. SALE AND LEASE OF STATE LAND — TIMBER — MINERALS — OTHER INTERESTS — INTERFERENCE WITH APPLICATION, AUCTION OR BID PROCESS — PENALTY. It shall be unlawful for any person, firm, partnership, or corporation to offer to accept, or to accept, compensation of any type in exchange for the withdrawal of a bid, or for the withdrawal of an application to bid, lease, or purchase, any state owned land, or timber, minerals, or other interest, or for foregoing a right to bid at any auction for the sale or lease thereof. Further, it shall be unlawful for any person, firm, partnership or corporation to offer to pay, or to pay, compensation of any type in exchange for the withdrawal of a bid, or for the withdrawal of an application to bid, lease, or purchase, any state owned land or timber, minerals, or other interest, or to cause or attempt to cause, another person, firm, partnership or corporation to forego a right to bid at any auction for the sale or lease thereof.Title 58 – Idaho Legislature
So based on the laws posted on Idaho government website, it appears that yes, under certain circumstances timber sale bid suppression is illegal in Idaho.
Here’s where it gets interesting for wood products distributors…
Illegally purchased timber and the Lacey Act
According to The Lacey Act…
The Lacey Act (16 U.S.C. 3371 et seq., the Act) as amended makes it unlawful to import, export, transport, sell, receive, acquire, or purchase in interstate or foreign commerce any plant, with some limited exceptions, taken or traded in violation of the laws of the United States, a U.S. State or a foreign countryU.S. Customs and Border Protection
In other words, if a violation of laws occurs in one place in the supply chain, downstream participants of the supply chain like distributors and retailers can be held legally liable under the Lacey Act.
If it is illegal in the U.S. to distribute wood obtained from timber sales involving bid suppression, and other forest tenure irregularities, there could be a significant amount of emergent legal risk that is not priced into U.S. building product markets. However, this risk may be offset by the historical use of The Lacey Act to enforce violations in imported wood supply chains.
Concerned about legal risks in timber supply chains? Join TimberCheck™ or check the Timber Risk Map. Want to explore the declared origin of a wood product? Start a WoodFlow™. Curious what the forest looks like after the presumed harvest, request access to TimberSat™.