The American Hardwood Export Council (AHEC) represents companies that export U.S. hardwood products. These products include lumber, veneer, plywood, flooring, moulding and other products.

On November 4th, 2021, an apparent representative of the trade association, listed on the AHEC website as a Director, contacted TimberCheck regarding the article: “Are US hardwood imports in violation of the EU Timber Regulation?“. This article argues that it is highly likely that a significant number of shipments of U.S hardwoods enter the European Union in violation of the EU Timber Regulation (EUTR).

The AHEC Director claimed that the article is “groundless”. Their logic appears to be that the risk of illegal wood of US origin is negligible, and thus US hardwoods have some kind of quasi exemption from the EUTR due diligence requirements relative to other origins. The basis for this “negligible risk” claim? A study AHEC commissioned.

Do US hardwoods receive preferential treatment under the EUTR? If not formally, is there some kind of informal agreement between entities enforcing the EUTR and the US hardwood industry? If so, what effect does this anti-competitive behavior have on access to the EU market and on the economic sustainability of forest management in other hardwood producing countries?

Evolving due diligence requirements of the EUTR

Under Article 4 of the EUTR…

  1. The placing on the market of illegally harvested timber or timber products derived from such timber shall be prohibited.
  2. Operators shall exercise due diligence when placing timber or timber products on the market. To that end, they shall use a framework of procedures and measures, hereinafter referred to as a ‘due diligence system’, as set out in Article 6.

What constitutes adequate due diligence has been a source of confusion since the inception of the law. For example, the due diligence system framework set out in Article 6 includes vaguely worded, subjectively interpreted requirements like: “documents or other information indicating compliance of those timber and timber products with the applicable legislation;”. What exactly constitutes “other information”?

Clarifications of the law and what constitutes adequate due diligence are being determined in court rulings such as a recent Dutch court ruling. Clarification on due diligence requirements provided by this ruling, according to the Environmental Investigation Agency (EIA), include:

  1. origin and legality of timber must be confirmed to the felling location;
  2. companies must confirm traceability (chain-of-custody) of the timber along the entire supply chain;
  3. no relevant documents can be missing.

This type of data is likely absent from a significant amount of US hardwood shipments, which would make their import illegal under the EUTR.

US hardwood shipments and due diligence data

Felling location data, and data proving chain-of-custody of timber along the entire supply chain, are unlikely to be accompanying a significant amount of US hardwood shipments to the EU. This data is likely unavailable, or the cost of collecting, analyzing and taking risk mitigating steps where risk of illegality are non-negligible would simply make these shipments unprofitable.

TimberCheck believes this is especially true for US hardwoods relative to other countries of origin due to the nature of the US hardwood forest. Specifically, because: (a) US hardwood forests are fragmented into many small ownership entities, (b) there is limited monitoring of timber harvests and flows, (c) and, there appears to be some relative immunity given to US wood products even when there are prosecutions of timber trespass and/or theft. For example, the Lacey Act is almost never enforced in the interstate trade of illegal wood in the United States, although it is for wildlife. (So the demand for data on felling locations and traceability to mitigate legal liabilities is weak).

AHEC’s Director claimed the original article making this hypothesis is “groundless”. To test their claim, TimberCheck offered to participate in a randomized sampling of US hardwood shipments to review the due diligence data accompanying these shipments. At the time of publication, AHEC has not agreed to participate.

AHEC argues US hardwoods are of “negligible risk”

According to the AHEC Director: “The writer [of Are US hardwood imports in violation of the EU Timber Regulation?] is misinformed about the content of the EU Timber Regulation and is unaware of the high quality independent and peer reviewed research carried out clearly demonstrating a negligible risk of any exported US-origin hardwood being illegally sourced.”

The basis of the Directors’ argument that significant numbers of US hardwood shipments are not in violation with the EUTR, seems to be it’s claim of “negligible risk” of “any” exported “US-origin” hardwood being illegally sourced.

In other words, a single industry study has allegedly determined that basically all US-origin hardwood exports have negligible risk of illegality. There are a just three problems with this allegation:

  1. the study was commissioned by AHEC itself;
  2. the consultant that produced it, founder and President of Seneca Creek LLC, has worked for the US International Trade Commission (USITC) and authored another study that, according to the Seneca Creek website, “led to enactment of amendments to the Lacey Act in 2008”. Both are either tasked with, or were founded for, the protection of US industry;
  3. there’s evidence of widespread and large scale illegal harvesting and trade of timber in the US.

“Low to negligible risk” study commissioned by AHEC

TimberCheck briefly reviewed the “independent and peer reviewed” research that the AHEC Director presumably references.

It’s titled “Assessment of Lawful Sourcing and Sustainability: US Hardwood Exports” and referred to as the Seneca Creek Report after the consultancy which produced it.

Describing the study as “independent and peer reviewed” seems misleading at best, if not fraudulent. The study was commissioned by AHEC. The trade organization also contracted the consultancy that “lead the technical panel” in the review of the study. The purpose of this review was “to enable AHEC to present and promote the Seneca Creek Report as a peer reviewed document which provides credible market assurance to those procuring hardwoods harvested in the United States.”

So, to be clear, the “independent research” cited as demonstration of “negligible risk” by the AHEC Director was commissioned by the US hardwood industry trade organization who also contracted the consultant who lead the “peer review”.

Not only does this call into question the credibility of data presented in this report; but, the actual report did not find a “negligible risk” but a “Low to Negligible Risk”. That’s quite different than what the AHEC director claims (“a negligible risk of any exported US-origin hardwood being illegally sourced”).

Lead author career in US industry protection

The credibility of the report is further called into question, considering that its lead author has a history of involvement in protecting US industry interests. How can research regarding the legality of US timber harvests – commissioned by a trade organization representing US timber interests – conducted by someone with a history of involvement in US industry protection – be objective?

The lead author of the study, Alberto Goetzl, is founder and President of Seneca Creek Associates LLC – the consultancy which produced the report (which is why it’s also referred to as the “Seneca Creek Report”).

According to the Seneca Creek website, “Mr. Goetzl served on the staff of US International Trade Commission (ITC) and has worked for and with major industry associations and companies.” The mission of the USITC is:

“Investigate and make determinations in proceedings involving imports claimed to injure a domestic industry or violate U.S. intellectual property rights; provide independent analysis and information on tariffs, trade and competitiveness; and maintain the U.S. tariff schedule.”

Perhaps even more interesting is that, according to the Seneca Creek website, Mr. Goetzl claims he authored a 2004 landmark study with the World Resources International that “led to enactment of amendments to the Lacey Act in 2008”. A primary motivation for the Lacey Act wood amendment was to prevent low prices from negatively affecting U.S. producers. In the words of a Research Forester with the USDA Forest Service, “The Lacey Act Amendment of 2008 (LAA) was enacted most proximately as a way of reducing aggregate demand for illegally obtained timber products globally.” According to Prestemon, “…having such material entering global markets serves to depress world wood product prices, indirectly and negatively affecting U.S. producers.”

Illegal harvest and trade of US timber

If you believe that “irregularities” are not present in US timber harvests on a large scale, consider this audit of two Alaska timber sales by the USDA Forest Service: Final Report — Alaska Region Timber Sales Program Audit.

Or this study of Idaho timber sales by the University of Pittsburgh: Bidder Collusion: Accounting for All Feasible Bidders.

True, these are not hardwood forests. For data on that, how about this study: An Analysis of Timber Trespass and Theft Issues in the Southern Appalachian Region.

This US hardwood region study estimated that about 120 instances of timber theft occur each year in just a 20 county area. In the three years prior to the study, in the same 20 country area, there were 36 criminal cases related to timber theft. In other words, roughly 10% of timber theft cases were being prosecuted.

If you are still not convinced, consider that, while this article is being written, the US Forest Service is working with a crowdsourced effort to collect core samples of Eastern Black Walnut trees throughout its 30 state range in the US. According to the coordinator, “samples will become the basis of chemical and DNA databases that law enforcement can use to prosecute timber thieves”.

Range of sample collection and sites of Eastern Black Walnut for chemical and DNA databases. Source: Adventure Scientists

Are US hardwoods getting preferential treatment under the EUTR?

The claim by the AHEC Director of “negligible risk of any exported US-origin hardwood being illegally sourced,” is not only false, and based on a study funded and conducted by US industry protectionists; but, the general argument itself which is basically – US hardwoods are of “negligible risk” and so not subject to the same due diligence requirements as other countries – sounds like preferential treatment.

According to the AHEC Director, “Information on origin beyond the country of harvest is required only in those circumstances where there is a risk that the wood derives from an illegal source.”

The AHEC Director continues… “The EIA interpretation referenced in the blog post refers to those countries or regions, like Myanmar, where there is a risk of illegal harvest, not where there is incontrovertible evidence of negligible risk.”

In other words, because the study they commissioned found “negligible risk” with regards to US hardwoods, then the due diligence requirements clarified in the Dutch ruling do not apply to US hardwood shipments.

Under Article 3 of the EUTR only shipments with FLEGT or CITIES licenses are considered to have been legally harvested and exempt from EUTR due diligence requirements. These licenses do not apply to US hardwoods.

Do EUTR monitors have an agreement with US industry?

One of the main monitoring entities of the EUTR appears to be the EIA. The EIA is the agency that declared that the August 2021 Dutch court ruling laid out a new clarification of EUTR due diligence requirements including felling location among others.

While the AHEC Director makes the claim that this declaration does not apply to the US, this is not evident in the EIA declaration. In fact, the EIA states “In its reasoning, the court confirmed a number of EUTR requirements that help ensure the law does the best possible job of ensuring the legality of timber products in the EU…”. It does not state that these requirements of the EUTR pertain only to shipments from Myanmar (as suggested by the AHEC Director).

So is this statement by a main EUTR monitor just unclear? Did the AHEC Director misinterpret it? Or is there an unspoken agreement that these due diligence requirements do not apply to US hardwoods?

It’s worth noting that the EIA has shared US timber industry interests in the past when they supported the 2008 Lacey Act wood amendment along with the National Hardwood Lumber Association and American Forest & Paper Association.

TimberCheck asked the Director if AHEC ever communicated with the EIA regarding the EUTR, but at time of publication has not received a response.

The problem with applying EUTR unequally based on country of origin

The cost of collecting data on the legality of a timber sale, harvest, transport, processing, and financial transaction is extremely expensive on a per unit basis. Add to that the cost of data analysis. Then add the cost of developing risk mitigating procedures if non-negligible risk is identified.

If these due diligence costs are expected in transactions of wood products from some countries (for example Peru) and not others (like the US), then the unequal application of the EUTR is essentially allowing access to markets, not based on the merit of forest management and legality of a supply chain, but on the political capital of the trade partners country.

The countries typically at a disadvantage are often tropical countries. Even legal suppliers in tropical countries are unable to compete. Although they abide by laws, the more stringent due diligence requirements expected of their transactions mean they have less market share, less revenue, and less profit. This ultimately makes forests in these countries less attractive as an economically viable land-use.

Unequal application of the EUTR could very well have the unintended consequence of contributing to deforestation in those countries receiving unequal scrutiny.

If the EUTR is not applied equally, it should be abolished for the sake of sustainable forest management in tropical countries.