The Taiwan Forestry Research Institute have published an article by Global Traceability on the tracing of supply chain information for the EU Timber Regulation (EUTR), available to download here. For English readers see the translated version below:
Tracking the Legality Data of Wood Products: An example and application service for EU Timber Regulation
Using traceability system to prove sustainability and legality of raw material
Concept of tracing products (traceability) has been applied in Taiwanese agricultural sector for many decades. In recent years, not only the quality and safety of products and raw materials, consumers have begun to attach importance to the sustainability and legitimacy of products. The concept of “choosing sustainable products” is widely accepted and reflects market influence, in the past decade demand has been provide proof of their legitimacy. Since the United States legislation in 2008, the European Union, Australia, Japan and Indonesia and other EU VPA countries (Voluntary Partnership Agreement) have legislated to regulate the market for the trading of wood products.
Regulate and encourage market mechanisms through legislation to prevent the import of illegal timber and reduce global forest damage
Today’s business organizations wanting to export wood products to the United States, Europe and Australia must prove the legality of the production of timber. The three laws are: the United States Lacey Act, EU Timber Regulation and the Australian Illegal Logging Prohibition Act. Although the decree varies by country (region) development and national conditions, the three decrees require “diligence” (Due diligence, Due care) to claim legitimacy. For wood manufacturing exporters, the collection of supply chain information is an important condition for trade. Another common point is that although both FSC and PEFC verification systems are fully compliant with the major timber regulations, this means that certified forest products simplify the process of careful investigation, but do not mean that companies only need to provide FSC or PEFC verification. Enterprises still need to provide other production information in order to meet the basic requirements of the act.
EU Timber Regulation and due diligence
EU Timber Regulation came into effect in March 2013, by passing the bill in the parliament of member states, aiming to legally compute the legality of timber import sources, thereby avoiding indirect incentives for EU consumers to purchase illegal timber. All timber traders in the European Union (Operator, the first placer to introduce EU wood products into the EU market) and traders (Trader, who sell or trade imported wood products within the EU) have become targets of the EU timber regulations. When the imported products are wood products listed in Annex I of the European Timber Regulations, such as logs, sawn timber, processed articles, furniture, pulp and paper, it is necessary to conduct a conscientious investigation. The steps are:
- Collect information about the supply chain of the product, such as tree species, forest producing country information, etc. If the forest is harvested from a high-risk country, provide more detailed information such as a logging area or permit to prove the source of the raw material and
- The operator conducts risk assessment of imported wood products at least every 12 months
- If the overall risk assessment is a result of a non-negligible risk, it is necessary for the operator to further provide other risk mitigation,
The Competent authority of each country will examine the results of the investigation every year, and may impose a fine or confiscation of the product.
The ultimate goal of the EU timber legislation is to facilitate consultations with VPA countries
Unlike the US and Australian regulations, the EU timber regulations accept FLEGT certification (Forest Law Enforcement, Governance and Trade License) to recognize the legitimacy of wood products. FLEGT certified wood products can be exempted from investigation, enjoy direct access to the EU market “privilege”.
FLEGT incentivises VPA countries to take initiative to improve local forestry management and forest production from the national level in order to meet the EU certification issued FLEGT certificate conditions. When the EU operator is likely to choose FLEGT-proven products due to exemption from due diligence investigations. It is rewarding for the VPA countries that have rich forest resources but need to invest in resource improvement management systems to combat domestic illegal timber investment.
Three common misunderstandings from suppliers for the EU timber regulation
EU timber regulations have been implemented for several years, but there are still common misunderstandings of the EU timber regulations:
Misunderstanding 1: Just providing forest certification is enough to prove legality. Or, must have a forest certification to prove legal.
Forest certification plays an important role in due diligence, but in reality, forest certification is not the only criterion for legitimacy. The required documents will vary depending on the conditions of the tree and the country of production. High-risk products such as high-value or protected tree species, products that are difficult to identify their raw materials (such as wood based panel) or countries where timber is cut from war-torn regionsor low corruption perceptions index are require further proof of risk assessment.
Misunderstanding 2: huge investment to fulfil export conditions to the EU is needed
If Taiwanese enterprises want to cooperate with EU buyers, they are required to provide necessary information on their wood products. Solutions are available to provide enterprises with a small cost to effectively collect supply chain information. The enterprises can also contact the third party companies to formulate the corresponding guidance program according to the demand and products. These solutions can significantly reduce the adaptation period and cost.
Misunderstanding 3: Exporters must also carry out risk assessment
Exporters are required to fully grasp the production purchase record of their products to submit the documents required by the operator to trace the source, but do not have to enforce the risk assessment. Table 1 lists the responsibilities of each organisation on the supply chain.
Table 1 Table 1 Responsibilities of the various roles in the supply chain in the three steps of careful investigation (the author)
|The role definition of each node on the supply chain||Export wood products to the EU market||The first person place timber and timber product into EU market||Buy forest products from operators and then sold in the EU|
|Information and document collection||Shall provide the supplier with information on the production supply chain of the product||Need to collect and save information to suppliers (5 years)||To keep the transaction information (5 years)|
|Risk assessment||Not mandatory for EUTR, but the supplier must have the information of product origin to provide the operator to assess the risk||The EUTR regulated product must be evaluated for risk every 12 months||No risk assessment is required|
|Reduce the risk of using illegal timber||If the product provided is assessed as potentially unlawful risk, it is necessary to cooperate with the operator to investigate the legality of its source of raw materials and to provide supply chain information of the product||If the results of the assessment shows there is potential risks in the product, further investigation of products and suppliers is required. If invalid, stop purchasing and replace the suppliers||If the trader knows that the product purchased from the operator has a potential risk, the product should be replaced|
Wood products supply chain structure is complex and effective management of supply chain information can expand market competitiveness
Every wood product in the market may have been processed several times, mixed with a variety of tree species or transnational production and sales. Effective traceability system, linking the supply chain and the country’s product information, and the apply due diligence with low cost, is now the key to ensure the competitiveness in the timber sector.
According to the EU timber regulations, operators may conduct their own or commissioned third-party companies to conduct due diligence investigations. Many private companies, such as Bureau Veritas, SGS or NEPCon, responsible for forest certification audit, also provide EUTR timber risk assessment services. Since 2016, NEPCon has partnered with Global Traceability. It shows that time and human resource are significantly reduced by the RADIX Tree platform, developed by Global Traceability, a product supply chain nformation platform that effectively collects the information needed for due diligence investigation.
Video: RADIX Tree platform for managing business partners. Users can easily invite business partners to edit and share product information online and customize the validation rules.
RADIX Tree supply chain information platform: easy to share while maintaining control over your data
Global Traceability’s supply chain information platform, RADIX Tree, was officially launched in 2012 to provide users with a convenient solution for managing supply chain information. More than 80,000 organisations are represented on the platform since March 2013 when EU timber regulations were implemented.
In addition to providing supply chain management for the wood industry, Global Traceability also provides consulting services such as timber risk assessment and implementing traceability systems. In recent years, further cooperation with other industries, such as: biomass energy certification scheme (SBP) and textile industry. GTS look forward to cooperate with enterprises in Taiwan.
About the Author
Ping-Lian Wu, graduated from the National Taiwan University in 2010, and 2014 in the Technische Universität München, Germany (M.Sc. Sustainable Resource Management). Since 2017 she works at Global Traceability.
Contact Ping-Lian at email@example.com