FLA 14th Semi Annual Membership Meeting, December 15th and 16th, 2015 | Guest Presentation Summaries

The 14th semi-annual membership meeting of the Forest Legality Alliance took place in December 2015. It was attended by 104 people from 78 different companies, NGOs, and government bodies and lively discussion was held on three main topics: timber legality in the Congo Basin, updates on the Lacey Act in the guitar industry, and the recent Lumber Liquidators Lacey Act case. Short summaries are below.

Panel 1: Timber Legality in the Congo Basin: Independent Monitors (IM) and the Impact of the EUTR and FLEGT VPA Negotiations

Environmental Investigation Agency

Central Africa produces 80% of the total volume of African timber. The Congo Basin is well-known for “dualistic configuration:” a formal sector dominated by large industrial groups with foreign capital, export oriented; and informal sector dominated by chainsaw loggers. The forest sector’s credibility has improved over the years, but there are still many problems. For example, management plans for logging concessions have been well-crafted, but they are not implemented; certification cannot be used to prove legality of concessions; and there is not enough transparency regarding basic sector data. The main types of illegality in the region are Illegal access to forest resources; infractions related to the timber exploitation, avoiding taxes, corruption, breaking trade and export rules, and “new” forms of illegalities, e.g. large-scale investment in infrastructure, agriculture leading to forest conversion and new source of illegal timber, also known as conversion timber.

Horline Njike, Field Legality Advisory Group (FLAG)

FLAG is a Cameroon based civil society organization with regional scope and is the independent monitoring (IM) body of forest law enforcement and governance (FLEG) activities in the Congo Basin (DRC, Cameroon and Congo specifically). There is formal independent monitoring of FLEG requested by the government and informal IMFLEG, i.e. independent work by NGOs. FLAG also contributes to forest law reform; some independent reporting has led to judicial action. FLAG provides technical support to nationally mandated IMFLEG civil society organizations. FLAG has been able to identify major forms of illegality and have grown the role of CSOs in the VPA timber legality verification process. However, FLAG still needs to improve information collection and analysis capacity to provide good and accurate reports, and communication needs to improve with VPA authorities. There is not enough political will (the government has the capacity to improve the scope of the IMFLEG), so independence of IMFLEG is sometimes hard to maintain. In the field, people don’t really know what trees they are cutting, or what laws they are breaking; they just follow the demand and fell trees when they can. There needs to be national action to motivate the loggers to follow the law.

Emmanuel Groutel, Association Technique Internationale des Bois Tropicaux

ATIBT was founded in 1951 to reorganize the tropical timber trade to improve tropical forestry. Members include producers, importers, traders and buyers, professional associations, governments who have signed ATIBT convention, international organizations and donors, NGOs, research and education bodies, and individuals. ATIBT helps with the marketing of legal products coming from Africa, and helps legally certified wood producers get access to markets. ATIBT shares knowledge across the industry, develop research and standards, serves as an advisor to members, and offers professional training. Since China is the largest importer for ATIBT member companies, ATIBT is trying to engage with them more; they are trying to work with China, not shut the door on them. The Chinese need to assess the risks they are facing – for example, the EU, the US and Australia have legality laws now, and China needs to satisfy the demand for legal wood in those countries.

Panel 2: Update on the Lacey Act and the U.S. Guitar Industry

Charles Redden - Director, Supply Chains, Taylor Guitar

The Gibson Guitar case was a wake-up call for the music industry: it made musical instrument producers realize that legality is now an essential component of working with wood products. Since the implementation of the Lacey Act, Taylor Guitars has made significant changes to their wood sourcing policies, including joining the FLA, taking steps to evaluate and rank risk by region and species, and exploring due diligence processes. Taylor began implementing the philosophy of investing in forests to save them, starting by building an ebony sawmill in Cameroon. They also started a business to harvest Hawaiian koa, and are trying to propagate exotic species on U.S. soil. “We want to show the world that if you do work hard, legality and transparency can be possible,” said Redden. In the future, Taylor will continue to evaluate risk by region and species, evaluate alternatives to wood, find realistic replanting options, invest in plantation operators rather than cutting down virgin rainforest, invest in proven suppliers, propagate exotic species on US soil, implement professional staffing for due diligence, and cooperate with certifiers and NGOs.

Mike Dickinson, Exotic and Sustainable Wood Buyer, Martin Guitar Company

Since the implementation of Lacey, Martin has joined the Forest Legality Alliance, as well as worked with the World Wildlife Fund, The Nature Conservancy, and the Rainforest Alliance. Martin has been FSC certified since 1992. Certification and shortening supply chains can be an onerous burden on companies, and until companies can put together willpower / resources to invest in due diligence, nothing will change.

Tom Bedell, Bedell Guitars

Compared to the amount of wood that is harvested for flooring, music and furniture are inconsequential: “we could care less about Lacey - we do what we do because it’s the right thing,” said Bedell. As part of the Bedell Tonewood Certification Project, Bedell Guitars never use clear cut wood for their products – only dead or damaged trees. This meant that they had to change almost their all suppliers, of which all are now family-run co-ops. They are also using TreeTag so that they can find out where exactly each tree came from. In Alaska, Bedell Guitars only uses trees from forest floor and is currently trying to get the industry to stop clear cutting in the Tonga Forest. In Guatemala, they have 11 different cooperatives for sourcing mahogany.

Panel 3: Lacey Act Enforcement: Understanding the Lumber Liquidators Plea Agreement

Patrick Duggan, Trial Attorney, Department of Justice, Environmental Crimes Section

The DOJ presented an overview of the Lumber Liquidators case along with the specific details outlined in the plea agreement. Information from EIA was brought to the U.S. Fish and Wildlife Service regarding illegal wood being imported from the Russian Far East, through China to the U.S. Two methods of illegality under Lacey were obtained: the falsification of declared species and/or origin, and using a legitimate permit (held by a Russian/Chinese) company to launder illegally harvested timber. The outcomes of this case are impressive: it is the first felony conviction under the Lacey Act, and the largest case of Lacey breakage to date. Lumber Liquidators will have to pay $7.8M in criminal fines, $1.2M to community service, and $4.5M in forfeiture. They also have to come up with an Environment Compliance Plan (ECP), which will be court enforced. LL will have to create measures to ensure that know what they are importing and who they are importing from. Their compliance decision-making process will be centralized, documented and audited. This plan represents only the minimum standards to which LL must abide. They are also under 5 years’ probation, and have hired a Chief Compliance Officer with a Lacey Act team which will be auditing their suppliers. In addition, LL will use a risk-based plan which will evaluate the risks of particular products and locations, and if a supplier is designated as medium or high risk, the Chief Compliance Officer has to give approval for any transactions made. The impacts of this case are that compliance expectations are heightened, and that the status quo is changed; it is no longer acceptable to have an “arms-length” relationship with suppliers. There will now be a knowledge pool in which modes and locations of illegality will be brought to light and complacency will no longer be allowed. Furthermore, LL and other companies will cooperate with NGOs working in the forests sector.

Alexander von Bismarck, Executive Director, Environmental Investigation Agency

Von Bismarck spoke on behalf of EIA and their role in the LL case. He began by echoing Patrick Duggan, emphasizing the unprecedented impact that NGOs – based on this case alone – have had on the fundamental way global timber is traded and the reverberating effects this case will have on trade going forward. Pointing out that, to date, the LL case is the first and only case where finished wood products from China (typically, a black box) were confirmed to be illegal under Lacey, giving the DOJ grounds to prosecute. Laying out a bit of background on the case, he spoke about the systematic approach that EIA had taken throughout their three year investigation on Russian trade data. He spoke about the challenges faced and how EIA “bumped into LL at a key factory while obtaining data on illegal Russian far east wood.” Alexander went on to express his enthusiasm around the plea agreement and that it was much more than what EIA had expected. The key components in the plea agreement that he felt would aid in creating historic change were that paper work of purchase order must now be translated before it can be processed, offering basic transparency for products

Cindy Squires, Executive Director, International Wood Products Association

Squires spoke on behalf of the International Wood Products Association regarding the steps IWPA took after the LL plea. Specifically, she spoke about educating IWPA members on the LL settlement, the IWPA due care course, online tools and other due care resources (IWPA website and FLA website). She went on to discuss the well-attended IWPA ‘Compliance 101 webinar’ that was held in the fall of 2015 and the key themes that were integrated into the course. Specifically, how the course was set up to include not just Lacey rules, but compliance in all its subtleties. A few points such as “there are no off-the-shelf compliance plans” instead, companies must create compliance SOPs for all activity within the company – and those SOPs must be baked into the company’s business model. She stressed the need for a simple, comprehensive approach to setting up compliance teams (focusing on the attainable compliance plan vs the aspirational plan) along with the internal support needed for compliance officers/employees – creating a safe space to raise a hand or discuss concerns. This first training was so successful that IWPA will be rolling out a nation-wide plan in 2016.

Lacey Act Enforcement: Implications from the Lumber Liquidators Plea Agreement for the Forest Products Industry Discussion (continued)

Following the presentations of the panelists, discussion on the Lumber Liquidators case specifically and the Lacey Act more generally brought forward several interesting issues. These exchanges included highlighting that the company suffered millions of dollars in losses of stock shares and ongoing civil suits, in addition to the fines in the plea agreement. Discussion also centered on reasonable expectations as to the level of detail on wood import declarations, with some participants affirming that species-level declaration is nearly impossible in some cases, while other participants argued that species information, along with country of origin or harvest, are essential for these issues. While participants drew comparisons to other declaration requirements, such as for food labelling, the issue of potential trade retaliations from other countries was also highlighted. Topics under discussion also included USDA APHIS’ transition to the Automated Commercial Environment system for import filings, which aims to be a more user-friendly interface for filings, and whistleblower rewards for people working within companies or organizations who alert enforcement officials to potential environmental violations.