Although the proportion of illegal wood-based products traded internationally has declined over the last decade, improved legal compliance does not necessarily imply improved sustainability.
Discussion has re-emerged as to the merits, or otherwise, of focusing international reform efforts on legality or sustainability. As outlined in Chapter Two, in the context of the forest sector the focus for the last two decades has been primarily on legality, because this approach was seen as being more supportive of a country’s sovereignty, and was considered to be easier to implement, compared to approaches that were focused on sustainability. However, experience has shown that the reality is not quite so straightforward.
Defining legality in the forest sector
One of the issues faced when considering legality is that the legitimacy of state sovereignty may not be accepted by all national stakeholders. For example, customary legal frameworks may have a high level of social recognition and acceptance, but these are generally ignored, or are not adequately recognized within some countries’ formal legal frameworks. For instance, a 2020 review of 42 countries estimated that 49 per cent of their total land area comprised indigenous and local communities’ land, of which 46 per cent was not legally recognized.
Similarly, artisanal and small-scale producers and enterprises are often not accounted for or regulated, which excludes them from operating legally, while some of their activities are banned in certain countries (see also Chapter Four). This is in spite of the fact that artisanal and small-scale producers provide most of the timber consumed in the domestic markets of many tropical forest countries, and play an important role in rural economies. Furthermore, certain legal principles that are well established in international law may not be reflected at the national level – for example, those related to human rights, labour rights or tenure of land and resources.
The laws in many countries are unclear and at times contradictory or incomplete.
A further challenge is that defining what is legal (and illegal) can be complicated. One reason for this is that opinions may differ as to the scope of laws that should be considered. For legislation regulating trade in timber, most definitions of legality or illegality refer to the legal framework of the country where the wood raw material of the products has been harvested. There are variations within this, with some definitions emphasizing particular aspects of the law. For example, the Lacey Act refers to ‘any foreign law’, and also specifies that regulations related to the fiscal regime are within scope. The EUTR refers to national legislation of the country of harvest as well as any ‘relevant international conventions’ to which the country is party. For the national legislation, five areas are identified as being applicable: rights to harvest within legally gazetted boundaries; payments for harvest rights and timber; timber harvesting, including environmental and forest legislation; third parties’ legal rights concerning use and tenure that are affected by timber harvesting; and trade and customs. The South Korean Act on the Sustainable Use of Timbers focuses on illegality with respect to non-compliance with regulations related to harvesting, and the definition of illegal logging developed by the APEC countries refers to domestic laws or regulations ‘related to the protection, conservation, or management of forests and timber’, also noting that countries may consider additional categories of law. As noted above, for some, such definitions are too narrow, particularly in failing to require compliance with certain international norms.
Another factor that can make defining legality complex is that the laws in many countries are unclear and at times contradictory or incomplete. This complexity has implications for those who are trying to comply with the law – this is particularly the case for artisanal producers and SMEs, which often have limited capabilities to evaluate and meet legal requirements. It also presents challenges for those seeking to enforce the law, whether within the country of production or further down the supply chain, for example, where there are market access regulations related to the legality of timber.
It is for these reasons that a fundamental element of the VPA negotiations has been to implement a national process for each partner country to define what constitutes legal timber.
Stakeholder engagement in defining legality
The national processes established under the VPAs to define what is legal in timber production and trade have proven to be transformative in some countries. These multi-stakeholder processes entailed reviews of national legal frameworks and prompted reforms where conflicting or weak laws were identified. Furthermore, they served to enhance the legitimacy of the law. For example, the new Forest Code in the Republic of the Congo was the result of such a process and has been met with a high level of support from civil society (although the implementing decrees have yet to be finalized). In Laos, the VPA supported wide-ranging forest sector reforms and helped to raise awareness of the legal framework and of the institutional responsibilities for its implementation.
Of course, the process has not always been smooth, and the legality definitions agreed have at times been criticized for not adequately addressing certain areas of law. The legality definitions vary between countries, reflecting the particular national contexts and priorities of those engaged in the negotiations as well as their awareness of relevant issues. This has meant that some issues have not been adequately covered, while changes in the sector have also highlighted gaps. This has been the case, for example, in Indonesia, where the legality definition did not initially consider the issue of corruption in permit allocation, nor did it cover timber from customary forests. The former issue has in part been addressed, and sustainability certification can now be revoked in certain cases: for example, if there is a conviction for corruption linked to a company’s permits. The issue of timber from customary forests became a priority with the recognition of customary land rights by Indonesia’s Supreme Court in 2013. The need for customary forests to be integrated into the country’s Legality and Sustainability Assurance System (Sistem Verifikasi Legalitas dan Kelestarian – SVLK) is recognized in the VPA and options for implementing this are being explored.
Negotiating legality definitions is not straightforward, and it has been more complex and time-consuming than originally foreseen. This in part reflects the weakness of the legal framework in many countries. Consequently, these processes have not simply entailed deciding on the scope of laws to be included within the legality definition, but have also required reviews of the existing legal framework and the elaboration of new or revised laws and policies.
A further complexity results from the fact that legality definitions cannot be seen as static. Rather, they need to be amended, as opinions on what issues (and thus, which areas of law) should be included are changeable, and because the law itself is subject to change.
Changes in law can of course be either positive – with the clarification of laws, or implementation of reforms that address existing inequities – or negative. There have been many cases over the last two decades in which the law has been changed to facilitate the exploitation of forests and forest lands to the detriment of sustainability. For example, the 2012 revision to Brazil’s Forest Code granted amnesties to those who had deforested land, exempting them from the requirement to restore forest cover on their property. Furthermore, in recent years, easing of social and environmental safeguards linked with the approval process for changes in land use has been reported in a number of tropical forest countries, as governments have sought to boost short-term economic growth following the COVID-19 pandemic.
These issues have come to the fore in recent discussions of policy measures to address deforestation in supply chains, with debate centring on whether such measures should target only illegal practices, or all deforestation – an issue which will be revisited below.
Assessing types of illegal practices and their prevalence
As noted above, defining illegality is complicated. To try and understand how the nature and scale of illegal practices have changed over the last two decades, the approach adopted for this analysis was to take a broad definition of illegality. Thus, it is assumed to include illegal practices as recognized within national definitions, as well as contentious practices, which are those prohibited in international law or norms but not necessarily embedded within national definitions of legality.
This approach was adopted in recognition of the fact that, even if contentious activities are not illegal under a particular national framework, they often serve to undermine confidence in government and can conflict with best practice for sustainable and equitable forest and land use. Consequently, the analysis presented here does not necessarily reflect the risk of non-compliance with regulations aimed at controlling the trade in illegal timber. Rather, it serves to highlight where there may be a need for further scrutiny and debate – by those in government, as well as the private sector and civil society.
Five categories of illegal practice were chosen, as follows.
- Customary tenure and resource rights:
- Free, prior and informed consent (FPIC) not obtained from affected people or communities; or
- The rights of affected peoples or communities not adequately taken into consideration and addressed in the process of allocating permits or developing management plans; and any loss of rights not adequately compensated.
- Award of permits:
- Environmental impact assessments (EIAs) not conducted in accordance with legal requirements;
- Legally required process not followed in decision-making for the award of permits, e.g. calls for tenders not published; technical requirements for selection of bids not followed; corruption influences decision-making; or
- Use of proxy companies by an entity that would otherwise be ineligible for being granted a permit.
- Forest management and harvesting:
- Management plans not developed or implemented, e.g. plans do not meet legal requirements; logging in restricted areas; overharvesting of particular species, etc.;
- Health and safety and/or labour laws not complied with, e.g. no provision of safety equipment; employment of illegal immigrants; non-payment of salaries or of minimum legal wage; or
- Environmental legislation not complied with, e.g. logging of protected areas or species; non-compliance with requirements for protection of wildlife; pollution of water courses.
- Forest sector payments and financing:
- Relevant royalties, fees, taxes and fines not paid, or not paid in full;
- Benefit-sharing agreements with local communities not complied with;
- Fraudulent financing /money laundering by concessionaires or in relation to mills; or
- Illegal forms of transfer pricing.
- Transport and trade:
- Export bans or quotas breached or exceeded for certain species or products;
- False declarations made; e.g. misdeclarations of species, value or source; or
- Non-compliance with CITES requirements.
Some of these – notably, the first two categories, ‘customary tenure and resource rights’ and ‘award of permits’ – are somewhat different in nature to the others. This is because illegalities in these categories are likely to be intractable. As such, unless there have been robust processes to address such illegal practices, they will affect the legality of all subsequent production. For example, if the process of granting a permit involved corruption, or if a logging permit was granted on land for which existing land rights were not recognized, the timber subsequently produced under these permits is considered illegal.
Addressing such issues, particularly where the illegal practices took place in the past, is challenging. However, it is possible to do so, for example, through a review of existing permits. Such a process was implemented in the Democratic Republic of the Congo (DRC) in the late 2000s, with the cancellation of 76 out of 156 concessions – although widespread breaches have since been reported. A further review of all forestry concessions is to be implemented in 2022.
Key findings
Analysis for the 37 countries included in this study indicates that, globally, the proportion of illegal trade in wood-based products has declined in the past 20 years, with respect to both volume and export value. However, there has been an absolute increase in these volumes, in particular between 2000 and 2008, because of an overall increase in international trade. (Detailed analysis for each of the project countries is provided in the country notes.)