A level playing field for Operators?

Transcription

1 EUTR Enforcement A level playing field for Operators? Presentation to the Commission Expert Group on EU Timber Regulation and the Forest Law Enforcement, Governance and Trade (FLEGT) Regulation The Environmental Investigation Agency June 2017

2 16 Substantiated Concerns submitted since March prohibition cases related to Vietnamese furniture produced with Balau timber from Laos, and placed on the Italian market 14 Due Diligence related to the placement of Burmese teak in 6 countries EIA submissions

3 Italy (2 x balau, 4 x teak) The Netherlands (3 x teak) The UK (3 x teak) Belgium (2 x teak) Denmark (1 x teak) Germany (1 x teak, since transferred to the Spanish CA) Cases submitted Substantiated Concerns have been submitted to:

4 Balau cases The Complaint EIA identified 2 prohibition offences in each case submitted to Italy Timber from the Xekaman 1 dam project in Laos, where a majority of timber (71%) was logged illegally in protected forests outside of the concession of harvest Timber exported to Vietnam, in violation of Laos log export ban

5 Balau cases Italy s response The Italian CA reported to EIA in March 2017 (12 months after submission) that each company was checked for the placement of wood products from Myanmar (1 found noncompliant) Checks appear to relate to teak a different species than identified in EIA submissions; and to imports from the wrong country EIA has serious concerns around the competence of this investigation

6 Balau cases Recommendations to Italy Reopen cases related to the placement of balau timber, and investigate companies for their placement of the correct species, from the correct country of origin

7 Teak cases The complaints EIA assessed the supply chain documentation available to operators placing Burmese teak None were able to conduct due diligence on their supply chain upstream of the point of sale by the Myanmar Timber Enterprise (MTE) Failures represent some of the most fundamental aspects of due diligence who cut down the trees, where, and did they have a permit to do so? Where harvest conditions followed? Burmese teak offered for sale by Teak Solutions. EIA reported the company to the German CA in October 2016

8 Teak cases Failings in Due Diligence Failures identified in due diligence that were consistent included failure to: Identify who carried out the harvest Identify the concession of harvest Mitigate the high risk of bribery and corruption in the allocation of harvesting rights View a harvest permit and establish the right to harvest Confirm that harvest conditions were followed, including compliance with the Annual Allowable Cut, and that no undersized trees were included within the harvest Confirm correct markings applied to logs during harvest/transport Identify transport operators involved Confirm that transport conditions were followed

9 Denmark investigated all Danish Operators, prevented further placement until conditions are met Germany transferred to Spain (re-opened by public prosecutor s office), sanctioned 2 Operators, issued guidance UK found one Operator to have acted as a Trader, other cases under investigation Belgium offences are being processed Netherlands requested translations of documents and further information, cases under investigation Spain cases under investigation Italy One Operator compliant. 2 Operators had no history of placement, but appears supply not investigated. Teak cases Outcomes

10 Teak cases Outstanding investigations Only the case submitted to Denmark has been satisfactorily concluded Of the 15 remaining cases, 9 appear to be under active investigation Particular concerns over investigations carried out in Italy

11 Teak cases Italy s response 3 companies where found to have no history of placement, but EIA has seen no indication that the Italian CA has taken steps to identify and investigate the Operator placing the timber traded 1 was found to have complied with the Due Diligence requirements of the EUTR

12 Recommendations to Italy Teak cases Where no history of placement of Burmese teak was found, companies have still acted as Traders The Italian CA should identify the Operators and investigate the Due Diligence carried out EIA has since submitted a Substantiated Concern on the suspected Operator in one supply chain

13 Recommendations to Italy Teak cases In the instance where the Operator was found to be EUTR compliant, the Italian CA should: Confirm whether reliance upon documents issued by the Myanmar Government complies with the EUTR, and If so, confirm why the Italian Competent Authority has taken a different position to other Competent Authorities, or If not, confirm what further documentation was provided by the Operator, and how risks were successfully mitigated

14 Italy was the 3 rd largest EU importer of timber and related products from non-eu countries (11.3% of the total) in 2015 A level playing field?

15 A level playing field? Italy was the largest importer of timber and related products from Myanmar in % of the EU s total (by value) is imported by Italy, 6.86 million Euros worth was imported in 2015 This figure does not include timber imported via secondary countries

16 Recommendations to the European Commission Ensure that Italy s enforcement failings do not lead to EU market distortion/unfair advantages for Italian Operators Instruct Italy to fulfill obligations to the EUTR, under Article 258 of the Treaty on the Functioning of the European Union Resolve jurisdictional loopholes (next slide)

17 Recommendations to all CA s Multiple jurisdiction supply Whenever a suspected Operator is found to be acting as a Trader, the Operators providing supply must be identified, even if Operators are from outside a CA s jurisdiction In supply chains that cross Member State boundaries, there is a need for cross community cooperation Potential role for EC coordination in this approach?

18 Recommendations to all CA s Secondary countries Searching customs records by country of origin and HS code fails to identify Operators importing from a second country Stockpiles of Burmese teak logs in countries such as India, Malaysia, and Singapore won t be flagged in such searches. As exported prior to Myanmar s 2014 log export ban, proof of legality will be particularly difficult for these logs Some companies mill first in Myanmar, and again in a second country, before shipment to the EU. These will not flag in customs searches CA s should also request trading records from Operators and Traders. Trader bottlenecks may identify multiple Operators

19 Recent developments in Myanmar Reports that MTE is to become more transparent, including civil society monitoring- sources from Sagaing (source of high grade teak) say no actual plans and no indication of action to include CSIM to date. Subcontractors removed from harvesting activities Harvest levels reduced in line with the AAC Continued logging in Myanmar to feed the illicit trade to China. Concern that some traders and MTE are attempting to produce a Green Book MkII, that will still fail to meet due diligence requirements DoubleHelix timber origin verification system

20 MTE transparency Ohn Win, Minister for Natural Resources and Environmental Conservation, has committed to provide complete transparency across all of MTE's operations Teak harvested prior to the season will not have been subject to monitoring Civil Society Organisations in Myanmar have yet to be granted this access, concern that this will only be available to Government chosen monitors.

21 Harvesting Subcontractors removed from harvesting, reduces significant risk of corruption and bribery. Risk remains extremely high for earlier harvests AAC reduced, harvest be reduced to 55% of the AAC for teak (19210 trees), and 30% of AAC for hardwoods ( trees) Significant proportion to be felled from the already heavily harvested Sagaing and Kachin regions, presents considerable risk that this will not adhere to the MSS Significant risk of overharvest from previous years

22 The illicit trade to China. 75,000 tonnes of teak crossed the Myanmar-China border in This is 5 times Myanmar s national AAC This timber has been illegally felled and exported, much from areas under MTE control Log trucks in Kachin waiting to cross into China Majority from Sagaing and Kachin, further raising risk of unsustainable yield from these regions Competent Authorities should be particularly vigilant when assessing any Burmese teak shipped from China

23 In a February 2017 meeting with EU trade federations, MFPMF proposed to extend the Green Book (previously offered by Operators as full Due Diligence) from 5 to 9 pages A March 2017 presentation from MTE to these federations listed 29 documents, plus other relevant documents A 9 page Green Book will still rely upon MTE issued documents, and will not satisfy the Due Diligence requirements of the EUTR Green book mark II?

24 Recent access to upstream information, example submitted FLEGT experts group Annual coup documents sometimes available. Example showed regional area of harvest (MTE extraction agency) Limited information gather, does not appear to involve any risk assessment DoubleHelix system

25 DoubleHelix example No information on harvesting volumes from annual coups over a cutting season, or how these comply with volumes authorized for cutting under the AAC, preharvest selection marking, etc. Shows MTE is able to provide further information to international trade when it choses to. On ground independent verification? Appears to be a useful tool for Operators, however a full risk assessment must still occur

26 EUTR success Despite the failings in investigations from some member states, and that many investigations have not yet concluded, the robust response from CA s to EIA s complaints, and independent action from Sweden, has Changed EU Operator behaviours Changed some behaviours and conditions in Myanmar Supported Reformers within the Government of Myanmar. Reaffirmed the importance of the EUTR s role within FLEGT and the EU market