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1 econstor Make Your Publications Visible. A Service of Wirtschaft Centre zbwleibniz-informationszentrum Ecomics Weimar, Holger; Janzen, Niels; Dieter, Matthias Working Paper Market coverage of wood imports by the EU Timber Regulation Thünen Working Paper, No. 45 Provided in Cooperation with: Johann Heinrich von Thünen Institute, Federal Research Institute for Rural Areas, Forestry and Fisheries Suggested Citation: Weimar, Holger; Janzen, Niels; Dieter, Matthias (2015) : Market coverage of wood imports by the EU Timber Regulation, Thünen Working Paper, No. 45, Johann Heinrich von Thünen-Institut, Hamburg, This Version is available at: Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are t to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.

2 Market coverage of wood imports by the EU Timber Regulation Holger Weimar, Niels Janzen and Matthias Dieter Thünen Working Paper 45

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4 Holger Weimar, Niels Janzen, Matthias Dieter Thünen Institute of International Forestry and Forest Ecomics Leuschnerstrasse Hamburg (Germany) Phone: / -310 / -300 Fax: holger.weimar@ti.bund.de, niels.janzen@ti.bund.de, matthias.dieter@ti.bund.de Thünen Working Paper 45 Hamburg/Germany, August 2015

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6 Executive Summary i Executive Summary Illegal Logging is one of the major global causes for deforestation and the degradation of forests. The further manufacturing of illegally logged wood and products made thereof as well as the associated trade has also negative social and ecomic effects on both sides of the wood markets, the producer and consumer countries. One of the key measures of the European Union (EU) to combat illegal logging is the EU Timber Regulation (EUTR). The EUTR came into effect on March 1, 2013 and it prohibits the placing of wood and wood products made of illegally logged wood on the EU internal market. This placement can either be done by selling removals from European forests or by importing wood and wood-based products into the EU. But for what kind of products does the regulation apply exactly? The EUTR refers to its Annex where a list is provided with respective commodities. The products are structured according to the trade classification of the Combined Nomenclature (CN). The main focus is laid on wood and articles of wood (chapter 44 of the CN), on pulp of wood (chapter 47) and on and articles made thereof (chapter 48). Additionally commodity codes for furniture and one code for prefabricated buildings are listed. However, as certain wood-based products are t included in the EUTR, the question arises, how many woodbased products are t covered by the EUTR. What is the coverage ratio of the EUTR if we are looking at all wood-based products? Hence, the objective of this analysis was to identify to which share the EUTR applies for wood and wood-based products, to provide kwledge of trade flows and markets in this regard. We firstly defined the scope of the wood-based products based on the definition of the forest-based sector. We then analysed the imports to the EU from other countries of the world by using three different reference units: the mandatory trade values as a monetary reference unit deted in Euro, and two physical reference units, the roundwood equivalent and the wood fibre equivalent. The roundwood equivalent is measured in cubic meter (m³ (r)) and expresses the amount of roundwood which is needed for the production of one unit of a product. The wood fibre equivalent is also measured in cubic meter (m³ (f)). It is defined as the equivalent volume of the wood fibres or wood-based fibres that are contained in the product and it describes how many wood fibres effectively have been traded with a given product. Our results show that approximately 90% of the imported quantities (i.e. 71 million m³ (f) and 119 million m³ (r), respectively) and three quarters of the imported values (i.e. 22 billion Euro) are covered by the EUTR. This means, the EU imported in 2013 a wood quantity of 6 million m³ (f), 17 million m³ (r) or a value of nearly 8 billion Euro respectively, that is t covered by the EUTR. This quantity is almost equally distributed between wood products and paper products. The coverage ratios for further differentiated product groups differ. Typically raw materials have a higher coverage ratio and finished products have a lower coverage ratio. The wood quantities that are t covered by EUTR are highly concentrated on few commodities like wood charcoal, articles of wood n.e.s. (t elsewhere specified), recovered paper, printed books and brochures and seats (with wooden frames).

7 ii Executive Summary Table: Imports to EU by product groups and by EUTR coverage, measured in Euro, m³ (r) and m³ (f) 1,000,000 Euro 1,000 m³ (r) 1,000 m³ (f) covered by EUTR coverage covered by EUTR coverage covered by EUTR coverage total ratio total ratio total ratio wood products 3,148 10,742 13,890 77% 8,235 64,730 72,965 89% 2,952 49,548 52,500 94% paper products 3,199 11,015 14,214 77% 6,752 54,420 61,172 89% 2,853 21,590 24,443 88% other wood based products 1, ,182 0% 1, ,520 0% % total imports 7,528 21,757 29,286 74% 16, , ,656 88% 6,017 71,138 77,155 92% Source: own calculation The most relevant exporting regions to the EU were Russia and Eastern Europe (Non EU) (25 million m³ (f)) followed by North America (16 million m³ (f)) and Western, Northern and Southern Europe (Non-EU) (14 million m³ (f)). These 3 regions account for about 70% of total imports measured in wood fibre equivalent. However, the coverage ratios vary between regions according to export composition of commodities and product groups. Imports from Oceania (99%) and Russia and Eastern Europe (Non-EU) (98%) are almost completely covered by the EUTR. While Russia and Eastern Europe (Non-EU) is the major exporting region to the EU, Oceania is the least important region in this regard with a total share of 0.3% of all imports. The highest volume of imports of wood and wood-based products t covered by the EUTR can be attributed to Eastern and South-Eastern Asia and Western, Northern and Southern Europe (Non-EU) (1.8 million m³ (f) each). For the former region the uncovered import quantities are in the product groups finished wood products, printed matter and furniture, while for the latter region it is mainly due to import of recovered paper commodities. For Africa the most important commodity of the imports that are t covered by the EUTR is wood charcoal. It is obvious that the coverage analysis we calculated in this study mainly depends on the definition and scope of wood and wood-based products in total. Beside the defined scope a lot of other commodities contain wood or products made of wood: Either products where wood has only a mir share in the given commodity code (e.g. caravans) or products with a high content of wood which are commingled in a commodity code with products made of other materials (e.g. toys). In this respect also wood-based packaging material can be mentioned (e.g. cardboard boxes that only cover the actual product). For these kinds of products the EUTR might t serve as an appropriate measure for combating illegal logging due to limits of practical implementation. Costs for acquisition of necessary information, legal uncertainty and administrative workload come to mind. Basically, the EUTR can be a suitable measure for all wood-based products. However, it must be pointed out, that such measure can have also negative effects if e.g. imported quantities decrease, product prices increase or trade diversions occur from stricter regulated regions to less regulated markets. Additionally, if EUTR acts as a n-tariff-barrier, a loss of welfare and undesired substitutions by other materials with worse environmental external effects are likely to occur. Keywords: EUTR, coverage ratio, wood-based products, illegal logging, international trade, reference units

8 Content I Content 1 Introduction 1 2 Methodology and Data Scope of wood and wood-based products Trade data and reference units 4 3 Results Analysis of global imports to the European Union Analysis of commodities t listed in the EUTR Regional analysis 13 4 Discussion and Conclusion 17 5 References 21 6 Annex 23

9 II Abbreviations Abbreviations CN CR EE ESE Asia EU EU28 EUTR FLEGT kg kg 90 % sdt LAA Latin Am. Combined Nomenclature Coverage ratio Eastern Europe Eastern and South-Eastern Asia European Union (with 28 member states) European Union with 28 member states European Union Timber Regulation Forest Law Enforcement, Governance and Trade kilogram kilogram of substance 90 % dry Lacey Act Amendment Latin America m³ (r) roundwood equivalent in cubic meter m³ (f) wood fibre equivalent in cubic meter n.e.s North Am. UN U.S. VPA WCS Asia WNS Europe WP t elsewhere specified North America United Nations United States Voluntary Partnership Agreement Western, Central and Southern Asia Western, Northern and Southern Europe Wood product

10 List of Tables III List of Tables Table 1: Scope of wood and wood-based products 4 Table 2: Table 3: Table 4: Samples of conversion factors for the two physical reference units wood fibre equivalent m³ (f) and roundwood equivalent m³ (r) 6 Imports to EU by product groups and by EUTR coverage, measured in Euro, m³ (r) and m³ (f) 7 Import shares to EU by product groups and by EUTR coverage, based on calculations with Euro, m³ (r) and m³ (f) 7 Table 5: m³ (r): Top 10 of products t covered by EUTR 12 Table 6: m³ (f): Top 10 of products t covered by EUTR 12 Table 7: Wood and wood-based products: Imports to EU by export region and by EUTR coverage, measured in m³ (f) 14 Table 8: m³ (f): Top 10 of wood products t covered by EUTR 23 Table 9: m³ (f): Top 10 of paper products t covered by EUTR 24 Table 10: m³ (f): Top 10 of other wood-based products t covered by EUTR 24 Table 11: Imports in 1,000 m³ (f) into EU by EUTR coverage, region and product group 25 Table 12: Import shares by product groups (based on m³ (f)) 26 Table 13: Import shares by regions (based on m³ (f)) 27 Table 14: Table 15: Import shares (based on m³ (f)) of regions and product groups to total t covered by EUTR imports 28 Imports in 1,000 m³ (r) into EU by EUTR coverage, region and product group 29 Table 16: Import shares by product groups (based on m³ (r)) 30 Table 17: Import shares by regions (based on m³ (r)) 31 Table 18: Table 19: Import shares (based on m³ (r)) of regions and product groups to total t covered by EUTR imports 32 Imports in million Euro into EU by EUTR coverage, region and product group 33 Table 20: Import shares by product groups (based on import value in Euro) 34 Table 21: Import shares by regions (based on import value in Euro) 35 Table 22: Import shares (based on import value in Euro) of regions and product groups to total t covered by EUTR imports 36

11 IV List of Figures Table 23: List of the wood based commodities, CN code, commodity code, the classification into product group and coverage status of the EUTR 37 List of Figures Figure 1: Structure of EU-imports by product groups and by EUTR coverage for import value, m³ (r) and m³ (f) 8 Figure 2: EUTR coverage ratios by product group in Figure 3: EUTR coverage ratios from 2010 to Figure 4: Wood and wood-based products: Imports to EU by export region and by EUTR coverage, measured in m³ (f) 14

12 Chapter 1 Introduction 1 1 Introduction Illegal Logging is one of the major global causes for deforestation and the degradation of forests. The further manufacturing of illegally logged wood and products made thereof, as well as the associated trade, does also negatively affect social and ecomic interests. To combat the severe effects of illegal logging, the European Union (EU) introduced various forest related policies and measures. The adoption of the EU Action Plan on Forest Law Enforcement, Governance and Trade (FLEGT) in 2003 was a major milestone in this respect. The FLEGT Action Plan proposes various measures for the support of international efforts to combat illegal logging and associate trade in relation to general efforts of the Union to achieve sustainable forest management (EC 2003). Since then, two main mechanisms have been implemented in order to achieve the goals of the FLEGT Action Plan: Voluntary Partnership Agreements (VPAs) and the EU Timber Regulation (EUTR). Basis of the VPA mechanism are agreements between partner countries and the EU to ensure that only wood products based on legal logging will be exported to the EU Member States. Detailed measures for the implementation of a licensing scheme and the regulation of trade in timber and timber products are provided (EC 2008). The EU Timber Regulation (No 995/2010) follows a different matter: its objective is to ban products made of illegally logged wood from the European market. The EUTR prohibits the placing of timber and timber products made of illegally logged wood on the EU internal market. Typically, this placement can either be done by selling removals from European forests or by importing wood and wood-based products into the EU. Also other countries use the ban of imports of products made of illegally logged wood as a measure to combat illegal logging. E. g. in 2008 the United States (U.S.) adopted an amendment to the Lacey Act (LAA). In Australia the Illegal Logging Prohibition Act came into effect in It also aims at a prohibition policy. The EUTR came into effect on March 1, But for what kind of products does the regulation apply exactly? An explanation is provided in Article 2(a): The EUTR focuses on timber and timber products with the exception of timber products that have completed their lifecycle and would be disposed as a waste (EUTR 995/2010, No. 2(a)). For a further definition of timber and timber products the regulation refers to its Annex where a list is provided with respective commodities. The products are structured according to the trade classification of the Combined Nomenclature (CN). The main focus is laid on wood and articles of wood (chapter 44 of the CN), on pulp of wood (chapter 47) and on and articles made thereof (chapter 48). Additionally some commodity codes for furniture and one code for prefabricated buildings is listed. As certain wood-based products are t included in the EUTR, the question arises, how many wood-based products are t covered

13 2 Introduction Chapter 1 by the EUTR. To what extend does the regulation apply, what is the coverage ratio of the EUTR if looking at all wood-based products? The objective of this analysis is to identify to which share the EUTR applies for wood and wood-based products, to provide kwledge of trade flows and markets in this regard. The analysis will compare different product groups of wood and wood-based products. It will differentiate between wood products, paper products and other wood-based products. Based on this objective the outline of the report is as follows: In chapter 2 methodology and data are presented. Chapter 3 focuses on the results of the analysis. Finally, in chapter 4, a discussion and conclusion are provided.

14 Chapter 2 Methodology and Data 3 2 Methodology and Data The analysis of the market coverage of imports of wood and wood-based products to the EU requires the clarification of two main aspects: (1) the definition and scope of wood products and (2) the trade data and respective reference units for the calculation of the trade flows in a physical unit. 2.1 Scope of wood and wood-based products Wood and wood-based products cover a wide variety of different goods and commodities. These include for example wood products such as firewood,, pellets or window frames or paper products such as newsprint, sanitary paper, paper for packaging or printed articles. Other products beyond the scope of these traditional goods are also manufactured and have to be considered. Regenerated cellulose or cellulose nitrate can be listed as examples. Additionally, there are a lot of products which also can be made of or contain parts of wood (e. g. toys, chewing gum). Hence, it is essential to define the scope of wood-based products for our analysis. Most of the wood-based products can be attributed to the forest-based sector, which was already described by the European Union already in 1999 (EC 1999). In this definition the forest-based sector consists of the wood working industry, the wood processing industry, the construction industry, the pulp and paper industry and the printing and publishing industry. Based on this definition of the forest-based sector, the scope of wood and wood-based products of our analysis can be derived. Table 1 gives an overview and structures the woodbased products into categories and products groups.

15 4 Methodology and Data Chapter 2 Table 1: Scope of wood and wood-based products Wood based products Wood products Paper Products Other wood based products Raw material Semi-finishedproducts Roundwood Wood processing residues Woodpulp Recovered paper Sawnwood Paper and Paperboard Regenerated cellulose Wood based panels Other semi-finished wood products Artificial Finished products Finished wood products (excl. furniture) Furniture Articles of paper or Printed matter Wood-based products can be distinguished into raw materials, semi-finished products and finished products and between the categories wood products, paper products and other wood-based products. Based on this structure we aggregated the products into twelve product groups for further analysis. The above matrix contains all products for which the EUTR applies. However, as already mentioned, the EUTR does t cover all commodities which have been defined as wood-based products. With regard to the Combined Nomenclature, the statistical classification of traded goods, products such as wood charcoal, wood marquetry, printed matter or regenerated cellulose are t listed in the annex of the EUTR. 1 As can be seen in the annex of the regulation, especially further processed wood-based products are t included in the EUTR. Also ather aspect has to be taken into account. The EUTR only focuses on manufactured goods as classified in the Combined Nomenclature. Hence, the EUTR does t apply for wood and paper products for packaging which are already in use. Also products which consist only partly of wood, products which only partly contain wood or products which are manufactured in an industry branch outside of the forest-based sector are t in the scope of our analysis. Examples for the products are wooden toys, chewing gum, caravans or musical instruments. 2.2 Trade data and reference units The different industries of the forest-based sector manufacture a broad variety of different wood-based products. In trade statistics, these products are basically measured in the net mass of the traded volumes and in monetary values. For some products also a supplementary unit of the traded quantity is provided. In the case of some wood-based products this 1 For a full list of the wood-based commodities, the classification into product groups and its coverage status of the EUTR see Table 23 in the annex

16 Chapter 2 Methodology and Data 5 traded volume is also recorded in the supplementary unit of cubic meter. For our analysis we used the trade data of the 28 countries of the EU provided by Eurostat (Eurostat 2015). The analysis is mainly conducted for the year 2013, the year when the EUTR came into force. We also analysed the market coverage for period 2010 to 2013 in order to recognize a trend in these years. However, the focus is on the year In the Eurostat trade database the bilateral trade of all 28 countries of the EU are recorded. The trade data is provided on the 8-digit level of the Combined Nomenclature (CN). However, for the comparison of the different trade flows neither the given trade volume in tons r in cubic meter is sufficient as many wood-based products also consist of other materials such as e. g. adhesives in panels or minerals and additives in. We therefore converted all trade data into suitable physical reference units. In the scope of this analysis we used three different reference units for our analysis: the mandatory trade values as a monetary reference unit deted in Euro, and two physical reference units, the roundwood equivalent and the wood fibre equivalent. Both physical reference units are units of volume. The roundwood equivalent is measured in cubic meter (m³ (r)). It has been used in various studies for balancing and analysing material flows of wood-based products (e. g. Dieter 2009, Dieter et al. 2012, Ollmann 2001, UN 2005, UN 2011, Weimar 2014, WWF 2008). The roundwood equivalent expresses the amount of roundwood which is needed for the production of one unit of a product. As such it indicates the required resource input of roundwood for manufacturing of a product. The wood fibre equivalent as the second physical reference unit is also measured in cubic meter (m³ (f)). It is defined as the equivalent volume of the wood fibres or wood-based fibres that are contained in the product (Weimar 2011). Hence, the calculated volumes in m³ (f) indicates how much wood fibres have effectively been traded with a given product. The wood fibre equivalent has been used for material flow analysis (Weimar 2011, Bösch et al. 2015). The volume of the wood fibres is calculated above the fibre saturation point to take into account the swelling and shrinking of the wood fibres below this threshold. For the purposes of this study we first calculated the mass of the wood fibres of the different commodities based on the study by Diestel and Weimar (2014). We then calculated the volume by using the density by volume of the respective commodity code. In this regard we had to take into account that most commodity codes of the CN do refer to more than a single wood species. In these cases we had to estimate an average density by volume of the wood species indicated in the description of the commodity code. We calculated the simple arithmetic average as there is information on the specific share of the individual wood species of traded volumes of a commodity code. Information on the density by volume is taken from An. (1995), Koch and Richter (2011), Koch and Sieburg-Rockel (2011), and Sell (1989). For commodity codes where specific wood species are explicitly mentioned we also used the arithmetic average of the wood species to which the description applies. This is the case for commodity codes which refer to e.g. softwood, hardwood, tropical wood or also if there is reference to a specific species group. As an example, for the commodity code (sawlogs of spruce of the species "Picea abies Karst." or silver fir "Abies alba Mill.")

17 6 Methodology and Data Chapter 2 we used the arithmetic average of the densities by volume of both wood species. For better illustration Table 2 provides some examples of the resulting conversion factors for both physical reference units. Table 2: Samples of conversion factors for the two physical reference units wood fibre equivalent m³ (f) and roundwood equivalent m³ (r) CN Code Source: own calculation CN Description (short) Conversion factor - m³ (f) Base unit for m³ (f) Conversion factor - m³ (r) Base unit for m³ (r) Wood charcoal 0,0025 kg 0,0060 kg Sawlogs of spruce or silver fir 1,0000 m³ 1,0000 m³ Sheets for veneering 0,0022 kg 0,0045 kg Particle board 0,0015 kg 0,0020 kg Pallets and pallet collars 0,0015 kg 0,0038 kg Unbleached coniferous chemical wood pulp 0,0019 kg 90 % sdt 0,0041 kg Newsprint 0,0015 kg 0,0032 kg Toilet or facial tissue stock, 0,0017 kg 0,0048 kg Cigarette paper 0,0012 kg 0,0042 kg Commercial catalogues 0,0017 kg 0,0035 kg As can be seen in above table, the two physical reference units represent the possible range of resource impact for the manufacture of a given commodity. The roundwood equivalent implicitly assumes that wood products are exclusively made of roundwood and can as such be interpreted as an input unit. The eventual use of wood by-products or residues for the manufacture of the product is t taken into account. The wood fibre equivalent describes the other side of the spectrum. It only accounts for the wood fibres contained in a given product. Hence, it can be interpreted as an output based unit. For example, for the manufacture of one ton of wood charcoal 6 m³ of roundwood are needed. However, the mass of one ton of the product only contain 2.5 m³ of equivalent wood fibres. The other parts of the wood are emitting during the production process but are t part of the product. Since the use of wood processing residues for further material use is increasing in a lot of countries, the range covered by both physical reference units allows analysing the full variety of resource demand for the manufacture of wood-based products.

18 Chapter 3 Results 7 3 Results 3.1 Analysis of global imports to the European Union Table 3 presents the import quantities to EU for product groups and product categories expressed in the three reference units. Furthermore, the import quantities are differentiated by EUTR coverage. Figure 1 visualizes the same information for an easier initial assessment. It should be ted, that trade within the EU is t included in the import quantities. Table 3: Imports to EU by product groups and by EUTR coverage, measured in Euro, m³ (r) and m³ (f) 1,000,000 Euro 1,000 m³ (r) 1,000 m³ (f) covered by EUTR total coverage ratio covered by EUTR total coverage ratio covered by EUTR total coverage ratio 1 roundwood % 0 16,613 16, % 0 15,406 15, % 2 wood processing residues % 0 7,995 7, % 0 6,655 6, % 3 0 2,042 2, % 0 10,801 10, % 0 8,267 8, % 4 wood based panels 0 1,583 1, % 0 8,722 8, % 0 4,268 4, % 5 other semi-finished WP % 122 2,350 2,472 95% 91 1,061 1,151 92% 6 finished WP 1,464 2,116 3,581 59% 6,686 13,385 20,071 67% 2,373 12,518 14,891 84% 7 furniture 1,668 2,914 4,581 64% 1,427 4,864 6,291 77% 488 1,374 1,862 74% 8 woodpulp & recov. paper 214 4,317 4,531 95% 4,738 30,011 34,750 86% 1,960 12,067 14,027 86% 9 0 3,672 3, % 0 20,051 20, % 0 7,985 7, % ,026 3, % 0 4,358 4, % 0 1,537 1, % 11 printed matter 2, ,985 0% 2, ,013 0% % 12 1, ,182 0% 1, ,520 0% % 13 : 1 to 7 total wood p. 3,148 10,742 13,890 77% 8,235 64,730 72,965 89% 2,952 49,548 52,500 94% 14 : 8 to 11 total paper p. 3,199 11,015 14,214 77% 6,752 54,420 61,172 89% 2,853 21,590 24,443 88% 15 : 12 total other wood based p. 1, ,182 0% 1, ,520 0% % 16 : 13, 14, 15 total imports 7,528 21,757 29,286 74% 16, , ,656 88% 6,017 71,138 77,155 92% Source: own calculation Table 4: Import shares to EU by product groups and by EUTR coverage, based on calculations with Euro, m³ (r) and m³ (f) based on Euro based on m³ (r) based on m³ (f) covered by EUTR total covered by EUTR total covered by EUTR total 1 roundwood 0% 4% 3% 0% 14% 12% 0% 22% 20% 2 wood processing residues 0% 1% 1% 0% 7% 6% 0% 9% 9% 3 0% 9% 7% 0% 9% 8% 0% 12% 11% 4 wood based panels 0% 7% 5% 0% 7% 6% 0% 6% 6% 5 other semi-finished WP 0% 4% 3% 1% 2% 2% 2% 1% 1% 6 finished WP 19% 10% 12% 41% 11% 15% 39% 18% 19% 7 furniture 22% 13% 16% 9% 4% 5% 8% 2% 2% 8 woodpulp & recov. paper 3% 20% 15% 29% 25% 26% 33% 17% 18% 9 0% 17% 13% 0% 17% 15% 0% 11% 10% 10 0% 14% 10% 0% 4% 3% 0% 2% 2% 11 printed matter 40% 0% 10% 12% 0% 1% 15% 0% 1% 12 16% 0% 4% 9% 0% 1% 4% 0% 0% 13 : 1 to 7 total wood p. 42% 49% 47% 50% 54% 54% 49% 70% 68% 14 : 8 to 11 total paper p. 42% 51% 49% 41% 46% 45% 47% 30% 32% 15 : 12 total other wood based p. 16% 0% 4% 9% 0% 1% 4% 0% 0% 16 : 13, 14, 15 total imports 100% 100% 100% 100% 100% 100% 100% 100% 100% Source: own calculation In the year 2013, wood and wood-based products were imported to the EU by an import value of 29 billion Euros (see Table 3). This is almost equally distributed between wood and

19 1,000,000 Euro 1,000 m³ (r) 1,000 m³ (f) 8 Results Chapter 3 paper products. Imports of other wood-based products amount to 1.2 billion Euros. In terms of import value, finished wood products and furniture are the most important product groups in the wood product category (see Figure 1). Roundwood imports contribute to only 3% of the total value of imports (see Table 4). In the paper product category all product groups contribute between 10% and 15% to the total import value. About one quarter of the imports, measured by their import value, are t covered by the EUTR. The most important product group in this respect is printed matter. Commodities in the product groups furniture and finished wood products also account for a high share of the import value t covered by EUTR. The products of wood pulp & recovered paper, which are t covered by EUTR, account for 0.2 billion Euros which equals less than 1% of total import value. Looking at physical import quantities of the EU, we calculated the actual wood imports by using the reference units roundwood equivalents and wood fibre equivalents (see chapter 2.2). Naturally, by using completely different reference units the structure of import, as well as the coverage ratios will be different. Still, it is useful to compare these structures to get a better understanding of the different reference units and hence of resulting product structures of imports as well as coverage ratios. Measured in cubic meter of roundwood equivalents (m³ (r)) the EU imported a total of 136 million m³ (r) in 2013, of which 73 million m³ (r) are wood products and 61 million m³ (r) are paper products. Further processed products like furniture or printed matter, which typically have a higher price per m³ (r), contribute less to total import volumes than in the case of import value. Vice versa product groups that can be classified as raw material like roundwood or wood processing residues as well as wood pulp and recovered paper are more important when using roundwood (or wood fibre) equivalents. These product groups contribute, with 60 million m³ (r) ( 44%), to total imports of roundwood equivalents (see Figure 1,Table 3 and Table 4), which is much more than its share of 20% of total import value. Figure 1: Structure of EU-imports by product groups and by EUTR coverage for import value, m³ (r) and m³ (f) 35,000 EUTR coverage in 2013 measured in Euro 160,000 EUTR coverage in 2013 measured in m3r 90,000 EUTR coverage in 2013 measured in m3f 30, ,000 80,000 25, ,000 70,000 printed matter 20, ,000 80,000 60,000 50,000 woodpulp & recov. paper furniture 15,000 40,000 finished WP 10,000 60,000 40,000 30,000 20,000 other semi-finished WP wood based panels 5,000 20,000 10,000 wood processing residues roundwood covered by EUTR total covered by EUTR total covered by EUTR total Source: own calculation

20 Chapter 3 Results 9 Also, by using the reference unit of wood fibre equivalents (m³ (f)) the product structure of imports changes compared to the structure when using import value. This is also true for a comparison between m³ (f) and m³ (r) structures. As mentioned above, roundwood equivalents express the amount of roundwood which is needed for the production of one unit of product. The wood fibre equivalent quantifies the amount of wood fibres that one unit of product actually contains. In 2013, the EU imported in total 77 million m³ (f) - of which 53 million m³ (f) were wood products ( 68%) - and 24 million m³ (f) are classified as paper products. Roundwood and wood processing residues account with about 30% of total wood fibre imports for an even bigger share than measured in roundwood equivalents (18%). Coverage ratios of the EUTR for all wood-based products are about 90% based on m³ (r) and m³ (f) (88% and 92%). Calculations based on the import value are considerably lower at 74% (see Figure 2 and Table 3). For the category wood products, 94% of imported m³ (f)) are covered by the EUTR. Coverage ratios based on m³ (r) and import value amount to 89%, and 77% respectively, in this category. Coincidentally the same coverage ratios as for wood products were calculated for paper products based on m³ (r) (89%) and import value data (77%). Measured in m³ (f) 88% of all imported wood fibres in paper products are covered by the EUTR. Figure 2: EUTR coverage ratios by product group in 2013 roundwood wood processing residues wood-based panels other semi-finished wood p. finished wood p. furniture woodpulp & recov. paper printed matter total wood p. total paper p. total other wood based p. total imports Euro m3(r) m3(f) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: own calculation The coverage ratios for wood products significantly vary between the product groups (see Table 3 and Figure 2). A full coverage of 100% can be identified for roundwood, wood processing residues, and wood-based panels. In the product groups other semi-

21 10 Results Chapter 3 finished wood products, finished wood products and furniture t all commodities are covered by the EUTR. For semi-finished wood products the coverage ratios are still rather high. For example 92% of total imported wood fibre equivalents in this product group are covered by EUTR. Based on m³ (f) data we computed a EUTR coverage ratio for finished wood products of 84%. These ratios are even lower when looking at the results for roundwood equivalents (67%) or import value (59%). For the product group furniture we calculated EUTR coverage ratios of 64% for the imported value, 77% for imported roundwood equivalents and 74% for imported wood fibre equivalents into the EU. In the category of paper products all commodities in the product groups and articles of are covered by the EUTR. Since printed matter is t listed in the EUTR, the coverage ratio is 0% for all reference units for this product group. The coverage ratio in the product group wood pulp and recovered paper amounts to 86% of total imported m³ (f) quantities. Based on m³ (r) quantities the coverage ratio is also 86%, but 95% when calculating the import value. Recovered paper commodities are excluded by EUTR, hence there is only a partial coverage in this product group. Because of the comparatively low price of recovered paper, the coverage ratio based on import value is higher than the coverage ratio calculated by the reference unit wood fibre equivalent. Regenerated cellulose, artificial are t listed in the annex of EUTR. As actually this product group is the only one in our category of other wood-based products, the coverage ratios are zero for both, the product group and the product category. Additionally to our base year of 2013 we also calculated the coverage ratios for the year 2010 to 2012, as 2010 is the year of the adoption of the EUTR. However, during this period the coverage ratios are rather stable (see Figure 3) for the wood and paper product categories. As mentioned above, the coverage ratios for other wood-based products are zero and did t change. Figure 3: EUTR coverage ratios from 2010 to % all wood based products 100% wood products 100% paper products 80% 80% 80% 60% 60% 60% 40% 40% 40% 20% Euro m3r m3f 0% Source: own calculation 20% Euro m3r m3f 0% % Euro m3r m3f 0%

22 Chapter 3 Results Analysis of commodities t listed in the EUTR In the above section we described the coverage ratios for different product groups. In this section we will focus on commodities that are t covered by EUTR. As explained, in the annex of the EUTR all products are listed to which the regulation applies. However, some products like recovered (waste and scrap) products are explicitly excluded. Others like wood charcoal are just t listed. Table 5 and Table 6 list the respective top ten commodities, ranked by their import volume in 2013 in m³ (r) and m³ (f), respectively. In both cases these ten commodities account for about three quarters of the imported wood quantity which is t covered by EUTR. Wood charcoal can be identified as the main product which is t covered by the EUTR. Its import volume sums up to 1.4 million m³ (f) or 3.3 million m³ (r) respectively. This accounts for 23% of all imported wood quantities that are t covered by EUTR. Placed second are Articles of wood, n.e.s. 2 which account for ather 0.7 million m³ (f) or 2.4 million m³ (r). Additionally, there are three other products and their related commodities of importance: Firstly, commodities related to recovered (waste and scrap) (1.8 million m³ (f), 31% share of total imports t covered by EUTR ). Secondly, commodities related to printed books, brochures, etc. (0.6 million m³ (f)). And thirdly, commodities related to seats with wooden frames. 3 For a more detailed view, Table 8 to Table 10 in the annex list in separate tables the 10 most important commodities for wood, paper and other wood-based products based on the imported wood quantities (measured in m³ (f)) in the year See as well Table 23 in annex for a complete list of analysed commodities, their assignment to products groups and EUTR coverage. 2 It is teworthy that there might be a temptation to classify wood products as those Articles of wood, t elsewhere specified to avoid due diligence effort. 3 Given sums for the commodity clusters refer only to the commodities listed in the Top 10. Outside the Top 10 there can be even more commodities related to the mentioned commodity clusters

23 12 Results Chapter 3 Table 5: m³ (r): Top 10 of products t covered by EUTR Rank m³ (r) share of imports "t covered by EUTR" CN Code Description Product Group Product Category 1 3,284,152 20% WOOD CHARCOAL, INCL. SHELL OR NUT CHARCOAL, WHETHER OR NOT AGGLOMERATED (EXCL. BAMBOO CHARCOAL, WOOD CHARCOAL USED AS A MEDICAMENT, CHARCOAL MIXED WITH INCENSE, ACTIVATED CHARCOAL AND CHARCOAL IN THE FORM OF CRAYONS) finished WP wood p. 2 2,356,162 14% ARTICLES OF WOOD, N.E.S. finished WP wood p. 3 1,243,651 8% RECOVERED "WASTE AND SCRAP" PAPER OR PAPERBOARD OF UNBLEACHED KRAFT PAPER, woodpulp & paper p. CORRUGATED PAPER OR CORRUGATED PAPERBOARD recov. paper 4 1,084,993 7% PRINTED BOOKS, BROCHURES AND SIMILAR PRINTED MATTER (EXCL. THOSE IN SINGLE SHEETS; printed matter paper p. DICTIONARIES, ENCYCLOPAEDIAS, PERIODICALS AND PUBLICATIONS WHICH ARE ESSENTIALLY DEVOTED TO ADVERTISING) 5 987,892 6% UNSORTED, RECOVERED "WASTE AND SCRAP" PAPER OR PAPERBOARD (EXCL. PAPER WOOL) woodpulp & paper p. recov. paper 6 675,444 4% SEATS, WITH WOODEN FRAMES (EXCL. UPHOLSTERED) furniture wood p ,536 4% UPHOLSTERED SEATS, WITH WOODEN FRAMES (EXCL. CONVERTIBLE INTO BEDS) furniture wood p ,795 4% SORTED, RECOVERED "WASTE AND SCRAP" PAPER OR PAPERBOARD (EXCL. WASTE AND SCRAP OF UNBLEACHED KRAFT PAPER OR KRAFT PAPERBOARD, OR OF CORRUGATED PAPER OR CORRUGATED PAPERBOARD, THAT OF PAPER OR PAPERBOARD MADE MAINLY OF BLEACHED CHEMICAL PULP NOT COLURED IN THE MASS, THAT OF PAPER OR PAPERBOARD MADE MAINLY OF MECHANICAL PULP, AND PAPER WOOL) 9 549,125 3% OLD AND UNSOLD NEWSPAPERS AND MAGAZINES, TELEPHONE DIRECTORIES, BROCHURES AND PRINTED ADVERTISING MATERIAL ,056 3% RECOVERED "WASTE AND SCRAP" PAPER OR PAPERBOARD MADE MAINLY OF BLEACHED CHEMICAL PULP, NOT COLOURED IN THE MASS 12,011,805 73% total Top 10 16,506, % total "t covered by EUTR" Source: own calculation woodpulp & recov. paper woodpulp & recov. paper woodpulp & recov. paper paper p. paper p. paper p. Table 6: m³ (f): Top 10 of products t covered by EUTR Rank m³ (f) share of imports "t covered by EUTR" Source: own calculation CN Code Description Product Group Product Category 1 1,393,634 23% WOOD CHARCOAL, INCL. SHELL OR NUT CHARCOAL, WHETHER OR NOT AGGLOMERATED (EXCL. finished WP wood p. BAMBOO CHARCOAL, WOOD CHARCOAL USED AS A MEDICAMENT, CHARCOAL MIXED WITH INCENSE, ACTIVATED CHARCOAL AND CHARCOAL IN THE FORM OF CRAYONS) 2 674,285 11% ARTICLES OF WOOD, N.E.S. finished WP wood p ,492 9% RECOVERED "WASTE AND SCRAP" PAPER OR PAPERBOARD OF UNBLEACHED KRAFT PAPER, woodpulp & paper p. CORRUGATED PAPER OR CORRUGATED PAPERBOARD recov. paper 4 496,678 8% PRINTED BOOKS, BROCHURES AND SIMILAR PRINTED MATTER (EXCL. THOSE IN SINGLE SHEETS; printed matter paper p. DICTIONARIES, ENCYCLOPAEDIAS, PERIODICALS AND PUBLICATIONS WHICH ARE ESSENTIALLY DEVOTED TO ADVERTISING) 5 384,405 6% UNSORTED, RECOVERED "WASTE AND SCRAP" PAPER OR PAPERBOARD (EXCL. PAPER WOOL) woodpulp & paper p. recov. paper 6 348,500 6% UPHOLSTERED SEATS, WITH WOODEN FRAMES (EXCL. CONVERTIBLE INTO BEDS) furniture wood p ,402 4% SORTED, RECOVERED "WASTE AND SCRAP" PAPER OR PAPERBOARD (EXCL. WASTE AND SCRAP OF UNBLEACHED KRAFT PAPER OR KRAFT PAPERBOARD, OR OF CORRUGATED PAPER OR CORRUGATED PAPERBOARD, THAT OF PAPER OR PAPERBOARD MADE MAINLY OF BLEACHED CHEMICAL PULP NOT COLURED IN THE MASS, THAT OF PAPER OR PAPERBOARD MADE MAINLY OF MECHANICAL PULP, AND PAPER WOOL) 8 248,337 4% OLD AND UNSOLD NEWSPAPERS AND MAGAZINES, TELEPHONE DIRECTORIES, BROCHURES AND PRINTED ADVERTISING MATERIAL 9 224,175 4% WASTE AND SCRAP" OF PAPER OR PAPERBOARD MADE MAINLY OF MECHANICAL PULP (EXCL. OLD AND UNSOLD NEWSPAPERS AND MAGAZINES, TELEPHONE DIRECTORIES, BROCHURES AND PRINTED ADVERTISING MATERIAL) ,633 3% RECOVERED "WASTE AND SCRAP" PAPER OR PAPERBOARD MADE MAINLY OF BLEACHED CHEMICAL PULP, NOT COLOURED IN THE MASS 4,760,541 79% total Top 10 6,017, % total "t covered by EUTR" woodpulp & recov. paper woodpulp & recov. paper woodpulp & recov. paper woodpulp & recov. paper paper p. paper p. paper p. paper p.

24 Chapter 3 Results Regional analysis In this section we focus with our analysis on the geographical origin of imports of wood and wood-based products. For this purpose we defined regions. We generated our regional classification by using UN-regional classification (UN Stats) and aggregated the sub-regions. As it is necessary for this paper to have EU as a separate region we were excluding EU member states and their associates territories from the related regions. Russia is an important producer and exporter of wood and wood-based products and is geographically located in Europe as well as in Asia. As we did t want to mix these data with trade data of Switzerland and Norway we got two other regions that are (partially) located in Europe: Western, Northern and Southern Europe, excluding EU member states (WNS Europe (Non-EU)) and Russia and Eastern Europe, excluding EU member states (Russia & EE (Non-EU)). The rest of Asia we aggregated to two other parts: Western, Central and Southern Asia (WCS Asia) and Eastern and South-Eastern Asia (ESE Asia). North America (North Am.) and Latin America (Latin Am.) represent America and Africa and Oceania are the remaining two regions. Figure 4 shows the regions and it visualizes the trade flows of wood and wood-based products in wood fibre equivalents into EU in the year Table 7 presents the related data. For further interest, as one might check own expectations of trade quantities for specific regions and/or product groups and their EUTR coverage with our calculations; see also Table 11 in annex 4. The largest exporter of wood and wood-based products into the EU in the year 2013 was Russia and Eastern Europe (Non-EU) (see Figure 4). The EU imported 25 million m³ wood fibre equivalents from this region, which equals a third of total imports of wood and woodbased products into the EU (see Table 11 and Table 12). The second biggest exporter to the EU is North America, followed by WNS Europe (Non-EU). These three regions account together, with 55 million m³ (f), for about 70% of total wood fibre imports. Least important in terms of total wood fibre imports are the regions WCS Asia, Africa and Oceania. Imports into the EU from these regions add up to only 4 million m³ (f), which is less than 5% of total wood fibre imports. On average, the coverage ratio for all wood and wood-based products is 92% based on m³ (f) calculations. Coverage ratios vary between regions according to export composition of commodities and product groups (see Table 11). Imports from Oceania and Russia & EE (Non-EU) are almost completely covered by EUTR (99% and 98%). In the case of Russia & EE (Non-EU) this high coverage ratio is associated with a third of total imports in wood fibre equivalents. The high coverage ratio for Oceania is less important, because the associated 4 See Table 12 and Table 13 for the same information in relative terms for product groups and regions. Table 14 shows the contributions of regions and product groups to the total quantity of imports t covered by the EUTR). For calculation in m³ (r) see Table 15 to Table 18; for calculations of the import values in Euro see Table 19 to Table 22.

25 14 Results Chapter 3 trade flows are negligible (0.3%; see Table 7). Eastern and South-Eastern Asia has the lowest coverage ratio with 74%. Imports from ESE Asia account for 9% of total wood-fibre imports (7 million m³ (f)). Figure 4: Wood and wood-based products: Imports to EU by export region and by EUTR coverage, measured in m³ (f) Source: own calculation Table 7: Wood and wood-based products: Imports to EU by export region and by EUTR coverage, measured in m³ (f) Source: own calculation WNS Europe (Non-EU28) Russia & EE (Non-EU28) North Am. Latin Am. WCS Asia ESE Asia Africa Oceania All Regions imports in 1,000 m³ (f) t covered by EUTR 1, , ,017 covered by EUTR 12,019 24,628 15,696 10, ,119 2, ,138 total imports 13,837 25,207 16,267 11, ,944 2, ,155 regional share on imports t covered by EUTR 30% 10% 9% 9% 3% 30% 9% 0.0% 100% covered by EUTR 17% 35% 22% 15% 1% 7% 3% 0.4% 100% total imports 18% 33% 21% 14% 1% 9% 3% 0.3% 100% regional coverage ratio 87% 98% 96% 95% 81% 74% 79% 99% 92% The regional structure of the products t covered by the EUTR is much different than the regional structure for total wood and wood-based product imports based on m³ (f). The major export regions Russia & EE (Non-EU) and North America each contribute significantly less

26 Chapter 3 Results 15 ( 10%). WNS Europe is almost twice as important, as it is the origin of 30% of all imported wood fibre equivalents which are t covered by EUTR. This is due to high imports of recovered paper commodities (see Table 11 to Table 13). Three other regions triple their shares: WCS Asia with 3%, ESE Asia with 30% and Africa 9% (shares for total imports: 1%, 9% and 3%, respectively). The reason for the increase in ESE Asia is on the one hand the relatively high amount of printed matter that is exported from ESE Asia (see Table 11). In fact, 69% of all imported printed matter into the EU is exported from ESE Asia (see Table 13). On the other hand, relatively high shares of furniture and finished wood products can be seen in their export product structure to the EU (see Table 12) in combination with a low coverage ratios in these product groups (see also Table 11). The imports of the EU from Africa which are t covered by EUTR amount to 9% of all imports t covered by EUTR (see Table 14). This is mainly due to the import of wood charcoal (a commodity of the product group finished wood products).

27

28 Chapter 4 Discussion and Conclusion 17 4 Discussion and Conclusion The objective of the presented analysis was to identify to which extent the EUTR applies for wood and wood-based products. We firstly defined the scope of the wood-based products based on the definition of the forest-based sector. We then analysed the imports to the countries of the EU from other countries of the world by using different reference units. As the monetary reference unit we used the mandatory trade values deted in Euro. Additionally we used two different physical units, the roundwood equivalent and the wood fibre equivalent. Our results show that approximately 90% of the imported quantities are covered by the EUTR. This means, the EU imported in 2013 a wood quantity of 6 million m³ wood fibre equivalents (17 million m³ roundwood equivalents) that is t covered by the EUTR. This quantity is almost equally distributed between wood products and paper products. For the twelve wood and wood-based product groups we quantified the wood imports and coverage ratios of EUTR. Coverage ratios for product groups differ. Typically raw materials have a higher coverage ratio and finished products have a lower coverage ratio. The wood quantities that are t covered by EUTR are highly concentrated on a few commodities like wood charcoal, articles of wood, n.e.s. and printed books and brochures. If measured in monetary terms, the overall coverage ratio only accounts for 74% of all woodbased imports. This significant drop is mainly due to the fact that further processed woodbased products typically show an increasing value per unit. As the coverage ratio of the EUTR decreases with increasing stage of processing, this leads to the discrepancy of physical and monetary reference units. Having a detailed look at the coverage rate of the physical reference units, the ratio for wood products based on m³ (f) are slightly higher than the coverage ratio based on m³ (r). This is due to the combination of two facts: On the one hand, furniture, finished wood products and semi-finished wood products account in m³ (r) for much higher quantities than in m³ (f) as the other product groups in the wood product category. On the other hand t all commodities in the product groups furniture, finished wood products and semi-finished wood products are covered by EUTR. For Paper products the coverage ratios are the same between m³ (r) and m³ (f) because the spread of m³ (f) to m³ (r) ratios for these product groups are rather small (between 0.37 and 0.46). It also can be pointed out that use of both physical reference units for our analysis provides the full spectrum of resource demand for a given product in the manufacturing country. On the one hand, the roundwood equivalent expresses the resource demand if a product would be completely manufactured using roundwood. The wood fibre equivalent also takes into account that also wood processing residues are utilized for manufacturing. The specific resource demand of a country will be between these two poles, depending on the intensity of the fibre utilization.