Illegal Logging (posted: 2005-2-01)

Illegal Logging

The Core of the Issue

The World Bank estimates that producer countries annually loose between US$10 billion and US$15 billion due to illegal logging (which contributes to illegal timber).

Based on Japan's import statistics and assumptions about the percentage of illegal timber and rubberwood in the composition of those statistics, ForestAlert.org estimates that the roundwood equivalent volume and import value of Japan's imports of illegal timber were in the order of 10 million cubic metres and Yen250 billion (c.US$ 2 billion)(c.i.f.) during each of the last few years. Although Indonesia supplies roughly half of this, the percentage which China supplies (some 30% by import value in 2003) is rising.

Although unauthorised logging - or improperly authorised logging - will account for a substantial proportion of the total, fraud and particularly smuggling may well account for a higher share. Relevant information: A and B, and also C.

Legality matters in part because dealing in illegal goods (from timber through counterfeit CDs and cigarettes to the trafficking of women) tends to be a criminal offence, in part alsobecause illegality tends to imply that both the indigenous communities whose forest is being logged and the producer country's economy are being impoverished by (/not properly compensated for) the loss of long-term forest value (/unsustainable forest management) - making it harder to alleviate poverty, enhance the country's credit worthiness, and obviate dependence on "aid" provided by tax payers in other countries.

Failure by logging and other timber companies to properly pay all applicable taxes, duties and fines to the relevant authorities - making the corresponding timber illegal - adds to the loss of local and national revenue.

Likewise, illegal timber depresses the market price for timber products and gives rise to unfair competition - the USA's timber industry estimates that it looses US$460 million annually in lost exports (and may loose a comparable sum from imports substituting for products made of timber grown in forests within the USA).

Logging enterprises can be brought to justice outside the country in which they operate (in a number of countries which import illegal timber from them), particularly under anti-money-laundering legislation.

Some caveats: low levels of illegality would appear to exist in countries which

a) choose to not investigate the main culprits (i.e. well-connected logging companies) - as in Burma, Cambodia, Cameroon, Indonesia, Malaysia, Russia - and the contracts of "independent" forest crime monitoring units tend to preclude such investigations;

b) have such a plethora of laws and conflicting jurisdictions that it is difficult to determine what is the applicable law (but solutions include taking into account the intent of the country's constitution and the interests of all stakeholders, and giving primacy to indigenous people over in-migrants) - as in Indonesia; and

c) have such weak laws as to make legal what in most other countries would be considered illegal (as in Brazil - which has recently watered down relevant laws in order to minimise illegality).

Small, independent suppliers have more reason to be ignorant of the origin of the timber products which they sell than, say, national chains.

In the vehicle and electronic goods manufacturing industries, quality checks of components to be used during product assembly are routinely carried out. If too many defects are found in a sample, then the corresponding batch is rejected. Such checks are akin to assessing the legality of timber along the chain of supply from forest to end-use - illegal timber being akin to defective components.

Established technology and management procedures to audit such chains of supply tend to be straight forward, particularly for long term supply contracts and where the suppliers involved wish to conduct their business properly.

The percentage of illegal timber in the imports which Japan declares as being from (rather than grown in) some of its main supplying countries might, on average, be as high as 90% for Indonesia and 30% for China, Malaysia, and Eastern Russia. The percentage for certain products may be much higher, especially those manufactured in China.

Importers have no basis to complain about any rise in cost that is attributed to ensuring that their supplies of wood-based products are legal. Any cost increase attributed toensuring that their imports of such productsderive from sustainably managed forest should be exclude any costsrequired to ensure that thechain of supply of thoseimports (back to forest origin) is legal.