11

The Reform of Public Timber The Reform of Public Timber Procurement in JapanProcurement in Japan

Federico Lopez-CaseroFederico Lopez-Casero

Henry ScheyvensHenry Scheyvens

Kimihiko HyakumuraKimihiko Hyakumura

Forest Conservation ProjectForest Conservation Project

Institute for Global Environmental Strategies (IGEInstitute for Global Environmental Strategies (IGES)S)

Chatham House Illegal Logging Update and Stakeholder Consultation Chatham House Illegal Logging Update and Stakeholder Consultation

20 July 20 July 20062006

22

OverviewOverview

1.1. Japan’s role in timber tradeJapan’s role in timber trade

2.2. Japan’s response to illegal wood importsJapan’s response to illegal wood imports

3.3. Legal and policy context of the public procurement (PLegal and policy context of the public procurement (PP) reformP) reform

4.4. Reform of timber procurement policyReform of timber procurement policy

5.5. Definitions and Verification ModalitiesDefinitions and Verification Modalities

6.6. Policy Implementation: a) domestic; b) imported timberPolicy Implementation: a) domestic; b) imported timber

7.7. Preliminary observations: a) certification / legality verifiPreliminary observations: a) certification / legality verification schemes and b) addresseescation schemes and b) addressees

8.8. ConclusionsConclusions

33

1. Japan’s role in timber trade 1. Japan’s role in timber trade

Tropical timber imports (2003-2005)

0 2000 4000 6000 8000 10000

logs

sawnwood

veneer

plywood

logs

sawnwood

veneer

plywood

logs

sawnwood

veneer

plywood

JAP

AN

Ch

ina

UK

1000 m3

2005

2004

2003

• Total timber demand in Japan is about 89 million mTotal timber demand in Japan is about 89 million m33 p.a., of p.a., of which roughly 80% are imported (world’s 3which roughly 80% are imported (world’s 3rdrd largest importer) largest importer)

Source: FRA (2005)

• Largest importerLargest importer ofof tropical plywood:tropical plywood: 4.6 million m4.6 million m33 in 2005 in 2005

• 33rdrd largest importer of largest importer of tropical logs: tropical logs: 1.6 million m1.6 million m33 in 2004 in 2004

• RussiaRussia is nowis now Japan’s Japan’s main log supplier: main log supplier: 11 million m11 million m33 in 2004 in 2004

44

2. Japan’s response to illegal wood imports2. Japan’s response to illegal wood imports

• Since the G8 Summit in 2002, Japan has repeatedly Since the G8 Summit in 2002, Japan has repeatedly expressed its expressed its commitmentcommitment to tackle to tackle illegal loggingillegal logging

• ““We will not use timber that has been produced illegally”We will not use timber that has been produced illegally” (Forestry Agency 31.03.2005)(Forestry Agency 31.03.2005)

• Government stresses financial/administrative support to Government stresses financial/administrative support to international organisations and producer countriesinternational organisations and producer countries

• Low engagement Low engagement of of private sectorprivate sector:: – Only 12% of 115 firms claimed to make any effort to assess Only 12% of 115 firms claimed to make any effort to assess

the legality of the procured timber (survey by JFWIA)the legality of the procured timber (survey by JFWIA)

• Potential of PP reform to Potential of PP reform to force a response force a response from the from the priprivate sectorvate sector::– Public sector: Public sector: 3%3% of total wood procurement of total wood procurement （（ estimated)estimated)

55

3. Legal and policy context of PP reform 3. Legal and policy context of PP reform • ““Green Purchasing Law”Green Purchasing Law”::

Law Concerning the Promotion of Procurement of Eco-Friendly Law Concerning the Promotion of Procurement of Eco-Friendly Goods and Services by the State and Other EntitiesGoods and Services by the State and Other Entities of 2000 (La of 2000 (Law No. 100/2000), enacted January 2001w No. 100/2000), enacted January 2001

• Basic PolicyBasic Policy for the Promotion of Procurement of Eco-for the Promotion of Procurement of Eco-Friendly Goods and ServicesFriendly Goods and Services::

– Identifies Identifies specific itemsspecific items for public procurement for public procurement

– RevisedRevised on 1 April 2006 by including: on 1 April 2006 by including:

◦ LegalityLegality as a as a “criterion for evaluation”“criterion for evaluation”

◦ SustainabilitySustainability as a as a “factor for consideration”“factor for consideration”

– Refers to “Refers to “Guideline Guideline for Verification on Legality and Sustainfor Verification on Legality and Sustainability of Wood and Wood Products” formulated by the ability of Wood and Wood Products” formulated by the ForeForestry Agencystry Agency

66

4. Reform of timber procurement policy 4. Reform of timber procurement policy

• ““Guideline Guideline for Verification on Legality and for Verification on Legality and Sustainability of Wood and Wood Products”:Sustainability of Wood and Wood Products”:

− Prescribes Prescribes modalities to verify legality and sustainabilitymodalities to verify legality and sustainability

− AimsAims to “promote verified products as appropriate items for to “promote verified products as appropriate items for procurement” of the procurement” of the public sectorpublic sector

− Is Is mandatorymandatory for for central-levelcentral-level ministries/agencies, Diet, ministries/agencies, Diet, courts and independent administrative institutions, courts and independent administrative institutions, but also addresses but also addresses local government local government andand administration administration

− Gives the Gives the suppliers suppliers a lot ofa lot of leeway when verifying legalityleeway when verifying legality

− Includes Includes revision revision process based on process based on multi-stakeholder multi-stakeholder consultation consultation (exploratory committee and working groups)(exploratory committee and working groups)

77

5. Definitions and Verification Modalities5. Definitions and Verification Modalities

• Legality Legality (Criterion for evaluation)(Criterion for evaluation)::• Timber “should be harvested in legal manner consistent with Timber “should be harvested in legal manner consistent with

procedures in the forest laws of timber producing countries”procedures in the forest laws of timber producing countries”

• Sustainability Sustainability (Factor for consideration)(Factor for consideration)::• ““should be harvested from the forest under sustainable management”should be harvested from the forest under sustainable management”

• 3 different modalities3 different modalities for verification: for verification:

1.1. Forest certificationForest certification / chain of custody / chain of custody

2.2. Codes of conductCodes of conduct of Japan’s of Japan’s wood industry wood industry associationsassociations

3.3. OwnOwn procedure set up by an procedure set up by an individual companyindividual company

88

(1) Verification through(1) Verification through Forest Certification Forest Certification

• Wood products certified under a Wood products certified under a forest certification forest certification schemescheme

• Accepted schemesAccepted schemes include: include:− Local scheme: Local scheme: Sustainable Green Ecosystem CouncilSustainable Green Ecosystem Council (SGEC) (SGEC)

− Overseas schemes: FSC, SFI, CSA, PEFC, LEI, MTCCOverseas schemes: FSC, SFI, CSA, PEFC, LEI, MTCC

No justification, no prior assessmentNo justification, no prior assessment

• Very Very limitedlimited availability availability of certified timber in Japan/Asia: of certified timber in Japan/Asia:− Less than 1.85 % of total forest area in Less than 1.85 % of total forest area in JapanJapan

(461,000 ha) in 2005 (461,000 ha) in 2005

− Less than 1% of natural production forests in Less than 1% of natural production forests in AsiaAsia

99

(2) Verification under(2) Verification under Codes of Conduct Codes of Conduct of Wood Industry Associationsof Wood Industry Associations

• The gist of this modality is voluntary The gist of this modality is voluntary codes of conductcodes of conduct: : − established by established by wood industry associationswood industry associations− procedures to guarantee that their members supply wood procedures to guarantee that their members supply wood

products verified as products verified as legallegal (sustainable) (sustainable)− mandatory for their mandatory for their members members (auditing, penalisation)(auditing, penalisation)

• Leading role of the Leading role of the Japan Federation of Wood Industry Japan Federation of Wood Industry AssociationsAssociations (JFWIA) as the (JFWIA) as the umbrella organisationumbrella organisation::

• Established code of conduct in March 2006Established code of conduct in March 2006• It has served as a template for most other associationsIt has served as a template for most other associations• Exception: The Exception: The Japan Lumber Importers’ AssociationJapan Lumber Importers’ Association

(JLIA) formulated their code in November 2005(JLIA) formulated their code in November 2005

1010

Forest OwnersForest Owners Producers (Owners’ Assoc.)Producers (Owners’ Assoc.) Manufacturers, distributorsManufacturers, distributors

Government Government purchaserspurchasers

Certificate (invoice)Certificate (invoice)Process of licensing suppliersProcess of licensing suppliersWhat associationsWhat associations

have to do have to do

Verification flow under modality (2)Verification flow under modality (2)

Information brochure edited by the JFWIAInformation brochure edited by the JFWIA

• The JFWIA has focused on implementation in Japan:The JFWIA has focused on implementation in Japan:• explaining to stakeholders in Japan why verification is neededexplaining to stakeholders in Japan why verification is needed• giving a domestic example for suppliers from abroadgiving a domestic example for suppliers from abroad

InvoicesInvoicesEvidence Evidence doc.doc.

Evidence Evidence doc.doc.

ＬｉｃＬｉｃｅｎｃｅｎｃ

ｅｅＬｉｃＬｉｃｅｎｃｅｎｃ

ｅｅ

ＡｐｐｌｙＡｐｐｌｙ ＡｐｐｌｙＡｐｐｌｙ

1111

(3) Verification through (3) Verification through ownown procedure procedure set up by an individual company set up by an individual company

• Applies mainly to Applies mainly to suppliers,suppliers, which: which:• are are not membersnot members of wood industry associations of wood industry associations

• prefer prefer handling timber under handling timber under own own code of conductcode of conduct

• Introduced at the paper industry’s urgingIntroduced at the paper industry’s urging

• To be used by To be used by chip/pulp importing businesseschip/pulp importing businesses (?) (?)

• No examples of implementation so farNo examples of implementation so far

• In principle it will work similarly to modality (2)In principle it will work similarly to modality (2)

1212

Flow under Modalities (2) and (3) for JLIA membersFlow under Modalities (2) and (3) for JLIA members

LoggingLogging

Processing & Processing & distribution distribution

Delivery Delivery

Public Public ProcurementProcurement

Segregated Segregated Management:Management:

DOCUMENT DOCUMENT FLOW:FLOW:

STAGES:STAGES:DOCUMENT DOCUMENT FLOW:FLOW:

Modality (2)Modality (2) Modality (3)Modality (3)

Logging notification Logging notification or or other evidence (copy)other evidence (copy)

Notification Notification && log sales log sales contract contract (copies)(copies)

Unveri-Unveri-fiable fiable

Verifiable Verifiable timber timber

Invoice & (or incl.) Invoice & (or incl.) evidence evidence documentationdocumentation

Invoice, shipping Invoice, shipping account, received account, received documents & photosdocuments & photos

Certificate based on Certificate based on evidence from all evidence from all received documentsreceived documents

Not procNot procured by gured by g

ov.ov.Invoice & (or incl.) Invoice & (or incl.) evidence evidence documentationdocumentation

Segregated Segregated Management as Management as in modality (3)in modality (3)

1313

6. Policy implementation: 6. Policy implementation: a) a) Domestic timberDomestic timber

Association typeAssociation type Codes of conductCodes of conduct OthersOthers SumSum

Estab-liEstab-lishedshed

Planned Planned for June - for June - AugustAugust

Local Timber AssociationsLocal Timber Associations 1212 1616 1818 4646

Local Forest Owners Local Forest Owners AssociationsAssociations

11 66 2323 3030

National Industry National Industry AssociationsAssociations

1111 00 44 1515

TotalTotal 2424 2222 4545 9191

• Modalities expected to work from September 2006Modalities expected to work from September 2006

Number of associations involved in the implementation processNumber of associations involved in the implementation process

1414

b) b) Imported Imported timbertimber

Working groupsWorking groups (researchers) under (researchers) under Exploratory Committee Exploratory Committee for Measures against Illegal Logging for Measures against Illegal Logging investigating optionsinvestigating options

Major exporter countriesMajor exporter countries SchemeScheme

IndonesiaIndonesia BRIK, SKSHHBRIK, SKSHH

MalaysiaMalaysia Export Declaration, Form 2Export Declaration, Form 2

Papua New GuineaPapua New Guinea SGS for now; upcoming workshopSGS for now; upcoming workshop

RussiaRussia Still being developed between JLIStill being developed between JLIA & partners in RussiaA & partners in Russia

Re-export of manufactured Re-export of manufactured products from Chinaproducts from China

Prior research required, to be undPrior research required, to be undertaken by Working Groupertaken by Working Group

Main schemesMain schemes with high with high probability probability of being accepted by of being accepted by the government as evidence of legality: the government as evidence of legality:

1515

7. Preliminary observations: 7. Preliminary observations: a) Certification/Legality Verification Schemesa) Certification/Legality Verification Schemes

• Modality (1):Modality (1): • GovernmentGovernment has has no intention no intention to assess to assess certification certification

schemesschemes

• Modalities (2) and (3):Modalities (2) and (3):• Organised by the Organised by the private sectorprivate sector in Japan in Japan

• Key role of Key role of industry associationsindustry associations (especially JFWIA) (especially JFWIA)

Initial evidence Initial evidence ofof policy impact: policy impact: • National producersNational producers & & environmental NGOsenvironmental NGOs see new policy as see new policy as

a chance to enhance demand for a chance to enhance demand for domestic timberdomestic timber

• ImportersImporters under under pressure to demonstrate legalitypressure to demonstrate legality of of imported timber, as domestic timber is increasingly favouredimported timber, as domestic timber is increasingly favoured

1616

b) Actorsb) Actors Main focusMain focus on the on the private sectorprivate sector::

• Granted wide Granted wide autonomyautonomy to establish their own voluntary co to establish their own voluntary codes of conduct for the verification of legalitydes of conduct for the verification of legality

• Considered Considered trustworthytrustworthy by the Japanese government by the Japanese government Prominent officials used the argument of the “Japanese waProminent officials used the argument of the “Japanese wa

y” based on the assumption of “the goodness of human naty” based on the assumption of “the goodness of human nature” (ure” ( 性善説 性善説 - theory developed by Mencius [- theory developed by Mencius [ 孟子孟子 ])])

Less focusLess focus on the on the public procurerpublic procurer:: Expected to Expected to acceptaccept provided documentation for legality ver provided documentation for legality ver

ification in accordance with one of the modalitiesification in accordance with one of the modalities No independentNo independent government/ 3 government/ 3rdrd party verification required party verification required No major capacity buildingNo major capacity building efforts or advice intended efforts or advice intended However, public procurer is free to pay a However, public procurer is free to pay a price premiumprice premium

1717

8. Conclusions8. Conclusions• Stepwise approachStepwise approach::

– Priority of Priority of legalitylegality over sustainability over sustainability– NeedNeed for for studies, studies, and forand for negotiations negotiations of private sector of private sector

and government with counterparts in producer countriesand government with counterparts in producer countries– So far, a So far, a paper trailpaper trail is being implemented is being implemented

• A major A major shortcomingshortcoming is a is a lacking 3lacking 3rdrd party auditing party auditing

• Remaining questions:Remaining questions:– Will the private sector suppliers prove worthy of the Will the private sector suppliers prove worthy of the trusttrust t t

he government has put in them?he government has put in them?

– How How reliablereliable will the schemes for verification of legality ne will the schemes for verification of legality negotiated with the major producer countries be?gotiated with the major producer countries be?

Thank you!Thank you!