Credit SystemFSC-STD-40-004V2 Key Topic

Version: 29 Sep 2008

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Contents

Definition of the Credit System

Defining FSC Product Groups

Inputs to the Credit System

The System

FSC-labeling

Sales & FSC Claims

Exercises

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• Outputs may be sold with an FSC

credit claim in proportion to the converted

quantity of FSC-certified and/or post-consumer

reclaimed inputs

• FSC credit balance shall be recorded in a

credit account

• FSC credit based on inputs to one FSC

product group

• FSC credit based on inputs at a single site

• Typical for– Continuous production– Systems that do not allow segregation– Operations with lower FSC input volumes

1. Definition

1 of 3 optional systems for making FSC Product Group claims

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Important Terms:Important Terms:

1. Definition

Conversion Factor (C.F.)Conversion Factor (C.F.) Ratio between input and output volume of a product/component

Controlled Wood (CW)Controlled Wood (CW)

FSC CW – non-FSC virgin material controlled by an FSC-certified organization

Controlled material – non-FSC virgin material controlled by the organization using the input

Eligible InputEligible InputInputs eligible for use in FSC Product Groups (see material category)

FSC ClaimFSC ClaimFSC Pure, FSC Mixed X%, FSC Mixed Credit, FSC Recycled X%, FSC Recycled Credit, FSC Controlled Wood

Material CategoryMaterial CategoryCategory of inputs: FSC Pure, FSC Mixed, FSC Recycled, FSC CW, Controlled material, post-consumer reclaimed, pre-consumer reclaimed (Uncontrolled material is ineligible)

Minor ComponentMinor ComponentUncontrolled wood-based component <5% of the product volume and specifically approved for use in an FSC Product Group

SiteSiteA single physical unit located at one locality, geographically unique from other units

Post-consumer Reclaimed Post-consumer Reclaimed (PCR)(PCR)

Reclaimed from a consumer or commercial product that has gone through its final end-use

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• One FSC Product Group shares the same basic input characteristics

– Species– Quality of inputs– Conversion factor

• FSC product groups shall be approved by the CB and represented in the Product Group Schedule (PGS)

2. Defining FSC Product Groups

A variety of components and species may be used in one product group provided they are consistent

Define product groups for which FSC credit is accumulated

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All eligible inputs are possible:All eligible inputs are possible:

3. Inputs

Input Input Material CategoryMaterial Category Potential Potential FSC ClaimsFSC Claims

FSC PureFSC Pure FSC Mixed CreditFSC Mixed Credit

FSC MixedFSC Mixed FSC Mixed CreditFSC Mixed Credit

FSC RecycledFSC Recycled FSC Mixed Credit, FSC Mixed Credit,

FSC Recycled CreditFSC Recycled Credit

FSC Controlled WoodFSC Controlled Wood FSC Mixed CreditFSC Mixed Credit

Post-consumer / Pre-consumer Post-consumer / Pre-consumer ReclaimedReclaimed

FSC Mixed Credit, FSC Mixed Credit,

FSC Recycled CreditFSC Recycled Credit

Controlled MaterialControlled Material FSC Mixed CreditFSC Mixed Credit

Minor ComponentMinor Component FSC Mixed CreditFSC Mixed Credit

It is possible to make FSC Controlled Wood claims for any eligible inputs/combinations

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Input Input Material Material CategoriesCategories

FSC ClaimFSC Claim

FSC Pure + FSC Pure + controlled materialcontrolled material

FSC Mixed FSC Mixed CreditCredit

FSC Mixed + Post-FSC Mixed + Post-consumerconsumer

FSC Mixed FSC Mixed CreditCredit

Post-consumer + Post-consumer + Pre-consumerPre-consumer

FSC Recycled FSC Recycled CreditCredit

Inputs of different material categories are transformed (or combined) for an FSC credit claim, e.g.,

FSC/PCR

CW/Pre-C

“FSC Mixed Credit”“FSC Recycled Credit”

“FSC Controlled Wood”

4. The System

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Credit system as bank account

... However there are some banking rulesHowever there are some banking rules ...

4. The System

BUY FSC (&/or PCR) raw material

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SELL FSC products

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1. Define raw material inputs

2. Calculate conversion factors

3. Apply the conversion factors on input volumes

4. Add the converted amount of FSC/PCR to the credit accountEarning

Credit

Keep inputs segregated until the volume is added to the account

(may be applicable when material is physically withheld from production,e.g., drying time)

4. The System

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Transfer system - essentialsPurchasing & Receiving Accounting Final Storage & Sales

• Specify material categorymaterial category

• Check supplier documentation for FSC FSC claimclaim

• Use the specific input FSC % / Credit claimFSC % / Credit claim when adding credit

• Use converted volume for each input type

• Co-mingle all inputs to the same product group

• Define period of time for updating the account, no greater than 3-months (claim period)

• AddAdd credit after ownership but no later than input entry to processing

• No future predictions

• No overdraws

• Deduct credit greater than that added over the past 12-months

• All necessary staff shall be aware of the balance

• Use distinguishing marks (labels), &/or&/or

• Designated areas

• DeductDeduct credit once product is FSC-labeled &/or sold with FSC claim

• Make FSC credit claimFSC credit claim on invoice

• Final product cross-references with invoice & transport docs

4. The System

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4. The System

Where:

FSC Credit = FSC credit earned

Input = Amount of purchased material

C.F. = conversion factor for input to output

FSC Credit = Input X C.F.

Sample:

Input = 40 cbm of logs

C.F. = 0.5 (0.5 cbm lumber produced from 1 cbm roundwood)

FSC Credit = 40(0.5) = 20 cbm

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4. The System

Where: FSC Credit = FSC credit earned

Input = Amount of purchased material % = the FSC percent claim on input

C.F. = conversion factor for input to output

A bit more complicated:FSC Credit = (Input X %)C.F.

Sample:Input = 40 cbm of logs (FSC Mixed 70%)

C.F. = 0.5 (0.5 cbm lumber produced from 1 cbm roundwood)

FSC CreditFSC Credit = [40(0.7)]0.5 = 14 cbm14 cbm

% = 0.7

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Illustration of a Credit Account

4. The System

MonthMonthFSCFSC

TotalTotal

PCR PCR

TotalTotal

FSC C.F. FSC C.F. (0.9)

PCR C.F. PCR C.F. (0.7)

TallyTally Total TallyTotal Tally FSC FSC SalesSales

BalanceBalance

July 20 4018

(20X0.9)

28 (40X0.7)

46(18+28)

46 3016

(46-30)

Aug 15 20 13.5 14 27.5 43.5 (27.5+16)

30 13.5

Sept 25 50 22.5 35 57.5 71 30 41

New Credit Balance = [(Inputs X C.F.) + Previous Balance] – FSC Sales

Claim period = one month

InputsInputs New credit for New credit for claim periodclaim period

New credit + New credit + previous balanceprevious balance

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5. Sales & FSC Claims

The invoice essentials

•Each FSC Product Group is clearly identified with the applicable FSC claim

–“FSC Mixed Credit”–“FSC Recycled Credit”–“FSC Controlled Wood” (optional for products not sold as FSC Mixed or FSC Recycled)

•FSC certificate code of the Organization is clearly represented

–SW-COC-00XXXX for “FSC Mixed Credit”, “FSC Recycled Credit”–SW-CW-00XXXX for “FSC Controlled Wood”

•Same details required for transport docs when invoice does not accompany product

Transport / shipping documents

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5. Sales & FSC Claims

•Optional but encouraged; there will always be products sold without an FSC Credit claim

•Required in the CoC certificate scope (evaluation against 40-005 parts 4 and 5)

•Does not apply to final end-products

•Shall only be to other FSC-certified organizations

•FSC CW claim only possible when FSC credit claim is not made

•No FSC-labeling! (some provisions for segregation marks)

•A system shall be in place to track input and output volumes (e.g., separate data columns in the credit account)

“FSC Controlled Wood” claims:

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FSC Mixed Sources LabelFSC Mixed Sources Label (FSC Mixed)(FSC Mixed)

6. FSC-labeling

FSC Mixed SourcesFSC Mixed Sources = any = any combination of combination of eligible eligible inputsinputs, including some virgin , including some virgin contentcontent

To apply a variation of the FSC Mixed Sources label the credit account shall have an adequate balance to cover the volume sold as FSC Mixed CreditFSC Mixed Credit

20%Note: generally, the moebius loop with the PCR content cannot be used under the credit system since the percentage is not specifically known.

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FSC Mixed LabelFSC Mixed Label ((Minimum RequirementsMinimum Requirements))

6. FSC-labeling

FSC MixedFSC Mixed = PCR + CW inputs = PCR + CW inputs (no FSC virgin inputs)

Label shown here is minimum elements example required for this combination of inputs

To apply an FSC Mixed label on-product the credit account shall have an adequate balance to cover the volume sold as FSC Mixed CreditFSC Mixed Credit

Mixed SourcesCert no. SW-COC-00XXXX

© FSC 1996

Example that illustrates the required elements

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FSC Recycled Label (FSC Recycled Label (Minimum RequirementsMinimum Requirements))

6. FSC-labeling

FSC RecycledFSC Recycled = 100% = 100% reclaimed content (may reclaimed content (may include some pre-include some pre-consumer)consumer)

To apply the FSC Recycled label the credit account shall have an adequate balance to cover the volume sold as FSC FSC Recycled CreditRecycled Credit

Label shown here is minimum elements style required when less than 100% post-consumer

RecycledCert no. SW-COC-00XXXX

© FSC 1996

NB: the recycled moebius loop shall be omitted as the exact percent of PCR is unknown in a credit system

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LINKS TO ANY EXERCISES

7. Exercises

Credit System Exercises

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THANK YOU!