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An Update on the EU Timber Regulation

July 2012

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With the publication last week of the Implementing Regulation to the EU Timber Regulation (officially known as Regulation (EU) No 995/201, laying down the obligations of operators who place timber and timber products on the market), the TTF has produced this update for members. It summarises the key points of this Implementing Regulation for members as well as providing a more general update on the EU Timber Regulation, indicating where appropriate how developments are shaping the TTF’s work programme in this important policy area. Please note that the analysis presented in this briefing note should be taken as indicative of any legal interpretation that may emerge. The interpretations below are complex and ultimately it will be the interpretation of the English courts that matter.  

First, it is useful to recap the core elements of the EUTR;

1. A prohibition on the “first placing” of illegally harvested timber and timber products onto the EU market.
2. Operators placing timber and timber products onto the EU market for the first time must exercise due diligence to mitigate the risk that this timber has been illegally harvested.
3. Those trading in timber and timber products within the EU must keep records of sale and purchase.
4. The establishment of Monitoring Organisations to support Operators and Traders to meet their due diligence and traceability requirements.

The Implementing Regulation lays down more detailed rules concerning the due diligence system and the frequency and the nature of the checks on monitoring organisations. 

The areas of this regulation that are most relevant for TTF members' businesses are presented below;

Timing and Frequency of Due Diligence
Article 2.1 of the Implementing Regulation states that "Operators shall apply the due diligence system to each specific type of timber or timber product supplied by a particular supplier within a period not exceeding 12 months, provided that the tree species, the country or countries of harvest or, where applicable, the sub-national region(s) and concession(s) of harvest remain unchanged". Effectively this avoids the need to undertake batch or consignment based due diligence for products within a 12 month period, if the characteristics of a product is the same as the initial/ first consignment. However, in practice, this may be difficult to know without knowing or undertaking due diligence of all raw material supply to mills at an early stage.

Information concerning the operator’s supply
When the primary piece of legislation was published back in October 2010, the EUTR established six pieces of information (listed below) that all operators should have access too. These are;

• product description,
• species (including scientific name where applicable),
• country of harvest (including sub-region or concession where applicable),
• quantity,
• supplier,
• customer,
• compliance with applicable forestry legislation. 

Paragraph's 2,3 & 4 of article 3 in the Implementing Regulation provides further detail of when information on scientific name of species, sub-region or concession should be used when undertaking due diligence; effectively due diligence should be conducted and recorded at these levels when there is ambiguity in common trade name of a species or where the risk of illegal harvesting between sub-national regions/ concessions varies within countries/ sub-national regions. A good example of ambiguity is in the way that eucalyptus is currently commonly used to identify species in a product; under the EUTR, eucalyptus is unlikely to be specific enough as it describes genus and not a specie, therefore further details would need to be collected and recorded, e.g. eucalyptus grandis/ eucalyptus globulous etc.

Risk Assessment and Mitigation
Article 4 of the Implementing Regulation provides further details how certification or other third-party verified schemes may be taken into account in the risk assessment and risk mitigation procedures. A set of criteria have been identified to establish the robustness of certification and third party schemes, and if met, such schemes can be used when assessing or mitigating risk. The TTF have analysed the criteria and believe that both the FSC and PEFC schemes, on the whole, meet the criteria laid out; the main gap in both certification schemes being the inability for the schemes to trace products back to their origin. Therefore, in some circumstances, due diligence may still be required when buying certified products, however, this is likely to be for only a small range of higher risk products and should complement the due diligence that members already undertake when buying certified products (simple checks on the relevant certification databases to check validity and scope of certificates). This information gap in the COC system is something that both certification schemes are looking to address over the remainder of the year.

The Implementing Regulation also states that the information collected by Operators on their supply should be recorded and kept for 5 years and made available to enforcement authorities should it be needed. Operators will then need to be able to use these records to demonstrate how "the information gathered was checked against the risk criteria provided for in Article 6(1)(b) of Regulation (EU) No 995/2010, how a decision on risk mitigation measures was taken and how the operator determined the degree of risk".  This is where members will be able to use their annual RPP Summary report which is essentially your annual record of due diligence. In a recent assessment of the RPP System some minor gaps were identified in meeting the EUTR, all ones that the TTF already were aware of. These gaps are being reworked into a revised set of forms and guides that the TTF is looking to release at the beginning of 2013.

The second part of the implementing regulation outlines the frequency of checks for monitoring organisations and so has little direct relevance to members businesses.

Next Steps in EUTR Legislative Process
The preparations for the next phase of EUTR continue with activity at both the European and UK level as follows;

- At the UK level the task is now for DEFRA to implement the EUTR in the UK, including the introduction of national legislation, and confirming the role of the National Measurement Offices as the UK's Competent Authority (NMO- formerly Weights and Measures). The Government will also outline the penalties that will be used within the UK. The UK proposals will be issued for public consultation in the Autumn of this year, before the Regulations come into force on March 3rd 2013. However the provisions regarding due diligence are already set by the main EU Regulation.

-  At the European level, further guidance is being developed to provide greater clarity for Operators. A list of the issues that have been identified as requiring further guidance is available by clicking here. Members can be assured that their interests are being fairly represented by the TTF, which is closely involved with the continuing development of the EUTR. If you want to input into this guidance please contact Anand directly who can provide the latest drafts to you to. A selection of the most relevant issues to members is summarised below;  

Defining “placing on the market” is a hot topic of discussion and debate. There are essentially two interpretations;

• a narrow one where a product is supplied by the actual transfer of a product from one person to another; or
• a wider one where a product is made available on the market.

The consensus view developing is that a wider definition is more in line with the spirit with the EUTR’s aims and also allows some flexibility to account for the variety of industry sectors that are affected by the EUTR.  With this interpretation, “placing on the market” will mean the intent of supplying a product on the market, rather than actually supplying a product. In the TTF’s view, this will have the following implications;

• Due diligence requirements of operators will have to take place prior to export. This will mean that the RPP will need to be used as a real time management tool, as has already been promoted thoughout 2012 by the TTF team. The RPP Summary report will become the record of your Due Diligence outcomes, which can be completed on an ongoing basis throughout your purchasing year and then submitted for verification audit (which will still be retrospective).

• Agents: it is unclear as to the exact legal position of agents as there are a variety of agency models within the Timber Trade Federation membership. Current thinking within the guidance being developed is as follows; "The position under the Regulation of ‘agents’ who act as middle men, sourcing products for others and not merely acting as shipping agents, will need to be determined by reference to the particular facts of each case and the applicable contractual arrangements......An ‘agent’ who purchases and imports stock to meet anticipated orders from buyers will be an “operator” in his own right, unlike a true agent who acts only on behalf of another party and at no point takes actual ownership of products himself."  In the TTF’s view agents will have a significant responsibility to ensure the Due Diligence process is undertaken prior to export. This should not affect agent members of the TTF as they should already be undertaking due diligence and submitting the RPP Annual Report to the TTF.

Wider Implications of recent developments for the TTF and RPP

As mentioned above, the RPP is being updated and improved throughout 2012 to take into account the minor gaps identified within the context of recent developments.  This new system will be in line with other European Timber Trade Federations including the wider ETTF system currently being finalised. The updated version of the RPP system will "go live" at the beginning of 2013.

The TTF team and Forests Forever have also been discussing whether the TTF should become a Monitoring Organisation (MO), in light of the publication of rules for MO's in March earlier this year. The conclusion of those discussions was that it was not yet appropriate for the TTF to become an MO; the rules and governance of MO's set out a level of bureaucracy and liability that is not seen as beneficial for the TTF or it's members. This position may change in the future, however we are still exploring various avenues to get more formal recognition of the RPP System. For example, one of Anand's tasks over the coming months is to present the updated RPP system to the NMO (the enforcement agency in the UK) to ensure they fully understand that TTF members are undertaking a robust level of due diligence and formal record keeping and therefore enforcement efforts within the Timber Trade focus on non-TTF members.

The TTF team is working continuously to improve the RPP in different ways- from its content to its process- such as looking to bring in an IT capability to help members acquire information from suppliers in an easier, quicker and a more accessible way.   We are always interested to get members more involved in such issues, so if you are keen to be involved in the development of the EUTR and how it will be implemented through the RPP please get in touch.

For further information see the EUTR page on the TTF website or contact Anand Punja on 0207 291 5373. 

 

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