Thursday, 5 March 2009

US Lacey Act: Respecting the laws of trade partners

US Lacey Act: Respecting the laws of trade partners

Andrea Johnson, London

Over the past decade Indonesia has been struggling to control illegal logging. The Indonesian government, in partnership with civil society, donor governments and institutions, has worked hard to build institutional capacity, improve enforcement, clarify and define domestic laws, and sign MOUs with trading partners.

But Indonesia's efforts have been hampered as illegal timber and wood products flow to markets such as China, Malaysia, Vietnam, and ultimately to the consumer markets of the United States, Japan, Australia, and the European Union. The demand generated by these vast, "no questions asked" markets has consistently undermined Indonesia's efforts to fight a problem estimated to have robbed the country of over US$20 billion.

As Indonesia's Minister of Forestry, M. S. Kaban explained in January 2005, "Expecting or asking one country to combat illegal logging while at the same time receiving or importing illegal logs does not support efforts to combat these forest crimes. Tropical timber producer and consumer countries should share a significant responsibility in combating illegal logging and its associated timber trade."

The United States has now made respect for this principle the law. Amendments to the Lacey Act, passed in May 2008, make it the world's first law banning the import, export, or commerce in illegally sourced plant products, including timber and wood products. This bill had broad support from all political parties and civil society. Indeed, now-President Obama was one of the bill's sponsors while he was in the Senate.

However, there has been some misunderstanding of what the amended Lacey act means for timber producing countries, with some suggestionsthat the act projects US law and systems onto traders in countries such as Indonesia.

One Jakarta Post article, for example, suggested that under the Lacey Act "traders selling wood-based products to the United States are required to have a certificate issued by the US government via internationally recognized agencies". ("RI risks losing $435.6m in wood exports on new US policy", The Jakarta Post on Dec. 17, 2008.) This is not the case.

The amended Lacey Act does two main things.

First, it prohibits trade in animals and plants sourced in contravention of another country's sovereign laws. It does not place a new American definition of legality over Indonesia's carefully-negotiated definition; instead, the Lacey Act supports the law enforcement efforts of trading partners by saying, in effect, `your laws matter to us, and we will fine or prosecute companies who profit in the US from knowingly breaking them.'

Before this law was passed, for example, a shipment of trees cut illegally from an Indonesian National Park and exported without payment of any taxes would be entirely legal once it reached US shores. Now, the US can help Indonesia protect its natural resources as well earn its rightful public revenues, instead of allowing a few corrupt timber barons and officials to pocket the profits.

The Lacey Act also encourages and rewards transparency and responsibility in the timber trade. Businesses that can show they are taking "due care" to source legal wood can protect themselves from many of the penalties under the Act.

The second main thing that the Lacey Act does is institute an import declaration requirement. There has been misunderstanding about what this is and isn't. What the declaration is: a mechanism to increase basic transparency in the supply chain.

For the first time, importers will be required to declare the country of harvest and the species of plant contained in the products they import. This will help US agencies to focus on enforcement, as well as encourage importers to take due care and to assess the risk of illegal sourcing based on knowledge of the species and country of origin. What the declaration is not: a requirement to provide third-party documents certifying the legality of each shipment.

Lacey is fundamentally a fact-based law, not a document-based law. The US government does not require any specific document upon import. Of course, a company practicing optimal `due care' will seek the most robust ways to ensure that its products are legal, and may opt for a third-party verification under a credible certification scheme, or a license under the FLEGT Voluntary Partnership Agreement currently being negotiated between Indonesia and the EU.This will be up to the internal risk-assessment procedures and procurement policies of each company, not a requirement of the US government.

The Lacey Act is designed to end the market dynamics that have undermined the fight against illegal logging waged by Indonesia and other countries. Much like the proposed legislation currently under consideration in the EU, Lacey eliminates the possibility of `leakage', where countries with fewer controls than Indonesia simply gain market share by exporting illegal wood at a lower price.

Finally, and critically, the Lacey Act structure helps to build the conditions for effective reduction of emissions from deforestation and forest degradation (REDD). It is simply incoherent for the US or the EU to pay countries not to cut down their forests while still buying millions of dollars of illegal wood from those same countries.

It is also clear that few donors or private investors feel comfortable paying for REDD projects in countries that struggle to enforce basic forest sector laws. Indonesia should welcome the Lacey Act, and call on the EU to explicitly prohibit illegal timber imports as well.

The writer directs forest campaigns for the US office of the Environmental Investigation Agency (EIA), a non-profit with bases in both London and Washington, D.C.