Illegal Logging, Trade andthe US Hardwood Industry
Peter King
Chairman of the Board
American Hardwood Export Council

www.ahec.org
www.sustainablehardwoods.info
www.ahec-japan.org

Illegal Logging• Illegal material
depresses world
prices for wood by up
to16%• Severely undermines
markets for legal
operators• Undermines
reputation of thewood industry

There is no “one size fits allsolution”

Forest certification and productlabelling• Assessment of forestry practices on the groundby a qualified independent auditor• Assessment against pre-determined standardsof good forestry practice• Standards developed through broad consultation
with interested parties• Auditing timber trading companies to ensure
wood comes from certified forests and to allow
labelling of finished wood products.

Late 1990s: certification diversifies

Distribution of certified forests
120100

M TCC
PEFC
ATFS
CSA
SFI
FSC

80
60
40
20
0
N.
W.
America EuropeE.
S.
Europe America

Asia

AfricaNon-tropical forests are the main source oftimber and are increasing in size
Proportion of internationally tradedindustrial roundwood by forest type

TropicalNontropicalA fence to the sun and back…
• During the 1990s, volumeof wood standing intemperate and boreal
forests increased by
21,000 million m3.
• That’s enough wood tobuild a 1m x 8cm fence tothe sun and back (or7500 times round theearth)Global Hardwood Forests
Latin Am
37%

Europe 4%

Russia 12%

USA 8%

Canada 5%
Asia 20%
Africa 13%
Source: FAO

Hardwood Roundwood
Production
USA 24%

Russia 4%

Europe 14%
SE Asia &China 19%

Latin Am
14%
Canada 5%

Source: FAO

Africa10%

Other
Asia 10%

World’s Leading Hardwood
Lumber Exporters: 2006
$1,500
United States
Malaysia$1,200$Million

CanadaBrazil$900

Hong KongEU-15$600

Romania
China

$300

ThailandCroatia$01999 2000 2001 2002 2003 2004 2005 2006
Source: Global Trade Atlas

A Sustainable Resource

Remarkable Recovery

More Growth than Harvest

Natural Regeneration

Sustainable Forest Management

US Hardwood -- Net Annual
Growth and Removals
Million M3

350300250200

Net Annual Growth

150

Annual Removals

1005001952 1962 1970 1976 1986 1996 20022010 2020 2030 2040 2050

An Increasing Resource
Billion M3

Hardwood Tree Diameters
121073 + cm
43 to 73 cm
28 to 43 cm
13 to 28 cm

86421953
Source: USFS

196219771987199720022006

How Do We Know This?
• Forest Inventory & Analysis System (FIA)– US Forest Service and State Forest Agencies– Fixed Sample Plots Across US (and remote sensing)– One plot every 2400 hectares– Periodic (and now annual) measurements– forest area and location; species, size, and health oftrees; tree growth, mortality, and removals; wood
production and utilization rates by various products;
forest land ownership.

• So why aren’t all
American hardwoods
certified???

Over 70% of US timberland isprivately-owned
10%

19%
PrivateNational Forests
Other Public

Private71%
Total Area = 204 Million Hectares

Private lands supply 90% of thetimber produced in the US
National Forests
4%

Other Public
6%Private
90%Source: Seneca Creek Estimates for 2005

Labelling challenges
Certified Forest

Certified company
Certified Forest

Certified Forest

U.S. Legal Framework• U.S. has no single national “forestry law”
• But several federal laws directly affectforest practices• States are empowered to regulate forest
practices. Each state has its own strategy
and system to do this.

Federal Law• Federal laws that impact forestry include:– Endangered Species Act (ESA)– Clean Water Act (CWA)– Clean Air Act (CAA)– Federal Insecticide, Fungicide andRodenticide Act (FIFRA)– National Environmental Policy Act (NEPA)– Occupational Safety & Health Act (OSHA)

State Laws & Regulations• Laws & regulations vary by state• States have different processes for monitoring and/or
controlling forest practices• Some 276 state agencies have some role in overseeing
forestry activities in the 50 states• At least 15 states have specific regulatory programs• All states have programs governing water quality
protection -- 37 have regulatory programs specific tononpoint source water pollution of the kind linked tosome forest practices.
• Federal and state laws are strictly enforced

Risk Assessment:
A Sensible Approach• Requirements established for legality verificationand certification should be based on an
objective assessment of the risk of illegal andunsustainable forestry practices in timber
supplying regions– To prevent imposition of unnecessary controls on
suppliers where there is little risk of poor practice– To ensure resources are focused on problem regions– To ensure the response is proportionate to the scaleof the problem– To help prevent technical barriers to trade for timberfrom small relatively low intensity managed forests

Corruption and illegal logging

(Chosen comparator also shown for selected countries)

Normalized Rule of Law Index

2HIGH

UNITED STATESWorld Bank Governance Indicators
Rule of Law - 2005

3

1

0

-1

-2

208 Countries-3

LOW

Note: Blue dots represent estimates forthe 2005 governance indicators. The thin
vertical lines represent standard errors
around these estimates for each country
in world-wide sample. Black dot
represents the chosen year comparator(if any). To add or delete countries fromthe chart, click on the "Country Selection"tab below.

Source: "Governance Matters V: Governance Indicators for 1996-2005 " by Daniel Kaufmann, Aart Kraay and Massimo Mastruzzi.
Disclaimer: The governance indicators presented here reflect the statistical compilation of responses on the quality of governance given by a large number ofenterprise, citizen and expert survey respondents in industrial and developing countries, as reported by a number of survey institutes, think tanks, nongovernmental organizations, and international organizations. The aggregate indicators in no way reflect the official position of the World Bank, its ExecutiveDirectors, or the countries they represent. As discussed in detail in the accompanying papers, countries' relative positions on these indicators are subject tomargins of error that are clearly indicated. Consequently, precise country rankings should not be inferred from this data.

US Compared to 200+ Countries
World Bank Governance Indicators
WB Indicator

US Percentile

Rule of Law

92%

Control of Corruption

92%

Regulatory Quality

93%

Government Effectiveness

92%

Source: World Bank

Legislative Options• Effectively 2 options:
1) Burden of proof on the prosecution– Similar to US Lacey Act– Encourages risk assessment and due diligence– Proportionate to the scale of the problem

2) Burden of proof on the importer/supplier– Every shipment would have to be verified legal– Takes no account of the risk of illegal activity– Could lead to imposition of unnecessary bureaucraticcontrols– Not proportionate to the scale of the problem

Combat Illegal Logging Act 2007(“Lacey Act”)• Supported by American hardwood industry through theHardwood Federation together with environmentalorganisations.
• It would become an offence within the U.S. to trade in awood product that has been “taken, possessed,transported, or sold” in violation of any foreign law.
• An amendment to the U.S. Lacey Act which currently
regulates trade in fish, wildlife and limited subset ofplants.
• Burden of proof with the prosecution who would have todemonstrate that wood derived from an illegal source• Actively encourages importers’ risk assessment andgreater diligence and action in regions of high risk

AHEC Actions•AHEC-commissioned study to assess the risk of American hardwoods being
derived from illegal sources or controversial sources as defined by FSC
Controlled wood standard– Satisfy immediate demands from foreign governments for verified legal timber– Facilitate supply of FSC and PEFC labelled American hardwood products byproviding an assurance that these derive from non-controversial sources– Ensure action in the US is targeted on issues and regions that may be identified
as higher risk
– Ensure American hardwoods are well positioned to ensure full compliance withany additional legislation that may be enacted•••Lobby national governments to accept detailed risk assessment asevidence of sustainability when dealing with small family-owned forests incountries demonstrating good forest governanceEncourage timber importing associations to ensure risk assessment forms
an integral component of private sector timber procurement policies
Continue to explore with FSC and PEFC potential for regional certification ofAmerican hardwood forests accommodating large numbers of family owners
at minimal costProcurement Policy Limitations• Need to be targeted to be successful• Markets can easily shift• Need to address root causes of deforestation• Risk of widening gap between illegal andlegitimate production

Goal: Reduce the Cost Spread
Legitimate Material

CostGOAL

Illegal Material + RISK

Source: Seneca Creek Associates, LLC

For More Information:www.ahec.org
www.sustainablehardwoods.info
www.ahec-japan.org