CORPORATE BACKGROUND

Chain of Custody for
Timber Products Exported fromSarawak
Presented by:

Datu Haji Len Talif SallehGeneral Manager,

Sarawak Timber Industry Development Corporation
26th February 20071

Order of Presentation

Brief Introduction to STIDC
Wood based industry in Sarawak
Regulatory and Administrative Requirements
Questions and Answers

2

Brief Introduction to STIDC

3

CORPORATE BACKGROUNDSARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION (STIDC)
Established in June 1973 following therecommendation of the FAO which
conducted a comprehensive forest
inventory in 1968-1972
STIDC is a State Government agency
formed to stimulate by all possiblemeans the planned expansion of woodbased industries in Sarawak at a rateconsistent with the overall interest of
the economy, the availability of capitaland technical expertise and effective
management of the forest resource

4Corporate Function•

Control and coordinate the manufacturing standards and tradepractices of timber industry•

Make recommendations to the Government as to methods, measuresand policies to be adopted to facilitate the improvement of existing
timber industry and where approved, to assist in the implementation ofthe same•

Encourage effective utilization of timber with emphasis on productdiversification and quality control•

Promote, stimulate and facilitate the development of the timberindustry and in connection with the discharge of its functions to assist
any person engaged in the production and marketing of timber•

Provide technical advisory services for the purpose of assisting in thedevelopment of existing timber industry and in the establishment ofnew industries
Provide technical training : Processing, Quality Control, Production
Management, Marketing, etc•

5

Geographical Location of SarawakSarawak6

Sarawak : Brief Background•••••••••

Located in the island of Borneo
Land area of 12.3 million ha.
70% of land mass still forested
6 million ha. Is permanent forest
estate1 million ha. is totally protected
for national park
Population of 2.5 million
One of the State in Malaysia
Land and forests management
under the state government
purview
Timber industry is governed bylaws, ordinances, regulations,and rules
7Status of Timber Industry in Sarawak

8

ECONOMIC CONTRIBUTION OF TIMBER INDUSTRYCONTRIBUTION TO SARAWAK,2005
Urea, 486,1%Others,5638, 11%

Agriculture, 1829, 4%

NATIONAL TIMBER INDUSTRY,2005

LNG,20790, 41%
Sarawak,7209,34%

Timber,7209, 14%Pen.
Malaysia,10537,
50%

Sabah,3462,16%

Petroleum,15094, 29%

Values: RM million

91976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004

Vol (million m3)

LOG PRODUCTION TREND FOR SARAWAK

25SwampHillTotal

2015105010

10000000

Log

Sawn timber

8000000

Plywood/Veneer

Others6000000
4000000
2000000

2006

2004

2002

2000

1998

1996

1994

Year

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

01972

V a lu e (R M '0 0 0 )EXPORT REVENUE OF TIMBER PRODUCTS

11

SARAWAK: EXPORT OF MAJOR TIMBER PRODUCTS
PRODUCTS

2004

2005

2006

M3

RM (‘000)

M3

RM (‘000)

RM(‘000)

LOGS

4,286,292

1,712,668

4,200,609

1,779,884

1,618,522

PLYWOOD

2,818,937

3,628,717

2,933,151

3,601,594

5,111,744

SAWN TIMBER

1,121,346

891,882

1,112,429

961,348

1,011,131

VENEER329,220271,259

360,263

321,155

270,718

MDF/FIBREBOARD

181,710

174,801

173,541

165,881

199,849LAMINATED BOARD

33,466

68,22622,25352,35574,741

MOULDINGS

28,661

60,661

26,31958,33064994

DOWELS

8,655

23,515

7,256

16,825

14,630PARTICLEBOARD

104,565

42,005

111,805

41,71549,900LAM.VENEER LUMBER

81,176109,973

78,475

114,472

130,924WOODCHIPS (TONNE)

220,325

25,842

292,603

31,58225,351OTHER PRODUCTS

96,73689,312

54,731TOTAL

7,106,285

7,234,453

8,627,235% EARNINGS TO SARAWAK

161412Economic Contribution of Timber Industry to Sarawak

Important contributor to the socio-economic developmentof Sarawak in term of:3rd largest foreign exchange earnings (RM8,627 in Y2006)
Investment opportunities
Employment opportunities (direct employment of about
50,000)Catalyst physical development of Sarawak
Promote transfer of technology

13Factors Contributing to Growth in Timber Industry

Continuous growing demand from overseas market due to
its reliability in meeting customers’ quality, requirements
and regulating laws
Strong and accepted laws, regulations, rules andprocedures established and implemented to regulate theindustryAbility to implement an effective, reliable and trusted
internal regulating mechanisms
Acceptance of customers’ on the administrative systemused
Ability to curb and control illegal activities to a
manageable level
Good relationship with traditional customers

14Regulatory and Administrative Requirements

15Illegal Logging Definition
Illegal Logging is defined as when timber is felled,transport, sold or transact in violation or not in
conformity with the national and state laws,ordinances, regulations and rules

16Issues of Illegal Timber•

Harvesting without authority in designated national parks orforest reserves•Harvesting without authorization or excess of concession
permit limits•Failing to report harvesting activity to avoid royalty payments
or taxes•Violating national trading laws, ordinances, regulations andrules

17

The Sarawak Timber Industry (Registration) Regulations, 1999

Regulation 3(1)Notwithstanding any other written laws, no person shall be engaged in orassociated with:a) The manufacture of timber; orb) The sale, distribution or marketing of timber.
Unless he is registered under these Regulations.

18Pre-requisite Regulatory Requirements
Registration of Companies in Wood Based Industry

Pre-requisite
Register withCompanies
Commission ofMalaysia

Category
Manufacturer
All activities
except sawmill

Apply to Register
STIDC

Exporter
Importer
Local Sale
Warehouse

Inspection &Verification

Approval

STIDC

STIDC

Operational

Procedure is certified under ISO9001:2000

19

The Industrial Co-ordination Act, 1975

Malaysia’s Industrial Coordination Act, 1975 (ICA) aims to secure orderly
development and growth in the country’s manufacturing sector.
The ICA requires manufacturing companies with shareholders’ funds of RM2.5
million and above or engaging 75 or more full-time employees to apply for amanufacturing licence for approval by the Ministry of International Trade andIndustry (MITI).
In Sarawak, manufacturing licence for operation with shareholders’ funds ofless than RM2.5 million and or engaging less than 75 or more full-time
employees is approved by the state Industrial Co-ordination Committee (ICC)
Manufacturing activity is define as making, altering, blending, ornamenting,finishing otherwise treating or adapting any article or substance with a view toits use, sale, transport, delivery or disposal; and includes the assembly of partsand ship repairing but shall not include any activity normally associated withretail or wholesale trade.

20Regulating Procedures for Timber Processing Mills

Paid-up capital >RM2.5 mil
Monthly Production
ReturnWorkers 75 and above
Sawmill
MITI

Forest Dept

Industry

Manufacturing
LicenseObtain Mill
LicenseOperational

Industrial

STIDC

SFC

Other
processing
mills

Harwood
TimberCoordination
Committee

Inspection

ExportLocal Use

STIDC

Paid-up capital <RM2.5 mil
Workers less than 7521

Forests Ordinance, The Taking of Forest Produce

Section 49(1)“The taking of forest produce in forests reserves and protected forests shall becontrolled and regulated by the Director who may a) Issue such licences or permits in such form and under such conditions as
he may deem expedientb) Call for tenders for the right to take forest produce from a specified areac) Fix the fees, royalties, premia or other payments to be made in respect ofsuch forest produce in any particular cased) Permit any other works that he may deem necessary for the taking of suchforest produce or for the management of the forest”

22Regulatory
MRPML&S
Sarawak River Board
Land Transport Department
Port Authorities

23

Flow of Timber and Timber Product

Licence Area
ForestLog
Landing

Transit
Point

ExportSawmill

ExportRamin
Import
PortEntry
Port

Processing

Restricted
Species

Local
Sale

Others24

Harvesting in Licence Area
• Primary source of timber
supplyLicence Area

Forest`Log
Landing

Transit
Point

Export• Approval of harvesting andforest engineering plan
• Approval to enter annual
coupe

Sawmill
Ramin
Import
PortEntry
Port• Onlycompanies
issuedlicence allowed to extract
timber from the forest

Processing

Restricted
Species
OthersExportLocalSale• Forest inventory• Harvesting according to planapproved• Stack logs at landing point• Mark block/coupe numberon every log harvested• Moved to transit point withLog Trucking List25

Production Number26

Transit Point• Log measured and graded• Identification of use (exportof domestic)

Licence AreaForest`

Log
Landing

Transit
Point

Export• Hammer/property marking• Log specification

Sawmill
Ramin
Import
PortEntry
Port

Processing

Restricted
Species
OthersExport• Taggingcolourswith• Inspection
Harwoodbydifferent
SFC&• Serial number issued
LocalSale• Transit Removal Pass• Transferofaccompanyspecification
removal passlogs
mustwithlogand transit• Pay royalty
27

Transit Point28

Export of Logs

Licence Area

Forest`Log
LandingTransit
PointExport• Apply export permit fromSTIDCwithcomplete
supporting documents• CUSTOM Form 2• SFC Transit Removal Pass(Log)

SawmillRamin
Import
PortEntry
Port

Processing

Restricted
Species
OthersExportLocalSale• Log Specification• Export
Certificate

Clearance• Source of timber supply29

Issuance of Import Licence• Approval of import permitand quota

Licence Area

Forest`Log
LandingTransit
PointExportImport
PortEntryPort

Processing

Restricted
Species
Others• Inspection
bySTIDC,Harwood, SFC and Dept ofAgriculture• Hammer Marking

SawmillRamin• Custom Declaration

ExportLocalSale• Tagging• Removal Pass
• Inspection at mill gates

30

Timber Processing• Obtained
manufacturing
licence (ICA/ICC)

Licence Area

Forest`Log
Landing

Transit
PointExport• Mill licence (Forest Dept)• Register with STIDC• SFC & Harwood inspect logs
at mill gate

Sawmill
Ramin
ImportPort

EntryPort

Processing

Restricted
Species
OthersExportLocalSale• Mill to submit monthlt
production return to STIDC• Check grading by STIDC forsawn timber• Company to maintain their
supplier list

31

Export Permit of Timber and Timber Products

Licence AreaForest`

Log
LandingTransit
PointExport• STIDC verify, inspect andapprove• Customregisteracknowledge approval

SawmillRamin
Import
PortEntryPort• Registered company submit
application to STIDC use
CustomForm2withcomplete
supporting
documents

Processing

Restricted
Species
OthersExportLocal
Saleand• STIDC issued export licenceon Custom Form 2 withauthorized signature andofficial stamp• JointSFC&inspection at port

Harwood• Declaration of goods withCustom and Port Authority

32

Export Permit of Timber and Timber Products
Supporting Ducoments:• STIDC Grading Certificate

Licence Area

Forest`LogLanding• Exemption
fromCertificate (for Ramin)

Transit
PointExport• CITES Certificate
Dept (Ramin)

fromGrading
Forest• Permit to Export Sepetir from
Forest Dept
• Packing List

Sawmill
Ramin
Import
Port

Entry
Port

Processing

Restricted
Species
OthersExport• Declaration of Source of Supplyof Timber Products• Shipping Order

LocalSale• Invoice• Log Specification (Log Export)• Removal Pass (TRP from FD)(Logs Export)• Log Quota Compliance Report• Other additional requirements
by exporting countries
33

SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION

Process Flow Chart for Export License Scheme

APPLICANT/EXPORTERSTARTEXPORTEREXPORTER

Submits Application

Approved & STIDC
Produce Export License
SUPPORTING DOCUMENTSNO

INSPECTION& VERIFY

YES

STIDC
NO

APPROVEYESHARWOODTIMBER
SDN.BHD.

NO• STIDC Grading Certificate(for Sawntimber except Ramin)• Exemption from Grading
Certificate (Ramin sawntimber)• CITES Certificate from FD(Ramin sawn & timber Products)• Permit to Export Sepetir from FD• Shipping Order• Invoice• Packing List
• Log Specification (Log Export)• Removal Pass (TRP from FD)(Logs Export)• Declaration of Source of Supplyof Timber Products• Log Quota Compliance Report

APPROVED EXPORTLICENSE• Print Export License
at the back of CDF No. 2• Authorized Signatory

EXPORT POINT• Inspection by SFC for Exportof Ramin timber Product• Joint Inspection by Harwood
Timber Sdn.Bhd & SFC(for logs Export)

REGISTERSFCYESCUSTOMSCUSTOMSACKNOWLEDGECUSTOMSEXPORTEndENDORSE & GOODS
CLEARANCE34
Updated 21/02/2007

CHAIN OF CUSTODY (CoC) SARAWAKORGANIZATIONFOREST LICENSEFOREST (LANDING)

TRANSIT CAMP

LOG PONDMILL

EXPORT

POINT

ForestDepartment

LoggingCompany/
Licensee
Sarawak
Forestry
Corporation(SF & C)• Approve Forest

License• Issuance ofForest License• Re-trim, re-scale,
re-grade• Sort-export/mill• Tagging logs serial no• Prepare log specs• Apply royalty marking• Scaling,• General Harvesting
Plan (GH)• Detailed Harvesting
Plan (DP)• Permit to Enter
Coupe (PEC)• TimberHarvesting• Marking &Tagging

Grading& Sorting• Property
Mark• Royalty Assessment• FD Hammer Marking• Issuance ofRemoval Pass (Royalty)

FOR LOGS EXPORT• Inspection
before Removal• Issuance of TRP

FOR MILLING LOGS
Harwood
Timber
Sdn.Bhd

Sarawak
Forestry
Corporation(SAPU)
TimberIndustry

STIDC

CUSTOMS• Inspection ofMilling Logs
• Endorsement
Clearance
Certificate(ECC) issued• Inspectionof Milling
Logs byriver transport• Issuance ofShipping Pass•Inspection ofMilling Logs
on arrival atMill• Inspection ofLogs on arrivalat Mill• Inspection of Logs
• Issuance of Export
Clearance Certificate(EXCC)•Checkingof Incoming
Log•Recordsverified• Inspectionof Logs
• Issuanceof TRP• Processing

Logs intotimber Products• Process & Verify Application• Inspection ofTimber Products• Issuance of Export License

35
Customs Clearance& Endorsement

CONCLUSION
Sarawak formulated and implemented a reliable legal framework andregulatory system to manage the forest and timber industry
The implementing agencies and stakeholders alike uphold dutifully tothe system implemented
Administrative system is multi-agencies linked to ensure continuous
auditing along the supply chainImplementing agencies certified core functions under ISO 9001:2000
quality management systems
Third party audit and continuous improvement are important elements
to adhere in ISO:9001:2000 system
Sarawak government allow transparency by inviting and allowing
external credible parties to evaluate the system implemented
Consumers can procure without doubts that timber issued with export
permit issued by STIDC is deemed “legal”

3637