PAPUA NEW GUINEA FOREST AUTHORITY
NATIONAL FOREST SERVICE

Forest & Log Export
Monitoring Systemin Papua New Guinea
Bruce TelferGeneral Manager
SGS PNG Ltd
26th February 2007

PRESENTATION SUMMARY PNG Forest Sector
 PNG Forest Concessions
 Role of PNG Government in Monitoring Role of SGS in Monitoring Log Smuggling Legality Issues Problems
 Potential Solutions

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PNG Forest Sector
 Total land area of 46 m ha. Forested area is 39.3 m ha of which
15.2 m ha (39%) has been classified as Productive with 11.2 m hahaving harvest rights secured by Government.
 National Allowable cut is quotes as 5.7 m m3 but the actual annual
harvest is nearer to 3 m m3.
 Log exports currently at a level of 2.5 m to 3.0 m per annum.
 About 80% of export logs go to China and 10% to Japan.

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PNG Forest Sector
 The ownership of almost all forested land in PNG remains with thetraditional landowners and access can only be gained to theseafter Government has negotiated an agreement with theselandowners.
 Monitoring and control of all forest operations is the responsibilityof the PNG Forest Authority (PNGFA).
 The PNGFA has appointed SGS (since 1994) to monitor all export
log shipments on its behalf.
 Therefore the role of export monitoring for PNG’s logs is shared
between the PNGFA and SGS.

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PNG Forest Concessions
 Under the Forest Act of 1991 (& subsequentamendments) the PNGFA issues a Timber Permit(permission to harvest logs) only after an exhaustive 34
step process:• Begins with an awareness process with traditional landowners• These landowners must sign up to a Forest Management Agreement• Development Options Study then completed by PNGFA• Tender Process for the selection of a developer• Extensive consultation processes through all steps at the landowner,
Provincial and National Level.
• Successful bidder is granted a Timber Permit to operate which
stipulates harvest/export quotas, development required in the area,
benefits to be provided e.g. royalty, levies etc
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PNG Forest Concessions
BUT Most of PNG’s current forest concessions are operating
under Permits that precede and are preserved by the1991 Forest Act. These are mostly:• Timber Permits (TP) issued under a Timber rights Purchase
Agreement signed between Government and traditionallandowners.
OR• Local Forest Areas (LFA) signed directly between traditionallandowners and developers.
• In many cases the TPs and LFAs are held directly by landownercompanies who engage a developer under a Logging andMarketing Agreement

6Role of PNG Government in Monitoring All PNG forest concessions are subject to planning,monitoring and control regulations established by thePNGFA. These are designed to ensure that logging:• proceeds in an orderly fashion as per the Timber Permit,• is excluded from socially and environmentally sensitive areas &• takes place in accordance with sound silvicultural andenvironmental principles - PNG Logging Code of Practice (1996)

 Monitoring is carried out by the 120 staff of the Field
Services Division of the PNGFA. Major concessions
have Project Supervisors based on site.
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Role of PNG Government in Monitoring PNGFA Field Services Division has formal documented
procedures for monitoring, reporting and approval
processes.
• 5-year, annual & coupe logging plans are field checked• PNG Logging Code of Practice PNGFA licenced log scalers are the only people
authorised to measure logs
 PNGFA ensures that companies affix SGS bar-coded
log tags at time of first log measurement.

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Role of PNG Government in Monitoring PNGFA Marketing Division in Head Office is responsible
for approving the export of logs and forest products.
 This Division issues an Export Permit via the following
process:• Project must have some form of proper licence (e.g. Timber
Permit, LFA)
• Exporter applies for Price Approval for each species• PNGFA checks that the proposed volume is within the projects
approved quota.
• Royalties and other forest charges must be paid up to date

 Department of Trade and Industry must issue aseparate Export Licence for each shipment.
• Fairly automatic after PNGFA issue Export Permit.

9SGS Monitoring
SGS Group Profile
SGS is the world’s leading
inspection, verification, testing andcertification company. SGS, aSwiss company, is recognized as
the global benchmark for quality
and integrity. With more than
48'000 employees, SGS operates
a network of over 1’180 offices
and 321 laboratories in 145
countries around the world.

Businesses
 Governments & Institutions Automotive Food & Agriculture Sectors
 Oil, Gas, Petrochemicals
 Minerals
 Industrial, Engineering & Manufacturing Life Science (CRO, QC)

More information:

 Consumer Products

www.sgs.com
 Systems & Service Certification
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SGS Forestry Services

 SGS QUALIFOR: a founder-member of the FSC back in 1994,
today a global leader in forest certification with a network of 100
auditors, and accreditations under the main global and national
schemes. Also offers PEFC Certification.
 SGS Forestry Monitoring Programme: established to operate
outside accredited certification programmes; since 1995, hasdeveloped and implemented independent Verification of Legal
Timber (VLT) programmes in several countries•

Government export monitoring contracts in Cameroon andCongo (Brazzaville) as well as Papua New Guinea
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Background to SGS Contract
 Government of PNG appointed a Commission ofInquiry into Forestry 1980’s.
 This revealed widespread abuses in the Forest
Industry and major financial losses to the Nation
 particularly transfer pricing through mis-declaration ofcargo and artificial pricing.

12System Overview
 All log producers required to affix bar-coded tags tologs at time of original scaling Exporter notifies SGS directly of impending shipmentwith details of all logs to be exported

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System Overview
 SGS completes a pre-shipment check of all logs forcorrect species identification and measurement.

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System Overview
 SGS tallies shipment &issues Inspection
Report (used byCustoms and Forestry
Dept. to clear a vessel)

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System Overview• All field inspection data
sent to SGS HQ• Exporter sends allcommercial documentation
to SGS HQ (Bill of Lading,Invoice, Letter of Credit andCustoms Export Entry)• SGS HQ enters allinformation into a speciallydesigned database16

System Overview• Comprehensive monthly
reports are provided toGovernment Agencies
including Forestry, CentralBank, Treasury, Finance,Trade, Customs, Taxation
and Prime Minister’s Dept.
• Major problems arereported for prompt action
by the Forestry or Finance
Departments.

17Technology Used Bar-coded log tagging system with unique site
identifier18

Technology UsedPortable Data recorders & barcode scanners
together with project field audit software

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Technology Used Special training programmes for all staff

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Technology Used Field audit & reporting database is used incombination with scanners & PDTs.

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Export Database Provides Regular Compliance Reports and Statistics to:• Forest Department for forest management purposes (&compliance to Regulations)• Central Bank to monitor foreign exchange remittances• Tax Department for Company tax audits• Customs for duty calculation

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Scale of Operations
 Currently inspecting 2.5 to 3.0 million m3 p.a.
 From 42 active export sites
 Project employs 50 staff including 35 PNG foresters.
 One main office plus
4 small branch offices
around the Nation.

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Achievements 1995 to 2006
 Volume Inspected 26.1 million m3 with an fob value ofUS$ 1,543 million from 80 logging camps
 Project Cost – US$ 17.7 m
 Additional Foreign Exchange Earnings – US$ 120 m
 Additional Revenue to Government – US$ 92 m
 Additional Revenue to Landowners – est. US$ 10 m

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Log Smuggling No examples uncovered in 12 years of operation
 July 2001 news reports (arising from the National
Surveillance Co-ordination Centre) of 3 “illegal logships” in Gulf Region investigated:• One ship had actually been inspected• Other two vessels were actually Ok Tedi copper concentrate
carriers

 Some secret surveillance of ship loading in Gulf
Region 2005 revealed no log smuggling25

Legal Aspects
 Through the SGS system the PNG Government is providing log
buyers with an independent third-party assurance that theseexports are:• from a known source (concession of some kind)• have an Export Permit from the PNG Forest Authority• have an Export Licence from the Dept. Trade & Industry• have had Export Tax paid
• And in most cases we see evidence that the foreign exchangeis actually remitted

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Problems!!
Rabaul volcano late 1994

SGS PNG Rabaul office January 1995

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Criticisms and problems with theSystem
 Does not address the increasing demands of stakeholders(especially ENGOs) for evidence of “legality”.
 In PNG these demands are focusing on resource acquisition andconsultation processes with traditional landowners plus thecompliance of timber companies with social and environmental
regulations.
 The PNGFA and other Government Agencies (e.g. Dept. ofEnvironment and Dept. of Labour) lack the funding and otherresources needed to provide adequate monitoring.
 The word “legal’ in the PNG timber industry means different
things to different people – no accepted standard

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Criticisms and problems with theSystem There are claims from some stakeholders that “legal timber” isnot enough it must also be proven to be produced “sustainably”(i.e. raising the bar).
 Lack of formal link between log production records (PNGFA) andexport records (SGS) makes log tracking very difficult at present.
 SGS system only covers log exports and not processed products
which are growing in importance to the PNG economy.

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Potential Solutions
 Have an international 3rd party legal compliance auditing by arecognised inspection company such as SGS. Current log export
verification system is a good basis on which to build this.
 Both the PNGFA and the PNG Forest Industries Association are
actively exploring the concept of developing a “legal standard”
for PNG forest operations (for example as has been done by theForest Ministry & LEI in Indonesia recently).
 This would enable companies to enter voluntary legal verification
programmes such as the SGS TLTV (Timber Legality andTraceability Verification) service.
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Potential Solutions
 Expand the role of independent verification ofGovernment systems. Specifically the PNGFA isconsidering 2 main areas:• Add processed forest products to the scope of the present
SGS contract• Combine log production, processing and export records intoa single central database to facilitate the chain of custody
verification that must go hand in hand with any legal
verification of forest operations.

31Thank you
Bruce Telfer
SGS PNG Ltd• Web site: http://www.sgs.com/forestry_monitoring• Email: bruce_telfer@sgs.com

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