CHAIN OF CUSTODY FOR SARAWAK - TIMBER TRACKING PROCEDURES
Datu Haji Len Talif Salleh1
1

Sarawak Timber Industry Development Corporation, Malaysia

There has been a growing demand lately for genuinely need of proof that timber traded in the global market place is supplied
from legal sources. In testimony, major consumer countries of tropical timber products such as Japan and Europe had drawn
in the pipeline public procurement policies for the trade of legal timber products. Both the industry and the state governmentof Sarawak viewed this development positively. Such a move is in consonance with the continuous effort done by Sarawak
authority to garner customer confidence that industry has always been managed in a manner adhering to the rules and lawsof the country.

INTRODUCTION
Sarawak is the one of the major suppliers of tropicaltimber in the global market. Latest foreign exchangeearning from the export of timber products for Sarawak
improved about 15% from US$2 billion in 2005 to
US$2.31 billion in 2006. This industry generates
investment opportunities, provides employment of multi
disciplines, catalyze transfer of technology and spur
regional development for Sarawak. In all fairness, it is ofutmost importance to ensure that the industry continue tosustain its contribution to the socio-economic
development of the general population at large.
The development of the timber industry that
contributes to the economic well-being of Sarawak was
attributed to internationally commendable sound andtransparent forest management practices implemented
over the years. It was supported by effective legal
framework, efficient regulatory system and continuously
improved administrative mechanism from the forest down
to the export exit point of the country. The system
implemented had not only catalyzed economic benefits
but also successful in curbing illegal practices to a
manageable minimum level.
Illegal timber in the context of Sarawak is timber
which is harvested, transported, bought or sold in
violation of national laws. Such practices include
harvesting without proper approved concession permit,
harvesting in violation of permit conditions, failing to pay
royalty and non-compliance to trading rules. The overallmanagement of the forest resource and industry
particularly in curbing illegal activities for Sarawak has
been adequately defined in the state constitution.
The objective of this paper, therefore, is to highlightthe primary regulatory framework used to manage overall
forest and timber downstream industry in Sarawak. This isnecessary to inform consumers that timber procured from
Sarawak with legitimate documentation is assured
sourced and traded legally. Such understanding isimminent to ensure continuous acceptance of the timbertracking system used in Sarawak.

LEGAL FRAMEWORKThe existing acts, ordinances, regulations and rules
which are relevant to regulate and manage the forest andforest industry sector in Malaysia in general and Sarawak
in particular are listed in Appendix I.
Forest Concession
The management of land and forests in Sarawak isunder the administrative purview of the state government.
The gazetted primary laws applied to management offorest resources are the Forest Ordinances, 1954,
Sarawak Wildlife Protection Ordinances, Forest Plantation
Ordinance, Natural Resources and Environment
Ordinances and Sarawak Forestry Corporation Ordinance1995.
The right to extract timber from forests in Sarawak is
only granted to companies holding concession license
issued by the Ministry of Planning and Resource
Management and managed by the Forest Department ofSarawak. Each concession, before the start of harvesting
activities, must have an approved plan pertaining totimber inventory, harvesting blocks and coupes, annual
volume of timber harvest, forest engineering plan andenvironmental impacts assessment.
Timber Processing
Any establishment for all types of manufacturing
including the processing of timber is required to obtain
manufacturing licence from the Ministry of International
Trade and Industry (MITI) under the provision of
Malaysian Industrial Co-ordination Act 1975 (ICA) after
obtaining support from the Sarawak Industrial Coordination
Committee(ICC).
Afterobtaining
manufacturing licence approval from MITI, themanufacturing company is required to obtain mill licencefrom Forest Department under Section 66 of the Forest
stOrdinance (Sarawak Cap. 126). With effect from 1 June
2007, STIDC will be authority to issue registration of millfor manufacturing involving in all kinds of timber
processing activities except sawmilling.

before the logging crew can implement the timber
harvesting in the approved block.

The Sarawak Timber Industry (Registration)
Regulations, vested powers to Sarawak Timber Industry
Development Corporation (STIDC) to register any
persons engage in or association with the manufacture,sale, distribute, storing and marketing of timber inSarawak. The penalty for any person who contravenes
this regulation was reviewed to RM300,000 (USD83,000)
in 2006.

The felled trees are de-crowned, bucked and skidded
to the log landing at the roadside. These logs are thendebarked and trimmed in accordance with the Licensee’s
requirement. Thereafter, tractor numbers are painted onto
the logs as a means of verifying that the logs are
extracted by a particular crew in the approved block.
Some licensees may affix their own tags (optional) onto
the logs.

Export Permit

Then the logs are affixed with white plastic tags toshow the coupe/block number and species. Blue plastic
tags are used for logs harvested using helicopter. These
plastic tags remain intact as verification features during
movement throughout the supply chain. The logs are thenloaded into the truck accompanied by Log Trucking List to
be transported to transit camps.

All sawn timber exported from Sarawak must be
graded in compliance with the Malaysian Timber Grading
Rules, 1984. Under the Timber Grading Regulations,
1983, STIDC is vested the power as Grading Authority tocheck grade at least 10% of the exported volume.
Under the Malaysian Custom Act 1967, STIDC isgiven the power to issued export and import permit oftimber products by the Malaysian Royal Custom
Department. An electronic permit issuance permit system
known as Sistem Maklumat Kastam (e-permit system)
had been developed and used since 2006. All exporters
must register to obtain their e-permit number as user ofthe e-permit system.

Regulating Agencies
There is not less than 8 agencies involved directly
issuing and cross checking documents for planning,
extraction, processing and trade of timber in Sarawak.
These departments are:a. Ministry of Planning and Resource Managementb. Forest Department
c. Natural Resources and Environmental Board
d. Sarawak Forest Corporatione. Sarawak Timber Industry Development Corporation
f. Harwood Timber Sdn Bhd
g. Royal Custom Department
h. Port Authorities
These organizations have their own procedures whichhave formed a very effective approach of implementing
and auditing the timber tracking system implement at
each point.

At the transit camps, the logs are unloaded andarranged properly to be trimmed, measured and graded.
All logs will be hammered marked at each end and at the
middle with the registered mark of the licence holder
under which the logs were harvested. Every licenceholder is assigned an approved and registered property
mark by the Director of Forests. At this point, logs aremarked with different tags to classify its respective
intended utilization (sawmill, plywood and export). After
grading and documentation is completed, the logs canthen be delivered to log ponds. Each truck must be
accompanied with the log trucking list to detail the logs
ferried.
At the log pond, the logs are further graded andsorted according to quality and end use (export or local
processing). Each log will be assigned with a uniqueserial number on plastic tags. Different alphabets areused as log serial numbers on plastic tags with different
colours to differentiate distinctly its intended used. The
tag colours and alphabets used are as follows:(a)Tractor and Kuda-kuda Logging Systems
Logs for export
White tag
A–L
Logs for sawmills
Yellow tag M – S
Logs for veneer/plywood mill Orange tag T – Z
Poles ( 30 - < 40 cm diam.) Purple tag
Poles ( 20 - < 30 cm diam.) Pink tag

Timber Harvesting(b)
Heli-Harvesting System
Logs for export
Blue tag
Logs for sawmillsBlue tag
Logs for veneer/plywood Blue tag

Only company issued concessions by Forest
Department is allowed to extract timber from the forest.
Before extraction can commence, the concession owneris to prepare and submit for approval their detailharvesting plan. The felling permit or commonly known asa Permit to Enter Coupe issued is to be endorsed by SFC

The
concession
licenseewillcomplete and submit Log Specification Forms to SFC for
log inspection. Log inspection is only carried out after
SFC had verified that the Licensee is clear of any
offences, unpaid outstanding royalty and other related
irregularity. SFC will carry out log inspection by checking

TIMBER TRACKING

HA – HL
HM – HRHT – HZ

log measurement, species, property marks, plastic tags
and number of log pieces. After satisfactory verification
exercise, royalty marking and removal pass will be carriedout to enable the logs to be transported to its finaldestination. Similar verification process is conducted forthe issuance of transit removal pass.

efficient delivery system, an electronic system wasdeveloped and now been used to process application andapprove export permit electronically. This system enables
accurate and real-time information management. The epermit system had been implemented state wide since
2006.

This exercise is in accordance with the rules whichstates no forest produce shall be removed to any placefrom any Forest Checking Station unless the person
actually removing it is in possession of a removal passrelating to such produce, issued under the hand of aforest officer and, if it is timber, unless it bears theprescribed Government hammer-mark denoting that it has
been assessed for royalty.

Exporters are registered and assigned unique
identification in order to do electronic permit applicationtransaction. It is a form of in-built verifying and monitoringmechanisms to curb illegal transaction.

Logs arriving at the export point and mill gates, will
be rechecked in term of measurement, species, property
marks, plastic tags and number of log pieces by SFC.
Harwood Timber will inspect the logs to ensure that it has
been shipped in accordance with its intended utilisation ofeither for export or reserved for domestic processing. An
Export Clearance Certificate (ExCC) is issued for export
logs which fully adhere to the specified requirements.
After verifying compliance through physical inspection
based on ExCC, SFC will issue the final Transit Removal
Pass. The Transit Removal Pass will be submitted as theverifying documents used to process application forexport permit. A similar physical inspection procedure isadhered at the mill gates for logs allocated to sawmill,veneer and plywood mills.

Timber Processing
All logs arriving at the mill will be physically inspectedby SFC and Harwood Timber at the mill log ponds. The
logs detail is verify against the information contained in
the accompanying Transit Removal Pass andEndorsement Clearance Certificate documents. The millcan only processed the log after it was physically verify
tally with the information in the accompanying documents.
All mills are required to submit their monthly production
return to STIDC which will be use to verify production
input and output of the mill.
As a prerequisite regulatory requirement, all mills
must have a valid mill license issued by Forest
Department and registration as manufacturer from STIDC.
Beginning June 2007, the registration of mills for all typesof timber processing activities except sawmill will be
issued by STIDC. The mill licences and registration
issued shall be valid for only one year and subject toannual renewal.
Export Permit Issuance
STIDC had been authorised by Royal Customs
Department Malaysia to issue export permits for timber
products exported from Sarawak. To facilitate a more

The export permit processes starts when the exporter
submits the Custom Declaration Form (CDF 2) on line
using the e-permit system. The application detail includes
consigner, consignee, shipping agent, description of
goods, destinations, timber volume, timber values andtimber quantity. Supporting documents submitted byexporter for the export of logs are transit removal pass,
shipping order, invoices, log specifications, summary oflogs, trade license, STIDC Registration Certificate andletter of log quota compliance. In the case of permit for
timber products, the exporter is to submit invoice, packing
list, shipping order, supplier list and grading certificates(for sawn timber). Export of Ramin must be accompaniedwith additional documents like grading exemption
certificate and CITES certificate issued by Forest
Department. Special export permit from Forest
Department is required for export of timber species like
Gaharu, Belian, Bakau, Sepetir and Bintangor.
Export of sawn timber is to be accompanied bygrading certificate. Timber Grading Regulations, 1983
requires all sawn timber to be exported are to be gradedin accordance with the Malaysian Grading Rules for Sawn
Hardwood Timber. STIDC will conduct a 10% check
grading of the consignment as detail in the schedule ofTimber Shipped to ensure grading compliance.
STIDC verifies e-permit application by checking theaccuracy of the supporting document received.
Applications with incomplete or inaccurate information are
rejected. Approval of permit application is transacted
electronically. STIDC will conduct physical inspection
before approval is granted. The Sistem Maklumat Kastam(e-permit system) will register, acknowledge and assign
permit number to each application approved. The Royal
Custom Department will issue acknowledgment of permit
approval. Exporters applying the permit will print theCustom acknowledgement on the CDF 2 form and submit
it to STIDC for endorsement of approved export permit.
The export permit is valid for not more than 3 days. New
application is required to replace permit exceeding the
expiry limit.
The exporter will submit the integrated shipping
documents and outward manifest to the Customs for entry
into the e-declare database system. Custom will give
feedback to STIDC via on-line on the clearance status of
the goods at the port. A copy of the approved e-permitand e-declare documents will travels with theconsignment. These documents can be used as proof
that the timber in the consignment is legal in accordancewith the law of the country and tracking can be done by
way of assessing the information detailed in those
documents.
TIMBER IMPORT
Beginning 3 July 2000, STIDC is empowered by thestate government to manage and control the import oftimber including sawn timber from Indonesia. Sarawak
share long land and sea border with its neighbouring
Kalimantan, one of the Indonesian provinces in Borneo
Island. For decades, there has always been in-flow ofgoods including timber passing through the borders fromIndonesia to Sarawak.
In effort to control illegal entry of timber, Sarawak has
designated 5 entry points for timber from Indonesia. The
five entry points are Sematan, Biawak, Tebedu, Batu
Lintang and Lubok Antu. These entry stations areoperated under the ambit of STIDC and being assisted by
Harwood Timber. The purpose is to control and monitor
the import of timber from Indonesia to ensure that only
timber from legal sources is allowed.
All importers must register with STIDC. Importer ofsawn timber from Indonesia will submit application for
Custom clearance using Borang Kastam 1 and to besupported with the Pemberitahuan Eksport Barang (PEB)and Surat Keterangan Sahnya Hasil Hutan (SKSHH) fromIndonesian authorities. STIDC will inspect and ensure thattimber of Ramin species is to be supported with CITES
certificate issued by the Indonesian authority. An
inspection note will be issued by STIDC. Timber can only
be allowed entry after it has been verified having
adequate supporting documents.

activities, however, are within the manageable limit. In
addition, preventive measures are being in placed tocreate awareness and prevent illegal practices cropping.
Every regulating agencies involved has form its own
preventive and enforcement units to tackle illegal
activities. Inter-agencies joint patrols are being conductedfrom time to time. In some instances, the assistance ofmilitary and police personnel are sought.
The multi-agencies involvement in tracking timbersource before issuing an export permit serve as internal
audit to the system implemented. Each agency has the
responsibility to verify information and documents used
are accurate and authentic. In addition, the relevant work
procedures of these departments are certified under the
ISO 9001:2000. Third party audit is the major requirement
to maintain certification under ISO 9001:2000 quality
management system. The system also emphasize on
continuous improvement on the overall work procedures
implemented.
Obviously, the management of the overall forest andtimber industry is being governed by the existing laws,
regulations and rules. As it is so, efforts are being done toimprove the existing regulatory procedures implemented
to strengthen its effectiveness.
Efforts are continuously being made to ensure thesystem used is transparent. Sarawak government has
engaged URS Australia Pty Ltd to looked at theeffectiveness and identify gap for improvement the forest
chain-of-custody systems used in Sarawak. Initial findingof this study revealed that there is a chain of custodyestablished in Sarawak for log production through to local
processors and log export points. The state government
is looking into the recommendations proposed by URS tostrengthen the acceptance of the system in place.
CONCLUSION

The timber will be transported to and unloaded at
Harwood Timber deport. Here the timber is physicallytallied by Harwood Timber to ascertain the quantity andspecies. After which the receipt note is issued and thetimber will be neatly stacked and bundle. The importer willsubmit application supported by relevant documents forhammer marking using Form A.
STIDC will validate the document received andconduct hammer marking and tagging on timber. Finally,a removal pass is issued to enable the timber to be
removed to its destination using Malaysian registeredvehicles. The timber will be assigned a unique serial
number used as reference on the tag and the removal
pass.

PREVENTIVE MEASURES
Despite stringent laws enforced, it cannot be denied
that there may be some element of illegal activities. Such

The present legal framework and regulatory systemused in Sarawak to manage the forest and timber industry
has been successful in sustaining the development of theindustry for the last 3 decades. It is the duties of all
stakeholders concern particularly the government and theinvestors alike to play equally important role in upholding
the good management practices to ensure thesustainability of the industry for the future generation.
Glitches in the system will be rectified. Gaps highlighted
will be narrowed at least but neutralise ultimately.

References[1] URS Pty Ltd, “Review of Chain of Custody Systems
Operating in Sarawak, Malaysia”, 12 January 2007
[2] Seneca Creek Associates, LLC and Wood Resources
International, LLC, “ ‘Illegal Logging’ and Global Wood
Markets: The Competitive Impacts on the US Wood
Products Industry”, November 2004
[3] Sarawak Timber Industry Development Corporation
Ordinance, 1999, Sarawak

Appendix I
LIST OF RELEVANT REGULATING LAWS
1.
2.
3.
4.
5.
6.
7.

[4] Forests Ordinance, Chapter 126, 1995
[ 5]
The Sarawak Timber Industry (Registration0
Regulations, 2006

8.
9.
10.
11.
12.
13.

14.
15.

Forest Ordinance, 1954
Wildlife Protection Ordinance 1998
Natural Resources and Environment (Amendment)
Ordinances1997
Forests (Planted Forests) Rules 1997
Sarawak Land Code
Sarawak
TimberIndustry
Development
Corporation Ordinance, 1999
The Timber Industry (Registration) Regulations,
2006
The Timber Grading Regulations, 1983
The Malaysian Grading Rules for Sawn Hardwood
Timber, 1984
The Industrial Co-ordination Act 1975
Malaysian Custom Act, 1967
Occupational, Safety and Health Act 1994
Occupational Safety and Health (Control ofIndustrial Major Accident Hazards) Regulations
1996
Environment Quality Act 1974
Environment Quality (Clean Air) Regulations, 1978