ANNEX V

HONDURAN LEGALITY ASSURANCE SYSTEM FOR TIMBER PRODUCTS (LAS)

Table of contents

1. INTRODUCTION

1.1. General context

1.2. Objective of the Honduran Legality Assurance System for Timber Products (LAS)

1.3. New tools and elements for the improvement of forestry management

2. HONDURAN LEGAL FRAMEWORK APPLICABLE TO THE LAS

2.1. International conventions and treaties

2.2. Regional conventions and treaties

2.3. National legislation on the sustainable management of natural resources

2.4. National legislation on labour market

2.5. National legislation on the payment of state and municipal taxes for the export of timber products

2.6. National legislation on administrative procedures, transparency mechanisms and public participation

2.7. National legislation applied by the judicial officers

3. ELEMENTS OF THE LAS

3.1. Definition of legality

3.2. Verification of compliance with the legality definition

3.3. Supply-chain controls

3.4. FLEGT and H-Legal licensing process

3.5. Independent auditing

4. INSTITUTIONAL FRAMEWORK AND ROLE OF ACTORS INVOLVED IN THE IMPLEMENTATION OF THE LAS

4.1. Actors involved in implementation of the LAS

4.2. State institutions

4.2.1. National Institute for Forest Conservation and Development, Protected Areas and Wildlife (ICF)

4.2.2. Revenue Administration Service (SAR)

4.2.3. Municipalities

4.2.4. Institute of Property (IP)

4.2.5. Ministry of Employment and Social Security (STSS)

4.2.6. Honduran Institute of Social Security (IHSS)

4.2.7. Ministry of Energy, Natural Resources, Environment and Mines (MiAmbiente)

4.2.8. National Agrarian Institute (INA)

4.2.9. Ministry of Agriculture and Livestock (SAG)

4.2.10. Customs Revenue Subdirectorate (DARA)

4.2.11. Government institutions indirectly involved

4.3. Private forestry sector

4.4. Civil society organisations

4.4.1. Local organisations

4.4.2. Non-governmental development organisations

4.5. Indigenous and Afro-descendant peoples of Honduras (PIAH)

4.6. Capacity-building

5. COVERAGE/SCOPE OF THE LAS

5.1. Timber products included in the LAS

5.2. Markets covered by the LAS

5.3. Sources of timber covered by the LAS

5.3.1. Timber harvested in Honduras

5.3.2. Imported wood

5.3.3. Timber not covered by this Agreement

5.4. Scope of operators included in the LAS

6. VERIFICATION OF COMPLIANCE WITH THE LEGALITY DEFINITION

6.1. Legality verification principles

6.1.1. Institutions involved in legality verification

6.1.2. Verification procedures based on the Legality Matrices

6.1.3. Storage of the means of verifying legality

6.1.4. Information systems and verification functionalities

6.1.5. Risk management principle

6.1.6. Legality audit resulting in a legal compliance certificate

6.2. Obligation of operators with regard to legality verification

7. VERIFICATION OF THE TIMBER AND TIMBER PRODUCT SUPPLY CHAIN

7.1. Principles of supply-chain verification

7.2. Identification of timber products

7.3. Declaration of supply-chain information by operators

7.4. Verification of imported timber products

7.5. Verification of timber products in transit

7.6. Verification of confiscated timber products

7.7. Verification of timber products sourced from land subject to a change in use

8. RECOGNITION OF PRIVATE CERTIFICATION

9. HANDLING OF CASES OF NON-COMPLIANCE WITH THE LAS

10. MECHANISMS FOR HANDLING COMPLAINTS

10.1. Introduction

10.2. Objectives

10.3. Types of complaint-handling mechanisms

10.4. Establishment of the complaint-handling mechanisms and governing principles

11. CONSULTATION, PARTICIPATION AND COORDINATION MECHANISMS CONCERNING THE IMPLEMENTATION OF THE LAS

11.1. Joint Implementation Committee

11.2. Technical Committee

11.3. Interinstitutional Secretariat for the Implementation of the FLEGT-VPA (SIIAVA)

11.4. National Strategy for the Control of Illegal Logging and Transport of Forest Products (ENCTI) and its links to this Agreement

12. INCENTIVE, PROMOTIONAL, SAFEGUARD AND MITIGATION MEASURES DESIGNED TO INVOLVE THE SECTOR'S VARIOUS ACTORS IN THE IMPLEMENTATION OF THE LAS

Appendix 1. Links in the supply chain (pine forest)

Appendix 2. Links in the supply chain (broadleaved forest)

1. INTRODUCTION

1.1. General context

Latin America has the highest rate of deforestation in the world and Honduras has one of the region's highest annual deforestation rates. Deforestation and forest degradation have a range of causes, mainly the encroachment of extensive cattle farming and monocultures (such as oil palm), illegal logging in the form of clearance, forest fires and unsustainable harvesting.

The repercussions and negative impacts as illustrated by the destruction and deterioration of forests caused by illegal logging, and the conversion of rainforest into farmland, results in reduced biodiversity and the limitation or loss of the natural resilience of forest ecosystems. There is also the financial loss resulting from non-payment of fees and tax evasion.

1.2. Objective of the Honduran Legality Assurance System for Timber Products (LAS)

The objective of the LAS is to improve governance in the country's forestry sector, ensuring strict legal compliance by all operators in the forest supply chain.

This objective covers the assignment of forest-use rights, the harvesting of raw materials, transportation of timber, primary processing, secondary processing and trade in timber products on both domestic and international markets, based on the application and enforcement of current legislation and the improvement of existing government control systems.

1.3. New tools and elements for the improvement of forestry management.

Although the licensing of legal timber under FLEGT is a key objective of the process of negotiation and implementation of the VPA, it is not the only expected outcome. For these licences to be issued, and to meet the expectations of Honduras and the EU in terms of improving forest governance and promoting the legal timber trade, new tools need to be developed to reinforce legality verification. For this reason, the Agreement proposes a number of new and innovative elements that are expected to have a positive impact on governance of the forestry sector. This set of elements, in place or yet to be developed, make up the Honduran Legality Assurance System for Timber Products (LAS). These elements, at both organisational and institutional levels, include in particular:

Definition of legal timber

(a) Establishing legal requirements, which are included in the Legality Matrices, for all sources of timber supplying the domestic market, and exports to any destination, including imported wood.

Supply chain controls

(b) Implementation milestone of this Agreement: Development and implementation of the Timber Traceability IT System (SIRMA): improved checking and controls on the volumes of wood along the supply chain, thanks to connection with other information systems (both the internal ICF system and systems in place at other institutions) and to information exchange with other countries (medium term).

(c) Information exchange and cross-referencing between SIRMA and Honduras's Automated Customs Revenue System (SARAH) (medium term).

(d) Implementation milestone of this Agreement: Introduction of due diligence for all operators. Inclusion in the legal framework of an obligation that reduces the risk of operator non-compliance to a minimum, regardless of whether the product is sourced locally or overseas (medium term).

Verification procedures

(e) Tougher application of all legislation included in the Legality Matrices (long term).

(f) Reinforcement of controls on harvesting in forest areas subject to rescue and recovery plans, particularly where greater efforts are required for monitoring along the supply chain (long term).

(g) Consolidation of the National Forestry Information System (SNIF) to create an effective and appropriate link to other related institutions, and also to allow users to access information that is of interest to them (medium term).

(h) Implementation milestone of this Agreement: Creation and management of a database on the degree of operator non-compliance with LAS requirements (medium term).

(i) Implementation milestone of this Agreement: Implementation of a risk-based legality audit as a means of checking that all operators comply with LAS indicators and requirements (medium term).

(j) Implementation milestone of this Agreement: Creation of a legal compliance certificate – resulting from the legality audit – as proof of compliance with LAS requirements (medium term).

(k) Recognition of private voluntary certification, subject to equivalence with the Legality Matrices. Bearing in mind the procedures set out in Section 8, the legality, forest management and/or chain of custody certificates issued by accredited certifying bodies may be accepted as evidence of partial or full compliance with the legality indicators in order to avoid duplication of work and as a way to simplify this verification (medium term).

FLEGT Licensing Procedures

(l) Issue of FLEGT licences, ensuring compliance with LAS requirements for all shipments of wood to the EU. The requirements for the issue of H-Legal licences must also be complied with for wood exported to other countries (medium term).

Independent audit

(m) Independent audit of the system, to ensure the credibility of all elements of the LAS and propose adjustments to remedy any weaknesses identified (medium term).

(n) Implementation milestone of this Agreement: Creation of an Interinstitutional Secretariat for the Implementation of the FLEGT-VPA (SIIAVA) to coordinate the activities and input of the various government institutions involved in the development and implementation of the LAS. This body will be a space for dialogue and coordination to ensure, together with other bodies such as the Technical Committee, successful implementation of this Agreement in an interactive and deliberative manner, so that all stakeholders are involved, aware of and committed to improving forest governance (short term).

(o) Implementation milestone of this Agreement: Implementation of Free, Prior and Informed Consultation (FPIC) in the forestry sector, under the provisions of the corresponding law once in force (medium term).

(p) Stepping up of efforts to place forest land without title deeds in state hands, with a focus on the legalisation ("regularización" and "saneamiento jurídico") of land not owned by the State and covered under the community forest management contracts issued by the ICF (long term).

(q) Stepping up of efforts to legalise ownership for PIAH of lands ancestrally possessed by them (long term).

(r) Reinforcement of the institutional capacity of the Ministry of Employment and Social Security (STSS) and the Honduran Institute of Social Security (IHSS), providing them with the necessary resources for the effective facilitation and supervision of the indicators and means of verification of the Legality Matrices (long term).

(s) Capacity-building for artisan operators in the sector, in terms of legal compliance (long term).

2. HONDURAN LEGAL FRAMEWORK APPLICABLE TO THE LAS

The legal framework for timber products in Honduras has diverse elements, consisting of international conventions and treaties (regional and extra-regional), the Constitution of the Republic, secondary laws, regulations and other standards specifically applied by the different government institutions depending on their sphere of competence. The institutions involved in the LAS liaise with each other to verify the legality of Honduras's timber products.

The Legality Matrices set out in Annex II and below describe the key legal instruments relating to the different elements of legality and the LAS, which will be verified before each FLEGT licence is issued.

2.1. International conventions and treaties

— International Labour Organization Convention No 169 concerning Indigenous and Tribal Peoples in Independent Countries.

— Convention on International Trade in Endangered Species of Wild Fauna and Flora.

— United Nations Conference on Environment and Development.

— United Nations Framework Convention on Climate Change, and in particular the 2015 Paris Agreement, which has become the main international instrument for dealing with climate change.

2.2. Regional conventions and treaties

— Convention for the Conservation of the Biodiversity and the Protection of Wilderness Areas in Central America. The purpose of this convention is to conserve as much as possible land and marine biological diversity in the Central American region. It was signed in Managua, Nicaragua in 1992, by the presidents of the Republics of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.

— Central American Alliance for Sustainable Development (ALIDES). This is a regional strategy for the coordination and consultation of interests, development initiatives, responsibilities and harmonisation of rights, signed in 1994 by the presidents and representatives of the Republics of Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.

— Regional Convention for the Management and Conservation of Natural Forest Ecosystems and for the Development of Forest Plantations. The purpose of this convention is to promote national and regional mechanisms to avoid changes in use of areas with forest cover located on land with forestry potential and to recover areas of deforestation. It was signed in Guatemala City, Guatemala, in 1993 by the foreign ministers of the Republics of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.

2.3. National legislation on the sustainable management of natural resources

— Decree No 131-1982, Constitution of the Republic of Honduras.

— Decree No 181-2009, General Law on Waters.

2.4. National legislation on labour matters

— Agreement No 101-JD-71, Implementing Regulation for the Law on social security.

2.5. National legislation on the payment of state and municipal taxes for the export of timber products

— Decree No 170-2016, Tax code.

— Decree No 194-2002, Law on financial equilibrium and social protection.

— Resolution No 223-2008 on the Central American Uniform Customs Code (CAUCA).

— Ministry of Finance Agreement No 0630, Implementing Regulation for the Law on foreign exchange revenue from exports.

2.6. National legislation on administrative procedures, transparency mechanisms and public participation

— Decree No 170-2006, Law on Transparency and Access to Public Information.

— Decree No 152-1987, Law on administrative procedures and its Implementing Regulation.

2.7. National legislation applied by the judicial officers

— Decree No 144-1983, Penal code of Honduras.

3. ELEMENTS OF THE LAS

The LAS comprises the following:

(1) A definition of legal timber that clearly establishes the aspects of the law for which the LAS will systematically seek proof of compliance, regardless of the intended market for the products.

(2) Supply chain controls to track timber from forest operations or the point of import to the last link in the supply chain.

(3) Verification procedures to ensure and document compliance with all elements of the legality definition and supply-chain controls.

(4) Procedures for the issuing of FLEGT licences for timber products destined for the Union.

(5) Independent audits to ensure that the system is as effective and efficient as it should be, as agreed by the Parties.

3.1. Definition of legality

The legality of timber under this Agreement is defined in Annex II. That Annex is closely linked to the other Annexes as part of the LAS. It includes a definition of the legal requirements applied under the Voluntary Partnership Agreement that are linked to the challenges to forest governance identified by the actors in the sector in a national dialogue.

The detailed definition of legality in the Legality Matrices provides the basis for checking the various supply-chain operators' compliance with the indicators, means of verification and traceability requirements and the respective monitoring and control by the relevant institutions. Independent audits ensure that the system is as effective and efficient as it should be.

3.2. Verification of compliance with the legality definition

Legality verification:

— ensures that timber products are legal. This means checking that all the indicators included in the Legality Matrices have been met by the operators in their sphere of competence in the forestry sector,

— ensures processing of cases of non-compliance and the application of corrective or preventive measures,

— requires unequivocal proof that timber products and related activities meet the requirements established in the definition of legality,

— shows compliance through physical and documentary checks and through checks of systematically collected information and data verified at various points along the supply chain,

— documents procedures and files evidence to allow the licensing authority to assess the legality of a shipment prior to issuing a FLEGT or H-Legal licence, and

— clearly defines and documents the functions and responsibilities of all institutions involved in the verification process.

The State of Honduras, by means of its specialist institutions and a verification manual approved by the Joint Implementation Committee (JIC), will have methodologies and means in place to check compliance with legal requirements by the sector's various actors and operators. These methodologies and means of verification are introduced in Section 6.1.4.

The system provides for the detection of any failings and instances of non-compliance, the imposing of penalties where applicable, the proposal of necessary corrective measures where appropriate, and assurance that measures to correct these failings will be taken.

The institutions involved in the LAS have IT tools and protocols to verify compliance with the indicators in the Legality Matrices, which are described in more detail in Section 4.

Legality verification includes action on the ground such as supervisory inspections and technical auditing, plus routine inspections to verify compliance with technical and administrative standards, performed by the relevant authorities depending on the type of indicator in question.

Inspections at roadsides and checkpoints are also conducted with the support of the judicial officers (1) and the collaboration of the law enforcement authorities – Honduran armed forces (FFAA), the National Preventive Police, MP, PGR – to check compliance with the law in the transportation of timber products, at all times reporting to the competent authorities in order for the necessary measures to be taken.

Civil society organisations, i.e. Advisory Councils on Forestry, Protected Areas and Wildlife (CCFs) (2), jointly perform social oversight to ensure compliance with the technical and administrative rules governing the execution of management plans, operating plans and other harvesting licences. The CCFs may report their findings and recommendations to the SIIAVA, to the FLEGT-VPA Joint Implementation Committee or its technical branches, to this Agreement's independent auditing department, and to the general public.

The frequency of verification will be established using a risk-based approach, taking into account the competencies and responsibilities of the public institutions involved in the supply chain and administrative records (fines, complaints and others) suggesting a risk of illegality. These risks have been taken into consideration for the forestry operators as well as for the service providers themselves. The frequency of verification by the various public institutions will be described in the legality verification manual, introduced in Section 6.1.

The institutions responsible for verification of legality will hold files of means of verification that contain both digital documents and hard copies (images of documents, geographical information, etc.). These files will contain a chronological sequence of documented facts. For security purposes, government institutions will hold a digital copy of these files as backup. All these files, in accordance with Annex IX, are public files insofar as the Law on Transparency and Access to Public Information considers them to be public information.

Checking of legal compliance is a key stage in the exportation of timber products, include the issuing of FLEGT and H-Legal licences, as it provides proof of compliance.

3.3. Supply-chain controls

Traceability of timber is one of the requirements of the LAS, in accordance with the Honduran legal framework. The ICF has supply-chain monitoring tools such as the SNIF and the SIRMA, among others. Both systems are already in operation, but new modules are planned, in line with the requirements established under this Agreement. They are therefore considered to be under construction, and the development of some functions is included in the supplementary measures in Annex VIII.

The starting point for monitoring the supply chain is the harvesting licence for timber felled in Honduras, and the single customs declaration (DUA) for timber imported into Honduras.

Harvesting licences, transport permits and waybills, production reports, input and output and delivery reports for SAR-authorised invoices, as well as the DUA, are the key documents for monitoring timber product flow under the LAS. These documents will be recorded in the SNIF and the SIRMA, once these systems have been fully developed, making it possible to calculate the volume of timber circulating in each stage of the supply chain, as described in Section 7.1.

The authorities employ two means of data verification: validation and reconciliation. Validation consists of comparing and contrasting the operator-generated data with the data collected by government representatives, as shown in column 3.1 of Appendices 1 and 2.

Data reconciliation consists of comparing and analysing the data reported between one stage of the supply chain and the next in order to detect differences indicating the presence of unchecked or illegal timber. Data reconciliation is presented in column 3.2 of Appendices 1 and 2.

Proper supervision and the application of clearly defined procedures for validation and reconciliation at each stage of the supply chain play a decisive role in ensuring that the timber moving from one point to another is legal, thereby avoiding contamination of legally circulating timber by that from unchecked or illegal sources.

3.4. FLEGT and H-Legal licensing process

The issuing of FLEGT and H-Legal licences takes place after positive and conclusive verification of compliance with all the requirements concerning the definition of legality and monitoring of the supply chain for timber products.

The FLEGT licence is the final compulsory requirement for timber products included on the list of products agreed between the parties, as set forth in Annex I to this Agreement, to be exported from Honduras to any country in the Union. For exports to countries outside the Union, the same legality verification is performed. The difference is that an H-Legal licence is required, rather than a FLEGT licence.

Annex IV describes the procedure for issuing FLEGT licences. The exporter submits the FLEGT licence for customs clearance when exporting to the Union, or the H-Legal licence when exporting to non-Union markets, together with the other documentation required by the Customs Authority.

3.5. Independent auditing

Independent auditing is an indispensable element of the LAS as it maintains the credibility of the system. The independent audit checks that the mechanisms implemented within the LAS to demonstrate the legality of all stages of the supply chain in timber products (including logging, transport, primary processing, secondary processing and trade) are functioning, and that they fully meet all supply-chain requirements and the provisions laid down by the FLEGT and H-Legal licensing authority.

The independent audit is part of the LAS and must be performed prior to commencing FLEGT licensing. Auditing procedures and their implementation will be defined in more detail during the preparatory and organisational phase of this Agreement.

The scope and principles of audits are defined in the terms of reference for independent audits in Annex VI.

4. INSTITUTIONAL FRAMEWORK AND ROLE OF ACTORS INVOLVED IN THE IMPLEMENTATION OF THE LAS

This section describes the role of the different actors involved in the implementation of the LAS. It describes how, according to their respective responsibilities, they support or implement in practice the requirements of this Agreement, or perform the necessary verification to ensure compliance with these requirements, and how they liaise with and complement each other to ensure the legality of timber products.

For the preparatory and organisational phase of this Agreement, institutions, private-sector operators and civil society, including agroforestry organisations and representatives of the PIAH, must perform a critical review of their capacity in the light of their responsibilities for legality verification and compliance. Annex VIII deals with all aspects of strengthening the technical and institutional capacities mentioned in this section.

The knowledge and appropriate management of the entire process required to implement the LAS, the institutional targets for participation and good practice, the responsibility of each actor involved and proper interinstitutional coordination all require a high level of training and capacity-building. For this reason, supplementary measures were included in Annex VIII to build the capacity of the actors involved in this Agreement.

Section 11 sets out the coordination bodies, such as the Interinstitutional Secretariat for the Implementation of the FLEGT-VPA, that will be created or maintained to implement the LAS. In order to reaffirm the institutional agreements on the implementation of this Agreement, one or more memoranda of understanding will be concluded between public sector institutions, involving at least: The National Institute for Forest Conservation and Development, Protected Areas and Wildlife (ICF); the Revenue Administration Service (SAR); the Association of Honduran Municipalities (AMHON); the Institute of Property (IP); the National Agrarian Institute (INA); the Ministry of Employment and Social Security (STSS); the Honduran Institute of Social Security (IHSS); the Ministry of Energy, Natural Resources, Environment and Mines (MiAmbiente); the Ministry of Agriculture and Livestock (SAG); the Customs Revenue Subdirectorate (DARA); the National Preventive Police, reporting to the Ministry for Security (SSN); the Public Prosecutor's Office (MP); the Attorney-General's Office (PGR); the Supreme Court of Justice (CSJ); the Honduran armed forces (FFAA), reporting to the Ministry of National Defence (SEDENA); the National Directorate of Indigenous and Afro-Honduran Peoples (DINAFROH); the Institute for Access to Public Information (IAIP); and the National Commission on Human Rights (CONADEH).

Cooperation agreements will also be established to ensure appropriate coordination between these institutions, based on and following the example of current agreements such as the Interinstitutional Agreement for the Legalisation and Ownership of Land, signed by the INA, IP and ICF in October 2015.

Considering that lack of defined ownership is one of the underlying causes of the widespread weak governance found in the forestry sector, under matters of this Agreement relating to the ownership and legalisation of land are dealt with both in Annex II on Legality Matrices, which lists specific indicators on this subject, and in Annex VIII on supplementary and support measures, under which a special plan to legalise land tenure is established, as agreed between the Parties in order to expedite legalisation as per the priorities defined in this Agreement.

The special plan to legalise land tenure focuses on the ownership of national forest areas and protected areas. In the case of the latter, it deals only with buffer zones where forest harvesting for the State is permitted in order to ensure the necessary legal certainty and to provide the basis for the community forest-management contracts signed or due to be signed with the communities settled in those areas. It also provides for the conclusion of usufruct contracts for the users or occupiers of this land. The usufruct contract is a legal instrument that, while maintaining the State's ownership of the land, provides the occupiers with legal certainty with a view to obtaining financial, ecological and social benefits that improve quality of life and rational use of natural resources in compliance with current legislation. The purpose of these activities is to strengthen forest governance and land-use planning.

Regarding the matters of land tenure and the legalisation process, as well as the leading role of the three institutions mentioned – the INA, IP and ICF – emphasis must be placed on coordination between them and the Honduran Institute for Coffee (IHCAFE), the goal of which is to increase the socioeconomic return generated by Honduran coffee growers by improving the competitiveness of the coffee production chain.

Coordination between these four institutions must focus on achieving an understanding of the process of issuing title deeds for coffee producers in national forest areas in a way that respects forested land, protected areas and watersheds so as to prevent the issue of new title deeds resulting in further destruction and deterioration of the forest and the environment.

4.1. Actors involved in the implementation of the LAS

Of the government institutions directly involved in the implementation of the LAS, and in order of importance, the ICF, as the leader of the process, is the forestry supervisory institution acting as executor of national policy on the conservation and development of forests, protected areas and wildlife. It focuses its activities on the administration and management of forest resources, protected areas and wildlife – including protection, restoration, harvesting, conservation and promotion – to encourage sustainable development and so support the social, economic, environmental and cultural interests of the country.

The other institutions directly involved in the implementation of the LAS are listed in Section 4.2, ordered according to the number of indicators and means of verification for which they are responsible under the Legality Matrices, in terms of, among other aspects, registration and control of taxes, property rights, social security and the environment. The description and indicators in the Legality Matrices for which each institution is responsible, and the resources needed for each of them, will be described in the verification manual approved by the JIC, as established in Annex II.

The following institutions and actors are also involved in the LAS:

The judicial officers and the law enforcement authorities (National Preventive Police, FFAA, PGR and MP) are responsible for prevention, control and law enforcement. The IAIP deals with matters relating to public information and transparency.

The National Directorate of Indigenous and Afro-Honduran Peoples (DINAFROH) reports to the Ministry of Social Inclusion (SEDIS) and seeks to improve the quality of life of the Indigenous and Afro-descendant population of Honduras through productive economic, cultural, political and social development.

Private forestry operators are operators performing activities along the timber supply chain, meeting the indicators in the Legality Matrices and filing the necessary supporting documents. They conduct the necessary and appropriate checks to ensure the legality of the timber they process, and they are subject to legality verification mechanisms implemented by the various State institutions, depending on their competencies. This group of operators includes natural and legal persons owning forest; micro-, small, medium and large forestry businesses; industrial loggers; private certifying bodies; community groups, etc. These operators must also consent to social oversight by civil society organisations via the CCFs in conjunction with State institutions.

Civil society organisations include, for the purposes of the this Agreement, CCFs operating at community, municipal, regional and national levels, non-governmental development organisations, and others that are active participants in the supervision of forest resources and their impact on the population and which perform social oversight of the activities of both authorities and operators. In order to do this, they use the procedures and protocols for handling complaints described in Section 10.3.

The PIAH, through their management bodies and organisations, are involved in social oversight and the implementation of mechanisms and procedures for free, prior and informed consultation. They are beneficiaries of the legalisation processes for forest lands run by specialist government institutions to recognise their ancestral claim to land. When PIAH are involved in commercial forestry activities as operators, they are subject to LAS procedures.

4.2. State institutions

Ten government institutions are directly involved in the Legality Matrices of this Agreement. In order to facilitate the issuing of legal compliance certificates to all operators meeting the indicators in the Legality Matrices and the LAS requirements, all institutions involved in this Agreement will provide information to the ICF Legality Verification Unit on compliance with the indicators under their responsibility. This obligation also applies to the various ICF bodies.

The following is a presentation of each of the institutions involved in the Legality Matrices, broken down by the number of indicators and means of verification under their responsibility.

4.2.1. National Institute for Forest Conservation and Development, Protected Areas and Wildlife (ICF)

The ICF is the supervisory institution for the forestry sector; it acts as executor of national policy on conservation and development of forest, protected areas and wildlife and has the authority to formulate programmes, projects and plans and create the technical and operative administrative units necessary to fulfil the purpose and goals of the Law on Forestry, Protected Areas and Wildlife (LFAPVS). It also has functions relating to the enforcement of other laws, such as the Law on Property, the General Law on Waters and the General Law on the Environment.

ICF activity focuses on the administration and management of forest resources, protected areas and wildlife, including their protection, restoration, productive use, conservation and promotion, so fostering sustainable development appropriate to the country's social, economic, environmental and cultural interests.

4.2.2. Revenue Administration Service (SAR)

For the registration and control of taxes, the Revenue Administration Service (SAR) works in centralised coordination with the ICF to ensure that operators in the forestry production chain meet their tax obligations.

According to the Legality Matrices, the main responsibilities of the SAR – which replaced the Management Board for Income (DEI) – are to comply with and to enforce national and international tax regulations and to manage the collection of the duties and charges established under various laws.

4.2.3. Municipalities

The municipal authorities are the governance and administration bodies for their respective municipalities, and their goal is to ensure the well-being of local residents, promote integral development and protect the environment.

Municipalities have a dual role in the LAS: firstly meeting their obligations in the Legality Matrices as owners of municipal forest land, and secondly as local government authorities, developing and enforcing municipal taxation. The municipalities have the Tax and Finance Administration System (SAFT), a tool which, in addition to facilitating the internal control process, also provides full information on municipal finances.

4.2.4. Institute of Property (IP)

The IP is a decentralised government institution with powers for the registration and identification of property and property owners throughout the entire country; as such it maintains the national register of all acts and deeds relating to registration of property and ownership, including the listing, recognition, transmission, transfer, modification, taxation and cancellation of property rights.

4.2.5. Ministry of Employment and Social Security (STSS)

The STSS has overall responsibility for employment policy and social protection systems for welfare and social security for workers and employers.

4.2.6. Honduran Institute of Social Security (IHSS)

The Honduran Institute of Social Security is an autonomous entity, with legal personality and its own assets, independent of the national tax authority. Since its creation, it has been responsible for guiding, directing, providing and administering social security services to the working population of Honduras. Under the Constitution of the Republic, the Government, employers and workers are obliged to contribute to the funding, improvement and expansion of the social security system.

Social security for the working class in Honduras primarily rests on the coverage offered by the IHSS, hence its major influence on governance in health and social security matters. Outside the country's main cities (Tegucigalpa, San Pedro Sula, Ceiba and Puerto Cortés) where the largest forest operators are located, the IHSS is not represented in the other population centres of the country, and even less so in rural areas, where most forest operators work.

4.2.7. Ministry of Energy, Natural Resources, Environment and Mines (MiAmbiente)

MiAmbiente is responsible for the formulation, coordination, execution and assessment of policies relating to the environment, ecosystems, the protection and use of water resources, coordination, the protection of flora and fauna, and compliance with the Environmental Impact Assessment on primary and secondary forest product companies.

4.2.8. National Agrarian Institute (INA)

As the INA is currently undergoing institutional restructuring, it is not yet clear where it will be located and its current functions may change in the future. Should any functions important to the LAS that are currently performed by INA be assigned to other institutions in the future, those new institutions will be formally recorded for the purposes of this Agreement as the replacements of the INA.

The INA is a quasi-autonomous body responsible for implementing the country's farming policy, issuing title deeds for agroforestry land and providing technical assistance to rural stakeholders and Indigenous and Afro-descendant communities of Honduras, involving the rural population in the integral development of the country. The INA is responsible for registering ownership of farm land in coordination with the ICF and the IP in land ownership legalisation processes. In the particular case of ownership applications for national forest land, the INA will act in liaison with the ICF in order to maintain the use of such land for forestry; it is not its role to register ownership of forest land. A favourable ICF technical opinion is always required for assigning ownership of forest areas.

4.2.9. Ministry of Agriculture and Livestock (SAG)

The Ministry of Agriculture and Livestock coordinates the aspects relating to sectoral policies implemented by institutions making up the public agriculture sector, specifically those relating to land tenure, rural funding, trade, forestry, crop and livestock farming and rural and forest development.

The SAG is responsible for the regulation of international trade in wildlife through the application of the Convention on International Trade in Endangered Species of Wild Fauna and Flora. In the context of this Agreement, this affects timber products taken from the species covered by the CITES.

4.2.10. Customs Revenue Subdirectorate (DARA)

Executive Decree No PCM-083-2016 creates the Presidential Commission for Comprehensive Reform of the Customs System and Trade Bodies (COPRISAO). At present, during the process of comprehensive reform of the customs system and trade bodies, this commission will have direct authority over the Customs Revenue Subdirectorate (DARA).

Under the LAS, the Customs Revenue Subdirectorate is involved in the control and verification of exported and imported timber products and those in transit. A thorough review of the customs procedures relating to exports, which may have an impact on verification methodology, should be completed during the preparatory and organisational phase of this Agreement in order to identify potential gaps and other weaknesses.

4.2.11. Government institutions indirectly involved

Below is a description of the government institutions indirectly connected to the LAS, i.e. they do not have full or direct responsibility or co-responsibility for the verification of the indicators in the Legality Matrices, yet they play a role as government control bodies, the functions of which are important to ensure the effective performance of the central government institutions and municipal authorities in relation to the LAS.

Special units, such as the National Interinstitutional Security Force (FUSINA) of the FFAA and the Interinstitutional Task Force against Environmental Crime (FTIA) are operational bodies for the prosecution of environmental offences under the National Strategy for the Control of Illegal Logging and Transport of Forest Products (ENCTI). These bodies have been set up by the Government on a temporary basis and have facilitated interinstitutional coordination to halt illicit acts and enforce environmental laws. The FTIA, in particular, comprises the ICF, MiAmbiente, judicial officers and law enforcement authorities (MP, PGR, National Preventive Police and FFAA). It is led by the ICF and operates as an interinstitutional coordination mechanism for dealing with investigations, sanctions and monitoring, particularly for crimes with a high environmental impact. The experience gained with these bodies will serve as a model should a permanent, long-term mechanism be created. The FUSINA, meanwhile is headed by the FFAA and acts on court orders.

4.2.11.1. National Preventive Police (PNP)

The role of the national preventive police is to ensure that residents in Honduran territory can freely exercise their rights and freedoms by enforcing the laws and regulations on the protection of life, conservation of natural beauty and the protection of the environment, both in urban and rural areas.

Under the LAS the PNP assists in checks on the transportation of timber products, together with the ICF, judicial officers and all other law enforcement authorities. For example, the PNP operates at transit checkpoints alongside the ICF and the SAR (green checkpoints).

4.2.11.2. Public Prosecutor's Office (MP)

The Public Prosecutor's Office represents society and takes public legal action before the courts; one of its functions is to investigate environmental crimes in accordance with the current legal instruments penalising environmental acts constituting environmental crimes in Honduras, and with international treaties.

In the forestry sector the Public Prosecutor's Office acts through the Special Environmental Prosecution Service (FEMA). As representative of Honduran society, its main role consists of investigating, documenting and presenting charges before the Honduran courts in penal proceedings resulting from actions causing damage to the environment, ecosystems, natural resources and public health.

4.2.11.3. Attorney-General's Office (PGR)

The Attorney-General's Office is responsible for promoting, representing and upholding the rights of the State in all court proceedings to which it is party; it acts as a general representative of the State.

4.2.11.4. Supreme Court of Justice (CSJ)

The power to issue and enforce judgments is exclusive to the courts of the Republic. The power to impart justice falls to independent magistrates and judges.

4.2.11.5. Honduran armed forces (FFAA)

The FFAA are the national institution whose primary function is to defend Honduras's territorial integrity and sovereignty, to keep the peace and public order, and to uphold the Constitution.

Since 2006 the FFAA have been charged with supporting the work carried out to protect the country's forests and ecosystems; this is done through the Dirección de Apoyo al Manejo de Ecosistemas y Ambiente (Directorate for Support of Ecosystem and Environmental Management) (C-9), through which they assist the law enforcement competent authorities.

4.2.11.6. National Directorate of Indigenous and Afro-Honduran Peoples (DINAFROH)

This is the department of the Ministry of Social Inclusion (SEDIS) that seeks to improve the quality of life of the Indigenous and Afro-descendant population of Honduras through productive economic, cultural, political and social development. With the coordination of the Ministry of Employment and Social Security (STSS) and support of the DINAFROH, the Honduran Government is currently engaged in a process of consultation that will serve as the basis for drawing up and passing a law on free, prior, informed consent with all the organisations of the nine Indigenous and Afro-descendant Peoples of Honduras, with the support of the UNDP and the UN Special Rapporteur on the Rights of Indigenous Peoples.

4.2.11.7. Institute for Access to Public Information (IAIP)

The IAIP is a decentralised government body that is responsible for promoting and facilitating citizens' access to public information, and for regulating and overseeing institutional procedures for protecting, classifying and keeping public information.

Under the LAS the IAIP's responsibilities include ensuring that citizens are able to exercise their right to participate in the management of public affairs, and that there is transparency in the exercise of public functions and in the relations between the State and private individuals. Information concerning the forestry sector is published on the IAIP's single transparency portal and on the ICF portal, and is described in detail on the portal of each institution. In addition, Annex VIII includes a supplementary measure to set up a management system for information intended for the public.

4.2.11.8. National Commission on Human Rights (CONADEH)

The CONADEH monitors compliance with the rights and guarantees laid down in the Constitution of the Republic, the Universal Declaration of Human Rights and other treaties and conventions ratified by Honduras.

4.2.11.9. National Research System for Forests, Protected Areas and Wildlife (SINFOR)

SINFOR is a public-private interinstitutional platform created by the LFAPVSwhich organises, fosters and promotes scientific research into the forestry sector, protected areas, wildlife and the like, and encourages transfers of know-how and technology in Honduras.

Its role includes providing up-to-date information for the formulation of policies, rules and regulations that ensure sustainability and governance for the sector. In its work of planning and fostering research into forests, protected areas and wildlife, SINFOR's priority is to seek research opportunities that can be identified in national plans and strategies, such as the ENCTI, and strategic plans for each of the member institutions and other initiatives relating to the sector.

4.3. Private forestry sector

Under the LAS, the private forestry-sector actors include those who, for profit, manage or produce the raw material, extract it from the forest, transport, process and place it on the market, and engage in its export and import.

Given the diversity of organisations involved and the range of their commercial activities, several classifications have been created. The Tax Code classifies them as: (i) natural persons; (ii) legal persons, which includes professional partnerships and commercial companies, cooperatives and associative enterprises and, in general, associations or entities that under public or private law have the status of legal persons; and (iii) entities, communities, organisations (Indigenous and Afro-descendant Peoples of Honduras, community groups) or legal transactions that constitute a functional or asset unit, even if they do not have a legal personality.

Another category is that arising from the number of persons working at each enterprise: forestry microenterprises, most of them set up as family businesses, employ a maximum of four people; small forestry enterprises employ 5-10 people; medium-sized forestry enterprises employ 11-100 people; and large forestry enterprises have over 100 employees.

The LFAPVS establishes three categories of company: a primary forest product company, that carries out the initial processing of the roundwood or any other timber or non-timber raw material sourced from the forest; a secondary forest product or processing company, that processes products from a primary forest product company; lastly, the timber or timber-product yards, that place the various timber products on the market.

It should be noted that the above description applies only to the industry that uses pine timber; in the case of broadleaved timber, on the date of entry into force of this Agreement, no primary forest product companies are registered or operating in Honduras. Furthermore, the timber extracted from the forest is generally in the form of roughly squared wood rather than roundwood, because it is squared in the forest and hauled to collection points for onward transportation by motorised vehicles to the secondary forest product companies or timber yard for sale. Stockpiles or collection centres are by definition places where timber products are stacked for subsequent transfer, with no change in their ownership. In contrast, timber yards are places where yard owners buy timber products from their suppliers and sell them to their customers.

In its routine inspections, and thanks to the social oversight reports from the CCFs, the ICF will regularly monitor any changes in the forestry production chain, including pine and broadleaved forests, forest plantations or scattered trees outside forests, in order to prevent the occurrence of any forestry activities that are not covered by the LAS. If in the future there are changes in the organisation of the forestry sector as a result of the review of the applicable legal framework, the LAS will be adapted to ensure that all sources of timber are covered.

It is these operators who implement the production processes and it is therefore they who must comply with the indicators and means of verification within their individual spheres of competence. To do so, they apply adequate and relevant internal controls concerning harvesting and production licences, complying with their obligations in matters of employment, environment, taxes (both national and municipal), transportation, trade and any others specified in the various indicators. They are also required to keep proper records of the necessary supporting documents and stipulated means of verification.

Likewise, private forestry sector organisations are subject to mechanisms for verifying legal compliance that are implemented by the institutions of the State, in accordance with their competencies.

4.4. Civil society organisations

The Honduran legal framework confers on the country's citizens the right and the duty to participate in and exercise social control over actions taken by the authorities. The forestry sector contains a variety of civil society organisations with an interest in enforcement of the law, and they play a very active and effective part in the means of verification. These organisations are:

4.4.1. Local organisations

The LFAPVS sets up bodies for public participation, consultation and support for the ICF, such as the CCFs, which are organised and operate at local or community, municipal, regional and central level. The ENCTI indicates the importance of these bodies for exercising social control, particularly at municipal and community levels, supporting verification of the forest management plans, annual operating plans or other types of authorisation, as well as for promoting the consumption of legal timber. This is achieved in coordination with the institutions of the State and particularly the ICF.

4.4.2. Non-governmental development organisations

A variety of domestic and international non-governmental development organisations (NGDOs) (3) support forestry sector actions at both an institutional and territorial level. Their activities address, inter alia, organisation, capacity-building for public participation bodies at municipal and community level, political impact, social control, technical support and human rights defence.

During the preparatory and organisational phase of this Agreement, the NGDOs will develop their own methodology for performing social oversight actions. The reports on this social oversight will be lodged with the JIC, among other bodies, for appropriate action. This will set up a participation system that will contribute to the ongoing improvement of governance procedures established under this Agreement.

A system will also be set up to deal with complaints, which will support the operation of this function of social oversight, described in Sections 10 and 11.

4.5. Indigenous and Afro-descendant Peoples of Honduras

Honduras is home to nine Indigenous and Afro-descendant Peoples of Honduras. Most of these peoples live in extensive forest areas, in which both protected areas and productive forests are to be found. These peoples are: the Pech, Tawahkas, Lencas, Maya Chortís, Tolupanes, Miskitu, Nahuas, Garífunas and English-speaking people of African origin, who have organisations that represent them, including the nationwide Confederation of Indigenous Peoples of Honduras (CONPAH).

These peoples are actors in the implementation of the LAS, including in relation to Principle 2 of the Legality Matrices: "Honduras respects the rights of the Indigenous and Afro-descendant Peoples of Honduras living in forest areas".

In the forestry sector, the Indigenous and Afro-descendant Peoples of Honduras are:

— the beneficiaries of the legalisation processes and the respect for the territories ancestrally possessed by them;

— involved in the implementation of the mechanisms and procedures for Free, Prior and Informed Consent (FPIC) set up in order to respect the self-determination and autonomy, in accordance with ILO Convention No 169 and the UN Declaration on the Rights of Indigenous Peoples; and

— engaged in commercial activities in productive forest areas, in compliance with the Legality Matrices and the applicable requirements of the LAS.

4.6. Capacity-building

Capacity-building to ensure effective operation of the system and ensure the legality of timber products is described in Annex VIII. The formulation of each measure will be subject to the review of the capacity needed by all actors involved in implementing the LAS.

5. COVERAGE/SCOPE OF THE LAS

All timber and timber products of Honduran origin that are covered by the LAS must be sourced from private, municipal or national forests (whether natural or planted) managed under administrative and technical criteria of maximum performance, multiple use and social equality, so as to ensure the sustainability of the ecosystems and their productive, protective and environmental capacity.

The LAS will also apply to timber from other countries when the importers of it can prove that it comes from legal sources and has been imported in compliance with the laws of both the timber's country of origin and Honduras. All operators will be subject to the LAS, including those who have their own private certificates of forest management and chain of custody, and those who own tree plantations for commercial purposes.

5.1. Timber products included in the LAS

The LAS covers all the products defined in Annex I to this Agreement. Article 102 of the LFAPVS prohibits the export of certain timber products, stating that timber from broadleaf species from natural forests may be exported only as processed wood. The export of round or roughly squared wood of these species is therefore not permitted.

Although roundwood or roughly squared wood of these species may not be exported, it is covered by the LAS, regardless of the extent to which it has been processed.

Timber products that are not listed in Annex I to this Agreement are not subject to the FLEGT licence procedure when they are exported to the Union. In this case, Union importers of these products from Honduras must exercise due diligence in accordance with the Regulation (EU) No 995/2010 of the European Parliament and of the Council of 20 October 2010 laying down the obligations of operators who place timber and timber products on the market (4), in order to demonstrate that they are legal.

5.2. Markets covered by the LAS

The LAS will apply to timber products placed on all markets, whether export or national. However, efforts to enforce the LAS will be prioritised by distinguishing between markets as follows:

— Union market: Verification of the legality of products exported to the market of the Union will apply as stipulated in this Agreement, which considers a FLEGT licence to be a prerequisite as soon as it has been confirmed that the scheme is ready to issue FLEGT licences following the procedure laid down in Annex VII.

— Other international markets: Verification of the legality of exported products will apply as stipulated in this Agreement, regardless of the country of destination of the export, and their legality will be demonstrated by means of an H-Legal licence.

— Domestic market: Verification of the legality of products placed on the domestic market will apply as stipulated in this Agreement, and the legality of the operators that own these products will be demonstrated by means of legal compliance certificates.

In all these phases for the implementation of the LAS, measures will be adopted to prevent the entry of timber of unknown or illegal origin into the forest supply chain. The ability to implement the LAS will be enhanced by applying the measures included in Annex VIII.

5.3. Sources of timber covered by the LAS

The sources of timber that are covered by the LAS are categorised as follows:

5.3.1. Timber harvested on the national territory

Timber harvested on the national territory comes from the following sources:

1. Forests, whether natural or plantations.

2. Areas in which agroforestry systems are established, i.e. natural or planted trees in association with other species such as coffee, cocoa or other agricultural crops.

3. Scattered coniferous or broadleaved trees outside forests.

Harvesting may be carried out in either broadleaved or pine forests, regardless of land tenure. Harvesting is authorised in one of the following ways:

— Under a forest management plan and its annual operating plans, as approved by the ICF for: — community beneficiaries who have group forest-management contracts (community forest management contracts, CMFC); — individual beneficiaries of forest management contracts; and — owners of private, municipal (ejido), national and fiscal forest.

— Under a special plan for agroforestry systems and its annual felling plans for owners of agroforestry systems on private and municipal (ejido) land.

— Under a rescue plan for harvesting forests affected by natural disasters, pests or diseases, public or private construction works and changes of vegetation on agricultural land. Rescue plans for sites where there are to be public or private construction works or changes of vegetation on agricultural land require an environmental impact assessment before an environmental licence certificate is issued by MiAmbiente. Rescue plans linked to a change in vegetation for temporary or permanent agricultural crops apply only to agricultural land. Article 93 of the LFAPVS stipulates that the natural use of forest land must be preserved and respected in conformity with the policies and legal regulations on land-use planning. Likewise, Article 294 of the Regulation for the LFAPVS forbids changes of vegetation in productive forests with management plans and on land with a high forestry potential. Section 7.7 of this Annex describes in greater detail the verification of timber products that are sourced from a change in land use.

— Under a recovery plan for the extraction of forestry by-products covered by an earlier licence (AOP, AFP, certified plantation harvesting licences and rescue plans).

— Certified plantation harvesting licences (APC) for the extraction of timber from forest plantations certified by the ICF.

Traditionally scattered trees outside forests, located mainly in residential and livestock areas, have been the principal source of supply of timber for carpentry shops. However, Honduras does not yet have legislation regulating the commercial harvesting of these trees, which is why a supplementary measure on this issue was included in Annex VIII. When this legislation comes into force, it will be included in the relevant indicator of the Legality Matrices following the procedure envisaged in section 4 of Annex II.

Prior to the update of the Legality Matrices, this source of timber will already have been included in the LAS and forestry sector operators that harvest this source of timber must apply all the other LAS requirements.

5.3.2. Imported wood

Both natural and legal persons that import timber must implement due diligence procedures to prove that the risk of illegal conduct concerning the imported timber is negligible and that the exporters of the country of harvesting respect the law. The scope of this due diligence procedure will be determined during the preparatory and organisational phase of this Agreement; a supplementary measure has been included in Annex VIII concerning the implementation of due diligence procedures in Honduras.

5.3.3. Timber not covered by the LAS

The following two types of timber are not included in the LAS and will not be subject to the FLEGT licensing scheme:

— Timber in transit Timber in transit is timber from third countries or timber that enters Honduras temporarily under a single transit declaration, the final destination of which is another country. It must be identified and kept separate from the supply chain of timber produced in Honduras or imported. Timber in transit will not be included in the LAS and therefore no FLEGT or H-Legal licence for export can be issued for it. Section 7.5 explains how the mechanisms to control the transit of these products will operate to ensure that they do not enter the national-market supply chain.

— Confiscated timber Timber products confiscated for infringing Honduran legislation or for failing to comply with due diligence obligations in the case of imported timber are excluded from the LAS. The ICF and the security forces are empowered to conduct the necessary investigations to prosecute cases through the Public Prosecutor's Office. Section 7.6 explains what happens to timber that is seized or confiscated.

5.4. Scope of operators included in the LAS

Under this Agreement, an "operator" is any natural or legal person that engages in activities in the forest production chain. The scope of the activities of operators covered by the LAS is described in Table 1.

Table 1.

Scope of activity of forestry sector operators.

Operator Scope of action under the LAS 1. Owner of private forest area (includes indigenous communities with land title) and common land (municipalities) Applies for or provides evidence of land tenure. Prior to carrying out harvest activities, applies to the ICF for approval of a forest management plan and the related annual operating plans, rescue plan or recovery plan. Applies to the ICF for transport permits for the transport of harvested timber, and reports on the transport permits used, which are entered in the SIRMA database. Provides evidence that the FPIC principles have been followed, as appropriate. 2. Owner of an area with an agroforestry system Applies for approval of a PESA and an AFP for harvesting as part of an agroforestry system. Applies to the ICF for transport permits for the transport of harvested timber, and reports on the transport permits used, which are entered in the SIRMA database. 3. Forest plantation owner Applies to the ICF for certification of the forest plantation and for harvesting of a certified plantation. Applies to the ICF for transport permits for the transport of harvested timber, and reports on the transport permits used, which are entered in the SIRMA database. 4. User/Occupant Obtains an usufruct contract as a result of the land legalisation procedures that allows the user/occupant to carry out forest management activities. The requirements that must be met by private beneficiaries of the legalisation of national forest areas are laid down in the LFAPVS. Applies to the ICF for permission to reforest the estate or carry out other forestry/environmental activities. Applies for certification of the plantation and then applies for permission to harvest it. 5. Usufructuary of forest areas (including community groups) In order to carry out forest management activities, applies to sign a forest management contract; and in order to harvest the forest area, applies to the ICF for approval of a forest management plan, a rescue plan or a recovery plan. 6. Contractor Hired by the forest owner when the latter does not directly harvest the timber with its own resources. Harvests, hauls, and transports the timber from the forest to primary forest product companies or timber yards and may also sell it. Files a return with the regional forestry office on the fact that it is registered, and lists the equipment and key personnel it has for harvesting and transportation operations. Is responsible for using the transport permit (authorised by the ICF) and waybill (authorised by the SAR). The beneficiary or holder of a harvesting licence who subcontracts a contractor is responsible for ensuring compliance with the applicable regulations. 7. Carrier Provides the goods transport service, in this case that of timber, whether it be roundwood from the site of harvesting to the forest product company or timber yard, or processed timber products from the forest product company to the final destination. In general, this service is hired by the forest owner, the contractor or the forest product company. In the case of broadleaved forests, on the date of entry into force of this Agreement, the carrier is involved from the time when the roughly squared wood that has come from the forest has been stockpiled outside it at a collection point, and vehicles are used to transport it from there to forestry companies or timber yards. Submits to the authorities the documents that prove the legality of the products transported (transport permit, invoice authorised by the SAR and waybill or invoice, as appropriate). 8. Qualified forestry technician (TFC) Draws up forest management plans, special plans for agroforestry systems, and related annual plans, rescue plans and recovery plans on behalf of the forest owner. (Has sole responsibility for administering the implementation of the annual operating plans of the forest management plans. For this purpose, submits to the ICF on behalf of the forest owner a memorandum of appointment and acceptance and becomes the administrator of the annual operating plan.) Is responsible for compliance with the technical standards governing any mode of harvesting that it administers. Is also responsible for submitting monthly progress reports on the transport permits used in the forest, giving detailed information about the timber extracted, supported by copies of the permits used. 9. Independent forestry technician (TFI) Draws up forest management plans, special plans for agroforestry systems, and related annual plans, rescue plans and recovery plans. Is responsible for compliance with the technical standards governing any mode of harvesting that it administers. Is also responsible for submitting monthly progress reports on the transport permits used in the forest, giving detailed information about the timber extracted, supported by copies of the permits used. 10. Exporter Applies to the ICF for issuance of the FLEGT licence (for the Union) or the H-legal licence (for other destinations) depending on where the shipments are to be sent. Applies to the Customs Authority for export permits, including the commercial import invoice, the Single Customs Declaration (DUA) and other documents that prove the legality of the product being exported, regarding both public health restrictions and tariff and non-tariff regulations, including CITES certificates when applicable. 11. Importer Applies to the customs authority for import permits, including the commercial import invoice, the DUA and other documents that prove the legality of the product being imported, regarding both public health restrictions and tariff and non-tariff regulations, including CITES certificates when applicable. Implements mechanisms of due diligence to verify the legality of the timber product being purchased. 12. Owner of a primary forest product company Keeps an up-to-date record book of inputs and outputs and files monthly production reports with the ICF, with the authorised sales invoices attached. Asks for invoices to be issued and files monthly and annual sales returns with the SAR, with the relevant authorised sales invoices and waybills attached. Implements mechanisms of due diligence to verify the legality of the products being purchased. In the case of broadleaved forests, primary forest product companies do not exist at present since the timber is roughly squared before leaving the forest and is placed on the market via secondary forest product companies or timber yards. 13. Owner of a secondary forest product company (including carpentry shops and other micro-, small and medium-sized enterprises (MIPYME)) Keeps an up-to-date record book of inputs and outputs and files monthly production reports with the ICF, with the authorised sales invoices attached. Asks for invoices to be issued and files monthly and annual sales returns with the SAR, with the relevant authorised sales invoices and waybills attached. Implements due diligence mechanisms to verify the legality of the products being purchased. 14. Owner of a timber yard Keeps an up-to-date record book of inputs and outputs and files monthly production reports with the ICF, with the authorised sales invoices attached. Asks for invoices to be issued and files monthly and annual sales returns with the SAR, with the relevant authorised sales invoices and waybills attached. Implements due diligence mechanisms to verify the legality of the products being purchased. 15. Employer (of any enterprise belonging to the above categories of operators) Registers employees with the Honduran Institute of Social Security and complies with labour legislation.

6. VERIFICATION OF COMPLIANCE WITH THE LEGALITY DEFINITION

Honduran timber products are deemed to be legal on the basis of the definition of them described in Annex II.

Verification is carried out by government agencies (if appropriate using inputs provided by recognised private certification mechanisms as stipulated in Section 8) and consists of performing adequate checks to ensure the legality of timber products.

Verification must be sufficiently rigorous and effective to ensure identification of any non-compliance with the requirements laid down in the Legality Matrices set out in Annex II, in the different phases of the supply chain on the national market. The legality of timber that is imported and will enter the national chain of supply must also undergo verification.

6.1. Legality verification principles

During the preparatory and organisational phase of this Agreement, the Parties, through the JIC, will update and approve a verification manual that describes the verification methodology that must be applied to check legal compliance for each of the indicators and means of verification identified as key elements for establishing the Legality Matrices. Each of the indicators specifies the body or unit at each institution in charge of the verification and the documents to be verified. In addition, the frequency with which the indicator is checked will be specified, and the location indicated of the records containing the information and the documents (both paper-based and digital) that are stored at the different institutions in accordance with their areas of responsibility.

6.1.1. Institutions involved in legality verification

Verification is carried out by clearly identified institutions that have adequate resources, management systems and trained personnel, together with robust and effective mechanisms to control conflicts of interest. All the verification personnel at each institution have the skills and experience necessary to perform their work and are properly supervised.

The ICF and the other institutions involved in the LAS have an organisational and functional structure to verify whether all the operators are complying with the legality indicators. Given the volume of information that will be produced by each institution's verification of operators, and the need to record and keep this information up to date, the verification results will be entered in a database available to the ICF Legality Verification Unit. This will provide the Verification Unit on an ongoing basis with all the information necessary to be able to issue and review the validity of the operators' legal compliance certificates. The feasibility of this gathering and updating of data requires the coordination of the institutions as described in Section 11.

The following diagram illustrates the flow of data between the different LAS actors for the verification of legal compliance:

Table 2 describes the mechanisms for verifying legal compliance presented in the previous diagram.

Table 2.

Description of mechanisms for verifying legal compliance

No Description 1. Forestry-sector operator: natural or legal person that carries out activities in the forest products supply chain. 2. Application for means of verification (Annex II). 3. Methodology for creation of the means of verification by each institution. Some means of verification are created only once and others are created periodically. 4. Creation of physical and/or electronic means of verification (Annex II). 5. Verification methodology. Upon identifying a case of non-compliance, each institution implements procedures to document, process, monitor and inform the database of the Legality Verification Unit. 6. Corrective or punitive action relating to legal non-compliance resulting from an administrative or ex officio action (Annex V, Section 9). 7. Compilation of joint legal compliance verification data by all institutions involved using the SIRMA, SNIF and ICF Geoportal and other tools of those institutions (Annex V, Sections 6 and 7). 8. Application to the Legality Verification Unit for a legal compliance certificate attesting to the operator's legality (Annex V, Sections 6 and 7). 9. Compilation of data held by the Legality Verification Unit in order to assess compliance with the Legality Matrices and control of the supply chain by the operator. If the conclusion is positive, the Legality Verification Unit issues a legal compliance certificate which proves to buyers in the domestic market that the operator has met the requirements of the LAS (Annex V, Sections 6 and 7). 10. Application to the FLEGT Licensing Unit for a FLEGT or H-Legal licence attesting to the legality of the operator's activities so that the operator can export its products to any market (Annex IV). 11. Decision by the FLEGT Licensing Unit on whether or not the operator is legally compliant. If the conclusion of the Verification Unit is favourable (i.e. the operator meets all the LAS requirements), either a FLEGT licence (Union market) or an H-Legal licence (other markets) is issued, proving to customers in the international market that the operator has met the requirements of the LAS. If the decision is unfavourable, the FLEGT Licensing Unit notifies the applicant (operator) (Annex IV). 12. Drafting by the LAS's independent auditors of reports on their findings that include conclusions and recommendations to the JIC, which is responsible for publishing these audit reports on a regular basis (Annex VI). 13. Drafting by civil society organisations of verification reports on harvesting licences and more generally on the forestry sector, which are made available to the JIC (Annex V, Section 4.4.2).

6.1.2. Verification procedures based on the Legality Matrices

The manual agreed by the Parties through the JIC will describe the methodology applied by the institutions involved, whose responsibility it is to verify part or all of the indicator. The manual will identify the body or office responsible for verification and the action it takes to perform this task. The manual will also refer to "Verification Frequency", indicating when the means of verification are to be verified; it will also include the body and office where the paper and digital copies of this information will be stored.

6.1.3. Storage of the means of verifying legality

The paper-based copies and digital files of the documents for each means of verification are kept at each institution that is responsible for creating the related means. These "institutional" records are kept for at least 10 years, as required under the Law on Transparency and Access to Public Information (LTAIP). The Law also establishes the procedure for processing information (Articles 30, 31 and 32), and defines what "public information" means (Article 3) and what should be considered as confidential personal details (Article 7) or classified information (Article 8).

Given the importance of the legality and authenticity of the means of verification, the institutions responsible ensure that physical and digital records are kept for each means of verification. In the interests of the transparency and effectiveness of information management, the institutions involved in the means of verification must ensure that the information in their records is made available to other organisations – including the ICF Legality Verification Unit – in a timely and effective manner as and when it is required. Similarly, each institution linked to legality verification should avail itself of the laws, regulations and procedures that apply within its sphere of competence to seek the necessary information from operators and keep it in its records.

6.1.4. Information systems and verification functionalities

The computer systems, tools and protocols that already exist and will be developed to verify compliance with the indicators in the Legality Matrices will make it possible to gather a set of documentary and field verifications and to reconcile the data throughout the timber supply chain. Section 3.2 sets out the main computer tools and protocols used by the institutions involved in the LAS. The following paragraphs give a brief description of the IT systems currently in operation to support the institutions in carrying out their remits.

At the ICF:

— National Forestry Information System (SNIF) This computer tool can be used to maintain dynamic databases on records evidencing ownership of private, national and municipal forests, and of forest product companies and timber yards. The system contains information on all the harvesting licences, including management plans, operating plans, rescue plans, recovery plans, special plans for agroforestry systems and harvesting of plantations certified by the ICF. The SNIF makes it possible to monitor the timber that flows between harvesting operators via the supply chain.

— Timber Traceability IT System (SIRMA) This computer tool makes it possible to monitor timber extractions and transport flows based on the record of transport permits used for each harvesting licence. The system uses the information from the SNIF to keep a record of transport permits. It reconciles information on the permits registered for transport from the forest to forest product companies and on the inputs and outputs at each link of the chain by means of the monthly reports filed by each operator. The information kept on record makes it possible to monitor production, distribution or sales and stocks/inventories.

— Geoportal This virtual platform of the forest map of Honduras shows the geographical location and surface area of the protected areas, areas assigned under management contracts, declared microbasins, road infrastructure, forest management plans and reference maps. The Geoportal is linked to the SNIF. This information is used to plot the timber flow routes and facilitates the planning of checkpoints for verification purposes on highways and at sensitive points of the road network. As and when new SNIF modules are created, they will be linked to the Geoportal: record of rescue plans, special plans for agroforestry systems, certified forest plantations and forest product companies, among others.

At the SAR:

— Electronic Internal Revenue System (E-tax) This portal provides taxpayers with the printed forms for filing tax returns. This system makes it possible, for example, to cross-check information between monthly filings by taxpayers, i.e. income taxes, and the monthly reports that operators file with the ICF.

— Tax and Finance Administration System (SAFT) This system enhances the efficiency, effectiveness, timeliness and transparency of municipal financial administration by means of the automated and integrated management of administrative and financial procedures based on the country's legislation. The system makes it easier to implement internal controls, handles municipal financial information on an integrated basis, and can be linked to other programs to generate statistics and digital maps.

— National Tax Register (RTN) Natural and legal persons and organisations or entities that have no legal personality but engage in activities that make them liable to tax must register with the National Tax Register (RTN) kept by the tax authorities as laid down in the applicable legislation. In the case of natural persons, their RTN number is the same as that of their National Register of Persons (RNP) number, with one extra digit, and is the same throughout their life. Legal persons must be entered in the RTN when they are registered or set up.

At the IP:

— Honduran National Property Administration System (SINAP) This is an IT system used as the Honduran official government platform for administering information on property rights. The SINAP contains subsystems that include the Honduran Unified Registration System: — Honduran Unified Registration System (SURE) This is an information system designed to gradually modernise the procedure for registering property rights, ownership rights and land registration throughout the country.

At the IHSS:

— Honduran Social Security System The IHSS operates an Information System on Members (SICA), which keeps the record of the employers and employees of enrolled enterprises. The geographical scope of IHSS is national with representations and offices in all the country's major cities.

At MiAmbiente:

— Simplified Environmental Licensing System (SLAS) This tool was designed to provide businesses with a flexible mechanism that enables them to make an immediate start on a project by supplying expeditious analysis of legal aspects that prohibit or exclude projects anywhere in the country, studying in depth the characterisation of the Environmental Impact Quotient for any type of project, and setting out automatically the mitigation measures required by the project in question in the geographical coordinates given for where it is to be sited.

At the INA:

— National Agrarian Register (RAN) For the National Agrarian Register, the INA has a documentary register and geographical databases that enable it to monitor areas with title deeds. At present, it does not have an IT system or relational database architecture that enable interaction with other systems.

At the DARA:

— Automated Customs Revenue System of Honduras (SARAH) This system uses cutting-edge technologies based on open standards that provide a highly accessible online customs service using a standard browser and web services. It also has additional applications that support customs management and make it possible to establish controls while facilitating international trade.

— Honduran Electronic System for External Trade (SECEH) and its online export declaration authorisation module The SECEH supports the export sector by making it possible to obtain online the export documents needed for customs clearance of goods.

— International Transit of Goods System (TIM) This IT system facilitates standardised customs procedures at Central American borders to optimise migratory, customs and quarantine formalities by means of a single document: the Single Document for International Transit of Goods (DUT).

— Integrated External Trade System (SICE) This system provides external trade statistics to users at the Central Bank of Honduras (BCH) and displays information in accordance with the Central American Tariff System (SAC), doing so reliably as the information is first verified via several information sources. During the preparatory and organisational phase of this Agreement the following IT tools will be developed:

— Creation of a management system for the information documented at the ICF This virtual library will enable the ICF to organise, monitor and maintain the documented information linked to the forestry sector, such as laws, State strategy and policy documents, studies, agreements, inquiries, reports, conventions and technical document backups, among others. This system must be designed to meet the objectives of maintaining an online area where enquiries may be made and operators are given access to the documentary information to facilitate decision-making. The creation of this system will facilitate the verification procedures carried out by the ICF, which is one of the key elements of the LAS. The objective is therefore to develop it over the short term, during the preparatory and organisational phase of this Agreement.

— Creation of a database for the Legality Verification Unit To be able to verify operators' compliance with the indicators in the Legality Matrices and the requirements of the LAS, the Legality Verification Unit will need a tool to receive and update information, which provides access to actors involved in the LAS, by means of interconnection with the databases of the information systems of the institutions involved in LAS enforcement. The creation of this database will facilitate supply-chain verification and control procedures, which is one of the key elements of the LAS. The objective is therefore to develop it over the medium term, during the preparatory and organisational phase of this Agreement.

— Creation of an IT System for Forestry Registration, Administration and Control (SIRACOF) This system is included in the results of the ENCTI as a computer tool to increase the efficiency of the processing of formalities, the transparency of administrative procedures and the quality of the information in the records, and to support the control mechanisms in the forest value chain, from the forest to the processing centres and to the products' placement on the market. Significant progress has been made in developing the SIRACOF by creating and continually upgrading the systems that form its basis, since they manage, process and administer the basic information, just like the SNIF, the SIRMA and the Geoportal.

— Creation of a record-keeping system at the STSS The STSS will need a system that will enable it to verify that operators are complying with the indicators related to its areas of responsibility. The preparatory and organisational phase of this Agreement will offer the possibility of identifying other modules or information systems in order to continue facilitating the generation, transfer, interconnection and administration of the information concerning the verification of legal compliance in a manner that is consistent with the available financial, technical and human capacity. Requirements and capacity will be analysed in greater detail to determine what is the most appropriate degree of system computerisation in each case. This means the list of information systems for verifying legal compliance will be constantly evolving.

6.1.5. Risk management principle in case of non-compliance with the LAS

Reducing unlawful practices constitutes the main challenge in implementing the LAS. It requires a comprehensive risk-management mechanism to be implemented across the entire supply chain. In cases where the authorities do not have the necessary resources to ensure effective verification in all areas with equal intensity and frequency, risk-based legality verification is an opportunity to overcome this limitation.

Risk management in implementing the LAS consists of evaluating the likelihood of the occurrence of each one of the risks and their impact on the legality of the timber. This evaluation will take into account the results of the baseline study on operators' level of compliance, which is included in Annex VIII. The nature of risk changes according to where and when it arises. For this reason, decision-making is based on an objective and integrated methodology applied by the ICF and the other government agencies, and starts with categorising the risk and establishing the criteria for decision in accordance with the circumstances.

The verification manual under the responsibility of the JIC will present the basic principles for the categorisation of risks, which will serve as the basis for deciding how to approach legality verification; an analysis of risks of unlawful practices that could arise during the implementation of the LAS will then be given.

Risk management procedures throughout the supply chain will take into account the following unlawful practices:

— material from unknown sources and material harvested without legal logging operation rights entering any point of the chain;

— cases where the amount of a product with certain characteristics is greater than the proportion of the original product or of the amount of raw material with the same characteristics from legal sources used in the production or sale process for that type of product.

In parallel, the risk management procedures will take into account the supporting documents substantiating the legality of operators and their timber, such as recognised certificates from approved private certification systems, as defined in Section 8.

The actions taken to control and verify legal compliance will be based on these risk categories. Joint interinstitutional actions will be defined in order to increase the efficiency of field management by means of the interaction of the country's existing IT systems.

Thus, risk management makes it easier to formulate national strategic objectives and goals in order to tackle the challenges that require particular attention in forest governance. It also helps to evaluate whether the institutions responsible for legality verification in the timber supply chain have adequate resources, or otherwise devise actions to overcome weaknesses.

As for risk management in relation to imports, customs inspections can be carried out at border crossings or through inspection procedures completed after customs clearance in accordance with the level of risk. Inspection after customs clearance may be applied to import shipments that contain timber. In accordance with customs legislation, the customs authority will apply risk management methods to decide on the scope, content and method of post-clearance inspections of imported shipments.

Post-clearance inspection of customs dossiers and goods released must be carried out within no more than five years of the date of registration of the customs declaration. Close coordination exists between the customs authority and the ICF for the monitoring and checking of timber imports, including regular and systematised border and customs clearance checks, as well as in cases of suspected risk.

Risk management in implementing the LAS will also apply to the due diligence systems of private operators, particularly importers, in order to minimise the risk of placing illegal timber or timber products on the national market.

As defined in Section 6.2, the second key element of the due diligence systems will be the evaluation by each operator of the risk of the presence of illegal timber in its supply chain, based on the information gathered on the timber suppliers and taking into account the criteria laid down in the procedures to be developed during the preparatory and organisational phase of this Agreement.

The performance of due diligence by private operators and the risk-based control procedures of the public institutions are each included in supplementary measures in Annex VIII. The procedures necessary to implement them will be drawn up, applied and validated by the JIC before the first FLEGT licence is issued.

6.1.6. Legality audit resulting in a legal compliance certificate

The ICF, via the Legality Verification Unit, will verify the legal compliance of each operator with regard to the legality indicators laid down in Annex II, the requirements concerning the supply chain set out in this Annex, which apply to each operator, following procedures that make it possible to issue a legal compliance certificate to each forestry sector operator.

The procedures for legality audits and issuance of legal compliance certificates must show that:

— The timber products have been produced in a manner that meets all the requirements included in the definition of legality. The indicators and means of verification of this definition must be complied with in accordance with the law and must attest to the operator's legality; there must be no evidence of any current infringement.

— The controls performed by the institutions involved provide assurance that the products include only timber from legal operations.

— The legality audit is carried out by the institutions involved by means of field inspections of the operators, and includes documentary control and verification of the databases available.

— A written report of this process of verification and validation is kept on file in accordance with procedures defined in the preparatory and organisational phase of this Agreement.

This process of verification will lead to the issuance of a legal compliance certificate for delivery to the applicant and will consist of the following steps:

Creation methodology:

1. The operator applies to the ICF Legality Verification Unit for a legal compliance certificate.

2. Based on the SIIAVA's annual legality audit schedule, each institution verifies the legal compliance of the operator in accordance with the applicable regulations under its responsibility and notifies the ICF Legality Verification Unit of the result.

3. The ICF Legality Verification Unit analyses the means of verification available to it, together with the verification reports from the institutions involved.

4. The Legality Verification Unit evaluates whether or not the operator complies with each of the indicators in the Legality Matrices and with the requirements of the LAS.

5. If the operator meets all these requirements, the Legality Verification Unit concludes the legality audit of the operator by issuing a legal compliance certificate.

Verification methodology:

At the request of the ICF or of any other institution with an interest, the Legality Verification Unit checks the SIRMA, SNIF or other information system to be defined during the preparatory and organisational phase of this Agreement to see whether the operator has a valid legal compliance certificate. Similarly, the existence of a valid certificate will be checked each time the operator applies to the Legality Verification Unit to renew its legal compliance certificate.

Before the legal compliance certificate expires, the operator must apply for its renewal or extension, as appropriate. When applying for an extension of the period of validity, the applicant must include supporting documents substantiating the need for an extension (e.g. if it is waiting to receive a means of verification from an institution) when its application was submitted on time and in accordance with the creation methodologies defined in a manual that will be approved by the Parties through the JIC. The Legality Verification Unit will analyse the supporting documents and determine whether it is appropriate to issue a new compliance certificate, or to renew or extend the current certificate.

As defined in Section 8, the procedure for issuing legal compliance certificates will take into account any recognised certificates issued under private certification systems approved by the State within the context of this Agreement. This may in fact reduce the length of the audit necessary to establish entitlement to a legal compliance certificate.

The procedures for issuing, renewing and extending the period of validity of legal compliance certificates, including the definition of the components of the administrative dossier, the operation of the system for reconciling data from the different institutions involved and the procedure for renewing legal compliance certificates will be defined in a specific ICF regulatory provision during the preparatory and organisational phase of this Agreement, and will be submitted to the JIC for approval.

6.2. Obligation of operators with regard to legality verification

Forestry operators throughout the supply chain will be responsible for verifying the legality of the products that they buy by applying due diligence, as defined in Section 7.4.

Due diligence must be performed on purchased timber, both for the products acquired on the national market and for products that have been imported. Although the legality verification will apply to each operator, this verification must demonstrate that each timber supplier also verifies and documents the legal compliance of the timber they purchase. Information classified as confidential, such as accounting or other data, may be excluded from the due diligence exercise, as will be determined with respect to due diligence procedures during the preparatory and organisational phase of this Agreement.

For each purchase of timber at each point along the supply chain, the checks carried out by operators entail verifying its validity, authenticity and compliance with the indicators that apply to the relevant supplier, including the correlation of the physical characteristics of the timber (including species and dimensions), in order to guarantee that the timber is of legal origin. If there is any suspected risk of timber being illegal, the operators must adopt risk mitigation measures before buying timber products, as defined