ANNEX V

INDONESIAN TIMBER LEGALITY ASSURANCE SYSTEM

1. Introduction

Objective: To provide assurance that harvesting, transportation, processing and selling of round logs and processed timber products comply with all relevant Indonesian laws and regulations.

Known for its pioneering role in combating illegal logging and the trade in illegally harvested timber and timber products, Indonesia hosted the East Asia Ministerial Conference on Forest Law Enforcement and Governance (FLEG) in Bali, in September 2001, which resulted in the Declaration on Forest Law Enforcement and Governance (Bali Declaration). Since then, Indonesia has continued to be at the forefront of international cooperation in combating illegal logging and associated trade.

As part of international efforts to address these issues, a growing number of consumer countries have committed themselves to take measures to prevent trade in illegal timber on their markets, whilst producer countries have committed themselves to provide a mechanism assuring the legality of their timber products. It is important to establish a credible system to guarantee the legality of harvesting, transportation, processing and trade of timber and processed timber products.

The Indonesian Timber Legality Assurance System (TLAS) provides assurance that timber and timber products produced and processed in Indonesia come from legal sources and are in full compliance with relevant Indonesian laws and regulations, as verified by independent auditing and monitored by civil society.

1.1. Indonesian laws and regulations as foundation of the TLAS

The Indonesian regulation on the “Standards and Guidelines on the Assessment of Performance of Sustainable Forest Management and the Verification of Timber Legality in the State and Privately-owned Forests” (Forestry Minister's Regulation P.38/Menhut-II/2009) establish the TLAS. The TLAS also includes the Indonesian sustainability scheme and targets to improve forest governance, to suppress illegal logging and the associated timber trade to ensure credibility and to improve the image of Indonesia's timber products.

The TLAS comprises the following elements:

1. Legality Standards,

2. Control of Supply Chain,

3. Verification Procedures,

4. Licensing Scheme,

5. Monitoring.

TLAS is the basic system used to assure the legality of timber and timber products produced in Indonesia for export to the Union and to other markets.

1.2. Development of the TLAS: a multi-stakeholder process

Since 2003, a wide range of Indonesian forestry stakeholders have been actively engaged in developing, implementing and evaluating the TLAS, thereby providing better oversight, transparency and credibility in the process. In 2009, the multi-stakeholder process resulted in the issuance of Forestry Minister's Regulation P.38/Menhut-II/2009, followed by DG Forest Utilization Technical Guidelines No 6/VI-SET/2009 and No 02/VI-BPPHH/2010, which were revised by Forestry Minister's Regulation P.68/Menhut-II/2011, P.45/Menhut-II/2012, P.42/Menhut-II/2013, DG Forest Utilization Technical Guidelines P.8/VI-SET/2011 and P.8/VI-BPPHH/2012.

Based on lessons learned from initial TLAS implementation, the results of the joint assessment in accordance to Annex VIII of this Agreement, and recommendations from various stakeholders, the regulations were again revised through a multi-stakeholder process to become Forestry Minister's Regulation P.43/Menhut-II/2014 in June 2014 and P.95/Menhut-II/2014 in December 2014, followed by DG Forest Utilization Technical Guidelines No.P.14/VI-BPPHH/2014 in December 2014 and No.P.1/VI-BPPHH/2015 in January 2015 (hereinafter referred to as the TLAS Guidelines).

The process of engagement with all stakeholders will be continued during implementation of the TLAS.

2. Scope of the TLAS

Indonesian production forest resources can broadly be divided into two types of ownership: state forests and privately owned forests/lands. State forests consist of production forests for long-term sustainable timber production under a variety of permit types and forest areas that can be converted for non-forestry purposes such as for settlement or agricultural plantations. The application of TLAS on state forests and privately owned forests/lands is set out in Annex II.

The TLAS covers timber and timber products from all permit types as well as the operations of all timber traders, downstream processors, exporters and importers.

The TLAS covers timber products destined for domestic and international markets. All Indonesian producers, processors, and traders will be verified for legality, including those supplying the domestic market.

The TLAS requires that imported timber and timber products are cleared at customs and comply with Indonesia's import regulations. These regulations require that imported timber and timber products must be accompanied by documents and other pieces of evidence providing assurance of the legality of the timber in its country of harvest. All timber and timber products imported into Indonesia must be included in a supply chain whose controls comply fully with all relevant Indonesian regulations.

Certain timber products may contain recycled materials. Specific legality requirements for recycled timber are described in the legality standards and TLAS Guidelines.

Impounded timber may be sold for use exclusively on the domestic market, with the exception of impounded timber that was harvested in conservation forest, which must be destroyed. Any industry receiving impounded timber must implement measures to segregate that timber from other supplies and duly inform a conformity assessment body (CAB), which will promptly conduct a special audit to ensure that this timber does not enter the export supply chain. No impounded timber may be covered by an export licence.

Changes in the procedures for utilization and/or administration of timber from Customary Forests, to address implementation of Constitutional Court Decision (MK) No 35/PUU-X/2012, shall be introduced after the adoption of related implementing legislation.

Timber and timber products in transit are strictly kept outside the gazetted Principal Customs Areas (PCA). Thus, such transit timber does not enter the PCA and furthermore will not be included in the timber supply chains of Indonesia. No transit timber will be issued with an export licence.

2.1. TLAS legality standards

The TLAS is based on specific timber legality standards covering all types of timber sources (permits and operators) and all operators' activities. These standards and their verification guidelines are set out in Annex II.

The TLAS also incorporates the “Standard and Guidelines on Assessment of Performance in Sustainable Forest Management (SFM)”. The assessment of sustainable forest management using the SFM standard also verifies that the auditee complies with the relevant legality criteria of the TLAS. Permit holders operating within production forest zones on state-owned lands (permanent forest domain) must adhere to both relevant legality and SFM standards. They can opt for complying with the legality standard at first, but they must comply with both the legality standards and the sustainable forest management standards not later than the date when their initial legality certification expires.

3. Control of the Timber Supply Chain

The permit holder (in the case of concessions) or landowner (in the case of private land) or company (in the case of traders, processors and exporters) shall demonstrate that every node of their supply chain is controlled and documented as set out in the Minister for Forestry Regulations P.30/Menhut-II/2012, P.41/Menhut-II/2014 and P.42/Menhut-II/2014 (hereinafter referred to as the Regulations). These Regulations require provincial and district forestry officials to undertake field verification and validate the documents which are submitted by permit holders, landowners, or processors at each node of the supply chain.

The key documents for operational controls at each point in the supply chain are summarised in Diagram 1.

All consignments in a supply chain must be accompanied by relevant transport documents indicating whether the material is covered by a valid SVLK certificate, or declared legal by use of Suppliers' Declaration of Conformity (SDoC), or originates from impounded sources. The owner or custodian of any consignment of timber or timber products at each point in a supply chain must record whether that consignment is SVLK certified, declared legal by use of Suppliers' Declaration of Conformity, or from an impounded source. If a consignment includes any impounded timber, the owner or custodian of that consignment must apply an effective system to segregate timber or timber products from verified legal sources, from impounded timber or timber products, and maintain records that distinguish between these sources.

Operators in the supply chain are required to keep complete records on received, stored, processed and delivered timber and timber products. These records must be sufficient to enable subsequent reconciliation of quantitative data between and within nodes of the supply chain. Such data shall be made available for provincial and district forestry officials to carry out reconciliation. Main activities and procedures, including reconciliation, for each stage of the supply chain and the role of the CABs in assessing the integrity of the supply chain, are further explained in the Appendix of this Annex.

Diagram 1

Control of the supply chain which shows the required key documents at each point in the supply chain where data reconciliation takes place

4. Institutional set-up for Legality Verification and Export Licensing

4.1. Introduction

The Indonesian TLAS is based on an approach known as “operator-based licensing” which has much in common with product or forest management certification systems. The Indonesian Ministry of Forestry nominates a number of conformity assessment bodies (Lembaga Penilai/LP and Lembaga Verifikasi/LV) which it authorizes to audit the legality of operations of timber producers, traders, processors, and exporters (“operators”).

The conformity assessment bodies (CAB) are accredited by the Indonesian National Accreditation Body (KAN). CABs are contracted by operators who want their operations to be certified as legal. CABs are required to operate according to the ISO/IEC 17065 guideline. They report the outcome of the audits to the auditee and to the Ministry of Forestry. Summaries of reports are made publicly available.

A CAB checks that the operator that is audited is operating in compliance with the Indonesian legality definition as contained in Annex II, including effective implementation of controls to prevent material from unknown sources entering its supply chains. When an auditee operating in state forests or a large industry (primary industry with a capacity above 6 000 m3/year, secondary industry with an investment above IDR 500 million) is found to be compliant, an SVLK legality certificate with a validity of 3 (three) years is issued. During this period, the CAB conducts annual surveillance visits to check that compliance is being maintained. For auditees operating small industries (primary industry with a capacity below 6 000 m3/year, secondary industry with an investment below IDR 500 million) the validity of the legality certificate is 6 (six) years, and 10 (ten) years for operators in privately owned forests/lands. In these cases CAB surveillance visits take place every second year (biennial).

Operators in privately owned forests/lands, household industries, craftsmen/artisans, primary industry that exclusively processes timber from privately-owned forests/lands and cannot directly export, registered depots (trading timber or processed timber that is exclusively sourced from privately owned forests/lands or from SVLK certified operations under Perum Perhutani), and importers can use Suppliers' Declaration of Conformity to demonstrate the legality of their timber and timber products and are therefore not audited by the CABs (refer to section 5.3).

LVs also act as export Licensing Authorities. They check the validity of the exporters' SVLK certificate and export registration, and the consistency of exporters' data declarations (monthly balance sheets) before issuing export licences in the form of V-Legal Documents or FLEGT licences. Thus exports of timber products covered by Annex I without an export licence are prohibited. Exports to the European Union that meet these conditions are issued with FLEGT licences, while exports to other destinations are issued with V-Legal Documents.

The TLAS Guidelines specify that Indonesian civil society groups, individuals and communities have the right to monitor the implementation of the TLAS on the ground. Such Independent Monitors are allowed to assess the compliance of operations against the requirements of the legality definition and also the conformity of the auditing and licensing processes against TLAS requirements and file complaints to CABs, Licensing Authorities, KAN and the Ministry of Forestry.

Diagram 2

Relationship between different entities involved in implementing the TLAS

4.2. Conformity assessment bodies and Licencing Authorities

The conformity assessment bodies (CABs) play a key role in the Indonesian system. They are authorized by the Ministry of Forestry and contracted by individual operators to verify the legality of the production, processing and trade activities of individual operators in the supply chain, including the integrity of the supply chain.

There are two types of CABs: (i) assessment bodies (Lembaga Penilai/LP) which audit the performance of Forest Management Units (FMUs) in state forests against the sustainability standards as well as the requirements of the legality standard; and (ii) verification bodies (Lembaga Verifikasi/LV), which audit FMUs, forest-based industries, traders and exporters against the legality standards.

In order to ensure that those audits that verify the legality standards as set out in Annex II are of the highest quality, the LP and LV are required to develop the necessary management systems addressing competency, consistency, impartiality, transparency, and assessment process requirements as outlined in ISO/IEC 17065. These requirements are specified in the TLAS Guidelines. The conformity assessment bodies (CAB) are accredited by the Indonesian National Accreditation Body (KAN).

LVs can also act as Licensing Authorities. In this case the LVs issue export licences to cover timber products destined to international markets. For non-Union markets, the Licensing Authorities will issue V-Legal Documents, and for the Union market, FLEGT licences will be issued in accordance with the requirements as outlined in Annex IV. Detailed procedures for the V-Legal Document and FLEGT licensing of export consignments are described in the TLAS Guidelines. LPs cannot act as Licensing Authorities and do not issue export licences.

All auditors working for CABs or Licensing Authorities must be registered and hold a valid certificate of competence from the Profession Certification Body (Lembaga Sertifikasi Profesi — LSP). The LSP will assess any alleged misconduct by an auditor brought to its notice, and may revoke the certificate of competence of that auditor.

4.3. Accreditation body

The Indonesian National Accreditation Body (Komite Akreditasi Nasional — KAN) is an independent accreditation body established through Government Regulation (Peraturan Pemerintah/PP) 102/2000 concerning National Standardisation and Presidential Decree (Keputusan Presiden/Keppres) 78/2001 regarding the National Accreditation Committee. It operates under the guidance of ISO/IEC 17011 (General Requirements for Accreditation Bodies Accrediting Conformity Assessment Bodies). It has developed internal TLAS-specific supporting documents for the accreditation of LPs and LVs.

KAN is internationally recognised by the Pacific Accreditation Cooperation (PAC) and the International Accreditation Forum (IAF) to accredit certification bodies for Quality Management Systems, Environmental Management Systems and Product Certification. KAN is also recognised by the Asia Pacific Laboratory Accreditation Cooperation (APLAC) and the International Laboratory Accreditation Cooperation (ILAC).

On 14 July 2009, the KAN signed a Memorandum of Understanding with the Ministry of Forestry to provide accreditation services for the TLAS. This makes it responsible for the accreditation of CABs to ensure their continued compliance with ISO/IEC 17065.

Complaints concerning the performance of a LP or LV can be submitted by any interested party, including operators and independent monitors, to the KAN.

4.4. Auditees

Auditees are operators which are subject to legality verification. They include forest management units (concessionaires or timber utilization permit holders, community-based or village based forest permit holders, private forest/land owners), registered timber depots, forest-based industries, non-producer registered exporters. The forest management units and forest-based industries must comply with the applicable legality standard. For export purposes, the forest-based industries and non-producer registered exporters must comply with export licensing requirements. The TLAS allows auditees to submit appeals to the LP or LV on the conduct of or results of audits.

4.5. Independent monitor

Civil society plays a key role in the Independent Monitoring (IM) of the TLAS. Civil society groups, individuals and communities acting as Independent Monitors have the right to assess and report on the compliance of operations against legality requirements, as well as on accreditation, verification and licensing activities. Findings from an Independent Monitor can also be used as part of the Periodic Evaluation (PE) which is required under this Agreement (Annex VI).

In the event of an irregularity related to the legality of an operator, complaints by an Independent Monitor shall be submitted directly to the concerned LP or LV. If they consider the response to a complaint by the LP or LV to be unsatisfactory, an Independent Monitor may file a report to the KAN and to the government. In case of complaints about the issuance of export licences, the Independent Monitor may directly file complaints with the Licensing Authority or with the Ministry of Forestry.

4.6. The Government

The Ministry of Forestry (as of October 2014, the Ministry of Forestry was merged with the Ministry of Environment to become the Ministry of Environment and Forestry) regulates the TLAS and authorises the accredited LPs to undertake SFM assessment and LVs to undertake legality verification.

The Ministry of Forestry also authorises the LVs to issue export licences (V-Legal Documents or FLEGT licences).

The Ministry of Forestry has issued a set of Guidelines providing the requirements related to verification and licensing activities. These Guidelines also include provisions for Ministry of Forestry's control over LVs verification, and specify the Ministry's procedures to authorize and oversee their licensing activities.

Furthermore, the Ministry of Forestry shall establish an ad-hoc follow-up team in charge of investigating on a case-by-case basis any reported violation in relation to the issuance of a legality certificate and/or V-Legal Document/FLEGT licence. The composition of the follow-up team depends on the nature of the violation reported. It can comprise different government agencies and civil society actors. Based on the follow-up team findings and recommendations, the Ministry of Forestry may revoke the authorization of the CAB resulting in an immediate cessation of their verification and licensing activities.

The Minister of Forestry will also immediately revoke their authorization of a CAB based on a KAN decision on withdrawal of its accreditation (e.g. resulting from KAN's annual surveillance activities of the CABs). CABs can appeal to KAN but not to the Ministry.

The Ministry of Forestry also regulates the Licence Information Unit (LIU) as an information management unit which validates information concerning V-Legal Document/FLEGT licence issuance. The LIU is also responsible for general information exchange on the TLAS, and receives and stores relevant data and information on the issuance of certificates of legality and V-Legal Documents/FLEGT licences. It also responds to queries from competent authorities of trading partners and stakeholders. The LIU also manages the due diligence based import recommendation process through its SILK online system.

In addition, the Ministry of Forestry controls the registration of technical governmental field supervisors (Wasganis) and technical company field staff (Ganis). Wasganis are tasked to carry out the supervision and control of log measurements. They also terminate the mandatory transport documents and carry out data reconciliation (for further details refer to the Appendix of this Annex). Ganis prepare the production and transport documents from all production in state forests. Ganis can also terminate the mandatory transport documents in the case of Wasganis' absence for more than 48 hours. Both Wasganis and Ganis are registered with the Ministry of Forestry. On a yearly basis, they are evaluated by the Ministry of Forestry through an official examination.

5. Legality Verification

5.1. Introduction

Indonesian timber is deemed legal when its origin and production process as well as subsequent processing, transport and trade activities are verified as meeting all applicable Indonesian laws and regulations, as set out in Annex II. CABs carry out conformity assessments to verify compliance. To reduce the burden on private forest owners, as well as traders and household industries/craftsmen/artisans fully depending on timber from privately owned/privately utilized forests (private land permit), such operators are allowed in clearly described cases to issue a Supplier's Declaration of Conformity as an alternative to obtaining an SVLK certification (see paragraph 5.2 below for more detail).

5.2. Legality verification process by CABs

In accordance with ISO/IEC 17065 and the TLAS Guidelines, the legality verification process consists of the following:

Application and contracting: The operator submits to the CAB an application that defines the scope of verification, operator's profile and other necessary information. A contract between the operator and the CAB, setting out the conditions for verification, is required prior to the commencement of the verification activities.

Verification plan: After the signing of the verification contract, the CAB prepares a verification plan, which includes nomination of the audit team, verification programme and schedule of activities. The plan is communicated to the auditee, to the relevant Provincial Forestry Authority and other relevant authorities at provincial and regional levels, and the dates of verification activities are agreed upon. This information shall be made available in advance for the independent monitors and to the public through the websites of the CABs and the Ministry of Forestry, and/or mass media or letters.

Verification activities: The verification audit consists of three stages: (i) opening audit meeting and coordination, (ii) document verification & field observation and (iii) closing audit meeting.

— Opening audit meeting and coordination: coordinate with relevant regional, provincial and district offices to inform about audit plans and to gather initial information from those offices. The CAB may also disseminate information and build communication with relevant CSOs to add to the initial information. The CAB discusses the audit's objective, scope, schedule and methodology with the auditee in the opening audit meeting, so as to allow the auditee to raise questions on methods and conduct of verification activities;

— Document verification and field observation stage: in order to collect evidence on the auditee's compliance with the Indonesian TLAS requirements, the CAB checks the auditee's systems and procedures, relevant documents and records. The CAB then carries out field checks to verify compliance, including cross-checking their findings with the findings of official inspection reports. The CAB also checks the auditee's timber traceability system to ensure that there is evidence that all timber entering the supply meets the legality requirements.

— Closing audit meeting: the verification results, in particular any non-compliances that may be detected, are presented to the auditee. The auditee may raise questions on the verification results and provide clarification on the evidence presented by the CAB.

Reporting and decision making: The audit team draws up a verification report, following a structure provided by the Ministry of Forestry. The report, which includes a description of any findings of non-compliances and the decision on certification taken, is shared with the auditee within fourteen calendar days after the closing audit meeting and submitted by the CAB to the Ministry of Forestry.

The audit team findings are used primarily to decide on the outcome of the verification audit by the CAB. The CAB takes the decision on whether to issue a legality certificate based on the verification report prepared by the audit team.

In cases of any non-compliance, the CAB will refrain from issuing a legality certificate, which will prevent the timber from entering the supply chain of verified legal timber. Once the non-compliance has been addressed, the operator may resubmit a request for legality verification.

Infringements, which are discovered by a CAB during the verification, are reported to the Ministry of Forestry and handled by the responsible authorities in accordance with administrative or judicial procedures. If an operator is suspected of breaching regulations, the national, provincial and district authorities may decide to halt the operator's activities.

Issuance of the legality certificate and recertification: the CAB will issue a legality certificate if an auditee is found to fully comply with all the indicators and verifiers in the legality standard, including the rules on control of the timber supply chain.

The CAB may report at any time to the Ministry of Forestry on issued, changed, suspended and withdrawn certificates and every three months shall issue a report. The Ministry of Forestry will then publish these reports on its website.

According to the type of permit held by the auditee, a legality certificate is valid for a period of three to 10 years, after which the operator is subject to a re-certification audit. The re-certification shall be done prior to the expiry date of the certificate.

Surveillance: According to the type of permit held by the auditee, operators with a legality certificate are subject to annual or biennial surveillance that follow the principles of the verification activities summarised above. The CAB may also carry out surveillance earlier than scheduled if the scope of the verification has been extended.

The surveillance team draws up a surveillance report. A copy of the report, including a description of any non-compliance found, is submitted to the Ministry of Forestry. Non-compliances detected by the surveillance will result in suspension or withdrawal of the legality certificate.

Special audits: Operators with a legality certificate are obliged to report to the CAB any significant changes in ownership, structures, management, and operations that may affect the quality of its legality controls during the period of validity of the certificate. The CAB may carry out special audits to investigate any complaints or disputes filed by the independent monitors, government institutions or other stakeholders or upon receipt of the operator's report on changes that affect the quality of its legality controls. CABs also carry out special audits if the operator reports that he intends to process impounded timber.

5.3. Legality verification using Supplier's Declaration of Conformity (SDoC) and internal checks

Supplier's declaration of conformity based on SNI/ISO 17050 is a “self-declaration” as defined in ISO/IEC 17000, i.e. first-party attestation following review that fulfilment of specific requirements has been demonstrated.

The SDoC can be used by (i) private forest owners, (ii) registered timber depots (only timber depots that exclusively receive timber from privately owned forests/lands or receive SVLK certified timber from Perum Perhutani), (iii) household industries/craftsmen/artisans, (iv) primary and secondary industries that exclusively process timber from privately owned forests/lands and hold no export permit. The SDoC applies to (a) timber from privately-owned forests/lands, (b) timber from regenerations of roadsides and graveyards, (c) recycled/demolished timber, and (d) imported timber or timber products.

The SDoC contains information about the supplier, products and their sources, transport document, recipient of the products, and date of issuance. The SDoC by private forest owners shall also include a proof of ownership of the land the timber comes from. The SDoC is attached to the transport document based on timber administration regulations. Detailed procedures for SDoC issuance and related checks are provided in the TLAS Guidelines.

The recipient of the SDoC from privately owned forest shall undertake and document internal checks on the validity of the information to be declared in the SDoC prior to signing of the purchase contract and at least once a year after the contract has been signed. Information contained in SDoCs issued by timber depots is checked by the recipient of the SDoC (primary or secondary industries) in intervals of three months for the traceability of log sources. This is verified by CABs when conducting an SVLK audit of the recipient through document review in case the recipient is certified. In addition, the Ministry of Forestry can carry out random inspections, which may be contracted to competent third parties. In indications of fraud and irregularities, the Ministry of Forestry can conduct special inspections of the operator which uses SDoC.

All timber products covered by a V-Legal Document or FLEGT licence must come from a SVLK certified and or SDoC supply chain. Timber and timber products covered by SDoC cannot directly access international markets. Such access is only possible through a SVLK certified operator.

5.4. Legality verification of imported timber and timber products

Minister for Trade regulation 78/M-DAG/PER/10/2014 states that imported timber and timber products require proof of legality in the country of harvest. In this context, the SDoC template is also used for imports. Only registered importers (traders) and processing operators can import timber and/or timber products into Indonesia. These operators must exercise due diligence on imported timber and/or timber products to minimize the risk of illegal timber entering the Indonesian supply chain. They are required to provide information such as HS codes of products, Bill of Lading, countries of harvest, country of origin, proof of timber legality, and port of export in the declaration template. The due diligence procedures encompass data collection, risk analysis and risk mitigation. Procedures are carried out using the SILK online system of the Ministry of Forestry. The Ministry issues an import recommendation to the Ministry of Trade after assessing each due diligence process conducted by an operator.

CABs when conducting audits of the importer carry out document review of the due diligence system applied. Detailed procedures for the due diligence system and related checks will be provided in the TLAS guidelines and related import regulations.

5.5. Government responsibility for enforcement

The Ministry of Forestry, as well as provincial and district forestry offices are responsible for the control of timber supply chains and checking of related documents (e.g. annual work plans, log felling reports, log balance-sheet reports, transport documents, logs/raw material/processed products balance-sheet reports and production tally sheets). In the event of inconsistencies, forestry officials may withhold approval of the control documents resulting in a suspension of operations.

Infringements detected by forestry officials or by independent monitors are communicated to the CAB, which upon verification may lead the CAB to suspend or withdraw the awarded legality certificate. Forestry officials may take appropriate follow-up action in accordance with the regulatory procedures.

The Ministry of Forestry also receives copies of the verification reports and subsequent surveillance and special audit reports issued by the CABs. Infringements discovered by the CABs, by forestry officials or by independent monitors are communicated between the involved actors and handled in accordance with administrative and judicial procedures. If an operator is suspected of breaching regulations, the national, provincial and district authorities may decide to suspend or halt the operator's activities. CABs immediately revoke the legality certificates if the requirements of the legality standard are no longer met.

The Ministry of Forestry shall establish an ad-hoc task force in charge of inquiring and investigating any reported violation in relation to the issuance of a legality certificate and/or V-Legal Document/FLEGT licence (follow up team) on a case-by-case basis.

6. FLEGT Licensing

The Indonesian export licence for legal timber products is known as the “V-Legal Document”. This is an export licence that provides evidence that the timber products exported meet the requirements of the Indonesian legality standard as set out in Annex II and were sourced from a supply chain with adequate controls against the inflow of timber from sources not verified as legal. The V-Legal Document is issued by the LVs who act as Licensing Authorities (LA) and will be used as a FLEGT licence for shipments to the Union once the parties have agreed to start the FLEGT licensing scheme.

The procedures for issuing FLEGT licences/V-Legal Documents are provided in the TLAS Guidelines.

The Ministry of Forestry has established a Licence Information Unit to maintain an electronic database with copies of all V-Legal Documents/FLEGT licences and LA non-compliance reports. The Licence Information Unit will grant on-line access to its database to the competent authorities of the Union. In the event of an inquiry concerning the authenticity, completeness, and validity of a specific FLEGT licence, the competent authority in the Union will be able to verify the licence information by using the SILK on-line database. For further information, the competent authorities of the Union can contact the Licence Information Unit, which will communicate with the relevant LA if needed.

The V-Legal Document/FLEGT licence is issued at the point at which the consignment is consolidated prior to export. The procedure is as follows:

6.1. The V-Legal Document/FLEGT licence is issued by the LA, which holds a contract with the exporter, for the consignment of timber products to be exported.

6.2. The exporter's internal traceability system shall provide evidence on the legality of timber for export licensing. The previous stage of the supply chain shall be included in the exporter's internal traceability system.

6.3. For a V-Legal Document/FLEGT licence to be issued, all suppliers in the exporter's supply chain that make up the consignment must have been covered by a valid legality or SFM certificate or a SDoC.

6.4. To obtain a V-Legal Document/FLEGT licence, an operator must be a registered exporter (an ETPIK holder) who possesses a valid legality certificate. The ETPIK holder submits a letter of application to the LA and attaches the following documents to demonstrate that the timber raw materials in the product originate only from verified legal sources (SVLK certified or SDoC declared): 6.4.1. A summary of the transport documents for all timber/raw materials received by the factory since the last audit (up to max 12 months); and 6.4.2. Summaries of Timber/Raw Material Balance-Sheet Reports and Processed Timber Balance-Sheet Reports since the last audit (up to max 12 months).

6.5. The LA then carries out the following verification steps: 6.5.1. Verification of the validity of the operator's legality certificate and ETPIK registration, using LA's own database as well as SILK. 6.5.2. Data reconciliation based on the summaries of the transport documents, Timber/Raw Material Balance-Sheet Report, and Processed Timber Balance-Sheet Report; 6.5.3. Control of the recovery rate(s) for each type of product (primary industry only), based on analysis of the Timber/Raw Material Balance-Sheet Report and Processed Timber Balance-Sheet Report. 6.5.4. Where necessary, a field visit may be conducted by the LA after data reconciliation so as to ensure consistency with the information to be specified in the V-Legal Document/FLEGT licence. This may be done through export consignments sample checking and inspecting the factory operation or timber depot, and record-keeping.

6.6. Result of verification: 6.6.1. If an ETPIK holder complies with legality and supply chain requirements, the LA issues a V-Legal Document/FLEGT licence in the format presented in Annex IV; 6.6.2. An ETPIK holder meeting the above mentioned requirements may use conformity marking (V-Legal Label) on the products and/or packaging. National Guidelines on the use of conformity marking are described in the TLAS Guidelines. 6.6.3. If an ETPIK holder does not comply with the legality and supply chain requirements, LA will issue a non-compliance report instead of V-Legal Document/FLEGT licence. The non-compliance report halts the movement of the related timber and/or timber products. 6.6.4. In case a shipment changes configuration before leaving the port of export (e.g. change of destination, volume, species as defined in the TLAS Guidelines), the exporter must request the Licensing Authority to cancel the initial export license and issue new licence(s). The Licensing Authority must inform LIU of all cancelled export licences. 6.6.5. In case of misuse or falsification of legality certificates and/or export licences by an operator, a sanction shall be imposed by the Ministry of Forestry as defined in applicable regulations.

6.7. The LA shall: 6.7.1. Forward a copy of a V-Legal Document/FLEGT licence or non-compliance report to the Ministry of Forestry within twenty four hours from the time the decision was taken; 6.7.2. Submit a comprehensive report and a public summary report outlining the number of V-Legal Documents/FLEGT licence issued as well as the number and type of non-compliances detected to the Ministry of Forestry once every three months with copies to the Ministry of Trade and Ministry of Industry.

7. Monitoring

The Indonesian TLAS includes civil society monitoring (Independent Monitoring). To make the system even more robust for a FLEGT-VPA, a Period Evaluation (PE) component is added.

IM is carried out by civil society to assess compliance of the operators, LPs, LV, and LAs with the Indonesian TLAS requirements including accreditation standards and Guidelines. Civil society is defined in this context as Indonesian legal entities including NGOs, communities, and individual Indonesian citizens.

The objective of PE is to provide independent assurance that the Indonesian TLAS is functioning as described, thereby enhancing the credibility of the FLEGT licences issued. PE makes use of the findings and recommendations of IM. Terms of Reference for PE are set out in Annex VI.