EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 17.10.2008 
SEC(2008) 2615 
  
COMMISSION STAFF WORKING DOCUMENT 
 
accompanying the 
Proposal for a 
 
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
 
determining the obligations of operators who make timber and timber products 
available on the market  
   
Impact Assessment  
 
Report on additional options to combat illegal logging 
{COM(2008) 644 final} 
{SEC(2008) 2616} 
EN 2   EN Lead DG: DG ENV  
Other involved services: DEV, AG RI, ENTR, SJ, SG, TRADE, MARKT  
 
Agenda planning: 2007/ENV+/023  
The report commits only the Commi ssion's services involved in the preparation and the text is 
prepared as a basis for comment and does not prej udice the final form of any decision to be 
taken by the Commission 
EN 3   EN TABLE OF CONTENTS 
1. EXECUTIVE SUMMARY 
2. PROCEDURAL ISSUES 
2.1. Overview 
2.2. Inter-Service Steering Group 
2.3. Public consultation 
2.4. Ad hoc consultations 
2.5. National studies 
2.6. Consultations with third countries 
2.7. Study 
2.8. Impact Assessment Board 
3. PROBLEM DEFINITION 
3.1. Problems of illegal logging 
3.2. Production and trade in timber 
3.3. Perspectives (international and EU po licy addressing illegal timber trade) 
3.4. Subsidiarity/necessity tests 
4. OBJECTIVES 
5. MAJOR POLICY OPTIONS 
6. ANALYSIS OF IMPACTS 
6.1. General remarks 
6.1.1.  Impact on illegal logging 
6.1.2.  Environmental impacts 
6.1.3.  Social impacts 
6.1.4.  Economic impacts 
6.1.5.  Risks 
6.2. Baseline scenario 
6.2.1.  Impact on illegal logging 
EN 4   EN 6.2.2.  Environmental impacts 
6.2.3.  Social impacts 
6.2.4.  Economic impacts 
6.2.5.  Risks 
6.3. OPTION 1 Expansion of the FLEGT VPA approach 
6.3.1.  Impact on illegal logging 
6.3.2.  Environmental impacts 
6.3.3.  Social impacts 
6.3.4.  Economic impacts 
6.3.5.  Risks 
6.4. OPTION 2 Voluntary measures by the pr ivate sector furthered developed 
6.4.1.  Impact on illegal logging 
6.4.2.  Environmental impacts 
6.4.3.  Social impacts 
6.4.4.  Economic impacts 
6.4.5.  Risks 
6.5. OPTION 3: Border measures to prevent the importation of illegally harvested timber 
6.5.1.  Impact on illegal logging 
6.5.2.  Environmental impacts 
6.5.3.  Social impacts 
6.5.4.  Economic impacts 
6.5.5.  Risks 
6.6. OPTION 4A: Legislation which prohibits the trading and possession of timber and 
timber products harvested in breach of the laws of the country of origin 
6.6.1.  Impact on illegal logging 
6.6.2.  Environmental impacts 
6.6.3.  Social impacts 
EN 5   EN 6.6.4.  Economic impacts 
6.6.5.  Risks 
6.7. OPTION 4B: Legislation which requires th at only legally harvested timber and 
timber products be placed on the market 
6.7.1.  Impact on illegal logging 
6.7.2.  Environmental impacts 
6.7.3.  Social impacts 
6.7.4.  Economic impacts 
6.7.5.  Risks 
6.8. OPTION 5: Legislation re quiring companies placing timber and timber products on 
the market to exercise due diligence in  ascertaining that th e products are legal 
6.8.1.  Impact on illegal logging 
6.8.2.  Environmental impacts 
6.8.3.  Social impacts 
6.8.4.  Economic impacts 
6.8.5.  Risks 
7. COMPARING OPTIONS 
7.1. Illegal logging 
7.2. Environmental impact 
7.3. Social impact 
7.4. Economic impacts 
7.5. Overall comparison of options 
8. MONITORING AND EVALUATION 
EN 6   EN  
EXECUTIVE SUMMARY This report presents possible op tions with respect to further policy or legislative options for 
measures to address the introduction of tim ber and timber products to the EU market 
originating from illegal logging.  
The European Community policy re garding illegal logging and rela ted trade was set out in the 
Forest Law Enforcement, Governance and Tr ade (FLEGT) Action Plan which includes a 
number of measures to ensure that timber a nd wood products imported in to the EU have been 
legally harvested or manufactured from legally harvested timber.  
One of the key measures proposed by the Action  Plan is a licensing scheme for the prevention 
of illegal logging and related trade coming into the European Union (EU). The licensing scheme would be implemented as part of th e Voluntary Partnershi p Agreements (VPAs), 
which are being negotiated w ith a number of countries. 
The VPA approach is considered promising but it is recognized that it may have limitations. 
The EU FLEGT Action Plan therefore makes provisions for an analysis of additional 
measures, which could enhance the EU’s efforts to eliminate imports of illegally harvested timber and timber products to the EU market. A total of five options have been identified, compared to the "baseline" scenario (c ontinuation present FLEGT VPA approach). 
(1) Expansion of the FLEGT VPA approach  
(2) Voluntary measures by the privat e sector further developed  
(3) Border measures to prevent the import ation of illegally harvested timber  
(4) Prohibition on the placing on the EU mark et of illegally harvested timber  
(5) Sub-option 4A: Legislation which prohibits  the trading and po ssession of timber and 
timber products harvested in breach of the la ws of the country of  origin (i.e. where 
trees harvested) 
(6) Sub-option 4B: Legislation which requires that only legally harvested timber and 
timber products be placed on the market  
(7) Legislation which requires due diligence by all timber traders to ensure that they trade 
in legally harvested timber 
The report defines the problem of illegal logging and the important economic (loss of 
revenues for third countries or unfair competition to the industry), social and environmental 
damage (loss of forests and biodiversity, other environmental impacts). It furthermore gives 
an overview of the production of timber and t imber products globally a nd within the EU as 
well trade figures globally and imports into  the EU. Estimates have been made on the 
proportion of illegally harvested timber (being not harvested in accordance with the applicable legislation) and the associated trade.  
EN 7   EN The impact of all policy options on the reducti on in illegal logging in the EU and non-EU 
countries have been assessed as well as the economic impacts (in particular regulatory costs 
involved for the government sector), costs for th e private sector and tr ade impacts in both EU 
and non-EU countries) and social (employment,  other social factors) and environmental 
impacts.  
The largest impact on a reduction in illeg al logging, assuming that the measures are 
implemented effectively, can be found in options  4A, 4B and 5. The uni t costs of legality 
control (in Euro/m3) are rather low in all op tions, the differences are attributable to the 
variation in implementation a rrangements (e.g. third-party ve rification may be included or 
excluded). Option 4b prohibiting the placing of ille gal timber on the EU market involves in 
particular high costs for the priv ate sector, while the regulatory costs are the highest in option 
3.  
The report indicates that the latest option 5 "due diligence", developed by combining the 
positive elements of option 2 (voluntary meas ures by the private sector) and option 4B 
(enforceability through the need for burden of pr oof) would be most effective of the options 
assessed. It would result in a reduction in illegal logging without the introduction of a high 
cost systematic control system and consid erable enforcement problems which might be 
expected under several other options (in particular options  4A and 4B). A separate cost 
assessment was made for option fi ve and is contained in Annex II. The main findings are that 
the costs to the EU private sector of the pr oposed due diligence approach appear limited and 
are expected to shift demand from high-risk to low-risk timber.  
It will serve as well as an incentive for sourcing of timber from countries with FLEGT 
Voluntary Partnership Agreements or for timber covered by valid CITES (Convention on 
International Trade in Endangere d Species) permits, since this w ould provide a high degree of 
certainty for operators and exporting countries involved. 
PROCEDURAL ISSUES 
1.1. Overview 
The EU Action Plan for Forest Law Enforcem ent, Governance and Trade (FLEGT) adopted 
by the Commission in May 2003, sets out a proce ss and a package of m easures by which the 
European Commission proposes to address the growing problem of illegal logging and related 
trade.  
One of the key measures proposed is a licensing scheme for the preventio n of illegal logging 
and related trade coming EU. Th e licensing scheme would be im plemented as part of the 
Voluntary Partnership Agreements (VPAs), wh ich are being negotiate d with a number of 
countries. The VPA approach is considered prom ising but it is recognized that it may have 
limitations.  
The EU FLEGT Action Plan therefore makes provision for an analysis of additional 
measures, which could enhance the EU’s efforts to eliminate imports of illegally harvested timber and timber products to the EU market. 
Following on from that commitment the Co mmission has explored a number of options 
including options for legislative measures a ddressing the importation or  marketing of timber 
products derived from illegally harvested timber. 
EN 8   EN The proposal with additional measures and this  impact assessment are part of the Commission 
agenda planning 2007/ENV+/023. 
1.2. Inter-Service Steering Group 
A Commission Inter-Service Steer ing Group on the Impact Asse ssment was established. The 
Group was led by DG Environment with the part icipation of the following Commission 
Directorate Generals and Services: Agriculture and Rural Development, Enterprise, Development, Trade, and Taxati on & Customs Union. Other services  were also invited to join 
but did not respond to the call. Following the la st stakeholder meeting that took place in 
Brussels the group met to discuss the draft fi nal study carried out by  a consultancy firm 
(section 2.7). A second meeting took place to disc uss options in light of the findings of the 
impact assessment process. Members of the gro up were also consulted on an ad hoc basis to 
provide input on particular items.  
1.3. Public consultation 
As part of the impact assessment proce ss the Commission held a web-based public 
consultation in early 2007. The consultation so ught views on the need for, appropriateness 
and feasibility of EU policy measures to address the problem of illegal timber and timber products being introduced to the European  market. The substantive response (93 
contributions) was not large in terms of numb ers. In terms of cont ents and variety of 
perspectives provided it however met the Comm ission’s expectations. Most responses came 
from within the EU. Forty respondents were i ndividuals, thirty one (31) from the private 
sector, nigh teen (19) fr om NGOs and three from national aut horities in EU Member States. In 
addition, 7.161 e-mails were received through th e 'Ban illegal timber' campaign launched by 
Greenpeace.  
Most of the respondents felt that the bilateral FLEGT approach wa s insufficient to address the 
problem of illegal logging. They also felt that further private sector voluntary schemes could 
only play a complimentary role to a robust binding framework. However some respondents 
felt that combining these approaches could allow targeting of those areas with highest risk of 
illegal logging. A significant proport ion of the respondents firmly expressed a wish for the EU 
to put an end to ‘business as usual’ and in pa rticular address possible loopholes in the system 
under FLEGT VPAs. In genera l these responses favoured a legislative approach . Often the 
positions expressed did not clearly favour a specific option, or supported more than one 
option. 
Many respondents considered an  import ban on illega lly harvested timber to be the most 
problematic of the options and were concerned that in designing lega lly binding measures it 
would be hard to overcome discriminatory im pacts of such a measure. The option which 
would require that only legally harvested tim ber and timber products are placed on the EU 
market attracted a lot of positive attention. Ho wever respondents, whether in favour or not, 
did not seem to understand fully  the distinction be tween the sub-options  included in the 
broader framework – an option that would ‘pro hibit the trading and possession of timber and 
timber products harvested in brea ch of the laws of the country of origin ’ or one that would 
‘require that only legall y harvested timber and timber products be placed on the market’. 
These were generally treated as equivalent in  terms of effectiveness and the impact on the 
forest sector -inside and outside the EU- and on the governance problems. 
EN 9   EN Many respondents considered that developm ent cooperation and capac ity-building are an 
essential element for halting illegal logging a nd felt that this had not been adequately 
addressed in the consultation. There were widely differing views on the need for, and practicability, of a common defi nition of legality in the context of the timber trade, 
highlighting the fact that ille gal logging has deep-rooted and complex causes, thus halting 
illegal logging requires a full unde rstanding of the root causes. To be effective any measures 
should also contribute to a ddressing the root causes a nd not just the symptoms. 
The synthesis report of the results of the consultation can be consulted in 
http://www.cc.cec/dgintranet/env/i/e2/doc/ pdf_docs/forests/Addl OptionsSynthFinal.pdf
 
1.4. Ad hoc consultations 
Stakeholders were consulted in workshops and through interviews of in dividual stakeholders 
1. The consultations were condu cted both in EU Member St ates as well as in non-EU 
countries that would potentially be involved in the implementation of additional options or be 
indirectly affected by them. Th e consultation was based on a que stionnaire but stakeholders 
could express their views verbally during the workshops or in writing.  
The participants were asked to rank the additional options from best to worst. At that time 
though, only 4 options were available. Option 5 wa s developed on the basis of the findings of 
the impact assessment. The way in which the question was put caused some ambiguity in the 
identification of the best option;  the results can be interpreted in two ways. On one hand, the 
most preferred option or combination of op tions across the EU are options 1 and 4b, and 
option 4b followed by option 1+2 and option 2.A nother possible ranking was done based on 
how many times each option was indicated either as the best option or was included it the 
favourite combination of options. Ranked in this manner, option 1 was referred to by 37 
respondents or about half of all respondents. The second most frequently mentioned option 
was option 2 with 31 references. Option 4b ranked  third with 24 indications and options 3 and 
4 were mentioned by 13 respondents each. 
1.5. National Studies 
In its conclusions the Council called on the Member States to supply the Commission with 
“relevant information” over the extent to whic h existing national legislation can be used to 
stop the trade in illega lly produced and traded wood. In response to that  request several MS 
including the Netherlands, the UK, Spain, Es tonia, Italy and Germ any carried out that 
analysis. 
1.6. Consultations with third countries 
Consultations were held with several interna tional partners. High leve l meetings were held 
with other major timber importers e.g. China, Ja pan and USA. Meetings were organised with 
FLEGT VPA countries (e.g. Malaysia, Indonesia, Ghana, and Cameroon) as well as certain 
other timber exporting countries (Russia, Brazil) and countries that have  shown interest in 
discussing VPAs with the EU.  
                                                 
1 Assessment of the Impact of potential further measures to prevent the importation or placing on the 
market of illegally harvested timber or derived products, Technical Report 3 Stakeholder Report 
Indufor, Finland, 2007.  
EN 10   EN 1.7. Study 
In the context of the impact assessment process the Commission contracted a consultancy 
firm to conduct an impact assessment study. The study provided an assessment of the environmental, economic and social impacts of the different policy opti ons identifie d at that 
stage, within and outside the EU, as  set out in the terms of reference
2.  
1.8. Impact Assessment Board 
The draft Impact Assessment was submitted to the Board on the 11th of March 2008 and 
discussed at the Board meeting of the 2nd of April 2008. The Board issued its final opinion on 
7 April 2008. It included a number of recomme ndations for the improvement of the impact 
assessment report, which were largely taken into account prior to the submission of the 
Commission proposal. 
The key amendments made to the impact assessment following the issuing of the Board 
opinion are: 
• Further clarification how the additional measures fit in th e current political context and 
commitments and link to ongoing policy developments (FLEGT action plan being 
implemented), including in ternational agreements. 
• Including more focused objectives and indica ting more clearly and earlier in the report 
which options had been discarded on feasibility grounds, although the full set of options 
and the assessment have been retained in the report for comparison purpose. 
• Further clarification how the preferred option combines the positive elements of a self-
regulatory and enforcement approach by explai ning further the pros and cons of this 
options. 
• Strengthened assessment by inclusion of fu rther details with regard to market 
developments and trade impacts of the different options and their risks with regard to these 
aspects (regulatory costs, compliance effectiveness and trade diversion) 
PROBLEM DEFINITION 
1.9. Problems of illegal logging 
Illegal logging activities include the harvest, tr ansportation, purchase or  sale of timber in 
violation of national laws. The harvesting proc edure itself may be illegal, including using 
corrupt means to gain access to forests; extr action without permission or from a protected 
area; the cutting of protected species; or the extraction of timb er in excess of agreed limits. 
Illegalities may also occur during transport, su ch as illegal processi ng and export; fraudulent 
declaration to customs; and the avoidance of ta xes and other charges. The impacts of illegal 
logging are multiple3.  
                                                 
2 Assessment of the Impact of potential further measures to prevent the importation or placing on the 
market of illegally harvested timber or products de rived from such timber, Indufor, Finland, 2007. 
3 As reflected in Extended Impact Assessment concerning the establishment of a voluntary FLEGT 
licensing scheme for imports of timber into the European Community (SEC(2004)977) 
EN 11   EN The clandestine nature of illegal logging makes its scale and value difficult to estimate in 
relation to the global trade in forest products (estimated by the OECD to be worth over 
€150bn per year), but strong evidence suggests that it is a substantial an d growing problem. In 
many countries, illegal logging is similar in size to legal production or it exceeds legal 
logging by a substantial margin (see also chapte r 3.2). It has been also  indicated that more 
than half of all loggi ng activities in particularly vul nerable regions – the Amazon Basin, 
Central Africa, Southeast Asia, the Russian Fe deration and some of the Baltic states – is 
illegal. 
The illegal exploitation of natural resources, including fore sts, is closely associated with 
corruption and organised crime.  In some forest-rich countr ies, the corruption fuelled by 
profits from illegal logging has grow n to such an extent that it is undermining the rule of law, 
principles of democratic governance and respec t for human rights. In some cases the illegal 
exploitation of forests is also  associated with violent conflict. Profits from the illegal 
exploitation of forests (and of  other natural resources) are of ten used to fund and prolong 
these conflicts.  
Illegal logging and associated trade undermines  the competitiveness of legitimate forest 
industry operations in both exporting and impor ting countries. In so doing, this limits the 
ability of these industries to conduct operations th at foster sustainable forest management and 
sustainable development genera lly. Illegal logging also co sts governments vast sums of 
money. Estimates suggest that illegal logging cost s timber-producing countries €10-15 billion 
per year in lost revenues, which could ot herwise be spent on the provision of better 
healthcare, education and other public services, as well as the implementation of sustainable 
forest management. 
The social impact of illegal logging is less well acknowledged. However, serious human 
rights abuses have been documented, particul arly where local comm unities or concerned 
citizens have attempted to stand up to powe rful logging interests. Illegal logging also 
provokes conflict over land and access to resources; and where laws are unjust, local people using forest resources to meet their basic n eeds are forced into il legal behaviour through a 
lack of alternative means to earn a living. Illegal logging does also provide rural employment, 
which has a positive social impact, but this empl oyment is often short-term in nature as the 
resource is not managed on a sustainable ba sis. Illegal logging also causes enormous 
environmental damage and loss of biodivers ity, for instance through logging of national 
parks, and can facilitate the ille gal exploitation of wildlife. It can be a contribut ory factor to 
the process of deforestation, and can increase th e vulnerability of forests to fires – both of 
which have climate change implications. It un dermines sustainable forest management and 
has a long term negative impact on the livelihoods of forest-dependent people, many of whom 
are amongst the world’s poorest a nd most marginalised people. 
Underlying motives and forces  
Corruption is considered the most important and deep-rooted cause of forest degradation. 
Corruption in forestry has many manifestati ons, ranging from give-a way logging concessions, 
log smuggling, and illegal logging operations, to fraud and tax evasion schemes. Such corruption reflects the lack of accountability of  corporations, governments, and other actors 
involved in the forestry sector. Corruption u ndermines the rule of law and renders most 
regulations and control mechanisms worthles s. These factors in developing and emerging 
EN 12   EN market countries compounded by strong interna tional demand for timbe r provide incentives 
for illegal behaviour and logging at large scales.  
Who is affected by illegal logging? 
A range of actors are affected by illegal loggi ng. Governments in afflicte d countries lose large 
potential revenues; citizens lo se a valuable productive resource. Citizens of the EU are 
affected through the impact illegal loggi ng has on global public goods, such as lost 
biodiversity and the long term im pact of forest loss on climate change. The EU is also 
affected by illegal logging in a more direct  way, since EU donors contribute aid to badly 
affected countries, while at the same time a va luable productive resource is looted and the 
profits generated are lost to the state. High-level scandals relati ng to imports of illegal timber 
into the EU have shaken the consumer's confidence in EU timb er purchasing policies. Illegal 
logging also undermines many essential elements  of the EC’s development objectives: public 
sector financing for development targeted at the poor, peace, security, good governance, the 
fight against corruption, and sust ainable environmental management .  
1.10. Production and trade in timber 
The estimated global production of industria l roundwood in 2005 was 1 709 million m3. This 
is divided in production from countries/regions with a high or  moderate risk for illegal 
logging of 615 million m3; from countries/regions with low-risk for illegal logging of ca. 726 
million m3 and internal EU production of ca.  370 million m3 (table 3.1 and figure 7.1).  
The available estimates on the extent of produc tion, imports and exports of illegal timber are 
also indicated in table 3.1. It has to be realis ed however that the figures are highly indicative 
due to the very nature of illegal activities and are to be considered more than indications of 
their order of magnitude. The main production of  illegal timber stems from countries/regions 
with a high or moderate risk for illegal logging and is esti mated at 139 million m3 in 2005. 
There are four broad regions where the risk of illegal logging was considered high or at least 
moderate. Among them, the propor tion of illegal production is estimated to be highest in 
Africa (excl. South Africa) and Asia (excl. Japan), around 30 %. In Latin America, the 
estimated share of illegal production is 15 % and the average for Russia, former Union of 
Soviet Socialist Republics (USSR ) countries and the Balkans is  put at 17 % of the total. 
Illegal logging is not a real problem within th e EU and other low risk countries. The risk is 
considered as low, although according to some statistic information in the study, it does exist 
and is estimated at around 3 million m3 in the EU in 2005.  
All imports of wood products to the EU in 2005 were about 142 million m3 (Figure 3.2). 
Roundwood, sawnwood, plywood and veneer account ed for 50 % of the total. Boards and 
panels, manufactured wood, and wood furniture accounted for 1, 3 and 4 %, respectively. Imports of wood pulp contributed to 26 % and thos e of paper and 16 % to the total imports of 
wood products to the EU in 2005. Exports from  the EU comprised 107 million m3. In 2005, 
the principal EU Member States in terms of  importing wood and wood products (RWE) were 
Italy, Germany, the UK and Finland, which togeth er accounted for more than one half. Other 
significant importers incl ude France, Spain, Belgium and the Netherlands. 
EN 13   EN Table 3.1 Estimated roundwood producti on and illegal pr oduction in 2005 
Region Production of 
industrial roundwood Estimated production 
of illegal industrial 
roundwood 
 million m3/y million m3/y % of 
total 
High or moderate risk countries/regions  
Africa excl. South Africa 45 14 30 
Asia excluding Japan 221 66 30 
Latin America 187 28 15 
Russia, Former USSR & Balkans 162 28 17 
Sub-total 615 136 22 
Low risk countries/regions  
Norway and Switzerland 13 - - 
South Africa 18 - - 
Japan 16 - - 
USA and Canada 632 - - 
Australia and New Zealand 46 - - 
Sub-total  726 - 0 
EU27  
EU-27 368 3 1 
Sub-total  368 3 1 
Total World 1 709 139 8 
 
EN 14   EN Figure 3.2 Imports of all wood products to the EU by country of origin in 2005 (RWE) 
05.000.00010.000.00015.000.00020.000.00025.000.00030.000.00035.000.00040.000.000
cubic meters (RWE )
Considering only the imports of r oundwood, sawnwood, plywood and veneer, the 
estimated imports of illegal products from high/moderate risk countries was 14 million m3 (RWE) in 2005. If all wood products except pulp and paper were considered, the amount in 2005 would have been 16 million m3 (RWE)  
In 2005, the total volume of tim ber placed on the EU market reached 512 million m3 
consisting of imports, 142 million m3  (RWE), and EU roundwood production, 
370 million m3. Imports of illegal timber amounting to 16 million m3 (excluding 
pulp & paper products) accounted for about 3 % of the total.  
1.11. Perspectives (International policy and EU policy addressing illegal timber 
trade) 
International Options The EU and its Member States have put a great effort in reaching international arrangements 
with regard to sustainable forest policies and c ontrol of legality of timber in international 
trade. 
While a number of countries have been fairly open to discuss the control of illegal logging in 
the international forest policy arena, negotiations on a multilateral framework, which started more than 20 years ago (FAO and following UN fo rest panels and forest fora), have only 
known very limited progress. The United Nations  Forum on Forests (UNFF) has recently 
(2007) however made progress towards a non-legally binding
 instrument on forests, but it is  
EN 15   EN unlikely that in this forum a multilateral ag reement on trade in forest products could be 
established in the foreseeable future. Many governments, including some key forest rich countries like Brazil continue to oppose such an id ea. They in particular insist that legislation 
and law enforcement are issues of national sovereignty. 
While progress on multilateral forest policy le vel has been very limited, the European 
Community has invested heavily into discussing illegal timber trade with other main timber 
importers (USA, Japan, China) in order to  seek a common approach in Forest Law 
Enforcement and Governance policies. Discussions  with those countries  are ongoing in order 
to share experience and combine efforts, where appropriate. 
At the international /multilate ral level, the Convention on In ternational Trade in Endangered 
Species of Wild Fauna & Flora (CITES) is a relevant instrument an d implemented in the 
Community by the EU Wildlife trade regulations. It s aim is to ensure that international trade 
in specimens of wild animals a nd plants does not thr eaten their survival and it has proved to 
be effective international agreement. Since CITES sets both legality and sustainability conditions, shipments covered by CITES permits  do not require additi onal FLEGT licenses 
under the Community legislation. The CITES scope in timber is so far however limited to a 
few tree species although the Conven tion allows also for exporting countries to voluntarily list 
species which are protected by national law in or der to control the trade internationally. With 
the species specific approach however, it is not r ealistic to suggest that CITES could be used 
to control all timber trade, although further lis tings of certain prior ity species on the CITES 
Appendices will contribute to th e regulation of legal and sustai nable trade which is supported 
by the Community. 
Despite its high profile, illegal l ogging has not been specifically addressed in the international 
legal frameworks concerning the fight against crime. 
Community Legislation 
The EU FLEGT Action Plan, adopted in 200 3 by the European Commission sets out a 
package of measures to address the problem  of illegal logging and related trade. The 
European Parliament and the Council have adop ted formal resolutions and conclusions. The 
centre-piece of the EU FLEG T Action Plan was the FLEGT licensing scheme, under which 
exports of timber from participating countri es to the EU would be covered by a (FLEGT) 
licence attesting that the timber has been harvested in confor mity with relevant national 
legislation. The licensing scheme would be implemented through the development of 
Voluntary Partnership Agreements (FLEGT VPAs ). In parallel, the Council adopted in 2005 
the FLEGT Regulation which establishes the legal framework for the imports of timber 
originating in partner co untries into the EU.  
There is however currently no overall Commun ity legislation deali ng with the import and 
marketing of timber and timber products produced illegally.  
National Legislation 
In the Action Plan the Commission invited the Me mber States to identify relevant national 
legislation which could be  applied to address the illegal lo gging issue (Section 6). In response 
to that call, studies carried out by some Member State have concluded that there is some 
potential in addressing illegal logging through na tional legislation such as that concerning 
EN 16   EN theft and trafficking of stolen goods, money-launde ring or smuggling. Howeve r, in practice it 
is very difficult to establish a link a link betw een an alleged illegal activity and a specific 
piece or shipment of timber.  
Possible evolution of the problem 
The FLEGT VPAs are considered by most stake holders as the most effective way to tackle 
illegal logging as they put particular emphasi s on governance and combine trade requirements 
with capacity building. Although, it  seems logical that VPAs s hould be allowed to prove its 
effectiveness and efficiency before considering taking further steps, certain limitations have 
outweighed that argument. To th is day only four countries have  formally engaged in that 
process, with some others having also expr essed an interest, although not amongst the major 
timber-producing countries. Furthermore, the negotiations towards c oncluding a VPA are for 
a variety of reasons proceeding more slowly than initially envisaged. In the meantime, 
countries have been raising in the VPA ne gotiations the circumvention risk and its 
ramifications for the FLEGT-licensed timber.  
The circumvention risk was already identifie d in the FLEGT Action Plan. The Commission 
thus, committed to 'review options for, and th e impact of, further measures, including in the 
absence of multilateral progress, the feasibility of  legislation to control imports of illegally 
harvested timber into the EU' (Section 4.2.4). Th e Council and the European Parliament have 
recalled that commitment.  
The strong international demand for timber ha s provided a strong incentive for illegal logging. 
Although the EU is not a huge mark et, it is an important player in the international arena and 
putting forward requirements for trading in t imber would send a clear signal regarding its 
commitment to support the fight against illega l logging. In a statement issued in 2006 several 
companies including IKEA, B&Q and Carrefour  have called on th e Commission to set 
common rules in timber trade to ensure fair competition and sustainable markets 4.  
Under a “no policy change” scenario  illegally harvested timber will continue to enter the EU 
market and illegal logging would thus c ontinue unchecked, exacerbating the impacts 
identified in chapter 3.1. It is therefore evid ent that other complementary measures at the 
Community level would be required if fast progress is to be made at eliminating the access of 
illegally harvested timber and timb er products to the EU market. 
1.12. Subsidiarity/necessity test 
There is a clear need for Community-level action to address the demand-side of illegal 
logging and associated trade, since all the proposed policy instruments fall under the 
competences of the Community. As regards the regulatory approach de scribed under options 
3, 4 and 5 Articles 133 or 95 of the Treaty woul d provide the appropriat e legal basis as the 
primary objective of the instrument would be the functioning e ither of the common 
commercial policy or of the internal market.  
The subsidiarity principle applies insofar as  the proposal does not fa ll under the exclusive 
competence of the Community, as in the case of option 3. 
                                                 
4 http://www.greenpeace.o rg/raw/content/international/pr ess/reports/FLEGTIndustry.pdf 
EN 17   EN At the core of the Community action under opti ons 4A, 4B and 5 lies the establishment of 
common rules for the placing on the Community market of timber products. Experience has 
shown that the smooth functioning of the inte rnal market is best safeguarded through 
harmonised action across the EU Member States. As regards the marketing of timber products 
it is considered that action at the EU level w ould deliver better resu lts than a series of 
individual actions by Member States. A harmonised approach would simplify the 
requirements for the operators and therefore stimulate competitiveness, while consumers would be better informed on the applicable st andards. The system would also provide the 
legal certainty and clarity, necessary for the prop er functioning of the market. In the absence 
of a harmonised approach, measur es restricting internal trad e would be taken by several 
Member States, hence disrupting the functioning of the internal market. This would have a 
serious impact on the functioning of the EU market, jeopardize the ability of European 
Operators to source timber products necessa ry for their economic activities as well as 
jeopardizing thee credibility of EU measures.  
The clandestine nature of illegal logging globally makes its scale and value difficult to 
estimate but strong evidence suggests that it is a substantial and growing problem which 
causes enormous environmental damage and loss of biodiversity, undermines the 
competitiveness of legitimate forest industry op erations while is closely associated with 
corruption, organised crime and violent conflict. Despite the limited occurrence of illegal 
logging incidents within the EU this proposal puts forward inte rnal market measures with a 
view to address the problem in a holistic manner and to avoid co nstraints posed by the 
international trade rules. Given that the releas e for free circulation into the community confers 
on imported products the status of Commun ity goods, rules governing the placing on the 
market also applies on imported products. It has been argued that measures affecting imports 
of timber products would only sh ift trade to non-demanding markets. However, the EU is a 
major player in the international arena and with  such an initiative it would send a clear signal 
on its commitment in the combat against illegal logging and pos sibly provoke similar 
reactions from other major consuming countri es. The potential impact  on the placing on the 
market of manufactured timber products would al so greatly enhance its impact, as not only 
primary producers would be affected. 
The proposal aims at closing the EU market to  timber and timber products harvested illegally 
through a set of rules governing the placing on the market of timber and timber products. 
While setting clearly the principles to be taken into account when ascertaining legality, 
operators will be allowed to choose the mechanisms to deliver the required result.  
In light of these elements, EU action is justifie d as it is clear that Member States can not 
achieve this satisfactorily and that the EU can do it better and more efficiently.  
OBJECTIVES The aim of this proposal is in line with th e Commissions' strategic objectives and better 
regulation principles notably to prov ide effective and efficient measures, 
ensure a high level 
of legal certainty across the EU , enable operators to be more dynamic without increasing the 
burden and thus help to strengthen the Community's credibility in the eyes of its citizens. The objectives have been also considered within  the context of the Sustainable Development 
strategy agreed by the European Council in June 2006 via its focus on the protection of 
natural resources. They are also in line with the Community’s overall policy objective in the 
forest sector, which is to achieve  sustainable forest management.  
EN 18   EN Although legality and sustainabil ity are distinct and different  concepts, in many countries 
forest legislation is based on the premise of su stainable forest manage ment, and so better law 
enforcement will in general lead to more su stainable forest management. Better forest 
governance is therefore an important step on th e path to sustainable development, and the 
Action Plan should thus be placed in the context of the overall efforts of the European Community to achieve sustainable forest management
5. 
The main overarching objectiv es of this proposal are to: 
• Support the international fight against illegal logging a nd related trade  
• Address the weaknesses entailed in the curren t framework i.e. circumvention, laundering, 
rerouting etc. due to its bilateral, voluntar y and geographically limited nature without 
nevertheless compromising its implementation 
• Reinforce EU consumers' confidence in timber 
• Improve forest governance and law enfo rcement in timber-producing countries 
Taking these objectives into account the following  specific objectives have been established: 
• Close the EU market to illegally harvested timber 
• Ensure consistency and legal clarity in terms of the requi rements for placing timber and 
timber products in the EU market 
• Avoid trade disputes and reciprocal meas ures that will devaluate the measures 
• Reward existing good practices for timber purchasing policies  
• Avoid creating a burdensome and expensive system 
• Establish a level playing field and foster a pro-competitive market environment 
• Facilitate smooth functioning of the internal market 
• Avoid impeding trade with low-risk countries  
By means of: 
• Laying down concrete rules for placing timbe r and timber products in the EU market 
• Endorsing existing schemes that comply w ith specific requirements in terms of 
demonstrating legality  
• Introducing a risk-sensitive approach  
MAJOR POLICY OPTIONS 
                                                 
5 As reflected in Extended Impact Assessment concerning the establishment of a voluntary FLEGT 
licensing scheme for imports of timber into the European Community (SEC(2004)977), section 3.2. 
EN 19   EN To address the problems iden tified and described under chapte r 3, different policy options 
have been considered and were the subject of this impact assessment. As regards the 
multilateral option the situation has not evolve d much since the adoption of the EU Action 
Plan and the FLEGT Regulation. As stated in the Impact A ssessment carried out for the 
purposes of the latter, 'given the pattern of trade in w ood products, a multila teral framework 
to regulate the international trade in timber wo uld be the most comprehensive way to tackle 
the issue. Progress in the in ternational dialogue on forest policy has been slow, however, and 
there is clearly little prospect of arriving at  a multilateral agreement to address the trade in 
illegal timber '. A solution based on voluntary co-operation with other major consuming 
markets offers better prospects was identified as the best option to combat illegal logging and 
associated trade and in line with the FLEGT Action Plan's objectives. As regards unilateral 
measures, the Impact Assessment concluded that the Community could introduce such 
legislation which would have the advantage of being a str ong and direct response to the 
problem, and would address an intuitive s hortcoming in the legislative framework6. 
The options were assessed against their rele vance in respect of achieving the objectives 
identified in section 4. 
Baseline "no additional EU action" 
The baseline scenario for comparing the impact s of the different option is that VPAs' are 
concluded between the EU and six timber producing countries wh ere negotiations are 
currently underway or expected  to start in the near future  (Indonesia, Malaysia, Ghana, 
Cameroon, Gabon and Congo Brazzaville). This optio n relies on the willingn ess of these third 
countries to conclude such VPAs. It's assumed fo r this report that this baseline option will be 
implemented and all following "additional options" are measures in addition ("top on") to the 
baseline. 
Additional Option 1: Expanded coverage of the bilateral approach through FLEGT 
Voluntary Partnership Agreements.   
This option is an expansion of the baseline option. In terms of geogr aphical coverage, the 
Voluntary Partnership Agreements are expanded with 6 additional countri es (Brazil, China, 
Vietnam, Russia, Belarus and Ukraine) which have been selected for illustrative purposes only. No formal discussions re garding potential Voluntary Pa rtnership Agreements are yet 
underway with these countries and this woul d rely as well on the willingness of third 
countries to conclude such VPAs. 
Under this option, the Community instead of  launching new initiatives which could just 
undermine the current approach would give prio rity to reinforce the implementation of the 
current framework designed to address th e root causes of illegal logging through a 
collaborative approach and use al l existing means to this end.  
Additional Option 2: Volunt ary measures by the privat e sector further developed 
The key element of this option is to support the development of private sector measures such 
as codes of conduct as well as forest certif ication schemes. Codes of conduct have been 
introduced by timber trade federations and bodi es who develop and advice their members on 
                                                
 
6 As reflected in Extended Impact Assessment concerning the establishment of a voluntary FLEGT 
licensing scheme for imports of timber into the European Community (SEC(2004)977), section 4.3. 
EN 20   EN responsible purchasing policies. Private certification schemes have been set up to set forest 
management standards and accredit forests, produc ts and or managers against those standards. 
Although these initiat ives have merits including their flexibility, powerful motivation and 
good cost/efficiency balance, their voluntary na ture, lack of policing over implementation and 
lack of sanctions for non-compliance challe nged over the years their credibility and 
sustainability.  
Under this option, the Community  would encourage the streng thening of such codes of 
conduct and private certification schemes in te rms of their performance, reliability and 
enforceability by e.g. recognising them in the FLEGT VPAs, making membership in the 
federations mandatory and by supporting measur es such as consiste nt public and private 
timber procurement policies and fina ncial or regulatory incentives.  
Additional Option 3: Border me asures to prevent the import ation of illegally harvested 
timber 
This option would consist in de claring illegal under Community  law the importation of timber 
products stemming from illegal logging and maki ng imports of timber into the Community 
conditional upon proving legality. The prohibition and the requirement would apply to all 
countries regardless of the le vel of risk in trad ing in illegally ha rvested timber. The 
compliance check would take place at the bord er on the basis of documentation ascertaining 
the legality of the timber.  
Under this option, the Community would rely on the assumption that illegal logging occurs 
only outside the EU and therefore trade measures ha ve an important role to  play in the combat 
against illegal logging. Despite the concer ns and difficulties in terms of the WTO-
compatibility and its proportionality this optio n has been retained for consideration for 
transparency purposes and because it attr acted a lot of atte ntion by several NGOs. 
Additional Option 4: Prohibition on the plac ing on the EU market of illegally harvested 
timber 
Under this option new community legislation w ill be developed making it illegal to place on 
the EU market illegally harvested timber or products derived from such timber. The option 
would apply both to imported forest products an d to those produced in the EU. It appreciates 
the international aspect of illegal logging and accep ts that an efficient strategy should aim at 
improving internal market standards and avoid im plications as regards the international trade 
rules.  
Two alternative approaches could be followed: 
• Additional Option 4A: Legisla tion which prohibits the trad ing and possession of timber 
and timber products harvested in breach of  the laws of the country of origin. 
This option would make it be unlawful to pla ce on the EU market illegally harvested timber. 
The key feature of such legislation is that the one who claims illegality should prove that 
claim. Effectively what should be proven is both the underlying –harves ting in breach of the 
laws of the country of origin - and the overlying violation –t rading in and possession although 
the actions need not be carried  out by the same person. Illegali ty would be determined on the 
basis of the legal framework of the country co ncerned. An investigation would be triggered 
EN 21   EN through information provided from within the ad ministration or by NGOs, companies, foreign 
governments, the news media or private individuals.  
Under this option, operators would be compelled to ensure that they are dealing in legal 
products but only when proven otherwise would they be asked to demonstrate compliance 
with this requirement. The focus of this opti on would effectively be on high-risk cases and it 
would thus provide operators with an incentive  to source timber with adequate guarantees 
regarding its legality.  
This option is similar to the US Lacey Act which makes it unlawful to trade in fish or wildlife 
harvested in violation of any foreign law. De spite the implementation challenges and the legal 
constraints detected from the start the option has been retained for consideration in light of the 
current discussions in the US le gislature to expand the scope of the Lacey Act to timber.  
• Additional Option 4B: Legisla tion which requires that only legally harvested timber and 
timber products be placed on the market. 
To a certain extent this opti on would rely on an approach si milar to the one described under 
option 3. Operators would be required to provide pr oof of legality of the timber they place on 
the EU market, regardless of the origin. Such proof would be provided either on request or 
systematically and for enforcement purposes it should take the form of documentation 
ascertaining legality. Fail ure to deliver would resu lt in refusing the marketing of the timber in 
question while falsification of  the documentation constitutes a self-standing offence under 
national laws and would thus be treated accordingly.  
Additional Option 5: Legislat ion which requires due diligen ce by all timber traders to 
ensure that they trade in legally harvested timber 
This option requires operators placing timbe r on the Community market to act in due 
diligence that enables reasonable assurance that the timber they trade in have been legally harvesting. Operators would thus employ systems and procedures to  ensure the legality of the 
products and bring to light facts that would speak against the ma rketing of certain products.  
Legality should be determined on the basis of th e laws and regulations of the country of origin 
and should be ensured throughout the supply chain. Recognising that the risk of timber 
harvested in breach of the applicable legislation entering the EU market is not the same in all 
cases, the due diligence procedure would rely on a risk-based approach to measure, monitor 
and control the risks in trading in illegal pr oducts. Under this option failing would constitute 
an offence.  
This option has common denominators with the self-regulatory approach in option 2 
(voluntary measures by the private sector) and enforcement approach in options 4A and 4B 
(prohibition of placing on the EU market illegally harvested timber). It relies on the fundamental principle that an efficient strate gy should address the need to implement robust 
systems to eliminate illegally harvested timber from the supply chain rather than requesting 
legality to be demonstrat ed for individual products.  
Existing private sector schemes ( option 2) is a highly useful interven tion but it is more of a 
complementary measure rather than a stand-alone approach. Their voluntary nature, lack of sanctions for non-compliance, incoherence be tween standards/sche mes combined with 
enforcement problems challenges the credibility and sustainability of those initiatives. The 
EN 22   EN lack of control over the content of the code s undermines initiatives such as the FLEGT 
licensing scheme. Option 5 appreciat es that private sectors' sche mes are a valuable instrument 
that will facilitate implemen tation and ensure uniformity in terms of the concepts and 
standards and thus provides for th eir recognition on the basis of a system that will assess them 
against concrete criteria.  
Option 4A implicitly imposes a requirement fo r due care on importers but in fact it condemns 
the latter for violations falli ng outside his control or inte nt. In addition, the compliance 
mechanism is triggered upon challenge while both  the underlying and th e overlying violation 
would have to be proven to secure conde mnation. Option 5 is building on the due care 
element but it effectively imposes  it on all traders while tying condemnation to the failure to 
ensure that illegally harvested timbe r does not enter their supply chain.  
Option 4B applies the requirement for certificati on of legality to all market operations for 
timber products. The absence of an internationall y agreed definition of legality and the issue 
of what would constitute a cred ible proof of it would represent a considerable challenge for 
the design of such an approach as we would run the risk of accepting “legality” documents 
from countries with serious credibility issues such as human rights abuses. Furthermore, the 
cost of the establishment and operation of the necessary legality assurance systems was 
estimated as at least a hundred million (100M ) Euros per annum within the EU. Option 5 
maintains the principle that the burden of proof  should lie with the trader but rather than 
condemning him for specific shipments of illegal timber it induces systemic changes in the timber market and makes traders falling within their control.  
ANALYSIS OF IMPACTS 
1.13. General remarks 
This Impact Assessment combines quantitative and qualitative approaches to ensure that 
adequate consideration is given to a broad range of direct a nd indirect economic, social and 
environmental impacts. The analysis is based on the results of the consultations, including 
data supplied in the study and provided by third countries comp etent authorities, industries, 
NGOs and other stakeholders affected. A comparat ive table of the impacts of all options is 
included in Annex I. 
1.13.1.  Impacts and data limitations and difficulties encountered  
In order to compare the differe nt options in the impact assess ment study, the product range in 
the study was limited to roundwood, sawnwood, pl ywood and veneer as presently are the 
items covered by the FLEGT Regulation and VPA negotiations. Costs and impacts were 
furthermore estimated assuming a broad definition of legality incorporating a fairly comprehensive range of core legislation to be  covered (e.g. forestry, environment, labour, 
land, fiscal, etc.).  
1.13.2.  Economic and costs impacts 
For the economic and cost impacts the following elements were considered and assumptions 
were made for the assessments: 
• Legality control system – the costs of the le gality control system (where applicable under 
the different options) were assessed through a th eoretical country case examining the costs 
EN 23   EN of the licensing system under the VPA in the ba seline countries. It estimates the average 
costs of legally control in the entire sector (incl. cost incurred by the private sector and 
government (referred to as "regulatory cost s") in a situation wh ere the supply chain 
consists of threes stages, including r oundwood harvesting, sawmill processing and further 
processing. Furthermore two possible system s are considered: consignment-based or 
operator-based.  Illegal logging is not easy to be monitored a nd even more reported and accounted for. The 
information presented in this report is the best available one and due to the issue treated, the Standard Cost model has not been followe d closely, as reported information and costs 
are not available. The regulat ory and private sector costs in the timber supply chain are 
analyzed as reported back by stakeholders (c ompanies, NGOs and administrations) as these 
are the experts from pr oviding the information. 
• Trade impact: The potential shifts of trade fl ows from one region to another and the impact 
on prices of wood and wood products were anal yzed using the EFI-GTM (European Forest 
Institute - Global Forest Sect or Model) model and assumptions have been made with 
regard to reduced trade flows of illegally harvested timber under the different options. This 
trade model is a regional global partial equilibri um model for forestry and forest industries, 
covering production and trade between 60 world regions
7. A central feature of the model is 
that it stimulates the market mechanism under the assumption of perfect markets. Changes in demand and supply, as well as economic fact ors such as production and transport costs, 
are the key variables. Factors such as pric e premiums for FLEGT licensed timber, impact 
of substitute products etc could not be consider ed because of poor data and the absence of 
existing models.   The model was used to assess the overall tr ade impacts of the options based on the 
assumptions that illegal harvested timber entering  the EU market is effectively restricted in 
accordance with the measures under the various  options. The trade model has furthermore 
some limitations which should be taken into c onsideration when interp reting the results, in 
particular that products made from tropi cal and non-tropical tr ee species are not 
distinguished in trade routes and that it does not differentiate between prices for legal and 
illegal timber. However, a quali tative assessment suggests that in most cases the price for 
legal wood increases while the pr ices of illegal ones decreases. 
• Market development: The key market develo pments and mechanisms behind them have 
been assessed based on the most salien t features related to supply and demand. 
1.13.3.  Impact on illegal logging 
The impact on illegal logging is considered to be proportionate to the volume of 
exports of illegal timber to  the EU or, where applicable  under the options, derived 
illegally within the EU. The introduction of  additional options will cause an initial 
decline in roundwood harvesting in countries exporting to the EU as illegal products 
no longer enter the EU market. However, this  decline will eventu ally recovered as 
                                                
 
7 Assessment of the Impact of potential further measures to pr event the importation or placing on the market of illegally harves ted 
timber or products derived from such  timber, Indufor, Finland, 2007; 
Kallio, A.M.IO., A. Moiseyes & B Solber, 2004. The global forest model EFI-GTM – the model structure. Technical report 15,  
European Forest Institu te, Joenssu, Finland. 
Kallio, A.M.IO., A. Mois eyes & B Solber, 2006. Economic impacts of increased forest conservation in Europa: a forest sector 
analysis. Env. Science and Policy 491:9-18.  
EN 24   EN exporters and their supp liers adjust to the new situati on and increase their supply of 
legal good to the EU market. The actual reduction of illegal logging depends on the 
adjustment strategies adopted by the vari ous market players for which the following 
optional scenarios could take place: 
• Increased supply of legal roundwood becomes ava ilable from resources that were unused 
either because of low demand or because low- cost illegal timber made their utilization 
uneconomical 
• Suppliers evading the pa yment of royalty fees and/or taxes choose co mpliance to maintain 
access to the EU market; exports  of illegal timber are "transformed" into exports of legal 
timber. 
• Trade flows are re-shuffled so that legal goods  are shipped to the EU  and illegal good to 
other, less discerning markets which would reduce the effect on illegal logging (please note that a few countries for which VPA negotiati ons are underway have expressed that VPA 
licensing scheme might be appl ied to all their exports).  
In assessing the options, the probability of th ese scenarios materializing is difficult to 
evaluate in quantitative terms, but some indicative projections are given based on a 
qualitative assessment. 
1.13.4.  Environmental impacts 
The change in the volume of illegal logging is also the key variable determining the 
environmental impact. With the reduction in illegal logging, the negative impacts on the forest resource base are also reduced (and subsequent pressure on remaining 
intact forests). It will result in a reducti on in erosion, degradation of land and water 
resources and negative impacts on climate ch ange. It will also reduce the conversion 
of forest areas into agricultural lands by rural populations and illegal wildlife trade following the construction of (illegal) new roads. Impacts depend however on the definition of legality to be agreed in th e VPAs' (where applicable under the options). 
In general terms, a broader definition (ensur ing more elements of sustainability in 
forest management) has a stronger positive impact. This is in particularly relevant for the options with VPA's where partner c ountries have expressed that the VPA 
licensing scheme might be ap plied to all their exports and therefore reduce both 
illegal logging and the negative environmenta l impacts without a risk  that trade flows 
of illegal goods are simply re-shuffled to other parts of the world (as identified as risks for some other additional options without VPS's). 
1.13.5.  Social impacts 
The social impacts in the timber exporting c ountries/regions depe nd on the extent to 
which social provisions have been incorporat ed in the definition of legality under the 
different options. A broader definition of legality would often have a major positive 
impact, however, legal compliance can seldom be considered to guarantee the social sustainability of forest management but  better observance of  existing provisions 
would nevertheless result in several positive impacts. For instance compliance with existing laws in the six VPA countries i nvolved would in many cases result in better 
security of tenure and access to land fo r indigenous communities, increased income 
EN 25   EN to the poor, improved working conditions for forest workers, respect for human 
rights etc. although is some cases the legal frameworks can be considered flawed and 
could actually work against the poor (e.g. by excluding local people from access to 
forest resources in existing fo rest laws in some countries) 
The projected changes for employment in fo rest industries and ot her social impacts 
(in exporting countries and EU) will be id entified under the rele vant options (where 
applicable).  
It is considered that soci al aspects relating to equal opportunities, private life and 
access to social welfare system s will not be affected by th e implementation of any of 
the options so these aspects are not consider ed separately during the analysis of each 
of the policy issues.  
1.14. Baseline scenario 
1.14.1.  Impact on illegal logging  
With VPAs concluded between the EU and the six countries fo r which negotiations 
are underway or expected to start in th e near future, the maximum reduction of 
illegal logging in those 6 count ries would be 2.4 million m3. It's assumed in this case 
that the licensing scheme from the timber  exporting country only applies to exports 
going to the EU.  
Accordingly, the elimination of exports of illegal timber to the EU would curb up to 
11 per cent of the total estimated production of  illegal timber, or 4 percent of the total 
production of industrial roundw ood in the countries invo lved. Compared to the 
estimated global volume of illegal industrial roundwood production, 139 million m3 in 2005, the maximum reduction of illegal l ogging in the baseline countries would 
represent about 2 percent of the global total. 
The actual impact depends however on how  market players respond to the new 
requirements. The reduction of illegal l ogging would be significant in the four 
African VPA countries (since domestic mark ets are small and the EU is the main 
export market) but in Indone sia (through the large number of actors and reshuffling 
of trade flows to other markets) and Malays ia (low exports to EU and share of illegal 
timber also limited) the impact could be substantially less than the estimated maximum. 
Under the VPAs, the countries will be supported by the EU in their efforts to 
improve law enforcement and remove the root  causes of illegal logging. This impact 
will be significant, considering that the VPA approach benefits from the implementation of the licensing scheme which provides strong support to more 
conventional law enforcement If all exports  (to EU and non-EU) of illegal timber 
were eliminated from the six countries, the only alternative outlet for illegal timber would be the domestic market, which is sm all in nearly  all baseline countries. 
Accordingly, a very strong reduction of illegal logging could be achieved fairly 
quickly in the countries concerned. 
EN 26   EN 1.14.2.  Environmental impacts 
The VPA licensing scheme is expected to lead to a reduced volume of illegal  logging 
in the six countries involved. This will have positive environmental impacts as 
outlined in chapter 6.1.4. The environmental impact in EU Member States is expected to be limited. 
1.14.3.  Social impacts 
The general social impacts as indicated in  chapter 6.1.5 applies. The establishment of 
VPA's with the six VPA countries will have  positive social impacts, depending on 
the extent to which social provisions have  been incorporated in the definition of 
legality.  
The introduction of VPA is projected to result in a reduction in the production of 
forest industries and employment in the six countries involved. The decline is still moderate in the period 2009-2015 but will accelerate between 2016-2020, as law 
enforcement takes effect reducing the supply of illegal timber. In other regions, the 
changes are expected to be marginal. In the EU the proj ected changes for 
employment in forest industries are very small. 
1.14.4.  Economic impacts  
Costs
  
Introducing systems in order to check the legality  of timber on the mark et will lead to costs 
for governments and the private sector in the exporting countries in particular. The licensing 
system under the VPA is built on existing systems combining manual work phases and 
limited use of information technology. The costs of  the system assuring legality consist of (i) 
control of forest operations, (ii) control of wood supply chai n, (iii) verification of forest 
operations and wood supply chain, (iv) licensing and (v) third- party monitoring of the whole 
Legality Assurance System (LAS). The co sts are assessed for the following options: 
• Consignment-based system 
• Operator-based system 
The verifications of forest operations and wood supply chain under the consignment-based 
system will largely be run by government agen cies, whereas in the operator based system, 
verification relies on the privat e sector’s own management systems and external checks. In 
both systems, however, private and public  sector participation is needed. 
The regulatory cost consists mainly of expenses  related to verification and licensing as well as 
independent monitoring. Table 6.1 presents th e LAS costs for the EU exports under both 
consignment-based and operator-based systems, assuming that there is no significant variation 
in the unit costs between the baseline countries. Th e private sector costs ar e expected to be of 
the same order of magnitude irrespective of  the country or product to be monitored. 
Table 6.1 Estimated regulatory (government) co sts and private sector costs for all 6 VPA 
countries  
EN 27   EN Exports to 
the EU Cost of consignment based 
system Cost of operator based 
system Countries 
Million m3/y EUR/m3 Total 
MEUR/y EUR/m3 Total 
MEUR/y 
Regulatory costs 7.0 m3/y 0.17 1.2 0.09 0.6 
Private sector 
costs 7.0 m3/y 0.05 0.4 0.25 1.8 
In the consignment-based system, the government  covers the system implementation costs, 
including purchase of hardware and software. Th e lower government costs are due to the fact 
that the companies take responsibility for demo nstrating the legal compliance and respective 
expenses. The cost of the LAS for the private sector will be ca. EU R 0.05-0.25/m3 (up to 1.6 
m/3 for state-of-the-art advanced information syst ems in certain high risk  countries), which is 
a minor factor and not considered a constraint  for legal trade. Compared to the price of 
tropical logs, which habitually reach levels be yond EUR 75/m3 at the mill gate, the additional 
cost is insignificant. The introduction of the licensing scheme in the baseline countries would 
eliminate the unfair advantage enjoyed by illegal operators within the country. 
SMEs' in developing countries  
The small and medium-scale forest enterprises8 represent the clear majority of forest 
enterprises in developing countri es, but it's unclear to which extent they are involved in 
timber exports and would participate in the VPA licensing system. Timber exports tend to be 
the domain of large enterprises, but smaller enterprises are often suppliers to larger ones thus 
becoming subject to obligations of the licensing scheme.  
Since the scale of operations by enterprises affect s the costs for the legality assurance systems 
(LAS), the smallest enterprises may have diffi culties in shouldering the cost of the initial 
investment in the LAS. Regarding operator-bas ed systems, the annual cost increases sharply 
below an annual processing of 25.000 m3 of roundwood. While the smallest enterprises have 
never been major contributors to export trade, the risk is that the introduction of the LAS, 
especially operator based systems, reinforces the pattern or that it encourages to co-operation 
between SMEs' in order to share the investment costs. 
Market development  
The VPA's in the baseline option wi ll as an immediate impact l ead to a decline in demand and 
prices for wood products in the six VPA countries. As illegal wood products are barred entry 
into the EU market, the total demand for w ood products in all non-EU  countries declines 
which lead to falling prices and reduced harv esting and processing of  wood products. A part 
of the illegal supply is re-direct ed to non-EU markets. At the same time, the total supply on 
                                                 
8 In the context of the study and this Impact Assessment Report, SMEs' in developing countries are meant 
to be interpreted as forest based enterprises which employ limited numbers of workers (typically less 
than 100), are locally owned and managed, rely on financing from ownership, have limited influence 
over the marketplace and lack scale efficiencies. 
EN 28   EN the EU market declines, as illegal wood produc ts are no longer entering the markets which 
will lead to higher prices. However, after ad justments on the market following the effective 
implementation of the measures , in non-EU countries producti on bounces back as the export 
of legal wood products to the EU increases due to the higher pr ices on the market as well as 
higher prices for legal good on the domestic mark et in those countries. On the EU market, the 
production of wood products and prices of wood pr oducts stay above the level assumed in the 
"business as usual" scenario without VPA's, b ecause of the declining supply from the six VPA 
countries. Supply from "low risk" forest product exporters could to some extent replace the 
declining supply from the "hi gh risk" baseline-countries. 
It is expected that the VPA's in the baseline sc enario will lead to a declining value added in 
the forestry and forest industry sector compared to a "busine ss as usual" scenario without 
VPA's. Improved law enforcement is expected to gradually eliminate all illegal logging. Lower supply of roundwood, as well as diminish ed industrial processing, bring value added 
below the level projected in a "business as usua l" scenario. The change in value in baseline 
countries is expected to be -6,5% (2009-2015), but the projected dec line in produc tion volume 
is, to a large extent, compensated with higher prices (annex I). Other countries with high and 
moderate risk of illegal loggi ng are expected to increase th eir value added by 2,5% in the 
period 2016-2020, mainly caused by higher prices on the market. The impacts on the EU and 
the low risk countries is ve ry modest or negligible.  
1.14.5.  Risks 
Key risks for the VPA in the baseline option are: 
• Delays in the establishment of the licensi ng system hindering lega l exports to the EU. 
• Efficient implementation and sustainability of  the system require capacity building and 
technical assistance in the least developed countries. 
• In the case that the government in partner countries wish to implement the LAS using 
advanced information technology, funding the in itial investment may become a bottleneck 
in the least developed countries. 
• Uncertain market demand for FLEGT timber. 
• Ultimately the success is determined by the govern ment’s capacity to tackle the root causes 
of illegal logging such as ineffective govern ance, poverty, and excessive timber processing 
capacity. 
1.15. OPTION 1 Expansion of the FLEGT VPA approach  
1.15.1.  Impact on illegal logging 
The maximum volume of illegal logging that coul d be eliminated in the 6 additional VPA 
countries is estimated at 9 million m3. Eliminati on of exports of illegal timber to the EU could 
curb up to 13 per cent of the estimated production of illegal timber, or 13  percent of the total 
production of industrial roundwood in the involved countries. Compared to the estimated 
global volume of illegal industrial roundw ood production, 139 million m3 in 2005, the 
maximum reduction of illegal logging in the involved countries would represent about 7 percent of the global total. 
EN 29   EN The reduction of illegal logging would be significan t in Russia, and possibly also in Belarus 
and Ukraine. The EU is the main export mark et and traders in ille gal timber have limited 
options due to lack of local processing capacit y and high cost of tran sport to alternative 
markets. In Russia, however, the rapidly de veloping domestic market could eventually 
provide an outlet for illegal timb er and enable a reshuffle of tr ade flows. In Brazil (where the 
domestic market would be able to absorb a la rge portion of the illegal) and China (diversion 
to other markets and increased outlet on domest ic market) the impact would probably be less 
than the estimated maximum. The impact in Vi etnam is negligible due to the very small 
export volume of roundwood, sa wnwood, plywood and veneer.  
Regarding the impact of capacity building su pported by the EU, the assessment made in 
chapter 6.2.1 with respect to the si x baseline countries applies.  
1.15.2.  Environmental impacts 
The assessments made in chapter 6.1 on environm ental impacts through th e decline in illegal 
logging applies as well in these 6 additional VPA countries. The environmental impact in the EU Member States is expected to remain lim ited, even though the harvesting volumes in the 
EU are expected to increase more than with  the baseline scenario. Increasing harvesting 
volumes would increase the pressure on the en vironment but the change will be moderate 
since the regulatory systems in the EU Member St ates are generally robust  and able to contain 
the potential threat to the environment. 
1.15.3.  Social impacts 
As in the baseline scenario, this option 1 is  projected to result  in reduced production 
of forest industries and employment. The change in the additional six VPA countries 
is however more moderate than in the six baseline scenario c ountries. The reason is 
that the level of illegal l ogging in the additiona l six VPA countries is lower and the 
countries are less dependant on exports to the EU. 
Furthermore the assessment with regard to the impact of the legality definition and 
the risks of applying existi ng legislation on social imp acts in the additional six VPA 
countries  apply as outlined in chapter 6.1.5.  
1.15.4.  Economic impacts 
Costs
 
In the six countries included in this opti on 2 with geographically expanded VPA, the 
regulatory costs of the Legality Assurance System per unit are largely similar to those in the 
six baseline countries. Since their export quantities to the EU are more than fivefold compared 
to the baseline countries, the cost effect in  absolute terms is manifold (Table 6.2). 
Table 6.2: Estimated regulatory (government) co sts and private sector costs for all six 
expanded VPA countries 
Exports to 
the EU Cost of consignment based 
system Cost of operator based 
system Countries 
Million m3/y EUR/m3 Total EUR/m3 Total 
EN 30   EN MEUR/y MEUR/y 
Regulatory 
costs  43.8 0.17 7.4 0.09 4.0 
Private sector 
costs 43.8 0.05 2.2 0.19 8.4 
As in the baseline scenario (chapter 6.2.4) th e cost of the LAS for the private sector was 
estimated at EUR 0.05-0.25/m3 (up to 1.6 m/3 fo r state-of-the-art advanced information 
systems in certain high risk count ries), which is a minor factor and not considered a constraint 
for legal trade. Compared to the price of tropi cal logs, which habitua lly reach levels beyond 
EUR 75/m3 at the mill gate, the additional cost is insignificant. The introduction of the licensing scheme in expanded six VPA countri es would eliminate the unfair advantage 
enjoyed by illegal operators within the country. 
For imports from Russia, the paper-based ap proach under the Legality Assessment System 
would cost an additional EUR 0.2 – 0.4/ m3 wh ich is not significan t even for pulpwood, 
compared to prices ranging from EUR 40-65/m3. The cost of an advanced LAS is estimated 
at EUR 1.2-1.6 m3 could affect th e trade of low cost pulpwood. 
SMEs' in developing countries
 
The observations in chapter 6.2.4 apply. The role of SMEs' is important in Russia where about 
20 000 SMEs' operate in the forest sector, ma ny of them engaged in the export trade. 
Market development  
Similar type of impacts (prices / added value in forest sector) are expected as reflected in the 
baseline scenario in chapter 6.2.4, including the ad justments to the new market situation with 
replacement, to some extent, of timber s upply from "high-risk" co untries by "low risk" 
countries. The introduction of VPA's in the add itional six VPA countries in this option is 
expected to cause a decline in  the generation of value added in those countries as well, 
compared to the "business as usual" scenario, but  the change is less significant than in the six 
baseline countries because ille gal logging in the "new" VPA count ries is less widespread than 
in the baseline countries. 
Similarly to the previous opti on (Chapter 6.2.4; annex I) other high/moderate countries stand 
to gain from the reduc ed production in the VPA countries (w ith 5,8% increase in added value 
in 2016-2020). The impact on the EU is  positive but still very modest. 
1.15.5.  Risks 
It is very doubtful, as expressed by many stak eholders, that the countries included in this 
analysis as potential VPA Partner Countries (e.g . China, Brazil etc) would actually enter into 
the VPAs. Political and technical constraints we re cited as possible reasons for the countries’ 
reluctance to join the scheme. It was also pointed out that the negotiation process would 
inevitably be quite lengthy. A number of other countries in Central Af rica (e.g. Cote d’Ivoire, 
Congo Democratic Republic) and the Andean re gion in Latin America (e.g. Ecuador, Bolivia) 
were identified as more willing potential candidates to engage in VPAs. However, if this would materialize, the impacts of the geographically expanded  VPA would be insignificant 
EN 31   EN compared to those identified in the present asse ssment, especially with respect to the impacts 
on the EU. Some effects would be felt in th e Central African countries but timber trade 
between the EU and the Andean countries is so  limited that the impact s attributable to the 
licensing scheme woul d be negligible. 
1.16. OPTION 2: Voluntary measures by th e private sector further developed 
1.16.1.  Impact on illegal logging 
The expansion of the voluntary private sector sc hemes with respect to e xports to the EU will 
gradually reduce the space for ill egal enterprises ope rating and supplying illegal timber to the 
market. It is also possible that companies wi th multiple export destinations expand the good 
practice to exports going to other destinations  than the EU. However, full elimination of 
illegal logging is challenging when  relying only on private sector schemes. As long as there is 
demand for illegal wood products in  the EU markets, and there ar e no effective in struments to 
prevent their entry to the EU market, supp liers of illegal products will have a niche. 
Convincing them to give up illegal practices will be much harder. 
Governance 
To the extent that the expans ion of voluntary priv ate sector schemes encourages illegal 
suppliers to comply with regulations con cerning tax and royalty payments, government 
revenue will increase, poten tially enabling investments in improved governance. The 
expansion of the legal supply would also reduce opportuni ties for corruption. 
The present concept for the development of vol untary private sector schemes does not include 
EU-supported capacity building.  
1.16.2.  Environmental impacts 
To the extent that the private sector scheme s reduce illegal logging a nd increase legal supply, 
the assessment made in  chapter 6.1 applies. 
1.16.3.  Social impacts 
The assessment made in chapter 6.1.5 applie s. The social impacts outside the six 
VPA countries will depend on the extent to which social provisions have been 
incorporated in the definition of legali ty in the private sector schemes.  
1.16.4.  Economic impacts 
Costs  
The development of private sector schemes woul d focus on countries wi th high or moderate 
risk of illegal logging. To enable  cost comparisons with other options, it is assumed that full 
coverage can be achieved.  
Option 2 is not considered to bring about costs for the govern ment of the exporting country. 
The additional costs for the private sector depend on the share of EU exports covered by the control systems and the quality of these systems (fully adequate systems and systems in need 
of improvement, or no system). The estimate on th e cost of legality c ontrol is based on the 
EN 32   EN theoretical assumption that  full coverage would be  reached in countries w ith high or moderate 
risk of illegal logging. Table 6.3 summarizes the estimated co sts effects by countries with 
high or moderate risks of illegal logging. 
Table 6.3 Cost of private sector control systems for countries with high or moderate risks of 
illegal logging 
Exports to the 
EU Cost of control system Countries 
Million m3/y EUR/m3 Total MEUR/y 
Private sector costs  
All high and moderate 
risk countries 61.2 0.27 16.5 
SMEs'  
The development of private sector schemes is likely to concentrate in larger companies. 
SMEs' do not have the incentiv es to develop voluntary schemes and they may also be 
disadvantaged in terms of costs. 
Market development  
The impacts of the voluntary private sector me asures could not be assessed using the trade 
models. The price and added value of products  will depend further on the demand and the 
potential market for these products. 
1.16.5.  Risks 
Imports from other countries are covered only to a very limited extent  by voluntary schemes, 
and reaching full coverage does not appear possible in the short or even medium terms, despite the fact that in some countries the tr ade sector has ambitious plans. On the whole, 
however, stakeholder consultati ons with importing companies and trade federations suggest 
that the expansion of the voluntary private sector  schemes will take place at a moderate rate.  
The future expansion of the voluntary private sect or schemes may be hindered by the fact that 
their development is demand driven and the pote ntial market for verified legal products may 
be small and even reaching saturation.  
Furthermore, the varying degree of rigor and effectiveness in the voluntary private sector 
schemes poses a risk to their credibility. Without a general and harmonized framework 
incorporating an independent as sessment of the effectiveness of the voluntary schemes, there 
is a risk that the schemes are abused to serv e mainly commercial purposes. There are attempts 
to move towards the harmonization of vari ous voluntary frameworks, but reaching full 
transparency is challenging. The Confederation of European  Paper Industries (CEPI) has 
developed a mandatory code of conduct for its members. The CEPI code of conduct does not 
entail third party verification but there is a sanction mechanism for non-complying 
companies. The effectiveness of this arrangeme nt could not be assessed as it is still under 
development. 
EN 33   EN 1.17. OPTION 3: Border measures to prevent the importation of illegally harvested 
timber 
The border measures constitute an import ban for illegal timber. The responsibility for 
providing evidence on legality rests with th e authorities in the exporting country. The 
proposed legality control system for government al agencies draws on low-tech information 
technology. The system covers the following elements:  
• Field verification of forest  operations and supply chain 
• Data management (e.g. transmission of data  between the private sector and the state 
authorities, reconciliatio n of quantities in the prior and subsequent stages in the supply 
chain) 
• Issuance of a legality certificate  
For assessing the impacts (costs, effectiveness), it  is assumed that the competent authorities of 
the EU Member States check the legality of ca. 1% of the imported consignments systematically. The check is based on the c ontrol of documents and communication to the 
authorities in producer countries.  
1.17.1.  Impact on illegal logging 
In 2005, illegal wood and wood product exports to the EU from countries where the risk of 
illegal logging is high or moderate we re about 14 million m3. Provided that the 
implementation of border measures is effective,  the scheme would curt ail up to 10 % of the 
estimated production of illegal timber or 2 % of the total pr oduction of indus trial roundwood 
in these countries. Compared to the estimat ed global volume of illegal industrial roundwood 
production, 139 million m3 in 2005, the maximum reduction of illegal logging would 
represent about 10 % of  the global total. 
Significant reduction of illegal lo gging is expected to take place in Central and Western 
Africa and Russia. In other major countries e xporting wood products to the EU, the reduction 
of illegal logging is likely to be less than the estimated maximum. Effectively implemented border measures (option 3) prevent circumven tion, i.e. shipping ille gal timber to the EU 
through third countries from the countries of origin, which is an important intervention in 
terms of levelling the playing field in the enterp rise sector. It should be  noted, however, that it 
does not necessarily have a majo r impact on illegal logging in the countries of origin, unless 
the opportunities to divert  trade to other markets is eliminated. If the illegal timber shipped 
countries such as China is barred entry to th e EU market, there are a large number of other 
markets including the Chinese domestic market  where the illegal goods can be placed. 
1.17.2.  Environmental impacts 
The observations made in chapter 6.1 concerning the overall environmental impact of illegal 
logging apply to all countries with high or moderate  risk of illegal logging. It is expected that 
there will initially be a slight decline in the overall timber pri ce in the baseline countries. This 
would increase the relative profitability of other land uses and could lead to increased forest conversion, especially in tropica l countries. This, in turn, coul d have negative environmental 
consequences. Another factor is that lax law enforcement in exporting countries might 
continue as no special m easures have been taken to improve  it, as envisaged under the VPA's. 
EN 34   EN Illegal harvested timber might therefore be diverted to other markets which will reduce the 
overall effect on the reduction of illegal logg ing and the negative environmental impacts. 
1.17.3.  Social impacts 
This option is expected to have only a modest  impact on employment. The reason is that 
changes in production volume of forest industries  are expected to be very modest. There is 
almost no impact on the employment in forest industries in the EU. 
The general observations made in chapter 6.1.5 a pply. If the definition of  legality does not 
include (or is narrowed down to exclude) social  considerations, there could potentially be 
negative impacts on forest-dependent people, fo rest workers and other socially vulnerable 
groups. 
1.17.4.  Economic impacts 
Costs  
Based on the assumption that government in th e producer countries controls and provide 
evidence on legality before exports take pl ace (and issue a certifi cate of legality) the 
government on the producer countries shoulder  these costs. These concern both high and 
moderate risk countries as well  as low-risk countries. The es timated regulatory costs in the 
countries of export total about 16.0 MEUR a nnually (table 6.4). In addition, the legality 
checks to be conducted by the comp etent authorities in the EU ar e estimated to cost less than 
EUR 0.01/m3 assuming that 1% of the imported consignments are checked systematically 
(documents and communication to the au thorities in producer countries).  
There are no costs for the private sector in th is option (but indirect  costs as slowness of 
procedures, issuance of documents or new oppor tunities for corruption might be a risk). If 
implemented effectively, the border measur es would eliminate the possibility of 
circumvention as well as the cost advant age enjoyed by illegal goods on the market. 
Table 6.4 Cost of border control measures preventing importation of illegally harvested 
timber. 
Exports to the 
EU Cost of control system Countries 
Million m3/y EUR/m3 Total MEUR/y 
Regulatory costs  
All non-EU countries 72.9 0.22 16.0 
Regulatory costs 
EU 72,9 < 0.01 <0.7 
SMEs'  
The impact is neutral because the co sts are borne by the government sector. 
EN 35   EN Market development  
As in the baseline scenario and option 1, the immediate imp act on the timber market in non-
EU countries will be a decline in demand and prices for wood products as illegal wood is 
barred entry in the EU. At the same time,  the price in the EU will increase.  
After adjustment of the markets to the ne w situation however, th e production in non-EU 
countries bounces back as the export of legal wood products to  the EU increases encouraged 
by higher prices on the EU market. Because legal goods are in higher demand on the domestic 
market, they benefit from a price increase, wh ile the price of  illegal goods declines due to 
weaker demand. On the EU market itself, with  the gradual recovery of supply from non-EU 
countries, the production and prices of wood produc ts start falling back to wards the levels in a 
"business as usual" scenario. 
Based on these market developments, the impl ementation of this option is projected to 
modestly reduce value added in all high and m oderate risk countries. The difference to the 
baseline scenario and option 1, where the de cline was substantial in the VPA countries 
concerned, is that the playing field is levelle d for all countries expor ting to the EU. Another 
factor is that lax law enforcement might cont inue, as no special measures (as envisaged under 
the VPA's) have been taken to improve it. As a result, illegal logging might recover from the 
decline in exports to the EU as illegal trad ers find other markets for illegal timber.  
The impact on the generation of value added in th e EU is modest but positive. The increase in 
value added is expected to be around one percent in relation to the business as usual scenario. 
1.17.5.  Risks  
In order to implement this option, the EU will impose border measures unilaterally which 
might lead to trade disputes in the context of  the WTO since its unclear whether forests fall 
under the exemption of 'exhaus tible natural resources' of Article XX (g) of the GATT 
Agreement. . It may however lead to problems in the establishment of common standards and 
procedures in a situation where the cooperation with  the authorities in the country of origin is 
limited, for instance in the application of a co mmon definition of legality. In order to find 
common ground with as many governments as possi ble, it might be necessary to adopt a 
rather narrow definition of legality which could in turn put the social and environmental benefits at risk. 
Furthermore the type of assurance on legality control that can be considered sufficient may 
vary from one country to another and it's uncle ar whether it would be possible for the EU 
separate imports from diffe rent exporting countries for legal and practical reasons. 
Government agencies are not usually subject to independent auditing either and without 
independent control there is a risk that the cr edibility of the system is undermined. 
The establishment of border measures could also bring other non-EU countries to impose 
similar requirements on EU exports which could lead to high costs fo r control on exports by 
EU countries (EU exports of 36 million m3 with total cost  estimated at about EUR 11 
million/y; if all wood products including pulp and paper were considered the cost would nearly triple). 
The practical arrangement to veri fy legality could become an obstacle for exports to the EU. 
In practice, it would be necessary to decide prior to each harvesting operation whether the 
EN 36   EN logs to be harvested or products made thereof ar e destined for EU exports. If this is not known 
at the time of harvesting and no checks are done , the EU market would be excluded as an 
export destination for the logs harvested. 
With regard to enforcement in the EU, Custom offices would control the legality 
documentation. Since several other products are controlled in a similar manner, the scheme 
seems feasible if verification is based on documentation and the procedures are incorporated 
in to the existing computerized systems. Howe ver, concerns have b een expressed by Custom 
officers that resources are limited and they have no capacity or authority for follow up 
investigations in the country of origin.  
1.18. OPTION 4A Legislation which prohibits the trading and possession of timber 
and timber products harvested in breach of the laws of the country of origin 
1.18.1.  Impact on illegal logging 
In 2005, illegal wood and wood product exports to  the EU from all non-EU countries were 
estimated at 14 million m3. The volume of ill egal logging in EU Member States was 
estimated at 3 million m3. In total, the ma ximum reduction of illegal logging would be 17 
million m3/y. Provided that the elimination of e xports of illegal timber to the EU and illegal 
roundwood production in the EU are effective, these measures would curb up to 12% of estimated production of illegal timber or 1 per cent of all global production of industrial 
roundwood.  
As for option 3 (chapter 6.5.1) significant reduc tion of illegal logging is expected to take 
place in Central and Western Africa, and Russi a. In other major countries exporting wood 
products to the EU the reduction of  illegal logging is likely to be less than the estimated 
maximum. The extent to which illegal loggin g in EU Member States will be eliminated 
depends on the effectiveness of  criminal investigations. 
Effectively implemented this opti on prevents circumvention, i.e. sh ipping illegal timber to the 
EU through third countries from the countries of  origin. It should be noted, however, that it 
does not necessarily have a majo r impact on illegal logging in the countries of origin, unless 
the opportunities to divert  trade to other markets is eliminated. If the illegal timber shipped 
countries such as China is barred entry to th e EU market, there are a large number of other 
markets including the Chinese domestic market  where the illegal goods can be placed.  
1.18.2.  Environmental impacts 
The assessment made in chapter 6.1 and 6.5.2 (op tion 3) concerning the environmental impact 
applies. In addition, the positive impacts of eliminating illegal logging extend to those EU Member States where illegal logging occurs. 
1.18.3.  Social impacts 
The impact on employment is projected to be very modest. The reason is that changes in 
production volume of forest industr ies are expected to be very limited. Similarly the changes 
in EU employment are very small. 
EN 37   EN The general observations made in chapter 6.1.5 appl y. If the definition of legality in the laws 
of the country of origin excludes social cons iderations, there will be no positive effects on 
forest-dependent people, fo rest workers and other soci ally vulnerable groups. 
1.18.4.  Economic impacts 
Costs  
 
There are costs involved related to investigat ions conducted by the EU police force or other 
enforcement authorities. However, the total costs for such investigations are difficult to assess 
and depend on the number of cases identifi ed and ultimately prosecuted (depending on 
compliance level by the sector as well), co-opera tion with the exporting c ountry, priorities set 
by enforcement agencies etc. Since criminal inve stigations are also part of the regular work 
routine of enforcement agencies, only a pro me morie (p.m.) post has been included in the 
overall cost table. Ther e are no other additional re gulatory costs foreseen. 
As the prohibition to trade or possess illega l timber does not oblige private companies to 
make investments in tracking systems, ther e is no direct impact on them. However, 
enterprises operating in countri es where illegal logging is a common problem may choose to 
establish necessary systems to protect themselves against unwarranted claims. The costs and impacts of such voluntary schemes are assessed in chapter 6.4.4. (Maximum 0,27 EUR/m3 or 
16,5 MEUR total). Some of the private sector representatives intervie wed expressed concern 
over the potentially high cost of litigation which companies ma y be obliged to shoulder even 
if they are cleared of criminal allegations. If  the prohibition of trade and possession of illegal 
timber could be implemented effectively, it woul d eliminate the possibili ty of circumvention 
and unfair competition by illegal operators in EU and non-EU countries.  
SMEs'
 
The impact is neutral. Market development
 
The impacts (prices and added value in forestry sector and forest industries) are very similar 
to option 3. The impact is quite  neutral because all exporters are in a similar position with 
respect to exports to the EU. Th ere is modest but positive imp act on the generation of valued 
added in the EU. The projected increase is more  than one percent in relation to business as 
usual scenario. 
1.18.5.  Risks 
There is a major risk that enfor cement will not be effective. This option requires that illegality 
is proven, regardless of the fact that the viol ation of law could have taken place outside the 
EU. Enforcement agencies would ha ve to conduct investigations to obtain evidence of the (il) 
legality of timber products being placed on the EU  market. This would be difficult in case of 
complex supply chains or where part or all of th e research would have to be carried out in a 
foreign country. Investigations would be tim e consuming as each case would have to be 
tackled separately. Law enforcement agencies w ill also have limitations to their capacity to 
deal with illegal timber as tackling it is not considered a priority. Finally, European courts 
would be empowered to adjudica te on the basis of foreign laws  on violations falling outside 
EN 38   EN the territorial scope of Community or MS law.  Given the general relu ctance of European 
states to accommodate an extrat erritorial legislative and judi cial jurisdicti on it should be 
expected that legislation which is founded on ex tra-jurisdictional empowerment would not be 
easy to implement. In the interest of ensuring equal treatment and consistency in jurisprudence the scope of legality should be defined. However, a definition needs to be 
interpreted in the country cont ext as the legal frameworks in non-EU countries can vary 
technically as well as with resp ect to their scope. To ensure a coherent approach, it might be 
necessary to identify the relevant laws se parately for each country however the national 
governments may consider it an infringement of their sovereignty, if th e identification is done 
by a foreign government in an official context.  
1.19. OPTION 4B: Legislation which requires that only legally harvested timber and 
timber products be placed on the market 
1.19.1.  Impact on illegal logging 
A similar impact on illegal logging is exp ected as in option 4A (chapter 6.6.1).  
1.19.2.  Environmental impacts 
Similar impacts expected as described in chapter 6.6.2 for option 4A.  1.19.3.  Social impacts 
Similar impacts expected as described in chapter 6.6.3 for option 4A.  
1.19.4.  Economic impacts 
Costs
 
It is assumed that the suppliers are responsible for the cost s of internal control systems and 
third-party certification. The gove rnments of the EU Member St ates fund the inspections of 
consignments held by timber buyers/parties  placing timber on the market. The control 
procedure is based on a low-tech "paper system". 
The regulatory costs relate to sample checki ng of timber consignments that have been 
imported or originate from EU Member States. The unit cost of  inspection is assumed to be 
the same irrespective of the origin of the cons ignment. However, in terms of total cost, the 
control of EU roundwood production requires much larger res ources than the control of 
imports. The total regulatory cost for the EU Member States is estimated at approximately EUR 2.2 million/y. 
The additional costs for the private sector de pend on how much of the timber supply to the 
EU market is covered by control systems and the quality of these systems (fully adequate 
systems, systems in need of improvements a nd no system). The cost in non-EU countries is 
assumed to be the same as when developing voluntary private sector schemes (Option 2, ref. 
Chapter 6.5). Table 6.5 presents the estimated costs in selected  countries outsi de and within 
the EU. 
EN 39   EN Table 6.5: Estimated regulatory  and private sector costs  
Imports (non-EU) EU roundwood production 
(EU) Total costs Countries 
Volume Costs 
MEUR/y Million m3/y Costs 
MEUR/y Total 
MEUR/y 
Regulatory costs 72.9 0.36 370.2 1.85 2.2 
Private sector 
costs 72.9 20.4 370.2 96.7 117.1 
The cost of legality control is estimated to be approximately the same as the cost of legal 
assurance in baseline countries and the countri es selected for the geographically expanded 
VPA in option 2. Therefore, the assessments made in chapters 6.2.4  and 6.3.4 apply. On 
average, the cost of legality verification usin g a low tech approach is considered a minor 
factor in legal trade. However, the impact on SMEs in the EU may be more significant. 
The cost of high tech solutions is substantia lly higher and it could affect trade in some 
Member States where the demand for pulpwood is low (e.g. in selected Member States in the eastern part of the EU). Furthermore, the syst ematic legality control systems might place an 
additional burden on trade flows and slow the timber business.  
If the requirement to place only legally harv ested timber and timber products on the market 
could be implemented effectively, it would elim inate the possibility of circumvention and 
unfair competition by illegal operators in EU and non-EU countries. The cost advantage can 
be significant.  
SMEs'
 
In the EU, SMEs are defined as enterprises em ploying less than 250 persons. In the forest and 
wood industries 99.0-99.5 of all enterprises fa ll into this group. In a more detailed EU 
classification, the SMEs are divided into micr o (1-9 employees), small (10-49 employees) and 
medium (50-249 employees) enterprises.  
The annual volume of roundwood processed by a fo rest enterprise has been established at 
75 000 m3/y. It is estimated that this amount  corresponds roughly to the annual volume of 
roundwood processed by “small” SMEs. With the s cale of operations affecting the costs, the 
study reveals that costs start gradually rising as the volum e of annually processed roundwood 
goes below 75 000 m3. The cost of legality cont rol could therefore be  significant for the 
“micro” SMEs at the lower end of the scale. 
Market development  
The impacts (prices and added value in forestry sector and forest industries) are very similar 
to option 3 and 4A.  
EN 40   EN 1.19.5.  Risks 
The requirement of traceability in creases the potential for detecting illegal activities. The risks 
related to the implementation of this option relate mainly to law enforcement and the 
authorities’ capacity to produ ce evidence on criminal cases. 
The assessment of the cost of legality control is based on the assumption on that a third party 
certificate is required. However, it  should be noted that a certific ate is merely an indication of 
the overall quality of the manage ment system, it does not attest to  the legality of individual 
consignments. Therefore, if irregularities su rface, the certifying part y cannot be considered 
legally liable. The legal responsibility rest s always with the party placing goods on the 
market. This notion has the implication that in criminal investigations  the supply chain would 
have to be traced back to the point where the alleged criminal act took place. Obviously, 
investigations can be quite complex, especially , if the crime took place in non-EU countries. 
Besides the probability of detection and convic tion, deterrence is determined by the penalty 
regime. This is subject to interpretation by cour ts in various Member States and there may be 
variation among them.  
Many stakeholders in the EU questioned the appropriateness of the principle that it is 
necessary to prove the legality of goods. It was considered to be in conflict with basic legal 
principles in that it implies that goods are illegal unless pr oven legal. Using third party 
auditors to verify legality may be in conf lict with the mandate that national governments 
traditionally are responsible for. If the national governments opt for an approach where national institutions issue legality certificates , the risks that are associated with the 
introduction of border measures ( option 3) become relevant. In particular, the credibility of 
the certificates could easily be put in doubt if the national arrangements for legality control 
are not subject to independent audits. 
1.20. OPTION 5: Legislation requiring compan ies placing timber on the market to 
exercise due diligence in ascertaining that the products are legal 
1.20.1.  Impact on illegal logging 
A similar impact on illegal logging is expected  as in option 4A and 4B (chapter 6.6.1). In 
total, the maximum reduction of illegal logging would be 17 million m3/a (14 million from non-EU countries and 3 million from  illegal logging in EU Member  States), provided that the 
measures are implemented effectively. 
As for option 3 and 4A and 4B (chapter 6.5. 1) significant reduction of illegal logging is 
expected to take place in Ce ntral and Western Africa, and Ru ssia. In other major countries 
exporting wood products to the EU the reduction of ill egal logging is likely to be less than the 
estimated maximum. The effect on illegal l ogging in EU Member States depends on the 
effectiveness of the risk management tools. 
Like in option 3, 4A and 4B effective implementa tion of option 5 prevents circumvention, i.e. 
shipping illegal timber to the EU through third countries from the countries of origin, which is 
an important intervention in terms of levelling the playing field in the enterprise sector. It should be noted, however, that it does not necessa rily have a major imp act on illegal logging 
in the countries of origin, unless the opportun ities to divert trade to other markets is 
eliminated.  
EN 41   EN 1.20.2.  Environmental impacts 
Similar impacts expected as described in chapter 6.6.2 for option 4A and 4B.  
1.20.3.  Social impacts 
Similar impacts expected as described in chapter 6.6.3 for option 4A and 4B.  
1.20.4.  Economic impacts 
Costs  
The regulatory costs will be considerable lowe r compared with the "c ontrol activities" by 
government authorities under option 4B. The fo cus of compliance and enforcement is not 
directed at sample checking of timber cons ignments, but merely on verification whether 
effective systems have been put in place by op erators for ascertaining that the products are 
legal. The regulatory costs in the EU are therefore estimated at 1 MEuro (Table 6.6). 
The additional costs for the private sector ar e considerable, although no t as high compared to 
option 4B. Due diligence procedures will be adapte d to risk levels with regard to importation 
of illegal timber. Therefore the cost of contro l systems in high and moderate risk countries 
will be comparable with the cost  level in option 4B but less st ringent for lower risk countries 
including the EU Member States . Therefore the costs for non-EU countries are estimated at 14 
MEuro and ca. 2 MEuro in the EU. The costs are therefore comparable with the private sector 
costs in option 2 for all high and me dium risk countries (Table 6.6). 
Table 6.6: Estimated regulatory  and private sector costs  
Imports (non-EU) EU roundwood production 
(EU) Total costs Countries 
Volume Costs million 
EUR/y Million m3/a Costs million 
EURya Total million 
EUR/y 
Regulatory costs 72.9 0.9 370 0.1 1 
Private sector 
costs 72.9 14 370 2 16 
SMEs  
SMEs in the EU placing timber on the market w ill be obliged to put "due diligence" systems 
in place. This will concern a high number of operators in the EU and might give a 
considerable impact. However it is expected th at in a chain of custody assurance will be 
requested from suppliers in orde r to be assured of obtaining products from legal origin only. 
In order to develop common risk management t ools, traders in the ch ain of custody might 
develop common systems to reduce implementa tion costs and creating common standards. 
The costs and effect of the systems could ther efore be significant for smaller SMEs' but can 
be reduced considerably by co-operating in the development of common risk management 
systems. 
EN 42   EN Market development  
The impacts (prices and added value in forestry sector and forest industr ies) are expected to 
be comparable with the impacts in option 3, 4A and 4B. 
1.20.5.  Risks 
The risks related to the implementation of this  option relate mainly to the challenges for 
individual operators to have the required measures and procedures in place and that 
government authorities can ensure compliance with these provisions. 
Risk management tools have ga ined considerably in significance in several and some are 
already being employed by some European timbe r federations reducing the risk of illegal 
timber in their supply chains. A number of factors are consid ered in assessing the risk 
including, inter alia, the country  of origin, business relationship, and type of product and size 
of transaction. This option ther efore focuses on a shift of attitude by the timber operators.  
The development of such schemes can therefore be  based on such experience of federations. It 
is furthermore expected that in a chain of  custody operators will seek assurance from 
suppliers for obtaining products from legal origin only an d will therefore develop common 
risk management tools and create common sta ndards. This will reduce the administrative 
burden for individual operators c onsiderably with less disturbances of regular trade flows and 
contribute to more transparen cy in the chain of custody.   
Government authorities will have to enfo rce the regulation by performing checks and 
investigations at the operators. The development of common standards by operators will also serve as an effective instrument to proof compliance with the regulations.  
The approach under this option will create the hi ghest degree of certainty for operators, based 
on their systems being put in place (compared to options 4). It will furthermore address 
imports and trade of wood products from other third countries ("transformation" countries), 
where timber originating from other source c ountries have been processed before being 
exported to the EU. The requirement for 'due diligence' systems will furthermore be an incentive for traders and exporti ng countries to establish VP A arrangements and/or list 
appropriate species on the appendices of the CITES Convention, since FLEGT and/or CITES 
permits will serve as a recognise d instruments in reducing the risk s of obtaining illegal timber 
in the supply chains.  
2. COMPARING
 THE  OPTIONS 
2.1. Illegal logging 
The largest impact on illegal logging, assuming that the measures are implemented 
effectively, are found in options 4A, 4B and 5 (potentially 17 million m3; figure 7.1, table 7.2 
and annex I with overview of all impacts), sin ce these options cover all imports of timber (or 
placing on the market) in the EU. Option 1, the geographically expanded VPA has a 
considerable impact as well with its focus on high risk countries wher e most illegal logging 
takes place. All these options have a consider able higher impact in comparison with the 
baseline option. The impact on ille gal logging in option 2 is unsure. 
EN 43   EN Option 1, a geographically expa nded VPA, would have a signi ficant impact (potentially 10 
million m3), if all countries selected for the theoretical analysis would actually join the 
scheme. However, this is highly uncertain sinc e governments in many of these countries have 
indicated their object ions or reservations. The potential e ffectiveness of this option is quite 
significant, but the likelihood of achievi ng sufficient coverage very uncertain. 
Option 4A prohibiting the trade and possessi on of illegal timber would be difficult to 
implement because of the difficulty to prove th at a timber shipment was linked to an illegal 
act, possibly in a country thousands of kilome tres away. The principal intervention is the 
introduction of an improved legislative framework but it is doubtful whet her this is sufficient 
to secure the effectiveness of law enforcem ent and actually reduces the illegal logging. 
Figure 7.1: Volume of trade (in million. m3 RWE) covered by the policy options 
2.4 10 14 17 17 17 19.668122 122 122 122
40297479 476 476 476726 726 726 726368 368 368
020040060080010001200140016001800
baseline
option 1
option 2
option 3
option 4A
option 4B
option 5volum e (million m 3/yr R WE)
total production timber in
EU
total production timber incountries concerned
(non EU)low risk 
total production timber in
countries concerned
(non EU) high-moderate
risk total illegal harvestedtimber in countries
concerned
illegal import/trade in EU
dd d
 
In general terms, most additional options attempt to discourage illegal logging through trade-
related measures. Accordingly th e impact of these measures is proportionate to the volume of 
imports to the EU from the involved countries. It is estimated that, globally, the additional 
options have the potential to curtail illegal logging by up to 12 % (17 million m3 compared 
with a total of ca. 139 million m3 of estimated illegal logging globally). If traders take advantage of various loopholes the impact could be less but it is likely that there would be a 
significant impact in selected countries of Africa as well as in northwest Russia, which is the 
main source of imports to the EU. The impact on illegal logging could be substantially higher 
in countries entering into VPAs  (option 1) when the VPA licen sing system were extended to 
all exports from those countries.  
EN 44   EN One of the main risks is that traders divert i llegal timber to other markets than the EU. The 
risk is present with all options and in all regions perhaps with the exception of northwest 
Russia where the availability of  alternative markets is restricted due to high transportation 
costs and the limited absorption capacity of the domestic market.  
2.2. Environmental impact 
The main environmental impacts are the benefits resulting from reduced illegal logging and 
improved adherence to environmental regul ations. The impact is dependent on how 
effectively the various additiona l options are able to contribute to these objectives, as 
indicated in 7.1 (and annex I). 
2.3. Social impact 
All additional options are expected to have a minor impact on the employment in the forest 
industries in the EU Member States. In non-E U countries, where illega l logging occurs on a 
significant scale, the social be nefits depend on whether social provisions have been included 
in the legality definition and whether they ar e adequately taken into consideration when 
implementing the additional options.  
2.4. Economic impacts 
The unit costs of legality control are rather low in all options, the differe nces are attributable 
to the variation in implementation arrangement s (e.g. third-party verifi cation may be included 
or excluded). Assuming a low-tech approach to data management is considered, the total costs 
range between EUR 0.22-0.34/m3 which represents only a fraction of the log prices ranging 
from EUR 40/m3 to more than EUR 100/m3 at the mill gate (table 7.2). 
Option 4B prohibiting the placing of illegal t imber on the EU market including requiring 
control of all timber sourced from within the EU could cause significant additional costs as 
well as considerable burden for small and medium-sized enterprises in the EU.  
The main difference between the additional opti ons is how costs are distributed between the 
private sector and the government administra tion. The regulatory cost s are the highest in 
option 3, where border measures are implemented to prevent the entry of illegal timber into the EU. A consignment-based approach to legal assurance under the VPA (baseline and 
option 1) also carries rather high regulatory costs. The regul atory costs are lowest and, 
conversely, the private sector cost s are highest in the approach where it is prohibited to place 
illegal goods on the EU market (option 4B) and, to some extent, where operators have to 
proof "due diligence" (option 5). At the sa me time, these are the only options causing 
regulatory costs in the EU. 
In absolute terms, the most significant cost, altogether EUR 117 million/y, would be 
shouldered by the private sector under option 4B prohibiting the placing of illegal timber on 
the EU market (option 4B). Differing from th e other options, it includ es the obligation to 
provide evidence on the legality of all timber materials placed on the EU market including 
those sourced from the EU.  
Provided that the additional options are implemented effectively and they substantially reduce 
the imports of illegally harvested timber, there would be a moderate increase in the price and 
production of timber and timber products in re lation to the business as usual scenario. 
EN 45   EN Under option 1 the production and prices of timbe r products on the EU market stay above the 
level assumed in the business as usual scenar io because of the declining supply from non-EU 
countries. Supply from “low risk ” forest product exporters coul d to some extent replace the 
declining supply from the “high risk” baseline countries. Under options 3, 4A, 4B and 5, with 
the gradual recovery of suppl y from non-EU countries, the production and prices of wood 
products would start falling back towards the le vel assumed in the business as usual scenario. 
In relative terms, roundwood prices remain highe r above the business as usual scenario than 
the prices for processed forest products due to the way in which the market mechanism works. 
As regards the coverage of the reported costs for the governments of the Member States there 
should not be any financial imp lications for the EU budget.  
Table 7.2: comparison of costs for legality co ntrol and impact on illegal logging in policy 
options 
 Baseline  
VPA Option 1 
Geographicall
y expanded 
VPA Option 2
Voluntary 
private 
sector 
schemes Option 
3 
Border 
measur
es Option 4a 
Prohibition to 
possess and 
trade illegal 
timber Option 4b
Prohibitio
n to place 
illegal 
timber on 
the 
market Option 
5 
Due 
diligenc
e 
Regions covered 6 countries In the 6 extra 
countries All high/ 
moderate 
risk 
countries All non-
EU All non-EU + 
EU All non-
EU + EU All non-
Eu + EU 
Legality Control         
Average annual 
cost (EUR million) consig
nment oper
ator consig
nment operat
or      
Private sector          
 - Non-EU timber 0.4 1.8 2.2 8.4 16.5 - Max 16.5 20.4 14  
 - EU timber     - -  96,7 2 
Government          
 - Non-EU -gov 1.2 0.6 7.4 4.0 - 16.0  -  
 - EU -gov - - - - - <0..7 p.m 
(enforcement 
investigations) 2.2 1 
Impact on Illegal 
Logging        
- Volume (million 
m3) 2.4 - 22 10 - 78 Some 14 17 17 17 
- In region (%) 11 - 100 13 - 100 Some 10 12 12 12 
- Globally (%) 2 - 16 7 - 56 Some 10 12 12 12 
EN 46   EN  
2.5. Overall comparison of options 
In light of the findings of the impact assessm ent process for the proposed options certain 
conclusions can be drawn in terms of their e ffectiveness, efficiency (both as regards the 
entailed costs and the implementa tion), proportionality and consistency with the principles of 
simplification and better regula tion. Another key issue is whether they can compliment 
effectively the existing framework (FLEGT VPAs).  
Option 1 
The key benefit of continuing with the VPA appro ach is that it offers broad context-specific 
solutions at country level and is thus compatib le with the EU Develo pment Policy applicable 
to the developing countries.  
This approach however, would have a significan t impact only if all major producing, transit 
and processing countries that present high ri sks of illegal logging w ould enter into FLEGT 
VPAs or if this would evolve into a multilateral initiative. The former is widely considered to 
be an impossible task while the latter appears highly unlikely (e.g. Brazil has clea rly stated its 
opposition to VPA).  
Option 2 
Industry self-regulation can be a valuable, comp lementary measure, which could inspire and 
underpin a robust legally binding framework. It cannot though, be a self-standing option due 
to its voluntary nature and relate d weakness of enforcement as well as wide variations in the 
rigour of the controls and implementation.  
Option 3 
While being conceptually simple, this option has important political and practical downsides 
and hurdles against effective implementation. It would be extremely difficult to introduce 
such a measure and at the same time comply with  international trade rules. It has been argued 
that an import ban adopted under the exception  stipulated in Article XX (g) of the GATT 
Agreement–relating to the conservation of exhaustible natural resources- could be 
successfully defended on the basis that forest s are accepted as an 'exhaustible natural 
resources'. It is an open question whether this is a valid assumption and whether application of 
such an exemption would comply with the ch apeau requirements of Article XX. A ban on 
imports could not only provoke trade disputes bu t reciprocal measures  by countries importing 
timber from the EU. If trading pa rtners introduced recipr ocal measures the fo rest sector within 
the EU would probably have to face additiona l implementation costs. Another key issue is 
whether such measures would go beyond what is n ecessary to achieve the ultimate objective.  
Option 4A  
Option 4A being similar to the US Lacey Act -which outlaws trade in fish or wildlife 
harvested, taken or produced illegally- has attract ed a lot of attention. It is easily understood 
and would give a visible sign al to the market. However, itis based upon rather unclear 
principles and administrative  procedures and would have significant difficulties in its 
implementation. Defining illegality might not be  necessary; however the scope of legislation 
EN 47   EN would need to be identified. Demonstratin g the underlying illegality would not be a 
straightforward task particular ly in the absence of cooper ation of foreign enforcement 
agencies, the general lack of availability of fo reign law materials and experts opinion. Timber 
products have complicated supply chains, stre tching through several countries which would 
also complicate the detection and demonstrat ion of illegality. Apart from the practical 
difficulties in its implementation it also w ould probably not provide the legal certainty 
necessary for the proper f unctioning of the market.  
Option 4B 
Option 4B would set clearer compliance stan dards. This model would be based upon the 
FLEGT-licence idea but apply certification of le gality to all market operations for timber 
products in Europe, regardless of their origin. It risks crea ting a burdensome, expensive and 
trade disruptive system. It woul d in particular create additional  burden for low-risk countries 
while creating difficulties for the forest sect or of many developi ng countries, which are 
vulnerable to market access requirements. Bear ing in mind that ille gal logging essentially 
happens outside the EU we should expect significant resistance from the downstream 
European forest sector. This approach goes agai nst the principles of simplification and better 
regulation while it also risks be ing disproportionate. The absence of an internationally agreed 
definition and the issue of what would constitute  credible proof of legality would complicate 
further the design of the policy. Furthermore, it could provoke recipro cal policy responses by 
countries importing EU timber.  
Option 5 
Those conclusions have led us to  reflect on the possibility of combining elements of Options 
2, 4A and 4B in a way that would address the ob jectives pursued and work with, rather than 
try to change current practices in the timber trade. This approach would require operators 
placing timber on the market to exercise due d iligence in ascertaining that the products are 
legal. The due diligence proced ure would include a risk-based approach to measure, monitor 
and control the risks in tr ading in illegal products.  
A balance has to be sought between the provis ion of sufficient detail in the legislation 
concerning the requirements to be met - thereb y providing legal certaint y - and the need to 
give operators flexibility in implementing systems to ensure they are sourcing legal timber. The legislation would not directly address plac ing on the market of i ndividual illegal timber 
shipments but rather the failure to implement systems to avoid such timber entering the supply chain.  
A 'due diligence' approach would avoid the in troduction of a high cost, systematic control 
system and would allow a greater focus to be  put on areas that present a clear risk. By 
building on existing mechanisms in the timbe r trade it facilitates implementation while 
addressing a key weakness of many private sect or schemes – their enforceability. Simplified 
systems or exemptions are taken for small businesse s. A major benefit is that it would tend to 
favour sourcing from countries with FLEGT Vo luntary Partnership Ag reements, since the 
FLEGT licence would provide a high degree of certainty for operators. 
Conclusion 
Option 5 builds on the positive elements of options 2, 4A and 4B while avoiding their key 
weaknesses and thus supports the most effici ent strategy for the future Community policy 
EN 48   EN against illegal logging and related trade. Althou gh not exempt from risk this approach would 
bring a sufficient and proportionate reply to the vulnerab ility of the Community market 
against illegally harvested timber. As regards th e legal instrument ‘Regul ation’ is considered 
the most appropriate because it is necessary to  ensure the highest le vel of harmonization to 
avoid the coexistence of different standards between Member States which would undermine 
the fundamental principle of free movement  of goods embedded in the Treaties.  
3. MONITORING  AND  EVALUATION 
Monitoring  
The Commission shall ensure that the Member  States will implement efficiently the 
requirements of the proposed legislation. Th e monitoring would be done by the Commission 
and Member States. Reporting obliga tions will be foreseen that will enable the evaluation of 
the extent to which the measures have been  adopted and implemented. The Commission will 
inform the European Parliament and Council regularly on the implementation of the new 
initiative.  
Benchmarks/indicators for assessing efficiency of the system (comparison before and after 
implementation of the additional measures): 
• Estimation of level of illegal logging o ccurring within and outside Community  
• Variation of trade flows of timber and timber products from third countries  
• Number of FLEGT VPAs concl uded compared to the number before the adoption of the 
measures 
• Development opportunities in timber-producing countries 
• Working and living conditions of the forest-dependant communities 
• Adoption of measures against illegal loggi ng and related trade by other consuming 
countries  
• Number of Member States with adequate polic y and means for an effective enforcement of 
Community rules and sanctioning non-compliance 
• Number of sanctions pronounced by MS further to serious infringements  
• Use of immediate enforcement me asures (where/if  available) 
• The economic situation of the Co mmunity forest-based industry 
Evaluation  
The Commission should undertake an intermediate evaluation of its new initiative within six 
years of its adoption assessing the extent to which its results are consistent with the objectives 
set. The evaluation results will be used for decision-making needs on the future of and 
EN 49   EN amendments to the regulatory framework if appropriate. The Commission will communicate 
the evaluation results to the European Parliament and the Council. 
EN 50   EN Annex I: Full table with key impacts of additional option s 
(NB! Impacts are projected assuming effective implementation; risks of failure are assessed 
separately;  *estimates for option 5 only partially availabl e or based on comparable impacts in other 
options) 
 Baseline  
VPA Option 1 
Geographically 
expanded VPA Option 2 
Voluntary 
private sector 
schemes Option 3 
Border measures Option 4
Prohibitio n
possess a n
trade ille g
timber
Regions covered 6 countries 6 countries All high/ 
moderate risk 
countries All non-EU All non-EU +
Legality Control       
Unit cost (EUR/m3) Consign-
ment Opera-
tor Consign-
ment Opera-
tor    
Private sector        
 - Non-EU 0.05 0.25 0.05 0.25 0.27 -  
 - EU - - - - - - - 
Government        
 - Non-EU 0.17 0.09 0.17 0.09 - 0.22 - 
 - EU - - - - - -  
Average annual cost (EUR 
million)        
Private sector        
 - Non-EU 0.4 1.8 2.2 8.4 16.5 - Max 16. 5
 - EU     - - - 
Government (regulatory costs)        
 - Non-EU 1.2 0.6 7.4 4.0 - 16.0 - 
 - EU - - - - - <0.7 p.m (enforce m
investigati o
Trade impact      
Change in forest sector value 
added 2009-2015 (%)      
- Baseline countries - 6.5 - 6.8 - 0.1 0.0 
- Countries in expanded VPA 0.3 -1.7  - 0.8 - 0.8 
EN 51   EN  Baseline  
VPA Option 1 
Geographically 
expanded VPA Option 2 
Voluntary 
private sector 
schemes Option 3 
Border measures Option 4
Prohibitio n
possess a n
trade ille g
timber
- All high and moderate risk 
countries 0.5 1.3  - 0.2 - 0.9 
EN 52   EN  Baseline  
VPA Option 1 
Geographically 
expanded VPA Option 2 
Voluntary 
private sector 
schemes Option 3 
Border measures Option 4
Prohibitio n
possess a n
trade ille g
timber
- EU-27 0.2 1.1  1,1 1.3 
- MS Nordic  0.4 - 0.1  0.1 0.2 
- MS Central/West 0.1 1.4  1.4 1.6 
- Other MS 0.2 2.3  2.4 2.5 
- USA 0.1 0.9  0.4 0.4 
Impact on Illegal Logging      
Maximum decline of illegal 
logging  Lower bound : 
potential impact of licensing scheme 
Upper bound
: potential 
impact of law enforcement Lower bound
: 
potential impact of licensing scheme 
Upper bound
: potential 
impact of law enforcement    
- Volume (million m3) 2.4 - 22 10 - 78 Some 14 17 
- In region (%) 11 - 100 13 - 100 Some 10 12 
- Globally (%) 2 - 16 7 - 56 Some 10 12 
- Area of strong impact, if 
implementation is effective Initially Central & 
West Africa, later all 
involved countries Initially Russia, later 
all involved countries - Central and West 
Africa, Russia Central and W
Africa, Rus
EU 
- Level of risk/main causes Moderate 
 
- Trade Diversion 
- Circumvention 
- Law Enforcement High 
 
- Lacking Interest to 
Join the Scheme 
- Law Enforcement  
- Trade Diversion High 
 
- Non-binding 
Measure High 
 
- Credibility 
- Trade Diversion High 
 
- Law 
Enforcem e
- Trade Dive r
 
Environmental Impact      
- Non-EU Benefits from reduced 
illegal logging + 
improved legal 
compliance See baseline See baseline See baseline See baseli n
- EU 
- - - - Benefits fr o
reduced ill e
logging +
improved l e
complian c
EN 53   EN  Baseline  
VPA Option 1 
Geographically 
expanded VPA Option 2 
Voluntary 
private sector 
schemes Option 3 
Border measures Option 4
Prohibitio n
possess a n
trade ille g
timber
Social Impact       
Change in employment 2009-
2016 (%)      
- Baseline countries -2.0 -2.4  0.2 0.1 
- Countries in expanded VPA 0.2 -0.8  -0.4 -0.4 
- All high and moderate risk 
countries -0.1 0.5  -0.4 -0.4 
EU 27 0.0 0.0  0.0 0.0 
 - MS Nordic  0.1 - 0.1  0.0 0.3 
 - MS Central/West 0.3 0.0  0.0 - 0.1 
 - Other MS 0.0 0.3  0.2 0.2 
Other Benefits from 
improved adherence to 
social provisions in 
legal frameworks see baseline See baseline Risk of applying 
narrow definitions 
of legality See baseli n
 
EN 54   EN ANNEX II   
Cost Impacts of the Commission propos al for a Regulation determining the 
obligations of operators who make ti mber and timber products available on 
the Market  
1. Introduction 
The proposal for a Regulation determining th e obligations of operators who make timber and 
timber products available on the Market  has been further refine d following the approval of 
the impact assessment. In light of a number of changes in the proposal since then, ENV 
reviewed the available data on the cost impact of the propos ed approach and reviewed the 
available literature.  
Following an outline of the proposal in cost term s, this annex provides a cost estimate of the 
proposed regulation on a per cubic metre basis.  A separate box provides information on the 
UK Timber Trade Federation which is operating such a system as a mandatory requirement for membership. In addition, it provides an overv iew of the impacts of combating the trade in 
illegally harvested timber on the production of EU timber as indicated by the modelling work 
done by the American Forest Products Association. 
1.1 Outline of the proposal 
The proposed regulation puts in place a system designed to prevent ille gally harvested timber 
and derived products from being traded on the Community Market. The proposal relies on the 
due diligence principle and requi res EU traders in timber products  to exercise sufficient care 
in order to provide reasonable assurance that they only place products derived from legally 
harvested timber on the market. Legality is define d on the basis of the applicable legislation in 
the country of harvesting.  
In costs terms the most important el ements to be taken on board are: 
• The proposed regulation requires al l EU timber traders to have in place basic due diligence 
systems that ensure the legality  of the traded  timber products; 
• The proposed regulation covers the placing on the Community market of almost all timber 
products, including pulp a nd paper and furniture. 
• A key element of the due diligence system is  the ability to trace timber through the supply 
chain back to the country of harvesting.  
• Traders are required to ascertain that the timber was produced in accordance with the 
prevailing legislation in the country of production. 
• In ascertaining legality traders are invited to  use a risk-management approach, i.e. to 
intensify controls in high-risk environments while using lighter controls in situations with 
strong institutional oversight. 
EN 55   EN • The exact shape and stringency of these controls  is subject to a Comitology procedure. As 
a result the associated costs can only be esti mated on the basic of a number of assumptions. 
1.2 An example: the costs of due diligen ce by the UK Timber Trade Federation 
Due diligence in the timber trade is not a new concept. The UK Timber Trade Federation 
(TTF) has for a number of years advised its me mbers to voluntarily im plement a responsible 
purchasing policy which aims to reduce that risk that TTF member trade in illegally harvested 
timber. From this year onwards implementing a due diligence system has been made pre-
condition for TTF membership. The TTF due d iligence system ultimately acts as an 
improvement of similar systems such as the IS O 9000 system in that it provides for a set of 
procedures that reduce the risk of trading in tim ber from high risk sources. The system itself, 
like the proposed due diligence regulation does not provide a guarantee of product 
integrity/legality.  
Key requirements for companies operating the TTF due diligence system are: 
• To designate a person res ponsible for due diligence; 
• To put in place a stock control system that records information on purchases and sales; 
• To have a procedure to review  suppliers and products at leas t annually in order to assess 
the risk of trading in illegally sourced products; 
• To record the changes in purchasing policy in  order to chart the improvement in timber 
supplies in an annual management report; 
• To communicate on due diligence requireme nts with suppliers and customers. 
According to the TTF the costs associated wi th the system fall apart in two categories: 
1) Development Costs borne by the Federation, mainly associated with having one full-time 
staff member developing the system, administ rating the system and supporting the members 
in its implementation; 
2) Implementing Costs which are borne by the co mpany in the form of staff time and which 
can be highly variable as they depend on a) the size of the company; b) the extent to which chain of custody, IT stock control systems and/ or ISO systems are already in place; c) the 
number of product lines and suppliers and d) the level of risk associat ed with these products 
and their sources. (Personal comm unication Mrs Rachel Butler) 
2. The Costs of the Proposed Regulation 
2. 1 Basic data for assessing the private sector costs of the proposed regulation 
The four options assessed in the Indufor impact assessment focused on the imports of a subset 
of four timber products cove red by FLEGT regulation (rou nd wood, sawn wood, veneer and 
panels). The proposed regulati on, however, covers trade in all timber products including pulp 
and paper. In addition the regulation c overs both EU imports and EU production.  
In this light the following trade data from th e Indufor constitute the basis for this cost 
assessment: 
EN 56   EN (1) In 2005, the total volume of timber products  including pulp and paper placed on the 
EU market was 512 million m3. This figure consisted of 142 million m3 (RWE) of 
imports into the EU and an EU  wood production of 370 million m3 (RWE).9 
(2) Of the 142 million m3 (RWE) of imports 95 million (RWE) is derived from non-EU 
countries with a moderate to high risk profile. 47 million is imported from-non EU low-risk countries (Indufor report table 6.3 page 17).  
With the proposed regulation taking a risk-management approach especially high-risk timber 
is the target of the 'due diligence' approach.  
A distinction needs to be made between the co sts imposed on the private sector in producer 
countries and the costs imposed on the EU private sector.  
As the brunt of controls will need to be implemented in high-risk environments where 
production takes place the highest per unit costs a ssociated with these c ontrols will be borne 
by the private sector and governments of VPA partner countries. The FLEGT action plan 
provides both for technical assistance to put cont rol systems in place in VPA partner countries 
and the development of incentives to enable F LEGT partners to benefit from the trade in 
legally harvested timber with the EU. 
3. Private sector costs 
Direct costs of the due diligence approach to the private sector fall apart in four broad 
categories:  
(1) Costs to operators trading timber products  from moderate to high-risk non-EU 
environments;  
(2) Costs to operators trading timber products  from low-risk non-EU environments;  
(3) Costs to EU operators trading in imported timber products; and  
(4) Costs to EU operators trading in EU-produced timber.  
These categories of the timber trade have differential trade volu mes and unit costs and need to 
be calculated separately. 
3.1 Costs to the private sector in modera te to high risk non- EU environments 
Under option 2 Indufor estimates th e costs of private sector lega lity verification in moderate 
to high risk environments at € 0.27 m3 /annum for logs, roundwood, veneer and plywood. 
(Indufor report table 10.1).
10 This estimate is likely to be on the higher end of the scale for 
several reasons:  
                                                 
9 These import volumes exclude wooden furniture which is not  captured under a separate HS code and which was 
not part of the TOR provided for the INDUFOR impact a ssessment. The proposed regula tion however, intends to 
cover the placing of wooden furniture on the EU market.  
10 This is based on the use of low-tech tracking and tr acing system. The Indufor report suggests that high-tech 
systems may cost up to five times as much (Indufor page 44 and annex 1). Helveta, a private company specializing 
in COC systems suggests that operating a fully GPS ba sed mapping, barcode-based tracking and tracing and 
computerised data reconciliation system can be operated  for about € 0.80 per m3 (personal communication 16 June 
2008).  
EN 57   EN (1) Indufor based its cost estimate on the VP A sub-set of timber products. Total EU 
imports consist for 42% of pulpwood and pape r which as bulk goods have much lower 
per unit verification costs (Indufor figure 6.1 ). That said, legal ity verification of 
composite products such as furniture  may have higher per unit costs. 
(2) Exporters from FLEGT partner countries curr ently regarded as high risk and thus 
facing high costs, will see their per unit ve rification costs drop to about € 0,05 per m3 
(Indufor table 9.2 page 37) when their G overnments start operating the legality 
assurance scheme established under its Volunt ary Partnership Agreement with the EU.  
(3) Where traders already export timber of  well-known certification and legality 
verification schemes they will not be required to make additional verification costs.  
The costs associated with 'due diligence' are largely associated with establishing a closed 
chain of custody within a weak institutional en vironment. These costs may vary widely. The 
Indufor data appear not too far out of lin e with World Bank and SGS estimates from 
Indonesia which depending on logi stics, the scale of operations  and the level of throughput 
suggest COC costs of between € 0,18 and € 0,7 8 per m3 (Bennett 1997). Similarly a study by 
ITTO into the costs of certifi cation notes that ' the costs of Chain of Custody certification are 
generally only a fraction  of the costs of forest management '. In its five certification case 
studies it shows that the costs of full sustainability certification range from U$ 0.04 to U$ 10 
per m3 (ITTO 2004). 
3.2 Costs to the private sector in  low-risk non-EU environments 
Indufor does not provide cost estimates fo r verifying legality in low-risk non-EU 
environments with a well established regulator y framework. These are provisionally estimated 
at a third of the costs of asse ssing legality in a high risk environment and set at € 0.9 per 
m3/annum. Controls are likely to largely consist of  establishing a paper trail with regard to the 
timber products imported and the production unit of origin. 
3.3 Costs to EU operators trading in timber and timber products 
The costs of meeting due dilige nce requirements within the EU fall apart in two categories: 
Controls on imported timber and cont rols on timber produced in the EU.  
The controls on imported timber ar e likely to be light given that  they largely dependent on the 
chain of custody established in th e country of origin. Additional costs are set at a level of € 
0,05 per m3/annum which is equivalent to the es timate made by Indufor for the private sector 
costs associated with importing VPA timber. Th is cost is applied to  all timber products 
imported into the EU.  
For the purposes of controlling EU produced tim ber, which includes an assessment of the 
legality of the production process the same level of costs as estimated for low risk 
environments was used, setting it at € 0,09 per m3. This cost is applied to all timber products 
produced in the EU.  
4. Conclusions on Costs  
The available data, based on estimates for per unit costs per category of timber are separated out 
between costs to the non-EU and the EU private sector and presented below.  
EN 58   EN Table 1: Estimated costs of for the non-EU private sector of ' due diligence' option 5 
 
Category of timber  
Volume 
(millions of m3 
RWE)  
Unit cost 
(€ /m3 RWE)  
Total cost 
(€ millions per 
annum) 
 
    
Imports from moderate-high risk environments  95 0,27 25,7 
Imports from low risk non-EU environments 
 47 0,09 4,2 
 
Total costs to the no n-EU private sector  
142  
0,21*  
29,9 
    
* weighted average unit cost for the non-EU private sector 
This table allows for the conclusion that the we ighted unit costs of th e proposed regulation lie 
around an average of € 0.21 per m3 to the priv ate sector of non-EU environments. At the 
current level of imports total costs to the non-EU timber industry stands at € 29.9 million 
annually.  
Table 2: Estimated costs for the EU pri vate sector of ' due diligence' option 5  
 
Category of timber  
Volume 
(millions of m3 
RWE)  
Unit cost 
(€ /m3 RWE)  
Total cost 
(€ millions per 
annum) 
 
Control on imports by EU private sector  142 0,05 7,1 
Control on EU production by EU traders 370 0,09 33,3 
    
 
Total costs to the EU private sector  
512  
0,08*  
40,4 
    
* weighted average unit cost for the EU private sector 
Costs amounting to the EU private sector fall apart in control costs on imports and control 
costs on EU timber production and amount to € 40,4 million annually at a unit cost of € 0.08 
per m3. 
Important to note is that the sum of all co sts of € 70,3 million on th e EU and non-EU timber 
trade is not the same as the additional  cost imposed by the proposed regulation. Many high-
volume timber product importers and producers such as Stora Enso, Carrefour, IKEA, UPM 
Kymmene, the pulp and paper sector, but also tropical timber traders organised in member 
state trade federations have due diligence requi rements and systems in place and are already 
carrying out the checks and supply chain controls that the proposed regulation aims to make 
mandatory (see box on UK Timber Trade Federation).  
Also important to note is that the level of cont rols required on the part  of EU importers and 
producers under the proposed regu lation is relatively light when  compared to other options 
investigated in the Indufor impact assessmen t. The proposed regulation broadly resembles a 
combination of Option 2 (voluntary private sect or schemes) and Option 4B (legislation that 
requires that only legally harvested timb er is placed on the EU market).  
EN 59   EN When the INDUFOR figures for total private se ctor costs are recalculated for the trade in all 
EU timber imports and production at 512 million m3 the following results are achieved: Option 2 will cost € 71.6 million per annum, wh ich is very close to the due diligence 
proposal, while the costs of implementing Optio n 4B will stand at an estimated € 136 million 
per annum. 
5. The economic benefits to the EU of addressing illegal logging 
No study has been conducted on the impact of illegal logging on the competitiveness of the 
EU forest sector. However in the US th e American Forest Products Association 
commissioned a comprehensive study on this topic in 2004 
11. The conclusions can, to a large 
degree, be applied to the EU.  
The study includes Russia as a “high risk” coun try and estimates that between 12 – 17% of 
timber entering international trade is “suspici ous”. The proportion is greater for hardwoods 
than softwoods (conifers). Using global forest trade models it estimated that illegal logging 
depresses world prices by 7% to 16 %, depending on product categories.  
Table 11 of page 24 from the report reprodu ced below shows the estimates of production 
increase or decrease if illegal logging were to be  eliminated. It can be seen that for the EU an 
increase in domestic production of roundwood of 5% would occur.  
The increased volume of roundwood produced in  the EU would amount to 16 million cubic 
metres. Average prices per cubic metre of roundwood (logs) of so ftwoods and hardwoods 
respectively are about €70 and €200 respectively. Assuming two thirds of timber used is 
softwood and one third hardwood an average price would be €113. The increased EU production would therefore be worth €1.8 bi llion. The increased production would not 
threaten the sustainability of EU harvesting as  only about 70% of tree  growth is currently 
harvested.  
Table 3: Summary of Simulated Effects of Eliminating Suspicious Roundwood Production  
 
% Change 
 Volume Change (000 m3
)  
 
  Roundwood Sawnwood Panels Roundwood Sawnwood Panels 
Change in:  
average 
world prices 19% 7% 16% 
 
Production:  
EU-15  5%  5% 0% 16,673 4,679  162 
Japan  13%  7% 2% 4,042 988  103 
U.S.  1%  1% 2% 5,386 911  874 Malaysia  8%  -2% 1% 2,060 -110  48 Brazil  -2%  -2% -2% -2,069 -482  -143 China  -23%  -10% -9% -18,455 -818  -3185 W/C Africa  -23%  -28% 2% -6,362 -1,353  23 Indonesia  -33%  -31% -32% -24,356 -2,490  -5,162 
                                                 
11 Illegal logging and global wood markets: the competitiv eness impacts on the US wood products industry. Seneca 
Creek Associates and Wood Res ources International, Nov 2004  
EN 60   EN Russia  -16%  -32% 5% -25,102 -7,685  294 
 
 
Exports:  
U.S.  0%  49% 35% 0 1,332  777 
EU-15  4%  12% 5% 919 5,164  1,456 
Brazil  0%  -1% 4% 0 -27  98 
Malaysia  48%  -1% 5% 1,809 -27  390 W/C Africa  -39%  -51% 10% -2,492 -1,063  64 Indonesia  -44%  -55% -51% -318 -1,451  -4,199 Russia  -19%  -57% 30% -11,867 -7,097  488  
Imports:  
EU-15  -9%  0% 0% -5,704 30  -61 
 
There are a number of assumptions  behind these figures e.g. they  assume that illegal logging 
is completely eliminated. Furthermore the actions  of consumer nations can only have an effect 
proportional to their trade with “high risk” environments. Nevertheless they provide an 
estimate for the order of magnitude of the imp act of illegal logging on global forest trade and 
how it undermines the competitiveness of EU forest industry.  
6. Summary of expected impacts on the due diligence regulation 
While Option 4B of placing the full burden of proof on the tr ader is thought to be too 
burdensome for the EU industry and especially small and medium enterprises, Option 2 has 
the problem that it remains voluntary. The pr oposed due diligence regulation strikes a balance 
between these two considerations with as its main impacts that it will: 
1) Require all EU traders to meet basic due diligen ce requirements with regard to timber 
legality. This creates a level playing field betw een those companies that are trying to address 
illegality and those that are currently undercut ting the market by selling cheaper illegally-
harvested timber products;  
2) Provide an incentive to trader s to buy and sell low-risk timber  rather than hi gh-risk timber, 
thereby reducing the use of illegally harvested timber by EU consumers.  
3) Provide an incentive to producer countries to conclude  FLEGT Voluntary Partnership 
Agreements with the EU as well as to exporters  in non-VPA countries to  put in place timber 
tracking and legality verification schemes.