The Reform of Public Timber Procurement in Japan

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The Reform of Public Timber Procurement in Japan
Chatham House Illegal Logging Update and
Stakeholder Consultation 20 July 2006
Federico Lopez-Casero Henry Scheyvens Kimihiko
Hyakumura Forest Conservation Project Institute
for Global Environmental Strategies (IGES)
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Overview

1. Japans role in timber trade
2. Japans response to illegal wood imports
3. Legal and policy context of the public
   procurement (PP) reform
4. Reform of timber procurement policy
5. Definitions and Verification Modalities
6. Policy Implementation a) domestic b) imported
   timber
7. Preliminary observations a) certification /
   legality verification schemes and b) addressees
8. Conclusions

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1. Japans role in timber trade

• Total timber demand in Japan is about 89 million
  m3 p.a., of which roughly 80 are imported
  (worlds 3rd largest importer)

• Largest importer of tropical plywood 4.6
  million m3 in 2005
• 3rd largest importer of tropical logs 1.6
  million m3 in 2004
• Russia is now Japans main log supplier 11
  million m3 in 2004

Source FRA (2005)
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2. Japans response to illegal wood imports

• Since the G8 Summit in 2002, Japan has repeatedly
  expressed its commitment to tackle illegal
  logging
• We will not use timber that has been produced
  illegally (Forestry Agency 31.03.2005)
• Government stresses financial/administrative
  support to international organisations and
  producer countries
• Low engagement of private sector
• Only 12 of 115 firms claimed to make any effort
  to assess the legality of the procured timber
  (survey by JFWIA)
• Potential of PP reform to force a response from
  the private sector
• Public sector 3 of total wood procurement
  (estimated)

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3. Legal and policy context of PP reform

• Green Purchasing Law Law Concerning the
  Promotion of Procurement of Eco-Friendly Goods
  and Services by the State and Other Entities of
  2000 (Law No. 100/2000), enacted January 2001
• Basic Policy for the Promotion of Procurement of
  Eco-Friendly Goods and Services
• Identifies specific items for public procurement
• Revised on 1 April 2006 by including
• Legality as a criterion for evaluation
• Sustainability as a factor for consideration
• Refers to Guideline for Verification on Legality
  and Sustainability of Wood and Wood Products
  formulated by the Forestry Agency

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4. Reform of timber procurement policy

• Guideline for Verification on Legality and
  Sustainability of Wood and Wood Products
• Prescribes modalities to verify legality and
  sustainability
• Aims to promote verified products as appropriate
  items for procurement of the public sector
• Is mandatory for central-level ministries/agencies
  , Diet, courts and independent administrative
  institutions, but also addresses local
  government and administration
• Gives the suppliers a lot of leeway when
  verifying legality
• Includes revision process based on
  multi-stakeholder consultation (exploratory
  committee and working groups)

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5. Definitions and Verification Modalities

• Legality (Criterion for evaluation)
• Timber should be harvested in legal manner
  consistent with procedures in the forest laws of
  timber producing countries
• Sustainability (Factor for consideration)
• should be harvested from the forest under
  sustainable management
• 3 different modalities for verification
• Forest certification / chain of custody
• Codes of conduct of Japans wood industry
  associations
• Own procedure set up by an individual company

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(1) Verification through Forest Certification

• Wood products certified under a forest
  certification scheme
• Accepted schemes include
• Local scheme Sustainable Green Ecosystem Council
  (SGEC)
• Overseas schemes FSC, SFI, CSA, PEFC, LEI, MTCC
• No justification, no prior assessment
• Very limited availability of certified timber in
  Japan/Asia
• Less than 1.85 of total forest area in Japan
  (461,000 ha) in 2005
• Less than 1 of natural production forests in Asia

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(2) Verification under Codes of Conduct of Wood
Industry Associations

• The gist of this modality is voluntary codes of
  conduct
• established by wood industry associations
• procedures to guarantee that their members supply
  wood products verified as legal (sustainable)
• mandatory for their members (auditing,
  penalisation)
• Leading role of the Japan Federation of Wood
  Industry Associations (JFWIA) as the umbrella
  organisation
• Established code of conduct in March 2006
• It has served as a template for most other
  associations
• Exception The Japan Lumber Importers
  Association (JLIA) formulated their code in
  November 2005

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Verification flow under modality (2)

• The JFWIA has focused on implementation in Japan
• explaining to stakeholders in Japan why
  verification is needed
• giving a domestic example for suppliers from
  abroad

Information brochure edited by the JFWIA
Forest Owners
Producers (Owners Assoc.)
Manufacturers, distributors
Government purchasers
Evidence doc.
Evidence doc.
Invoices
Licence
Apply
Licence
Apply
Certificate (invoice)
What associations have to do
Process of licensing suppliers
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(3) Verification through own procedure set up by
an individual company

• Applies mainly to suppliers, which
• are not members of wood industry associations
• prefer handling timber under own code of conduct
• Introduced at the paper industrys urging
• To be used by chip/pulp importing businesses (?)
• No examples of implementation so far
• In principle it will work similarly to modality
  (2)

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Flow under Modalities (2) and (3) for JLIA members
Modality (2)
Modality (3)
Segregated Management
DOCUMENT FLOW
DOCUMENT FLOW
Segregated Management as in modality (3)
STAGES
Notification log sales contract (copies)
Verifiable timber
Logging
Unveri-fiable
Logging notification or other evidence (copy)
Processing distribution
Invoice, shipping account, received documents
photos
Invoice (or incl.) evidence documentation
Not procured by gov.
Certificate based on evidence from all received
documents
Delivery
Invoice (or incl.) evidence documentation
Public Procurement
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6. Policy implementation a) Domestic timber

• Modalities expected to work from September 2006

Number of associations involved in the
implementation process
Association type Codes of conduct Codes of conduct Others Sum
Association type Estab-lished Planned for June - August Others Sum
Local Timber Associations 12 16 18 46
Local Forest Owners Associations 1 6 23 30
National Industry Associations 11 0 4 15
Total 24 22 45 91
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b) Imported timber
Main schemes with high probability of being
accepted by the government as evidence of
legality
Major exporter countries Scheme
Indonesia BRIK, SKSHH
Malaysia Export Declaration, Form 2
Papua New Guinea SGS for now upcoming workshop
Russia Still being developed between JLIA partners in Russia
Re-export of manufactured products from China Prior research required, to be undertaken by Working Group

• Working groups (researchers) under Exploratory
  Committee for Measures against Illegal Logging
  investigating options

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7. Preliminary observations a)
Certification/Legality Verification Schemes

• Modality (1)
• Government has no intention to assess
  certification schemes
• Modalities (2) and (3)
• Organised by the private sector in Japan
• Key role of industry associations (especially
  JFWIA)
• Initial evidence of policy impact
• National producers environmental NGOs see new
  policy as a chance to enhance demand for domestic
  timber
• Importers under pressure to demonstrate legality
  of imported timber, as domestic timber is
  increasingly favoured

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b) Actors

• Main focus on the private sector
• Granted wide autonomy to establish their own
  voluntary codes of conduct for the verification
  of legality
• Considered trustworthy by the Japanese government
• Prominent officials used the argument of the
  Japanese way based on the assumption of the
  goodness of human nature (??? - theory developed
  by Mencius ??)
• Less focus on the public procurer
• Expected to accept provided documentation for
  legality verification in accordance with one of
  the modalities
• No independent government/ 3rd party verification
  required
• No major capacity building efforts or advice
  intended
• However, public procurer is free to pay a price
  premium

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8. Conclusions

• Stepwise approach
• Priority of legality over sustainability
• Need for studies, and for negotiations of private
  sector and government with counterparts in
  producer countries
• So far, a paper trail is being implemented
• A major shortcoming is a lacking 3rd party
  auditing
• Remaining questions
• Will the private sector suppliers prove worthy of
  the trust the government has put in them?
• How reliable will the schemes for verification of
  legality negotiated with the major producer
  countries be?

Thank you!