Bridges Trade BioRes Review • Volume 4 • Number 1 • March 2010

The Lacey Act: Timber trade enforcement gets some teeth

by Paige McClanahan

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In May 2008, the United States became the first country in the world to place an outright, criminally enforceable ban on the import of illegally harvested timber. Codified in Section 8204 of the US Farm Bill, the new provisions amended the Lacey Act - a century-old law that serves as Washington’s primary tool in the fight against illegal wildlife trade - to include imports of plant and wood products. The move by the world’s biggest importer and consumer of wood products has provided a powerful incentive for the private sector to pay closer attention to how and where it sources its timber. The industry has started to react - and other countries are taking notice.

The US Department of Justice (DOJ) held off on enforcing the amendments until the spring of 2009, but promised that soon after it would prosecute some high-profile cases to make its point. True to its word, the DOJ followed through in November 2009 with a raid on Nashville-based Gibson Guitars, the world-renowned manufacturers of an array of stringed instruments. No arrests were made, but federal agents from the US Fish and Wildlife Service seized boxes full of documents, wood, guitars, and computer files from Gibson’s corporate headquarters as well as from a nearby factory. Madagascan rosewood, the wood targeted in the investigation, is very popular in guitar manufacturing; it is also very expensive, usually selling for US$5,000 per cubic metre, twice the price of mahogany.

At time of writing, the Gibson investigation was the DOJ’s only high-profile enforcement case under the expanded Lacey Act, but observers say that similar raids are sure to follow.

The new amendments to the Lacey Act define ‘illegal timber’ as wood that has been harvested or transported in violation of a law or regulation of the country in which it was sourced. This includes violations of explicit timber-protection laws - illegally harvesting wood in a national park, for example - but it could also include breaches of administrative regulations, such as violating a curfew designed to combat illegal harvesting to transport timber at night.

Penalties for infringing the new Lacey amendments can be severe: individuals found guilty of importing, exporting, selling or trading illegal timber can face up to five years in prison or a US$250,000 fine - for each separate violation. The responsibilities placed on importers are significant: US-based buyers of foreign wood can be prosecuted even if they had no knowledge that the wood they imported was illegally sourced. The government only has to prove that — “in the exercise of due care” — the importer should have known about violations in the harvesting of the timber. Of course the more an importer did know about the violations, the greater the potential penalties they could face.

To guarantee full protection, companies will have to be very thorough in vetting their imports. Before its headquarters were raided, Gibson Guitars appeared to have solid green credentials: its CEO, Henry Juszkiewicz, sat on the board of the Rainforest Alliance - a strong advocate for the new Lacey amendments (Juskiewicz has since taken a leave of absence from the board) - and most of the wood in its instruments was harvested ‘sustainably’. Most, that is, but not all.

Studies estimate that up to 10 percent of all wood that enters the United States has been harvested illegally. Imports of wood products from places like Russia and Madagascar and are widely considered to be especially high risk. Some observers predict that once the government’s enforcement efforts are in full swing, countries whose wood is likely to be tainted could be effectively blacklisted by US importers.

The ‘Forest Annex’: An alternate approach

The amending of the Lacey Act may be the most dramatic step that the US government has taken to combat illegal logging, but it certainly is not the first. The so-called ‘Forest Annex’ that was written into the free trade agreement (FTA) between the US and Peru has similar aims but takes a very different approach.

Instead of placing the burden on US timber importers, the Forest Annex requires the Peruvian government to enact a number of specific provisions to combat illegal logging. Under one of the mandatory measures, Peru must track the harvesting, transport, processing, and export of tree species that are protected under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Moreover, the Andean country - the world’s biggest exporter of mahogany - is obliged to fully investigate violations of the agreement’s law and regulations.

Some critics have said that because the Forest Annex approach ignores the question of ‘transhipment’ - routing timber through a third country to circumvent the system - it is fundamentally flawed. “Without a broader commitment to excluding illegal timber from all its trading partners, the US runs the risk that illegal Peruvian mahogany will be sent to Mexico or China to become our doors and furniture just the same,” Alexander von Bismarck, Executive Director of the Environmental Investigation Agency, explained in testimony to legislators in October 2007.

The Forest Annex came about as a result of a political deal that was struck between lawmakers and the administration of President George W. Bush in May 2007. Many predicted that the revised Peru deal would become a model for future US trade agreements; so far, though, no new pacts have been negotiated.

Already a positive impact?

But while the Forest Annex demands reforms on the part of the producer country, the amended Lacey Act targets US-based importers, forcing them to take full responsibility for how their timber is handled all the way through to the end of the supply chain. For that reason, the new measures could be a boon to a critical actor in the forestry sector: third-party forest certification bodies.

The Forest Stewardship Council (FSC), a non-governmental organisation founded in 1993, and the Sustainable Forestry Initiative (SFI), run by the American Forest & Paper Association, an industry group, are two of the biggest such independent certifiers. Both schemes, and several others like them, ‘certify’ forest management practices according to a set standards of environmental and social sustainability. All of those certification schemes require the wood to have been harvested legally. The FSC alone has certified about 117 million hectares of forest - an area roughly the size of Colombia - in 82 countries around the world.

While certification has become significantly more popular over the past 15 years, the vast majority of wood traded in the international market has not been vetted by an independent third-party certifier. (The FSC’s 117 million hectares represent only 5 percent of all forests in production around the world.) And there are several reasons for this: The certification process, which is purely voluntary, can be time-consuming and costly, especially for producers in developing countries. Moreover, there is little evidence that consumers are willing to pay a price premium for wood products bearing a ‘certified’ label.

But the revised Lacey Act may be starting to change that. Immediately after the amendments passed, certifiers began touting their services as the best way for companies to protect themselves from the prying eyes of DOJ lawyers. Now, nearly two years later, some certifiers are reporting an increase in demand for the services they provide.

Smartwood - a certification system run by the Rainforest Alliance, an environmental group - claims to have registered “a significant increase in interest in verification services since the Lacey Act was passed,” including requests from Paraguay, Guyana, China and Russia - countries in which it had never worked in the past. WWF’s Global Forest Trade Network has also reported a spike in interest in certification.

“From everybody that I talk to in the world of third party auditing - the folks who actually do the verification audits for certification - by all accounts, there is increased interest” from companies, especially in the chain-of-custody certification, says Andrea Johnson of the Environmental Investigation Agency, a green group that fought hard for the amendments on Capitol Hill. “My sense is that they’re starting to see an uptick…but it hasn’t been a massive surge yet.”

The demand for certification could become stronger, however, as the US government’s enforcement efforts get more intense, Johnson said in an interview. “We talk pretty closely to folks in the [US government] who are implementing here, and the level of interest and investment in enforcement of Lacey is only getting stronger,” Johnson says.

Other countries are taking notice. Australia is expected to announce similar legislation on illegal timber in the coming weeks, while the European Union is on track to pass a set of ‘due diligence’ laws governing the timber trade later this year. New Zealand and Japan have also signalled interest in pursuing similar strategies.

Taken together, a series of illegal timber bans in several major consumer markets could push the illegal timber trade past a “tipping point,” Johnson says.

“I have no doubt that this is going to lead to more certification on the ground, not just in the chain-of-custody end of things, but in forest management as well.”

Paige McClanahan is Editor of Bridges Weekly Trade News Digest at the International Centre for Trade and Sustainable Development.