LEGAL

FOREST PRODUCTS AND INTERNATIONAL TRADE: A REGIONAL PERSPECTIVE August 9th and 10th, 2012

 TABLE OF CONTENTS

TABLE OF CONTENTS ........................................................................................................................... 1 EXECUTIVE SUMMARY ........................................................................................................................ 2 FOREST LEGALITY IN LATIN AMERICA: AN OVERVIEW ........................................................................ 5 FOREST LEGALITY AND TRADE IN LATIN AMERICA: SELECT COUNTRIES ............................................. 8 SMALL FOREST ENTERPRISES AND THE TIMBER TRADE .................................................................... 12 IMPLICATIONS AND PERSPECTIVES FROM MEXICAN FORESTRY SECTOR ......................................... 15 EMERGING GLOBAL LEGISLATION THAT IMPACTS TRADE OF FOREST PRODUCTS ........................... 17 INTERNATIONAL BUYERS PERSPECTIVES ......................................................................................... 22 TECHNOLOGY TOOLS TO PROMOTE TRADE OF LEGAL WOOD PRODUCTS ....................................... 24 INITIATIVES TO PROMOTE THE TRADE OF LEGAL FOREST PRODUCTS .............................................. 27 APPENDIX 1 OTHER RESOURCES .................................................................................................... 30 ANEXO 2 EVENT AGENDA ............................................................................................................... 31 1


AMADHO Asociacin de Madereros de Honduras APHIS Animal and Plant Health Inspection Service CALAS Centro de Accin Legal Ambiental y Social de Guatemala CCMSS Consejo Civil Mexicano para la Silvicultura Sostenible CIFOR Center for International Forestry Research CITES Convention on International Trade in Endangered Species COFOMP Concesiones Forestales del Petn CONAFOR Comisin Nacional Forestal CORPI Coordinadora Regional de Pueblos Indgenas EFI European Forest Institute EIA Environmental Investigation Agency EUTR European Timber Regulation FAO Food and Agriculture Organization FLA Forest Legality Alliance FORESCOM Empresa Comunitaria de Servicios del Bosque GEF Global Environmental Facility IUCN International Union for Conservation of Nature IWPA International Wood Products Association PNUD Programa de Naciones Unidas para el Desarrollo PROFEPA Procuradura Federal de Proteccin al Ambiente Red MOCAF Red Mexicana de Organizaciones Campesinas Forestales RM Reforestamos Mexico SEMARNAT Secretara de Medio Ambiente y Recursos Naturales TPP Trans-Pacific Partnership USAID United States Agency for International Development USTR United States Trade Representative WRI World Resources Institute 2

EXECUTIVE SUMMARY

In August 2012, the Forest Legality Alliance (FLA) and Reforestamos Mxico co-hosted the event Legal Forest Products and International Trade: A Regional Perspective. The Alliance is a joint effort of the World Resources Institute and the Environmental Investigation Agency, supported by the United States Agency for International Development. The event brought together more than 100 participants from more than 8 countries from private companies, civil society organizations, Mexican and U.S. government agencies, trade associations and academia. The group focused on the following objectives: Discussing and analyzing interregional timber trade. Discussing and analyzing forest legality challenges and how legality issues and the forest products trade impacts Latin Americas small and medium-sized enterprises, including community forest enterprises. Providing information to the producers and exporters about the legal requirements of timber products in the international market and its increased demand.

Timber Interregional trade is not well known and there are information barriers that impede a deep understanding of the value and volume of the timber product flow in the region. The European Forest Institute is supporting a study to understand the regional dynamics. Moreover, representatives of Mexico, Guatemala, Honduras, Colombia and Peru discussed illegal logging in their countries and proposed specific actions against illegal logging on a national level. Reducing the demand for timber products that originate from illegal sources in national and international markets is a way to with illegal logging. Half of the event was dedicated to discussing the current requirements of timber products from legal sources at the international market, both from private buyers and trade regulations. United States government representatives, the European Forest Institute and international corporations guided the discussion of the Lacey Act, The European Timber Regulation and private sector purchasing practices. The event concluded with a discussion on initiatives and resources available to help promote the demand for timber products from legal sources and equipping value chains for those that supply legal products, as well as Initiatives and resources, including the Forest Legality Alliance and a series of existing and emerging technologies that can help businesses to track and control the risks of illegal timber in their value chains. 3

 The reduction of illegal logging in Mexico -- and the Latin American region as a whole -- will require the implementation of dialogues, meetings and collaboration between stakeholders. The event Legal Forest Products and Trade: a Regional Perspective joined the efforts that are already in place to facilitate dialogue and the coordination against illegal logging In Latin America.

FOREST LEGALITY IN LATIN AMERICA: AN OVERVIEW

Participants:

Moderator: Alicia Grimes (USAID) Regional overview: Guillermo Navarro (EARTH University) Regional trade: A mexican perspective, Ernesto Herrera (Reforestamos Mxico)

The objective of this session was to provide an overview of inter-regional trade of forest products, movement towards legality, and impacts in the region. Guillermo Navarro Not all illegal actions result in environmental damage; not every illegal action has a legal option (e.g. lack of institutional presence, only a few resources for law implementation); it is possible that some legal actions result in environmental damages and, in the international trade context, a regional effort is required. Fig. 1. Guillermo Navarro

Forests value chains are complex and involve a lot of stakeholders. In terms of legality verification, in most cases, different levels are involved (e.g. forestry verification, phytosanitary check, customs verification). Furthermore, being legal means additional efforts, more time and additional costs. In Central America, verifying timber legality, in terms of interregional trade, is a weak effort and is limited by customs controls and phytosanitary checks. This also applies to the species and CITES controls. The dynamics of timber product trade is not well known in the region. Statistically, there is a discrepancy (value, volume) among different information sources (national and interregional) on timber product trade. In light of these circumstances, a specific study is being developed to provide clear baseline information for timber products between 2000-2011 in countries of Central America. For each country, a separate comprehensive analysis for timber product trade will be created, as well as a general overview on the administrative governance (legality verification) for timber product imports and exports. Ernesto Herrera Mexico produces only a quarter of its timber consumption. The private sector in Mexico needs information related to their value chains. It is known that illegal logging exists, though it is not clearly identified how the illegal wood is acquired nor how it enters the supply chains. The duality of timber (whether it is legal or not) is related to the legality of the enterprises; that is, the level of regulation of their purchases or processes. It is necessary to define legal timber; sustainable timber and legal timber are not the same, just as timber coming from exposed land is not the same as land use change. There is timber that can be documented, which is transformed and the industry is expected to export it. Reforestamos Mxico is conducting a study to investigate the source of the timber that comes to Mexico. The study is based on interviews, with a total of 630 enterprises of which at least 120 will be interviewed. The preliminary results show that for some enterprises, 50% of their imports come from Brazil, followed by Canada. The main problems presented in this study are tariff barriers and the need for data standardization to be able to speak the same language. For Reforestamos Mxico, its important to be able to provide accurate information to stakeholders (mainly government agencies such as SEMARNAT, CONAFOR and PROFEPA) so they can generate dialogue processes in order to define legality in Mexico and provide certainty in sustainability issues in Mexico. 6

 Closing Remarks: Partnerships have been generated in Mexico to ensure that market studies have an approach focused on community forest enterprises in order to lower information barriers. The red flags of governance implication and commercial relations between Central America and North America are: information quality, trade barriers, commerce strategy and capacity definition.

Fig. 2. Forest Legality in Latin America Panelists

FOREST LEGALITY AND TRADE IN LATIN AMERICA: SELECT COUNTRIES

Participants:

Moderator: Victor Lleras, Utz Che Mexico: Sergio Madrid, Consejo Civil Mexicano para la Silvicultura Sostenible Guatemala: Yuri Melini, CALAS Colombia: William Braham, Instituto de Investigaciones Ambientales del Pacifico Peru: Julia Urrunaga, Environmental Investigation Agency Honduras: Ramn Alvarez; AMADHO

Fig. 3. Forest Legality Panelists Panelists presented a general perspective on the situation of the forest sector, and the production and commercialization of timber products in Mexico, Honduras, Guatemala, Colombia and Peru. Sergio Madrid (Consejo Civil Mexicano para la Silvicultura Sostenible, Mexico) Its important to understand the causes behind illegal markets. Mexico does not have a responsible consumption culture. Land ownership disputes have made this a complex topic due to overlap between owners that are generating conflict and promoting illegal logging. Another problem facing legality in Mexico is that paperwork is expensive and takes a lot of time. This assessment was done by CCMSS who has been working in 15 regions of Mexico. It has been shown that SEMARNAT takes at least two months to release paperwork that in conjunction with existence of marginalized areas and the need to trade creates an environment conducive to illegality. According to PROFEPA, preventive detention of timber has been decreasing in the last years, which equals 20 thousand cubic meters. It is estimated that illegal production is between seven and eight thousand cubic meters. The verifications conducted by PROFEPA on warehouses are minimum and they perform a lot in the forests; which means that the focus is on the people working in the forest and not on the trader. Illegal market contributes to increasing poverty, income loss, encourages corruption and discourages market development.

The following is proposed: a) emphasize the fight on the legal market: strengthen the focus on the surveillance of community forests and warehouses, roadside inspections and certificate of origin systems; b) simplify paperwork and handling costs; and c) create a mechanism that encourages consumption between private and government sectors. Yuri Melini (CALAS, Guatemala)

Guatemala has a 125-year forestry tradition with an influential political framework dating back to 1996. Legality and good management is possible through logging concessions. These incentives encourage forest investment -- equivalent to 400 thousand USD -- and this money goes towards reforestation programs and other lines of work. The 1950s inventory of the FAO shows that forests covered 58% of the Guatemalan territory and only 28% remains. In 2006 deforestation corresponded to 200 thousand hectares. Climate change adaptation and mitigation play a prominent role in reducing vulnerabilities from inhabitants and their access to biomass in human development management. The Center for Environmental, Social and Legal Action in Guatemala (CALAS, for its Spanish acronym) developed a regulatory framework that features a data analysis study focused on economics and law including control application costs and justice. This work is a social, governability and democracy exercise and its not a public sector topic; it's for the users, consumers, buyers and stakeholders. The legality model in Guatemala relies on instrumentation and public policy tools that create an advanced strategy in forestry and management issues. However, the development of law enforcement efforts is still required. Sustainability originates from stakeholder participation. William Brahan (Instituto de Investigaciones Ambientales del Pacfico, Colombia) Colombia is a country recognized for its rich forest cover but it still is incipient in the efficient use of its resources. Management exists mostly in mining and illicit crops. Colombia has 61 thousand hectares of forest cover, a deforestation of more than 300 thousand hectares and a system of natural protected areas. The Colombian pacific region has the largest forest cover and accounts for 70% of the timber that gets traded within the country. From the volume used in 2009 and 2010, almost 99 thousand cubic meters were traded. Species are classified under: very special, Fig. 4. William Brahan 9

special, ordinary and very ordinary, and are traded according to their classification; however, some species are erroneously reported as ordinary when they are actually special. Therefore, illegality begins when one species is classified as the wrong one. Management systems are manual (for example, felling, limbing, bucking, edging and types of transport, etc.) and there is little chance of transformation, which means that prices differ between management sites and urban areas. Furthermore, mishandled management impacts the environment by creating damage such as biodiversity loss, floods, landslides, etc. Julia Urrunaga (Environmental Investigation Agency, Peru) Since the beginning of the United States-Peru Trade Promotion Agreement (PTPA), Peru has been working on forestry reforms and development projects. PTPA has a new model that includes a forestry annex, and contains commitments to reduce corruption and increase transparency, participation methods for local communities and non-compliance penalties. These penalties may become so serious, for example, that the PTPA could be suspended. In this framework of improvements, the government of Peru is working on generating a forestry law model, which was approved a year ago but has not been implemented yet. In Peru, this reform framework is focused on CITES species destined for the United States. This is because countries are forced to declare the timber extraction point with CITES, allowing to locate their place of origin and allowing visits to the site to verify that the timber amount is the same as the one reported at the timber extraction point. Inventories done by concessionaries contain forestry information that is not accurate. The steps to extract commercial timber are the following: a) get a permit, b) present a forestry management plan, c) present a total and detailed inventory of all trees and utilization explanation, d) approve (local authority) the program (if there is mahogany and cedar, CITES must verify volume) and e) approve utilization. However, this process isnt always implemented and some loopholes in the law indirectly support the illegal export of trees with no accurate control to avoid this situation. One of the biggest challenges in the forestry sector in Peru is to ensure that laws are applied; the law is not the problem (it is not that bad), the problem is that they dont know how to implement it. There are no ways to ensure transparency and obtain greater access to information. It is recommended that government facilitate monitoring and surveillance capabilities for more civil society organizations and indigenous organizations. Ramn Alvarez (AMADHO, Honduras) Honduras is a country with 11 hectares and has 7.5 million inhabitants; the forests, 60% of which are broadleaf forests and the rest conifer forests, cover half of the territory. FAO data shows that Honduras, with at least 100 sawmills, is one of the countries with more deforestation in the 10

region. 97% of the forest management comes from the conifer forest and less than 3% from the broadleaf forest since these are protected areas. Currently, people in Honduras struggle with high levels of insecurity, market reduction, corruption and few investment incentives; consequently, law enforcement and land tenure are a problem. In the last three years, supply for local timber products has decreased and the demand of imported timber has increased; its cheaper to buy furniture made in China than made locally. One solution for Honduras is to encourage politicians to generate actions to control timber supply. For example, control timber in the cities and forests; enhance economic growth by generating and increasing the density of forests; and reducing protected areas. In addition, to promote legality we need to reduce corruption (illegal charges and illegal logging); the government should improve the legal and personal security; and we should also develop better systems of transparency and research that allow reliable sources. Among the positive actions, 97% of the forests are now private and the public owned ones have management plans in place. Each tree is measured and marked. Since 1992, the creation of new forests through restoration has been promoted. Closing remarks Legality is increasing its importance globally, for example, in European countries forestry and production issues are being promoted. The demand for timber in the world is very high and to fight illegality we must attack the problem of actual consumption. It is a fact that this problem not only needs the support of the government, it also requires the involvement of more stakeholders. CIFOR made a proposal on the engagement of actors in forestry, the focus was seeking to address and track the earnings of illegal timber.

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SMALL FOREST ENTERPRISES AND THE TIMBER TRADE

Participants: Moderator: Arturo Santos, IUCN Mexico: Gustavo Snchez, Red MOCAF Guatemala: Julio Escalante, Community Enterprise for Forests Services (FORESCOM) Colombia: Jhuver Gonzalez Rivear, Los Delfines Peru: Juan Tapayuri CORPI, Alto Amazonas, Per Honduras: Melvin Cruz, Fundacin Madera Verde

Fig. 5. Small forest enterprises panelists Forest community leaders from Mexico, Guatemala, Honduras, Colombia and Peru discussed their efforts to sustainably manage forest resources, comply with national and international regulations, and challenges to market access while remaining financially viable. Mexico: Gustavo Snchez, Red MOCAF The Mexican Network of Forestry Community Organizations (Red MOCAF, for its Spanish acronym) is comprised of 50 local and regional organizations, all of which are corporate entities and are organized as community enterprises, indigenous communities or peasant communities (ejidos or communities). In the late 70s and 80s, ejidos and communities were allowed to manage their resources in Mexico -- called the community forestry model and has been driven by the socio-production policy in order to empower owners managing their resources. Illegal logging is one of the main problems that forestry companies face for consolidation. It is estimated that for every cubic meter of legal production (6 thousand cubic meters) there is at least one cubic meter of illegal production. Another problem of the forestry sector is stagnation in processing, an issue that must be addressed in two areas: a) from productivity (the quality of the site) and b) the counterparty, more balanced public inversion in forestry. Currently, resources that are invested in forestry are focused on conservation issues and income subsidies. These topics are not aligned to development, which implies that by being separated they also can be forgotten. Only 30% of the subsidies are focused on forestry production, a number that should be higher to be more beneficial. 12

 Carbon markets and its advantages, as well as the rural communities rights, are issues that should also be considered important. Legality is not only related to coercive forces. A successful environmental strategy includes market intervention through transformation centers and consumer enterprises intervention. Guatemala: Julio Escalante, Community enterprise for forests services (FORESCOM) FORESCOM is a company from Guatemala formed by the forestry communities that constitute COFOMP (Forest Concessions in Petn). These communities manage 322,000 hectares, and harvest seven thousand cubic meters of timber. FORESCOM seeks to add value to products in order to increase the chain of benefits for producer communities (direct beneficiaries) and indirect beneficiaries, although the volume is small. FORESCOM takes into account all legal measures to maximize what they need from the forest. The FORESCOM operation area is authorized to exploit 29 species; however, trading really is affected by illegal activities, such as timber laundering, which reduces revenue potential. Colombia: Jhuver Gonzalez Rivear, Los Delfines os Delfines has 24 hectares of primary wealthy forest, covering 15 communities. Los Delfines is composed by community forest enterprises, which are looking to take an active role in the transformation of resources, benefiting their region and they are looking for opportunities to expand their market as well as to make more partnerships and alliances. In this context, they are working to increase the profits of their communities and intermediaries are not the only beneficiaries. Peru: Juan Tapayuri, CORPI, Alto Amazonas AIDESEP considers that public policy must be reflected in the communities. AIDESEP is comprised by diverse and they work on topics such as health, education and public policy, and the forest management promotion in order to ensure future sustainability. 13

Fig. 6. Los Delfines Community Council

Fig. 7. AIDESEP presentation

 Honduras: Melvin Cruz, Fundacin Madera Verde The foundation seeks to improve the socioeconomic status of the families and the opportunity for these forest communities living around protected areas to compete in the timber market. The Fundacin Madera Verde serves as a technical facilitator in timber production. Timber production has three phases: establishment, production and export. The foundation is located in three regions of the country, and is looking to expand their operations and improve productivity. The communities where the foundation works have incorporated women in productive activities, generated hydropower of 12 kilowatts for the community, and have monitoring of timber along the value chain to prevent product contamination. The communities have a profit margin and have project funds, social security and savings. Closing Remarks: Eliminate illegal logging, simplify procedures, eliminate illegal invaders and find incentives for sustainable forest management. Build capacity to enter the market. Promote respectful dialogues between sectors, eliminate mistrust between the social sector and the market, and look for needs and shortages. Encourage more social responsibility in business and encourage legal purchases. Create incentives, reward and simplify processes because they become complicated. Transfer technology and increased technical assistance. Invest in machinery and technology development, and administration systems.

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IMPLICATIONS AND PERSPECTIVES FROM MEXICAN FORESTRY SECTOR

Participants:

Mexican forestry sector stakeholders presented and discussed the implications of the new business environment. The panelists also shared their perspectives on the Mexican forestry sector, its competitiveness and market dynamics. Juan Manuel Barrera (PNUD-CONAFOR) It is not only important to ask where timber comes from, it is a fundamental issue. Currently, forest certification is an alternative that can ensure the legality of products and facilitate their tracking. Community governance is aligned to community organizations and those who apply the law, and is linked to land-use regulation and equipping. Theres a need to support initiatives that promote these kinds of actions, in addition to strongly fostering links between local and municipal governments. One of the key objectives is to ensure that timber is an equitable business and focused on sustainability. Otherwise, it will have negative implications such as illegality. In Mexico, theres an 8.5 hectare area under sustainable forest management, the authorized volume is 10 million cubic meters and the production is 5.8 million cubic meters. The trade balance denotes little compared to what it is produced. The timber marketing and production model is, in several cases, focused on job creation and neglects other aspects. Raw materials are very expensive in Mexico, the Derecho de Monte is the instrument that reflects the value of the timber sales. There are success and important stories such as La Ciudad, Vencedores, San Pablo, Ixtlan, etc. In all these cases, theres a support process from the government on management issues, marketing, etc. Governance is a key issue to make this work. There will be no community people against these ideas if they are organized. 15

Moderator: Tania Mijares, Realidad Climtica Mxico Ejidos La Ciudad, San Pablo y Vencedores: Alma Lili Mena Cmara de la Industria Maderera: Jos Cibrin Tovar, CONAFOR-PNUD-GEF: Juan Manuel Barrera, CONAFOR: Ignacio Antonio Gonzlez Hernndez

 Alma Lili Mena (Ejidos de Durango) For several years, there have been voluntary certification processes in Durango, which have allowed the application of international standards seeking to balance the social and economic environment. Ejidos are the basis of production and these companies have demonstrated quality and professionalism in the manufacture and sale of their products. These companies have faced disadvantages in terms of prices and its strategy has been to promote good practices and ensure that they base their action on legality; this way, they raise competitiveness and ensure the demand for their products in the market. For the ejidos, having intermediaries on the sale of their products is still a challenge since communities do not receive 100% of the resources for which they are working. They need systems to close the gap between buyers and producers. For ejidos and communities, barriers to market access and financing are the current dynamics, where businessmen dont investigate the origin of timber and have an inclination towards price points. In addition, to access funding they need to follow many steps and often they are not loan candidates because they dont generate the needed trust. Jos Cibrin Tovar (Cmara de Industria de la Madera) Legality is an issue that should involve all sectors of society to get stronger and be viable, not just the forestry sector. The different structures of government and different sectors of civil society should facilitate the process. It should stimulate investment and develop a much more organized forest policy. We cannot forget that our forest resources under management are the future and we must analyze what policies are needed to lift this sector. Closing Remarks: In Mexico, the Sustainable Development Act and its regulations define forest management areas. Many forest areas have insufficient funds to make management plans. Originally, PROCYMAF was the one promoting these subsidies and it still can be a useful tool. Management types should be defined and development schemes must be real. It is necessary to encourage investment in technological development and the study of species and forest regeneration systems. 16

EMERGING GLOBAL LEGISLATION THAT IMPACTS TRADE OF FOREST PRODUCTS

Participants: Moderator: Mauricio Limn, Subsecretario de Gestin para la Proteccin Ambiental, SEMARNAT. U.S. Government representatives: Gary Lougee (APHIS), David Oliver (USTR), U.S. Lacey Act. EFI: Didier Devers, EUTR. Environmental Investigation Agency: Tom Bewick, NGO perspectives about the U.S. Lacey Act.

The panelists discussed the U.S. Lacey Act, the EUTR, and the impacts of these laws at the local and international levels. David Oliver (United States Trade Representative) The U.S. addresses illegal logging by promoting and supporting the trade of legal forest products. The U.S. takes a holistic approach to address illegal logging that includes alliances with other governments, the private sector, civil society organizations, and international organizations, forging commitments, trade agreements, and supporting research and innovation to support good forest management The Trans-Pacific Partnership (TPP) is an agreement mechanism between the U.S. and other countries in Asia and the Pacific. Mexico and Canada will join the negotiations towards the end of the year. Within the TPP, the U.S. promotes the adoption of prohibitions in the trade of forest products of illegal origin, the adoption of civil and criminal penalties to enforce the prohibitions, and better cooperation to implement the prohibitions. Regarding research, the U.S. government is supporting the development of innovative technologies to identify and trace wood such as DNA fingerprinting, use of barcodes and isotope analysis. The U.S. government supports also CIFOR to assess the efficiency of sustainable forest management systems and tools such as forest certification. The Lacey ACt is a flora and fauna protection statue. The Lacey Act was first put in place in 1900, and it has been amended several times. The most recent amendment was in 2008. The main objective of the 2008 amendment was to extend the protection against illegal traffic of animal and 17

animal products, to plant and plant products, including forest products. The amendment expands protection by controlling the import, export, transport and trade of plant products. In less technical terms, the Lacey Act establishes requirements to buy and sell forest products in the U.S. market. The Lacey Act does not apply to common cultivars, or common consumption species (except trees), species subject to scientific investigation that are not threatened with extinction, and species to be used in greenhouses or that will be replanted. The U.S. government will be responsible for prosecuting and demonstrate violations to the Lacey Act. The U.S. government will also be responsible for applying relevant penalties, which could be civil penalties (fines) or criminal (fines and jail time), and the forfeiture of the products. Importers have to submit declaration for plant and plant-based products. The information required in the declaration includes basic information about the shipment and the products including: scientific name of the plant (genus and species), country of origin, amount of the product, value of the product, etc. Nevertheless, the declaration is not a legality certification and importers are not required to provide information about the legality or the supply chain of their products.

Fig. 8. Emerging legislation p anel 18

Gary Laugee (Animal and Plant Health Inspection Service (APHIS), Departamento de Agricultura de los Estados Unidos) APHIS is the U.S. agency responsible for collecting and analyzing the information in Declaration Form required by the Lacey Act for importers. Importers are responsible for filling out the declaration. Besides collecting and analyzing the information, APHIS provides information to facilitate and support compliance with the declaration requirement. The Lacey declaration requirement does not cover all products, and it is based the Harmonized Tariff System code (HTS codes). For example, an importer does not need to fill out a declaration form for a bagpipe made with wood parts that belong to the HTS 92059020, but the prohibition of illegal wood trading applies to all the wood used to make the instrument. This means that if the bagpipe was made with illegal wood, importing the product to the U.S. is a violation of the Lacey Act. The declaration form has been simplified in the past few years to help the importers understand better what information is required to import the product to the U.S., for example the scientific name, the origin of the raw materials, and the origin of the export.

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The Lacey Act is a U.S. and it only affects U.S. importers although there are implications for actors outside of the U.S. The U.S. importers are responsible for collecting and presenting the information to the U.S. government. APHIS also seeks to provide assistance to importers to collect information about their products. APHIS has set up an Internet page for users to find information/answers about the Lacey Act at http://www.aphis.usda.gov/plant_health/lacey_act/index.shtml. Questions and comments can be sent to APHIS at lace.act.declaration@aphis.usda.gov Tom Bewick (Environmental Investigation Agency) The Environmental Investigation Agency (EIA) has invested significant resources to combat illegal logging, promoting the Lacey Act amendment and Lacey-like legislations in Australia. There have been a significant amount of efforts to promote the trade of legal products, but there has not been a real positive impact in the communities in terms of better prices. This is the reason why many choose illegality. There are advantages in developing voluntary legality measures, but there are still problems in new and emerging markets such as Cameroon and Indonesia. In Latin America, there have been efforts to control illegal logging, including promoting the Lacey Act. It is important to improve the image of Latin America as a responsible producer as more and more U.S. importers are more interested in monitoring their value chains. One of the activities that EIA undertakes to combat illegal logging is to focus on species that are protected by the laws in the country of origin. For example, in the case of Gibson Guitars, the focus was on ebony, which has been under protection in Madagascar since 2006. EIAs investigation in Madagascar culminated with the first Lacey Act implementation action, and the criminal agreement between Gibson Guitars and the U.S. Department of Justice. In this case, it was determined that Gibson traded with illegally logged ebony, and the company had to pay stiff penalties: donate US$ 50,000 to a foundation and pay a US$ 261,000 fine. This was the first successful application of Lacey. However, market legality requirements have limited reach, and U.S. and European laws and regulation need to be strengthened and improved to include trade agreements in countries like China. Another important challenge is to access legal wood at accessible prices. Didier Devers (EFI-EUTR) Producer countries are not the only one to blame for illegal logging, buyer countries also contribute to the problem. This is the reason why large buyer countries are changing their laws to decrease the consumption of illegal timber.

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The European Union Timber Regulation (EUTR) requires buyers to known the place of origin of any product imported to Europe because they are responsible for any potential implications if the wood is of illegal origin. There are various requirements of the prohibition for those who first place the wood in the European market. For instance: inform themselves about the origin of the wood (similar to the U.S. Lacey Act), and assess the risk of sourcing illegal wood in their supply chains to reduce the risk of illegality. Closing remarks:

Based on the EUTR, the illegality is defined according to the laws in the country of origin, specifically laws that address: The use and access rights based on the laws of the country of origin. The payment of applicable fees and taxes for the use of the wood. The use of wood from managed forests and promoting biodiversity conservation. The legal rights of others (third-parties) to use the wood. Trade and customs laws related to the forest sector.

There are little imports from Latin America to Europe, and some Latin American producers see Europe as a market that is out of reach. Nevertheless, Latin American producers need to change their perspectives and see the global picture. 21

INTERNATIONAL BUYERS PERSPECTIVES

Participants: Moderator: Ernesto Herrera, Reforestamos Mxico Taylor Guitars: Chris Cosgrove International Wood Products Association (IWPA): Ashley Amidon Masisa Mexico: Leo Schlesinger

Representatives from global leading companies discussed how they face the global market requirements of legal wood. Chris Cosgrove (Taylor Guitars) Taylor Guitars faces illegality problems with some species that are difficult to identify or track their place of origin. Every country establishes different documents to help track and identify the origin of the products, but, for Taylor, the most important approach has been to involve every actor along the supply chain (individuals, businesses and governments in the producing countries), to address the legality issues. Ashley Amidon (International Wood Products Association) IWPA members have changed their purchasing practices, trying to increase the transparency in the supply chain and avoid discrepancies with the information in the country of origin. In terms of legality, it will be terrible if wood products lose their value because there will be no reason to manage forests for wood production. If we work with community forests, or small land owners, we should not forget that it is important to improve the conditions on the ground. Leo Schlesinger (Masisa) In Mexico, the problem needs to be addressed not only from the demand side. The problem is that there is an imbalance in the market. More than 60 percent of the forest products in Mexico are imported. In Mexico, native forests are the only source to meet the demand of forest products; this scenario is highly inefficient and expensive because there is not supply to meet the demand. Chile has 3 million hectares of forest plantations and produces 45 million cubic meters of wood. Mexico has 56 million hectares of native forests, and the production meets only between and 10 percent of the demand in the country. The system is highly inefficient; we need fix satisfying the demand first. In this situation, the legality of the wood could become an obstacle even if it is well intentioned. Commercial forest plantations could pose a solution to this problem; in general, in other countries particularly the communities that live in the forests manage native forests for 22

conservation purposes only. There might be cases where management is for production, but in this case [in Mexico] is not enough to meet the demand. We have to work to ensure the legality and sustainability of the products for consumption; ensuring legality and sustainability is the only way to know if the forest product is reliable. Ernesto Herrera (Reforestamos Mxico)

If our vision is to ensure that the forest sector functions as a business in the future, we have to focus on the communities, even if this means a bigger investment at the moment, because we are investing in the future. Closing remarks: Forest plantations are an alternative to combat illegal logging. It would be less expensive to extract timber from a plantation than harvesting illegally in a native forest. Regarding a companys own plantations. Taylor Guitars acquired mahogany forest plantations in Fiji. At the time of acquisition, they did not know what sustainability implied, and they are now developing that plantation. For Masisa, the development of sustainable plantations in Mexico needs to be supported with incentives and alliances. Subsidies. Nowadays, there are no subsidies in Mexico. In general, the support for plantations is a significantly smaller than the help available to cattle ranchers, and they get access to assistance on an annual basis. All the incentives to cattle ranching are very inefficient because the lands where those operations are established are not productive in general. It is important to simplify paperwork, mitigate environmental impacts and develop integrated business solutions. The innovation strategies are focused on resolving environmental problems such as climate change, deforestation, water scarcity and environmental impacts; the social aspects focus mostly on labor and on marginalized populations. It is important to educate the consumer. 23

TECHNOLOGY TOOLS TO PROMOTE TRADE OF LEGAL WOOD PRODUCTS

Participants: Moderator: Victor Lopez Illescas, Utz Che Identificacin de Madera: Shelley Gardner, USFS Helveta: Philip Briscoe, Cdigos de barra y sistemas computacionales de rastreo Double Helix: Darren Thomas, Rastreo usando ADN

The panelists discussed and presented current and upcoming technologies to identify wood and trace their origin through the supply chain. Shelley Gardner (USFS) There are currently various methods to trace the wood through the supply chain and identify the wood species; for example, using wood anatomy, or identifying the wood fingerprint. Wood pulp can be analyzed in the microscope to identify some of the pulp components; for example, if the mix contains bamboo, tropical woods, hardwoods or softwoods, etc. This is very useful, specially to identify species protected under CITES. Using intelligent mechanisms, wood fingerprinting Fig. 10. Fiber analysis allows the identification of features such as the area of origin and the genus of the wood. Taxonomists and genetic scientists have worked together to improve identification and tracking techniques such as using DNA. Currently, there are efforts to partner with other specialists working on other vanguard technologies, such as isotope spectrometry and bar coding. Darren Thomas (Double Helix) DNA tracking can be used to identify the region, the country, the concessions and the genus and species of the wood, depending on the conditions and the level of information needed. Wood anatomy can be used to identify genus and species. Through DNA, scientists can identify information such as the geographic origin, the species, and even the interaction of species within 24

one area. Using DNA fingerprinting scientists can identify specific features to identify, for example, if the wood came from the same tree. Isotope analysis can help identify regions and countries because the element-absorption is different in different places of the world. It might not be possible to identify the species, but it is possible to identify wood from two concessions in the same area. These technologies are useful to control the supply chain. These new tools open alternatives that were not available before, and add a level of assurance about the origin of the products and the suppliers. Double-Helix is currently using DNA to create genetic maps in Central America, Bolivia and Brazil, in partnership with stakeholders working with mahogany. The objective is to combat excessive harvesting, but they are starting with developing the genetic markers of a number of features.

Philip Briscoe (Helveta) Tracking technologies using bar codes help improve governance and combat illegal logging. Using bar codes and electronic databases, companies can demonstrate the origin of the product and 25 Fig. 11. Identification based on the different technologies available

meet the requirements of laws from the U.S., the European Union, and other countries and international agreements. With bar coding technology, companies can manage costs associated with legality because they can track the supply chain from beginning to end, reduce the risk of illegal wood entering in the supply chain, and increase the reliability which can help in securing permits. Using bar codes to track species can help identify duplicates; it also helps deter illegal activities because each specie/piece has unique bar codes. It is possible (and recommended) to use the system in community forest operations because the people in the communities can learn to use the technology on the ground and be empowered to combat illegal logging. Companies can also control and track the products for import, for example, track the mahogany from the communities in Honduras to Taylor Guitars in California. In this specific example, the Fundacion Madera Verde provides support to the community. Closing remarks: It is important to assess the limitations of introducing new technologies in counties in Latin America that do not use the technologies yet. It is a challenge to introduce mobile technologies to isolated communities. In some cases, there are not enough laboratories to conduct the analyses. Promote the participation of the communities to adopt the technology tools. Define who, within the supply chain, pays for the adoption of new technologies.

Fig. 16 Pases que realizan trabajo con Helveta

Fig. 12. Helveta tracking solutions 26

INITIATIVES TO PROMOTE THE TRADE OF LEGAL FOREST PRODUCTS

Participants: Moderator: Tom Bewick Veeduria, Per: Juan Tapayuri Alianza para la Legalidad Forestal: Ruth Noguern Forest legality framework for Mexico: Eduardo Jr. Arenas, Reforestamos Mxico FLEGT, Didier Devers, EFI Daniel Arancibia WWF-GFTN

The panelists presented other initiatives that seek to support the trade of legal forest products. The Veeduria is a technical body within the indigenous community organization in Peru. The Veeduria is designed to strengthen existing community mechanisms that have been established to ensure the wellbeing of the community, protect their land rights, and manage their forest resources. The Veeduria is an innovative development initiative to develop traditional forest management by building capacity and empowering members of the communities to protect their forest resources from external parties and prevent forest degradation. The focus of the Veeduria is to provide technical assistance to indigenous communities. In Peru, most of the communities transfer their permits to third or intermediary parties, which often misuse the resource and sell the products illegally. As a result, almost 100 percent of the communities that transfer the permits are fined. Intermediaries, or third parties, take advantage of the lack of commitment from the communities to manage their forest resources responsibly because they do not have the knowledge or capacity to manage their resources. Through the process, the Veedurias are beginning to monitor and control the permitting process. Without the Veedurias, the management plans are managed by third parties using false or unrealistic information. As a result, the forests are mismanaged and when the authorities show up, the people in the community are penalized for the mismanagement. The Veedurias promove the good management of the forests by the communities, and they prevent the use of third parties which are the ones involved in the trade of illegal forest products. Ruth Noguern (Forest Legality Alliance) The Forest Legality Alliance (FLA) is an initiative managed by the World Resources Institute (WRI), EIA and USAID. The FLA seeks to work with different actors along the different steps of the supply chains.

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The FLA is a response to the market demands of legal forest products. The mission of the Alliance is to support the demand of legal forest products, and work with stakeholders along the supply chains to meet this demand. The Alliance has approximately 80 members from places like the U.S., Canada, Asia, Europe, and also Mexico. Members include NGOs, private companies such as Taylor Guitars, and trade associations. The Alliance provides and share information to help importers asses the risk of sourcing illegal forest products, and to help companies improve their sourcing practices. The FLA is working on various case studies with members like Taylor Guitars in Honduras, IKEA in China to document their supply chain control systems, and a Brazilian flooring company that produces FSC-certified hardwood floors that are exported to the U.S. The Alliance launched also an Internet tool where there is context information about the legal framework in various countries, CITES protected timber species. The Alliance also provides information about the Lacey Act requirements in terms of the declaration requirement. Eduardo Jr. Arenas (Reforestamos Mexico) As a country, we need the government to recognize the value of the forests. Without a legal framework, the forests have no future. In collaboration with TRAFFIC and IUCN, Reforestamos Mexico is developing an initiative that seeks to build the understanding about the legality in Mexico, and the entry points for legal reform in the country. In this sense, Mexico is a very complex country and the market is little regulated. The initiative seeks to build a general understanding among different stakeholders in the sector, and define the components of a legality definition. TRAFFIC developed nine criteria that seek to help define and assess legality; these criteria are the basis of the consultation process that Reforestamos Mexico is considering. Reforestamos Mexico is involved in this process because the organization is interested in opening spaces to discuss legality and governance and promote and increased participation of different stakeholders in the sector. Didier Devers We need to work with all stakeholders in the public sector, not only actors involved in the forest sector (e.g. involving customs, transportation, justice, etc). The FLEGT Plan has various entry points for the European Union to engage with producing countries. Engagement is through a dialogue focused on legality, and based on the respect of the countries sovereignty. It is important to remember that all legality-focused initiatives, which by the way relate to governance, seek to promote international trade. Within the FLEGT process, all relevant stakeholders define what legal wood is, according to the national legal framework. This is the first phase. Next is to define a traceability system, and then comes implementation and control. 28

Daniel Arancibia (WWF-GFTN) GFTN is a WWF program that began in 1991. The program is focused on green procurement management practices, and trade of green products. To enable a supply of sustainably produced products, we should promote the legality of the products. This is the starting point. GFTN promotes these principles in Peru, Brazil, Colombia, Panama and Bolivia. In Bolivia, almost all forest companies are certified under FSC. It is critical to involve all stakeholders and promote alliances along the supply chain, from producers to consumers. Closing remarks: Establish dialogues, focused on legality, between Mexico and the European Union The government, being the main timber buyer in Mexico, should promote the purchase of products that are legal and responsibly produced. Promote the identification of local supply chains. Systematize purchasing commitments and identify strategic areas of interest. Establish collaborations between groups like SEMARNAT and IUCN to conduct research and better implement purchasing commitments. Continue the discussions on forest governance, and promote that each stakeholder takes their responsibility in promoting better governance and sustainability.

Fig. 13. Event closing, Ernesto Herrera 29

APPENDIX 1 OTHER RESOURCES

An Inside Look At Latin Americas Illegal Logging Part One http://insights.wri.org/news/2012/09/inside-look-latin-americas-illegal-logging--part- one#fn:1 An Inside Look at Latin Americas Ilegal Logging Part two http://insights.wri.org/news/2012/09/inside-look-latin-americas-illegal-logging--part-two Perspectivas sobre la Tala Ilegal en Amrica Latina Parte I http://www.reforestamosmexico.org/blog/general/foro-de-legalidad-forestal Perspectivas sobre la Tala Ilegal en Amrica Latina Parte II http://www.reforestamosmexico.org/blog/general/perspectivas-sobre-la-tala-ilegal-en- america-latina-parte-iii Event presentations http://www.forestlegality.org/content/mexico-meeting

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ANEXO 2 EVENT AGENDA

Legal Forest Products and International Trade: A Regional Perspective. August 9 10, 2012 Centro Cultural Casa Lamm, Mxico City, Mxico

August 9th 8:00 8:30 Registration 8:00 - 9:30 Breakfast and Welcoming Remarks (Alicia Grimes, Ernesto Herrera, Adam Grant) 9:30 - 10:30 Forest Legality in Latin America: An Overview An overview of inter-regional trade of forest products, movement towards legality, and impacts in the region. Participants: Intro and moderator: Alicia Grimes (USAID) Regional overview: Guillermo Navarro (EARTH University) Regional trade: A mexican perspective, Ernesto Herrera (Reforestamos Mxico)

10:30 - 11:00 Coffee Break 11:00 - 1:00 Forest Legality and Trade in Latin America: Select Countries Experts from Mexico, Guatemala, Honduras, Colombia and Peru will provide an overview of the harvest and trade of forest products in their respective countries and the corresponding economic and ecological impacts. Participants: Moderator: Victor Lleras, Utz Che Mexico: Sergio Madrid, Consejo Civil Mexicano para la Silvicultura Sostenible Guatemala: Yuri Melini, CALAS Colombia: William Braham, Instituto de Investigaciones Ambientales del Pacifico Peru: Julia Urrunaga, Environmental Investigation Agency Honduras: Ramn Alvarez; AMADHO

1:00 - 2:00 Lunch 31

2:00 - 3:45 Small Forest Enterprises and the Timber Trade Forest community leaders from Mexico, Guatemala, Honduras, Colombia and Peru will discuss their efforts to sustainably manage forest resources, comply with national and international regulations, and challenges to market access while remaining financially viable. Participants: Moderator: Arturo Santos, IUCN Mexico: Gustavo Snchez, Red MOCAF Guatemala: Julio Escalante, Empresa Comunitaria de Servicios del Bosque (FORESCOM) Colombia: Jhuver Gonzalez Rivear; Representante Legal, Los Delfines Peru: Juan Tapayuri CORPI, Alto Amazonas, Per Honduras: Melvin Cruz, Fundacin Madera Verde

3:45 - 4:15 Coffee Break

4:15 - 5:30 Implications & Perspectives from Mexican Forestry Sector

Participants:

Moderator: Tania Mijares, Realidad Climtica Mxico Ejidos La Ciudad, San Pablo y Vencedores: Alma Lili Mena Cmara de la Industria Maderera: Jos Cibrin Tovar, CONAFOR-PNUD-GEF: Juan Manuel Barrera, CONAFOR: Ignacio Antonio Gonzalez Hernandez,

5:30-6:30 Cocktail August 10th 8:00 8:30 Registration 8:00 - 9:30 Breakfast and Regional Trade Issues (Recap), Filippo del Gatto 9:30 - 11:00 Emerging Global Legislation affecting trade in wood products The Lacey Act and European Union Timber Regulation both prohibit the import of illegal sourced forest products. Panelist will discuss these laws and their impacts at home and abroad. Participants: 32

Moderator: Mauricio Limn, Undersecretary for Environmental Protection Management, SEMARNAT U.S. Policies on Combating Illegal Logging and Associated Trade, and the U.S. Lacey Act: Gary Lougee APHIS, David Olivier USTR Implications of the U.S. Lacey Act: Tom Bewick, EIA. Timber Trade Regulation: Didier Devers, EFI

11:00 - 11:30 Coffee Break 11:30 - 1:00 International Buyers Perspectives Examples of companies addressing the demand for legal products Participants:

Moderator: Ernesto Herrera, Reforestamos Mexico Taylor Guitars: Chris Cosgrove International Wood Products Association (IWPA): Ashley Amidon Masisa Mxico: Leo Schlesinger

1:00 - 2:00 Lunch 2:00 3:00 Technology Tools to Promote the Trade of Legal Wood Products Available and upcoming technologies for wood identification and tracking Participants:

Moderator: Victor Lopez Illescas, Utz Che Wood ID: Shelley Gardner, USFS Helveta: Philip Briscoe, Barcoding and computer systems tracking Double Helix: Darren Thomas, DNA tracing

3:00 - 3:30 Coffee Break 3:30 - 4:30 Stakeholder Initiatives to Promote Trade of Legal Wood Products Initiatives to support the trade of forest products of legal origin Participants:

Moderator: Tom Bewick Veeduria, Per: Juan Tapayuri Forest Legality Alliance: Ruth Nogueron 33

Forest Legality Framework TRAFFIC- for Mexico: Eduardo Jr. Arenas, Reforestamos Mxico FLEGT, Didier Devers, EFI WWF-GFTN: Daniel Arancibia

4:30 Thank you and Closing

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