International Trade Requirements

Sustainability and legality of the timber trade are issues of international concern, and are estimated to cost timber producing countries as much as US$17-25 billion per annum in lost revenue. Malaysia is actively involved in numerous international forums, such as the FAO, the ITTO, the UN Forum on Forests and Convention on International Trade on Endangered Species (CITES) to promote not just Malaysian interests but also those of other tropical timber producing countries. Malaysia’s stand has always been that legislative efforts must never be used as a non-tariff barrier to restrict the imports of tropical timber products into environmentally-sensitive markets, and that implementation of such efforts must take into account developing countries’ level of development and the right to optimise the use of its natural resources.

The European Union Forest Law Enforcement, Governance and Trade (EU-FLEGT)
The EU market is one of Malaysia’s high-value export markets for timber products. Malaysia was one of the first countries to start negotiating a Voluntary Partnership Agreement (VPA) with the EU and negotiations are currently ongoing.

The EU-FLEGT VPA is a mechanism to combat illegal logging and facilitate trade in legal timber. The VPA under the FLEGT is an action plan signed between wood producing countries and the EU. It aims to ensure that wood being sold in the EU is legal. Malaysia is supportive of this EU initiative and is in the final stages of negotiation to conclude a FLEGT VPA.

Whilst the EU-FLEGT VPA is being finalised, Malaysia has come up with an interim measure called the Malaysian Timber Legality Assurance Scheme (MYTLAS) in order to help Malaysian companies comply with the importing criteria stipulated by the EU Timber Regulation (EUTR), which came into force on 3 March 2013.
EU Timber Regulation (EUTR)
The EU Timber Regulation (EUTR) is part of the European Union's policy to fight illegal logging and associated trade which was defined in 2003 under the Forest Law Enforcement Governance and Trade (FLEGT) Action Plan.

Enforcement and Products Covered
Since 3 March 2013, the EU Timber Regulation prohibits the first placing of illegally harvested timber and products produced from such timber on the EU market. The Regulation obliges operators on the EU market to have systems in place that assure the timber is from legal origin. The definition of legal timber is based on the law of the country of harvest. The Regulation covers a large range of timber products including furniture, pulp and paper, logs and sawntimber.

How It Works
Operators who are placing timber or timber products on the EU market for the first time must exercise “due diligence”; the Regulation applies to timber harvested within the EU or imported, and to imported timber products. The “due diligence” places the onus on operators to undertake a risk assessment and risk management exercise so as to minimise the risk of placing illegally harvested timber, or products containing illegally harvested timber on the EU market. This means that they need to have access to information on, among others, their suppliers, the tree species and the timber’s country of harvest. All these are steps to ensure that their supply contains only legally harvested timber.

Each country is to have an EU-designated competent authority that will be responsible for the enforcement of the Regulation. Countries in the EU will also determine the type and range of penalties that will apply in case of non-compliance with the Regulation.

The Regulation provides for Monitoring Organisations to be recognised by the European Commission. These organisations are private entities, and will provide EU operators with due diligence systems that are ready to use. Operators can thus develop their own system or use one developed by a monitoring organisation.
Malaysian Timber Legality Assurance Scheme

Malaysia is supportive of the global initiatives in combatting illegal logging and trade of illegal timber. In support of the EU Timber Regulation (EUTR) and pending the conclusion of the EU FLEGT VPA negotiation, Malaysia commenced implementation of the Peninsular Malaysia Timber Legality Assurance Scheme [MYTLAS (Peninsular Malaysia)] and Sabah TLAS to assure the legality of its timber and timber products exported to the EU. Similarly, Sarawak has also implemented its Sarawak Timber Legality Verification System (STLVS) to strengthen the traceability of its legal timber production supply chain.

This PDF booklet contains information on the scope of MYTLAS, its control procedures, institutional arrangements and its implementation in Peninsular Malaysia. Malaysia is confident that MYTLAS meets the requirements of the due diligence procedure under the EU Timber Regulation (EUTR).
U.S. Lacey Act
The Lacey Act is a U.S. law originally passed in 1900 to protect wildlife from trafficking. In 2008 it was amended to include plant products, making it the world's first ban on the trade of illegally sourced wood products. Under the amended Act, it is unlawful to import, export, transport, sell, receive, acquire or purchase, in interstate or foreign commerce, any plant taken or traded in violation of the laws of the United States, a U.S. state, tribal territories, or foreign countries.

The Lacey Act covers the entire supply chain for timber and timber products. Illegal activity at any point means that the product may not be legally traded in the United States. All parties are equally liable under the law, not just the first placed into the U.S. market.

The ban on trade in illegally sourced wood products applies to all products, except for certain scientific specimens and food crops, and has been in effect since the law was amended in 2008. It includes common products such as raw logs, sawntimber, plywood, composite materials, furniture, pulp, paper and musical instruments. The updated schedule is available from the Animal and Plant Health Inspection Service (APHIS), the U.S. agency that implements the Lacey Act.

What is considered 'illegal' under the Lacey Act?
There are two parts to a Lacey Act violation:

First, an underlying law must be violated. There are only six specific types of laws which, if violated, mean that the resulting product is illegally sourced. They concern forestry, taxes, and export. Other activities which may be illegal in the country of origin (e.g. labour violations) are not covered by the Lacey Act. The six categories are:
  1. Theft of plants
  2. Taking plants from an officially protected area such as a park or reserve
  3. Taking plants from other types of "officially designated areas" recognized by a country's laws and regulations, such as a designated community forest
  4. Taking plants without, or contrary to, required authorization, including cutting without permits for the area or species harvested
  5. Failing to pay appropriate royalties, taxes, or fees associated with the harvest, transport, or commerce of plants, including not paying stumpage fees or paying appropriate taxes
  6. Violating laws concerning export or trans-shipment, such as exporting logs from a country with a log-export ban
Second, the resulting product must be traded to or within the United States. This second transaction may trigger a Lacey Act Violation.

Although the law is complex, it boils down to four basic requirements:
  1. Do not deal in illegal wood;
  2. Employ due care in the import and buying process;
  3. File the mandatory import declaration with every shipment of wood products imported to the U.S.; and
  4. Do not knowingly mis‐label products or make false statements on the import declaration.
The Lacey Act is violated when someone trades illegally-sourced wood or products in U.S. interstate or foreign commerce.

How do Malaysian companies comply with the Lacey Act?
Malaysia is a manufacturing hub of raw wood materials, whether locally-sourced or imported from other countries. Malaysian companies whose main export market is the US usually source for certified timber (whether PEFC- or FSC-certified) or legally-extracted timber raw materials, to feed into their production line.

With Malaysia's own Malaysian Timber Certification Scheme (MTCS), which is PEFC-endorsed, it is easy enough to source for certified timber from sustainably managed forest. For further information on the MTCS, please click here.
Australian Illegal Logging Prohibition Act 2012
Australia's Illegal Logging Prohibition Act 2012 (AILPA), is designed to promote the trade in legally harvested timber and timber products in Australia. The legislation restricts the movement of illegally logged timber into Australia and comes in two parts – primary legislation, followed by detailed regulations.

The legislation promotes trade in legally harvested timber by restricting the importation of illegally logged timber and forms part of international efforts to do so.

The Act defines illegally logged as: "in relation to timber, means harvested in contravention of laws in force in the place (whether or not in Australia) where the timber was harvested."

Timber that has been harvested in accordance with the legislative regime of the relevant country would be considered to be legally logged.

This legislation:
  • only places requirements on Australian businesses; establishes equal treatment for suppliers of timber regardless of nationality;
  • applies equally to both Australian-grown and imported timber; and
  • is consistent with Australia's obligations under the World Trade Organization.
The Act asserts a high-level prohibition on importing or processing illegally logged timber. In order to prosecute someone against this prohibition, it will need to be proven that an Australian importer or processor knowingly, intentionally or recklessly imported or processes illegally logged timber.

Within two years of the commencement of the legislation, the regulations will outline the due diligence process for importers and processors of domestic timber regarding certain timber products. Regulated timber may include raw and sawntimber, paper, pulp and furniture. Due diligence requirements will vary according to the product.

So far, Malaysian companies have had no problems complying with the AILPA.