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ClientEarth Communications

24 June 2022

EUTR
EUTR Newsletter
Forests
Forests & trade

EUTR Newsletter March 2022- May 2022

This issue of the quarterly EUTR News provides an update on the operation of EU law to address illegal logging and the EU Timber Regulation (EUTR) in the period of March to May 2022. In line with our previous editions, this issue will include:

  1. Information on what both the European Commission and EU Member States are doing to ensure the proper application of the EUTR and updates on similar international legislation.
  2. Resources and publications concerning the EUTR and other issues related to timber trade.
  3. A short analysis section where we in ClientEarth identify an important and topical EUTR-related issue and provide a brief legal analysis of it for your information. In this edition of the Newsletter, we focus on the issue of conflict timber.

If you have any updates to share that we could include in the next newsletter, any queries regarding the EUTR implementation or enforcement that you would like us to address in the next release, or if you would like to receive this newsletter by email, please contact us at:

forests-contact@clientearth.org

1. Recent developments – EU and Member States

Eighth and ninth meeting of the Multi-Stakeholder Platform on Protecting and Restoring the World’s Forests (EUTR and the FLEGT Regulation focus)

On the 16th of March, 2022, the Commission’s Multi-Stakeholder Platform on Protecting and Restoring the World’s Forests held its eighth meeting and focused on the EUTR and the FLEGT Regulation. The discussion, in which only Member States participated and not other stakeholders, concentrated on the situation regarding timber and timber products originating from Belarus and Russia. The Member States’ representatives concluded that – due to the ban on the export of certain timber products covered by the EUTR enacted by the Russian Federation in early March 2022 – any products imported into the EU from Russia that are covered by this ban will be considered illegal if placed on the EU market. The same applies to a number of timber supplies from Belarus, which fall under the sanctions adopted by the Council of the EU around the same time. See the summary of the meeting here.

On the 29th of April, 2022, the Platform held its ninth meeting and continued discussing the situation regarding Belarussian and Russian timber. Under the present circumstances, timber products that are not covered by either Russia’s ban or the EU sanctions were viewed as being unverifiable and operators were instructed to refrain from placing on the EU market all timber harvested in the Russian Federation and Belarus and timber products derived therefrom. On the other hand, the import of Ukrainian timber compliant with the EUTR was concluded to be possible (although high-risk), unless they originate in the non-government controlled areas of the Ukrainian territory (Donetsk and Luhansk oblasts) or other areas of active military hostilities. Additionally, the Platform confirmed the illegality of Myanmar teak imports to the EU after the 21st of June, 2021. See the summary of the meeting here.

Fifth round of EU sanctions on timber from Russia

On the 8th of April, 2022, the Council of the EU has approved a new set of sanctions against the Russian Federation for its invasion of Ukraine, with the practical consequence of banning the import into the EU of most of the timber and timber products covered by the EUTR. For more information, see the press release of the Council of the EU here.

Police raid against German company trading in illegal Myanmar timber

On the 22nd of April, 2022, the German police and customs raided the private villa of Stefan Bühric – the former director of WOB Timber, a company that was found to be trading in illicit timber in circumvention of the EUTR and sentenced by the Regional Court in Hamburg in April 2021. The authorities seized a total of 111 m3 of Myanmar teak worth more than €1 million and the company assets worth €1.7 million, reported Environmental Investigation Agency (EIA). See the details of the case here.

The Commission’s guidance document on conflict timber updated

In May 2022, the Commission published an updated version of the guidance document regarding timber originating from conflict areas – Consideration of prevalence of armed conflict and sanctions in Due Diligence Systems. When identifying conflict-affected and high-risk areas, the document now suggests referring to the Fragile States Index (FSI), instructing that countries ranking above 110 in the FSI should always be considered as countries where armed conflict was prevalent.

The Commission’s Briefing Note on the EUTR and on sourcing of deforestation-free commodities

In May 2022, the Commission published the latest Briefing Note, produced by UNEP-WCMC, on the implementation and enforcement of the EUTR and on sourcing of deforestation-free commodities (covering October 2021 to April 2022 . The Note includes i.a. an overview of the latest enforcement actions of the competent authorities in Hungary, Spain and Sweden. See the previous Briefing Notes here.

2. Publications and resources

Continued logging in Romania’s protected forests

In February 2022, Agent Green, ClientEarth and EuroNatur published a report summarising an investigation into habitat degradation in Făgăraș, Domogled, Maramureș and Frumoasa Natura 2000 sites. The investigation found that large-scale habitat degradation in Romania’s forests has continued, despite the infringement proceedings launched by the Commission in early 2020. See the report here.

Trade association calls for printed products to be included in the scope of the new EU Regulation on deforestation-free products

In February 2022, Integraf - the European Federation for Print and Digital Communication published a position paper calling on the Commission to extend the scope of the Commision’s Proposal for the new EU regulation on deforestation-free products (which will repeal the EUTR) to printed products. See the position paper here.

Report on the impact of international sanctions on Myanmar's timber trade

In March 2022, Forest Trends published a report on the impact of international sanctions targeting Myanmar Timber Enterprise – the state-owned company that monopolizes the trade of timber in Myanmar. The authors concluded that – despite the sanctions having the consequence of a factual ban on any trade in Myanmar timber – imports have continued or even increased. See the report here.

Earthsight’s call on a “name and shame” list of non-compliant businesses

On the 30th of March, 2022, Earthsight published a policy briefing calling for the establishment of a mandatory public list of non-compliant businesses in the Commision’s Proposal for the new EU regulation on deforestation-free products (which will repeal the EUTR). The authors argue that such a list would provide a major incentive for companies to comply with the law. See the briefing here.

ClientEarth’s briefing on the traceability requirements in the Commission’s proposal for a regulation on deforestation-free products

On the 3rd of June, 2022, ClientEarth published a new briefing on the current debate regarding traceability requirements in the Commission's proposal for a regulation on deforestation-free products. The briefing explains the traceability requirements in the Commission’s proposal, responds to concerns raised by industry stakeholders, and reiterates why supply chain traceability is essential to minimising the EU’s contribution to global deforestation. See the briefing here.

3. ClientEarth’s analysis: Conflict timber & sanctions

In this section of our Newsletter, we provide an analysis of an EUTR-related implementation issue in each edition. For this edition of our Newsletter, we look into the issue of conflict timber.

Please note that the content of the following analysis represents the views of ClientEarth only. It does not reflect the views of the European Commission, nor any other official entity or organisation mentioned therein, and does not constitute legal advice.

Illegal timber and armed conflicts

The practice of illegal logging is often based on or linked to a variety of different types of wrongdoings: from logging without or in excess of relevant permits and within protected areas to white-collar fraud (such as tax evasion, timber laundering and bribery) and human rights abuses of indigenous people and local communities. The possibility of these wrongdoings occuring forms a particular concern in conflict-affected and post-conflict countries, where weak institutions and weak environmental governance  let deforestation proliferate. For leaders and groups in control of forest-rich areas, forests have the potential to constitute an easy source to finance military operations through timber trade. In countries like Myanmar, home to some of the most valuable species of teak on Earth, the exploitation of forests provides funds for the military regime and thereby contributes to further erosion of the rule of law and to serious human rights violations in the country.


How does the EUTR deal with the prevalence of armed conflict?

The issue of timber being sourced in conflict-affected areas has been acknowledged in the EUTR. While the criteria guiding the due diligence process on timber legality that must be conducted by operators are not exhaustively listed, they must include an assessment of the prevalence of illegal harvesting or practices in the country of harvest, “including consideration of the prevalence of armed conflict” (Article 6(1)(b) of the EUTR).

The EUTR does not define “the prevalence of armed conflict”. The Commission recommends to use the definition of “conflict-affected and high-risk areas” set out in Regulation (EU) 2017/821 on conflict minerals, which reads: “Conflict-affected and high-risk areas' means areas in a state of armed conflict or fragile post-conflict as well as areas witnessing weak or non-existent governance and security, such as failed states, and widespread and systematic violations of international law, including human rights abuses”. Where timber is found to be harvested, processed or manufactured in such areas, this affects the legality of the timber and would likely lead to the impossibility to carry out an appropriate due diligence assessment, and thus, incompliance with Article 4(2) in accordance with Article 6(1) of the EUTR. This could also lead to a breach of Article 4(1) of the EUTR which prohibits placing on the EU market of illegally harvested timber or timber products.

In the process of identifying conflict-affected or high-risk areas, the Commission suggests referring to the Fragile States Index (FSI) – an annual report published by the US-based think tank Fund for Peace. It further instructs that all countries ranking above 110 in FSI should always be considered as countries with a prevalence of armed conflict, while countries below 110 in FSI should be assessed on a case-by-case basis. The FSI is not, however, an ultimate determinant, as it is revised once a year. The validity of the data must be always verified with the use of latest news and other resources, such as from foreign affairs offices and civil society organisations.


How does the EUTR deal with sanctions on timber imports or exports?

Carrying out an appropriate risk assessment must also include an assessment of any sanctions imposed by the Council of the European Union, either specific to timber imports or exports (Article 6(1)(b) of the EUTR), or other types of sanctions. In other words, if such sanctions are in force – which happens relatively often in case of armed conflicts or other wrongdoings at national level, this affects the legality of the import or export of timber. Imports into the EU of timber or timber products from a country that is subject to sanctions are likely to entail a breach of Article 4(1) of the EUTR, which prohibits placing on the EU market of illegally harvested timber or timber products.

According to the Commission, while sanctions may not specifically be aimed at “timber imports or exports” (as specified in the EUTR), shipments of timber and timber products may be linked to entities (i.a. logging, processing, or exporting companies) or individuals (i.a. beneficial owners of related companies, managers and employees, or contractors) that are themselves subject to sanctions. As an example, sanctions against Myanmar imposed by the Council of the EU do not expressly cover timber. However, the timber trade of this country is monopolised by a state-owned company – Myanmar Timber Enterprise, which is an entity subject to the Council’s restrictive measures. Consequently, imports of timber from Myanmar fall under the sanctions against Myanmar Timber Enterprise.

Currently, sanctions on timber imposed by the EU concern Belarus, Myanmar and Russia, and in case of sanctions imposed by the UN – North Korea. To learn more about the sanctions imposed on Belarus and Russia, see the section EU developments – EU and Member States above.

The case of Myanmar teak - does the EU ban serve its purpose?

On the 1st of February, 2021, the Myanmar military led a coup against the government and seized power in the country. In response to the coup, in 21 June 2021, the Council of the EU has introduced a set of sanctions to curb the funding streams of the junta through revenues from i.a. the forestry sector. This decision confirmed the common position taken by the EU in 2020, when the EU Member States agreed that the risk that  timber from Myanmar had been illegally harvested was to be considered non-negligible and could not be mitigated.

As of now, the situation is clear: the Commission recently acknowledged that the sanctions imposed on the Myanmar Timber Enterprise and other individuals and entities following the military coup mean that it is de facto illegal to import timber or timber products into the EU originating from Myanmar after the 21st of June, 2021. However, data shows that teak imports from Myanmar to the EU have been growing despite the sanctions. While a small number of competent authorities have undertaken enforcement actions to halt this trend (i.a. the Netherlands and Germany), some EU Member States have significantly increased their imports of Myanmar teak (Austria, Belgium, France, the Netherlands and Poland). As a result, in terms of quantity, there has been an almost uninterrupted flow of timber from Myanmar into the EU despite the Council’s sanctions and the ‘common position’ agreed by the Commission and EU Member States that should prevent such trade.

The new EU anti-deforestation law should help prohibit conflict timber from accessing the EU market

The Commission's current proposal for a regulation on deforestation-free products opens the door to strengthen the legal framework against illegal timber being placed on the EU market, including the volumes harvested in areas prone to conflicts and misgovernment. One of the many improvements this proposal intends to introduce, based on evidence of weaknesses in the implementation of the EUTR, is to clarify and reinforce the role of competent authorities. This is proposed to be done through i.a. assigning new and clearer responsibilities to national authorities  (such as requiring authorities to undertake higher numbers of obligatory checks and enforcement measures to be taken when non-compliance is identified), and granting them new operational powers (such as the right to perform unscheduled checks without notifying the operator).

These additional measures – if they are agreed upon by the European Parliament and Council in the EU law-making process – would strengthen the ability of competent authorities to reliably check companies trading in forest-risk commodities (including timber) and would subsequently increase the probability of effective prosecution of cases of illegal logging. Eventually, this would ensure better implementation and enforcement of the EU’s legal framework applicable to timber and other forest-risk commodities covered by the new law.

If you seek a more detailed analysis of the Commission’s Proposal, please see the following ClientEarth’s briefings:

- The proposed EU law on deforestation-free products: what does it include and what is left out?

- The proposed EU law on deforestation-free products: how does it compare to the EUTR framework?

- Getting to “deforestation-free”: clarifying the traceability requirements in the proposed EU deforestation regulation

Picture credits to Ernesta Vala via Unslash