Indonesia’s Ministry of Trade has passed a new Regulation that rubber-stamps a vast range of timber products as being ‘legal’ – but without performing any checks on them.

The rule changes come in Trade Minister Regulation No 89/M-DAG/PER/10/2015, passed last month, which exempts 15 major groups of timber products from Indonesia’s timber legality verification system.

The Ministry of Trade exemptions have been vociferously opposed by Indonesia’s Ministry of Environment and Forestry, which rightly sees its efforts to improve the lamentable governance of the country’s forest and timber sectorm coming under attack.

Concern is all the greater as illegal logging is one of the major factors driving this year’s catastrophic forest fires which are estimated to be emitting more carbon dioxide than the entire US economy – while also wiping out millions of hectares of precious, biodiverse rainforest.

Move may scupper EU-Indonesia timber agreement

Under Indonesia’s Sistem Verifikasi Legalitas Kayu (SVLK), all wood products exporters’ operations must be audited for compliance against a legality standard covering raw material inputs and factory or trade practices.

Positive audit results are rewarded with so-called VLK certificates enabling them to acquire a ‘V-Legal document’, an export license legally required to export wood products.

While this system applies to exports to all markets, it is also the foundation of a long-negotiated Voluntary Partnership Agreement (VPA) between Indonesia and the EU intended to guarantee that all Indonesian timber imported to the EU is legal in origin.

But the new Regulation undermines that principle, permanently exempting all exporters of 15 wood product customs codes (HS Codes) from the requirement to undergo SVLK audits, while maintaining their ability to export.

Exempted companies – many of which have multi-million dollar exports – must still use SVLK certified wood but no checks that they do so will be required, providing significant opportunities for laundering uncertified or illegal wood into supply chains.

This has prompted the EU’s Ambassador to Indonesia to raise concerns in an October 23rd letter to the Trade Minister. If the problem is not resolved it could delay or sabotage the VPA, or cause imports of the affected products to be blocked.

“The Trade Minister Regulation introduces structural inconsistencies in Indonesia’s long-term efforts to improve forest governance through implementation of the SVLK and threatens the proposed scope and timeframe for the implementation of the Indonesia-EU Voluntary Partnership Agreement (VPA)”, stated Zainuri Hasyim, National Coordinator of Indonesia’s Independent Forest Monitoring Network (JPIK)

Corruption in high places coud derail flagship agreement

Faith Doherty, Forest Campaign Team Leader for the Environmental Investigation Agency, commented: “The Trade Ministry Regulation introduces an eleventh-hour back door exemption for an elite group of companies with friends in high places. It violates the aims and mechanisms underpinning both the SVLK and the VPA.

“The consequence is that either the VPA must be re-negotiated, the SVLK licensing system must be re-designed or the exempted companies are structurally blocked from accessing the EU market. This bad regulation – ironically produced to hasten de-regulation – needs to be ammended immediately.”

The Indonesian Government is planning to announce VPA implementation as a headline offering at the UN climate change talks in Paris in December. Once the VPA is activated, timber products without associated V-Legal documents will be rejected at EU ports, and cannot be sold on the EU market.

Similarly, products accompanies by V-Legal documents will also be exempted from the EU Timber Regulation (EUTR), which prohibits illegal wood in the EU and requires EU companies to conduct due diligence on wood products purchases.

However the EU is likely to delay implementation of the VPA until the new Regulation is withdrawn – and if it does not, it will come under strong criticism for agreeing to an ineffective measure that will merely greenwash illegal timber imports. Such a decision could also be subject to legal challenge in the European Court.

The Voluntary Partnership Agreement (VPA) is a major component of the 2003 EU Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan. The Indonesia-EU VPA and has been negotiated by the Government of Indonesia and the European Union since 2007,  was signed on September 30, 2013 and ratified by both parties in 2014. 

Source: Environmental Investigation Agency.