1 Japan’s Public Timber Procurement Policy Dr. Federico Lopez-Casero Forest Conservation Project Institute for Global Environmental Strategies (IGES) Round-table Forum on Trade of Legal and Sustainable Wood in China Beijing, 26 April 2007

2 Overview 1.Japan’s role in timber trade 2.Japan’s response to illegal wood imports 3.Framework of timber procurement policy 4.Legal and policy context of PPP reform 5.Reform of timber procurement policy 6.Definitions and verification modalities 7.Policy implementation: a) Domestic; b) Imported timber 8.Preliminary observations: a) Certification / legality verification schemes and b) Actors 9.What does this mean for China?

3 1. Japan’s role in timber trade Japan’s total wood demand is about 89 million m 3 p.a.: Roughly 80% are imported → World’s 3 rd largest importerJapan’s total wood demand is about 89 million m 3 p.a.: Roughly 80% are imported → World’s 3 rd largest importer Largest importer of tropical plywood (4.6 million m 3 in 2005)Largest importer of tropical plywood (4.6 million m 3 in 2005) Source: ITTO (2006)

4 2. Japan’s response to illegal wood imports Since the G8 Summit in 2002, Japan has repeatedly expressed its commitment to tackle illegal loggingSince the G8 Summit in 2002, Japan has repeatedly expressed its commitment to tackle illegal logging “We will not use timber that has been produced illegally” (Forestry Agency )“We will not use timber that has been produced illegally” (Forestry Agency ) Government stresses financial/administrative support to international organisations and producer countriesGovernment stresses financial/administrative support to international organisations and producer countries Low engagement of private sector prior to PPP reform:Low engagement of private sector prior to PPP reform: – Only 12% of 115 firms claimed to make any effort to assess the legality of the procured timber (survey by JFWIA) Potential of PPP to represent “hard” policy option:Potential of PPP to represent “hard” policy option: – Public sector: 3% of total wood procurement （ estimated) – May prompt a response from the private sector

5 3. Framework of timber procurement policy Green Purchasing Law Basic Policy Guideline 3 Verification Modalities Forest certification/ CoC (2) Accreditation under industry associations (3) Company’s own procedure For specified items, refers to For wood products, refers to Specifies Associations’ or companies’ codes of conduct Certification schemes Based on

6 4. Legal and policy context of PPP reform “Green Purchasing Law”: Law Concerning the Promotion of Procurement of Eco- Friendly Goods and Services by the State and Other Entities of 2000 (Law No. 100/2000), enacted January 2001“Green Purchasing Law”: Law Concerning the Promotion of Procurement of Eco- Friendly Goods and Services by the State and Other Entities of 2000 (Law No. 100/2000), enacted January 2001 Basic Policy for the Promotion of Procurement of Eco- Friendly Goods and Services:Basic Policy for the Promotion of Procurement of Eco- Friendly Goods and Services: – Identifies specific items for public procurement – Revised on 1 April 2006 by requiring for timber products: ◦Legality as a “criterion for evaluation” ◦Sustainability as a “factor for consideration” – Refers to Guideline formulated by the Forestry Agency

7 5. Reform of timber procurement policy “Guideline for Verification on Legality and Sustainability of Wood and Wood Products”:“Guideline for Verification on Legality and Sustainability of Wood and Wood Products”: − Prescribes modalities to verify legality and sustainability − Aims to “promote verified products as appropriate items for procurement” of the public sector − Is mandatory for central-level ministries/agencies, Diet, courts and independent administrative institutions, but also addresses local government and administration − Gives the suppliers a lot of leeway when verifying legality − Includes revision process based on multi-stakeholder consultation (exploratory committee)

8 6. Definitions and verification modalities Legality (Criterion for evaluation):Legality (Criterion for evaluation): Timber “should be harvested in legal manner consistent with procedures in the forest laws of timber producing countries”Timber “should be harvested in legal manner consistent with procedures in the forest laws of timber producing countries” Sustainability (Factor for consideration):Sustainability (Factor for consideration): “should be harvested from the forest under sustainable management”“should be harvested from the forest under sustainable management” 3 different modalities for verification:3 different modalities for verification: 1.Forest certification / chain of custody 2.Procedures established by codes of conduct of wood industry associations 3.Self-established procedures of individual companies

9 (1) Verification through forest certification Wood products certified under a national or international forest certification schemeWood products certified under a national or international forest certification scheme Accepted schemes include:Accepted schemes include: −Local scheme: Sustainable Green Ecosystem Council (SGEC) −Overseas schemes: FSC, SFI, CSA, PEFC, LEI, MTCC  No justification, no prior assessment Very limited availability of certified timber in Japan/Asia:Very limited availability of certified timber in Japan/Asia: −Less than 1.85 % of total forest area in Japan (461,000 ha) in 2005 −Less than 1% of natural production forests in Asia

10 (2) Verification under accreditation by wood industry associations Voluntary codes of conduct:Voluntary codes of conduct: −established by wood industry associations −regulating accreditation of manufacturers and suppliers of verified wood and wood products −mandatory for members (incl. monitoring & penalisation) Leading role of the Japan Federation of Wood Industry Associations (JFWIA) as umbrella organisation:Leading role of the Japan Federation of Wood Industry Associations (JFWIA) as umbrella organisation: Established code of conduct in March 2006Established code of conduct in March 2006 Has served as a template for most other associationsHas served as a template for most other associations Exception: The Japan Lumber Importers’ Association (JLIA) formulated their code in November 2005Exception: The Japan Lumber Importers’ Association (JLIA) formulated their code in November 2005

11 (3) Verification through own procedure set up by an individual company Applies mainly to suppliers, which:Applies mainly to suppliers, which: are not members of wood industry associationsare not members of wood industry associations prefer handling timber under own code of conductprefer handling timber under own code of conduct Used by chip/pulp importing/processing businesses under the Japan Paper Association (JPA)Used by chip/pulp importing/processing businesses under the Japan Paper Association (JPA) In principle it works similarly to modality (2)In principle it works similarly to modality (2)

12 7. Policy implementation: a) Domestic timber Association type Codes of conduct Total members Accredited members Ratio of accredited members National timber industry associations 191,8861,03055% e.g.: Japan Lumber Importers’ Association (1)483879% Prefectural/ regional timber industry/ forest owners’ associations 10423,4003,87617% Total12325,2864,90619% Modalities working since October 2006Modalities working since October 2006 Number of involved associations & accredited members (2007/03/16):

13 b) Imported timber  Working groups (researchers) under Exploratory Committee for Measures against Illegal Logging investigating options Major exporter countries Scheme Indonesia BRIK, SKSHH Malaysia Export Declaration, Form 2 Papua New Guinea SGS for now Russia Still being developed between JLIA & partners in Russia China (including re-export of manufactured products) Options presently explored by Working Group Main schemes considered by the government as evidence of legality:

14 c) Flow under modalities (2) and (3) for JLIA members Logging Processing & distribution Delivery Public Procurement Segregated Management: DOCUMENT FLOW: STAGES: Modality (2) Modality (3) Logging notification or other evidence (copy) Notification & log sales contract (copies) Unveri- fiable Verifiable timber Invoice & (or incl.) evidence documentation Invoice, shipping account, received documents & photos Certificate based on evidence from all received documents Not procured by gov. Invoice & (or incl.) evidence documentation Segregated Management as in modality (3)

15 8. Preliminary observations: a) Certification/legality verification schemes Modality (1):Modality (1): Government has no intention to assess certification schemesGovernment has no intention to assess certification schemes Modalities (2) and (3):Modalities (2) and (3): Organised by the private sector in JapanOrganised by the private sector in Japan Key role of industry associations (especially JFWIA)Key role of industry associations (especially JFWIA)  Initial evidence of policy impact: National producers & environmental NGOs see new policy as a chance to enhance demand for domestic timberNational producers & environmental NGOs see new policy as a chance to enhance demand for domestic timber Importers under pressure to demonstrate legality of imported timber, as domestic timber is increasingly favouredImporters under pressure to demonstrate legality of imported timber, as domestic timber is increasingly favoured

16 b) Actors  Main focus on the private sector: Granted wide autonomy to establish their own voluntary codes of conduct for the verification of legalityGranted wide autonomy to establish their own voluntary codes of conduct for the verification of legality Considered trustworthy by the Japanese governmentConsidered trustworthy by the Japanese government  Prominent officials used the argument of the “Japanese way” based on the assumption of “the goodness of human nature” ( 性善説 - theory developed by Mencius [ 孟子 ])  Less focus on the public procurer: Expected to accept provided documentation for legality verification in accordance with one of the modalities Expected to accept provided documentation for legality verification in accordance with one of the modalities No independent government/ 3 rd party verification required No independent government/ 3 rd party verification required No major capacity building efforts or advice intended No major capacity building efforts or advice intended However, public procurer is free to pay a price premium However, public procurer is free to pay a price premium

17 9. What does this mean for China? China and Japan are important timber trade partnersChina and Japan are important timber trade partners However, presently China has no complete timber tracing and monitoring management system in placeHowever, presently China has no complete timber tracing and monitoring management system in place  Impossible to identify or verify the origin of timber  Only two ways China’s timber industry can presently supply public entities in Japan ： − Certified wood products − Enterprise able to provide legality evidence throughout supply chain Need for a timber monitoring system in China: Presently, in close consultation with its Chinese partners, the JFWIA is exploring options to set up a legality verification system for wood products (re)exported from China and procured by public entities in JapanNeed for a timber monitoring system in China: Presently, in close consultation with its Chinese partners, the JFWIA is exploring options to set up a legality verification system for wood products (re)exported from China and procured by public entities in Japan

18 謝謝。 Thank you! Sarawak, Malaysia,