Chapter 1 Illegal Logging Prohibition Bill 2011
Referral of the inquiry
The Illegal Logging Prohibition Bill 2011 (the bill) was referred to the
Joint Standing Committee on Foreign Affairs, Defence and Trade for inquiry on
22 March 2012 by the House of Representatives Selection Committee.
The Selection Committee’s report stated the following reason for
Concern over the international implications of the bill which
have been expressed by Canada, Indonesia, Malaysia, New Zealand and Papua New
Guinea in their submissions to the Senate Rural and Regional Affairs and
Transport Legislation Committee inquiry.
This inquiry is the third parliamentary committee inquiry into the
On 23 March 2011, the Minister for Agriculture, Fisheries and Forestry,
Senator the Hon Joe Ludwig, referred an exposure draft of the bill to the
Senate Rural Affairs and Transport Legislation Committee for inquiry. The
Senate Committee received 31 submissions, conducted one public hearing and
reported on 23 June 2011. The majority report made seven recommendations.
The Government agreed with five recommendations and agreed in principle with
A revised bill was introduced in the House of Representatives by the then
Parliamentary Secretary for Agriculture, Fisheries and Forestry, the Hon Dr
Mike Kelly AM, MP, on 23 November 2011. The Explanatory Memorandum notes that
the bill was redrafted to address the recommendations of the Senate Committee
and subsequent consultation with stakeholders.
On 25 November 2011, the Senate referred the bill to the Senate Rural
and Regional Affairs and Transport Legislation Committee. The Senate Committee
received 22 submissions, conducted one public hearing and reported on 27
February 2012. The majority report recommended that the bill be passed.
Additional comments were made by the Liberal Party, Australian Greens and
Senator Nick Xenophon.
Background information about the development of the bill is outlined in
the Explanatory Memorandum.
Conduct of the inquiry
This inquiry was conducted by the Trade Sub-Committee of the Joint
Standing Committee on Foreign Affairs, Defence and Trade. The Committee
resolved, in light of previous inquiries, that it would focus specifically upon
the reason for referral outlined in the Selection Committee’s report (see
Individuals and organisations were invited to prepare submissions. A
media release was issued on 12 April 2012, and the inquiry was included in the
fortnightly House of Representatives advertisement in the Australian on
18 April 2012. Details of the inquiry were made available on the Committee’s
The Committee also wrote to all submitters to the Senate Rural and
Regional Affairs and Transport Legislation Committee inquiry and to the
Embassies and High Commissions named in the Selection Committee’s
report—Canada, Indonesia, Malaysia, New Zealand and Papua New Guinea, inviting any
The Committee received 22 submissions to the inquiry, which are listed
at Appendix A.
A public hearing was conducted on Wednesday, 9 May 2012 in Canberra. Representatives
of the Governments of Canada, Indonesia, Malaysia, New Zealand and Papua New
Guinea participated in a roundtable style public hearing. The Committee also
heard from Australian Government representatives. Appendix B lists the
witnesses that appeared at the hearing.
Overview of the bill
The objective of the Illegal Logging Prohibition Bill 2011 is to:
... reduce the harmful environmental, social and economic
impacts of illegal logging by restricting the importation and sale of illegally
logged timber products in Australia. The Bill represents a major step by
Australia to prevent the trade of illegal timber products both nationally and
The bill restricts importation and sale of illegally logged timber in
n by prohibiting
importation of all timber products that contain illegally logged timber and
processing of domestically grown raw logs that have been illegally harvested;
n requiring importers
of regulated timber products and processors of raw logs to undertake due
diligence to mitigate the risks of products containing illegally logged timber;
n establishing a
comprehensive monitoring, investigation and enforcement regime to ensure
compliance with all elements of the bill, including the prohibition and due
In his second reading speech, the Parliamentary Secretary explained that
the bill would regulate timber products at two key points of entry onto the
Australian market. First, at the border for imported timber products and
secondly, at timber processing plants where domestically sourced raw logs are
processed for the first time.
The Explanatory Memorandum noted that the bill:
... provides a high-level legislative framework to implement
the government’s policy to combat illegal logging. It provides the Commonwealth
with the authority to develop subordinate legislative instruments, including
regulations, to realise the government’s policy objective...
It also noted that by including the operational elements in subordinate
legislation, the Commonwealth would have a level of flexibility to amend the
regulations to ensure they remain up to date.
Matters that will be covered by the regulations include:
n timber products to be
n due diligence
requirements to mitigate the risk of importing or processing illegally logged
n circumstances under
which a trade description relating to due diligence may be used.
Importers will be required to complete a statement of compliance with
the due diligence requirements of the bill before making a customs import
declaration at the border.
The Parliamentary Secretary indicated that the regulations would be developed
in consultation with key stakeholders. The regulations would be based on a risk
management approach and aligned as closely as possible with other legislative requirements,
such as the United States Lacey Act Amendment 2008 and the EU Timber Regulation,
so as to minimise compliance costs for exporters.
In its joint submission, the Department of Agriculture, Fisheries and
Forestry and Department of Foreign Affairs and Trade argued that the bill is
important in order to:
n promote global trade
in legally logged timber products;
n contribute to an
increase in legal timber production by a larger proportion of overseas timber
n help reduce
deforestation, forest degradation and the harmful environmental, social and
economic impacts of illegal logging; and
n provide greater
certainty for businesses and consumers that timber products sold in Australia
are from legal sources.
The Regulation Impact Statement incorporated into the Explanatory Memorandum
It is generally acknowledged that, as the forestry laws in
developing countries are sufficiently robust to stop illegal logging if they
were adequately enforced, it is not the legal framework that is the problem. A
lack of capacity of governments to enforce those laws or to monitor compliance
with the regulatory regimes applying to forestry has subsequently led to
consumer countries taking action to address the illegal logging problem.
The Government has indicated that, with the exception of timber products
protected under the Convention on International Trade in Endangered Species of
Wild Fauna and Flora, its ability to verify timber legality, other than though
voluntary measures, is limited.
The World Bank estimates that illegal logging as a criminal activity
generates approximately US$10-15 billion annually worldwide.
The majority of participants in the inquiry expressed support for the
intent of the bill. The Uniting Church in
Australia, for example, considered the bill to be consistent with global
efforts to combat illegal logging, moving Australia, in line with the United
States and European Union, towards ‘ending, for what is for the most part, an
organised criminal activity.’ The Papua New Guinea
High Commission also acknowledged Australia’s efforts, noting that international
trade in illegally logged timber:
... causes environmental damage, costs governments billions
of dollars in lost revenue, promotes corruption, undermines the rule of law and
good governance and funds armed conflicts. It also deprives local communities
from direct benefits and retards sustainable development in some countries.
Bunnings Group Limited and Kimberley-Clark Australia pointed out that
they are signatories to the Common Platform on Eliminating Illegal Forest
Products in Australia, which supports action to ban the importation and
trade in illegally procured timber and wood products.
While submitters were broadly supportive of the bill, a number of issues
were raised, primarily relating to the international implications of the bill,
the development of subordinate legislation, and possible impacts of the bill on
timber exporting countries.
Australia’s international trade obligations
Consistency with international agreements
Australia has a number of obligations arising from the World Trade
Organization Agreement and the free trade agreements it has concluded with
countries that supply timber products to Australia.
In its submission, the Department of Agriculture, Fisheries and Forestry
and the Department of Foreign Affairs and Trade (the Departments) addressed the
bill’s compliance with Australia’s international trade obligations, stating
that the bill has been designed to be fully consistent with these obligations. The
Departments went on to say:
The Bill complies with principles and disciplines contained
in Australia’s international trade obligations, including those aimed at
ensuring non-discriminatory treatment of products and those governing approaches
to trade policies which have clear environmental objectives. The Bill meets
these obligations by providing even-handed treatment of suppliers of timber
irrespective of their nationality; incorporating clear environmental
objectives; minimising the administrative burden that importers will face; and,
importantly, having a clear and direct relationship between the environmental
objective of the Bill and the detailed operational provisions.
The question of consistency with Australia’s obligations under various
agreements was raised by several submitters. For example, Mr Alan Oxley,
drawing on a legal opinion, argued that the bill is inconsistent with:
n Australia’s World
Trade Organization obligations;
n the Australia New
Zealand Closer Economic Relations Agreement;
n the South Pacific
Regional Trade and Economic Cooperation Agreement;
n the proposed revised
version of the Pacific Area Closer Economic Co-operation Agreement; and
n the ASEAN-Australia-New
Zealand Free Trade Agreement.
The Papua New Guinea Forest Industries Association also questioned the
bill’s consistency with negotiations for the revised Pacific Agreement on
Closer Economic Relations and the South Pacific Regional Trade and Economic Cooperation
At the hearing, the Committee asked departmental representatives about
the legal advice that has been obtained. The Committee was specifically
interested to clarify opinion that the bill either contravenes, is inconsistent
with or cannot be justified under:
n Articles I.1, III.2,
XI.1, XX(b), XX(d) and XX(g) of the General Agreement on Tariffs and Trade
n Articles 2.1 and 2.2
of the Agreement on Technical Barriers to Trade; and
n Article 4 of chapter
11 of the ASEAN-Australia-New Zealand Free Trade Agreement.
In response, departmental representatives advised that the Government has
taken legal advice in relation to Australia’s international trade obligations
and was satisfied that the bill as drafted meets those requirements. Further,
in relation to these agreements:
... those specific concerns have been examined and have been
part of our consideration and discussions.
Departmental representatives also observed that:
Consistency with Australia’s international trade obligations
will continue to be a central issue as the regulations are formulated.
Equal treatment for importer and domestic products
As noted above, the Departments have stated that the bill provides
even-handed treatment of suppliers of timber irrespective of their nationality.
The Regulation Impact Statement notes that:
Like measures for imported timber would also be applied to
domestic products, in line with Australia’s commitments under the World Trade
Organization and obligations under its free trade agreements.
In evidence to the Committee, however, both Canada and New Zealand were
of the view that the bill provides more favourable treatment to domestic
products because imported products face more onerous point-of-entry
Mr Robert Coleman of the Canadian High Commission outlined Canada’s
concern that imported products entering the market could be much more complex,
... it would be much more difficult to go back from a complex
product to find certification or chain of custody, whereas on the Australian
market you are only looking at the original logs when they are harvested. So it
is very easy to find chain of custody for a log that has just been harvested in
the same country compared with looking at a very complex product and trying to
go to all of the inputs and find out where they came from.
In its submission, the New Zealand High Commission argued there is a
... importers of and exporters from countries of low-risk
status will bear the significant and unnecessary compliance costs of ‘proving’
legality. These costs will escalate with the length of the chain of custody,
which in the case of processed forestry exports from New Zealand, is long. This
is in contrast to the compliance costs Australia’s own domestic timber
processing sector will face, with processors only needing to verify the
legality of raw logs for their due diligence which may create a competitive
At the hearing, Ms Alison Mann of the New Zealand High Commission
Essentially it is a question of the extent to which we need
to certify or in some way verify the legality at each stage of the process. If
it only applies to the raw log phase in Australia but for imported product it
applies at each stage of the processing there is an undue burden placed on
those particular imports.
The Royal Institute of International Affairs (Chatham House) argued that
the differential treatment of imported and domestic timber is a key argument
that the Government needs to address in relation to the bill as:
[t]he real challenge in WTO terms, for any measure designed
to exclude illegal timber is to ensure that imports are treated, as far as
possible, in the same way as domestic products.
In response, departmental representatives told the Committee that the
framework for the operation of the bill is designed around the first point of
entry onto the Australian market. For imported materials, the first point of
entry is the Australian border, and for domestic material, the point of
processing. In terms of Australia’s WTO obligations, representatives informed
the Committee that the Departments consider this to be a reasonable approach,
and that by focussing on first point of entry, the system would operate
effectively and allow good trade.
Complementarity with United States and European Union regimes
The Government has stated that it intends this legislation to be as
complementary as possible to regimes being implemented in two of Australia’s
biggest timber importing markets—the United States and European Union, so as to
minimise the impact of the legislation on businesses.
Under the United States Lacey Act Amendment 2008, it is unlawful
...trade in any plant that is ‘taken, possessed, transported
or sold in violation of any US law or regulation, or any foreign law’, that
protects plants or regulates: the theft or taking of plants; the payment of
royalties, taxes of stumpage fees required for the harvest; the governance of
export or transhipment of plants.
The Act also requires importers to exercise ‘due care’ in ensuring
shipments of timber are obtained legally.
Under the EU Timber Regulation, to be implemented from March 2013,
‘the placing on the market of illegally harvested timber or timber products
derived from such timber’ is prohibited. Illegally harvested is defined to mean
timber that is harvested in contravention to ‘applicable legislation in the
country of harvest.’
Due diligence must be exercised when timber or timber products are first
placed on the European Union market.
The EU Regulation is supported by a Voluntary Partnership
Agreement (VPA) between the European Union and some developing countries.
Chatham House noted that these agreements incorporate a licensing scheme
designed to ensure only legal products are exported to the European Union.
The timber-exporting country will establish, with European Union assistance, a
timber legality verification scheme for its own products. Only products
licensed as being legally produced under the scheme will be able to be exported
to the European Union and such products will automatically satisfy the
requirements of the EU Timber Regulation.
The Committee notes that Indonesia’s timber legality assurance system, the
Sistem Verifikasi Legalitas Kayu or SVLK, has been developed under its VPA.
The Malaysian Government is also currently negotiating a VPA with the European
Union, which will include a timber legality assurance system.
The Departments noted:
Timber legality verification is increasingly part of the
global business environment for trading partners and commercial interests, who
are already participating in markets with similar legislation.
This view was echoed by Greenpeace, which, noting that the bill reflects
these initiatives in the United States and European Union, argued:
These are two massive timber markets, with restrictions on
the import of illegal timber and timber products already in place. These rules
have already affected practices and processes in most timber producing
Chatham House also emphasised that national and international legality
verification and forest certification schemes are increasingly common in
international trade in timber and timber products.
Kimberly-Clark Australia observed that compliance with the bill ‘should be no
more difficult or onerous than that existing now for US imports.’
Indeed, the Committee noted during the public hearing that Canada and
Malaysia are already exporting within the framework of the Lacey Act.
The Canadian Government provided the Committee with additional
information about its experience with the Lacey Act Amendment 2008. In
2011, Canada exported 61.5 per cent of its total forest exports, with a value
of approximately $16 billion, to the United States. As the United States’
largest trading partner, Canada has more experience than any other country in
dealing with the import declaration requirements imposed under the Lacey Act
The Canadian Government argued that despite its world leading forestry
practices and effective regulatory regime (and therefore negligible risk that its
products are illegal), Canadian exporters are disproportionately affected by
the legislation’s requirements. In its view, this has resulted in unnecessary
restrictions on legal trade as well as significant new compliance costs for
exporters. These concerns centre around information requirements under the ‘due
care’ process and the import declaration rules. 
Canada has advocated to the United States that it adopt a risk-based
approach that focuses its regulatory or enforcement efforts upon imports from regions
with a high risk of illegal logging.
Clause 2 of the bill provides for different parts of the bill to
commence at different times. The prohibition on all illegally logged imported
timber products and domestic processing of illegally logged raw logs will
commence the day after Royal Assent, as will the related enforcement, seizure
and forfeiture provisions of the bill.
The regulations will then come into force two years after the bill
receives Royal Assent. The Committee notes the
Government’s intention that regulations will be tabled in Parliament within six
months of Royal Assent so as to give timber importers and domestic processors
sufficient time to establish their due diligence systems in the following 18
The Departments explained how the Government envisaged importers and
processors would meet the due diligence requirements:
... it is anticipated that importers and processors will
carry out a number of steps including: (a) risk identification; (b) risk
assessment; and (c) risk mitigation. The level of risk will determine what
action importers and processors will be required to carry out to mitigate that
risk. The legislation provides that the due diligence requirements for
importing regulated timber products will be satisfied, wholly or partly, by
compliance with specified laws, rules or processes, including the following:
n laws, or processes
under laws, in force in a State or Territory or another country;
n rules or processes
established or accredited by an industry or certifying body;
Importers required to comply with due diligence arrangements
will be able to implement due diligence that responds to the risks associated
with a given product.
The Explanatory Memorandum explains the two-step process that must be
undertaken by persons importing regulated timber products into Australia:
n First, importers are
required to undertake due diligence in compliance with clause 14 of the bill
before regulated timber products are imported. On completion of due diligence,
importers are required to sign a legally binding statement of compliance with
n Secondly, importers
or their agents will be required to answer a community protection question on a
customs import declaration.
Several countries raised concerns about the implications of the
regulations and the due diligence process for timber exporters. These concerns are
based on uncertainty about:
n the due diligence
requirements that are to be outlined in the regulations, particularly those
products that will be prescribed as ‘regulated timber products’;
n the imposition of
additional compliance costs that may act as a deterrent to exporters; and
n the extent to which
national laws and certification schemes will be recognised.
Due diligence requirements
Uncertainty for exporters
At the hearing, Malaysian representatives highlighted the uncertainty
currently facing timber exporters about the level of due diligence that will be
required. Mrs Ernawati Soedjono of
the Indonesian Ministry of Trade also told the Committee:
The bill does not yet clearly define how it will be
implemented in the regulations, so it is difficult for us to guess how it will
be implemented and how difficult it will be for our country to adjust.
Datuk Yeo of the Malaysian Timber Council stated:
The point is, only after this two-year period would you be
sure ... If ... the regulations can be put in place, at the same time as the
bill, all this concern that we have will not be there.
Other submitters also raised this issue. Mr Thorry Gunnersen contended
... the bill creates a crime without adequately defining that
crime. There is no list of products to be regulated, the definition of ‘illegal
logging’ is broad, and the regulations do not yet exist.
Greenpeace considered that ‘too much information and detail is being
left to the regulations resulting in uncertainty for business (and countries).’
The Papua New Guinea Forest Industries Association was similarly concerned
about the extended period of uncertainty for exporters.
Chatham House also argued that the due diligence process needs to be clarified
to address the concerns expressed by a number of countries.
Regulated timber products
An additional source of uncertainty for exporters is a lack of clarity
as to those products that will be ‘regulated timber products.’
Clause 9(3) of the bill states that a regulated timber product is a timber
product prescribed by the regulations.
The Explanatory Memorandum explains that:
The selection of timber products for regulation will be
undertaken in consultation with key stakeholders based on an economic analysis
of the coverage, value and volume of timber products imported in Australia and
an analysis of their risk profile using appropriate criteria and indicators.
Both the Indonesian and Malaysian Governments raised this issue in
evidence. The Ministry of Trade Indonesia argued in its submission:
... it is crucial that the scope of this bill be set out and
that loose terminology such as ‘regulated timber products’ be addressed. ...
This is essential in that the trade chilling effect of the introduction of the
bill, which would also lead to criminal prosecution for a trade that remains
undefined, is obvious and very damaging.
Malaysian representatives also expressed particular concern about need
for clarity, explaining that most of Malaysia’s exports to Australia are
furniture, made from wood originating from small estates and with components
other than rubber wood being used. Mr Yew Eng Low of the
Ministry of Plantation Industries and Commodities emphasised that the
regulations must be clear, ‘otherwise we are afraid that the exporter may face
a lot of difficulty.’
For a number of submitters, the possibility of increased compliance
costs as a result of the due diligence process, was a matter of concern. Wood
and paper products manufacturer, Carter Holt Harvey, argued that:
There is the potential for a significant increase in
regulatory and compliance cost on importers and their suppliers in seeking to
meet the full requirements of the proposed Bill.
Others considered that the real cost of compliance would be higher than
modelled with a negative effect on a range of industries.
Both Canada and Malaysia highlighted the possible flow-on effect on trade.
According to Mr Robert Coleman of the Canadian High Commission:
... subordinate legislation may impose unnecessary burdens
and costs on the trade enforced products from countries with effective
legislative supervision and therefore may discourage imports of forest products
The Malaysian Government took a similar view:
The vague due diligence process imposed on importers coupled
with the heavy penalty for non-compliance will make it onerous on importers of
timber products in terms of time, effort and cost. The need to obtain
additional information will incur additional costs which when passed to
consumers will mean higher price and less competitive timber products, thereby
deterring them from using imported timber products.
The New Zealand Government considered the regulations should not impose
unnecessary costs on forestry exports from low risk countries, such as New
Zealand. New Zealand advocated an outcome based approach to the regulations
that provides flexibility as to how importers meet the bill’s objectives.
New Zealand also indicated that to avoid unnecessary compliance costs and
streamline the due diligence process, it supported a special trade description
being established in regulations.
For Double Helix Tracking Technologies:
The assertion that costs will be prohibitive and discourage
trade is not backed up by any evidence. Cost is frequently raised as an
objection, but is generally not calculated.
Double Helix went on to point out that due diligence and due care
requirements under the EU Timber Regulation and Lacey Act Amendment
2008 are similar to the requirements in this bill.
Recognition of national laws and certification schemes
The Government’s stated position is that it will not accredit, certify
or mandate the use of third party schemes or country initiatives under the
legislation. It has indicated,
however, that importers and domestic processors will be able to use these
schemes as ‘a component of their due diligence toolbox.’
... the system that we are putting in place is in fact a risk
based system. We are not mandating a specific certification scheme or
certification level to other countries. We are imposing a requirement on
Australian based companies and people to undertake a risk assessment of the
chance of illegally logged timber coming in.
The Malaysian and Indonesian Governments both considered that
recognition should be given to their national certification schemes.
Malaysian representatives told the Committee about the timber legality
assurance system it is developing as part of its Voluntary Partnership
Agreement with the European Union. Dr Harun of the
Malaysian Timber Industry Board indicated that recognition of these schemes
would provide greater certainty as to the definition of legal timber.
Indonesia noted that its timber legality assurance system is already
recognised by the European Union, and argued ‘it deserves the full support of
Australia as one of our closest trading partners.’
Other submitters noted that the bill does not provide for recognition of
other countries’ processes to recognise timber legality.
Chatham House considered that the more due diligence systems can rely on
existing system for verifying legality, the easier they will be to operate and
the lower the burden placed on exporters to Australia.
The Papua New Guinea Forest Industries Association (PNGFIA) supported
recognition of third party certification schemes, noting that ‘third-party
legality verification schemes (whether endorsed by governments or the private
sector) are the most straightforward means to verify legality’. The PNGFIA
considered that without such recognition, there will be a lack of certainty for
exporters in the two year period between the Act and regulations coming into
In contrast, Greenpeace argued that the bill should avoid bias towards
any certification scheme and that:
... its primary goal should be to seek verification of
legality rather than reliance on specific mechanisms that may or may not
A number of submitters, including the Governments of Canada, New Zealand
and Malaysia, the American Hardwood Export Council and Carter Holt Harvey
argued that countries with effective legislative supervision and therefore a
low risk of exporting illegal timber, should be given national recognition and
not be subject to the same level of scrutiny as higher risk countries or
Mr Coleman of the Canadian High Commission argued that the risk of
illegal logging in Canada is negligible due to its comprehensive legislative
and regulatory regime. Consequently:
We feel that the legislation and resources allocated to its
implementation should be focussed on jurisdictions where the risk of illegal
logging would be the greatest.
Countries took the view that a risk based approach would be consistent
with Australia’s obligations to provide non-discriminatory treatment to
importing countries. Ms Alison Mann of the New Zealand High Commission told the
From our perspective it is consistent with Australia’s
international legal obligations to put in place a risk-based system which
ascribes different requirements for different levels of risk, and under such a
system you would then be able to impose a lesser array of requirements for
low-risk countries as opposed to those where there is a high risk.
Potential prosecution in initial two year period
Dr Jalaluddin Harun of the Malaysian Timber Industry Board expressed an
expectation that prosecution would not occur within the initial two year
period, stating amongst other things:
... once the procedures have been finalised in six months
time, we expect a two-year breathing space ...
Departmental representatives clarified however that the penalties in the
bill would take effect from the date of Royal Assent.
The legal standard that would apply at this time is defined by the Criminal
A person is reckless with respect to this circumstance if the
person is aware of a substantial risk that the thing is, is made from, or
includes, illegally logged timber and, having regard to the circumstances known
to him, it is unjustifiable to take that risk.
The Australian Government would be required to prove that timber was
‘harvested in contravention of laws in force in the place (whether or not in
Australia) where the timber was harvested’. This was further explained as
The fault element associated with that is material
‘intentionally, knowingly, recklessly’ imported. That relates to the definition
in clause 8 of the bill. The regulations will apply a due diligence approach to
a subset of timber and timber products. So there will be a lower level of
evidence required, if you like, in terms of fault once the regulations come
into place in regard to that subset after two years.
With regard to products such as furniture, a person would be committing
an offence from the date of Royal Assent ‘if they imported a thing made from or
including illegally logged timber’. Drawing on an example of a chair made from
another material but with wooden feet, this would be the case, even though
‘[s]ubsequently, when a lower fault element is implemented, there will be a
subset that may exclude those sorts of products.’
Possible impacts on timber exporting countries
Countries put forward their views that the bill could possibly have an
adverse impact on their trade.
The Papua New Guinea High Commission considered there could be possible
effects on trade if the due diligence requirements are too costly for Papua New
Guinea’s exports to be competitive in the Australian market.
This point was reinforced by the PNGFIA, which highlighted concerns about the
impact of the bill on around 10,000 low income forest producers in Papua New
Guinea, who harvest up to 500 cubic metres of timber per year on the basis of
customary tenure laws and are not required to substantiate legality. PNGFIA
considered that compliance costs would deter these smallholder foresters from
exporting to Australia.
Other submitters also addressed this issue. An alliance of Australia’s
major timber importers considered the bill to
... a substantial over-reaction to the issue and will have a
range of unfortunate consequences, such as potentially impacting on the cost
effectiveness and willingness of importers to continue to import timber
products where legality assurance has never been raised as an issue in the
The alliance observed that without the regulations and a definition of
regulated timber products there has been ‘an escalating lack of confidence by
the industry and supplier countries in the development of the Bill.’
Consultation on regulations
The Committee notes that the Government has been consulting on the
proposed legislation since 2008. With respect to the
regulations, departmental representatives told the Committee:
As the more detailed process of developing the regulations is
now underway, more in-depth consultation with stakeholders is being and will be
undertaken to assist their development and to ensure they operate as intended.
This consultation will include the continuation of productive discussions with
domestic producers, importers, trading partners, international supplies and
other interested stakeholders through an illegal logging working group convened
by the Department...
New Zealand, Canada and Indonesia are represented on the DAFF-convened
Illegal Logging Working Group.
The Committee notes that the countries that participated in the public
hearing have called for further consultation.
For example, Dr Harun of the Malaysian Timber Industry Board told the
Our No. 1 concern about the bill is that we would like to
have proper consultation on the implementation of the bill later on, especially
during the creation of procedures.
His Excellency Mr Salman Ahmad, High Commissioner to Malaysia, also
Once the consultation has been done, I think it will satisfy
During the hearing, the Committee questioned whether there is scope to
expand the membership of the Illegal Logging Working Group,
noting that the Malaysian Government would welcome Malaysia’s inclusion.
The Committee notes the Government’s stated intention that:
Due diligence requirements will be developed in consultation
with industry and key stakeholders in relation to information gathering, risk
assessment and identification and risk mitiaton to assist importers to meet the
due diligence requirements in a cost effective, efficient and adaptable manner.
This may include addressing due diligence requirements for different timber
product categories (e.g. solid, composite, manufactured, processed), supply
chains of differing complexity (e.g. single, multiple, short, long) and
applicable laws of different countries of harvest, to be prescribed by
Illegally logged definition
The Committee notes that the definition of illegally logged timber received
considerable attention during the Senate Rural and Regional Affairs and
Transport Legislation Committee inquiry. It was again raised in a number of
submissions to this inquiry.
The bill defines illegally logged as follows:
illegally logged, in relation to timber, means
harvested in contravention of laws in force in the place (whether or not in
Australia) when the timber was harvested.
The Explanatory Memorandum explains the basis for this definition:
Illegally logged is a high level definition that
provides scope and flexibility for importers and processors of raw logs to
undertake due diligence in relation to the applicable laws in place where the
timber is harvested, which may be prescribed by regulations, without the
limitations of a prescriptive set of legislative requirements. The challenge of
prescribing individual requirements in a definition is complicated by the range
of legislation given the number of countries—85 in total—from which Australia
imports timber products. An unintended consequence of a prescriptive definition
of illegally logged may result in some elements of applicable legislation being
overlooked or excluded through omission.
In its submission, the Malaysian Government argued that illegal logging
should be defined in terms of compliance with respective national forest laws.
Similarly, the New Zealand Institute of Forestry argued that the definition
‘illegally logged’ was difficult to interpret and unnecessarily broad.
Concern was raised too about the scope of the definition—that is,
whether it is intended to apply to forestry laws or other legislation more
broadly, such as health and safety, transport or tax laws.
The Papua New Guinea Government questioned whether it would extend to labour
laws or land tenure laws.
Departmental representatives advised the Committee that in contrast to
the European Union definition of illegal logging:
In our definition we have tried to be as broad as possible so
we do not exclude any of those categories or issues that may come into play.
Representatives also indicated that there would be scope within
subordinate legislation and regulations ‘to further categorise the issues and
laws we may be considering here.’
As indicated earlier, the Committee’s focus for this inquiry was the
reasons for referral outlined in the House of Representatives Selection
Committee’s report—that is, ‘concern over the international implications of the
bill expressed by Canada, Indonesia, Malaysia, New Zealand and Papua New Guinea...’
The Committee has endeavoured to address these issues while avoiding unnecessary
duplication with previous parliamentary committee inquiries into the bill.
The Committee notes that the bill is essentially harmonious with
legislation in the United States and European Union, and that timber exporting countries
are adjusting to these new regimes. The Committee shares
the view expressed by Double Helix Tracking Technologies in its submission,
The Australian Bill is not adding to a problem; it represents
Australia joining a growing international movement to prevent the trade in
illegal timber products.
Indeed, the Committee notes that at the 2011 APEC Summit, the Prime
Minister, the Hon Julia Gillard MP, and other leaders from Canada, Indonesia,
Malaysia, New Zealand, Papua New Guinea, the United States and China declared
they would address illegal logging. The APEC 2011 Leaders’
Declaration states, inter alia:
We will also take the following steps to promote our green
growth goals: ...
Work to implement appropriate measures to prohibit trade in
illegally harvested forest products and undertake additional activities in APEC
to combat illegal logging and associated trade.
The Committee supports Australia’s efforts to address the negative
impacts of illegal logging and promote legal international trade. In doing so,
however, it is essential that this legislation is consistent with Australia’s
international trade obligations. The Committee is satisfied that the Government
is taking these obligations seriously in the development of the bill and
subordinate legislation, including the need to provide equal treatment for
imported and domestic products.
The Committee acknowledges the broad approach taken by the Government to
the definition of illegally logged timber so as to limit unintended
consequences that may arise from a more prescriptive approach.
The Committee also notes that there will be flexibility as to how the
due diligence requirements are implemented, based on a risk management
approach. As noted earlier, the level of risk will determine what actions
importers and processors must take to mitigate that risk. The lack of clarity,
however, about the process, likely compliance costs, and the extent to which
certification schemes and national laws will be recognised, is a significant
source of concern.
The Committee notes the Government’s stated intention that industry,
including importers, will be extensively consulted in the development of the
regulations. It is apparent,
however, that timber exporting countries also have considerable concerns about
the details of the new regime that are to be outlined in the regulations, which
will not be available for about six months.
The Committee commends the consultation that has been undertaken to date
on the bill. The Committee considers it is essential however that there be
continued bilateral and multilateral engagement on the development of the
The Committee also encourages the Government to make the regulations
available as quickly as possible.
The Departments advised the Committee that the two year period between
the bill and regulations coming into effect was ‘something that we have not
been picking up as a concern from our timber importer members of our industry’
and that it expected that the two year period between entry into force of the
Act and the regulations would have negligible unintended consequences upon
Evidence to the Committee suggested however that the lag between the
bill and regulations is a matter of some concern. It was also clear that there
are differing expectations among other nations as to whether prosecution would
occur in this period. The Committee considers further outreach is required by
the Government on this issue.
The Committee notes that this is the third parliamentary committee inquiry
into the proposed legislation and acknowledges the ongoing participation of
stakeholders. Broad support for the intent of this legislation has been
expressed throughout the inquiry. The Committee considers that with continued
engagement, many of the outstanding issues can be resolved.
||The Committee recommends that the Government continues to
consult closely with the Governments of Canada, Indonesia, Malaysia, New
Zealand and Papua New Guinea and other relevant stakeholders on
implementation of the bill and the development of subordinate legislation.
||The Committee recommends that the Government facilitate
Malaysia and Papua New Guinea’s representation on the Illegal Logging Working
Group convened by the Department of Agriculture, Fisheries and Forestry.
||The Committee recommends that the Illegal Logging
Prohibition Bill 2011 be passed.
Ms Janelle Saffin MP
Chair, Trade Sub-Committee
Mr Michael Danby MP