Lopez Casero

The Reform of Public Timber Procurement in Japan: 

The Reform of Public Timber Procurement in Japan Federico Lopez-Casero Henry Scheyvens Kimihiko Hyakumura Forest Conservation Project Institute for Global Environmental Strategies (IGES) Chatham House Illegal Logging Update and Stakeholder Consultation 20 July 2006

Overview: 

Overview Japan’s role in timber trade Japan’s response to illegal wood imports Legal and policy context of the public procurement (PP) reform Reform of timber procurement policy Definitions and Verification Modalities Policy Implementation: a) domestic; b) imported timber Preliminary observations: a) certification / legality verification schemes and b) addressees Conclusions

1. Japan’s role in timber trade : 

1. Japan’s role in timber trade Total timber demand in Japan is about 89 million m3 p.a., of which roughly 80% are imported (world’s 3rd largest importer) Source: FRA (2005) Largest importer of tropical plywood: 4.6 million m3 in 2005 3rd largest importer of tropical logs: 1.6 million m3 in 2004 Russia is now Japan’s main log supplier: 11 million m3 in 2004

2. Japan’s response to illegal wood imports: 

2. Japan’s response to illegal wood imports Since 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 31.03.2005) Government stresses financial/administrative support to international organisations and producer countries Low engagement of private sector: Only 12% of 115 firms claimed to make any effort to assess the legality of the procured timber (survey by JFWIA) Potential of PP reform to force a response from the private sector: Public sector: 3% of total wood procurement （estimated)

3. Legal and policy context of PP reform : 

3. Legal and policy context of PP 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 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 including: Legality as a “criterion for evaluation” Sustainability as a “factor for consideration” Refers to “Guideline for Verification on Legality and Sustainability of Wood and Wood Products” formulated by the Forestry Agency

4. Reform of timber procurement policy : 

4. Reform of timber procurement policy “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 and working groups)

5. Definitions and Verification Modalities: 

5. Definitions and Verification Modalities Legality (Criterion for evaluation): Timber “should be harvested in legal manner consistent with procedures in the forest laws of timber producing countries” Sustainability (Factor for consideration): “should be harvested from the forest under sustainable management” 3 different modalities for verification: Forest certification / chain of custody Codes of conduct of Japan’s wood industry associations Own procedure set up by an individual company

(1) Verification through Forest Certification : 

(1) Verification through Forest Certification Wood products certified under a forest certification scheme 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: Less than 1.85 % of total forest area in Japan (461,000 ha) in 2005 Less than 1% of natural production forests in Asia

(2) Verification under Codes of Conduct of Wood Industry Associations: 

(2) Verification under Codes of Conduct of Wood Industry Associations The gist of this modality is voluntary codes of conduct: established by wood industry associations procedures to guarantee that their members supply wood products verified as legal (sustainable) mandatory for their members (auditing, penalisation) Leading role of the Japan Federation of Wood Industry Associations (JFWIA) as the umbrella organisation: Established code of conduct in March 2006 It has served as a template for most other associations Exception: The Japan Lumber Importers’ Association (JLIA) formulated their code in November 2005

Verification flow under modality (2): 

Forest Owners Producers (Owners’ Assoc.) Manufacturers, distributors Government purchasers Certificate (invoice) Process of licensing suppliers What associations have to do Verification flow under modality (2) Information brochure edited by the JFWIA The JFWIA has focused on implementation in Japan: explaining to stakeholders in Japan why verification is needed giving a domestic example for suppliers from abroad Invoices Evidence doc. Evidence doc. Ｌｉｃｅｎｃｅ Ｌｉｃｅｎｃｅ Ａｐｐｌｙ Ａｐｐｌｙ

(3) Verification through own procedure set up by an individual company : 

(3) Verification through own procedure set up by an individual company Applies mainly to suppliers, which: are not members of wood industry associations prefer handling timber under own code of conduct Introduced at the paper industry’s urging To be used by chip/pulp importing businesses (?) No examples of implementation so far In principle it will work similarly to modality (2)

Flow under Modalities (2) and (3) for JLIA members: 

Flow under Modalities (2) and (3) for JLIA members Logging Processing & distribution Delivery Public Procurement Segregated Management: DOCUMENT FLOW: STAGES: DOCUMENT FLOW: 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)

6. Policy implementation: a) Domestic timber: 

6. Policy implementation: a) Domestic timber Modalities expected to work from September 2006 Number of associations involved in the implementation process

b) Imported timber: 

b) Imported timber Working groups (researchers) under Exploratory Committee for Measures against Illegal Logging investigating options Main schemes with high probability of being accepted by the government as evidence of legality:

7. Preliminary observations: a) Certification/Legality Verification Schemes: 

7. Preliminary observations: a) Certification/Legality Verification Schemes Modality (1): Government has no intention to assess certification schemes Modalities (2) and (3): Organised by the private sector in Japan 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 timber Importers under pressure to demonstrate legality of imported timber, as domestic timber is increasingly favoured

b) Actors: 

b) Actors Main focus on the private sector: Granted wide autonomy to establish their own voluntary codes of conduct for the verification of legality Considered 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 No independent government/ 3rd party verification required No major capacity building efforts or advice intended However, public procurer is free to pay a price premium

8. Conclusions: 

8. Conclusions Stepwise approach: Priority of legality over sustainability Need for studies, and for negotiations of private sector and government with counterparts in producer countries So far, a paper trail is being implemented A major shortcoming is a lacking 3rd party auditing Remaining questions: Will the private sector suppliers prove worthy of the trust the government has put in them? How reliable will the schemes for verification of legality negotiated with the major producer countries be? Thank you!