Because of the impact that illegal logging has on the European economy, environment and society, the European Commission passed the EU Timber Regulation (EUTR) which came into force on March 3, 2013. It bans illegal timber in the EU and requires those companies that place wood and wood products on the EU market (for the first time) to assess the risk that those products may have come from an illegal source and act to mitigate any identifiable risks. This is known as the “Due Diligence” requirement. Such Due Diligence must happen before a company buys the product and it has to be undertaken even if the product is certified.

Due Diligence

The Due Diligence requirement is found under Article 6 (c) of the EU Timber Regulation which states: “except where the risk identified in the course of a risk assessment procedures referred to in point (b) is negligible, risk mitigation procedures which consist of a set of measures and procedures that are adequate and proportionate to minimize effectively that risk and which may include requiring additional information or documents and/or requiring third party verification.”

Due Diligence requires an operator to gather information about timber and timber products and their suppliers in order to conduct a full risk assessment. The information required to be assessed falls into two categories: (1) specific information related to the timber product itself: a description, its country of harvest, the supplier and trader, and records indicating compliance with applicable legislation; and (2) general information providing the context for assessing the product-specific information, about the prevalence of illegal harvesting of specific tree species and prevalence of illegal harvesting practices in the place of harvest, and on the complexity of the supply chain.

The level of risk only can be assessed on a case-by-case basis and depends on a number of factors:

  1. Where was the timber harvested?
  2. Is the level of governance a concern?
  3. Are all documents indicating compliance with applicable legislation made available by the supplier and verifiable?
  4. Are there indications of involvement of any company in the supply chain in practices related to illegal logging? and
  5. Is the supply chain complex?

Negligible risk should be understood to apply to a supply when, following full assessment of both the product specific and the general information, no cause for concern can be discerned.

Penalties For Violating EU Timber Regulation

Under Article 19 of the EU Timber Regulation, the level of penalties is defined by the Member States and may vary from one Member State to another. However, the EUTR clarifies that penalties must be “effective, proportionate and dissuasive.” Penalties will be imposed by national enforcement authorities. Such penalties include: (1) Seizure of timber and timber products concerned; (2) Immediate suspension of authorization to trade; and (3) Fines proportional to the damage resulting from the infringement

Penalties may be imposed on Operators: (1) If they place illegally harvested timber or timber products derived from such timber on the market; and (2) If they fail to exercise due diligence when placing timber or timber products on the market.

Penalties may be imposed on Traders : (1) If they are unable to identify the operators or traders who have supplied them the timber; (2)If they are unable to identify, where applicable, the traders to whom they have supplied timber.

Monitoring Organizations may be liable for fines and have their recognition as Monitoring Organization revoked: (1) If they fail to maintain and regularly evaluate a Due Diligence System as set out in Article 6 of the Regulation; (2) If they fail to verify the proper use of their Due Diligence System by operators; and (3) If they fail to take appropriate action if an operator doesn’t properly use their Due Diligence System, including notification of competent authorities in the event of significant or repeated failure by the operator.

For more specific guidance regarding the Due Diligence requirements under the March 3, 2013 EU Timber Regulation, please see http://ec.europa.eu/environment/forests/pdf/guidance_document.pdf.