Building China Due Diligence System Framework For Timber Legality

During the process against illegal logging and related trade,EU,US and Australiaas the major consumer markets of forest products have enacted timber legality trade regulations,providing that operators who import timber products shall exercise due diligence to exclude the illegally logged timber into their markets.As China is the world’s largest forest products producer and trader,these regulations is having a significant impact on China’s international trade in forest products,and posed new challenges and demands to Chinese timber enterprises.In order to guard the smooth development of China’s international trade in forest products,and help Chinese companies establish and operate due diligence system and meet the requirement of the international market on timber legality,this essay developed China due diligence system framework for timber legality using a range of research methods including literature research,comparative research,survey research,stratified sampling,qualitative and quantitative research.The essay firstly reviewed the timber legality relevant legislation or regulations in major consumer markets,and compared and analyzed the legality verification schemes or tracing systems available now by the industry for their advantages and disadvantages,characteristics and efficiency.The main findings and conclusions are as follows:Due diligence is now the primary requirements from consumer markets for meeting legality requirements after the EU,the USA and Australia released their regulation on timber legality.The analysis and comparison of these major regulations concluded that they have much similar requirements on timber legality by requiring operators to exercise due diligence,and the stepwise approaches are provided in these regulation or from subsequent case judgments.Generally,due diligence is required to be adopted for information collection,risk assessment and risk mitigation to ensure that all the timber used in the products are from legal source and no timber from illegal or unknown sources is mixed into the legal supply chain.But these regulations have some differences in relation to legal foundation,due diligence systems implementation procedure and due diligence process.The current timber legality verification or guarantee systems developed and promoted by various institutions or organizations are compared and analyzed in terms of requirements and structure.It is concluded that these systems keep similar in four aspects: a general requirement for companies to commit to legal timber procurement and production;risk evaluation and mitigation in species,origin and supply chain;whole supply chain requirements for from forest management to timber processing and trading;and due diligence tools to help the businesses to fulfill due diligence obligations.However,they also have some differences such as means for assessment,risk degree classification,system structure and ultimate goal.With a view to understanding the impacts of the implementation of timber legality relevant regulations from consumer markets on China’s international trade in forest products,and expounding that the setup and operation of China due diligence system framework for timber legality could be conducive to Chinese timber companies for their addressing the challenges from international markets,questionnaire surveys were carried out targeting timber producers,processor or manufacturers,and traders.The results showed that 53% of the companies believe that the implementation of these regulations has a significant impact on China’s international trade in forest products,and 75%of the companies are subject to relevant requirements from their principal customers or markets,which is facing a number of challenges though they have undertaken various measures to cope with the legality requirements.There are 40% among these companies that hope to obtain helps or assistances so as to establish and operate due diligence system for legality.The SWOT analysis on the due diligence system indicates that it is feasible to build China due diligence system for timber legality.Based on the above analysis and conclusions,this paper builds China due diligence system framework for timber legality,which could meet the timber legality requirements from international markets,based on the principles of legitimacy,systematicalness,scientificalness and applicability.The system framework includes general requirements,information collection and supply chain management,legality risk assessment,and risk mitigation.General requirements here is the foundation and guarantee of the due diligence system,including developing responsible timber procurement policy,defining product scope for due diligence,identifying roles and responsibilities,establishing internal control procedures,conducting and organizing training,and monitoring the system implementation;Information collection and supply chain management could be achieved by recording suppliers information,collecting additional information about supply chain,mapping supply chains,etc.;risk assessment needs to implement categorized risks assessments for risk controlled materials and risk uncontrolled risks,respectively,and then records the assessment conclusions and non-conformities;Risk mitigation mainly includes determining mitigation actions,implementing risk mitigation measures and evaluating the effectiveness of risk mitigation activities.At last,the essay discusses the problems and challenges that could arise during the due diligence system establishment and operation,including how to develop and carry out pilot activities,how to highlight its own advantages,how to mobilize the enthusiasm of enterprises to get involved,how to build the capacity of enterprises.Besides,some policy recommendations are proposed: due diligence system implementation in China should put the focus on the current condition and actual needs of forestry development and could be facilitated by enhancing policy mechanism development,promoting the collaboration between relevant stakeholders like government,research institutions,financial institutions,non-governmental organizations,and seeking the opportunities for international cooperation and recognition.