This article is guest authored by Mari Momii of Deep Green Consulting.
Introduction
In May 2016, Japan adopted a new piece of legislation, called the “Law Concerning the Promotion of Distribution and Use of Legally-Harvested Timber, etc.” This law takes a different approach from other demand-side regulations for illegal timber imports, such as the U.S. Lacey Act, the EU Timber Regulation and Australian Illegal Logging Prohibition Act, in the sense that it is designed to promote the trade of legal timber, rather than attempting to eliminate illegal timber on the market. Nevertheless, this new law marks the beginning of Japan’s effort to follow the growing trend of implementing measures to prevent imports of illegal timber. This article takes a brief look at what the new law aims to do.
Background
Japan Remains a Significant Timber Importer
While Japan’s timber imports have recently been decreasing, the country is still a major importer, following China, the EU and the US. Recent reports and studies from various NGO list Malaysia, Russia (through China) and Romania as some of the high-risk countries from which Japan imports wood and forest products. It is the government’s policy to increase the use of domestic timber (nearly 70% of Japan is forested) and the new law reflects this policy.
Bill Passage and the G7
It is important to note that the new law was drafted and proposed by several Members of the National Diet (Japan’s bicameral legislature), since bills presented this way usually only provide a framework and do not provide detailed guidance for implementation. This is one reason that there significant amounts of crucial details remain to be determined. In addition, the process was expedited so that the new law could be announced at the G7 Summit in June. The bill passed both Houses by consensus (with supplementary resolutions) and was issued on 20 May 2016. Implementation will begin one year from the law’s ratification.
An Overview1
The Law Concerning the Promotion of Distribution and Use of Legally-Harvested Timber, etc. is based on a voluntary registration system, as is the current Goho-wood (legal wood) system. The most significant difference from the document-based Goho-wood system is that businesses will have to carry out some form of due diligence if they wish to register. Since it is a voluntary system intended to motivate businesses rather than regulate them, there is no prohibition of illegally sourced timber.
The Definition of Legal Timber
The definition of legal timber has yet to be clarified. Article 2 of the Law defines legal timber as “wood derived from trees logged in compliance with laws and regulations of Japan or the country of origin.” There are passages in the law which imply that elements of social issues and sustainable forest management should be taken into consideration. It is thus possible that the Japanese definition of legal timber, when developed, could be comparable to the EUTR’s definition, for instance.
The Scope
The scope of the Law is wide: it covers most wood and timber products except for collected materials, including unused materials that are collected for reuse and recycle. Products with more complex supply chains such as paper and furniture are also covered.
In terms of the scope of “operators,” the Law covers most businesses dealing in timber and timber products – whether manufacturing, processing, importing, exporting or sale (except at a retail level). The Law also covers those in the construction industry using timber. However, it is possible that particular types of businesses importing high risk products will become focus industries for registration. Relevant details are to be specified by the Ministerial Order.
Responsible agencies
The responsible government agencies are the Ministry of Agriculture, Forestry and Fisheries (MAFF); the Ministry of Economy, Trade and Industry (METI); and the Ministry of Land, Infrastructure, Transport and Tourism (MLITT), although the Forestry Agency under MAFF will play a central role in issuing the relevant rules and the overall implementation.
Due Diligence
As mentioned earlier, there is no prohibition in the Law on importing timber that has been harvested or traded illegally. Companies are only expected to make an effort to use legal timber. They are encouraged to carry out due diligence, though this is not a legal requirement. It is currently unknown what the Japanese Due Diligence System (DDS) will entail, except that it contains the following four elements; (1) risk assessment; (2) risk mitigation; (3) requirements for traders; and (4) records management. Detailed standards for the DDS will be stipulated by a Ministerial Order.
Registration
If they choose to, companies can register their businesses once they are approved by a registering organisation as complying with the DDS standard. Approved third-party registering organisations will make an assessment of companies applying to register their business.
This voluntary option for registration is designed to provide an incentive for carrying out due diligence, since companies are only allowed to call themselves “registered operators in timber related business” if they have enrolled in the system. Non-registered companies will be subject to penalties if they use this term. The registration fee is 15,000 JPY (approximately 140 USD) per company.
Registering organisation
There are detailed rules for registering organisations to prevent conflicts of interest. A monitoring function is also present, as “stakeholders,” and timber-related operators, are allowed to ask for information from registering organisations. Registering organisations are subject to fines if they violate the set procedures.
Enforcement
Enforcement measures are designed to mostly focus on issuing administrative orders for remedial actions (such as withdrawal of registration status, request for information disclosure and inspections). Relevant Ministers (MAFF and Ministers of the responsible departments) have the power to ask for reports or carry out unannounced inspections both for operators and for registering organisations.
Key points for coming months
Despite its voluntary nature, this law still has a chance to develop more teeth. Several key elements are going to be determined in the coming months, including; (1) DDS standards; (2) the legality definition; (3) how to ensure that businesses register under the voluntary system, particularly those dealing in high-risk timber; and (4) how to monitor and regulate non-registered companies, amongst others.
It is also important to note that the Japanese Government is committed to the implementation of this Law, by actively seeking information and exercising the power to monitor, enforce and apply adequate penalties. Since other East Asian countries, namely, Korea and China are also considering passing due diligence legislature for timber, the world needs to keep a watchful eye on Japan’s move.
1 The following paragraphs are based on Forest Trends’ forthcoming briefing, 2016.
