Japan Revised Clean Wood Act (Act to Partially Amend the Act on Promotion of Use and Distribution of Legally-Harvested Wood and Wood Products)

The Act on Promotion of Use and Distribution of Legally-Harvested Wood and Wood Products (Act No. 48 of 2016), commonly known as the Clean Wood Act (CWA) hereinafter referred to as “The Act”, promotes the legal harvest, trade and use of wood and wood products placed on the Japanese market and encourages business entities to take measures to ensure the use and trade of legally harvested wood and wood products. The Act applies to timber and timber products harvested in Japan, as well as imported timber. In 2023, the CWA was amended as the Revised Clean Wood Act.

The Act

The Act entered into force on May 20, 2017, and established provisions for Japan to combat illegal logging and trade. The Act provided that business entities must endeavor to use legally harvested wood and wood products, but are not legally required to, and encouraged wood-related business operators to register as legal timber suppliers as a voluntary measure to combat illegal logging and trade of timber and timber products (Article 5).

Revised Clean Wood Act (2023 updates)

In 2023, the Act to Partially Amend the Act on Promotion of Distribution and Use of Legally Harvested Timber was passed. Commonly known as the Revised Clean Wood Act (also referred to as the Revised CWA or Revised Act) the law is scheduled for implementation on April 1, 2025.

The 2023 amendment, alongside the Revised Clean Wood Act Basic Policy, now makes:

• The “confirmation of legality” (also known as legality due diligence (DD)) which refers to a company’s responsibility to confirm whether there is a high probability that the timber in question does not fall under the category of timber from illegal logging, is mandatory for type 1 wood-related business entities (those who first bring wood and wood products into the domestic market), including timber importers (Articles 6-8 of the Revised CWA). Type 2 businesses shall endeavor to take measures related to creating and preserving necessary records and communicating information.
• Businesses, such as wood producers and distributors, are required to provide information on raw materials to wood-related businesses upon request (Article 9 of the Revised CWA); and
• Expands the scope of wood-related businesses to include retailers (Article 2, paragraph 4 of the Revised CWA).

The key change of the revision is to introduce the risk-based concept and mandate legality due diligence for importers. Specifically, under the Revised Clean Wood Act, Type 1 businesses (including importers) must (Explanatory materials from the Forestry Agency of Japan):

1. Collect information on raw materials. This includes the tree species, harvest area, and documentation that proves the legality of the harvest. Such documentation may include certificates issued by the country of harvest, and certifications like PEFC (Programme for the Endorsement of Forest Certification) or FSC (Forest Stewardship Council) that verify the timber's certification.
2. Confirm legality (which means they must conduct legality due diligence according to the assessed risks based on the collected information and information provided by the government and other sources). The responsibility for determining the unit (per business, transfer of timber, etc.) of these legality checks rests with the business; however, these checks must be completed by the time the wood or wood products are transferred to the next party.
3. Create records of (1) information on the raw materials collected, (2) the results of the legality of due diligence, and (3) the reasons for confirming legality. Records must be created before transferring the wood and wood products to the next party, and they should be kept for five years.
4. Provide information on the results of the collection of raw material information and information on whether the legality is confirmed when the timber/timber products in question are transferred to other wood-related businesses; and
5. Report the quantity of materials they handle each year when it exceeds specific thresholds. The thresholds are defined as follows: for imported timber a total volume of 30,000 cubic meters (m³) or more, when converted to logs. For imported furniture, paper, and other goods, a total volume of 15,000 tons or more.

The Revised Clean Wood Act also provides for stronger penalties imposed for violations of the Act (Chapter VIII).

The Revised Clean Wood Act is implemented/enforced by the following supporting legislation:

• Revised Enforcement Regulations for the Law Concerning the Promotion of Distribution and Use of Legally Harvested Timber, etc.
• Revised Ministerial Ordinance on Criteria for Ensuring the Use of Legally Harvested Timber by Timber-Related Businesses.
• Ministerial Ordinance on Confirmation of Legality of the Clean Wood Act
• Revised Basic Policy for Promoting the Distribution and Use of Legally Harvested Timber, etc.

Other relevant legislation related to the Revised Clean Wood Act and timber legality in Japan can be found on the Clean Wood Navi webpage.

Compliance/Registration provisions

While there are no binding, legal provisions that make wood-related business registration mandatory, the Act encourages wood-related business entities to become a Registered Organization to ensure the legal harvest, trade and use of wood and wood products in compliance with Japanese laws and the laws and regulations of the country of harvest.

If one chooses to register their wood-related business, registration renewal is required every five years. Under the Revised Clean Wood Act, registered type 1 wood-related businesses are required to verify that the wood and wood products were harvested legally, through the “confirmation of legality”.

“Confirmation of legality”

The Revised Clean Wood Act (CWA) Due Diligence Guidance requires the tree species names used in business transactions to be specified. Although the Act does not require the scientific name of wood and wood products for legality due diligence, the risk of illegal logging can be considered low when the scientific name is identified.

Wood-related business operators are required to collect or organize raw material information (below) for the wood relating to their business and verify that the wood was harvested legally according to Japanese legislation and following all laws and regulations of the country of harvest (Article 6 of the Revised Act). The following information is used to “confirm legality”:

1. The species of wood and the country of harvest;
2. A copy of the notification or a copy of a certificate issued by a government agency of the country of origin to prove that the wood was harvested in accordance with the laws and regulations of the country of origin. In lieu of these copies, information specified by government ordinance proving there is a high probability that the timber or timber products were not illegally logged is limited to information prepared in writing or in the form of electromagnetic records (Article 6 of the Revised Act).

As specified in the Ministerial Ordinance on Confirmation of Legality of the Clean Wood Act, the following information is required to “confirm legality” and must be prepared as records (Article 3):

• Type of timber and tree species, the period of transaction, and other classifications prescribed in Article 6 of the Revised Clean Wood Act;
• The region of production/harvest, whether domestically (Japan) or for imported timber produced elsewhere.

Wood-related business operators must retain records of the information they collect for five years (Article 7).

When a timber producer or seller (timber production or sales business operator) transfers timber for which raw material information has been collected or compiled to another wood-related business operator, the producer/seller must transmit the information specified by the competent ministerial ordinance and information on the confirmation of legality of the timber (Article 7, paragraph 2). When a timber producer or seller business operator transfers or commissions the transfer of materials to a wood-related business operator, the producer/seller must, upon request from said wood-related business operator, provide information that will contribute to the wood-related business operator's confirmation of legality (Article 9).

Type 2 wood-related business entities are not mandated to carry out the “confirmation of legality” and, instead, the Revised Act imposes an obligation on Type 2 wood-related business entities companies to make efforts to carry out two main responsibilities:

1. Obtain information on whether the timber in question is verified as legal (and to request this information if it is not provided); and
2. Store and share information regarding the legal verification of timber. This information must be maintained and stored for five years (Article 5 of the Revised Ministerial Order on Criteria for Ensuring the Use of Legally Harvested Timber by Timber-Related Businesses).

The Revised Ministerial Ordinance on Criteria for Ensuring the Use of Legally Harvested Timber by Timber-Related Businesses sets out the criteria for determining legality of the use of timber by wood-related businesses.

Additional information on timber legality

Article 13 of the Revised Act outlines the obligations of efforts for both Type 1 and Type 2 businesses. According to Article 2 of the Revised Ministerial Ordinance on Criteria for Ensuring the Use of Legally Harvested Timber by Timber-Related Businesses, companies are to:

• Establish a person in charge of measures to ensure the use of legally harvested timber and timber products.
• Establish a policy for ensuring the planned use of legally harvested timber and timber products.

To increase the amount of legally confirmed timber and timber products in the trade, Article 3 stipulates that companies:

• Select suppliers based on their track record, information, and other necessary information.
• Request suppliers to provide the relevant information.

Under the current legal frameworks in Japan, timber and timber products whose legality has not been confirmed can be traded. Article 4 stipulates that companies shall take the following measures to ensure the use of legally harvested timber and timber products and to prevent the use of timber and timber products whose legality has not been confirmed:

• If businesses use timber that is not legally confirmed, they must consider necessary measures to enable the preferential use of timber that is highly likely not related to illegal logging.
• If businesses recognize that they have received timber and timber products whose legality is not confirmed and are received, they must consider changing the supplier and taking other necessary measures.

Penalties

Articles 10, 11 and 45 of the Revised Clean Wood Act set out measures to be taken in case of a violation of the “confirmation of legality” (legality due diligence) that is mandatory under the Revised Act. Specifically, these articles outline measures, such as guidance and advice, recommendations, public announcements (if the company does not comply with the legislation), orders, and penalties. Article 45 stipulates that in case of a violation of the Revised Act, the person who committed the violation may be subject to a punishment by a fine of up to one million yen.

• Article 46 of the Revised Act defines that in any of the following cases, the person who has committed the violation may be subject to a fine of up to 300,000 yen:
  • Violating Article 20, paragraph 3 (on the naming of registered wood-related businesses). Any non-registered business entity shall not use the name ‘registered timber-related business operator’ or any name that is confusingly similar to it;
  • Suspending or abolishing all or part of the registration implementation affairs without making the required notification, or has made a false notification;
  • Failing to prepare books, make entries in the books, make false entries in the books, or preserve the books;
  • Failing to make a report per Article 40, paragraph 3, make a false report or has violated the provisions of the Article; and
  • Refusing, obstructing or evading an inspection.

Other violations and penalties outlined in Articles 47-49 include:

• Failing to make a report as provided for in Article 40, paragraphs 1 or 2, or makes a false report, or refuses, obstructs or avoids an inspection under the provisions may be subject to a fine not exceeding 200,000 yen.
• Representatives of a corporation or the agent, employee or other worker of a corporation or individual commits any of the above violations in connection with the business of that corporation or individual, the perpetrator and corporation/individual is also subject to punishment in the form of a fine.
• Failing to prepare financial statements as stated in Article 31, paragraph 1, failing to record matters that should be recorded in financial statements, making false records, or refusing a request under the provisions of the same article without a justifiable reason may be subject to a fine no greater than 200,000 yen.

Provisions on strengthening government oversight

Article 40 of the Revised Act empowers the competent minister to request that timber-related business operators submit reports detailing the implementation status of measures designed to ensure the legality of wood and wood products or the implementation status of measures designed to ensure the use of legally harvested wood and wood products. Additionally, the article authorizes the competent minister to dispatch its officials to conduct on-site inspections of timber-related business operators' offices, factories, workplaces, or warehouses, including the examination of books and documents.

---