Timber Tags: The currency of illegal logging

uly 17, 2006, with additions at end 20Jul2006 and 27Jul2006

This briefing note for the Chatham House FLEGT Update Meeting in July 2006 reports interim findings from fieldwork in Suriname (June-July 2005) and Guyana (June-July 2006). The study on “Slippage” between Government law/regulation/policy/strategy/procedures and actual practices shows widespread failures and extensive corruption. Findings reported here are based mainly on confidential, semi-structured interviews, triangulated (cross-checked) amongst many stakeholders.

Necessarily, much of what is here summarized is in the nature of allegations, unsupported by civil or criminal court proceedings; although some clearly should be the subject of prosecutions and would be if there was political will and if corruption was not so pervasive and interlocking.

Countries and enterprises seeking to demonstrate that their timber production is entirely legal will wish to avoid the situations mentioned below. The following list is by no means exhaustive; we anticipate finding yet more kinds of problems as the fieldwork continues.


Outright illegality

1.1. “Landlording concessions”. This means renting out forest harvesting concessions when the original concessionaire finds it technically impossible to operate a log harvest or financially more profitable to get someone else to do the work. Landlording differs from contracting in that all effective management decisions are taken by the renter. This practice is illegal in most countries, because unworkable concessions should be returned to the national forest service for re-allocation according to transparent and competitive procedures, or returned to the strategic forest reserve.

1.2. Logging outside the boundary of an allocated concession. Sometimes this may be accidental because procedures for boundary demarcation have not been followed.

1.3. “Washing” illegally felled logs through special areas to avoid area-related fees. Examples are using areas under mining leases (where all the residual forest will in due course be bulldozed and burned) and areas free of area charges because they are titled to indigenous communities. The illegal logs may not physically be moved through such areas, only the records manipulated to imply that they come from these areas.

1.4. Mis-declaration of timber names to avoid specific bans on felling protected species, and to reduce royalties by “baptizing” the logs with the name of a less expensive timber.

1.5. Declaring logs of protected species to have originated from road construction clearing when actually they have come from interior compartments.

1.6. Re-using timber tags which have not been properly cancelled, retrieved or destroyed by national forestry authorities.

1.7. “Freshening the stump”: cutting a slice off the top of a tree stump together with the original timber tag, and fixing another timber tag so as to “wash” logs actually felled elsewhere.

Against policies and strategies

2.1. (Arbitrary) allocation of forest harvesting concessions in the absence of a Strategic Allocation Plan, even when the latter is required in the National Forest Plan.
2.2. Uncontrolled raw log exports by enterprises which enjoy Foreign Direct Investment concessions, such concessions having been granted on the promise of local processing of logs, training of nationals and purchase of local services.
2.3. Uncontrolled or under-taxed raw log exports when government policy favours value-adding national secondary and tertiary timber processing.
2.4. Brokering by government agencies of timber harvesting contracts in small scale concessions and on indigenous lands for the benefit of larger scale enterprises.

Against procedures
3.1. Offering forest harvesting concessions without public advertisement and open competition.

3.2. Delaying the issue of the actual licences for forest harvesting concessions even though all formal procedures have been satisfactorily completed.

3.3. Mis-allocation of timber tags and timber transport permits such that timber appears to have come from one area when it actually originated in a different area and (possibly) was illegally felled anyway.

3.4. Failure to issue sufficient transport permits for timber originating free of area charges from indigenous titled land. This implies that a “bank” of transport permits (and/or timber tags) is built up secretly to aid the washing of illegally logged timber.

3.5. Using timber tags outside the original designated period. Sometimes this occurs because of months-long weather-induced delays in extraction from stump to mill.

3.6. Arbitrary assignment of numbers of timber tags to mixed loads of chainsawn lumber from scattered trees.

3.7. Under-invoicing of timber volumes for internal transport, to reduce freight charges and taxes.

3.8. Under-invoicing of timber exports which are subject to export duties and taxes.

3.9. Use of duty free or reduced duty concessions under Foreign Direct Investment for areas outside the forest area to which the FDI agreement applies.

3.10. Underuse of barcode readers of timber tags, so concealing the actual marketing chain from stump to mill or export, and potentially failing to record the passage of quantities of illegal timber.

3.11. Failure to have enough functioning barcode readers to permit the intended computer-assisted reconciliation of forest production records from stump to mill or stump to export.

3.12. Failure by government agencies to monitor field use of timber tags on stumps and logs, and of transport permits; so allowing tags and permits to circulate as currency for illegal logging.

Commentary
Our interviews were remarkable in revealing how many stakeholders were deliberately engaged in doubtful or illegal practices. Our interviewees felt that the ways in which the government systems actually worked made legitimate business uncompetitive with forest piracy. Several stakeholders regretted the prevalence of illegalities. They were insistent that government agencies should be more transparent and should be held more accountable.

However, in the Guiana Shield countries, Parliamentarians have weak or no relation to geographic constituencies; Parliamentary Select Committees do not have a Westminister ability to scrutinize government agencies; and civil society is relatively weak and powerless to force remedial action from the political “party-in-power”. Secretive political parties provide cover for venal and corrupt practices. Non-transparent FDI agreements negotiated at Cabinet level and unpublished, poorly monitored and not held to account, tilt the business playing field against legitimate operators.

Some of these illegal operators volunteered strong feelings about the need for sustainable forest harvesting and the provision of forest-based livelihoods for their children and future generations. The same illegal operators acknowledged that at least some of the problems were caused by the high rate of staff loss from government agencies through migration to Canada and the USA (for Guyana) and to The Netherlands (for Suriname). Training programmes are not sufficient in volume or continuity nor are salaries sufficiently competitive to compensate for this high turnover.

If forest resource access charges (forest pricing) were raised to Malaysian levels (they are about one-twentieth of Malaysian charges) and if fees and taxes were actually collected in full by the government agencies, then government salaries could be raised to competitive levels. One may speculate why large FDI-supported forest concessionaires are allowed to remain hugely indebted to government while small-scale operators are fiercely pursued for small debts.

Guyana rated a poor 2.5 out of 10 on the corruption perception index of Transparency International in 2005. This rating ranks Guyana at 117 out of 158 countries surveyed.

A more detailed interim report will be offered to the FLEGT website of Chatham House/RIIA later this year after more fieldwork.

[27Jul2006]

Extract from GoG brochure “Statement on sustainable forest management in Guyana”, February 2006

QUOTATION
Also in year 2000 the GFC introduced the Log Tracking System to verify the origin of raw material and to control the level of harvesting within State Forests.

Guyana is probably the only country in the world with a complete national log tracking system. Forest produce originating from Guyana and used in any part of the world can be traced directly to the stump of the tree the wood was taken from.

The log tracking system provides detectable evidence on the legitimacy, location and magnitude of forest operations and is currently applied to all forestry operations including State Forests, Amerindian Reservations and Private Properties. It is linked to a Quota System which is an initiative to control the volume of produce harvested. The log tracking system is regulated by the use of Log Tags which are assigned to all concessionaires at the commencement of each year operations free of charge. An operator’s quota is calculated based on the sustained yield of the forest area which considers variables such as felling cycle, felling distance and minimum girth. The quota is equated to the number of standing trees which will yield the volume and the number of trees computed indicates the number of tags to be issued (one tag is equivalent to one tree). Each operator is allocated a number of tags equivalent to his sustained yield and is recognized by a unique sequence of numbers assigned to that operations. Log tagging is done at stump where half of the tag is affixed to the stump at the time of felling and the other part bearing the same sequence of numbers as recorded on the stump tag is affixed to the produce being conveyed. All forest produce including logs, lumber piles, poles and posts are tagged. It is the unique number of tag assigned that indicates who the operator is and therefore is able to indicate the geographic origin of the forest produce within the forest estate.

Buyers of timber and other forest products from Guyana can be assured that these products originate from forests that are being managed sustainably utilizing the best forest management practices supported by quality scientific information. Etc.
END OF QUOTATIONS

Once I was on a flight to Asia from the US and I ran into a couple of people on their way to Asia to buy logs for Kmart's furniture making department. I asked them why go all the way to Asia and why not to South America - countries like Guyana. They stated the log tracking system in Guyana was not up to standard and Kmart refuses to do business with countries that do not have proper accounting systems. Although I wonder if they were on their way to Malyasia to buy logs which were originally felled in Guyana?