Status of Timber Legality Verification by Business Entities in China

Commissioned Report

In China, the verification of the legality of procured wood has mainly been voluntary, with businesses exporting wood products to Europe and the U.S. conducting their own checks. However, since the revision of the Forest Law in 2019, the procurement, processing, and transportation of clearly illegally harvested wood is now prohibited, and violators will face penalties. In this context, we conducted a survey of 72 timber-related businesses in China to understand the current status of legality verification.

Almost all businesses responded that they have established a due diligence system regarding the legality of their procured wood, maintained a standing book of the entry and exit of raw materials and products, and requested legality certification documents from their suppliers. While nearly half of the businesses obtained legality certification documents for all of their procurement volume, there was no significant difference between imported and domestic timber, or between businesses selling on domestic or overseas markets. Moreover, for both imported and domestic timber, the most common reason for obtaining legality certification documents from suppliers was to comply with domestic laws and regulations, such as the 2019 revision of the Forest Law. This suggests that as of 2022, China's domestic laws and regulations are the primary driver for businesses to confirm the legality of their wood.

Based on these findings, it is possible for businesses importing wood products from China to assume that their suppliers are obligated not to handle illegally logged wood, regardless of the type of wood or main sales destination. Moreover, it is possible to reduce additional costs and efficiently confirm legality by confirming how suppliers comply with the revised Forest Law's Article 65. On the other hand, the Chinese government and business may prioritize their own standards (e.g., stable supply of timber to China) in terms of what items and tree species they require to meet what legality standards (rather than those of their suppliers). Thus, it is necessary to check for any differences between their standards and those of their Chinese suppliers.

Furthermore, 60-70% of both imported and domestic timber businesses faced difficulties in obtaining legality certifications, and many were trying to secure legality by changing suppliers or investing upstream in the supply chain. Therefore, sustainable procurement of legally secured timber is possible by understanding the situation of Chinese suppliers and, if necessary, supporting their efforts to ensure legality when importing timber products from China.