Following the teak: Companies are using convoluted routes to bring EUTR non-compliant timber into the European Union. A September 2020 Update

Forests Sep 30, 2020
Marigold Norman and Jade Saunders

European imports of teak sawnwood from Myanmar are still on the rise, even as timber imports overall are down due to COVID-19. The high-value wood, widely reported to be illegally extracted in the last remaining forest frontiers of the Mekong, is feeding an ongoing appetite from the yachting industry despite a damning report from the Environmental Investigation Agency (EIA) in May 2020 and a longstanding common EU-wide enforcement position (“common position”) that such imports cannot comply with the requirements laid down by the EU Timber Regulation (EUTR) to prevent illegal timber from entering EU markets.

In 2018, EU Member State enforcement authorities and the European Commission (EC) concluded that importers should refrain from placing teak from Myanmar on the European market. In the last six months, moreover, the COVID-19 pandemic has depressed overall imports of topical sawnwood by nearly 20 percent. But not from Myanmar. Forest Trends analysis reveals that, in the first six months of 2020, imports of such timber from Myanmar were 10 percent higher than the same period in 2019.

As Forest Trends reported in May, imports of this non-compliant timber are shifting away from countries that are enforcing the common position effectively. In fact, in 2020 just seven Member States are responsible for the Myanmar teak still entering the European market – but their imports have continued unabated or even increased, fueling the overall increase in EU-wide imports.

New entry points into Europe are currently emerging as others are shut off by enforcement officials, reflecting an inconsistent approach to the EUTR between Member States. Since our May update, for example, Forest Trends has detected rapidly increasing volumes of tropical sawnwood (likely teak) from Myanmar newly available on the single market after entering through Poland.

We break down the data to show where this non-compliant timber is entering the EU and reveal the onward trade to Germany, Belgium, and the Netherlands – countries that have all but wiped out direct imports of teak sawnwood through a number of enforcement actions designed to prevent such timber being placed on the EU market.

Where is tropical sawnwood from Myanmar still entering the EU?

Imports into Poland rose a dramatic 385 percent compared to the first six months of 2019, marking the country as a new entry point into the EU for Myanmar tropical sawnwood, responsible for 5 percent of all such imports. Forest Trends analysis suggests that this timber is traded on to Germany and the Netherlands.

Italy remains the EU’s biggest importer of tropical sawnwood from Myanmar, accounting for 73 percent of imports so far this year. The country shows no sign of slowing such imports, with imports up 22 percent compared with the first six months of 2019, and despite the Italian enforcement authorities issuing at least 30 financial penalties to importers of Myanmar timber between 2017 and 2019.

Croatia has imported 7 percent of the EU’s Myanmar tropical sawnwood in 2020. In May, Forest Trends reported on an EIA investigation, identifying six European companies that continued to import Myanmar teak and circumvent EU law by buying from a Croatian importer. Despite this company now being under investigation by the enforcement authorities, imports into Croatia have continued unabated in every month of 2020.

Greece is the entry point for 7 percent of the EU’s Myanmar tropical sawnwood in 2020, though imports were down compared with the first six months of 2019. Forest Trends’ analysis suggests a significant onward trade, primarily to Germany (50 percent) and Belgium (25 percent).

Swedish imports of tropical sawnwood from Myanmar are up 50 percent compared to the first six months of last year, leaving Sweden responsible for 6 percent of all such timber entering the EU. This trade continues despite the enforcement authority issuing a letter to all importers at the start of 2020, notifying them of the common position and that this timber cannot comply with the EUTR.

Further Forest Trends analysis reveals that Sweden has traded over 600,000 kilograms of teak (roughly 1,800 cubic meters of Round Wood Equivalent), primarily to two EU Member States in 2020: the Netherlands (89 percent) and Germany (11 percent).

Of the seven member states to import teak from Myanmar so far this year, Spain and Portugal import the lowest volumes, collectively accounting for 3 percent of total EU wide imports in 2020.

Action Taken by the EC and the European Anti-Fraud Office

Discussion at the June 2020 European Commission Expert Group for the EUTR indicates that the EC is taking action to address some of the challenges exposed from the continuing imports.

Minutes from the meeting show that the European Anti-Fraud Office (OLAF) opened a Myanmar investigation in March 2020 in response to intelligence received from the United Kingdom. This investigation focuses on one company, principally importing via Italy.

The minutes also show that OLAF received a proposal for cooperation from several Member States and has expanded the scope of its investigation in response. OLAF has also sent out a new mutual investigation assistance invitation to Member States’ customs agencies requesting that they pay special attention to timber from Myanmar and EUTR circumvention by false declaration of origin, for example.

In addition, OLAF has asked Member States to report their imports from Myanmar since 2018. Once reports are received, OLAF is expected to provide enforcement authorities with analysis as well as recommendations for action, which might include joint inspections or field inspections in Myanmar. In the meantime, OLAF expects further collaboration with INTERPOL on this issue.

Next steps

These steps by the European Commission and OLAF are all to be welcomed but, as the European Commission is undertaking a Fitness Check of the EUTR, there is an opportunity to consider what is working as well as priorities for reform. As such, it is time to: 

  1. Improve communication of the common enforcement positions so that these are clearly published as standalone documents on the EC’s Timber Regulation website alongside country overviews and guidance documents and communicated to industry associations. While there have been recent improvements in publishing clear conclusions and guidelines relating to the common enforcement position on timber sourced from Brazil, this needs to go further to clearly list all the agreed upon common positions, details of the position, and the common expectations on importers irrespective of the Member State entry point into Europe.
  2. Strengthen requirements on traders. The EUTR only provides significant powers to enforcement officials in those countries where the timber is first placed onto the European single market. This means that officials in countries to which non-compliant timber is subsequently transported have little power to act under the EUTR. Making supply chains subject to enforcement in both the country where the timber was first placed onto the single market and all EU Member States where the timber is subsequently traded would level the playing field and close this loophole for companies deliberately attempting to circumvent the law.
  3. Require detailed, species level reporting of trade data at a level of granularity that allows effective tracking of high-risk and potentially non-compliant timber. In this case, all timber imported from Myanmar is non-compliant and therefore easy to trace, particularly because some species-level reporting categories exist primarily for logs, sawnwood, veneer, and plywood. However, it is much more challenging to track other specific high-risk products using the current reporting categories for trade data reported by EU Member States and published on Eurostat. It is vital that more species level data is both captured and reported at the European level to monitor other high-risk woods entering the EU.

The European Commission ultimately needs to review the consistency of powers and penalties applied across Member States and needs more powers itself to tackle inconsistent enforcement approaches and anti-competitive behavior.

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