The Company Director of Heartlands Furniture (Wholesale) Ltd, a UK furniture importer based in the West Midlands, pled guilty to two criminal offenses under the EU Timber Regulation (EUTR) on September 20th 2019 at Birmingham magistrates court.
Similar to several other prosecutions under the EUTR across Europe in recent years, the Heartlands Furniture’s offences reflected:
- Non-compliance with a February 2017 Notice of Remedial Action (NRA) that had been issued by the UK Competent Authority (government agency responsible for enforcing the EUTR in the UK). The NRA had set out a number of improvements for two product lines which would be required for the company to be EUTR-compliant;
- Failure to exercise due diligence when placing two products on the EU market in October and November 2017. The two product lines were a Brazilian Pine Corona bed frame imported from Brazil and an American Oak Stirling glass fronted cabinet imported from Vietnam.
The EUTR sets out two specific requirements on importers which include:
- Prohibiting importers from placing illegally harvested timber on the EU market, and
- Requiring importers to exercise due diligence to consider whether there is a high-risk that illegal timber can enter their supply chains. Adequate due diligence involves assessing the prevalence of illegal logging in a source country, the history of company compliance, prevalence of fraud and corruption, the accessibility of official information, and/or the potential association with armed conflict which is frequently associated with natural resources, including timber, in developing countries.
The UK Competent Authority used the due diligence requirements of the EUTR to prosecute, as Heartlands Furniture had essentially failed to establish the necessary systems to be able to tell if the timber was legal for the two product lines.
This case thus further clarifies the expectations on importers and the requirements around due diligence. It also demonstrates that enforcement action is evolving, with compliance failures increasingly leading to prosecution across Europe.
Enforcement starts to ramp up with information and guidance on compliance now widespread
Competent Authorities have phased enforcement actions over the six years the EUTR has been operational. Initially, importers were given time to understand the requirements and opportunities to make improvements after initial agency notifications of non-compliance such as NRAs. The extended time frames provided to importers allowed them to build their compliance capacity, but also allowed prosecutors to justify sanctions when companies continued to fail or respond inadequately to notifications.
Today, in 2020, after six years of implementation, the industry has significantly greater understanding and guidance on what is required when importing timber into the EU. The European Commission has published a wealth of information and additional guidelines related to due diligence, sourcing risk, and enforcement action which together further clarify what importers are expected to do to prevent illegal timber entering European markets.
It is no surprise that Competent Authorities in the UK and across Europe are targeting furniture importers in their enforcement checks. Guidance produced by the European Commission suggests that furniture products made of multiple parts are high-risk due to the complexity of their supply chain.
Competent Authorities in general recommend that if importers cannot mitigate the risks of illegal timber entering their supply chains to the required “negligible level”, they should not import that product, switch suppliers, and/or research alternative products.
In addition to the guidelines and information provided to importers, the Commission and EU Member States have also developed a common enforcement position for imports from Brazil, Myanmar, and Ukraine. The enforcement position developed for Brazil, for example, quite clearly declares that risk is not “negligible” and that importers therefore need to mitigate the risk, specifically using independent third-party verification complemented by further mitigation measures (laid out in detail in a recent summary notes from a Commission Expert Group).
Given the widespread information now available to importers, and the early phases of outreach and warnings which has given companies time to comply, enforcement officials now expect a strong level of compliance.
Increasingly, enforcement will be conducted with science and technology
Enforcement officials are increasingly using new technologies to test the validity of document claims, which will likely facilitate and lead to more prosecutions and guilty pleas. Scientific testing is the only way to authenticate the species and location of harvest listed in supply chain documentation, and thus, is a critical indicator of whether a due diligence system is effectively managing the risk of buying illegally harvested wood.
This surge in interest among enforcement authorities has been a response to growing evidence of fraud and mismanagement in traceability systems in the forest sector, with a recent study showing 62% of tested products available on the US market had one or more fraudulent claim.
New data collected by Forest Trends shows that 53% of EU member states are already using scientific testing in enforcement of timber trade legislation. This figure is expected to rise to 93% by 2024. Given the high degree of failure identified in the sample described above, it is advisable that importers use scientific testing of species and origin as part of their risk mitigation measures for high-risk supply chains to ensure that they do not place illegal timber on the EU market.
Setting a penalty precedent
An increasing number of prosecutions will likely set further precedent around EUTR penalties which are expected to be effective, proportionate and dissuasive. European Member States use the penalty regime of their national legislation which means that penalties and fines vary across the EU according to the Member State’s legal system. However, fines in general have been relatively low to date, and are unlikely to be high enough of a deterrent to prevent future EUTR infringements.
Heartlands Furniture, for example, was sentenced on December 4, 2019 and issued with two fines of £4,000 and ordered to pay full costs of £5,177.86 and a victim surcharge of £170.00 for the two offences. Heartlands Furniture must pay a total of £13,347.86 by January 18, 2020.
There is a clear need for greater consensus on what constitutes an effective, proportionate, and truly dissuasive fine under the EUTR. It is vital not to lose sight of the fact that due diligence requirements are there to prevent forest crime. By knowingly buying wood without tracing the supply chain back to source to check that the timber was legally harvested, importers also make European consumers unwittingly complicit in the ongoing illegal destruction of the world’s last remaining forests.
 Information related to this case was released to Forest Trends on October 21 2019 and December 19 2019 by the UK Department for Business, Enterprise and Industrial Strategy (BEIS) in response to two Freedom of Information requests under the UK Freedom of Information Act 2000 and the Environmental Information Regulations 2004.