Guidance provides clarifications and reveals potential loophole in the EU Timber Regulation

How to assess risk

Some of the guidance centers on the understanding of specific words used in the regulation, such as ’negligible risk’. EU confirms the understanding that ’negligible risk’ exists when all relevant risk factors have been assessed and no grounds for concern have been discovered in the process. As such, there is no concrete or measurable threshold defining ’negligible risk’, owing to the complexity of the issue.

Among other points of clarification, EU confirms that documentation should be treated with caution. The basic principle is that ”there should be well founded confidence that the documents are genuine and reliable”. In many cases, this implies that the documentation must be verifiable.

The complexity of products and supply chains is also highlighted as a key factor in risk assessment.

Complexity factors include the number of timber sources, species in a product, traders and middlemen, and countries that the product passes through before it arrives into the EU.

The potential use of certification and verification schemes in risk assessment and mitigation is given a thorough treatment, without changing the message already contained in the EU Timber Regulation itself: such schemes may be used as important indicators of compliance, however their exact scope and level of credibility define their usefulness in this context (see our latest article on this subject).

The guidance includes an annex describing specific scenarios. These are very helpful for illustrating specific points of interpretation within a realistic context that operators are able to recognise.

Can non-EU companies be liable?

”By and large, the guidance document confirms our interpretations used for NEPCon’s LegalSource programme and certification standard”, comments Christian Sloth, Forest Legality Programme Manager at NEPCon.

However, the section clarifying what it means to ”place the product on the market” contains information that could open a loophole in the regulation. Mr Sloth: ”It is worrying that non-EU based companies can be classified as operators under certain conditions”.

Mr Sloth is referring to a scenario referenced in the guidance document (scenario 5 in Annex 1). Under this scenario, a non-EU based supplier becomes an ”operator”, while the EU-based buyer is not considered an operator and is thus not liable under the regulation:

A EU based timber merchant H buys particle board online from supplier L, who is based outside the EU. Under the contract, ownership only transfers when the particle board is delivered to timber merchant H’s yard in the UK. Shipping agent J imports the board on behalf of supplier L and delivers it to timber merchant H’s yard: - supplier L becomes an operator when his agent J imports the particle board into the EU for distribution in the course of L’s business. Shipping agent J is merely acting as a ‘postman’; as an agent, he is merely transporting goods on behalf of supplier L and so does not place them on the market himself.

”In essence, this scenario seems to describe a set-up which would in principle place obligations on entities outside EU. This would make enforcement of the regulation virtually impossible”, comments Mr Sloth.”Realistically, non-EU based suppliers will hardly be prosecuted under the regulation. Under this set-up, it is unlikely that any of the organisations involved will be penalised for violations. We know that the EU is aware of the issue and hope that this part of the guidance will be amended in the forthcoming final version of the guidance". 

It is expected that EU will release the final version of the guidance in January 2013.