Timber - Papua New Guinea | Preferred by Nature

Timber Risk Score: 3 / 100 in 2017. The Timber Legality Risk Assessment contains an evaluation of the risk of illegality in Papua New Guinea for five categories and 21 sub-categories of law. We found:

Specified risk for 19 sub-categories.
Low risk for 0 sub-categories.
No legal requirements for 2 sub-categories.

This page provides an overview of the legality risks related to timber produced in Papua New Guinea (PNG).

PNG has 33.6 million hectares of forested land, which covers 73% of the country (FAO, 2015). More than 90% of the forested area is primary or naturally regenerated forest, making it one of the most intact forest ecosystems in the world. The PNG forest industry produced about 5 million m³ logs in 2014, of which 74% was exported as roundwood (ITTO, 2015).

Illegal forestry practices are widespread in PNG and a key driver of deforestation. Available information (including independent reviews commissioned by the government, and surveyed views of private sector experts) suggests that the majority of timber production in PNG is illegal in some way (Lawson, 2014). Separate reports have estimated that 70% of the wood supply is affected by illegal logging (Seneca Creek Associates and Wood Resources International, 2004; World Bank, 2006; Hoare, 2015).

Several legality risks are present in PNG timber supply chains. The risks are wide ranging and relate to legal rights to harvest, taxes and fees, timber harvesting activities, risk that the implementation of harvesting regulation is lacking, third parties’ rights, and trade and transport. If you are sourcing timber from PNG you should take care to ensure the extensive risks identified are not present in your supply chains, or have been sufficiently mitigated.

Corruption Perceptions Index

Score: 31 / 100 in 2021

Rank: 124 out of 180 countries in 2021

Bans and restrictions

Export bans: 1) Round logs for selected species since 1990. 2) Logs from concessions granted after 2010 (Logs can be exported from concessions granted before 2010).

Armed conflict

There are currently no armed conflicts in Papua New Guinea according to the Council on Foreign Relations' Global Conflict Tracker.

According to the Uppsala Conflict Data Program there were 57 deaths from 2010-2017.

CITES species

CITES appendix II: Aquilaria tomentosa, Dalbergia spp..

Certification

FSC Certified Forest Area: 15,016 hectares (4 December 2019).

Information Gathering

Timber sources

Find out the different sources of legal timber
Determine which source type your timber comes from

Timber source type	Description of source type
Natural forest - Forest Management Agreement (FMA)	Timber from a production forest (natural forest), accompanied by a Timber Permit issued by the Minister for Forests to the timber operator with conditions outlined for a specific Forest Management Agreement Area or a Local Forest Area to carry out forest management activities including harvesting by the timber operator.
Timber Authority (TA)	Timber from produced under five specific timber authority arrangements: TA-01: harvesting of less than 5,000 cubic metres, within a 12 month permit validity period, timber is for domestic processing TA-02: harvesting of timber for road line clearance TA-03: harvesting of timber for clearing in preparation for agriculture or other land use TA-04: harvesting of forest produce other than timber TA-05: harvesting of timber from a plantation area. Only timber from TA-02, TA-03, and TA-05 can be exported in log form. For the purpose of this risk assessment, TA-05 is treated as a different source type.
Natural forest - Forest Clearing Authority (FCA).	Timber from a natural forest harvested under a FCA.
Natural forest - Timber Rights Purchase (TRP) – Timber Permit	Timber from production forests in natural forest, accompanied by a Timber Permit.
Natural forest - Local Forest Area (LFA).	Timber from a natural forest within a Local Forest Area
Plantation – Timber Authority – TA-05	Timber from a plantation under Timber Authority TA-05

Risk Assessment

Risk assessment summary

Legal rights to harvest	Risk that the state fails to gain the free prior informed consent of the customary landowners before timber rights are transferred from the landowners to the state Risk that corruption and bribery are involved in the issuance of all permits and licences, including concession licences Risk that management plans do not meet legal requirements and corruption is involved in their approval due to lack of proper monitoring and enforcement and Risk that enforcement monitoring of requirements relating to harvesting permits is not conducted
Taxes and fees	Risk that royalties are distributed to and within clans improperly Risk that log prices are undervalued to avoid export tax liability Risk that operational expenses are overvalued by using multiple companies and subsidiaries in logging operations to reduce income tax (natural forest only)
Timber harvesting activities	Risk that the Logging Code of Practice is not complied with Risk that protected sites (within Forest Management Agreement Areas) and areas are harvested, including by mapping forest management areas incorrectly Risk that environmental plans and environmental monitoring plans are not prepared or implemented Risk that health and safety requirements contained in the Logging Code of Practice, including requirements relating to camp hygiene, protective clothing and safety equipment, and equipment safety, are followed Risk that employment requirements are not followed, including those related to: Minimum wage and maximum working hours Child labour Workplace discrimination Forced labour Illegal migrant workers Rights to strike and freedom of association
Third parties' rights	Risk that obligations to deliver basic infrastructure (e.g. health, education facilities) to communities are not complied with Risk that the state fails to gain the free prior informed consent of the customary landowners before timber rights are transferred from the landowners to the State, especially under old timber right purchase arrangements Risk that customary ownership is not recognised
Trade and transport	Risk that documents related to export volumes and species are falsified Risk that taxes are avoided through underpricing and transfer pricing Risk that corruption is involved in the issuance of export permits Risk that CITES implementing legislation is not complied with, and that CITES permits are issued improperly

Specified risk species

Common/trade name	Scientific name	Risk information
Agarwood	Aquilaria spp.	CITES listed
Ramin	Gonystylus macrophyllus	CITES listed

Risk Mitigation

Mitigate the risks in your supply chain

Learn which actions we recommended to mitigate the risks associated with the timber sources from Papua New Guinea

Source Certified Materials

NEPCon believes that third party certification (for example FSC and PEFC certification) can provide strong assurances of the legality of the products they cover. Companies seeking to mitigate the risks of sourcing illegal timber should seek to purchase third party certified materials wherever possible.

While the European Timber Regulation does not include an automatic “green lane” for certified products, it does recognise the value of certification as a tool for risk assessment and mitigation. The European Commission says that companies “may rate credibly certified products as having negligible risk of being illegal, i.e. suitable for placing on the market with no further risk mitigation measures, provided that the rest of the information gathered and the replies to the risk assessment questions do not contradict such a conclusion.”

For more information on using certified materials in your due diligence, including how to assess whether a certification system meets EUTR requirements, see the page on Certification and Due Diligence.

Mitigation recommendations

There are six recommended actions to mitigate the risks associated with timber sources from Papua New Guinea:

1. Fully map your supply chain

Our supply chain mapping tool can help you do this.

2. Obtain and verify documents

Tenure and management rights documents
- Land group incorporation certificates, with proper genealogy and property listing completed in compliance with the Land Group Incorporation Act 1974, amended 2009.
- Business Registration, issued by the Investment Promotion Authority, held by the timber business
- Registration as a Forest Industry Participant, a list of Forest Industry Participants kept by PNGFA Head Office
- Certificate Permitting Foreign Enterprise to carry out business activity, issued by the Investment Promotion Authority Timber business
- Forest Industry Participant Certificate held by the company
- For timber harvested under a Forest Management Agreement, the following are also required:
  - Environment Management Plan, approved by Conservation Environment Protection Authority. Timber Permit (for FMA or TRP), issued by the Minister of Forests, copies held by the PNGFA Head Office
  - Project Agreement, approved by Finance Minister
  - Forest Management Agreement, certified by Provincial Management Committee, singed by landowners through Incorporated Land Groups, endorsed by National Forest Board, signed by the Minister for Forests on behalf of PNG Forest Authority. A copy is held by the PNGFA Head Office and the timber business
- For timber harvested under a Timber Authority, the following are also required:
  - Sales and Purchase Agreement between the company and the customary owners
  - Timber Authority, issued by the Chairman of the PFMC after approval from the National Forest Board
- For timber harvested under a timber license, the following are also required:
  - Timber License, issued by the National Forest Board
- For timber harvested under a Forest Clearance Authority (FCA), the following are also required:
  - Forest Clearance Authority
  - Environment impact statement by the DEC
- For timber harvested under a Timber Rights Purchase (TRP) Agreement, the following are also required:
  - Timber Rights Purchase (TRP) agreement, held by the PNGFA Head Office ad the timber business
  - Timber Permit (for FMA or TRP), issued by the Minister of Forests, copied held by the PNGFA Head Office
- For timber harvested under a Local Forest Area (LFA) agreement, the following are also required:
  - Local Forest Area (LFA) agreement, approved by the Minister of Forests, copy held by the PNGFA Head Office
  - Copies of all ILG Certificates relevant for the forest area in question
  - Constitution of each ILG
  - Dispute settlement mechanism exists within the constitution of the ILGs
  - For FMAs, obtain a record of the consultation showing a 75 per cent consensus, this may be obtained from the PNGFA. Ask for minutes of consultation from the policy and planning – FMA signing meeting minutes are taken.
Forest management documents
- 5 year Forest Managment Plan approved by the MD and annual logging plan approved by the PNGFA for the FMU where the harvesting is taking place.
- Maps showing harvesting areas (in compliance with the harvesting plan)
- Forest management plans and harvest plans containing all legally required information (consistent between the documents) and procedures
- Annual Logging Plan authorized by PNGFA as per the Forestry Act (for concessionaires)
- Operational Set-up Plan (harvesting plan) authorized by PNGFA as per the Forestry Act (for concessionaires)
Tax related documents
- Receipts for payments of harvesting related royalties, taxes, harvesting fees and other charges.
- Sales and transport documents. Check that volumes, species and qualities match the royalties and fees paid
- Sales documents. Check they include applicable sales taxes and that prices are in line with market prices.
- Audited financial statements
Trade and transport documents:
- All required import and exports permits
- CITES permits for CITES-listed species

3. Consult with stakeholders

Customary owners and members of the ILG confirm validity of the process for forming and registering the ILG
Customary land owners confirm consent to harvest has been given
Landowners confirm proper distribution of royalties
Financial authority confirms all required income, profit and sales taxes have been paid
Confirm that Planning, Monitoring and Control Procedures for Natural Forest Logging Operations under Timber Permit (1995) (referred to as the PMC Procedures) are being enforced properly by the project officers
Staff and contractors confirm that legally required protection equipment is provided and used by relevant people
Staff and contractors confirm that people are employed legally

4. Carry out on-site verification

Confirm that the forest management plan has been approved according to legally prescribed process
Confirm that harvesting is conducted within the authorised boundaries and not where prohibited
Confirm that the Logging Code of Practice (LCOP) is being complied with during the harvesting process
Confirm that the Five Year Forest Working Plan, Annual Forest Working Plan and Set-up plans are in place, and have been verified in accordance with the law
Confirm that the Planning, Monitoring and Control Procedures for Natural Forest Logging Operations under Timber Permit (1995) (referred to as the PMC Procedures) are being enforced properly by the project officers
Confirm that health and safety regulations are followed
Confirm that products (species, quantities, qualities etc.) are classified correctly on sales documents, custom declarations and other legally required documents
Confirm that your material matches what has been invoiced and marked

Note: Retrospective verification of the validity of a permit allocation process to reduce the risk of corruption and bribery is not possible. Independent 3rd party verification of a secure supply chain is the only way to mitigate this risk.

5. Conduct targeted timber testing on samples of purchased materials

Conduct timber testing on samples of purchasd material to verify the species or origin of timber, where appropriate

6. Avoid / do not buy

Avoid products that include materials bought at spot- and/or open-markets

Profile Publication Date

2017-11-01

Papua New Guinea Timber Risk Profile

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