A framework for differentiating legality verification and

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Dec 13, 2013 (3 years and 6 months ago)

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1


2

Final Report

3

Legal Forest Products Assurance

4

A framework for differentiating legality verification and
chain of custody schemes

5




31 MARCH

2010


Prepared for

Department of

Agriculture, Fisheries and Forestry

18 Marcus Clarke Street Canberra City ACT 2600

42807483




Framework for differentiating legality verification and chain of cus
tody schemes



Project

Manager:


……………………………

Kerri Rusnak

Senior Consultant

URS Australia Pty Ltd

Level 6, 1 Southbank Boulevard

Southbank VIC 3006

Australia

T: 61 3 8699 7500

F: 61 3 8699 7550

Project

Director:



……………………………

Blair Freeman

Project Director

Reviewer:



……………………………

John Tredinnick

Senior Principal

Date:

Reference:

Status:

31 March 2010

42807483/01/04

Final

Document delivery

URS Australia

provides this documen
t in either printed format, electronic format or both. URS
considers the printed version to be binding. The electronic format is provided for the client’s
convenience and URS requests that the client ensures the integrity of this electronic information is
maintained. Storage of this electronic information should at a minimum comply with the requirements
of the Commonwealth Electronic Transactions Act (ETA) 2000.

Where an electronic only version is provided to the client, a signed hard copy of this document
is held
on file by URS and a copy will be provided if requested.


Framework for differentiating legality verification and chain of custody schemes

4280
7483/01/04

i

Table of Contents

Executive Summary

................................
................................
................................
..

v

1

Intr
oduction

................................
................................
................................
.....

11

2

Overview of Schemes

................................
................................
.....................

13

2.1

Summary of schemes

................................
................................
....................

13

2
.2

Related initiatives

................................
................................
...........................

13

3

Assessment Framework

................................
................................
.................

19

3.1

Key elements

................................
................................
................................
..

19

3.2

Assessment criteria

................................
................................
.......................

19

3.3

Rigour and robustness

................................
................................
..................

21

4

Assessment of Schemes

................................
................................
................

23

4.1

Assessment scorecards

................................
................................
................

23

4.2

Assessment of schemes

................................
................................
................

33

4.2.1

Verification req
uirements
................................
................................
..............................
33

4.2.2

Audit requirements

................................
................................
................................
........
35

4.2.3

Governance arrangements

................................
................................
...........................
37

5

Synthesis of Findings

................................
................................
.....................

39

5.1

Legal origin

................................
................................
................................
.....

39

5.2

Legal compliance

................................
................................
...........................

40

5.3

Chain of custody

................................
................................
............................

40

6

Trade in Verified Products
................................
................................
..............

43

6.1

Traded products

................................
................................
.............................

43

6.2

Australian imports

................................
................................
..........................

43

6.3

Verified trade

................................
................................
................................
..

45

6.4

Initiatives impacting v
erified trade

................................
................................

49

7

Conclusions

................................
................................
................................
.....

51

7.1

Assessment of schemes

................................
................................
................

51

7.2

Guidance for timber importers

................................
................................
......

51

7.3

Capacity building initiatives

................................
................................
..........

52

8

References

................................
................................
................................
.......

55

9

Limitations

................................
................................
................................
.......

59

Framework for differentiating legality verification and chain of custody schemes


42807483/01/04

ii


Tables

Table 2
-
1

Selected legality and CoC schemes

................................
................................
...............

15

Table 2
-
2

Coverage of selected legality and CoC schemes

................................
...........................

17

Table 3
-
1

Assessment criteria for legality and CoC schemes

................................
........................

20

Table 6
-
1

Indicative value of verified wood and paper products, imported to Australia from selected
Asia
-
Pacific countries (2009)

................................
................................
..........................

47


Figures

Figure 1
-
1

Context for legality and chain of custody schemes for forest products

..........................

12

Figure 4
-
1

Assessment of verification requirements for legal origin

................................
................

34

Figure 4
-
2

Assessment of verification requirements for legal compliance

................................
.......

34

Figure 4
-
3

Assessment of verification requirements for chain of custody

................................
........

35

Figure 4
-
4

Assessment of audit requirements of legality schemes

................................
..................

36

Figure 4
-
5

Assessment of audit requirements for chain of custody schemes

................................
.

36

Figure 4
-
6

Assessment of governance for legality schemes

................................
...........................

37

Figure 4
-
7

Assessment of governance for chain of custody schemes

................................
.............

37

Figure 5
-
1

Assessment of legal origin schemes

................................
................................
..............

39

Figure 5
-
2

Assessment of legal compliance schemes

................................
................................
.....

40

Figure 5
-
3

Assessment of chain of custody schemes

................................
................................
......

41

Figure 6
-
1

Australia’s imports of wood and paper products from selected countries in the
Asia

Pacific

region (2008)

................................
................................
...............................

44


Appendices

Appendix A

Overview of schemes

Appendix B

Relevant studies of verification schemes

Appendix C

Assessment of selected schemes

Appendix D

Commentary on selected schemes

Appendix E

Trade volume imports to Australia

Framework for differentiating legality verification and chain of custody schemes

428074
83/01/04

iii

Abbreviations

Abbreviation

De
scription

AFCS

Australian Forest Certification Scheme

AFS

Australian Forestry Standard

ASEAN

Association of South East Asian Nations

CoC

Chain of Custody

CPET

Central Point of Expertise on Timber

DAFF

Department of Agriculture Fisheries and Forestry

DFA

Defined Forest Area

EU

European Union

FLEGT

Forest Law Enforcement, Governance and Trade

FMU

Forest Management Unit

FSC

Forest Stewardship Council

GFS

Global Forestry Services Inc

GFTN

Global Forest Trade Network

ISEAL

International Social an
d Environmental Accreditation and Labelling Alliance

ISO

International Organization for Standardization

ITTO

International Tropical Timber Organization

LPI

Lembaga Penilai Independen
(Mandatory legal compliance)

LC

Legal compliance

LO

Legal origin

LV


Legality verification

MLTV

Mandatory Legal Timber Validation

MoF

Indonesian Ministry of Forestry

MOU

Memorandum of Understanding

MTCC

Malaysian Timber Certification Council

MTCS

Malaysian Timber Certification Scheme

NGO

Non
-
governmental organisatio
n

ODI

Overseas Development Institute

PEFC

Programme for the Endorsement of Forest Certification schemes

PNG

Papua New Guinea

RAFT

Responsible Asia Forestry and Trade Programme
(USAID program)

RAP/
CoC

Requirements and Assessment Procedures for Chain
-
o
f
-
Custody Certification

R
CoC

Requirements for Chain
-
of
-
Custody Certification

SFM

Sustainable Forest Management

Framework for differentiating legality verification and chain of custody schemes


42807483/01/04

iv

Abbreviation

De
scription

SGS

Société Générale de Surveillance

SVLK

Sistem verifikasi legalitas kayu

(
Indonesia’s
Timber Legality Assurance System)

TFF

Tropical Fores
t Foundation

TFT

Tropical Forest Trust

TLAS

Timber Legality Assurance System (see
also
SVLK)

TLTV

Timber Legality & Traceability Verification

TTAP

Timber Trade Action Plan

UNFF

United Nations Forum on Forests

URS

URS Australia Pty Ltd, trading as UR
S Forestry

VLC

Verification of Legal Compliance

VLO

Verification of Legal Origin

VPA

Voluntary Partnership Agreement (under EU FLEGT programme)

WCS

Wood Control System

WTP

Wood Tracking Program

WWF

World Wildlife Fund


Framework for differentiating legality verification and chain of custody schemes

42807483/01/04

v

Executive Summary

Introductio
n

URS Forestry (URS)
was

engaged by the Department of Agriculture, Fisheries and Forestry (DAFF)
to
:

(i)

D
escribe existing legality verification (legality) and chain of custody
(CoC) schemes

that
are used to

verify

the
legality of

timber and wood products expo
rted to Australia from
producer countries in the Asia
-
Pacific region
; and

(ii)

Provide a framework

to differentiate schemes on the basis of the rigour and robustness of
their verification and auditing requirements and governance arrangements
.

The
outcomes
of t
he project
are intended

to assist importers and domestic producers
to
identify
schemes that have the capacity to provide
a level of

assurance

that timber products are from a legal
source. The level of assurance
required
should be
commensurate with the risk
s of products being
derived from illegally harvested sources
.

URS has developed an assessment framework through the distillation and synthesis of a broad range
of criteria and indicators for verifying legality. This framework applies equal weightings to
the
assessment criteria and indicators
.

A more definitive assessment of schemes would require direct
inputs from relevant schemes and a broad sta
keholder review of the proposed criteria and indicators
.
The URS framework can be used as the basis for further

engagement with government agencies,
timber importers, scheme operators and other stakeholders working to combat illegal logging within
the region. Key matters to be addr
essed to

support a finer differentiation of schemes would be to
consider the criteria

and the weightings applied to them.

Th
is
review covers

schemes that have the broader aim of certifying sustainable forest management
(SFM), but
has
focus
s
e
d

only on the principles and indicators relating specifically to legality
verification
requirements.

The assessment of broader forest management and sustainability aspects of
certification schemes was not included in th
e

review
.

Key

elements

and assessment criteria

Based on a review of selected schemes and other relevant studies, t
hree key elements of l
egality and
CoC schemes were identified
:



Verification
-

The specific

standards and other
requirements of the scheme against which the
legality of wood products or the
CoC

is assessed;



Audit

-

Auditor
requirements
and
the
processes for auditors to follow wh
en assessing whether
the
requirements of the scheme have been met; and



Governance



The s
tructure and processes for the
establishment
and ongoing management of
standard setting, verification and administration proce
dures
.

Using
these

elements
,

the
‘rigour’

and
‘robustness’

of
schemes were
defined
as follows
:



Rigour



The
coverage and depth of a scheme’s
processes and procedures for
verification

and

audit

requirements
; and



Robustness


The
capacity
of a scheme
to withstand external influences
and to

respond
to industry
dynamics and drivers for
improvement
in relation to its

governance
.

Framework for differentiating legality verification and chain of custody schemes

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42807483/01/04

vi

Assessment
framework

Assessment criteria
were developed
for each of the key elements
and these
are presented in
Table
1
.
These criteria
form the basis of

a

framework that importers and domestic producers can use as part of
their due diligence to minimise the risk of illegal timb
er entering their supply chain.

Table
1

Assessment criteria for legality and CoC schemes

Key element

S
cheme
s

Assessment criteria

Verification

Legal origin

Principle: Legal access and rights to harvest are clearly defined and
established



Legal

access
and harvest
rights are clearly defined and legally
established





Where required, operational plans are ap
proved by the appropriate
authority under relevant legislation and specify allowable or otherwise
regulated harvest levels




All royalties, fees and taxes properly due from timber production are paid
to land owners, local community and other entities

Le
gal
compliance

Principle: Rights to harvest and compliance in the conduct of forestry
operations are clearly defined and established

Same criteria as

for
Legal origin
,
plus




C
ompliance with all codes of pra
ctice for harvesting operations

and all
relevant

social and environmental legislation and regulations relevant to
forestry operation
s


Chain of custody

Principle: Auditable systems are in place for tracking and monitoring the flow
of wood products from the forest through the supply chain



The scheme req
uires s
ystematic processes to verify the ori
gin of
materials and ensure

valid documentation
matches nominated materials





The scheme requires

a
chain of custody system to track certified or
verified legal wood along the certification chain, using appropri
ate
inventory methods and documented controls





The scheme requires e
ffective controls to prevent products from
unverified
and potentially illegal sources from ent
ering the supply chain





The scheme has

a
defined policy for product labelling and processe
s for
managing associated product claims

Audit

All schemes

Principle:
Compliance with the scheme is audited regularly and the results
are publicly available



Compliance with all legality verification requirements is documented and
maintained for audit





S
takeholder consultation
is
undertaken
as appropriate
during the audit





Audit reports and certificate holder status
for the scheme are
publicly

reported

Governance

All schemes

Principle:
Robust standard setting processes are in place for verification and

audit and for management of non
-
compliance



The s
cheme
’s standard has been developed by a nationally or
internationally recognised standards authority





The scheme has been developed with broad stakeholder input




There is a clear basis for establishing
compliance and corrective actions
for non
-
compliance




A
uditors are independent third parties that are accredited by an
independent accreditation body

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vii

Assessment
of schemes

This framework
was

applied to existing legality and CoC schemes operating within
the Asia
-
Pacific
region. Under this framework, a scoring system was developed to compare the schemes and identify
key aspects of differentiation
.

For the purpose of this review, the assessment outcomes were grouped
into broad categories relating to the ex
tent to which the schemes provide a level of assurance that
timber products are from a legal source
.

Based on
the assessment framework developed in this
project

and

information currently available, the
following schemes ranked high
ly

against the criteria:


Rigour

Robustness

Legal verification



Australian Forest Certification Scheme
-

Sustainable Forest Management



Forest Stewardship Council (FSC)
Controlled Wood

Systems



FSC
Principles & Criteria for
Forest

Management



Société Générale de Surveillance
(SGS)

Ti
mber Legal
ity & Traceability
Verification



SmartWood Verification of Legal Origin
(VLO)

and
Verification of Legal
Compliance (
VLC
)



Australian Forest Certification Scheme
-

Sustainable Forest

Management



FSC Controlled Wood Systems



FSC Principles & Criteria f
or Forest
Management



Malaysian Timber Certification Scheme



Indonesia’s
Sistem verifikasi legalitas
kayu

(
SVLK
)

-

Timber Legality
Assurance System

Chain of custody



Australian Forest Certification Scheme


Chain
-
of
-
Custody



SGS

Timber Legality & Traceability

Verification



FSC
Chain
-
of
-
Custody standard



Malaysian Timber Certification Scheme


Programme for Endorsement of
Forest Certification (PEFC) Chain
-
of
-
Custody



SmartWood

Chain of Custody



Australian Forest Certification Scheme


Chain
-
of
-
Custody



FSC Chain
-
of
-
Custody standard



Malaysian Timber Certification Scheme


Programme for Endorsement of
Forest Certification (PEFC) Chain
-
of
-
Custody



Indonesia’s SVLK
-

Timber Legality
Assurance System



SGS
Timber Legality & Traceability
Verification


As legality verificatio
n and CoC schemes are evolving, it is expected th
e

assessment of

schemes will
change over time in response to market influences and continuous review and improvement
mechanisms.

Two broad conclusions can be drawn from the assessment against the criteria. T
hese are:



B
enefits of scale


the more

rigorous and robust schemes tended to be those which have the
resources to develop and implement audit procedures and governance structures that support the
implementation of schemes on the ground, including national
programs and well established global
frameworks such as the FSC and PEFC; and



I
mprove
ment of

audit

and governance elements



in broad terms,
verification requirements tended
to be stronger than the
auditing and governance requirements

across a range of sch
emes. This
indicates importers and producers may need to give particular attention to auditing and governance
requirements within schemes to minimise risks
that the

products are fr
om illegally harvested
sources.

Framework for differentiating legality verification and chain of custody schemes

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42807483/01/04

viii

Guidance for timber importers

The assessment

framework
developed in this review

can assist importers to complete a due diligence
assessment of the legal origin of timber and wood products.
T
he

key requirements for legality and
CoC schemes

are as follows
:

Key r
equirements for legality verification

Ke
y r
equirements for chain of custody

1.

The scheme’s standard
is

developed by or in
conjunction with a national or internationally
recognised standards authority;

2.

Auditors
are

accredited by an independent
accreditation body;

3.

Legal access and rights to harvest

are

clearly
defined and legally established;

4.

Where required, approval of management plans by
the appropriate authority;

5.

Compliance with all codes of practice for harvesting
operations, and all relevant social and
environmental legislation and regulations
relevant
to forestry operations;

6.

Stakeholder consultation during the audit process;
and

7.

Documented compliance with all aspects of the
legality verification scheme.

1.

The scheme’s standard
is

developed by, or in
conjunction with, a national or internationally

recognised standards authority;

2.

B
road stakeholder input is sought during the
development of the scheme
;

3.

Auditors
are

accredited by an independent
accreditation body;

4.

Systematic process
are in place
to
verify the

legal
origin of wood direct from the forest

through checks
on accompanying documentation
;

5.

E
ffective controls to prevent unverified wood from
entering the supply chain, such as a risk
assessment to identify wood from high risk sources,
and physical segregation of wood from high risk or
otherwise unv
erified sources
; and

6.

Product claims are used

in accordance with a
product labelling policy relating to claims on legality
verification
.


I
mporters
can use this framework to
identify the risks of products being derived from illegally
harvested

sources and
then

determine if available schemes provide an adequate level of assurance
that the product is from a legal source. Where available schemes do not address the risks

adequately, this framework indicates the additional information that importers would need
to obtain
from their suppliers to minimise the risks.

Trade in
legally
verified products

Knowledge of
the
volume and value
of trade
in legally verified timber and wood products
,

and the
rigour and robustness
of schemes
used to verify the legality of these

products
relative to total imports
,

is important to
effectively

combating illegal logging. However,
there is limited information available on
the
total
volume of legally
verified products.

In the absence of
this

information,
a methodology is proposed to
determine indicative values
based on
the p
roportion of the area
certified or verified legal product for

selected producer countries in the
Asia

Pacific region
. For each country and scheme, records of
forest

management
, legality and CoC
certificates were r
eferenced to identify the
product
groups
that have been
verified.
The legally verified
proportion of products imported to Australia was then determined by comparing the product groups
that have been verified within the exporting country to the products th
at are exported to Australia from
that country.

Using this proposed methodolog
y and trade value data from
Global Trade Information Service
s,
New

Zealand is estimated to be the largest exporter of verified materials to Australia, accounting for
an estimated

80% of the value of verified imports from Asia

Pacific countries. The next largest
exporters of verified materials to Australia are Malaysia

(14
%) and then Indonesia (3%)
, followed by
China, Thailand, Vietnam and Papua New Guinea
.

Framework for differentiating legality verification and chain of custody schemes

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yle in document.

42807483/01/04

ix

I
n total,
it

is estimate
d that around AUD549

million of verified wood and paper products were imported
from these countries into Australia in 2008
, representing
approximately
19
% of the total import value
from

the Asia Pacific countries of interest.

This analysis indicates there
is a large proportion of wood product imported from within the
Asia

Pacific region that is not covered by
certification or
legality verification schemes.
This does not
necessarily imply that these unverified products are from illegal sources. However, in

countries where
regulatory systems relating to the assurance of timber legality have limitations, further effort is required
to provide this assurance for Australian importers, producers and consumers.

C
apacity building

to
develop

legality and chain of cu
stody schemes

Initiatives that are likely to have a significant

impact
on
the extent
of uptake of
timber legality
verification
and
CoC

schemes w
ithin the
Asia

Pacific
region
in the future
include:



Voluntary Partnership Agreements implemented between produc
er counties and the EU;



US Lacey Act amendments and
EU
legislation

that ha
ve

been designed to establish
due diligence
requirements for operators to
implement
management systems that will minimise the risk of
importing or otherwise trading in

timber and woo
d products

from illegally harvested sources
;



Growing interest in
climate change mitigation, particularly reduced emissions through avoided
deforestation and degradation (
REDD
)

and the processes required to ensure credibility

of REDD
projects and emission r
eduction credits
; and



Increasing stringency of public and industry procurement policies

in consumer countries
.

Australia
may help focus efforts on the development and adoption of
timber legality verification
and
CoC

schemes

through
the above

initiatives
an
d
through capacity building programs and policy
leadership within the Asia Pacific region.
In addition to this report, p
rograms underway t
hat

facilitate
this contribution include the
Asia Pacific Forestry Skills & Capacity Building Program

(Phases I and II
)

and the development of an industry code of conduct designed to
assist importers to
identify illegally
logged timber and restrict its import into Australia
.

These initiatives will strengthen Australia’s policy
position on illegal logging and provide a cle
ar framework with
in

which Australia can engage directly
with other countries with shared interests in restricting the tr
ade of illegally logged timber.

This
assessment
suggests Australia
c
ould focus its
further efforts in
cap
acity building

on initiatives t
hat
will strengthen
auditing
requirements
and governance
associated with

timber
legality verification and
CoC

schemes
. This could include:



Governance roles within national or regional programs. For example, this may include:

o

Roles on
governing board
s

or ad
visory committee
s

for regional or national schemes or
initiatives with the purpose of developing
common
standards and governance systems; and

o

Roles on audit or compliance committee
s

responsible for overseeing the implementation of
regional or national sche
mes or initiatives, including the review of auditor accreditati
on and
compliance reporting;



Promotion of

the d
evelop
ment

and implement
ation of

a
uditor training programs, potentially through
an independent accreditation entity or facility
to
support
timber
and wood
product
legality
verification within the Asia Pacific region;

and

Framework for differentiating legality verification and chain of custody schemes

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42807483/01/04

x



Secretariat

functions for intergovernmental initiatives, to support the implementation of schemes
and facilitate the further development of coordinated initiatives across the region
.

Framework for differentiating legality verification and chain of custody schemes

42807483/01/04

11

1

Introduction

URS Forestry (URS)
has been

engaged by t
he Department of Agriculture, Fisheries and Forestry
(DAFF)
to

establish a framework that will assist importers and producers to differentiate

legality
verification (legality) and chain of custody (C
oC) scheme
s
. This framework can be used by importers
to
identify those schemes that have the capacity to address identified risks of timber and wood
products being derived from illegally harvested sources.

The
scope of the framework is intended to
cover

t
imber and wood products exported to Australia from
producer countries in the Asia
-
Pacific regio
n.
This review

also

discuss
es

the proportion of wood
products imported into Australia that are covered under
existing

schemes.

T
he common purpose of legality sc
hemes and CoC schemes is to provide an assurance of the legality
of timber and wood products to customers and other stakeholders
.

However,
the
scope of schemes
varies

depending on the criteria and verification processes specified. For the purposes of this
project
,
the scope of legality and CoC schemes is delineated as follows:



Legality schemes

relate specifically to verification of the legal status of timber and wood products
harvested from specified areas. This analysis encompasses two levels of legality:

Verification of
Legal Origin and Verification of Legal Compliance. These levels are defined as
1
:



Verification of Legal Origin (
VLO) verifies that producers have the right to access and harvest,
complying with the relevant timber harvesting laws and regula
tions. This includes possession of
required approvals and permits, adherence to production quotas and allowable species, and
that they have paid all relevant fees, charges, taxes and royalties; and



Verification of Legal Compliance

(VLC) verifies that lega
l origin has been demonstrated and that
producers have complied with all relevant local, national and international forestry,
environmental, social and labour regulations, codes of practice and conventions.



Chain of custody schemes

relate to
verification o
f the controls and systems implemented to ensure
the origin of ‘verified’ or ‘certified’ wood products is from legal sources. This is achieved by tracking
the wood products through all the steps in the process from the forest, through the various
manufact
uring and distribution stages and ultimately to the point where the final consumer
purchases the product, where claims of legal origin or compliance are made
2
.

The scope of this review includes schemes that have the broader aim of certifying sustainable fo
rest
management (SFM), but with a focus only on the principles and indicators relating specifically to
legality requirements. The assessment of broader forest management and sustainability aspects of
certification schemes was not included in this project.

Figure
1
-
1

outlines the scope of legality and CoC schemes for forest products, and their interaction in
the broader context of sustainable forest management initiatives. In this framework, VLO and VLC
assessments
relate to forestry operations within the ‘forest gate’, and the CoC extends from the forest
gate to the end consumer of wood products.

URS developed this assessment framework in consultation with DAFF, following an analysis of
existing schemes and a review

of recent and relevant studies relating to forest certification and legality
assessments. The framework is focussed on the key elements of schemes and the use of assessment
criteria to compare their rigour and robustness.




1

Based on definitions and descriptions of VLO and VLC by SmartWood (2007) and SGS (2009)

2

Crawford (2007)

Framework for differentiating legality verificati
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1


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12

The development of the framework
is described in Section
0
. Results of an assessment using this
framework for existing schemes are presented in Sections 4 and 5. An assessment of verified trade
from key producer countries is presented in Section 6.

Outcomes a
nd conclusions are presented in Section 7, with discussion of how the analysis and results
can be used by key stakeholders, including timber importers and policy makers. This section also
outlines the scope for Australia to assist further in capacity build
ing in key producer countries.

Figure
1
-
1

Context for legality and chain of custody schemes for forest products


Source
: Derived from SmartWood (2007) Generic Standards for VLO and VLC; and C
rawford (2007).



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2
S
ummar y of Schemes

Overview of Schemes

The legality and CoC schemes addressed in this analysis all operate within the Asia
-
Pacific region, for
the purpose of assessing and verifying legality and CoC for timber and wood products. All of
the
schemes use a detailed standard or defined set of principles and criteria.

Summary of schemes

A summary of schemes included in this analysis is set out in
Table
2
-
1
. This summary comprises brief
descriptions of the following
aspects of each scheme:



Owner


the proponent of the scheme;



Type



the coverage
of the scheme in terms of l
egality verification and CoC requirements;



Certificates issued



the number of certificates issued within the Asia Pacific region; and



Product scope



the forest and wood products that can be verified by the scheme.

Table 2
-
2 illustrates the scope of the schemes addressed in this analysis in terms of the extent of their
coverage across legality verification and CoC certification. Further information
on each of these
schemes is outlined in
Appendix A.

Related initiatives

T
here is a range of other programs and initiatives underway that relate to efforts to restrict illegal
logging and related trade. While excluded from this analysis, it is important to
recognise the role they

play in supporting the development of legality and CoC systems within the region.
These programs
and initiatives include:



Intergovernmental processes and agreements
, such as the United Nations Forum on Forests
(UNFF), International
Tropical Timber Organization (ITTO) policy and projects, and the European
Union’s (EU) Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan.
Bilateral
agreements formed under these processes, such as Voluntary Partnership Agreements (VPAs)
bet
ween the EU and producer countries, are supporting the further development of Timber Legality
Assurance Systems (TLAS) where VPAs
have been established;



National import legislation and regulations
, such as the US Lacey Act, and the proposed EU
due

diligenc
e regulations. Under the Lacey Act, timber importers are required to exercise ‘due

care’ to ensure timber legality. C
redible third party verification of legality or forest management
certification
can be used as one means of demonstrating this due care
.
The proposed EU
due

diligence regulations include requirements for member states to ensure that only legally
harvested timber and timber products are placed on the market
. This requires

employ
ment of
a

traceability syst
em and third party verification;



Gov
ernment timber procurement policies,

such as the UK Timber Procurement Policy and the
New

Zealand Timber and Wood Products Procurement Policy, specifying the purchase of legal
timber
with a preference or requirement for third party verification of legality
; and



Supply chain support programs
, which assist or facilitate industry members in verifying and/or
strengthening the assurance of legality in their supply chains. These include government and
industry sponsored programs such as the WWF Global Forest and
Trade Network (GFTN).

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Table
2
-
1

Selected legality and CoC schemes

Standard

Owner

Type

Certificates
issued

Product scope

ASEAN Timber Legality Criteria and Indicators

ASEAN and supporting regi
onal
partners

VLO/ VLC

In development

Wood based and non
-
timber forest products

Australian Forest Certification Scheme
(AFCS), Australian Forestry Standard (AFS)


Sustainable Forest Management
-

AS 4708

Australian Forest Certification
Scheme (AFCS)

VLO/
VLC

15

Wood based raw materials

AFCS CoC Standard
-

AS 4707


2006 Chain
of Custody for certified wood and forest
products

AFCS

CoC

142

Wood based raw materials, post
-
consumer
wood raw material

Certisource Legality and CoC Verification

Certisource UK

VLO
/ VLC/ CoC

18

Logs and sawn timber

Forest Stewardship Council (FSC) Principles
and Criteria for Forest Stewardship

FSC

VLO/ VLC

28

Wood based and non
-
timber forest products

FSC Controlled Wood Standard for Forest
Management Enterprises

FSC

VLO/ VLC

4

Woo
d based and non
-
timber forest products

FSC Standard for Chain of Custody
Certification

FSC

CoC

Not available

Wood based and non
-
timber forest products
from virgin and/or reclaimed materials from
wood/paper processing

Global Forestry Services (GFS) Requir
ements
on Legality (LVS
-
005)

Global Forestry Services

VLO/ VLC

Not available

Wood based forest products

GFS Guidelines on Requirements
-

CoC (WTP
-

005)

Global Forestry Services

CoC

14

Raw and processed wood products

Indonesia’s
Sistem verifikasi legalit
as kayu

(Timber Legality Assurance System)

Indonesian Ministry of Forestry
(MoF)


SVLK

VLO/ VLC/ CoC

In development

Wood based forest products

Malaysian Criteria and Indicators for Forest
Management Certification

Malaysian Timber Certification
Council (M
TCC)

VLO/ VLC

10

Wood based raw materials

Programme for Endorsement of Forest
Certification
-

CoC of Forest
-
based Products


Requirements

Malaysian Timber Certification
Council (MTCC)

CoC

6 in Malaysia,
plus 86 PEFC
CoC in region,
except Australia

Wood b
ased raw materials, post
-
consumer
wood raw material

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Standard

Owner

Type

Certificates
issued

Product scope

SmartWood Generic Standard for Verification
of Legal Origin

Rainforest Alliance SmartWood
program

VLO

8

Wood based and non
-
timber forest products

SmartWood Generic Standard for Verification
of Legal Com
pliance

Rainforest Alliance SmartWood
program

VLC

0

Wood based and non
-
timber forest products

Chain
-
of
-
Custody Standard for General
Applications

Rainforest Alliance SmartWood
program

CoC

Not available

Wood based and non
-
timber forest products

Société Gén
érale de Surveillance

(SGS)
Timber Legality and Traceability verification
(TLTV) (draft) Generic Standard

SGS

VLO/ VLC/ CoC

1

Timber production and timber processing (wood
based forest products)

Tropical Forest Foundation (TFF) Standard for
Legal Origin (
v.1.0) & CoC minimum
requirements

Tropical Forest Foundation

VLO/ CoC

6

Wood based and non
-
timber forest products

TFF Standard for Legal Compliance (v.5.0)
(Indonesia) & CoC minimum requirements

Tropical Forest Foundation

VLC/ CoC

0

Wood based and non
-
tim
ber forest products

Tropical Forest Trust (TFT) Wood Control
System (WCS), also known as “Chain of
Custody System”

Tropical Forest Trust (TFT)

CoC

59 members

Wood based and non
-
timber forest products

Source: Company information, October 2009


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Table
2
-
2

Coverage of selected legality and CoC schemes

SFM
VLC
SGS
TLTV
VLO
SGS
TLTV
COC
MTCS/ PEFC COC
SmartWood CoC
FSC
P&C
forest gate
GFS
WTP
AFSC
SFM
MTCS
AFCS
COC
Smartwood VLO
Certisource LVP
TFF
SLC
TFT
WCS
SVLK
Smartwood
VLC
+ Smartwood VLO
ASEAN
TCI
FSC
CW for
FMEs
GFS
LVS
Certisource LAC
FSC CoC
TFF
VLO
TFT
WCS
SVLK
TFF LV/RIL-COC
+ TFF
VLO


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3

Assessment Framework

Each legality and CoC scheme contains multiple criteria and indicators, which can make it difficult to
determine whether

particular schemes can adequately verify the legal origin of wood
-
based products.

To this end, an assessment framework has been developed to assist importers and domestic
producers to differentiate between legality and CoC schemes. This framework, present
ed below, has
been designed to assist importers to complete a due diligence assessment of the legal origin of timber
and wood products. Importers that identify risks of products being derived from illegally harvested
sources can use the framework to deter
mine if available schemes provide an adequate level of
assurance that the product is from a legal source. Where available schemes do not address the risks

adequately, this framework indicates the additional information that importers would need to obtain
from their suppliers to minimise these risks.

The most significant component of the framework is the distillation and synthesis of key elements and
common criteria and indicators for verifying legality. The key elements and assessment criteria
identified b
y URS in this review are set out below.

Key elements

Based on the review of selected schemes and other relevant studies (
outlined in
0
), three key
elements of legality and CoC schemes were identified.
These key elements are:



Verification

The specific standards or requirements of the scheme
against which the legality of wood products or the CoC is
assessed;



Audit

The audit processes employed to assess whether
requirements of the scheme have been met; a
nd



Governance

Structure and processes for standard setting and
management of the scheme.

Assessment criteria

For each of the three key elements, assessment criteria were derived from the review of selected
schemes and consideration of key aspects of diff
erentiation.

These criteria are presented in
Table
3
-
3
.

These criteria form the basis of a framework that importers and domestic producers can use as part of
their due diligence to minimise the risk of illegal timber entering thei
r supply chain.


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Table
3
-
3

Assessment criteria for legality and CoC schemes

Key element

Schemes

Assessment criteria

Verification

Legal origin

Principle: Legal access and rights to harvest are

clearly defined and
established



Legal access and harvest rights are clearly defined and legally
established





Where required, operational plans are approved by the appropriate
authority under relevant legislation and specify allowable or otherwise
regula
ted harvest levels




All royalties, fees and taxes properly due from timber production are paid
to land owners, local community and other entities

Legal
compliance

Principle: Rights to harvest and compliance in the conduct of forestry
operations are cle
arly defined and established

Same criteria as for
Legal origin
,
plus




C
ompliance with all codes of pra
ctice for harvesting operations

and all
relevant social and environmental legislation and regulations relevant to
forestry operation
s


Chain of custody

Principle: Auditable systems are in place for tracking and monitoring the flow
of wood products from the forest through the supply chain



The scheme requires systematic processes to verify the origin of
materials and ensure valid documentation matches nomi
nated materials





The scheme requires a chain of custody system to track certified or
verified legal wood along the certification chain, using appropriate
inventory methods and documented controls





The scheme requires effective controls to prevent produ
cts from
unverified and potentially illegal sources from entering the supply chain





The scheme has a defined policy for product labelling and processes for
managing associated product claims

Audit

All schemes

Principle:
Compliance with the scheme is aud
ited regularly and the results
are publicly available



Compliance with all legality verification requirements is documented and
maintained for audit





Stakeholder consultation is undertaken as appropriate during the audit





Audit reports and certificate h
older status for the scheme are
publicly

reported

Governance

All schemes

Principle:
Robust standard setting processes are in place for verification and
audit and for management of non
-
compliance



The scheme’s standard has been developed by a nationally or
internationally recognised standards authority





The scheme has been developed with broad stakeholder input




There is a clear basis for establishing compliance and corrective actions
for non
-
compliance




Auditors are independent third parties that are
accredited by an
independent accreditation body

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Rigour and robustness

Using key elements to provide the basis for the assessment, schemes can be considered
in the
context of both their
‘rigour’

and
‘robustness.’

For the purpose of this analysis these term
s are broadly
defined as follows:



Rigour

The coverage and depth of a scheme’s processes and
灲潣敤畲敳 f潲o v敲ific慴a潮 慮d a畤i琠 a条i湳t 瑨t
r敱畩r敭敮瑳 潦 瑨t sc桥m攮e q桥 慳s敳sm敮琠 cri瑥物a
developed under the key elements of ‘
Verification’
慮d

Audit


r敱畩r敭敮瑳 慲攠 c潮sid敲敤e 瑯t rel慴攠 dir散瑬y 瑯
瑨ts敡s畲攮u



Robustness

A measure of the scheme’s structure and capacity to
睩瑨t瑡湤 數t敲湡l i湦lu敮c敳 whil攠 慬s漠 r敳p潮din朠 瑯
i湤畳瑲y dyn慭ics 慮搠 摲dv敲e f潲o c桡湧攮 q桥
慳s敳sm敮琠cri瑥物a d敶敬
oped under ‘
Governance
’ relate
摩r散瑬y⁴漠ohis敡s畲攮u

q桥 摩m敮si潮s 潦 ri杯畲u 慮搠r潢畳瑮tss 慲攠i湣潲p潲慴敤 i渠瑨攠慳s敳sm敮琠fram敷潲o 瑯t 慳sist
畳敲e in c潮si摥ri湧 wh整e敲eavail慢l攠sc桥m敳 桡ve 瑨t c慰慣ity 瑯 灲pvi摥 a level 潦 慳s畲慮u攠瑨t琠
瑩m扥r⁰牯摵c瑳⁡牥⁦r潭⁡ l敧al⁳潵rc攮


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4

Assessment of Schemes

The assessment framework was applied to existing legality and CoC schemes operating within the
Asia
-
Pacific region. Under this framework, a scoring system was developed

to compare the schemes
and identify key aspects of differentiation.

Assessment scorecards

The scoring system developed for this assessment comprises separate scorecards for schemes
relating to verification of legal origin, legal compliance and chain of cu
stody. These three sets of
scorecards are set out below.

The scorecards incorporate indicators for each of the assessment criteria. The indicators were
derived to provide guidance for scoring of the criteria, on a scale of 0 to 2. On this scale, a score o
f 0
indicates that there is no substantial conformance to the criterion and a score of 2 represents full
conformance with the criterion. A score of 1 represent partial conformance, and indicators are
incorporated for each criterion to provide guidance to t
he basis on which URS has assessed partial
conformance.

Recognising that there are a differing number of criteria for each element, the total scores for criteria
for each element were converted to a score out of 10. This provided a consistent basis for te
sting the
proposed framework through a comparison of assessment results across key elements of each
scheme.

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Legal origin schemes

VERIFICATION


Principle 1: Legal access and rights to harvest are clearly defined and established

Scor
ing



Criterion 1.1

Land access and harvest rights are clearly defined and legally established




Indicator 1.1.1. Requirement to define legal access arrangements and establish harvest rights
for a designated forest area through an authorised approval or permit process, wi
th reference
to land tenure as appropriate


2

Indicator 1.1.2. Requirement to establish legal access and use rights that could be met with
permits approved at the national level only, without addressing land tenure and use rights at the
regional or local
level


1

Indicator 1.1.3. There is no requirement for land tenure, legal access and use rights to be
defined or established

0



Criterion 1.2 Where required, operational plans are approved by the appropriate

authority under relevant legislation and spe
cify allowable or otherwise regulated

harvest levels



Indicator 1.2.1. Requirement for management plans to be approved by appropriate authority
and the plan is required to include calculated allowable or otherwise regulated yield for
designated forest
area


2

Indicator 1.2.2. Requirement for management plans, which may include allowable or otherwise
regulated harvest levels, but no requirement to submit them for approval by an appropriate
authority


1

Indicator 1.2.3. Management plans may be prepared
but are not required

0





Criterion 1.3 All royalties, fees and taxes properly due from timber production are paid to
appropriate entities




Indicator 1.3.1. Requirement for all royalties, fees and taxes properly due from harvesting and
transportati
on to be paid to appropriate entities


2

Indicator 1.3.2. Requirement for royalties to be paid, but no reference to other applicable fees
and charges that may be payable to appropriate entities


1

Indicator 1.3.3. There is no requirement to verify paymen
ts properly due from harvesting and
transportation have been paid to appropriate entities

0



Total
-

Maximum score

6

Total
-

Normalised score (out of 10)

10

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AUDIT




Principle 2: Compliance with the scheme is audited and recorded regularly and re
sults
are publicly available

Scoring



Criterion 2.1 Compliance with legality verification requirements are documented and
maintained for audit




Indicator 2.1.1. Requirement that records of compliance with the legality verification scheme
are accura
te, complete and up
-
to
-
date


2

Indicator 2.1.2. Requirement to comply with relevant legislation and other requirements, but no
reference to document compliance with all legal criteria of the scheme


1

Indicator 2.1.3. There is no requirement that records

of legal compliance with the legality
verification scheme be maintained

0



Criterion 2.2 Stakeholder consultation is undertaken as appropriate during the audit




Indicator 2.2.1. Requirement that key stakeholders are identified and consulted during
the audit
process


2

Indicator 2.2.2. The scheme recognises that consultation with stakeholders may be undertaken
during the audit process


1

Indicator 2.2.3. There is no requirement for consultation to be undertaken as appropriate during
the audit

0



Criterion 2.3 Audit reports and certificate holder status for the scheme are publicly
reported




Indicator 2.3.1. Requirement that audit reports and certificate status for certificate holders are
made public, including names of companies


2

Indicator
2.3.2. Requirement that certificate status for certificate holders are made public,
including names of companies, but no such requirement for audit reports


1

Indicator 2.3.3. There is no requirement for audit reports and certificate status for certificat
e
holders to be made available in the public domain or by request

0



Total
-

Maximum score

6

Total
-

Normalised score (out of 10)

10

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GOVERNANCE




Principle 3: Robust standards setting processes are in place for verification, audit and
management
of non
-
compliance

Scoring



Criterion 3.1 The scheme's standard has been developed by a nationally or internationally
recognised standards authority




Indicator 3.1.1. The scheme's standard has been developed by an internationally or nationally
recogn
ised standard setting authority


2

Indicator 3.1.2. The scheme's standard has not been developed by an recognised standard
setting authority, however the scheme manager has substantial experience with standards
development and auditing in the forestry sec
tor

1

Indicator 3.1.3. The scheme has been developed without reference to a nationally or
internationally recognised standard setting body

0



Criterion 3.2 The scheme has been developed with broad stakeholder input




Indicator 3.2.1. Requirement tha
t broad stakeholder input is sought during the development of
the scheme


2

Indicator 3.2.2. Limited requirement that stakeholder input is sought during the development of
the scheme

1

Indicator 3.2.3. There is no requirement for stakeholder input during

the development of the
scheme

0



Criterion 3.3 There is a clear basis for establishing compliance and non
-
compliance and
corrective actions for non
-
compliance




Indicator 3.3.1. Requirement that non
-
compliance with legality verification requirements

of the
scheme are identified and processes for corrective actions are clearly established, followed and
publicly reported


2

Indicator 3.3.2. Requirement that non
-
compliance with legality verification requirements of the
scheme are identified but process
es for corrective actions are not clearly established or
demonstrably followed

1

Indicator 3.3.3. There is no requirement for non
-
compliance with legality verification requirements
of the scheme to be identified and corrective actions implemented

0



Cr
iterion 3.4 Auditors are independent third parties that are accredited by an independent
accreditation body




Indicator 3.4.1. Requirement that auditors are independent third parties, free of conflict of
interests with the parties they audit, and can de
monstrate accreditation by an accreditation body
independent of the scheme


2

Indicator 3.4.2. Requirement that auditors are independent third parties, but are not necessarily
accredited by an independent accreditation body

1

Indicator 3.4.3. There is no

requirement for auditors to be independent or free of conflicts of
interest with the parties they audit

0



Total
-

Maximum score

8

Total
-

Normalised score (out of 10)

10

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Legal compliance requirements

VERIFICATION




Principle 1: Rights to harves
t and compliance in the conduct of forestry operations are
clearly defined and established

Scoring



Criterion 1.1 Land access and harvest rights are clearly defined and legally established



Indicator 1.1.1. Requirement to define legal access arrangem
ents and establish harvest rights for
a designated forest area through an authorised approval or permit process, with reference to land
tenure as appropriate


2

Indicator 1.1.2. Requirement to establish legal access and use rights that could be met with
p
ermits approved at the national level only, without addressing land tenure and use rights at the
regional or local level


1

Indicator 1.1.3. There is no requirement for land tenure, legal access and use rights to be defined
or established

0



Criterion
1.2 Where required, operational plans are approved by the appropriate authority

under relevant legislation and specify allowable or otherwise regulated harvest levels



Indicator 1.2.1. Requirement for management plans to be approved by appropriate auth
ority and
the plan is required to include calculated allowable or otherwise regulated yield for designated
forest area


2

Indicator 1.2.2. Requirement for management plans, which may include allowable or otherwise
regulated harvest levels, but no requirem
ent to submit them for approval by an appropriate
authority


1

Indicator 1.2.3. Management plans may be prepared but are not required

0



Criterion 1.3 All royalties, fees and taxes properly due from timber production are paid

to appropriate entities



Indicator 1.3.1. Requirement for all royalties, fees and taxes properly due from harvesting and
transportation to be paid to appropriate entities


2

Indicator 1.3.2. Requirement for royalties to be paid, but no reference to other applicable fees
and ch
arges that may be payable to appropriate entities


1

Indicator 1.3.3. There is no requirement to verify payments properly due from harvesting and
transportation have been paid to appropriate entities

0



Criterion 1.4 Compliance with all codes of practi
ce for harvesting operations, and

all relevant social and environmental regulations relevant to forestry operations



Indicator 1.4.1. Specific requirement to comply with codes of practice for timber harvesting and
all relevant social and community regu
lations and all relevant environmental laws and regulations


2

Indicator 1.4.2. General requirement to comply with all relevant legislation and regulations, but no
specific requirements to comply with codes of practice and/or applicable regulations releva
nt to
forestry operations

1



Indicator 1.4.3. There is no specified requirement to comply with social or environmental
legislation and regulations

0



Total
-

Maximum score

8

Total
-

Normalised score (out of 10)

10

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AUDIT




Principle 2: Compli
ance with the scheme is audited and recorded regularly and results
are publicly available

Scoring



Criterion 2.1 Compliance with legality verification requirements are documented and
maintained for audit




Indicator 2.1.1. Requirement that records o
f compliance with the legality verification scheme
are accurate, complete and up
-
to
-
date


2

Indicator 2.1.2. Requirement to comply with relevant legislation and other requirements, but no
reference to document compliance with all legal criteria of the sch
eme


1

Indicator 2.1.3. There is no requirement that records of legal compliance with the legality
verification scheme be maintained

0



Criterion 2.2 Stakeholder consultation is undertaken as appropriate during the audit




Indicator 2.2.1. Requireme
nt that key stakeholders are identified and consulted during the audit
process


2

Indicator 2.2.2. The scheme recognises that consultation with stakeholders may be undertaken
during the audit process


1

Indicator 2.2.3. There is no requirement for consul
tation to be undertaken as appropriate during
the audit

0



Criterion 2.3 Audit reports and certificate holder status for the scheme are publicly
reported




Indicator 2.3.1. Requirement that audit reports and certificate status for certificate holders

are
made public, including names of companies


2

Indicator 2.3.2. Requirement that certificate status for certificate holders are made public,
including names of companies, but no such requirement for audit reports


1

Indicator 2.3.3. There is no requir
ement for audit reports and certificate status for certificate
holders to be made available in the public domain or by request

0



Total
-

Maximum score

6

Total
-

Normalised score (out of 10)

10

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GOVERNANCE




Principle 3: Robust standards setting p
rocesses are in place for verification, audit and
management of non
-
compliance

Scoring



Criterion 3.1 The scheme's standard has been developed by a nationally or internationally
recognised standards authority




Indicator 3.1.1. The scheme's standard
has been developed by an internationally or nationally
recognised standard setting authority


2

Indicator 3.1.2. The scheme's standard has not been developed by an recognised standard
setting authority, however the scheme manager has substantial experienc
e with standards
development and auditing in the forestry sector

1

Indicator 3.1.3. The scheme has been developed without reference to a nationally or
internationally recognised standard setting body

0



Criterion 3.2 The scheme has been developed with
broad stakeholder input




Indicator 3.2.1. Requirement that broad stakeholder input is sought during the development of
the scheme


2

Indicator 3.2.2. Limited requirement that stakeholder input is sought during the development of
the scheme

1

Indicato
r 3.2.3. There is no requirement for stakeholder input during the development of the
scheme

0



Criterion 3.3 There is a clear basis for establishing compliance and non
-
compliance and
corrective actions for non
-
compliance




Indicator 3.3.1. Requiremen
t that non
-
compliance with legality verification requirements of the
scheme are identified and processes for corrective actions are clearly established, followed and
publicly reported


2

Indicator 3.3.2. Requirement that non
-
compliance with legality verif
ication requirements of the
scheme are identified but processes for corrective actions are not clearly established or
demonstrably followed

1

Indicator 3.3.3. There is no requirement for non
-
compliance with legality verification requirements
of the scheme

to be identified and corrective actions implemented

0



Criterion 3.4 Auditors are independent third parties that are accredited by an independent
accreditation body




Indicator 3.4.1. Requirement that auditors are independent third parties, free of
conflict of
interests with the parties they audit, and can demonstrate accreditation by an accreditation body
independent of the scheme


2

Indicator 3.4.2. Requirement that auditors are independent third parties, but are not necessarily
accredited by an i
ndependent accreditation body

1

Indicator 3.4.3. There is no requirement for auditors to be independent or free of conflicts of
interest with the parties they audit

0



Total
-

Maximum score

8

Total
-

Normalised score (out of 10)

10

Framework for differentiating legality verification and chain of custody schemes

4


42807483/01/04

30

Chain
-
of
-
Custody
schemes

VERIFICATION


Principle 1: Auditable systems are in place for tracking and monitoring the flow of

wood and wood products from the forest through the supply chain

Scoring



Criterion 1.1 The scheme requires systematic processes to verify the or
igin of

materials and that documentation is valid and matches nominated materials



Indicator 1.1.1. Requirement for a system to verify the legal origin of wood direct from the

forest through checks on accompanying documentation

2

Indicator 1.1.2. Req
uirement for a system to verify that wood received direct from the forest
matches accompanying documentation, but no requirement for verifying the legal origin at the
source

1

Indicator 1.1.3. There is no requirement for a system to verify the legal origi
n of wood direct from
the forest through checks on accompanying documentation

0



Criterion 1.2 The scheme requires a chain of custody system to track certified or

verified legal wood along the certification chain, using appropriate inventory methods

a
nd documented controls

Indicator 1.2.1. Requirement for a chain of custody system to track wood from specified sources
along the supply chain, with appropriate inventory methods and controls that can be audited at
any time

2

Indicator 1.2.2. Requirement
for a means to trace wood from specified sources through the
supply chain but no specific requirement for an inventory
-
based accounting system to account for
verified wood flows over time

1

Indicator 1.2.3. There is no requirement for a system to trace wo
od from specified sources
through the supply chain


0

Criterion 1.3 The scheme requires effective controls to prevent products from unverified and
potentially illegal sources from entering the supply chain

Indicator 1.3.1. Requirement for effective contr
ols to prevent unverified wood from entering the
supply chain, such as a risk assessment to identify and manage wood from high risk sources,
and physical segregation of wood from high risk or otherwise unverified sources

2

Indicator 1.3.2. Requirement for

controls to separately track verified wood from unverified wood,
but minimal specification of the types of controls that should be used to be effective

1

Indicator 1.3.3. There is no requirement for controls to prevent unverified wood from entering the
s
upply chain

0



Criterion 1.4 The scheme has a defined policy for product labelling and process for managing
associated claims

Indicator 1.4.1 Requirement for product claims to be used in accordance with a product labelling
policy relating to claims on
legality verification


2

Indicator 1.4.2. Requirement for product labels or claims to be used with scheme approval only,
and limited guidance on the permitted use of such claims

1

Indicator 1.4.3. There is no requirement or specification relating to prod
uct labelling or associated
claims under the scheme

0

Total
-

Maximum score

8

Total
-

Normalised score (out of 10)

10

Framework for differentiating legality verification and chain of custody schemes

4


42807483/01/04

31


AUDIT




Principle 2: Compliance with the scheme is audited and recorded regularly and

results are publicly available

Scoring



Criterion 2.1 Compliance with scheme requirements are documented and maintained

for audit




Indicator 2.1.1. Requirement that records of compliance with the CoC scheme are accurate,
complete and up
-
to
-
date


2

Indicator 2.1.2. Requirement to comply w
ith relevant legislation and other requirements, but no
reference to document compliance with all aspects of the scheme


1

Indicator 2.1.3. There is no requirement that records of compliance with the CoC scheme be
maintained


0



Criterion 2.2 Audit rep
orts and certificate holder status for the scheme are publicly

reported




Indicator 2.2.1. Requirement that audit reports and certificate status for certificate holders are
made public, including names of companies


2

Indicator 2.2.2. Requirement that

certificate status for certificate holders are made public,
including names of companies, but no such requirement for audit reports


1

Indicator 2.2.3. There is no requirement for audit reports and certificate status for certificate
holders to be made av
ailable in the public domain or by request


0



Total
-

Maximum score

4

Total
-

Normalised score (out of 10)

10

Framework for differentiating legality verification and chain of custody schemes

4


42807483/01/04

32


GOVERNANCE




Principle 3: Standards setting processes are in place for verification, audit and
management of non
-
compliance

Scor
ing



Criterion 3.1 The scheme's standard has been developed by a nationally or

internationally recognised standards authority



Indicator 3.1.1. The scheme's standard has been developed by an internationally or nationally
recognised standard setting authori
ty


2

Indicator 3.1.2. The scheme's standard has not been developed by an recognised standard
setting authority, however the
scheme manager has substantial experience with standards
development and auditing in the forestry sector

1

Indicator 3.1.3. The s
cheme has been developed without reference to a nationally or
internationally recognised standard setting body

0



Crite
rion 3.2 The scheme’s standard has been developed with broad
stakeholder input



Indicator 3.2.1. Requirement that broad stakeholder

input is sought durin
g the development of
the scheme


2

Indicator 3.2.2. Limited requirement that stakeholder input is sought during the development of
the scheme

1

Indicator 3.2.3. There is no requirement for stakeholder input durin
g the development of

the
scheme

0



Criterion 3.3 There is a clear basis for establishing compliance and

non
-
compliance and corrective actions for non
-
compliance



Indicator 3.3.1. Requirement that non
-
compliance with legality verification requirements of the
scheme are
identified and processes for corrective actions are clearly established, followed and
publicly reported


2

Indicator 3.3.2. Requirement that non
-
compliance with legality verification requirements of the
scheme are identified but processes for corrective a
ctions are not clearly established or
demonstrably followed


1

Indicator 3.3.3. There is no requirement for non
-
compliance with legality verification requirements
of the scheme to be identified and corrective actions implemented

0



Criterion 3.4 Audito
rs are independent third parties that are accredited

by an independent accreditation body



Indicator 3.4.1. Requirement that auditors are independent third parties, free of conflict of
interests with the parties they audit, and can demonstrate accredit
ation by an accreditation body
independent of the scheme


2

Indicator 3.4.2. Requirement that auditors are independent third parties, but are not necessarily
accredited by an independent accreditation body

1

Indicator 3.4.
3. There is no requirement for a
uditors to be independent or free of conflicts of
interest with the parties they audit

0



Total
-

Maximum score

8

Total
-

Normalised score (out of 10)

10



Framework for differentiating legality verification and chain of custody schemes

4


42807483/01/04

33

Assessment of schemes

The scorecards developed under this framework were used to assess existi
ng schemes operating in
the Asia
-
Pacific region.

URS undertook this assessment with reference to publicly available information for each of the
schemes at the time of this review. Detail of assessment scores and commentary on points of
differentiation acro
ss the schemes are provided in Appendix

C and Appendix

D respectively.

The proposed framework applies equal weightings to the assessment criteria and indicators. A more
definitive assessment of schemes would require direct inputs from relevant schemes and
a broad
stakeholder review of the proposed criteria and indicators. The URS framework can be used as the
basis for further engagement with government agencies, timber importers, scheme operators and
other stakeholders working to combat illegal logging with
in the region.

On this basis, the assessment outcomes were grouped into broad categories relating to the level of
assurance that
timber products covered by the schemes are from a legal source
. These categories
were defined in terms of the extent to which t
he schemes provide high, moderate or low levels of
assurance.
In this way, they can provide direct guidance to importers on the requirements for
additional information,
as

follows:

Levels of assurance

Guidance for importers



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Verification requirements

Figure
4
-
2

and