FDS-TLAS-006

Sabah TLAS Audit Report Legality Standard Principles 1 – 4

Licensee Brilliant Junction Sdn. Bhd. (1212780-M) Reference # GFSSBH 003-027 Contact Date of Report 05/07/2019 Steven Lee (Person in-charge) Person Date of close out - Telephone th +6088 201 879 Office Suite E2, 5 Floor, CPS Tower, Centre Address Point, 88000, , Sabah. Fax +6088 201 879

Email [email protected] Approved By Dr. Kevin Grace

Statements Audit Statement NA: Non Compliance - Criterion 1.3, 1.8, 2.1, 2.2. Issuance Date NA Expiration Date NA

Assessment Details

Assessment Dates 01 – 05 July 2019 Scope of Assessment Sabah TLAS P1-4: FIIB permit JPHTN/FRM 700-2/4/1/542(a)/Jld.2/60 dated 25/06/2019 and JPHTN/FRM 700-2/4/1/542(a)/Jld.2/57 dated 17/06/2019 Species Shorea spp. (Red & Yellow Seraya), Sapotaceae spp. (Nyatoh), Neolamarckia cadamba (Laran), Alstonia spp. (Pulai), Eugenia spp. (Obah), Lauraceace spp. (Medang), Lithocarpus & Quercus spp. (Mempening/Berangan), Cratoxylum arborescens (Serungan), Koordersiodendron pinnatum (Ranggu), Tristaniopsis merguensis (Pelawan-pelawan), Annonaceae spp. (Pisang – Pisang), Annonaceae spp. (Kerai), Scaphium spp. (Kembang semangkuk), Heritiera simplicifolia (Kembang), Planchonia valida (Putat), Shorea pauciflora (Obah Suluk), Duabanga moluccana (Magas), Shorea inappendiculata (Selangan Batu), Dipterocarp spp. (Keruing), Cotylelobium spp. (Resak), Parashorea spp. (White seraya), Drybalanops spp. (Kapur). Lead Assessor Priera Bagang Assessor(s) Cynthia D. John FDS Staff Hj. Muhd Razali bin Mohammad (SFMO ), Afifuddin Jadin (ADFO ), Julius Janusip (MCEE Keningau), Julaili Mukiaman (MCEE Keningau), Joachim Japil (KPPM Pamuntarian), Rahman Lamat (PPM Pamuntarian)

OBJECTIVES: • The objective of this checklist is to verify compliance to the Criteria listed in the Sabah Legality Standard as defined by Principles 1 - 4 for Sabah dated 01st January 2015 (FDS-TLAS-002). • Compliance is defined when all applicable criteria are observed to be compliant. A Minor Gap to any indicator does not constitute non-compliance to a criterion. A Major Gap to any applicable indicator does reflect non-compliance to a criterion. Compliance for a criterion where multiple minor gaps are identified in indicators under the criterion may reflect non-compliance to the criterion. • All issues identified under this standard shall be considered appropriate to the scale and degree of forestry operations undertaken by the parties under the agreement.

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FDS-TLAS-006

Summary Information

Overview of Licensee: • The Communal Grant (Field Register (FR) number: 154000683) was issued by the State through Land and Survey Department of Sabah on 22nd January 2019 to 475 beneficiaries listed in the Communal Grant Agreement for logging and land clearing operations with approximated total area of 3,530 hectares in Tatalaan II, Nabawan. • The Land and Survey Department has appointed Brilliant Junction Sdn. Bhd. (Brilliant Junction) to carry out logging and land clearing operations of 3,530 hectares within the Communal Grant FR 154000683. The agreement between Brilliant Junction and the 475 Communal Grant Beneficiaries has been signed on 14th January 2019. Beneficiaries of the Communal Grant FR 154000683 are from Kg. Tatalaan Ulu, Kg. Nangkawangan, Kg. Tatapu Ponontomon, Kg. Binanun, Kg. Pohon Batu Baru, Kg. Sumbiling, Kg. Pengaraan, Kg. Pohon Batu Lama, Kg. Katalirus and Kg. Layon situated in the Nabawan District. • The project area is located at Tatalaan II, District of Nabawan, Sabah, which is approximately 16.52 km to Township and 27.00 km to Nabawan Township. Access to this project area can be from Keningau Town by using Nabawan-Sapulut Road and Sapulut- Road. • The project area was previously part of Forest Reserve (Class 1) and excised in 2015. The history of logging activity in the Pensiangan Forest Reserve was logged by the Majlis Ugama Islam Sabah (MUIS) through a Form 1 license in 2013. • Brilliant Junction has engaged Hokin Trading and KKS Timber Trading as a subcontractor for timber extraction. • The project area has been zoned into 8 blocks and the current approved FIIB permit only valid for 2 blocks (Block 1 & 2). The logging and land clearing operations will be carried out in stages beginning from Lot 1 to Lot 8 as below: Lot/Block Number Area (Acres) Area (ha) 1 1,199.46 485.40 2 1,200.33 485.76 3 1,199.95 485.60 4 1,200.02 485.63 5 1,200.51 485.83 6 800.23 323.84 7 1,000.03 404.70 8 785.32 317.81 Total 8,585.85 3474.57

After the salvage logging operations are completed, Brilliant Junction must conduct a subdivision survey for the Communal Grant for issuance of the land title (Native Title) to all beneficiaries of the Communal Grant.

The logging progress by blocks:

Block 1 Grant tittle number Total area, ha Total area logged, ha Total unlogged area, ha 16.67 (Parcel 4) 32.66 (Parcel 6) FR: 154000683 485.41 49.30 (Parcel 8) 300.46 54.05 (Parcel 10) 32.27 (Parcel 12) Total 184.95 300.46

Block 2 Grant tittle number Total area, ha Total area logged, ha Total unlogged area, ha

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41.17 (Parcel 1) 48.88 (Parcel 2) 42.23 (Parcel 3) 49.99 (Parcel 4) FR: 154000683 485.61 136.21 48.83 (Parcel 5) 41.70 (Parcel 7) 43.75 (Parcel 9) 32.85 (Parcel 11) Total 349.40 136.21

Timber production records from Blocks 1&2 by parcel (July 2019): Parcel # Total logs, pcs Total volume, m3 Remarks Parcel 1 702 1,996.01 Parcel 2 851 2,172.16 Parcel 3 903 2,316.97 Parcel 4 1,796 3,466.55 Parcel 5 1,448 2,929.57 Parcel 6 1,469 2,734.01 Approved FIIB permit from FDS Parcel 7 1,522 2,502.25 Parcel 8 1,508 2,465.21 Parcel 9 1,265 2,187.49 Parcel 10 1,680 2,944.95 Parcel 11 812 1,624.75 Parcel 12 779 1,613.37 Pending for approval from FDS Parcel 13 1,114 2,319.19 Total 15,849 31,272.48

The total of timber transported to the local mills based on the Removal Passes: Parcel Total logs, pcs Total volumes, m3 1 – 10 8,922 18,095.26

Environmental Context: • The project area is located within the state land under land title number FR 154000683 adjacent to Pensiangan Forest Reserve, which is a Class 1 forest reserve located at the southern boundary of the project area. There is no other development or facilities identify within the project area and 3 km radium from the project area. The topographic pattern is relatively undulating ground with attitude verifying between 1,750 m to 3,500 m above sea levels. The Slope Map generated through Geographical Information System (GIS), classified the project area into two slope categories: Steep Area above 25° within the project area (555 ha) and slope below 25° (2,975 ha). • Dipterocarp diversity is low and non-dipterocarps become more dominant. Trees above 30 cm DBH growth size have been identified and recorded within the project site. The common trees found within the project area are Macaranga, Seraya, Mempening, Binuang, Keruing, Sedaman, Darah-Darah, Melapi and Laran. • The fauna species identified within the project area are Cervus unicolor (deer) and Sus barbatus (wild boar), Macaca fascicularis (long tail macaca monkey) and Acerodon jubatus (Giant golden- crowned flying fox ‘Gawir’). The animal life identified through animal footprints, dung, claw mark and sound. There is no protected species known to exist within the project area and the aquatic species identify within the river and stream is Labi-labi/Tuntung (Batagur borneonsis). • The soil is made up mostly of Crocker Association under Mountains landform with main soil units of Orthic Acrisol, Chromic & Dystric Cambisols and Lithosols. The parent materials of these associations are sandstone and mudstone. In Pensiangan area, Orthic Acrisol of the Kumansi Family formed on mudstone of the Sapulut and Labang Formations. There is also a small area at

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the south made up with Malian Association with main solid units of Orthic Acrisol; Dystric Cambisol; Gleyic Podzol; Humic Gleysol and Lithosol. The parent material of these associations area is sandstone and mudstone as well. • The geological formation of the project area is classified as Sapulut Formation. The general aspect of Sapulut Formation is mudstone-dominant turbidite with several incursions of sandstone and periods of instability causing slumping of blocks and clasts into a generally muddy environment (conglomerate). • Main rivers that flow within the project area are Sg. Talangkai, Sg. Tingkalis and Sg. Saliuh. The other affected tributaries flow within the project area is tributary of Sg. Rumidi, tributary of Sg. Tingkalis and tributary of Sg. Pangaraan. • There is no sensitive or protection area within this project area. The nearest protection area is Pensiangan Forest Reserve a Class 1 forest reserve located at the southern boundary of the project area. • Brilliant Junction has submitted an EIA report (May 2019) for the 3,530 ha project area but is still pending for approval from the Environment Protection Department (EPD). The EPD acknowledged receipt of the EIA submission on 10th May 2019.

Social Context: There is no village or local settlement located within the project area or 3 km radius from the project area. Scope of Assessment • The scope of the evaluation is to verify compliance of Brilliant Junction Sdn. Bhd. with the FIIB permit JPHTN/FRM 700-2/4/1/542(a)/Jld.2/60 dated 25/06/2019 and JPHTN/FRM 700- 2/4/1/542(a)/Jld.2/57 dated 17/06/2019. • The assessment is in accordance on the terms of the agreement for the “Sabah Legality Standard Principles 1 - 4 dated 01st January 2015 (FDS-TLAS-002). • Site evaluation to verify and report the level of compliance by Brilliant Junction Sdn. Bhd. and contractors to the standard in respect to each of the criteria within this report. • Compliance is defined when the auditee demonstrates that the indicators consist of none or only minor gaps against any applicable criteria of the standard. Non-compliance to the Sabah Legality Standard occurs when the auditee does not demonstrate adequate compliance to a criterion.

Itinerary & Mandays: FIIB permit: JPHTN/FRM 700-2/4/1/542(a)/Jld.2/60 dated 25/06/2019 and JPHTN/FRM 700-2/4/1/542(a)/Jld.2/57 dated 17/06/2019 by the Brilliant Junction Sdn. Bhd. in the district of Nabawan (01 – 05 July 2019) (Total Mandays = 12)

Date Activity GFS Staff Mandays 01 July 2019 Travel to Keningau. Priera Bagang, 2 Monday Opening meeting at PPD Keningau. Cynthia D. John Field visit to licensed area; base camp, 02 July 2019 contractor camps, licensed boundary, riparian Priera Bagang, 2 (Tuesday) reserve, buffer zone, stumps inventory plot, Cynthia D. John stumping (sampled royalty paid logs). 03 July 2019 Preparing document and documentation Priera Bagang, 2 (Wednesday) review at PPD Nabawan. Cynthia D. John 04 July 2019 Priera Bagang, Document review at PPD Nabawan. 2 (Thursday) Cynthia D. John 05 July 2019 Closing meeting at PPD Keningau. Priera Bagang, 2 (Friday) Travel back to Kota Kinabalu Cynthia D. John Dr. Kevin Grace, 06 – 07 July 2019 Reporting GFSSBH 003-027 2 Priera Bagang Total 12

Highlights of Assessment

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FDS-TLAS-006

Highlights of Assessment (Major Gaps = 3; Minor Gaps = 3; Observations = 1)

Brilliant Junction Sdn. Bhd. has NOT demonstrated compliance with the Sabah Legality Standard (FDS- TLAS-002) as non-compliance was identified in Checklist 1.3, 1.8, 2.1, and 2.2 during the assessment on 01 – 05 July 2019.

Summary of status of operations by Principle: Currently, Brilliant Junction has harvested 15,849 pieces of logs with a volume of 31,272.48 m3. Based on the Removal Pass, total logs that have been transported to local mills are 8,922 pieces with a volume of 18,095.26 m3.

Principle 1. Brilliant Junction has a valid FIIB permits from the FDS. The latest Form IIB permit is parcel 11 that was approved by the Chief Conservator of Forests (Ref.#: JPHTN/FRM 700-2/4/1/542(a)/Jld.2/60 dated 25/06/2019). The company has an EIA draft that was submitted to the EPD on 10/05/2019 and pending for approval.

July 2019: GAP 001/2019 (Major) – Checklist 1.3.1, 1.3.3 The company has an EIA draft report for “Propose Logging and Land Clearing Operations of 3,530 hectares within Communal Grant FR 154000683 in Tatalaan II, Nabawan, Sabah” submitted to the EPD on 10/05/2019. However, logging operations started prior to the submission and approval of the EIA by EPD. Based on the production records (March – June 2019), total logs harvested were 15,849 pieces with a total volume of 31,272.48 m3.

Based on the survey map attached to the Form IIB application, only riparian reserves and road reserve are identified. The buffer zones and 555ha of steep slopes are not mapped in the survey map.

July 2019: GAP 002/2019 (Major) – Checklist 1.8.3, 2.1.5, 2.2.12 The stream buffer areas were disturbed based on field observations at Block 1 and 2. Brilliant Junction did not consistently protect stream buffer zones: • Measures to control excess soil (due to road construction) from entering the stream buffers zone were not adequate. • The road drainage was directly channelled into streams instead of buffer zones. • No evidence of protection of areas identified as steep slopes (over 25 degrees).

Principle 2. The field assessment was conducted in KKS Timber Trading campsite and Hokin Trading campsite to ensure the mitigation measures for sanitation and schedule wastes were implemented in accordance with EIA requirements.

July 2019: GAP 003/2019 (Minor) – Checklist 2.1.3 Inadequate implementation of mitigation measures to prevent oil spillage was observed at Hokin Trading campsite (store, diesel depot and repairing machineries by the roadside).

The Communal Grant, Field Register No. 15400683, have 10 beneficiaries namely Kg. Tatalaan Ulu, Kg. Nangkawangan, Kg. Tatapu Ponontomon, Kg. Binanun, Kg. Pohon Batu Baru, Kg. Sumbiling, Kg. Pengaraan, Kg. Pohon Batu Lama, Kg. Katalirus and Kg. Layon situated in Nabawan District.

The Land and Survey Department has appointed Brilliant Junction Sdn. Bhd. to carry out logging and land clearing operations of 3,530 hectares within the Communal Grant FR 154000683. The agreement between Brilliant Junction and the 475 Communal Grant Beneficiaries was signed on 14th January 2019.

July 2019: GAP 004/2019 (Minor) – Checklist 2.3.4, 2.4.2 Record of Power of Attorney for Block 2, between the beneficiaries and Brilliant Junction was not available during the assessment.

Based on the approved FIIB by the Chief Conservator of Forests, the terms and conditions did not

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Highlights of Assessment mention forest workers/contractors working in the licensed area must be registered with FDS CoI.

July 2019: GAP 005/2019 (Major) – Checklist 2.6.1, 2.6.6 There is no evidence payment of SOCSO was made by Hokin Trading for their forest workers.

July 2019: GAP 006/2019 (Minor) – Checklist 2.6.2, 2.6.7 Brilliant Junction conducted no safety and health training in respect to their logging operations.

No fire accidents were reported from January – June 2019.

July 2019: Observation 001-2019 – Checklist 2.6.10 Two (2) units of fire extinguishers were found in KKS campsite (lubricant store & diesel depot) and due for service since expired on 20/04/2018.

Principle 3. Records of Form IIB permit payment, royalty payment, removal pass fees and other associated fees were maintained and made available during the assessment.

Principle 4. Not applicable – There is no village and local settlement located within the project area and 3 km radius from the project area.

Summary Results: (Major gap = 3, Minor gap = 3, Observation = 1)

Gap raised against indicators & criteria during the July, 2019 assessment. GAP Type Checklist Status Description 001/2019 Major 1.3.1 New July 2019: 1.3.3 The company has a draft EIA for “Propose Logging and Land Clearing Operations of 3,530 hectares within Communal Grant FR 154000683 in Tatalaan II, Nabawan, Sabah” submitted to the EPD on 10/05/2019. However, logging started prior to the submission and approval of the EIA by EPD. Based on the production records (March – June 2019), total logs harvested were 15,849 pieces with a total volume of 31,272.48 m3. 002/2019 Major 1.8.3 New July 2019: 2.1.5 Stream buffer areas sampled were disturbed based on 2.2.12 field observations at Block 1 and 2. Brilliant Junction did not consistently protect stream buffer zones: • Measures to control excess soil (due to road construction) from entering the stream buffers zone were not adequate. • Road drainage was observed channelled directly into the streams. • No evidence of protection of areas identified as steep slopes (over 25 degrees). 003/2019 Minor 2.1.3 New July 2019: Inadequate implementation of measures to prevent oil spillage was observed at Hokin Trading campsite (store, diesel depot and parking for machineries by the roadside). 004/2019 Minor 2.3.4 New July 2019: 2.4.2 Record of Power of Attorney for Block 2, between the beneficiaries and Brilliant Junction was not available

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GAP Type Checklist Status Description during the assessment. 005/2019 Major 2.6.1 New July 2019: 2.6.6 There is no evidence payment of SOCSO was made by Hokin Trading for their forest workers. 006/2019 Minor 2.6.2 New July 2019: 2.6.7 No safety and health training were conducted by Brilliant Junction is respect to their logging operation.

Observation raised against indicators & criteria during the July, 2019 assessment Obs # Checklist Description 001-2019 2.6.10 July 2019: Two (2) units of fire extinguishers were found in KKS campsite (lubricant store & diesel depot) are due for service since expired on 20/04/2018.

Highlights of Close Out Visit (if applicable) Dates - Major Gaps (001/2019, 002/2019, and 005/2019) shall be addressed within 2 months by September 2019.

Recommendations Brilliant Junction Sdn. Bhd. has NOT demonstrated compliance with the Sabah Legality Standard (FDS- TLAS-002) as non-compliance was identified in Criterion 1.3, 1.8, 2.1, 2.2 and is NOT eligible to receive a GFS Audit Statement and STCC from FDS.

The Major Gaps shall be addressed within two months by September 2019. GAP 001/2019 (Major) – Checklist 1.3.1, 1.3.3: The company should not be logging the project area without an approved EIA as required by regulations. GAP 002/2019 (Major) – Checklist 1.8.3, 2.1.5, 2.2.12: The company must identify and protect buffer zones and areas identified for protection as per EIA draft that can include the 555ha of steep areas over 25-degree slope. GAP 005/2019 (Major) – Checklist 2.6.1, 2.6.6: Maintain SOCSO payment records in the office.

Minor Gap(s)/Observation(s) identified in this assessment should be addressed before the next surveillance visit. Actions required to close the gap(s)/observation(s) include: GAP 003/2019 (Minor) – Checklist 2.1.3: Implement the environmental mitigation measures to prevent spillage of lubricants and diesel and monitor all subcontractors working in the licensed area. GAP 004/2019 (Minor) – Checklist 2.3.4, 2.4.2: Maintain the Power of Attorney (Block 1 – 8) record in the office. GAP 006/2019 (Minor) – Checklist 2.6.2, 2.6.7: Conduct safety and health training to all forest workers and maintain the record of trainings. Observation 001-2019 – Checklist 2.6.10: To regularly inspect and service the fire extinguishers in the campsite.

The next surveillance audit will be scheduled in May 2020.

End of Summary Report

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