LEGAL VERIFICATION SYSTEMS FOR WOOD SUPPLY BETWEEN RUSSIA AND CHINA Josh Newell, PhD University of Southern California [email protected] George Kuru Forestech Research and Development Ltd [email protected] 1 © WWF-International, 2008. Acknowledgements: This report is an outcome of the FOREST FUTURES WWF partnership project in Russia and China. This project is being implemented by WWF in partnership with IKEA. Preferred Citation: Newell, J. and Kuru, G. Legal Verification Systems for Wood Supply Between Russia and China . WWF-International, Gland, Switzerland. 77 pages. 2 CONTENTS Contents ................................................................................................................................................................ 3 List of Figures ...................................................................................................................................................... 7 List of Tables ....................................................................................................................................................... 8 Introduction ........................................................................................................................................................ 9 Structure and Methodology ......................................................................................................................... 10 1. FORESTRY AND WOOD SUPPLY IN THE RUSSIAN FEDERATION ........... 11 Overview of Russian Forestry ..................................................................................................................... 11 Administrative Structure of Forestry in Russia ............................................................................................... 12 Acquiring Forest Management and Use Rights ................................................................................................ 13 Acquiring Permission to Harvest............................................................................................................................ 13 Controlling Timber Transactions ........................................................................................................................... 14 Structure of Russian-Chinese Wood Supply Chains ............................................................................ 16 Node 1 Timber Harvest Site .............................................................................................................................. 16 Node 2 Sorting/Storage/Processing yard ................................................................................................... 16 Node 3 Loading and Export Depot ................................................................................................................. 17 Node 4 Chinese importer .................................................................................................................................... 17 Node 5 Storage and/or wood processor ..................................................................................................... 17 Node 6 Chinese furniture manufacturer ..................................................................................................... 18 Risks of Illegal Wood Supplies – What, Where, How .......................................................................... 19 Node 1 Timber Harvest Site .............................................................................................................................. 19 Node 2 Sorting and Storage Yard/Sawmill ................................................................................................. 19 Node 3 Loading and Export Depot ................................................................................................................. 19 Node 4 Chinese importer .................................................................................................................................... 19 Node 5 Storage and/or wood processor ..................................................................................................... 20 Node 6 Chinese furniture and flooring manufacturer ........................................................................... 20 Improving the Administrative Framework for Wood Supply in Russia ...................................... 20 Regulatory Change ........................................................................................................................................................ 20 Provision of Improved Access to Information on Licensing and Harvest Permits........................... 21 2. SYSTEMS FOR WOOD TRACKING ............................................................... 22 3 Overview of Wood Supply and Wood Tracking .................................................................................... 22 Technologically-Based Wood Tracking Tools ...................................................................................... 22 Labeling Technologies ................................................................................................................................................. 22 Spatial Management Information Systems ........................................................................................................ 23 Information Systems for Managing Timber Transactions .......................................................................... 24 Vendors of Wood Tracking Systems ......................................................................................................... 25 3. ESTABLISHING LEGAL WOOD SUPPLY ..................................................... 28 Establishing Legal Authority to Manage and Harvest Forests ........................................................ 28 Establishing Legality of Operations .......................................................................................................... 29 Compliance With Russian Operational Management Regulations .......................................................... 29 Securing Forest and Land Resources .................................................................................................................... 30 Supply Chain Simplification ...................................................................................................................................... 30 Improved Sales Administration .............................................................................................................................. 32 Establishing Transparent Documentation Systems ........................................................................... 34 Establishing Basic Control over Procurement and Sales Documents .................................................... 34 Reducing or Eliminating Supplies from Undocumented Sources ............................................................ 35 Private Sector Tools for Verifying Legal Source ................................................................................... 35 Overview ........................................................................................................................................................................... 35 IWAY Program ................................................................................................................................................................ 37 Global Forest Trade Network Program ............................................................................................................... 38 4. COMPANY A .................................................................................................. 40 Company A Wood Supply Chain Configuration .................................................................................... 40 Company Background ................................................................................................................................................. 40 Wood Supply .................................................................................................................................................................... 40 Sawmill Company 1 ...................................................................................................................................................... 42 Sawmill company 2 ....................................................................................................................................................... 42 Sawmill Company 1 Operations ................................................................................................................. 43 Mill Configuration .......................................................................................................................................................... 43 Documentation and Wood Tracking Processes ............................................................................................... 44 Status of Wood Tracking Systems at Sawmill Company 1 ................................................................ 45 Chain of Custody ............................................................................................................................................................ 45 4 Systems Requirements for Company A ................................................................................................... 46 Improving Documentation Management Procedures ................................................................................... 46 Simplifying the Supply Chain ..................................................................................................................................