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Rural and Regional Affairs and Transport Legislation Committee
16/05/2011
Illegal Logging Prohibition Bill 2011

HALKETT, Mr John, Technical Manager, Australian Timber Importers Federation Inc.

Committee met at 09:02

CHAIR ( Senator Sterle ): I declare open this public hearing of the Rural Affairs and Transport Legislation Committee. The committee is hearing evidence on the committee's inquiry into the exposure draft and explanatory memorandum of the Illegal Logging Prohibition Bill 2011. I welcome you all here today. This is a public hearing and a Hansard of the proceedings is being made. Before the committee starts taking evidence, I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a content. It is also a contempt to give false or misleading evidence to a committee. The committee prefers all evidence to be given in public but, under the Senate's resolution, witnesses have the right to request to be heard in private session.

It is important that witnesses give the committee notice if they intend to ask to give evidence in camera. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken and the committee will determine whether it will insist on an answer having regard to the ground which is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may also be made at any other time.

I would also ask witnesses to remain behind for a few minutes at the conclusion of their evidence at the conclusion of their evidence in case the Hansard staff need to clarify any terms or references. I remind people in the hearing room to ensure that their mobile phones are either turned off or switched to silent. Finally, on behalf of the committee, I would like to thank all those who have made submissions and sent representatives today for their cooperation in this inquiry.

Welcome, Mr Halkett. The ATIF has lodged submission 14 with the committee. Would you like to make any amendments or additions to your submission?

Mr Halkett : Thanks, perhaps I will make a few introductory comments, if that is okay.

CHAIR: I am going to invite you to do that.

Mr Halkett : The submission is fine as it stands.

CHAIR: Okay. I now invite you to make a brief opening statement before we go to questions.

Mr Halkett : Thank you. I want to start off by saying that this process we are engaged in today of trying to restrict illegally logged imports has been a longstanding parliamentary process and I want to acknowledge the contribution over the last four years that has been made by a number of senators, including Senator Abetz, Mr Burke, the previous minister, current Minister Ludwig and Senator Colbeck, and of course a very good work that has been done by the Department of DAFF staff in the forestry section over a number of years.

I want to make it clear at the outset that the timber importing sector supports the government policy and has worked with successive governments and within the industry to restrict the import of illegally sourced timber to Australia. Illegally logged timber damages the very sound environmental credentials of timber. Timber is largely based on the fact that it stores carbon and has a lot of sound environmental credentials, and any talk about timber coming in illegally damages those credentials.

It is absolutely critical that Australia continues to have a strong, commercially robust timber products importing sector. According to ABARES, there was a 19 per cent increase in volume in imported timber in the year 2009-10. That supports new housing starts, and senators will be aware that Australia is languishing in terms of housing. We are looking to step up to about 180,000 housing starts a year and imported timber products are critical to that expansion. And that does not factor in issues of population increase. Imported timber products help housing affordability and sustain jobs in the building and construction sector, and that is quite important.

Essentially this piece of legislation transfers the responsibility for legal assurance from the government to the industry. The minister is able to appoint timber industry certifiers who then do the heavy lifting in terms of ensuring legality verification. The industry is comfortable with that approach and it is consistent with the approach that has been taken in the EU and the UK. So the industry recognises that this model is based upon overseas experience and supports the approach, with one exception that I will come to in a minute. The industry also notes and supports the start-up transitional aspects of the bill and notes that they are quite consistent with the US Lacey Act. The concern that the industry has is that there does not appear to be any commitment from the government to financially support the establishment tasks that are required under the legislation. The appointment of timber industry certifiers then requires those certifiers that are appointed by the minister to undertake a number of tasks, codes of conduct, legality assurance, risk assessment and reporting audit and we believe that that substantial effort to give effect to the government policy should be supported by the government to some degree or another. Similarly we believe the government should support associated advocacy and capacity building programs. I note that the government has not continued with the Asia-Pacific forestry skills and capacity building program that was set up to provide support for particularly those high-risk countries of Papua New Guinea and Indonesia. We think that is a disappointing aspect of the government's policy.

The work the industry has done that has been confirmed by overseas research suggests that the industry will take about a 2.5 to 4.5 per cent hit in the marketplace in terms of additional costs as a result of this legislation. That will put timber products at a competitive disadvantage with other building materials which are far less environmentally friendly, materials made of steel, masonry and plastic. I wanted to note that point. But the industry does recognise that it would be required to absorb the routine costs of legality assurance under the bill and that is consistent with the approach that has been taken in the UK, the US and Japan. However, as I have noted before, in those countries the government has financially supported the establishment of legality assurance systems and we believe that the government ought to support the setup costs here in Australia.

The ATIF submission sets out some suggested amendments to the bill. I will not go through those but I want to draw your attention to a couple of them. We thought that the title of the bill might be changed to better reflect its intention, and in the submission it is suggested that the bill could be called the timber product legality verification bill. That better reflects what the bill is about. We believe that there should be a new section 12(3) added that makes it quite explicit that, once the bill is in operation, timber industry certifiers can recoup the costs of their work on a fee-for-service basis from those timber importers and processors that are appointed under the bill. We think it is critical that the term 'regulated timber products' is clarified. It is a critical aspect of the bill, and the current draft does not do that. It is certainly important, we believe, that that occurs. We have also pointed in our submission to the ambiguity and apparent confusion at proposed section 13 of the bill, which I think needs to be clear. We have also had some legal advice on the potential liability of timber industry certifiers in the event that they approve a timber importer or processor and that timber importer or processor is subsequently found to be in breach of the bill. So there is an issue there. Thank you; those are my opening comments.

CHAIR: Thank you, Mr Halkett.

Senator COLBECK: You mentioned that the bill reflects similarly the approach taken in the UK and the EU. Have they set up this additional layer of bureaucracy, effectively: the timber legality certifiers, if you want to call them that—or whatever you want to call them, I suppose? Why couldn't that be more cost-effectively done within a business's quality management systems, whether it be certification for the product or their own QA systems? Why do we have to set up an additional bureaucracy? A lot of submissions talk about that, including those from other countries. It seems to me to be the one factor of the legislation that it sets up something that could be managed in a different way. I note that the United States do it in a very different way. They impose a legislative regime, basically, and say, 'If you breach it, you're liable to legal action.' We seem to be setting up this bureaucratic mountain on the side of what we are doing, and it concerns me that that is unduly adding to the cost, which is another thing you have mentioned.

Mr Halkett : I hear those comments. Certainly, currently most timber-importing companies and timber-product-importing companies have their own in-house systems; there is no doubt about that. The companies that I represent, the large timber importers, all have in-house systems. Many of those companies also import timber that is third party certified. Those systems are in place. It is our understanding from the government that they did not believe that was sufficiently transparent and at arms-length; hence the establishment of what are called timber industry certifiers. Certainly under the previous government's arrangement, where the system was going to be voluntary, the current systems that companies have in place by and large, with some additional audit, perhaps, would be sufficient.

However, the bill talks about establishing timber industry certifiers, and that approach is consistent with the approach taken, for example, in the UK, where the UK Timber Trade Federation is effectively the timber industry certifier. The UK Timber Trade Federation has a responsible-purchasing policy, which to some degree mimics the notion of a code of conduct. It undertakes the audits, reporting and additional work. The fundamental difference between the UK, the EU and Australia is that at this stage, still, whilst there has been a lot of talk about the EU moving forward, if you like, there is still no legislation through the EU sovereign governments. The EU parliament has passed legislation; it has to be replicated across the 27 members of the EU, and it is probably anyone's guess as to when that will happen.

In the US, I think the situation is quite different. The Lacey Act effectively relies on the Department of Justice to do the enforcement. The US has a justice department that is different from the set-up in Australia. I think what is occurring now in the US is that because timber industry importers are required under the Lacey Act to have a duty of care there is a bit of uncertainty about what that duty of care is and so some retrofitting is going on to try to develop systems that will give timber industry companies a degree of comfort. But you are right in the sense that in the US there are no separate bodies established to effectively undertake that audit and the policing and enforcement role.

Senator COLBECK: There are obviously different risk profiles to different countries, and that has been mentioned to me on a lot of occasions. The New Zealand submission talks about the fact that, like Australia, they have pretty strict regimes in place to control the harvesting of their timber, whether it be in plantation or in indigenous forest, as they call it over there. Yet a simple certification through the harvest chain would suffice in those circumstances, and you would not be adding a layer of cost that you do not need to add to the process. You also mentioned there was not enough transparency in certification systems that currently exist. If a certification system or a quality management system is properly managed and audited, why isn't there any transparency in that?

Mr Halkett : I recognise those comments. I guess that when this is all boiled down the risk of illegally sourced timber coming into Australia is largely from South-East Asia. For 90 per cent of the timber products that come into Australia you could probably say, doing a risk analysis, that they are fine. I guess the political and public interest tends to be about tropical forests, tends to be about species like merbau or kwila and tends to be about products from countries like Papua New Guinea—I recognise we are going to hear from the Papua New Guinea Forest Industries Association later—or Indonesia. Those countries are developing systems of legality assurance themselves. Recently in Jakarta the Indonesian government, in association with industry, launched what they call a VLSK legality assurance system, which companies are now signing up to.

Nonetheless, one of the issues still for Papua New Guinea and Indonesia is that the internationally recognised third-party certification systems, like PEFC or FSC, are not in place for some of the species that are imported into Australia from Papua New Guinea and Indonesia. My assessment is that those systems are unlikely to be in place for some species in those countries for some time. Those countries are recognised as having some degree of risk, and the legality assurance arrangements in the bill ought to be able to deal with that situation adequately.

Senator COLBECK: In what form, in your view, would most of the illegal product be coming into Australia?

Mr Halkett : That is the issue that I have not touched on. There are three major categories of timber products that come into Australia. One is the solid wood products, which are the products that I represent: plywood, panels, solid timber componentry and those sorts of products. There is a fair degree of transparency and I think a relatively minor amount of risk. There are two other areas that the bill attempts to deal with. There are manufactured products that come from countries like China, Vietnam, Korea and so on, and the work that has been done and supported by the department to date suggests that in those manufactured products there is a greater probability of illegally logged timber being incorporated into them. They have a long supply chain and it is very difficult to track the timber back to source, so there is some risk there. Similarly—

Senator COLBECK: What would you characterise as manufactured?

Mr Halkett : When we say manufactured products we are talking about sophisticated furniture, soft and garden furniture, wooden furniture, automotive parts, windows and doors, panels—manufactured products that contain a component of timber.

Senator COLBECK: By panels you mean MDF, particle board, things of that nature?

Mr Halkett : Yes, particle board, LVL, cross-laminated timber, a whole range of wood panels. This gets into the area where there is some degree of difficulty. Last week I was talking to a company that is importing briquettes for barbecues made out of reconstituted or waste white oak from the US. They wanted to know whether they were required to have that product certified. I could not answer that. There are a whole range of manufactured products that I think are going to challenge this legislation in terms of their identification, because everything that comes into Australia comes through the four-digit code that Customs use. As products become more sophisticated and go up the value chain it is often difficult to determine whether they have a wood component or not. They might just be described, for example, as lounge room furniture made of leather and so on. Those items generally have a wooden frame inside them, so is it part of the equation? I am not sure.

Thirdly, there is the whole range of paper based products—packaging, paper and those products. Because they are wood based, as I understand it, they are supposed to be caught up in this legislation as well. There have been some concerns about, for example, short-fibre pulp paper coming into Australia from countries like Indonesia and whether all the fibre that goes into that product is lawfully sourced. My view is that probably is the easy part of the question is the solid wood products, which are currently fairly well regulated by the companies that import them and by the certification systems that exist. More challenging is going to be the manufactured products and the paper based products, in my view.

Senator COLBECK: What about a declaration or certification of the process at the border? This system does not require that, whereas the EU, UK and Lacey systems all require a declaration or a certification at the border, and that forms part of the basis of the offence. It also provides the capacity, I suppose, to deal with circumstances and allow a low-risk country to have a simple declaration of legal harvest that comes with the product. I know we are talking about solid timber here and it gets more murky when you start talking about some of the other things, but a declaration at the border that provides the foundation of the offence would seem to me to provide a point at which you could found a lot of the issues that you want to deal with once you get through that process. We already have systems in place through Customs and things of that nature. We already have declarations for other products. Why not put something like that in place?

Mr Halkett : The problem with the current Customs arrangements, as I understand them, is that Customs declarations show the country of origin. When you bring in a product, the country of origin is the country from which that product was imported. We are talking here about trying to restrict illegal logging in the country of harvesting. Often they are different. You will get a lot of timber products, for example, imported into Australia from Singapore. We know that there is not a massive forest or timber industry in Singapore. A lot of that product comes from other countries and comes through Singapore.

But you are correct, and this is why the Indonesian government has moved to establish its SVLK system, which is exactly as you have suggested. It is a declaration made when the product is exported from Singapore that says that this product is obtained from legally logged timber. That is an attempt to get to the point you have just made. When you import products into Australia from Indonesia, if it has an SVLK certificate with it, you can be assured that the timber in that product comes from legal operations.

Senator COLBECK: But surely if we went down that track we would actually enhance the process that is being undertaken by the Indonesians. It would provide some strength to what they are trying to do. We are talking about changing our systems here, so if there is a problem in the way Customs operates why can't we do that as part of that process?

There are plenty of other countries that require different elements in their certification. We have had a significant discussion here at previous hearings on export certification through AQIS, for example. So why not make as part of that import certification that the timber is legally sourced so that it can be part of that check-off process and be incorporated into it? At the same it will enhance efforts made in other jurisdictions, which is what we want see at the end of the day—building capacity in those jurisdictions. Surely in those circumstances the market would gravitate towards those particular processes that are being developed in those countries. This would mean that we were doing two things: we would be providing our own legal system of protection at the border and we would also be enhancing the systems and procedures that are developed—and that we want to see developed—in those other countries.

Mr Halkett : I have no argument with any of that. The only point I would make, though, is that in the discussions which I have been party to between officials from DAFF and Customs, the latter have shown a fair degree of reluctance to change existing procedures and forms to accommodate that particular issue. They talk about Australia being part of an international arrangement for customs, with codes and procedures that have to be negotiated internationally and I think the next review is in 2013. The general view, as I understand it, is that you need some additional piece of documentation to support your customs declaration that testifies to the fact that the timber products that you are importing have been obtained from timber that was logged lawfully in the source country.

Senator COLBECK: Again, we will go back to what is happening globally. The US have a certification at the border and the EU have a certification at the border. I am not really interested in what Customs want; I am interested in making legislation that actually works. If the parliament says that Customs are going to do that then that is what Customs are going to do. We are seeing a global move towards this process. If you are talking about harmonisation that is the way things are going anyway, so why not do that and have some benefits on each side of the process?

Mr Halkett : That is a fair comment. I really cannot go beyond what I have said but I understand what you are saying.

Senator COLBECK: In your discussions and in the processes that are occurring with the department at the moment, are you aware of whether the department has engaged with other countries as part of this process? I know that in the EU, through the FLEGT process, there are direct relationships being negotiated with different countries to do some of this capacity building work. You have mentioned the Asia Pacific Forestry Skills and Capacity Building Program that we had some funding put in place for and I know that there is a lot of work going into Europe, particularly in north Africa on that. Are you aware of anything that is happening in that sphere through the development of this legislation?

Mr Halkett : There are two points I will make. The industry, through ATIF, has quite a strong relationship with organisations in other countries such as the US, Japan, the EU and the UK. So at an industry level there is quite a substantial dialogue. I really cannot speak for the department. I understand that the previous minister, Minister Burke, had negotiated a number of bilateral agreements with countries such as China, Indonesia, Vietnam and Papua New Guinea. All I can do is observe that the program was set up under the previous government to assist in building capacity in countries of high risk, particularly Papua New Guinea and Indonesia, and had a second round of funding of $12.1 million that was set aside to support Papua New Guinea and Indonesia, and that work has not proceeded. I think that is a problem of supplier countries adequately understanding what Australia needs in terms of legality assurance and meeting those requirements at the border. I think there is a problem there; hence, my comment in the submission that perhaps the government needs to revisit its capacity building support, particularly for countries of high risk.

Senator MILNE: I am just interested in your view on the fact that this bill does not require a declaration as the Lacey Act does and the EU does. I think it is one of the main criticisms of the bill that the due diligence requirement of the bill does not require explicit and mandatory declaration, chain of custody and legality verification documentation. I would have thought it would have been in your interests to seek that kind of assurance in the bill because, at one level, it protects you from subsequent liability because people have to say which coup it has come from, what species it is, which company et cetera, so there is a very clear line of verification, as opposed to what is now going to be a fairly woolly chain of custody, which will come back to you in terms of liability, if someone decides to pursue the whole chain of custody and shows that claims that have been made are wrong and that the auditors have been wrong et cetera. What is your view about that? Greenpeace have very strong view that the legislation should be explicit. I am interested in your response to that.

Mr Halkett : Thanks, yes, I am aware of the view that Greenpeace have put forward. ATIF has had some useful discussions both with Greenpeace and with WWF over this and we both have the same agenda which is to restrict the import of illegally logged timber. The way the bill is structured does not provide for that upfront declaration that you have mentioned or that Greenpeace have provided in their submission. It sets up a surrogate system, in some sense, whereby the minister appoints timber industry certifiers. Those certifiers then approve importers or processers and the responsibility then lies with timber industry certifiers to do the work that you have mentioned—the declaration under a code of conduct to look at risk assessment, to report to the minister and so on. That is the approach that has been taken. There are other ways to do that and, certainly Senator Colbeck's approach is a bit different, and having an upfront declaration which is what the US Lacey Act requires. The difference there is that in the US have a justice department. I am not sure that within DAFF there is the capacity to do this work. I think that is one of the major reasons that this bill effectively handballs responsibility for this to the industry. Industry is not unhappy with that because it is consistent with the approach that is taken elsewhere, but that is the way it is structured.

Senator MILNE: Yes, but I am asking what is your response if we were to decide to go down a declaration route in this bill. I would have thought it would stop the handball. What is effectively happening here is closer to a system of self-regulation and codes of conduct than mandatory disclosure. The liability will rest with you in the event that you are shown to have imported illegally logged timber.

Mr Halkett : I do not have any fundamental difficulty with that approach. Where I think there is perhaps a difficulty is that the countries of highest risk may not have the capacity to provide the declaration of the sort that you have indicated. Although, having said that, the reason that the Indonesian government and the industry have developed this SVLK system is exactly for that reason—that is, if you import timber that has an SVLK certificate with it, you know that the timber has been obtained from legally sourced material and logged in accordance with Indonesian law, and that is effectively a declaration.

Senator MILNE: But we do not have that with PNG or a range of other countries.

Mr Halkett : You could argue the toss as to whether the systems which are used in PNG, the system that is developed by SGS, or the TLVT system that is used in Indonesia provide sufficient comfort that the timber is legally sourced. There is a difference of opinion on that issue, and you will hear about that.

Senator MILNE: I want to understand your view of the declaration upfront is because, to me, that is a very clear way of establishing the custody chain right through. Thank you.

CHAIR: Senator O'Brien.

Senator O'BRIEN: On the costs to Australia business of administering arrangements proposed under this exposure draft, could you elaborate on any concerns your industry has about the impact of such costs and the impact on the competitiveness of product?

Mr Halkett : There was a substantial body of work funded by the government and undertaken over the last couple of years. Some major consultancy projects were done. One of those projects went to that particularly issue. It relied on advice and research done overseas to look at the impact of these sorts of systems on wholesale prices of imported timber products. That independent report and research, which is included in the ATIF submission, suggests that the impact on imported prices would be somewhere between 2.5 and 4.5 per cent of the wholesale price. That is the cost of this sort of work that needs to be done setting up the timber industry certifiers, codes of conduct for tracking, audit, reporting and so on. There is no doubt that will have an impact on the price competitiveness of timber products relative to other building materials and that the timber industry sees that as a competitive disadvantage. It is a question of whether that disadvantage is sufficient to completely eradicate the notion that imported products are somehow or other sourced from illegal products when the industry is very keen to showcase the very good climate change abatement and environmental credentials of timber products. Certainly there is an expectation among the companies I represent that they would take a hit of around three per cent in the wholesale price that they would then have to pass on to competitors.

Senator O'BRIEN: To competitors or consumers?

Mr Halkett : Sorry, to consumers, and that would advantage competitors.

Senator O'BRIEN: They would like to pass it on to competitors.

Mr Halkett : They would like to pass it on to consumers. I know with current imported product coming from Malaysia, the Malaysians have a system which is recognised by PEFC—you will hear about that later—that the price of the Malaysian certified product in the Australian marketplace is somewhere between five and eight per cent more expensive than similar product coming from Indonesia and that is an major impediment that the Malaysians in selling their product in the Australian marketplace.

Senator O'BRIEN: So your industry tells us that it is having an impact greater than the three per cent you expect—

Mr Halkett : In the case of Malaysia, this is a full chain of custody certification system. It is not unlike the Australian forestry standards. It is a fall chain of custody system, which is more expensive than we are talking about here. If it is legally verified at the border, that is it; there is no internal requirement for chain of custody, as there is with FSC or PEFC. Those systems are more expensive and Malaysians tell us that they are having trouble selling their product in the Australian marketplace because of the additional cost of somewhere between five and eight per cent which they add to products which are similar to products imported from Indonesia and South America.

Senator O'BRIEN: Has your industry conceptualised how a prosecution for alleged breach of any subsequent legislation might run, establishing that in fact the product was not legally logged in accordance with the law of the country of origin?

Mr Halkett : We have taken some advice from the US on this. Although the Lacey Act talks tough, it has been pretty ineffective in terms of prosecution. There have only ever been two prosecutions brought. One is the famous Gibson guitar case, which is still before the courts, and there is one other. So in terms of being an effective legal deterrent for alleged imported products in the US, the Lacey Act has not been that successful in our view.

Senator O'BRIEN: Do you know what the alleged cost impact of that legislation is on the cost of timber in the US?

Mr Halkett : The studies we have done have been based on similar models to the Australian one and the EU but I would suspect that it is probably around two per cent, probably at the lower end of our range of 2.5 to 4.5. Effectively in the US you take a bit of a risk. If the Justice Department knocks on your door you need to demonstrate to them that the product is lawful. You need to take a duty of care and prosecutions—I went to a presentation in Geneva which the US put on and under the Lacey Act it has been incredibly difficult for the US to prosecute on a range of plant and animal species under the act because there are required to get officials from the country of origin to come to the US to testify and the Honduran officials have a habit of changing their minds on a flight from Honduras. There have been some problems. I think this system is probably one that has some process involved which avoids perhaps the need to go to prosecution. When I look at the large part of the bill that gives the Commonwealth officials powers, I struggle to understand how that would work, where officials would get their intelligence from to go and get a warrant from a magistrate to break down a door to come and take a hard drive—the sorts of things that the bill allows them to do. I struggle to see how that would work in practical terms.

Senator O'BRIEN: We have a submission that suggests that, because of the potential impact on, for example, Australian furniture manufacturers of the cost to their production, these measures should apply to any imported product which contains five per cent volume—I think, not value—of timber. What does your industry think of that?

Mr Halkett : This is a bit outside my area of expertise, but I do recognise that in the discussions which occurred with Minister Burke the manufacturing sector in Australia was very firmly of the view that, if they are going to be required to go through a process, then imported products should go through the same process. But it is a challenge. The view was that, if you are manufacturing, for example, a wooden window in Australia and you are required to ensure that the product that you put into that window is legally sourced, it competitively puts you at a major disadvantage against your competitors if they import the same product but do not have to jump through the same hoop. That is the reason I made the comment about the regulated timber products. It is really important that it is clarified as to what products are covered by that particular expression or phrase.

The view generally is that it would cover all timber based products—lounge suites, outdoor furniture, wooden components; anything that has got a wooden component to it would be covered. As the supply chains become longer and more complex, it is going to become increasingly difficult to actually nail that down. There is no doubt about it. The people that I represent, being the timber importers, were absolutely keen to ensure that the government did not just pick off the easy target—which was to target my members because of the shorter supply chain—and that it should go across the board. Manufacturers in Australia are of the same view.

Senator COLBECK: I have a question to follow on from what Senator Milne and Senator O'Brien were talking about. You mentioned the process in Malaysia that applies a cost premium over and above competitive product from Indonesia. Surely if there is a liability in the market the market is going to cost that liability and move towards mitigating that. So, if the Malaysians have in place a practice or a process that we are trying to encourage, I would have thought the market would be moving towards that; markets are marvellous things in trying to keep themselves out of trouble. Surely, if there is a process in place that provides the surety and a known cost to the process, the market will gravitate to that. That is exactly the behaviour that we are trying to encourage, which would then apply pressures to other parts of the market to do the same thing.

That is reducing the cost to our local business but applying the cost down the supply chain where it ought to be. Okay, some of it will come back through the supply chain, but surely that would be the behaviour that we are trying to encourage throughout our legislative process rather than having a bureaucracy bundled up at this end. What we want to do is ensure that we are getting legally logged timber, at the end of the day. We do not necessarily need to create a huge bureaucracy around that if there are already processes are in place in the countries of source that actually can provide the information.

Mr Halkett : I agree with that. Certainly the marketplace is moving to some degree in Australia towards requiring timber to be certified. This is where the Malaysian product has an advantage. That is where PEFC certified timber has an advantage. I am involved with the Woolworths initiative to set up this Masters Home Improvement chain. Their sourcing committee is looking very carefully at making sure that there is some comfort, that their corporate reputation is not going to be besmirched by illegal products of any sort. So certainly the marketplace is moving in that direction. Bunnings have a system in place. IKEA have a system in place. Many architects and specifiers now prescribe certified timber, so there is a movement in that direction which is certainly providing a price premium for products of the sort I described from Malaysia.

Senator COLBECK: Which takes me back to where I started from. There are processes and there are quality management systems in place. We ought to be using that process rather than creating another system altogether, if we can, to most efficiently get what we want.

CHAIR: Thank you for your evidence.