Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Rural and Regional Affairs and Transport Legislation Committee
16/05/2011
Illegal Logging Prohibition Bill 2011

TATE, Mr Robert, Executive Officer, PNG Forest Industries Association

[10:50]

CHAIR: I welcome Mr Tate from the PNG Forest Industries Association. You have lodged submission 10 with the committee. Would you like to make any amendments or additions to that submission?

Mr Tate : No, I have no amendments or additions.

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

Mr Tate : Thank you, Senator. It has been interesting. I have not written my initial comments down anywhere. One comment is a request, strongly felt, that similar to the International Tropical Timber Organisation when it looks at questions of legality and similar to what is in the EU legislation, which recognises the legality of production in the country of origin, the Australian legislation when it is finalised, together with the regulations under the legislation, also recognises that legality of production in the country of origin according to that country's rules and laws is satisfactory performance for the purposes of exporting to Australia. It is also our view—and listening to evidence this morning from other witnesses I think it is also their view—that legality and sustainability of production are not necessarily the same beast, for want of a better term. For it to be sustainable, there must first be legality of production, adequate chain of custody controls, some form of checking and validity of the resource base and social aspects and then certification.

In PNG at our stage of development, we are able to give genuine and real assurance as to legality of production and chain of custody but very little assurance as to certification of long-term sustainability. In a developing country, sustainability of the forest resource base is not necessarily the primary or the only reason a timber operation is commenced by the state in a certain area. It may well be for land conversion to plantation or establishment of a new township. A whole range of reasons may lead to a forest operation, which by its very definition will not be sustainable but can be legal. Thank you.

CHAIR: Thank you, Mr Tate.

Senator MILNE: I have read your submission and I want to go to this issue you have just raised of what illegal logging is. You are arguing that you do not want an expanded definition of illegal logging—that you are happy with the definition as it currently stands—but the EU and the US acts make it very clear. For example, the term 'harvest in the EU regulation also covers issues of the rights to harvest timber within legally gazetted boundaries and the payment for harvest rights and timber relating to those. In PNG there is quite a lot of evidence that companies are not paying native title holders, as such, the rights for the timber and there is quite a famous case that I referred to earlier—the Supreme Court decision in October 2008 against RH—where it was found that it was given its rights to log illegally. I argue to you that the definition Australia is proposing is considerably weaker than the definition that either the Lacey bill or the EU regulations would permit. Would you like to comment on that?

Mr Tate : The association certainly has no problems with including the extended definition.

Senator MILNE: Okay, that is encouraging to hear. You also say in your submission that there is little illegal timber currently entering Australian markets. What is the basis for that claim?

Mr Tate : In relation to our exports from PNG, prior to being able to export, you must have a valid production licence, for want of a better word, a timber harvesting licence. You must then apply for an export permit. Your production is then inspected by the department of forest representatives prior to shipment. They check things such as species description, royalty payments and the physical description of the cargo is checked and verified by the government. You are then given a permit. You can then export that shipment to Australia.

Senator MILNE: On that basis you would be comfortable with including a declaration in the Australian legislation which would require those very matters to be publicly available with the shipment, such as species and chain of custody right through to where the timber was logged.

Mr Tate : Yes, the system in PNG at the moment already provides for exactly that.

Senator MILNE: It is an issue as to whether that declaration should be included in the Australian legislation as it is in the EU and the US; I would argue that it is. I was interested to hear whether you would support that and you clearly do. When you go to the issue of legality it is all very well, once the harvest rights have been allocated, to claim a chain of custody, or certification or whatever else, but what about the assertion or the allegation that there is a higher level of corruption in the allocation of timber rights in PNG?

Mr Tate : I would think it would be naive to say there was not, but the industry, or this association, did start the commission of inquiry into aspects of the forest industry back in 1989. Since 1992 we have operated under a new forest act. It would be my opinion that allegations of corruption in resource allocation perhaps had more to do with incompetence on the part of the government agencies responsible for putting a concession together, which is purely and solely a government function, not one of the operators. It involves lands, forestry and environment, to name the three most directly involved, and sometimes the department of agriculture, but rarely. It often takes many attempts to get them to do their job right, and I can say that quite honestly. However, the allocation process is then carried out by the forest board under the new act. The forest board comprises various stakeholders, including representatives of community involved in forestry, women, provincial governments and landowners from timber areas. When people say the allocation process is corrupt, to my way of thinking the possibility of being able to effectively corrupt such a diverse range of stakeholders is almost zero, I would have thought.

Senator MILNE: Well, that is a matter of opinion, but I take what you say in evidence and I will go to the next point that you made, about the incompetence of government departments in being able to make this a more rigorous process. Let me put it that way. You said that there is now a certification scheme in place, the TLTV scheme, which you claim is a credible, independent auditing scheme. What level of capacity is there in PNG to actually give robustness to a certification scheme? You might well have one, but why would we think it was robust?

Mr Tate : If I could just elaborate slightly before I answer. Currently there are two schemes operating. One is the FSC scheme and it is what they call a controlled wood program, and then there is the SGS TLTV scheme, which is far more extensive in its content. Both schemes are private sector based. They do not involve government. One is obviously operated by FSC and one by SGS, the big Swiss company. They bring in auditors. In SGS's case they come from South Africa. They come to PNG and a company's performance is then benchmarked against a set of performance criteria which we make publicly available on our website. To that extent, the companies and the obtaining of a legality certification are independent of the government system. Yes, it does recognise or accept the limitations of the government in being able to impose requirements or monitor effectively.

SGS and FSC were recognised by the EU. There is still ongoing work to have them recognised as accredited under the EU system. They are already recognised under the New Zealand government procurement programs for wood products. They are recognised by the Dutch government as credible schemes. What we are saying is that, given the collapse in confidence on the part of Western developed economies like Australia in PNG's ability to manage its own affairs, this would appear to be a credible alternative. It is independent third-party auditing of legal compliance in your country of origin.

Senator MILNE: There are two issues, as we said. One is the allocation of the timber rights; the second is the issue of certification once you have the rights allocated. There are also some issues of capacity building. One issue is the sovereign rights of another nation and the level to which a country like Australia may interfere or otherwise, and then there is the issue of building capacity in those countries. How would you suggest that the level of confidence that a country like Australia might have in the allocation of timber rights could be increased by capacity building, given that conundrum I just mentioned?

Mr Tate : If Australia were serious about such a proposition, it could revisit much of what was proposed to the Australian government—by us and others—two or three years ago under the Asia-Pacific Forestry Skills and Capacity Building Program and then under the Papua New Guinea-Australia Forest Carbon Partnership program. It would be entirely up to the Australian government and the PNG government as to how they would progress the need for capacity building. We have certainly put what we thought were worthwhile proposals to them, particularly in the area of chain of custody, logging code of practice training and a whole range of issues.

Senator O'BRIEN: Can you tell us a little more about the history of the SGS TLTV scheme and how it has developed?

Mr Tate : Certainly. Illegal logging has been an international issue for the timber trade for quite some time. It would be naive of industry and markets not to have reacted to those genuine concerns. Legality and certification systems grew out of the need to be seen to be doing something independent of governments, which nobody trusted. It did not matter where you were. Out of those early movements grew the FSC movement. That was probably the first major one.

Then there were the PEFC arrangements. There were individual country initiatives—the Australian Forest Standard, the Malaysian forest standards that are now in place—and a whole raft of measures for legal verification. SGS operate in many countries around the world and had been approached initially in Indonesia for similar work. They have a generic standard to ensure legal compliance of production and operations. You are then expected to form a country committee to modify that standard, then circulate the modified standard to stakeholders for comment, input, amendment—checking, basically. Once the final version has been accepted by the PNG drafting committee, it then goes to SGS in Switzerland. As long as it is compliant with their in-house procedures and we have not left out the key ingredients, SGS will then endorse it as a standard applicable for use in PNG.

The mechanics of the thing are quite involved: forming the committee, which comprised a broad cross-section of everybody—industry, government, semi-government bodies and NGO groups. Then there is the written comment period, where it had to be circulated. We even sent the draft to the Australian government. They have a passing interest in PNG. After it lay on the table for a while it then became our standard for legality, and it includes legal origin and also legal compliance—with the labour laws, the payment of wages, the wearing of a crash hat in the sawmill and all that sort of thing. It is very detailed. That was a bit of background to SGS. It evolved over a period of two years, from commencement to the first standard, and currently we have five member companies that have adopted the standard. We would propose that, having met those criteria for legal origin and legal compliance, recognition or a risk reduction would be made on arrival in Australia so that that product is not perhaps subject to the full rigours of having to go through and prove due diligence and all the rest of it again.

Senator O'BRIEN: Where an importer is provided with certification under the SGS TLTV scheme, you suggest that any measures under this proposed legislation would effectively recognise that as proof to the extent of the certification?

Mr Tate : Yes. The EU, which has not yet formalised their regulations and there is still much debate in the EU itself about it, is thinking along the lines that, along with the certificate of harvest and origin of harvest, a certificate of legal compliance at least relieves part of the onus from the importer of having to prove that he has conducted an otherwise fairly rigorous due diligence test. Obviously you would still have to check that the certificate was valid and current on arrival, so to speak, but you would not then have to go and look behind that certificate to find out if his timber permit was valid, if he was compliant with the labour act in whatever the exporting country was, and that sort of thing.

Senator O'BRIEN: I presume that the chain of custody would be more difficult to establish where PNG timber was imported by another country and converted into a product or a component of a product and then imported here. It would be more difficult to rely on that certification for that timber in that circumstance. Do you have any suggestions that we might consider in that regard?

Mr Tate : It is very difficult. We have two companies that have TLTV certificates, both of which export to Australia. Product on arrival in Australia is then separated, if you like, into: 'Yes, that is certified,' and they may buy from other producers as well, or 'No, that is not.' So on arrival here it is fairly easy to distinguish at the primary stage of import. However, when a sheet of plywood goes to China and comes back as something like this, it is virtually impossible. We have no ready answer for that. The easy, glib answer is that we are such a small supplier in the Chinese market that nothing we ask them to do will make the slightest impression. It would have to be a concerted effort from all suppliers into China, suggesting that China would then have to at least label the end product as either fully certified, partially certified or unknown.

Senator O'BRIEN: It would be an interesting audit to pursue such a train of production, I imagine.

Mr Tate : Certainly in PNG's case we are fortunate in that our species tend not to get mixed up in the lower end, utility wood markets. They are fairly readily identifiable purely by species and value, so we are not as exposed perhaps to the cheap plantation wood suppliers into the Chinese market.

Senator COLBECK: I want to go back to your evidence in relation to the definition of illegal and where that sits. So you would be comfortable with the definition that currently sits within our act or with the definitions that apply in either the Lacey or the proposed EU systems?

Mr Tate : The definition in the proposed Australian act is adequate. Our concern is that so much of the regulations is still unclear. We choose to make the point that the ideal for us is the ITTO definition—everyone knows that. The further we drift away from that the less uncertain things become.

Senator COLBECK: So the devil will come in the detail. You talked about the process of verification to gain an export certification. You have had some discussions with Senator Milne and Senator O'Brien about the SGS TLTV process and you have also talked about your internal processes for gaining export certification. Can you give us a rundown on the types of issues that are dealt with as part of that process?

Mr Tate : Do you mean generally from production through to the export stage?

Senator COLBECK: I will take you through a specific example. At another inquiry we heard of two streams of product going into a sawmill. I do not think it was directly relating to PNG so I am not making an allegation in relation to any of your industry, but it appears that it may be a practice that occurs in a number of jurisdictions. There were two streams. One was a certified and legal stream so all the raw material—logs—goes into a sawmill and comes out the other end—and who can tell the difference? So are the inputs and the outputs of mills and those sorts of things part of the assessment process to try to determine where particular issues or particular problems might be occurring in the supply chain?

Mr Tate : There are two parts to the answer. Under the SGS and FSC systems, if you are buying logs from two different sources you must keep those separate and identify them in the end product form as well. So if it is legal in it is legal out but it must be kept separate. If there is a risk of contamination then you are obliged to implement corrective measures. What was the other part of your question?

Senator COLBECK: I was trying to get a broad sense of the types of verification processes, and that is one example. Take an export certificate to be achieved, which was where we started your entire evidence, and you have been talking about how that might be accepted into whatever system we finally derive. I am interested in the strength and efficacy of that process.

Mr Tate : I would start by saying you can always improve the system. It would always be a lot better if the government inspector were a lot better at doing his job, I suppose.

Senator COLBECK: So that comes back to capacity issues?

Mr Tate : To implementation, I think. But it is quite a robust system, particularly in comparison to, say, the Solomon Islands, which were mentioned earlier. I would rate it far in advance of anything in the Solomons. And there is one big advantage in PNG that lessens the risk of this sort of contamination of different sources. Because PNG is not well connected with roads or even coastal shipping services, each forest operation tends to be very discrete. There is little cross-buying or supply of either logs or wood products within PNG. So it is a fairly simple exercise to ensure that all that production sitting on the beach or in the sawmill actually came from that concession area, due purely to the geographic limitations on being able to access and move product around the country.

Senator COLBECK: I think that between us we have covered all I need to cover.

CHAIR: Thank you, Senator Colbeck. In that case, then, thank you, Mr Tate. We will now take a short break.

Proceedings suspended from 11:20 to 11:34