1

Chain of Custody for

Timber Products Exported from Sarawak

Presented by:

Mr. MOHD HINRI ABDULLAHAssistant General Manager, Preventive & Enforcement,

Sarawak Timber Industry Development Corporation

3rd December 2007Yokohama, Japan

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ScopeScope

Sarawak Timber Industry Development Corporation (STIDC)

Timber industry in Sarawak

Chain of Custody

Illegal Timber

3

Sarawak Timber Industry Development Corporation (STIDC)

4

Ministry of Planning &Resource

Management,Sarawak

Land Custody &

Development Authority

Sarawak Timber Industry

Development Corporation

(STIDC)

Land & Survey Department

Sarawak Biodiversity

CentreForest

Department

Natural Resources

& Environment

Board

SarawakForestry

Corporation(SFC)

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CORPORATE BACKGROUNDCORPORATE BACKGROUND

SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION (STIDC)

Established in June 1973 following the recommendation of the FAO, UN which conducted a comprehensive forest inventory in 1968-1972

STIDC is a State Government agency formed to stimulate by all possible means the planned expansion of wood-based industries in Sarawak at a rate consistent with the overall interest of the economy, the availability of capital and technical expertise and effective management of the forest resource

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Timber Industry in Sarawak

0

5,000

10,000

15,000

20,000

25,000

LNG PETROLEUM&

PETROLEUMPRODUCTS

TIMBER &TIMBER

PRODUCTS

AGRIC.PRODUCTS

UREA &AMMONIA

OTHERPRODUCTS

20052006

SARAWAK: MAJOR EXPORT COMMODITIES 2005 - 2006

61,9405,9214862,9798,77320,49723,2852006

51,4645,547497 2,3017,234 15,094 20,7902005100%10%1%4%14%29%40%

100%9%1%5%14%33%38%

UREA & AMMONIA

(RM MILLION)

TIMBER & TIMBER

PRODUCTS(RM MILLION)

AGRIC. PRODUCTS

(RM MILLION)

OTHERPRODUCTS

(RM MILLION)

TOTAL

(RM MILLION)

CRUDE PETROLEUM &

PET. PRODUCTS(RM MILLION)

LNG(RM

MILLION)YEAR

FOREST RESOURCE BASE

TOTAL LAND AREA : 12.3 MILLION HA.

PERMANENT FOREST ESTATE (PFE) : 6.0 MILLION HA. (70%)

TOTALLY PROTECTED AREA (TPA) : 1.0 MILLION HA. (12%)

STATE LAND : 1.5 MILLION HA. (18%)

TOTAL FOREST AREA : 8.5 MILLION HA. (69%)

02468

101214161820

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Vol

ume

(mill

ion

m3)

Swamp Hill Total

SARAWAK: LOG PRODUCTION TREND

1991 - 19.41 Million m32005 - 12.04 Million m32006 - 11.86 Million m3

5

365

2

1

26

13

3

23

217

32

2004

7

389

5

1

27

12

3

18

213

34

2005

31PLYWOOD

193SAWMILL

17VENEER

3MDF/FIBREBOARD

12LAMINATED BOARD

27MOULDINGS/DOWELS

1PARTICLE BOARD

5WOODCHIPS

397FURNITURE

7CHARCOAL BRIQUETTE

2006MILL TYPE

NUMBER OF WOOD-BASED INDUSTRY IN SARAWAK

SARAWAK: INSTALLED & UTILISED CAPACITY OF MILLS - 2006

5.613.66PLYWOOD

2.585.45SAWMILL

VENEER

MILL TYPE

0.78

INSTALLED CAPACITY

( MILLION M3/YEAR) *

0.57

UTILISED CAPACITY(MILLION M3/YEAR)

(8 HRS/SHIFT PER DAY)

* 1 shift 8 hour/day

0

5,000

10,000

15,000

20,000

25,000

LNG PETROLEUM&

PETROLEUMPRODUCTS

TIMBER &TIMBER

PRODUCTS

AGRIC.PRODUCTS

UREA &AMMONIA

OTHERPRODUCTS

20052006

SARAWAK: MAJOR EXPORT COMMODITIES 2005 - 2006

61,9405,9214862,9798,77320,49723,2852006

51,4645,547497 2,3017,234 15,094 20,7902005100%10%1%4%14%29%40%

100%9%1%5%14%33%38%

UREA & AMMONIA

(RM MILLION)

TIMBER & TIMBER

PRODUCTS(RM MILLION)

AGRIC. PRODUCTS

(RM MILLION)

OTHERPRODUCTS

(RM MILLION)

TOTAL

(RM MILLION)

CRUDE PETROLEUM &

PET. PRODUCTS(RM MILLION)

LNG(RM

MILLION)YEAR

SARAWAK: EXPORT OF MAJOR TIMBER PRODUCTS

25,351193,80031,582292,603WOODCHIPS (TONNE)

53,915122,78541,715111,805PARTICLEBOARD

59,15089,312OTHER PRODUCTS

967,4651,070,756961,3481,112,429SAWN TIMBER

339,572322,454321,155360,263VENEER

224,519207,086165,881173,541MDF/FIBREBOARD

75,13619,13652,35522,253LAMINATED BOARD

65,07029,32658,33026,319MOULDINGS

14,6986,15016,8257,256DOWELS

132,99895,643114,47278,475LAM.VENEER LUMBER

1,641,3713,456,6611,779,8844,200,609LOGS

8,772,6557,234,453TOTAL

20062005PRODUCTS

14

2,933,151 M3

3,601,594RM (‘000)

14% EARNINGS OF TIMBER PRODUCTS OVER SARAWAK

EXTERNAL EARNINGS

3,488,665M3

5,173,410 PLYWOOD

RM (‘000)

EXPORT TREND OF MAJOR TIMBER PRODUCTS FROM

SARAWAK

0800,000

1,600,0002,400,0003,200,0004,000,0004,800,0005,600,0006,400,0007,200,0008,000,0008,800,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

LOGS SAWN TIMBERPLYWOOD VENEERDOWELS/MOULDINGS LAMINATED BOARDPARTICLEBOARD MDF

Volume M3

EXPORT TREND OF MAJOR TIMBER PRODUCTSFROM SARAWAK

SARAWAK: EXPORT OF LOGS BY DESTINATION

2001 2002 2003 2004 2005 2006

0.98 0.98 1.28 1.21 1.41 1.25

0

1

2

3

4

5

6

OTHERS

VIETNAM

KOREA

HONG KONG

TAIWAN

CHINA

JAPAN

INDIA

VOLUME MILLION M3

SARAWAK: EXPORT OF SAWNTIMBER BY DESTINATION

2001 2002 2003 2004 2005 20060

200,000

400,000

600,000

800,000

1,000,000

1,200,000

OTHERS

SINGAPORE

EU

KOREA

CHINA

MIDDLE EAST

TAIWAN

PHILIPPINES

THAILAND

VOLUME M3

SARAWAK: EXPORT OF PLYWOOD BY DESTINATION - 2006

2001 2002 2003 2004 2005 2006

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

OTHERS

INDIA

EU

TAIWAN

CHINA

MIDDLE EAST

KOREA

USA

JAPAN

VOLUME M3

POLICY: RESOURCES

Sustaining the momentum of growth by ensuring adequate long term raw material supply.

Production - 9.2 million m3 annually from Permanent ForestEstate as recommended by ITTO.

Log Quota Policy - 60% of log production for local processing mills & 40% export.

FUTURE RAW MATERIAL SUPPLYFOREST PLANTATION

Sarawak Government in collaboration with private sectors have embarked on large scale forest plantation. Establishment of forest plantation to ensure sustainable supply of timber in the long term.

Target: About 1.0 million hectares of planted forests within the 15-20 years to produce 20 million m3 of fast growing timber species annually.

Species planted include species such asAcacia Mangium, Albizia falcataria, Shoreamacrophylla, Durio zibethinus and Heveabraziliensis.

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CHAIN - OF - CUSTODY

Laws & regulations Laws & regulations relating to timber industry relating to timber industry

SARAWAK RELEVANT LAWS ON FOREST AND TIMBER INDUSTRY

• Plant Quarantine Act 1976DEPARTMENT OF AGRICULTURAL (DOA)

•The Natural Resources and Environment (Amendment) Ordinance, 1997NATURAL RESOURCES AND ENVIRONMENTAL BOARD (NREB)

• Land Code, 1958 (Cap.81)LAND AND SURVEY DEPARTMENT

• Customs Act 1967, Customs (Prohibition of Export) Order 1988• Customs Act 1967 Customs (Prohibition of Import) Order 2006

CUSTOMS DEPARTMENT

• The Sarawak Timber Industry Development Corporation Ordinance, 1973 • The Sarawak Timber Industry (Registration) Regulations, 1999• The Timber Grading Regulations, 1975 (Amendment 1983)

SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION (STIDC)

• Sarawak Forestry Corporation Ordinance, 1995SARAWAK FORESTRY CORPORATION (SFC)

• Forests Ordinances, 1954 (Cap.126)• Wild Life Protection Ordinance (Cap. 26), 1998• National Parks and Nature Reserves Ordinance (Cap.27), 1998• The Ramin Logs (Prohibition of Export) Order, 1980• The Ramin Shorts and Ramin Squares (Prohibition of Export) Order, 1991• The Sepetir Timber (Export Restriction) Order, 1980• The Forest Rules 1962

FOREST DEPARTMENT, SARAWAK

LAWS/ORDINANCESORGANIZATIONS

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CHAIN OF CUSTODY (CoC) SARAWAK

LoggingCompany/Licensee

• Timber Harvesting

• Marking & Tagging

Sarawak Forestry Corporation(SF & C)

ORGANIZATION FOREST LICENSE FOREST (LANDING) TRANSIT CAMP LOG POND MILL EXPORT POINT

• Inspection before Removal

• Issuance of TRP

• Inspection of Milling Logs byriver transport

• Issuance ofShipping Pass

•Inspection of Milling Logson arrival at Mill

HarwoodTimber

Sdn.Bhd

TimberIndustry

STIDC

Customs Dept

Sarawak Forestry Corporation(SAPU)

•Checkingof IncomingLog

•Recordsverified

• Inspection of Logs

• Issuance of TRP

• Inspection of Logs• Issuance of Export

Clearance Certificate (EXCC)

ForestDepartment

FOR LOGS EXPORT

FOR MILLING LOGS

• General HarvestingPlan (GH)

• Detailed HarvestingPlan (DP)

• Permit to EnterCoupe (PEC)

• Scaling,Grading & Sorting

• PropertyMark

• Royalty Assessment• FD Hammer Marking• Issuance of

Removal Pass (Royalty)

• Inspection of Milling Logs

• Endorsement Clearance Certificate (ECC) issued

• Approve ForestLicense

• Issuance of Forest License • Re-trim, re-scale,

re-grade• Sort-export/mill• Tagging logs serial no• Prepare log specs• Apply royalty marking

• Inspection of Logs on arrivalat Mill

• ProcessingLogs intotimber Products

• Process & Verify Application• Inspection of

Timber Products• Issuance of Export License

Customs Clearance& Endorsement

SARAWAK TIMBER INDUSTRY DEVELOPMENT CORPORATION Process Flow Chart for Export Permit

APPLICANT/EXPORTER

STIDC

START

Submits Application

EXPORTER

HARWOOD TIMBER SDN.BHD.

SFC

CUSTOMSACKNOWLEDGE

APPROVED EXPORT LICENSE

CUSTOMS

• STIDC Grading Certificate (for Sawntimber except Ramin)

• Exemption from Grading Certificate (Ramin sawntimber)

• CITES Certificate from FD (Ramin sawn & timber Products)

• Permit to Export Sepetir from FD• Shipping Order• Invoice• Packing List• Log Specification (Log Export)• Removal Pass (TRP from FD)

(Logs Export)• Declaration of Source of Supply

of Timber Products • Log Quota Compliance Report

SUPPORTING DOCUMENTS

End

• Print Export Licenseat the back of CDF No. 2

• Authorized Signatory

ENDORSE & GOODSCLEARANCE

YES

NO

Approved & STIDC Produce Export License

EXPORTER

CUSTOMS

EXPORT

REGISTER

YES

INSPECTION& VERIFY

YES

APPROVEEXPORT POINT

• Inspection by SFC for Exportof Ramin timber Product

• Joint Inspection by HarwoodTimber Sdn.Bhd & SFC(for logs Export)

NO

NO

Custom Form 2

(Back page of Custom Form 2)Export Permit

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IMPORT

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Country of

origin EntryPort Sawmill

Export

LocalSale

POLICY . Ban on log import from Indonesia. Ban on import of sawn timber of size 60 sq.inches

and above from Indonesia. Log import from other countries approved on case

by case basis

Issuance of Import Permit

• Approval of Import by Ministry of Planning & Resource Management

• Approval of Import Permit by STIDC

• Custom Declaration• Inspection by STIDC, and

Dept of Agriculture (Plant & Quarantine Division)

• Hammer Marking• Tagging• Removal Pass• Inspection at mill

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IMPORT OF SAWN TIMBER FROM INDONESIA

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Authorized entry points for import of sawn timber from Indonesia

SEMATAN

BIAWAK

LUBOK ANTU

TEBEDU

Entikong

Nanga BadauSri Aman

Kuching

Sri Aman

Sarikei

BATU LINTANG

Sibu

Mukah

Miri

Procedure for import of sawn timber from IndonesiaProcedure for import of sawn timber from Indonesia

IMPORTER

STIDC

CUSTOMS DEPT

HARWOOD TIMBER S/B

DESTINATION

REGISTERED WITH STIDC

• Customs Form No.1• STIDC Inspection Note• PEB/SKSHH from Indonesia• CITES Certificate from Indonesia (Ramin)

• Physical Inspection( Ramin? )

STIDC • Customs Form No.1 & Harwood Receipt Note • CITES Certificate from Indonesia (Ramin) • Form A (Hammer Marking)

• Form B (Removal Pass)

• Discharge timber at Harwood TimberDepots

• Customs Form No.1 • Tallying & Bundling• Receipt Note & Despatch Note

DOCUMENTS

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DEVELOPMENTS

Review of Chain of CustodyStudy conducted by : URS AUSTRALIA PTY. LTD. (consultant engaged by the

state government of Sarawak)

Recommendations

To strengthen existing Chain of Custody System

Logs for export & processing (CoC from log pond and mill/ log export point)

> One agency to maintain log and timber product database to reduce duplication and improve efficiency across agencies involved

> Pre-harvest inventory with SFC auditing

> 100% tree marketing or Tree / Log production No. to commence at forest landing

> Log Production No. to be carried through the entire supply chain (including in batching for mill CoC)

> Introduction of an Internal Audit Systems to facilitate 3rd party audit which would assist with credibility

> Documented audits at logs ponds by Sarawak Forestry Corporation and Harwood Timber Sdn Bhd

Timber Processing (Introduce CoC into all mills)

> Develop simple and robust CoC system based on those currently in use

> Ensure Log Production No. is used throughout the process

> Utilise the detailed electronic data kept by most mills to avoid duplication

> Centralised database will enable all logs and timber products to have ‘origin’identified if required

Export point – ship

> More STIDC staff allocated where ‘midstream’ loading is involved

>STIDC and SFC staff work in shifts on a 24-hour basis to better monitor ship movements and loading

Database for CoC & Reporting

> STIDC and Harwood Timber map out each point in data collection, responsibilities and data format to identify how these can be linked and shared

> Develop a single section within Harwood Timber devoted exclusively for management

> Linking of enumeration data (from companies) to harvest date (collated by companies and Harwood Timber)

> Linking STIDC Export Permit (ePermit) to Harwood log tracking systems (HENDIS)

> Linking or sharing data in STIDC ePermit with Customs or Port Authorities

Briefing on Japan’s Green Procurement Policyby

5th April 2007STIDC Head Office, Kuching, Sarawak

Briefing on “Japan’s Green Procurement Policy”by Mr. Kazuyuki Morita, Director of Wood Products

Trade, Ministry of Forestry & Fisheries, Japan5th April 2007, STIDC Head Office, Kuching, Sarawak

37

Datu Haji Len Talif Salleh, General Manager of STIDC handing over publications to Mr. Kazuyuki Morita

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ILLEGAL TIMBER

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Illegal Logging Illegal Logging

Illegal Logging is most referred to in the literature as when timber is harvested, transported, bought or sold in violation of national laws.

Seneca Creek Associates & Wood Resources International, Illegal Logging and Global Wood Markets:

The Competitive Impacts on the U.S Wood Products IndustryNovember 2004

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Issues of Illegal TimberIssues of Illegal Timber

• Harvesting without authority in designated national parks or forest reserves

• Harvesting without authorization or excess of concession permit limits

• Failing to report harvesting activity to avoid royalty payments or taxes

• Violating international trading rules or agreements, such as export bans or CITES

Seneca Creek Associates & Wood Resources International, Nov. 2004

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ILLEGAL TIMBER IN SARAWAK CONTEXT

• Harvesting without valid licence

• Harvesting in National Parks or Forest Reserves

• Harvesting in excess of concession permit limits & outside boundary coupe

• Failing or avoid royalty payments

• Export & Import without permits

• Not registered with STIDC

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Regulation 3(1)

Notwithstanding any other written laws, no person shall be engaged in or associated with:-

a) The manufacture of timber; orb) The sale, distribution or marketing of timber.

Unless he is registered under these Regulations.

The Sarawak Timber Industry (Registration) Regulations, 1999

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Section 49(1)“The taking of forest produce in forests reserves and protected forests shall be

controlled and regulated by the Director who may -a) Issue such licences or permits in such form and under such conditions as

he may deem expedientb) Call for tenders for the right to take forest produce from a specified areac) Fix the fees, royalties, premia or other payments to be made in respect of

such forest produce in any particular cased) Permit any other works that he may deem necessary for the taking of such

forest produce or for the management of the forest”

Forests Ordinance, 1954. The Taking of Forest Produce

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ACTIONS TO COMBAT ILLEGAL LOGGING

45

46

47

48

49

50

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TO CONCLUDE

Sarawak formulated and implemented a reliable legal framework and regulatory system to manage the forest and timber industry The implementing agencies and stakeholders alike uphold dutifully to the system implementedAdministrative system is multi-agencies linked to ensure continuous auditing along the supply chainImplementing agencies certified core functions under ISO 9001:2000 quality management systemsThird party audit and continuous improvement are important elements to adhere in ISO:9001:2000 systemSarawak government allow transparency by inviting and allowing external credible parties to evaluate the system implementedConsumers can procure without doubts that timber issued with export permit issued by STIDC is “legal”

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