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IMM Annual Report highlights progress in overcoming market constraints to FLEGT-licensed timber

The first IMM EU trade survey in 2017 identified several administrative issues that may have had an impact on the market for FLEGT-licensed timber in the early stages after implementation. First and foremost, there were delays in clearance of shipments for circulation on the European markets due to FLEGT-license mismatches. Some companies also had difficulties adapting to the new administrative procedures involved in importing FLEGT-licensed timber and called for a fully electronic process to reduce administrative effort. Besides these administrative issues, lack of awareness of the Indonesian FLEGT VPA and what it means on the ground was frequently mentioned as undermining market development. 

HS Code harmonisation and other License mismatches

The number of both HS code and other FLEGT-license mismatches related for example to shipments’ weight or volume has been reduced in 2018, according to both Indonesian sources and to respondents to the IMM trade survey and IMM Trade Consultation delegates. The EU and Indonesia have worked bilaterally on further harmonising HS codes for certain product groups since the issue first came up as a part of validation of FLEGT-licenses. 

Interviews conducted by the European IMM correspondents with ten European timber-sector associations and Monitoring Organisations representing more than 2700 companies confirm this assessment. Only one of the ten organisations flagged up a recent significant issue with FLEGT-licenses from Indonesia. The case did not refer to a license mismatch but to a FLEGT-licensed shipment that had overstayed the original expiry date of the license in a bonded warehouse. Obtaining an extension for the FLEGT-license was described as difficult and time-consuming. This organisation also criticised and called for a change of the fact that FLEGT-licensing currently doesn’t take account of the timber trade’s practice of keeping imported stock in bonded warehousing and breaking up shipments into individual lots as orders are placed. That way importers spread the cost of customs duty, which eases cashflow.

Electronic licensing

The EU and Indonesia decided to pilot an e-licensing tool; a final decision on using the e-licensing system will be made in early 2020. Bilateral work, with additional support of some individual EU Member States, on developing this system has been on-going for some time. 

The fact that the process wasn’t fully electronic had been the major general point of criticism raised by EU traders of the administrative procedures of importing FLEGT-licensed timber in 2017. 

Communication and marketing

In terms of promoting Indonesian timber with a FLEGT-license to the EU market, the UK Department for International Development (DFID)’s latest phase of the Multi-Stakeholder Forestry Programme (MFP4), launched in 2018, contains a component that will provide background assistance to the MoEF and Indonesian stakeholders in “building confidence and demand” for Indonesian FLEGT timber. 

One aspect of MFP4 will be a project in collaboration with the Global Timber Forum to identify how best to promote specific FLEGT-licensed wood products within the EU. MFP4 will also examine prospects for a central online resource for information on Indonesian FLEGT achievements and news. The website www.legalwoodmarket.com was established as a market for legal and sustainable Indonesian timber and wood products under the previous project phase, MFP3, and a new Indonesian Wood Association platform is now currently being developed.

The Indonesian MoEF and the MFP3 programme also supported the UK Timber Trade Federation in developing and hosting the Timber Transformer exhibition, dedicated to the Indonesian FLEGT VPA and with a focus on environmental, social and economic benefits on the ground. The exhibition ran for four months in London and attracted hundreds of visitors, including journalists, timber businesses, NGO representatives, end users and members of the public. With the exception of the UK Timber Trade Federation, European associations interviewed by IMM in 2018 said they did not formally promote FLEGT-licensed timber. However, some had delivered training courses or were “encouraging” members to use FLEGT-licensed timber. A detailed analysis of timber association attitudes to FLEGT and their level of engagement in promotion can be found in Chapter 8 of this report.

The EFI FLEGT Facility launched a website dedicated to timber buyers, which provides timber traders, specifiers, architects and retailers with information on business benefits of trading in FLEGT-licensed timber. It also demonstrates social, environmental and economic benefits that such trade brings to producer countries. The new resource explains what FLEGT licences are, how they benefit timber buyers in the EU, and how the advantages of FLEGT licensing extend beyond legality to encompass social, economic and environmental gains in producer countries. It includes links to multimedia stories that highlight the benefits of FLEGT licensing, and to downloadable resources that can help timber buyers to communicate about FLEGT-licensed products with their customers.

When trying to evaluate the levels of awareness and acceptance of FLEGT-licensed timber, it is useful to bear in mind that FLEGT-licensing is a new concept, that has been available in the marketplace for less than three years and from only one country. Considering that private sector certification, for example, as a concept is now 25+ years old and yet, as demonstrated by the IMM private sector procurement study, it is not universally advocated or specified, FLEGT-licensing can be expected to still have some way to go to achieve similar levels of acceptance.

More information on Indonesia’s Market Position and Prospects can be found in chapter 5 and information on EU wood promotion campaigns and influencers and their support of FLEGT in chapter 8 of the latest IMM Annual Report.

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