In 2015, Japan was the world’s fourth largest importer of timber and timber products after China, the United States (US) and the European Union (EU), and it was the third largest importer of wooden furniture after the US and the EU.
A comparison of the Japanese Clean Wood Act and the EU Timber Regulation
In recent years, Japan has made progress in tackling the trade in illegal timber and timber products. A new Japanese law, the ‘Act on Promotion of Use and Distribution of Legally-Harvested Wood and Wood Products,’ was adopted in May 2016.  This law is also known as the ‘Clean Wood Act.’
The Japanese Government subsequently implemented the Clean Wood Act through a basic policy and two ministerial ordinances on enforcement and due diligence that were proclaimed in May 2017. The Clean Wood Act is expected to become operational towards the end of 2017.
This briefing paper introduces Japan’s Clean Wood Act and compares it to the EU Timber Regulation (EUTR). It recommends closer cooperation between major timber markets on strengthening key aspects of the Clean Wood Act.
Key differences and similarities between the Japanese Clean Wood Act and the EUTR
This section summarises the key features of the Clean Wood Act compared to the EUTR. The table in Annex 1 provides a more detailed comparison.
In the Japanese Clean Wood Act, operators voluntarily register as a way of being recognised by the Government of Japan for their responsible behaviour. Registered operators are officially recognised as businesses that take measures to verify the legality of their wood and wood products.
The Government of Japan plays an important role in promoting the registration of operators and disclosing good practice by registered operators. Further, the Government engages in educational and public-awareness activities to promote timber legality.
While registration under the Japanese Clean Wood Act is voluntary, one should not underestimate the reputational benefits that the formal recognition of responsible behaviour brings to Japanese businesses. Large-scale operators in the Japanese timber sector are likely to pursue such a high-level form of recognition from the authorities and this might cause smaller players to follow suit. One should not underestimate the reputational damage of losing the registration due to irresponsible behaviour either. Once deregistered, businesses risk losing their good name and standing in society.
The EUTR is a mandatory piece of legislation and EU Member States lay down the penalties applicable to EUTR infringements. The EUTR prohibits illegal timber and timber products from being placed on the EU market, it requires due diligence on the part of importers, and traders are obliged to keep records of their suppliers and customers.
Under the Clean Wood Act, the main penalty is the revocation of registration. Registration can be refused or revoked if the operator cannot prove that it takes measures to handle only legal timber and timber products. Fines are also contemplated, but they relate to falsely claiming registration and not to the trade in illegal timber or timber products.
The EUTR applies primarily to operators that place timber and timber products on the EU market for the first time. It also sets traceability obligations for economic operators that sell or buy timber or timber products already placed on the EU market. Similarly, the Clean Wood Act applies to two types of operator. Type 1 are entities in the supply chain that first place timber on the Japanese market. Type 2 are entities that handle timber and timber products that have been obtained from other timber-related entities in Japan.
Processed timber in Japan
Source: Bakoko construction
Exercising due diligence and maintaining a robust due diligence system are fundamental obligations under the EUTR and the Clean Wood Act. The enforcement ordinance of the Clean Wood Act sets out requirements on collecting information for Type 1 operators to ensure they take measures to verify that the timber was harvested in compliance with the laws and regulations of the country of harvest. When transferring timber, Type 1 operators must give the recipient a record demonstrating that the relevant information was collected and a statement on the legality of the timber. Type 2 operators must confirm the content of the documents provided by the operator that transfers the timber to them.
The ministerial ordinances do not provide details on risk assessment and risk mitigation. However, they stipulate that, if no documentation is available, the operator shall gather additional information confirming that the timber was legally harvested. The ordinance states that the operator shall not handle timber if it cannot confirm its legality. Furthermore, the ordinance encourages operators to establish a due diligence system with staff responsible for managing it.
Under the EUTR, Competent Authorities of Member States carry out checks on operators to verify compliance. Under the Clean Wood Act, checks on operators are conducted primarily by registering organisations, which also have the power to cancel the registration of the operator. The competent ministry, usually the Ministry of Agriculture, Forestry and Fisheries, may also require a registered operator to report on activities and may carry out on-site inspections. The competent minister may impose similar requirements on registering organisations.
The product scope covered by the Clean Wood Act is broad. The basic policy states that legality measures apply to –‘wood and the like’-, which refers to timber and items obtained by processing wood, or furniture, paper and other items manufactured using wood as the primary raw material. Products made from recycled wood are excluded. Annex 1 lists the products covered by the Clean Wood Act that fall under furniture, paper and other items.
The Annex to the EUTR provides a list of products covered by the Regulation based on the Harmonized Commodity Description and Coding System (HS). It covers a broad range of timber products, including solid wood products, flooring, plywood, pulp and paper. Recovered/waste products, printed matter and products made from plaited or woven bamboo are exempt.
Further development of the Clean Wood Act
The following aspects of the Japanese Clean Wood Act could be clarified:
- There is no clear division of roles and responsibilities between the registering bodies and the authorities. According to the basic policy, registering bodies can carry out investigations to ensure that registered businesses are implementing all necessary measures to avoid illegal timber. According to the Act adopted in May 2016, the authorities can also carry out investigations at the premises of the registered businesses. The roles of registering bodies and the authorities overlap and it is unclear who is doing what or when. Sharing experiences between the European competent authorities and Japan may help to further clarify the roles and responsibilities of the actors involved.
- Due diligence requirements and guidelines for operators could be strengthened. Further, registering bodies play a major role in the Clean Wood Act and can investigate as well as de-register an operator. Clear requirements and processes should therefore be developed to ensure that registering bodies are sufficiently competent and qualified to carry out their duties. Upcoming implementation would benefit from regular exchanges of information and lessons learnt on risk, risk mitigation, due diligence assessments, tools and practices between the EU and Japan.
- A glossary of terminology could be created for clarification. The product scope of the Clean Wood Act is not described in internationally-agreed norms such as the HS codes.
- The status of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and the potential role of Forest Law Enforcement, Governance and Trade (FLEGT) licensed timber is unclear. Sharing information and lessons learnt among the EU, Voluntary Partnership Agreement (VPA) countries and Japan would be helpful. EU-Japan policy dialogues could integrate a FLEGT agenda point.
- International markets should exchange practices and lessons learnt in developing and implementing laws related to illegal logging and associated trade. A level playing field would benefit global efforts to stop illegal logging and promote supply chain transparency throughout the forest products sector.
Processed timber in Japan
Source: Bakoko construction
Annex 1: Detailed comparison between the EUTR and the Japanese Clean Wood Act
The following table is based on the requirements and mechanisms of the EUTR compared to the Japanese Clean Wood Act. The table provides an overview of the two pieces of legislation, identifies similarities and differences, and supports discussions on further developing the Clean Wood Act.
|Features||EUTR||Japanese Clean Wood Act|
Definition of illegal timber
Timber is illegal when harvested in contravention of the applicable legislation in the country of harvest.
Timber is illegal when harvested in contravention of the laws and regulations of Japan and/or the country of harvest.
Definition of country of harvest
The country or territory where the timber or the timber embedded in the timber products was harvested.
There is no definition, but the ordinance requires operators to have documentation on the country or region in which the trees forming the raw material were harvested. The meaning is similar to that found in the EUTR.
Definition of applicable legislation
The legislation in force in the country of harvest. Scope of legislation and regulations are well defined.
Applicable legislation is not defined, but the ordinance refers to compliance with the laws and regulations of Japan and/or the country of harvest.
The EUTR does not mention corruption, but the 2016 Guidance Document for the EUTR specifies that operators must consider the risk of corruption when evaluating documentation as part of the due diligence measures. Mitigation measures must be in place when the risk is higher (e.g. low CPI score).
The policies and ordinances do not address corruption.
The Annex to EUTR provides a detailed list of the products covered.
A broad range of timber products are covered, including solid wood products, flooring, plywood, pulp and paper.
Recovered/waste products, printed matter including magazines, newspapers and books and products made from plaited or woven bamboo are exempt.
The product scope can be amended if necessary.
‘Wood and the like’ is covered and refers to wood and items obtained by processing wood, furniture, paper and other items manufactured using wood as the primary raw material. Wood consists of logs, boards and square timber, veneer and sliced veneer, plywood, laminated veneer lumber and glued laminated timber, wood pellets, chips and fragments.
Article 2 of the enforcement ordinance lists a broad array of wood products under furniture, paper and other items that are covered by the Clean Wood Act.
1. Chairs, desks, shelves, storage fixtures (other than shelves), low partitions, coat hangers, umbrella stands, bulletin boards, blackboards, whiteboards and bed frames using wood for primary components
2. Wood pulp
3. Copy paper, form paper, coated paper for inkjet colour printers, non-coated printing paper, coated printing paper, tissue paper and toilet paper using wood as the basic material
4. Flooring using wood as the basic material
5. Wood-cement boards
6. Siding board using wood
7. Unfinished goods that will be transformed into the abovementioned items through subsequent manufacturing or processing using wood or wood pulp
The list does not use HS codes.
Used timber and timber products that have completed their lifecycle, and would otherwise be disposed of as waste, are excluded from the scope of the EUTR.
Excludes recycled wood and wood products.
The EUTR sets out the obligations of the operators that place timber and timber products on the internal market for the first time, as well as the obligations of traders.
Operator means any natural or legal person that places timber or timber products on the market.
Trader means any natural or legal person who, during a commercial activity, sells or buys on the internal market timber or timber products already placed on the internal market.
The liability is with ‘wood-related business operators’ that have voluntarily registered with the Government. A registry exists but the policies and ordinances do not specify who maintains it. Registering bodies are responsible for registering businesses, maintaining and revoking their registration.
The liability applies to registered Type 1 and Type 2 operators. The first entities in the Japanese supply chain that import timber are considered Type 1 operators.
Type 2 operators are business entities that handle timber and timber products that are obtained from other timber-related entities in Japan.
The Clean Wood Act requires all timber-related entities to ensure that the timber and timber products they handle are legal. The Government can request reports from operators and carry out on-site inspections. However, the absence of penalties and binding regulations minimises the liability of non-registered operators.
Traders are required to keep records of
b. where applicable, the traders to which they have supplied timber and timber products.
Traders are Type 2 operators. They are therefore regulated parties under the Clean Wood Act. Type 2 operators are required to confirm information, documents and the legality of harvest when providing timber and timber products to the next entity.
Checks on operators
Competent authorities carry out checks on operators to verify compliance with the EUTR and keep records of those checks.
Competent authorities also carry out checks on monitoring organisations to verify that they continue to fulfil their functions.
Monitoring organisations are private entities that the European Commission recognises based on their fulfilment of specific requirements.
Monitoring organisations provide EU operators with operational due diligence systems. Operators have the option of developing their own due diligence system or using one developed by a monitoring organisation.
Monitoring organisations maintain and regularly evaluate due diligence systems, grant operators the right to use it, verify the proper use of it and act in the event of failure by an operator.
Checks on operators are primarily conducted by registering bodies that collect a report at least once a year from the registered operators, carry out inspections, and verify that registered operators are implementing measures to ensure the use of legal wood and wood products.
Registering bodies may require the registered operator to implement necessary measures, and may cancel the registration if the operator is found to have failed to implement appropriate and robust measures.
It is not clearly specified whether the use of registering bodies is mandatory for operators that wish to be registered and whether ground checks on operators will be systematic.
The competent minister may also require operators to report on activities and may carry out on-site inspections. The competent minister may impose similar requirements on registering organisations.
Competent ministries are the Ministry of Agriculture, Forestry and Fisheries (MAFF); the Ministry of Economy, Trade and Industry; and the Ministry of Land, Infrastructure, Transport and Tourism. It appears that MAFF is the principal authority.
The division of roles between the Government and the registering bodies should be clarified because responsibilities overlap.
There are basic requirements for recognising registering bodies. However, the enforcement ordinance does not provide detailed requirements on the capacity and expertise of registering bodies.
Penalties for non-compliance
EU Member States lay down the penalties applicable to infringements of the EUTR.
Penalties are related to the key obligations in the EUTR: the prohibition to place illegal timber and timber products on the EU market; the obligation to exercise due diligence; and the obligation of traders to keep records of their suppliers and customers.
Penalties must be effective, proportionate and dissuasive, and may include fines, seizure of timber and suspension of authorisation to trade.
The highest penalty is the revocation of registration. The registration can be refused or revoked if the operator is not recognised as an entity that properly and securely takes measures to ensure it handles only legal timber and timber products.
Monetary penalties are defined. These fines relate to registration, not to the trade in illegal timber or timber products. Fines range from Yen 500 000 (approximately EUR 4 250) for violating an order of suspension of registration to Yen 300 000 (EUR 2 550) for businesses that claim to be registered when they are not.
Due diligence obligations
Exercise due diligence when placing timber or timber products on the EU market. Maintain and regularly evaluate the due diligence systems consisting of three main elements: access to information; risk assessment; and risk mitigation.
Business operators must enact ‘Judgement Criteria’ on securing the use of legally harvested timber. Basic guidance is provided on due diligence.
Due diligence systems –access to information
Specific information requirements related to the product, the country of harvest, the quantity, the supplier, the trader and documents indicating compliance with the applicable legislation.
Business operators are required to have documentation on:
- type and tree species (no HS codes provided)
- country or region of harvest
- weights, square measures, volumes or amounts (numbers)
- name, title and address of the owner of the timber or the person who exports the timber to Japan
- documentation certifying that the timber was harvested in compliance with laws and regulations of the country of harvest
- for timber harvested in Japan, documentation certifying that it is in compliance with the laws and regulations of Japan
Due diligence systems – risk assessment
Risk assessment criteria are defined. These consider the assurance of compliance with applicable legislation, prevalence of illegal harvesting of specific tree species, prevalence of illegal harvesting or practices in the country of harvest, sanctions and the complexity of the supply chain.
Unclear. The legislation does not define risk assessment criteria.
Due diligence systems – risk mitigation
When the risk is not negligible, risk mitigation procedures, such as additional information or third-party verification, shall be implemented to minimise the risk.
While there is no requirement on the level of risk, the due diligence ordinance requires that additional information shall be collected in case it was not possible to confirm legality when the information was initially gathered. The ordinance states that timber of unconfirmed legality shall not be handled, but it appears that unconfirmed timber can still be circulated if companies designate it as such.
CITES certificates and FLEGT licences
Timber and timber products covered by FLEGT licences or CITES certificates should be considered legally harvested.
CITES permits and FLEGT licences are not recognised as proof of legality.
Status of third-party certification
May be used in the risk assessment, but it does not have the same status as FLEGT licenses or CITES certificates.
The basic policy states that operators may use ‘certification methods utilizing forest management certification schemes and CoC [chain-of-custody] certification schemes’ as a measure to ensure the use of legally-harvested timber.
Exchange and dissemination of information
The operator is responsible for collecting information as part of its due diligence system.
EU Member States, assisted by the European Commission, may facilitate the exchange and dissemination of information on illegal logging to assist operators in assessing risks.
The basic policy states that the Government shall collect wide-ranging information on the production and distribution of timber and the like in Japan and overseas, and on the laws and regulations of Japan and producer countries concerning the sustainable use of forest, trade, the distribution of timber and the like.
The MAFF’s website includes country specific information on Japan, Indonesia, Malaysia, Papua New Guinea, Solomon Islands, Vietnam, the Russian Federation (Russian Far East), the US, Canada, the EU, China and Chile. It also provides information on third-party certification, the EUTR, the US Lacey Act and the Australian Illegal Logging Prohibition Act.
The Government shall disseminate information through the Internet and other media to increase the sophistication and efficiency of measures to ensure the use of legally logged wood and the like.
Furthermore, when deemed necessary, the Government shall give necessary instructions and advice to operators.
No specific clause on promotional activities by the Commission, the EU Member States or the Competent Authorities.
The draft basic policy states that in order to promote the registration of operators, the Government shall engage in promoting the registration system, and in collecting information on, and disclosing good practice by, registered operators.
Further, the Government shall endeavour to inform and educate the public about its cooperation with operators, relevant organisations and the like.
Specifically, it shall engage in educational and public-awareness activities by organising seminars, distributing pamphlets, providing information through the Internet and other media, and by other means.