The Research Institute of Forestry Policy and Information at the Chinese Academy of Forestry (CAF) carried out a study in 2018-2019 to explore the recognition of Indonesian V-Legal Documents in China. The study was foreseen in the 2018 work plan of the Bilateral Coordination Mechanism (BCM) on Forest Law Enforcement and Governance, which frames the collaboration between the EU and China on combating illegal logging and associated trade globally. The study built on a series of workshops facilitated by the EU FLEGT Facility in China. Agus Sarsito, a former chief Indonesian negotiator of the Voluntary Partnership Agreement (VPA) between the EU and Indonesia on forest law enforcement, governance and trade (FLEGT), participated in these events. He introduced the Indonesian timber legality assurance system (SVLK) to Chinese stakeholders, including CAF, the National Forestry and Grassland Administration, and China Customs.
Exploring the recognition of Indonesian V-Legal Documents in China
Under its VPA framework, Indonesia issues V-Legal Documents for its timber shipments to non-EU markets. The study aimed to identify the steps China could take to recognise Indonesian V-Legal Documents as proof of legality for timber and timber products that it imports from Indonesia. Indonesia issues V-Legal Documents building on the same procedures as those followed to issue FLEGT licences. Exports without valid V-Legal Documents for products listed under the Indonesia-EU VPA are considered illegal by Indonesia. In the absence of Chinese legislation on the legality of imported timber, CAF explored short- and long-term steps, as well as challenges and opportunities that the recognition would bring. Below are the key findings from the study.
Benefits of China’s recognition of V-Legal Documents
- It would simplify due diligence for Chinese companies that exercise it and reduce the risk of illegal timber exported from Indonesia and imported into China. Chinese companies exporting to regulated markets would be in a better position to fulfil their market requirements.
- It would promote legal trade between China and Indonesia, and between China and international markets. It would also increase the supply of legal forest products in China, whose forest industry partially and increasingly relies on imports.
- It would set a precedent that would support FLEGT, in particular Indonesia’s efforts on timber legality, and act as an incentive for other VPA countries to make progress in the implementation of their Agreements.
Challenges to the recognition of V-Legal Documents in China
The key challenge to the recognition of V-Legal Documents as proof of legality is the absence of Chinese legislation on the legality of timber imports. Companies importing timber into China are not required to have a due diligence system. Furthermore, China lacks the policy, enforcement capacity and data-sharing infrastructure that would be needed to implement the recognition of V-Legal Documents.
China and Indonesia signed a Memorandum of Understanding (MoU) on combatting illegal forest products trade in Beijing in 2002. The MoU could contribute to creating a favourable policy environment for the recognition of V-Legal Documents. However, the implementation of the MoU would require concrete actions by the two Governments.
Warehouse at the harbor
Furniture products are packed in warehouses ready for export to the foreign market.
Source: Murdani Usman, CIFOR
Short-term options for the recognition of V-Legal Documents
- Chinese companies that export to regulated markets could make the presentation of V-Legal Documents a requirement in their due diligence system for timber imported from Indonesia.
- Third-party certification bodies that provide verification services to Chinese operators that export to regulated markets could make the presentation of V-Legal Documents a requirement for verifying legality of timber exported from Indonesia.
- The two major timber industry associations in China could recognise V-Legal Documents as proof of legality of timber exported from Indonesia in their voluntary timber legality standards.
Long-term options for the recognition of V-Legal Documents
- China and Indonesia could sign a timber trade agreement specifying that Indonesian products covered by the EU-Indonesia VPA and entering China would have to be accompanied by valid V-Legal Documents. The trade agreement would provide a basis for China Customs to verify that timber imports from Indonesia are accompanied by V-Legal Documents.
- Building on the agreement between China and Indonesia, V-Legal Documents could be recognised as evidence of legality in a future Chinese timber legality system. The recognition would trigger disciplinary measures for companies that import without V-Legal Documents.
- China and Indonesia could also develop a due diligence manual for Chinese enterprises importing from Indonesia to raise awareness about Indonesian laws and reduce compliance costs.
Suggested next steps
- Carry out a pilot project to understand how Chinese companies could integrate V-Legal Documents into their due diligence system by demanding V-Legal Documents from Indonesian suppliers and verifying that the documents match the shipment. The results of the pilot could be captured in a technical document that would help industry associations to recognise V-Legal Documents in their timber legality standards. The pilot would also explore the feasibility and potential challenges of supervision by Government authorities, including Customs. A first pilot is foreseen under the 2019 BCM work plan for Chinese imports of Indonesian plywood and/or furniture.
- Facilitate the cooperation between Chinese and Indonesian industry associations to promote bilateral trade in sustainable forest products.
- Strengthen the cooperation between the Chinese and Indonesian Governments in the implementation of their MoU. The BCM could support trilateral cooperation (EU-China-Indonesia) on legal timber trade by serving as a platform for information exchange, learning and technical support.
- Raise awareness among Chinese companies about SVLK and V-Legal Documents through seminars and workshops.
 The study was carried out before China amended its Forest Law in 2020 and included Article 65 prohibiting the purchase, transport and processing of illegal wood.
 Currently, China Customs does not check whether the timber and timber products entering China are legal because China does not have relevant legislation in place (with the exception of legislation implementing the Convention on International Trade in Endangered Species of Wild Fauna and Flora).