Key points

• The Illegal Logging Prohibition Amendment (Strengthening Measures to Prevent Illegal Timber Trade) Bill 2024 proposes to amend the Illegal Logging Prohibition Act 2012 to modernise the compliance and enforcement framework.
• The Bill:
  • updates the existing offence and civil penalty regime, including by adding corresponding strict liability offences and civil penalty provisions and introducing new civil penalties relating to the provision of false and misleading information
  • makes available additional compliance and enforcement mechanisms, including:
    • requiring importers and certain processors of raw logs to notify the Secretary of the proposed import of a regulated timber product or processing of domestically-grown raw logs
    • clarifying that additional monitoring powers and additional investigation powers include taking, testing, and analysing samples of regulated timber products
    • enabling the Secretary to direct an audit of an importer or processors’ due diligence system and compliance with that system
    • making available injunctions and enforceable undertakings.
• The Bill implements reforms identified in a Statutory Review of the Act completed in 2018 and Sunsetting Review of the associated regulations conducted in 2021–22.
• In accordance with proposed amendments in the Bill, the Illegal Logging Prohibition Regulation 2012 is expected to be remade as rules. The department is yet to release a draft of those rules, making it difficult to fully assess the scope and impact of the proposed reforms.

Introductory Info

Date introduced: 27 March 2024
House: House of Representatives
Portfolio: Agriculture, Fisheries and Forestry
Commencement: The earlier of Proclamation or 6 months after Royal Assent.

Purpose and structure of the Bill

The Illegal Logging Prohibition (Strengthening Measures to Prevent Illegal Timber Trade) Bill 2024 (the Bill) proposes to amend the Illegal Logging Prohibition Act 2012 (the Act) to modernise the compliance and enforcement framework established by the Act.

The Bill:

• provides for more flexible enforcement options, including by establishing strict liability offences and civil penalty provisions alongside the existing fault-based offences
• includes civil penalty provisions for providing false and misleading information
• extends monitoring and investigation powers under the Regulatory Powers (Standard Provisions) Act 2014 (Regulatory Powers Act), including in relation to taking, testing and analysing samples of regulated timber products, and provides for injunctions and enforceable undertakings
• extends the time period in which an infringement notice may be given for a strict liability offence or civil penalty provision to 24 months from the date of the offence (up from the standard timeframe of 12 months)
• requires an importer or processor to give notice of the proposed import of regulated timber products or the processing of domestically-grown raw logs
• enables inspectors to exercise regulatory powers while regulated timber products are subject to biosecurity or customs control
• enables the Secretary to require information to be provided by an importer or processor, or for an audit to be carried out to determine compliance with due diligence requirements
• allows the disclosure of information in certain circumstances, and for the department to publish information on contraventions on its website
• repeals and replaces the regulation-making power with a rule-making power.

The Bill has one Schedule. An overview of selected key provisions is provided in the Key issues and provisions section of this Bills Digest.

Background

Scale, sources, and impacts of illegal logging

Forests provide a range of vital ecosystem services, including climate regulation (including carbon sequestration), biodiversity (individual species and habitat), livelihoods and food security (especially in less developed countries), soil conservation, water regulation and conservation, and cultural and spiritual wellbeing.[1] However, the provision of these vital services is impacted by illegal logging, which has in turn:

… been linked to human rights abuses of local communities and their culture as well as the development of transnational organised crime groups and money-laundering operations, bribery and corruption.[2]

It has been estimated that illegal logging comprises 10–15% of global timber production, with rates of up to 50% in some countries.[3] Historically, key source countries of illegal timber include Indonesia, Brazil and Malaysia, along with several countries in central and west Africa and south‑east Asia, and Papua New Guinea.[4] The World Bank has estimated that the full global economic value of illegal logging (including the estimated value of ecosystem, regulating and cultural services not priced by the market) is between US$868 and US$1,893 billion each year.[5]

Australia’s import of timber and timber products

Australia’s import of timber and timber products has increased from $4.12 to $6.87 billion over the decade to 2022­–23. This includes:

• a 2% decline in the volume, but a 40% increase in the value, of sawn wood
• a 60% increase in the volume, and 77% increase in the value, of wood-based panels
• a 30% decrease in the volume, but 14% increase in the value, of paper and paperboard
• a 58% increase in the value of miscellaneous forest products and
• a 61% increase in the value of paper manufactures.[6]

In 2017 regulated timber products were imported from 135 different source countries, with approximately 75% of these sourced from the 10 largest suppliers.[7] In 2022–23, the top five source or import countries (by volume) were China, New Zealand, Indonesia, Germany and Malaysia. The top 5 source or import countries (by value) were China, New Zealand, Indonesia, Malaysia and the United States.[8]

Following the introduction of this Bill, the Minister for Agriculture, Fisheries and Forestry, Senator Murray Watt, said:

It is estimated that up to 10% of Australia’s annual timber and wood-based imports may be illegally logged and the trade in illegal imports reduces [the] price of legal timber globally by 7­–16%.[9]

Commonwealth regulatory framework

The Australian regulatory framework for illegal logging was established in 2012 by the Illegal Logging Prohibition Act 2012 and the Illegal Logging Prohibition Regulation 2012 (ILP Regulation). The objective of the Act is to:

… reduce the harmful environmental, social and economic impacts of illegal logging by restricting the importation and sale of illegally logged timber products in Australia.[10]

The framework applies to both the import into Australia of raw and processed timber products and the processing of domestically-grown raw logs.[11]

‘Illegal logging’ – a central element of the framework

The Act’s operation centres on the words ‘illegal logging’, a phrase which is defined, in relation to timber, as:

… harvested in contravention of laws in force in the place (whether or not in Australia) where the timber was harvested.[12]

The Revised Explanatory Memorandum to the Illegal Logging Prohibition Bill 2011 [2012] described this definition as:

… a high level definition that provides scope and flexibility for importers and processors of raw logs to undertake due diligence in relation to the applicable laws in place where the timber is harvested, which may be prescribed by regulations, without the limitations of a prescriptive set of legislative requirements.[13]

This differs from the approach in the European Union Timber Regulation (EUTR) and under the 2008 amendments to the United States’ Lacey Act, both of which preceded the establishment of the Act.[14] As described in the 2018 Statutory Review,

• the EUTR defines ‘illegally harvested’ as ‘harvested in contravention of the applicable legislation in the country of harvest’. ‘Applicable legislation’ is defined to incorporate laws covering harvest rights; payments for harvest rights; timber harvest practices; third-party tenure rights; and trade/customs obligations
• the US Lacey Act takes an even wider approach and makes it unlawful to import, export, transport, sell, receive, acquire or purchase any plants, or their parts, taken in violation of any foreign law.[15]

The definition of illegal logging was discussed in the Senate Rural and Regional Affairs and Transport Legislation Committee’s inquiry into the Illegal Logging Prohibition Bill 2011.[16] The 2018 Statutory Review observed that adopting a wider definition could ‘expand the focus to address some of the “associated trade” aspects of illegal logging in recognition of the inherent complexity of timber supply chains’ and ‘may also provide a more comprehensive basis for future prosecutions’.[17] However, the review noted that would ‘significantly increase the complexity of establishing the legality of timber products and could impact the effectiveness of the Act’.[18] The Bill does not make any such changes.

What does the framework do?

The Act establishes criminal offences for the import of timber or timber products into Australia and for processing domestically-grown raw logs that have been illegally logged.[19] It requires importers and processors to obtain information and conduct a structured risk assessment process before importing a regulated timber product or processing domestically-grown raw logs.[20] Civil penalties apply to the failure to undertake due diligence.[21]

The due diligence requirements are set out in the ILP Regulation and can be summarised as follows:

• establish a due diligence system (in writing, setting out the process by which the importer or processor will meet the due diligence requirements)[22]
• gather relevant information (with the caveat of what is ‘reasonably practicable’)[23]
• assess risk, using one or more of 3 options (with the caveat of what is ‘reasonable’):
  • timber legality frameworks (2 frameworks are prescribed: Forest Stewardship Council and the Programme for the Endorsement of Forest Certification)[24]
  • country specific guidelines (CSGs) or State specific guidelines (SSGs)[25]
  • regulated risk factors[26]
• mitigate risk (where risk identified is not low).[27]

While the primary import and processing offences commenced at the time of the Act’s commencement, the remaining offence provisions and the requirement to undertake due diligence requirements did not commence for a further 2 years.[28] The Department of Agriculture, Forestry and Fisheries (DAFF) then implemented a further 18-month ‘soft-start’ compliance program, with an emphasis on education, to allow the regulated community time to adjust to the new framework.[29]

In 2018, following a review of the impact of the framework on small business, the Coalition Government tabled changes to the ILP Regulation which would have established ‘a “deemed to comply” arrangement for timber products certified’ under the prescribed timber legality frameworks.[30] These components of the Illegal Logging Prohibition Amendment (Due Diligence Improvements) Regulations 2017 were disallowed in the Senate on 8 February 2018.[31]

Reviews and consultations

A number of reviews related to Australia’s timber legality framework have been conducted over the last decade. The Minister said the Bill will implement improvements identified in 2 of these: the Statutory Review of the Illegal Logging Prohibition Act 2012, and the Sunsetting Review of the Illegal Logging Prohibition Regulation 2012.[32]

Statutory Review of the Illegal Logging Act

The Act required the Minister to initiate a review of the first 5 years of the operation of the Act.[33] The Statutory Review, conducted by the then Department of Agriculture and Water Resources (DAWR), found:

… [d]etermining the extent to which the Act has achieved the government’s policy objectives of preventing or reducing the risk of the importation and processing of illegally logged timber within Australia remains challenging.[34]

The review noted that there was ‘limited concrete data available to measure the impact of the Act’ and the review relied rather on internal departmental data (including compliance assessments), trade data, and information obtained in previous reviews and anecdotal evidence. It concluded that ‘full implementation of the Act, in concert with other international measures, should deliver benefits to the Australian timber sector’.[35]

The Statutory Review noted that the ‘implementation of an extended “soft-start” compliance period (where no penalties were applied for non-compliance) for a large part of the review period may have delayed some businesses’ responses to the laws’.[36] In fact, assessments undertaken over several years ‘found that around 60 per cent of the importers assessed were non-compliant with some or all of their due diligence obligations’.[37] The report notes that the largely inadvertent non-compliance occurred despite the department’s efforts to raise awareness and understanding among the regulated community.

The Statutory Review identified several options for improving the Act, including:

• providing clarity, through the provision or revision of definitions and publication of advice to assist regulated entities comply with due diligence requirements for complex products
• increasing the reach of the Act by broadening the conduct regulated by the Act
• providing improved compliance and enforcement powers, including ‘at-border’ powers
• facilitating the efficient administration of the Act, including by providing streamlined processes for CSGs and SSGs.[38]

Sunsetting Review of the Illegal Logging Regulation

The then Department of Agriculture, Water and the Environment (DAWE) commenced a Sunsetting Review of the ILP Regulation with the release of an Overview Paper and Consultation Paper in July 2021. The objective of the review was ‘to ensure that the Act and the Regulation delivers on Australia’s commitment to reduce the harmful impacts of illegal logging’, with the department also considering ‘the operating context of the sunsetting legislation, and broader legislation and policy context’.[39]

The Sunsetting Review identified the following problems:

• large volumes of illegal timber are on the market, with a timber identification testing pilot program suggesting that up to 40% of imported timber was potentially misrepresented in terms of species and origin
• reliance on desktop audits for compliance action is inefficient and ineffective
• the legislative framework doesn’t allow for emerging technical solutions, such as at-border timber identification testing
• Australia’s timber legality framework lags behind best-practice developments in other jurisdictions
• there are limited regulatory resources available to (strategically) target a regulated community of 20,000 entities, an issue addressed in other jurisdictions by streamlining the due diligence process.[40]

The Sunsetting Review considered 3 options and determined that the regulations should be revised and remade. In particular, the department indicated it would pursue 7 reforms:

• receiving due diligence information earlier, prior to the time of importation
• providing for sampling, seizure and detainment powers, including at the border
• streamlining due diligence requirements for low-risk pathways, including for importers and processors using a timber legality framework assessment pathway
• reducing repeated due diligence, where an identical import pathway is used repeatedly over a set period of time
• providing for injunctions and enforceable undertakings
• introduce publication powers for compliance findings and instances of non-compliance
• clarifying certain key definitions including timber, processing, raw log and illegal logging.[41]

The department estimated that the ‘net regulatory saving for the regulated community’ would be over $2.8 million per annum.[42]

The sunsetting of the ILP Regulation has been deferred until 1 April 2025.[43] The Department is yet to release a draft of the proposed rules.

Complementary developments

The forestry sector has been identified as a high-risk sector for forced labour, in both developing and some developed countries.[44] The Global Slavery Index 2023 estimated that US$7.4 billion worth of timber imports to G20 countries were at-risk of being produced with forced labour.[45]

In December 2018, the Australian Parliament enacted the Modern Slavery Act 2018, with operational provisions commencing on 1 January 2019. The Act imposes an obligation on commercial and not-for-profit entities with annual consolidated revenue of at least $100 million to publish annual Modern Slavery Statements. These statements must address the ‘entity’s actions to assess and address modern slavery risks in their global operations and supply chains’.[46]

While many small importers are unlikely to meet the reporting threshold under the Modern Slavery Act, the due diligence requirements of importers and processors under the Illegal Logging Prohibition Act complement the modern slavery reporting framework.

Committee consideration

Senate Selection of Bills Committee

At the time of writing, the Bill has not been referred to any committee for inquiry and report.

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had not considered the Bill.

Policy position of non-government parties/independents

At the time of writing, non-government parties and independents do not appear to have commented directly on the Bill. As outlined in the Background section of this Digest, the review process commenced during the tenure of the previous Coalition Government.

Position of major interest groups

The Australian Forest Products Association, the peak body for industries covering the forest products value chain, commended the introduction of the proposed strengthened laws. The CEO said:

Illegal timber not only undermines the environmental sustainability of the forest products industry, it also undermines our domestic biosecurity protections creating a heightened risk of potentially devastating pests and diseases that can devastate local industry.[47]

In July 2023, the Environmental Investigation Agency and Centre for International Environmental Law published an assessment of Australia’s exposure to illegal logging. Their report argues that Australia imports timber directly from several high-risk countries in East Asia, eastern Europe and Latin America, and indirectly from Africa through third-country processing hubs such as China and Vietnam.[48] The ‘report concludes that both the Australian government and Australian companies should increase implementation, compliance, and enforcement actions’ to reduce illegal timber imports.[49]

Financial implications

The Explanatory Memorandum to the Bill states ‘the Bill will have no financial impact on the Australian Government Budget’.[50] However, it notes:

It is estimated to incur some costs to the Department of Agriculture, Fisheries and Forestry, and increase the regulatory burden to importers of regulated timber and timber products and processors of domestic raw logs. This increase of approximately $1.9 million per annum will be offset by a reduction of approximately $4.9 million per annum through streamlined due diligence measures proposed to be set out in the rules.[51]

The Department is yet to release a draft of the proposed rules.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[52]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comment on the Bill.[53]

Key issues and provisions

New strict liability offences and civil penalty provisions

The Illegal Logging Prohibition Act establishes several offences:

• importing illegally logged timber (section 8)
• importing illegally logged timber in regulated timber products (section 9)
• importing regulated timber products without complying with the due diligence requirements (section 12)
• importing a regulated timber product without making a declaration about the person’s compliance with the due diligence requirements (section 13)
• processing domestically-grown illegally logged raw logs (section 15)
• processing domestically-grown raw logs without complying with the due diligence requirements (section 17).

The Bill repeals and replaces each of these offences in the same manner, retaining the existing fault-based criminal offence and applicable penalty, and inserting new strict liability offences and civil penalty provisions.[54]

The Explanatory Memorandum states:

Including civil penalty provisions and strict liability offences would enable a graduated compliance framework and flexible enforcement options. Providing different options to address non-compliance would allow the Commonwealth to pursue a penalty that is proportionate with the severity of the contravention (for example, allowing smaller penalty amounts to be issued through infringement notices for minor breaches). By enabling lower-level contraventions to be addressed in a timely manner, the strict liability offences would significantly increase the deterrence and effectiveness of the regulatory regime while retaining the ability to prosecute the most serious contraventions that warrant higher penalties.[55]

Corresponding amendments are made to existing sections 10 and 16 which allow a court to make a forfeiture order if the court convicts a person of an offence or makes a civil penalty order under amended sections 8, 9 or 15.[56]

Of note, in relation to the offence of importing regulated timber products without complying with the due diligence requirements, proposed subsection 12(4) states that the offence and civil penalty provisions (subsections 12(1)–(3)) would ‘not apply in any circumstances prescribed by the rules for the purposes of this subsection’. As noted earlier in this Digest, the department is yet to release a draft of the rules and it is therefore unclear what the prescribed circumstances may be. However, the Sunsetting Review makes reference to reducing regulatory burden for low frequency importers, streamlining due diligence requirements for certified products, and ‘optimising the products regulated including broadening exemptions and reducing burden for low risk products’.[57]

Changes to due diligence requirements

The Act establishes the framework under which importers and processers are required to undertake due diligence requirements. Existing sections 14 and 18 provide that the due diligence requirements for importing regulated timber products and processing raw logs, respectively, must be prescribed in the regulations and set out the matters that may be addressed. The Bill retains this framework with the following changes:

• proposed sections 13A and 17A provide that a due diligence requirement for importing regulated timber products and processing raw logs (respectively) is the existence of a due diligence system. A due diligence system must be:
  • in writing
  • set out the process by which the person will meet the due diligence requirements and
  • include the information prescribed by the rules[58]
• existing sections 14 and 18 are amended to make reference to ‘other due diligence requirements’, which may be prescribed in the rules.[59]

Proposed sections 13A and 17A elevate the requirement for an importer or processor to have a due diligence system from the ILP Regulation to the Act.[60]

New notice and information requirements

Under the current framework, the department does not receive advance notice of the intended import of regulated timber products or processing of domestically-grown raw logs. An importer of regulated timber products is rather required to make a declaration to the Customs Minister about the person’s compliance with the due diligence requirements for importing the product and the department receives this information through trade data systems.[61] The Statutory Review states, based on a review of the declarations data collected at that time, ‘importers may be significantly overestimating their compliance with the laws’.[62]

The Secretary may request information from an importer or processor about the person’s due diligence system and compliance with the requirements of that due diligence system.[63] However, the regulations specify that the importer or processor must be allowed at least 28 days to comply with the request. The Sunsetting Review explains that, along with the delayed awareness of imports, this hinders the ability of the department to proactively identify high-risk imports.[64]

Proposed sections 18B and 18C introduce new notice requirements so that an importer of regulated timber products and a processor of raw logs (intending to process the raw logs into something other than raw logs) would be required to provide a notice to the Secretary of the intended import or processing. The specific requirements (including exceptions) would be prescribed in the rules.

Proposed sections 18E and 18F would elevate the Secretary’s ability to request information (including any documents) from an importer or processor about the person’s due diligence system and their compliance with the requirements of that due diligence system from the regulations to the Act. The Secretary’s notice must allow the person a reasonable time, not being less than 28 days, to comply with the notice. The specific information requirements of a due diligence system would be prescribed in the rules.[65]

Proposed sections 18B, 18C, 18E and 18F each include a strict liability offence and civil penalty provision and, in accordance with proposed section 82, the privileges against self-incrimination and self-exposure to a penalty would not apply.

The abrogation of the privileges against self-incrimination and self-exposure to a penalty may draw the attention of the Senate Standing Committee for the Scrutiny of Bills. However, the Explanatory Memorandum explains that the information required to be provided is likely to be ‘peculiarly within the knowledge of the importer or processor’ and that ‘it is considered that the public benefit associated with the ability to effectively enforce the Act and rules would outweigh the loss of personal liberty associated with abrogating the privilege against self-incrimination in this context’.[66]

Improved compliance and enforcement powers

The Statutory Review identified the provision of ‘at-border’ compliance powers and the ability to take, test, and analyse samples of timber and regulated timber products as measures that would ‘address specific risks of illegally harvested timber products entering Australia’.[67] The Sunsetting Review also identified the addition of injunction and enforceable undertaking powers, and publication powers as desirable.[68]

Part 4 of the Act sets out a range of existing monitoring, investigation and enforcement powers. These reflect the standard suite of provisions for monitoring and investigation powers provided by Parts 2 and 3 of the Regulatory Powers Act, with provision for additional specified monitoring and investigation powers.

Existing sections 21 and 22 apply Parts 2 and 3 of the Regulatory Powers Act, such that an inspector[69] may, with the consent of the occupier or under a monitoring warrant, enter a premises and exercise certain monitoring and investigation powers to ensure or investigate compliance with the provisions of the Act, and provisions of the Crimes Act 1914, or the Criminal Code that relate to the Act.

Items 45 and 46 repeal and replace subsections 21(11) and 22(10) to clarify that an inspector would have the additional monitoring power and additional investigation power (respectively) ‘to take, test and analyse samples of any regulated timber product’ on the premises entered in accordance with those provisions. Proposed section 27 extends the monitoring power to regulated timber products subject to biosecurity control under section 119 of the Biosecurity Act 2015 or customs control under sections 30 or 31 of the Customs Act 1901.

Item 50 inserts 4 new Divisions to Part 4, each introducing new compliance and enforcement powers. This includes:

• Division 6—Enforceable undertakings which inserts proposed section 25 to provide that the provisions of the Act are enforceable under Part 6 of the Regulatory Powers Act
• Division 7—Injunctions which inserts proposed section 26 to provide that the provisions of the Act are enforceable under Part 7 of the Regulatory Powers Act.

Proposed Division 9—Audits inserts proposed sections 28 to 32 to allow the Secretary to require an audit to be carried out in relation to an importer or processor’s compliance with the due diligence requirements relating to the import of regulated timber products or the processing of raw logs. The Secretary may approve a person or class of persons to conduct audits. Additional matters relating to audits may be prescribed in the rules.

Proposed section 84A would allow the Secretary to publish certain information about specified contraventions of the Act, and specified enforcement outcomes (such as the entry into enforceable undertakings) on the department’s website.

Other issues: statutory reviews and regular reporting

As explained in the Background section of this Digest, the Act required a statutory review of the operation of the Act after 5 years. The relevant section is repealed by the Bill but not replaced with any further requirement for regular statutory reviews of the Act’s operation and effectiveness.[70] Rather, existing section 83 would allow the Secretary to, at their discretion, ‘publish reports about the operation of this Act’.

This contrasts with the illegal logging frameworks in other jurisdictions. For example, the EU Timber Regulation is subject to 6-yearly reviews and requires publication of a biennial report on the application of the regulation based on information provided by member States.[71] In Canada, an annual report on the administration of the relevant Act must be tabled in Parliament and a 10-yearly review of enforcement provisions undertaken and also tabled in Parliament.[72]

The EIA and CIEL recommended that the government publish ‘an annual report of compliance activities, due diligence checks, and any other relevant enforcement actions, including fines, court cases, and audits’, as well as publication of third party substantiated concerns (both received and acted upon).[73]

With the Statutory Review identifying high levels of non-compliance, regular monitoring and transparent reporting is likely to be of concern to key stakeholder groups.