Chapter 2Key Issues
2.1The committee received submissions from organisations, companies, academics, and industry associations with a direct interest in the Illegal Logging Prohibition Amendment (Strengthening Measures to Prevent Illegal Timber Trade) Bill 2024 (the bill).
2.2Most submitters were supportive of the need for amendments to the Illegal Logging Prohibition Act 2012 (the Act), and subsequently the Illegal Logging Prohibition Regulation 2012 (the Regulation). However, a number of submissions raised some concerns relating to the content of the bill and the implementation of the new amendments. This chapter outlines submitters’ views on the bill, including the concerns, impacts, and benefits to the logging and timber industry in Australia. The chapter concludes with the committee’s views and recommendation.
Importing timber into Australia
2.3The committee heard from many submitters about the size and importance of timber importations into Australia, particularly in the context of addressing the growing housing crisis now and in the future.[1]
2.4Housing Industry Association suggested that this need is based on 'an increasing global demand for wood products and a limited increase in the size of Australian plantations'. It explained that to meet domestic timber demand, imported products are a necessary supplement.[2]
2.5This view was echoed by Woodhouse Timber, which stated that:
… the risk that flows from the systemic undersupply of local product, is that by making imports harder, and more expensive to bring into Australia this will impact on the current housing crisis. There is a significant shortfall in the number of dwellings needed, and there is a significant shortfall of product required to build those buildings. Even if Australia started planting today, we will have a 25-year gap that will need to be supported by imported product.[3]
2.6Some submitters, including Australian Timber Importers Federation (ATIF), argued that while Australia must import timber to meet its future housing needs, it must also do so in competition in the international market, and must ensure it does not place excessive pressure on the import market to operate at scale.[4]
2.7Housing Industry Association stressed there is a need to ensure the laws 'strike the right balance' of an effective regulatory framework whilst not placing an undue level of burden on importers, manufacturers, and suppliers. It further claimed that this would result in increased costs of construction and, as such, impact housing affordability.[5]
2.8City Timber put forward a view that the bill imposes 'undue burdens on the timber and forest products industry without effectively addressing the underlying issues', while Preference Floors claimed that this would also increase cost burdens on small and large businesses.[6]
2.9Tasman KB and Forest One Australia also expressed concerns that additional regulatory requirements, such as those proposed in the bill would increase cost pressures on importers and consumers and threaten imported timber supply.[7]
2.10The key amendments that submitters suggested may increase regulatory burdens, administrative tasks and financial costs are:
the requirement for importers to notify of intention to import; and
changes to the due diligence requirements.
2.11The Department of Agriculture, Fisheries and Forestry (the Department) told the committee that the intent of the bill is to ensure it does not impose any unnecessary compliance costs on regulated businesses and individuals, while continuing to be effective in combatting illegal logging and its associated trade.[8]
2.12The Explanatory Memorandum (EM) forecasts that the regulatory burden to importers of regulated timber and timber products and processors of domestic raw logs would increase by $1.9 million per annum. However, it explained the increase would be offset by $4.9 million per annum through streamlined due diligence.
Introduction of a notice of intention to import
2.13One of the bill’s measures proposes to require notice be given to the Department for regulated timber products brought into Australia and unloaded at a landing place or port, and for the processing of raw logs within Australia.[10]
2.14As mentioned in chapter 1, the bill’s amendments were developed in response to both a 2019 Statutory Review of the Act and a 2021 Sunsetting Review of the Regulation, and subsequent stakeholder consultation on potential reforms. In the Sunsetting Review Regulation Impact Statement (RIS), the Department reported that there was a 'high level of support' for receiving key due diligence information for products ahead of importation, such as timber species and location of harvest.[11]
2.15Industry submitters explained that the proposed notice of intention to import or process will be required for each order or import and may include requirements to undertake due diligence on these orders before they have arrived.[12]
2.16The ATIF argued that this requirement will increase the amount of administration despite the product having not yet been processed, or potentially even harvested. Meyer Timber claimed that this is 'practically impossible', stating that 'in some cases, the raw material to produce an order will not yet have been procured', limiting traceability.[13]
2.17A joint submission from the Jubilee Australia Research Centre, Uniting Church in Australia, Synod of Victoria and Tasmania, Center for International Environmental Law, and the Environmental Investigation Agency (Jubilee, Uniting, CIEL and EIA) highlighted that requiring this information 'is a significant improvement' on the current legislation and is 'essential for a robust and enforceable due diligence regime'. It suggested that the Department’s requirement for this information is likely to increase the number of importers collecting the required data, and overall compliance with the laws and due diligence requirements.[14]
2.18In its submission, the Department clarified that the Rules 'would prescribe the type of information required in a notification, which would align closely with that already required under the Regulation and be reasonably practicable to obtain—such as the timber species and country of harvest'. It further explained that the changes would allow more efficient and targeted monitoring and compliance action for regulated timber products.[15]
2.19The Department also outlined that the Rules would:
set out the manner and form of the customs declaration required by the bill;
set out the manner, form, and timing of the notice requirement for importers and processors; and
prescribe the circumstances in which importers and processors are exempt from certain requirements, such as the exemption from due diligence for importers of recycled products, or where the total consignment value is less than $1000.
Compliance with due diligence requirements
2.20The bill also provides that the Secretary of the Department is able to require information to be provided or an audit to be conducted, to determine compliance with the due diligence requirements.[17]
2.21Submitters to the inquiry expressed concerns that the Sunsetting Review RIS indicated that reforms would streamline due diligence requirements for low-risk pathways, or reduce repeated due diligence for identical pathways, yet, they believe the bill has not done this and instead appears to increase due diligence requirements.[18]
2.22For example, Preference Floors highlighted its concern with this as a small business, explaining that it is a 'massive undertaking' to complete the level of due diligence required by the Department, and to ensure a sufficient paper trail.[19] Freight and Trade Alliance echoed these views, noting that with the volume of consignments, it would be 'impractical for customs brokers to perform due diligence on a shipment-by-shipment basis'.[20]
2.23One submitter explained that:
Given the sheer volume and frequency of imports, the strict application of the requirement to conduct due diligence for every import by our business is not reasonably practicably. We would be conducting and recording confirmations from the entire supply chain continuously. We import hundreds of consignments every month of regulated timber products. The time and cost to the business as a result of the labour required to constantly conduct these verifications, the constant communication requirements this would demand from suppliers, as well as the potential costs associated with delays and disruptions to the company’s supply chain leads to a legislative outcome that would place significant burden on our company.[21]
2.24This submitter also suggested a way to reduce the administrative burden on business and still fulfill the nature and intent of the legislation. It proposed that where consignments are repeated and identical, the laws could consider existing contractual agreements in which disclosure of changes in the supply chain are already a feature, along with periodic due diligence, rather than conducting due diligence on each occasion.[22]
2.25In its submission, the Department advised that while the bill does not address all recommendations and reforms of the Sunsetting Review RIS, it does instead provide for rule-making power which will enable the remaining reforms and recommendations to be addressed within the proposed Rules, following development and consultation. It argued that the Rules would address the reforms to 'further modernise' matters set out in the Regulation, including:
providing a simplified due diligence pathway for importers and processors conducting due diligence on an identical product and supply chain pathway within a 12-month period; and
providing a streamlined approach to remove duplicative due diligence requirements in relation to gathering information for low-risk products and pathways, such as those with third-party certification.[23]
2.26Currently, the Regulation provides that importers and processors may use third-party timber legality frameworks including the Forest Stewardship Council (FSC) and Programme for the Endorsement of Forest Certification systems (PEFC), to assess the risks of regulated timber products.[24]
2.27According to Housing Industry Association the certification frameworks 'operate globally and accredit products, harvest operations, and supply chains against set criteria and standards to attest to the legality and sustainability of harvesting and subsequent production of timber products'.[25]
2.28However, Housing Industry Association was concerned that the bill would lead to the use of third-party certification schemes being 'unlikely to satisfy the requirements' of the bill, due to the 'unpracticable administrative requirements'.[26]
2.29This sentiment was shared by some submitters who were concerned that while the bill has good intent, it 'does not sufficiently recognise systems that are currently effective in reducing the risk of illegal logging', such as the third-party certification schemes.[27]
2.30Submitters also expressed that the way in which Australia assesses the risk of timber and forest products from all countries in the same way, regardless of their level of transparency or likely illegality, is 'nonsensical' and 'unreasonable'. City Timber explained that, 'even certified products from low-corruption countries like Canada, Scandinavia, and New Zealand' are assessed in the same way as 'higher' risk countries such as the Congo Basin, Guatemala, or China.[28]
2.31Wespine Industries and Australian Glass and Window Association suggested that the proposed legislation should provide for a 'risk-based approach' to due diligence, such as a matrix that is informed by corruption perception indices, strength of laws, and past evidence of illegal logging. It was also proposed that for low-risk countries, the PEFC and FSC certifications continued to be relied upon.[29]
2.32The Forest Stewardship Council (FSC) also recommended the ongoing use of these schemes within Australia’s illegal logging approach. However, it also acknowledged that it 'cannot solely address multi-layered issues such as illegal logging, deforestation and other global issues affecting forests worldwide'.[30]
2.33The Department highlighted that, consistent with the current Regulation, the Rules that are currently being prepared are anticipated to supplement the legislation, and would:
set out the due diligence requirements for importers and processors, including information gathering, risk assessment, risk mitigation, and record keeping requirements;
prescribe regulated timber products for the purposes of the Act, by referring to regulated Harmonised System tariff codes as is set out in the current Regulation; and
prescribe, by reference, documents as in force from time to time, including third-party certification, Country Specific Guidelines, and State Specific Guidelines as currently listed in Schedule 2 to the Regulation.[31]
Consultation with stakeholders
2.34As mentioned previously, the Department undertook comprehensive stakeholder consultations with relevant parties and the broader public regarding potential reforms to the Act and the Regulation between July and September 2021. The Department reported that it released a consultation paper on the potential reforms, receiving 20 written submissions and 30 survey submissions, and further input from stakeholders was sought through interviews and a webinar of 53 participants.
2.35The level of consultation undertaken in the lead up to the bill’s creation was discussed in submissions, with some claiming the Department did not sufficiently consult with, or consider the views and feedback provided by industry partners in the Sunsetting Review consultations.[33]
2.36ATIF criticised the Department, stating that it had 'ignored any reform suggestion that reduced the regulatory burden on importers' and that 'only provisions which increase the regulatory burden' were included.[34]
2.37Several other submitters noted that recent interpretation by the Department had been notably stricter, requiring 'absolute adherence to every detail'.[35]Preference Floors argued that the 'original spirit of the Act' was to reduce the risk of illegally logged timber in Australia by equipping importers and processors with due diligence practice, rather than it being to completely eliminate the risk.[36]
2.38Maxlon Industries and City Timber argued it would be 'impractical' and 'impossible' to completely remove all risk of illegally logged timber entering Australia, 'given the complexity and length of supply chains'.[37]
2.39Meyer Timber expanded on this and explained:
Supply chains are long and difficult and sadly, perfection does not exist. Timber comes from trees. Trees grow in forests and are then taken to mills where they are prepared into cut timber or sliced into veneers. These are often then taken on trucks to other manufacturing facilities, sometimes across [c]ountry borders where they are consolidated with other material from other suppliers, regions and log coups. Due to these complications and the hundreds of people that form part of each timber product supply chain, they are difficult to manage.[38]
2.40City Timber submitted that this potential shift in interpretation was 'unsupported by industry' and had led to additional compliance activities 'without adequate notice or consultation'.[39] ATIF also questioned why no draft copies of the legislation were provided to industry associations for comment.[40]
2.41This sentiment was shared by others regarding the proposed Rules, that are proposed to replace the existing Regulation. Submitters advised the committee that these Rules had not yet been released for comment, and queried exactly what they would contain, stating that without access to this information, it was difficult to assess and provide feedback on the bill, as much of the required information would be left to the Rules.
2.42In its submission, the Department reiterated that the consultation found that:
… key stakeholders, including the regulated community and environmental non-government organisations, supported the option of remaking the Regulation with the proposed reforms. Stakeholders acknowledged the benefits of amending the legislation to ensure it continues to be effective in combatting illegal logging and associated trade.[42]
2.43The Department also confirmed that while the majority of potential reforms explored in the Sunsetting Review consultations would be fulfilled, there were a small number of measures it did not pursue due to a lack of support or definitive feedback. It explained that these reforms may be considered again in the future, which include:
reducing the regulatory burden for low-frequency importers;
clarifying the products regulated; and
implementing licensing or third-party audits for high-frequency importers.[43]
2.44The Department explained in its submission that it is currently developing the Rules and is engaging with regulated stakeholders and entities to identify where inefficiencies exist. The Department also said that it will continue to engage with the industry on these Rules in the coming months, 'well ahead of the Regulation sunsetting date of 1 April 2025'.[44]
Introduction of a strict liability offence
2.45As discussed briefly in chapter 1, a key feature of this bill introduces a strict liability offence for all offences listed, including importing and processing illegally logged timber, failure to comply with due diligence requirements, failure to provide information or providing misleading or false information. This is in conjunction with two other offences, a fault-based offence, and a civil penalty provision.
2.46Some submitters to the inquiry raised concerns over the introduction of this offence, claiming that the offence is 'unfair' and 'unnecessary' as it could lead to importers and processors being charged despite having conducted 'thorough due diligence'.[46]
2.47ATIF said that the strict liability provision will 'unfairly penalise Australian individuals and businesses, both financially and criminally, for unscrupulous or careless behaviour in international supply chains, which they realistically have no prospect of having any meaningful visibility over'.[47]
2.48Additionally, submitters highlighted the potential for the new strict liability offence to restrict trade by reputable businesses and place a high level of pressure on the import industry, leading it to 'buckle and contract', resulting in reduced timber supply and higher costs.[48]
2.49In its submission, the Australian Forest Products Association noted that the strict liability offence must be used 'judiciously and sparingly and recognise where honest and reasonable attempts to meet their obligations have been made'.[49]
2.50The FSC and Meyer Timber provided similar sentiments, stating that they are supportive of the strict liability offence, but that it should only be utilised in situations where non-compliance 'is deliberate or due to gross negligence', and not based on a one-off shipment where part of the supply chain has improperly acted.[50]
2.51Supporters of the proposed new enforcement framework and introduction of the strict liability offence detailed how the graduated enforcement framework may work in reality to deter those from non-compliance.[51]
2.52The joint submission from Jubilee, Uniting, CIEL and EIA commended the bill’s proposed powers and penalties, stating there is a clear need for stronger enforcement powers to ensure 'meaningful' outcomes of the Act. It argued that the 'greater the range of sanctions available', the greater the ability to impose the right level of sanction.[52]
2.53The Department advised that the changes to the penalty framework 'are intended to give greater flexibility in resolving instances of non-compliance with the Act' while encouraging behaviour change and educational awareness.
2.54Further, the EM for this bill explained that the introduction of a strict liability offence alongside the fault-based offence and civil penalty provision would provide options for penalties based on the seriousness and severity of the offence. It stated:
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.
Powers to publish contraventions of the Act
2.55The bill proposes another enforcement and compliance mechanism whereby the Department may publish information relating to contraventions of the Act on its website, including the offence, the name of individuals or organisations, and other relevant details of the breach.
2.56The Department clarified that this provision aims to encourage compliance, educate the public and consumers, and encourage selection of legally and sustainably sourced timber and timber products.
2.57According to the bill’s EM, the application of these powers would only take place when it is in the public interest, and for serious breaches and repeat contraventions.[57]
2.58Despite this assurance, some submitters argued that the public disclosure of contraventions would unjustly 'lead to reputation[al] damage of the industry as a whole, whether importers or domestic processors'.[58]
2.59Preference Floors and the National Timber and Hardware Association complained that the powers would provide that 'even simple administrative errors or omissions have the potential for severe penalty and public shaming', which they argue 'represents a gross overreach' of the goal of reducing illegally logged timber.[59]
2.60FSC explained that the illegally logged timber trade is becoming increasingly complex and sophisticated, so much so that even importers and processors that follow the laws will 'fall victim of fraud'. It argued that it would not be appropriate 'to name and shame' those organisations and individuals.[60]
2.61However, similarly to the introduction of the strict liability offence, several submitters declared that they did support the introduction of these publishing powers, under the conditions that it was used in circumstances of deliberate breaches or due to 'gross negligence'.[61]
2.62The Department maintained that this proposed measure is needed to address challenges with implementing and enforcing that Act, stating that the inability to share relevant information was identified as a limitation in educational activity and the ability to engage in international efforts regarding illegal logging.
Timber testing technology
2.63A mechanism for identifying illegally logged timber and subsequently enforcing penalties for these breaches, is the introduction of powers in the bill for inspectors to take, test, and analyse regulated timber products, including at the border to determine the region or species of the timber.
2.64While the bill does not determine the ways in which the materials would be tested, the EM explains that the proposed sections 'would recognise the increasing use of timber identification technologies in Australia' and would facilitate their use 'as a tool in monitoring and investigating compliance with the Act'.
2.65The response to the introduction of these powers and technology varied widely. Some submitters were very supportive of the proposed amendments to include powers for seizing and testing timber. World Resources Institute emphasised that these powers are a 'notable improvement' and leveraging timber identification technologies would 'bolster the capacity to detect and address illegal logging and associated trade effectively'.
2.66Likewise, Meyer Timber and Innovative Timber Ideas Australia remarked that while this new testing was welcome, it should first be used as a tool to improve the industry and assist importers to conduct their desk-based due diligence, rather than being used an enforcement and compliance mechanism.[67]
2.67Submitters also called on the Department to provide cost-reduced timber testing to industry to improve their investigation sources prior to making the choice to import products.[68] Responsible Wood expanded on this asking the Australian Government to:
… consider making free or subsidised testing available during the phase-in period to enable origin to be verified independently by scientific methods by organisations subject to the Illegal Logging Act, rather [than] relying on the claims of suppliers. This would greatly assist in cleaning up supply chains, removing illegal wood from the Australian market and providing additional scrutiny.[69]
2.68However, not all submitters were convinced that the testing technology was capable of accurately and sufficiently identifying illegally logged timbers. Anumber of submissions noted that there is currently no 'reliable technology' to accurately determine the exact location of harvest or species of timber.[70]
2.69ATIF explained that timber supply chains can be complex and lengthy where, for example, some timber products are combined with others to produce dowels in furniture or MDF (medium density fibrewood). It stated that in these circumstances 'testing can pick up recycled sources or sawdust and erroneously flag a product' as an illegally logged product.
2.70Noting these technologies are newly developed, the Department informed the committee that in the 2022–23 Federal Budget, $4.4 million was committed over two years to better explore timber identification and traceability systems. It reported that a trial involving timber testing technologies has been underway and is exploring which technologies 'are best suited to certain instances, the costs, processes, timeliness and accuracy of existing technologies and services'.
2.71The Department stated that the trials will provide outputs in late 2024 to inform the implementation of key reforms contained in the bill.
Miscellaneous concerns
Domestic and native forest logging
2.72Several submitters raised concerns that the bill does not directly address native forest logging or illegal logging in Australia.[74] Environmental Justice Australia stated that:
Presently, the Act prohibits importing and processing illegally logged timber, however it does not expressly ban the sale of timber that is logged domestically in breach of Australian laws, including associated Codes of Practice.[75]
2.73Timber Queensland also suggested that the Regulation could be strengthened by including 'the high-risk category of raw native hardwood logs' to be exported from Queensland.[76]
2.74However, in its submission the Department clarified that the Act and the bill do not regulate the harvesting of timber, and contraventions of laws relating to the act of harvesting are handled by the jurisdiction itself. It further emphasised that section five of the Act provides that 'the Act is not intended to exclude or limit the operation of a law of a State or Territory that is capable of operating concurrently with the Act.
Committee view
2.75The committee would like to thank all participants for their submissions.
2.76The committee acknowledges Australia’s current requirement to import timber and timber products to supplement the domestic demand. As such, the committee supports the reforms and modernisation of Australia’s illegal logging laws to ensure they are appropriate, utilise emerging technologies, and keep pace with international approaches.
2.77The committee notes that since 2019, the Department has undertaken a range of stakeholder consultations regarding potential reforms to the Act and Regulation. These comprehensive consultations have resulted in the Sunsetting Review RIS and the subsequent development of this bill.
2.78In addition, the committee heard evidence that industry partners and organisations are eager to continue to participate in future consultation processes, specifically on the drafting of the Rules, which have been proposed in this bill to replace the Regulations. The committee believes it is critical that industry is consulted at every step to ensure the requirements surrounding importing and processing of regulated timber products are fit-for-purpose and do not unnecessarily burden these businesses.
2.79The submissions highlighted concerns from participants regarding the proposed new strict liability offence and the powers for the Department to publish contraventions of the Act on its website, particularly that these penalties and protocols may unfairly punish importers or processors despite their efforts to adhere to the Act.
2.80On this point, the committee was assured that these enforcement and compliance mechanisms would only be enacted in cases of serious and repeated breaches of the Act and would be used with caution. While the implementation of this matter is a cause for concern for some industry partners, the committee is confident these measures are necessary to deter repeated and serious non-compliance and decrease instances of illegally logged timber in Australia.
2.81The committee also heard concerns from stakeholders on the level of administrative and financial burden that may result from the changes proposed within the bill, such as the requirement to notify the Department ahead of the importation of timber, or repeated due diligence.
2.82Noting the Department is currently drafting the upcoming Rules, that are proposed to replace the Regulations, the committee is satisfied that these legislative instruments will reduce and offset the financial and administrative burdens imposed by the bill through the use of streamlined due diligence processes.
2.83While acknowledging the concerns raised about domestic illegal logging, logging of domestic native forests and the definition of 'illegally logged', the committee understands that the responsibility for these issues is a matter for state and territory, and international jurisdictions. As such, this bill does not make any changes to the categorisation or definition of these issues.
2.84The committee encourages the Department to continue its consultation process on the Rules and Regulations and provide industry further information to improve understanding of the due diligence and notice requirements going forward.
2.85The committee recommends that the Senate pass the bill.
Senator Glenn Sterle
Chair