Overview of the timber industry in Vietnam New international regulations about timber legality and legal timber sources VPA and negotiations results to-date Verification system and FLEGT licensing Challenges faced during negotiations

1. Updates on Negotiations Of
VPA/FLEGT Between VN-EU
Peer learning workshop
Qui Nhon, 26 June 2015

2. Contents
1. Overview of the timber industry in Vietnam
2. New international regulations about timber
legality and legal timber sources
3. VPA and negotiations results to-date
4. Verification system and FLEGT licensing
5. Challenges faced during negotiations

3. Timber Processing Industry
2006
2014
1.9
billion
USD
6. 2
billion
USD
> 4000
SMEs

4.  Vietnam export timber
products to more than
100 countries;
 4 major export
markets: US, China,
Japan & EU
 Vietnam accounts for
about 4% the indoor
furniture trade in the
world, and raked 6th
in
the world, and 2nd
in Asia
(after China).
Timber and Timber Products Export Markets

5. Changes In The Markets
• Integrating trends globally, free trade, opened markets:
 New international institutions form supported investments,
trade and, labour movement: ASEAN community 2015, TPP
(12 countries), comprehensive economic partnerships RCEP
(ASEAN+ 6).
 New generations of free trade agreements has been signed :
FTA VN- South Korea, FTA-EU, custom alliances Russia,
Belarus, Kazakhstan…
 Tax barriers will be removed: taxes will be reduced and close to
zero for many goods and products in coming years.
 Alternatively, imported countries will increase their own trade
protection measures and technical barriers.

6. Market Changes In Processing
Industries
2008:
US issue Lacey Act
(effective from April
2010 applied to timber
products), businesses
have to declare timber
origins.
2010:
EU issue (EUTR -
995)
effective from March
2013: Businesses
have to do due
diligence for their
timber products in
EU markets.
2012:
Australia issue
Prevention of illegal
logging Act
effective from 30
November 2014,
companies have to do
due diligences for
timber products.

7. EU Timber regulations (EUTR 995/2010)
• Issued in October 2010 and
effective from 3 March 2013
• Illegal timber trade banned in
the EU, a list of timber products
will be compliant with this law.
• EU operators will have to
conduct due diligence about
timber origin, including
measures and procedures:
information access;risk
assessment and analysis, risk
reduction in supply chain

8. What is legal timber?
Timbers are legally
harvested, transported,
processed and exported in
accordance with existing
laws and regulations of
producing countries.
Products with FLEGT and
CITES licenses are
compliant with EUTR. This
means that operators will
not have to do any further
due diligences
FLEGT licenses are only available in countries that sign
VPA with EU
EU Timber regulations (EUTR 995/2010)

9. What is VPA/FLEGT?
 VPA is a bilateral trade agreement signed between
EU and producing partner countries:
• Partner country commits to the fact that it will only
export legal timber and timber products to EU
markets.
• Partner country will develop Timber Legality
Assurance System (TLAS) to verify and grant FLEGT
licenses for timbers and timber products indicated in
VPA for exporting to EU.
• An independent monitoring authority agreed by both
sides will be set up for monitoring TLAS and FLEGT
licensing system.

10. Vietnam Negotiations With EU About
VPA/FLEGT
• Vietnam started negotiations
since 11/2010 referring to
proposals made by
businesses and associations;
• We can not learn from any
of the experiences lived by
countries for our own VPA;
• 4 negotiation rounds, with
changes after each round
based on our own contexts;
• Aimed to be finalised in
2015.

11. 1. Issuing Authority
Name
Address
2. Reserved for partner
country purpose
3. FLEGT License number 4. Expiration Date
…../…../…..
5. Country of Export 7. Means of transportation
6. Code ISO
8. Licensee
Name
Address
9. Commercial Description product
10. Common or scientific name 11. Code HS
12. Country of Harvest 13. Code(s) ISO
14. Volume (m3) Wt Net
(kg)
16. Number of units
17. Distinguishing marks
18. Signature and stamp issuing authority
1. List of products in VPA
2. Legality Definition (LD)
3. Supply chain controls
4. TLAS
5. FLEGT licensing
6. Independent monitoring
Negotiations focus on

12. List of Timber Products
List of products in EUTR
Chapter 44: timber
- 4401, 4402, 4403….4418
Chapter 47: Paper pulp
Chapter 48: Paper
Chapter 94: Indoor furniture
-940330: Office furniture
-940340: Kitchen furniture
-94035000: bedroom furniture
-940360: other indoor-furniture
-94039030:
-94060020: ready-made houses
List of products in VPA
Chapter 44: timber
-4401, 4403, 4407, 4408, 4409, 4410,
4411, 4412, 4413000, 44140000,
4415, 4416, 4418
Chapter 94: indoor furniture
-94033000: Office furniture
-94034000: Kitchen furniture
-94035000: bedroom furniture
-940360: other indoor-furniture

13. Legality Definition (Annex II Of VPA)
Seven principles of LD for organizations
Pr. 1 Timber harvested domestically must follow land use
rights, forest use rights, and environment
management regulations
Pr. 2 Compliance with regulations on confiscated timbers
Pr. 3 Compliance with regulations on imported timbers
Pr. 4 Compliance with regulations on timber transportation
and trade
Pr. 5 Compliance with regulations on timber processing
Pr. 6 Compliance with regulations on timber exporting
Pr. 7 Compliance with regulations on taxes and labor issues

14. Some Issues Related to LD
• Imported timbers: this is the most difficult issue in Vietnam
as we are importing timbers from high risk countries
• EU requests that Vietnam should have similar regulations like
EUTR to manage imported timbers but this is not relevant for
Vietnam.
• Vietnam proposed solutions for timber from natural sources if
they did not have international recognized certificates as FSC,
PEFC. This will mean that they will have to submit harvest
permits from the countries of origins.
• Timber from rubber tree: Vietnam does not have legal
document for this timber so they will need to develop one in
the near future.

15. Business Responsibilities in the Supply Chain
Compliance with
regulations on
import, customs,
business
registrations and
taxes…
Compliance with
regulations on
land use, forest
harvest,
environment
requirement with
domestic timbers
…
Compliance with
regulations on
transportation,
trade, business
registration and
taxes …
Compliance with
regulations on
timber
processing,
business
registration,
environment
labor and taxes…
Compliance with
regulations on
export , custom,
business, taxes …
Business
imported
timbers
Timbers in
Vietnam
processed
by
businesses
Businesses
have timber
transport
and trade
services
Businesses
processing
timbers and
produce
indoor
furniture
Export
business

16. National
control system
applied for all
markets and
businesses both
domestic and
export
Additional
measures
applied for
companies
exporting
timber
products to
EU markets
1. Legality Definition: Organizations and
households
2. Establishment, verification, and approval of
verifiers in each step of the supply chain
3. Internal inspection and monitoring
4. Verification of compliance of organizations and
households, including business classification
based on risk assessment and verification
5. FLEGT Licensing
6. Independent Evaluation
CHART – SUPPLY CHAIN CONTROL IN VPA

17. FLEGT LICENSING
• FLEGT licenses will be granted for each shipment in the
annex 1 of VPA before exporting to the EU;
• Licensing authority: expected CITES in Vietnam;
• Verification office: Forest Protection Offices;
• Vietnam will classify businesses to provide licenses and
expect to divide businesses to two categories:
 Category 1: Export companies that meet all requirements
of LD and have no violations.
 Category 2: Export Companies that have not met the LD
requirements fully and/or have certain violations.

18. FLEGT LICENSING STEPS
• Step 1: Companies who want to export their products to EU will
send requests to the licensing office to grant permits for each
shipment;
• Step 2 : FLEGT licensing office will receive the documents and
will conduct the following activities:
 For businesses in category 1 that do not have any suspicions indicated
on the papers submitted , the FLEGT licenses will be granted promptly.
 For businesses in category 1 or 2 with suspicions, FLEGT licensing office
will send profiles to verification offices. The verification offices will
notify results which will be based on whether the FLEGT licenses will be
granted or not.
• Step 3: Based on compliance of LD and supply chain controls
and verification of TLAS, the FLEGT licensing office may or may
not grant a FLEGT license for each of the shipments.

19. Storage
- Storage
records,
products
codes
Inspection of
buyers
-Invoices,
receipts,
contracts …
based on
product
codes,
production
monitoring
Custom
check
-Custom
declaration
(list, out-of
storage
records ,
sale
contracts,
bill of lading,
seal
containers
same as step
(2), apply for
FLEGT
Transporta
tion
-
Transportati
on contract,
sale
contracts ,
out-of
storage
records
same as step
(3)
Custom clearance
- Custom
declaration
forms, out-of
storage records,
sale contracts
same as step (4)
Shipment
and transfer
for buyers
(FOB price)
same as
step 5
Exporting process of Vietnamese businesses
Apply for
FLEGT
In the case that there is a
discrepancy between
FLEGT licenses and the
actual shipment quantity,
how would you deal with
this?
1 2 3 4 5 6

20. Independent monitoring - TLAS
• Regular monitoring of:
– Implementation
– Effectiveness and trustworthiness of the VNTLAS and
FLEGT licensing systems for timber products exported to
EU and verification of the needs for system improvements.
• Vietnam will assign the independent monitoring
system after consultations with EU.
• Independent monitoring experts will have access to
profiles submitted for licenses for all timbers and
timber products exported to EU in FLEGT licensing
offices and verification offices

21. Verification
(Forest
Protection
Offices)
Verifiers based
on LD
Independent monitoring
CHART - VNTLAS – DRAFT VERSION OF JEM 9 AS OF JUNE 2015
AGRIRULTURE AND RURAL DEVELOPMENT
SECTOR: Established and verified all proofs
about timber legality
ENRIRONMENT AND NATURAL RESOURCES
SECTOR: establish and verify proofs about land
and environment issues
FINANCE SECTOR: establish and verify proofs
about taxes and customs
TRADE, JUSTICE, PLANING AND INVESTMENT
SECTORS : establish and verify proofs about
import and business registration .
LABOR AND SOCIAL ISSUES SECTOR: establish
and verify proofs about labor and insurance
PEOPLE’S COMMITTEES AT ALL LEVELS:
establish and verify other necessary proofs
required by current regulations
FLEGT
licensing
provided by
CITES VN –
based on
- Business in
category 1:
Based on
documents
submitted
-- Business
category 2:
Based on
verifification
results from
forest
protection
offices
Regular monitoring from authorities
Check verifiers from agriculture and rural development sector and approve
Check verifiers when suspicions
Independent monitoring
Send documents for
verification of category
2
Aplications for FLEGT licenses
FLEGT licensing process
Verification process and results
Send FLEGT licenses for businesses
Send verification results

22. Comparisons
 Due diligence according to EU
requirements
 Ensures timber legality throughout
supply chain, establishing a system to
trace timber origins
 Under inspections of both EU and
Vietnamese authorities
 Increased costs for businesses in EU
 Risk of returned goods, businesses fines
and penalties which could result in close-
out businesses
 Businesses applied for FLEGT in Vietnam
for timber products exported to EU
 Businesses ensure timber legality
throughout supply chain according to LD
and VNTLAS
 Under inspection and verification of
forest protection agencies in Vietnam,
independent monitoring experts
 Increase costs and administrative
procedures for Vietnamese businesses
 No due diligence required – no risk in EU
EUTR VPA

23. Challenges Faced During Negotiations
of VPA For Vietnam
• FLEGT licenses increase costs for businesses despite the fact that
the government is trying to reduce costs for businesses.
• Vietnamese businesses are now working with operators in EU
resulting in conducting due diligence for EUTR to be easier than
getting FLEGT licenses.
• Some of the technical issues in granting FLEGT licenses have not
been addressed.
• Six other countries have already signed VPAs but no FLEGT
licenses are available. Is VPA really working?
• EU is conducting overall evaluations on FLEGT including VPA
negotiations.

24. Conclusions
1. Whether or not Vietnam is going to sign VPA,
Vietnamese businesses have to meet the requirements
set for international markets;
2. Integration context: Vietnamese businesses have to
comply with international regulations and standards;
3. Should continue to negotiate VPA to comply with EU
regulations to fit with Vietnamese contexts
4. If VPA with EU is successful, there will be positive
impacts on other markets such as US and Australia.
Facilitate access to world markets for Vietnamese
timbers and timber products.

25. Nguy n T ng Vânễ ườ
Phó V tr ng V KHCN và HTQTụ ưở ụ
T ng c c Lâm nghi p (VNFOREST), MARDổ ụ ệ
Email: van.fssp@gmail.com
Thank you!