Indonesians withdraw export legality licensing requirement

Regulation 15 is being presented as part of a Covid-19 trade stimulus strategy. However NGOs are saying that the government has also been influenced by long-term lobbying by industry, notably the Indonesian Furniture and Craft Association HIMKI, to drop the legality assurance requirement.

Under the new ruling, set for implementation on May 27, companies will no longer need to obtain so-called V-legal licences (an umbrella term for both FLEGT legality assurance licences for exports to the EU and V-legal documentation for exports elsewhere), but can still secure them if the overseas customer requires them.

The EU demands FLEGT licences on imports from Indonesia under its FLEGT Voluntary Partnership Agreement (VPA) with the country, so exporters will need to continue to provide them. But Indonesian exporters will have no need to supply V-legal documentation with exports to any other country unless requested by the buyer.

The complication for the FLEGT system is that under the EU-Indonesia VPA it was agreed that Indonesia would apply the same legality assurance standard to exports to the rest of the world as the EU.

Indonesia’s SVLK timber legality assurance system requiring legality audit and assurance provision of companies from forest, through timber processing and trade within the country, which is managed by the Ministry of Forestry, remains in place, it is just for exporters that the rules are changed.

In fact it’s part of the argument of HIMKI against obligatory export licensing that, if timber has already been legally certified at the logging stage, then there’s no need to continue with legality checks further down the supply chain, including for exporters.

The Ministry of Forestry, which it is reported was not consulted by the Ministry of Trade on Regulation 15, is now said to be in talks with the latter on revision of the new rules.

According to environmental news website Mongabay, Indonesian trade minister Agus Suparmanto said the decision to scrap the V-legal requirement was taken to boost timber exports amid an economic slowdown caused by the COVID-19 outbreak.

“With the relaxation of the policy [SVLK], it’s hoped that the export of Indonesian timber products can increase,” he said.

However, Syahrul Fitra of Indonesian environmental NGO Auriga told Mongabay that the current health crisis was being effectively used as a cover to implement change HIMKI and others have been pressing for for years.

“The coronavirus is being used as a reason to pass an agenda that would otherwise be quite difficult [to pass],” he said, adding that it could lead to illegal timber getting into Indonesian export supply chains, undermining Indonesia’s advances in legality assurance under its SVLK system over the last decade.

The EU authorities, trade bodies and EU and Indonesian NGOs are pressing Indonesia to change tack. NGOs are also calling on the EU trade to lobby against Regulation 15 which they say threatens to significantly damage Indonesian timber legality assurance and the international reputation of the country and its timber industry.

Indonesia is the only VPA partner country to date to get to FLEGT licensing stage, starting in 2016.