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DestinationChina:AcompanionbriefingtoMomentofTruthFordecades,thePeruviantimbersectorhasbeenrifewithcriminalactivity,taintingdomesticandglobalsupplychains,perpetuatingunsustainable logging in theAmazon,andharmingPeruviancommunities.NewanalysesofPeruviancustomsrecordsandforest inspectionsbyboththeCenter for InternationalEnvironmental Law (CIEL) and by the Environmental Investigation Agency (EIA) confirm that a largepercentofPeru’swoodexportswerecutillegally,withcompletedisregardforlawsandsustainability.TheUnitedStates,thethird-largestimporterofPeruviantimber,hasrecentlytakenstrongactionstointerdicttheentryofillegalPeruviantimber.1China,Peru’slargesttimbertradingpartner, isalsothebuyerandconsumerofthemajorityofPeru’sillegaltimber.

DatashowsthatalargepercentageofPeru’stimberexportscomesfromillegalsourcesIllegal logginghasplaguedPeru’sAmazon forests for years. In2002 the International Tropical TimberOrganization(ITTO)estimatedthat“anywherebetween70to90%ofalltimbercomingtothemarketisillegallyharvested.”2In2006,theWorldBankestimatedthat80%ofPeruviantimberwasillegallycut.3And in 2016, the Peruvian government’s forest oversight agency,Organismo de Supervisión Forestal(OSINFOR),reportedthat78%ofthewoodinspectedbetween2009and2016camefromillegalsources.4

OSINFORconductspost-harvestassessmentsofloggingareasaroundthecountrytodeterminewhetherharvestingwas conducted legally. Inspectors publish their findings on a public database,5and classifyparticularloggingoperationsaseither“green”or“red.”“Green”harvestingoperationscontainnomajorviolations,thoughtheyoftencontainminorviolationsthataredetailedintheinspectors’reports.A“red”designationindicatesthatinspectorsfoundextensiveevidenceofillegallogging,falsifieddata,orothermajorforestlawinfractions.

This illegally harvested wood is sold domestically and exported to other countries. The independentanalysesconductedbyCIELandEIAbothdemonstratethat,ofthe33%oftimberexportsfromthe2015sampleinspectionsselectedbySerfor,Peru’sforestauthority,whichcorrespondedtositesinspectedbyOSINFOR,51%containedtimberthatOSINFORmarkedas“red.”6CIELfoundthattheproportionofillegal

OSINFORinspectors(EIA)

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woodinexportshipmentsvariedbydestinationmarket.Woodfromred-listedconcessionsrepresented70%ofexportstoChinain2015,comparedwith30%ofexportstotheUS,forexample.

EIAwasalsoabletoassesstheriskleveloftheremaining67%oftimberexportsthatdidnotcomefromOSINFOR-inspectedsites.Ofthese,EIAdeterminedthat44%ofthetimbershipmentswereathighriskofbeingillegal,andanadditional20%containedmoderateriskofillegality.7

Exporterssystematicallylaunderillegalwoodwithfakedocuments,anddosowithimpunityThetheft,corruption,collusion,andfraudthroughoutthetimbersupplychaininPeruissystematic,wellknown, and persistent in spite of attempted reforms. Rampant illegal logging in the 1990s severelydepletedpopulationsofhigh-valuemahoganytrees,leadingPerutoenactanewforestlawin2000.Yettheproblemscontinued,andin2006thethen-forestagencyINRENAestimatedthat72%ofthesourceconcessions and communities for mahogany were using invented volumes, and that 92 of the 150concessionsauthorizedtoharvestmahoganywereusingfraudulentdocuments.8A2015documentarybynews network Al Jazeera found that “buying fraudulent Transport Guides needed to sell timberdomesticallyandexportit[was]aseasyasmakingaphonecall.”9

Unfortunately,collusionbetweencriminalsandcorruptofficialshasthusfarpreventedmeaningfulforestsectorreform.In2006theWorldBankdescribedillegallogginginPeruassystematic,characterizedbycriminalnetworksincollusionwithstateactors.10Thesameyear,theUSambassadortoPeruwarnedthat“muchof[Peru’s]exportsarelikelyfromillegallogging,violatingPeruvianlawandtheCITESinternationalconvention.”In2010thedirectorofINRENAacknowledgedthat“thecorruptionwithinINRENAis…ofamagnitude that’s really incredible.”11In2017, twoyearsafterUScustomsseizeda shipmentof illegalPeruvian wood and exposed the complicity of Peruvian officials, the Associated Press reported thatprosecutionshadfailedtoadvanceandofficialswhosignedoffon“falsifiedloggingpermits”remainonthejob.12

That seized shipment had been carried aboard the Yacu Kallpa, amaritime vessel that for years hastransportedPeru’stimbertoMexico,theUnitedStates,andtheDominicanRepublic.In2014and2015,thePeruviangovernmentexaminedthelegalityofthetimberaboardtheYacuKallpaundertheauspicesofalarge-scaleenforcementeffortknownasOperationAmazonas.Focusingonthreevoyagesbetween

TheYacuKallpa(EIA)

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December2014andNovember2015,governmentofficialsfoundthat86%to96%ofthetimberineachofthoseshipmentswasofillegalorigin.13

MethodologyofillegallogginginPeru

Fraudandtheftcanoccurateverystepofthetimbersupplychain.Belowisasimplifiedsequenceofthestepsfromharvesttoexport,alongsideexamplesoflaunderingactivitythatmayoccurateachstep.14

CorrectProcedures CommonIllegalities1.Timberiscutwherethereisapermittodoso,withamaximumspecifiedannualharvestvolume.

è Loggerscutmorethanallowed,andcutoutsideoflegalcuttingareas,includinginNationalParksandindigenousterritories.

2.Theharvestedvolumeisreportedaccuratelyandavalidtransportpermitforthecorrespondingvolumeisissued,permittingtransportofthatvolume.

è Timbermerchantsfraudulentlyoverstatethemeasurementsfromlegallycuttrees,soastoobtaintransportpermitsthatwillcoveryieldsfromthecombinedlegalandillegaltrees.

è Loggingcontractholdersfalsifyforestinventoriestogenerate“real”transportpermitsbasedonnon-existingtrees.

è Tradersbuyblack-markettransportpermitsgeneratedfromthesemethodstotransferillegalwood.

3.Thewoodistransportedbyrivertomilltowns,mostcommonlyPucallpaorIquitos.Atsawmills,thewoodofknownoriginsiscutintoboardsandnewtransportpermitsareissued.

è Illegalwoodismixedwithlegalwoodatsawmills.Newtransportpermitsareissuedwhichcanobscuretheactualorigin.Since2016,secondarytransportpermitsarenotrequiredtolistthepointoforigin.

è Increasingly,logsarerough-cutatcollectionpointsinthejunglebymobilesawmillswithevenlessscrutinythaninmilltowns.

è Tradersbuyblack-markettransportpermitstotransferillegalwood.4.Tradersinthesawmilltownsselectthebestboardstoselltoexportcompanies.ThesearebroughttotheportofCallaoonthePacificOceanforexport.Thetimberanditsaccompanyingdocumentsareexportedtoover34countries.

è Dependingonthesensitivityoftheirmarket,collectorsandexportcompaniesmayreshufflethedocumentsorsimplybuynewdocumentsforthewoodontheblackmarket.

LogsandsawmillsinPucallpa,Peru(TobySmith/EIA)

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ImportingPeru’sillegalwoodunderminesgoodgovernance,harmstheenvironment,andhurtsPeruviancommunities

Illegalloggingcontributestoabusivelaborconditions,corruption,andviolentconflictAnInternationalLaborOrganization(ILO)studyfrom2005,attheheightoftheillegalmahoganyboom,estimatedthatsome33,000peopleworkedunderforcedlaborconditionsinloggingcamps.Thebribery,fraud,andblackmarketsthatarepartofPeru’stimbertradecontributetoacultureofinstitutionalizedcorruptionandimpunitythatunderminestheruleoflaw.Insomecases,thesamemafiascontrollingtheillegaltimbermarketarealsotraffickingdrugs.15

Illegalloggersrepeatedlycomeintoviolentconflictwithindigenouscommunities,fightingtoprotecttheirlandsfromincursion.16In2014,forexample,illegalloggerskilledtheenvironmentalactivistandAshéninkaleaderEdwinChota,alongwiththreeofhiscolleaguesfromtheindigenouscommunityofSaweto.Todate,noonehasbeenprosecutedforthiscrime.17

Illegalwoodisunsustainablyharvested,increasescarbonemissions,andthreatenspopulationsAccordingtoarecentstudyexaminingcarboncaptureandemissionsfromtropicalforests,deforestationfromhumanactivities,includingillegallogging,hasturnedtropicalforestsfromnetcarbonsinkstonetsources of carbon emissions since 2003.18The combined activity of thousands of commercial loggingoperations is degrading even the seemingly inexhaustible vastAmazonmorerapidlythananyonewouldliketobelieve.19

Illegalwoodisunsustainablebydefinition,asitisusuallyharvestedin violationof forest lawsandmanagementplans. Two formerlycommon Peruvian species, mahogany and cedar, have alreadybeen brought to the edge of commercial extinction. In 2015, aworkinggroupofover90scientists,taskedbySerfortorecommendupdates to the national list of endangered flora, concluded thatcumaru (known in Peru as shihuahuaco and comprising threespecies of Dipteryx) should be added to the list, due to itsunsustainableandincreasingextractionlevels.20Theslow-growing,massivecumarucanrepresentupto

one-third of the entire carbon sequestered in a hectare ofprimaryrainforest,andisavitaltreefortheendangeredharpyeagle,macawsandothercavity-nestingbirds.21CumaruisalsoPeru’smostexportedspeciestoChina.

IllegalwoodtrapsPeruviancommunitiesincyclesofpoverty.InpartsoftheAmazon,thetimbertradeisanimportantsourceof native community income. However, loggers rarely informcommunitiesaboutthelegalobligationsandpossiblesanctions,muchlesscompensatethemappropriately.Moreover, loggersoften use transportation permits from native communities tolaunder timber, often without knowledge or consent of the

communities.Soonthese loggersabandontheareaand leavethecommunity to face,alone, the legalconsequencesforfalsificationsandharvestinfractions.Theresultingfinesbecomefinancialburdensthatmakeitimpossibleforcommunitiestogetoutofthecycleofillegalityandpoverty.22

Trucksfulloftimberandmaterialsonillegalloggingroad,2015.

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RelevancetoChina

ChinaimportsthelargestquantityofquestionabletimberWhileallcountriesimportingtimberfromPeruarereceivingsomeillegaltimber,notallimportersareatequalrisk:PeruviangovernmentdataindicatesthatChinaimportsthegreatestvolumeofillegalandhigh-riskwoodshipments,andtheproportionsofillegaltimberarealsoveryhigh.AccordingtoCIELandEIA’sanalysisofPeru’sexportsin2015:

• ChinaisbyfarthelargestimporterofPeru’stimber.42%ofPeru’stimberexportsweretoChina,followedbytheDominicanRepublic(20%),USA(10%),andMexico(9%).

• Chinaimportsmoreuninspectedtimber(71%oftotalexportsin2015)thananyoftheothertop-5importers.Ofthisuninspectedtimber,halfissuspectedtobeathighriskofcontainingillegaltimber.

• OfChina’ssupervisedtimberimports,70%isillegal(red-listed).

• Over89%ofChina’simportsbyvolumein2016werecumaru,23onethemostcommonlyillegally-loggedspeciesofwood.24Peruviangovernmentforestersfearthatcumaruisrapidlyreachingcommercialextinction,andrecentlyrecommendedaddingittothelistofendangeredspecies.

0

20,000

40,000

60,000

80,000

100,000

120,000

weightinmetrictons

Peru'stimberexports,topfourdestinationssource:UNComtrade

China USA Fra Mex

AdvertisementforcumaruflooringonChineseonlineretailwebsiteTmall

Acumarutree(EIA)

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ChinaisasafetyvalvefordirtywoodAstheUSandotherconsumermarketsbecomemore“sensitive,”withlegislationsuchastheLaceyActandEUTRthatdemandgreaterevidenceofimportlegality,Peru’sexportershaveadaptedbyprovidingsensitivemarketsthecleanestdocumentsandtimberavailable,andfindinga“safetyvalve”fortherest.AsobservedbyCIEL,Peruvianexporters“mayhaveidentifiedmarketswhohavelawsprohibitingillegaltimber imports and requiring companies to undertake due diligence or exercise due care, as thepercentage of exports from the ‘red list’ to these countries is generally lower.” For example, “thepercentageof[transportpermits]onthe“redlist”forexportstotheUSandFranceislower,whileChinaandMexicohavehigherpercentages.”CIELconcludes:“Consumercountrieswithoutlawsprohibitingtheentryofillegaltimberandrequiringduediligencebyimportersallowunscrupulousexporterstoexploitthisweaknessandexporttimberwith[transportpermits]thatareonthe‘redlist.’”25

China,whichdoesnotyethavealawprohibitingtheimportandtradeof illegaltimber,receivesmoretimberfromillegalandhigh-riskpointsofharvestfromPeruthananyothercountry.Inthisway,ChinaactsasasafetyvalveforPeru’sillegalwood.

Othergovernmentsareactingtostoptheentryofillegalwoodandholdoffendersaccountable

Anumberofgovernmentshavepassedlawstoprevententryofillegalwoodontotheirshores.In2008,theUnitedStatesamendedtheLaceyAct,therebyprohibitingtheimportorsaleofillegaltimberproducts.Under this law, they have taken multiple actions to seize or exclude illegal Peruvian timber, whilecontinuing to investigate the trade. In 2010, the EuropeanUnion passed the EuropeanUnion TimberRegulation(EUTR),whichhassent“strongsignalsthatillegaltimber,includingillegalPeruviantimber,willno longer be accepted inmajormarkets.”27Governments of the US, Norway, and Germany, have allestablished cooperationmechanismswithPeru to improve forestmanagement, includingby reducingillegallogging.28

In2015and2016,theDominicanRepublic,theUS,andMexico—the2nd,3rd,and4thlargestimportersofPeruviantimberrespectively—collaboratedwithPeruvianauthoritiestodetainorseizemillionsofdollars’worthofillegaltimbercargo.29Asmentionedabove,theUShasalsoprohibitedimportsfromoneofPeru’smainexporters,30sanctionedUSentities importingillegaltimber,andiscurrently investigatinganotherimporter.31

Perutimberproductexportsin2015bynumberoftransportpermitsTopfivedestinations26

Destination Total transport permits

Inspected Inspected: Red

Not Inspected

Not inspected: High risk

China 1021 299 209 722 359

Dominican Republic 479 174 54 305 96

USA 251 101 30 150 69

Mexico 220 70 51 150 98

France 85 43 4 42 17 Total, 34 countries 2427 791 400 1636 715

PeruviantimberexporttoChinabynumberoftransportpermits(2015)

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Chinaneedstoact

PresidentXi JinpinghasconsistentlyaffirmedChina’scommitmentsto leadingtheworld inaddressingclimate change, reducing carbon emissions, and to pursuing an “ecological civilization” in which we“cherishtheenvironmentaswecherishourownlives.”32ChinahasalsopledgedtointegratetheconceptsofgreendevelopmentintotheBeltandRoadInitiative—whichChinahasinvitedLatinAmericatojoin—andoutlinedadetailedplanfordoingso.33ToLatinAmericaspecifically,undertheauspicesoftheChina-CELACforum,Chinahasfoundedapartnershipon“mutualbenefit,”onewhichwillpromote“commonsustainabledevelopment,”“sustainableuseofnaturalresources”andcollaborateonthe“protectionofbiodiversity.”34WeapplaudtheseprinciplesandurgetheirapplicationinthePeruviantimbersector.Astheworld’slargestimporterofPeruviantimber,andthelargestimporterbyvolumeofPeru’sillegaltimber,Chinacaninfluencethemarketforlegaltimbermorethananyothercountry.Chinashouldrequireproofoflegalityforitsimportsandtherebyplayaleadingroleinpushingforalegal,sustainabletimberindustryinPeru.

Toensurethelegalityofitstimbersupplychain,toprotectitsnationalreputation,toshowresponsibleleadership, to prevent harm to Peruvian communities, and to safeguard the existence of theworld’sAmazonforestresources,ChinashouldceasetheimportofillegallysourcedPeruviantimber.

References

1OfficeoftheUnitedStatesTradeRepresentative(20October2017).USTRAnnouncesUnprecedentedActiontoBlockIllegalTimberImportsfromPeru.Pressrelease.https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/october/ustr-announces-unprecedented-action2“AchievingtheITTOObjective2000andSustainableForestManagementinPeru–ReportoftheDiagnosticMission”http://www.itto.int/partner/id=21400003Goncalves,M.P.etal.(2012).Justiceforforests:improvingcriminaljusticeeffortstocombatillegallogging.TheWorldBank.http://siteresources.worldbank.org/EXTFINANCIALSECTOR/Resources/Illegal_Logging.pdf.4GarcíaDelgado,F.(15Sep2016).Osinfor:80%deinspeccionescontratalailegalirregulares.ElComercio.http://elcomercio.pe/peru/osinfor-80-inspecciones-talailegal-irregulares-259137;citedinEnvironmentalInvestigationAgency(2018,forthcoming).MomentofTruth:PromiseorPerilfortheAmazonasPeruconfrontsitsillegalloggingtrade.P.11.5Osinfor.SIGO-SFCdatabase:http://www.osinfor.gob.pe/sigo/6Gomez,RolandoNavarro,andMelissaBlueSky.(2017)“ContinuousImprovement”inIllegalPracticesinthePeruvianForestSector.CenterforInternationalEnvironmentalLaw.http://www.ciel.org/wp-content/uploads/2017/11/EnglishVersionFinal.pdf7EIAassessedrisklevelsforharvestpointsthatwereneverinspectedbyOsinforbyexaminingthegreenorred“sigo”statusofotherpointsofharvestfromthesameparcels,amongotherfactors.FormoredetailsonthemethodologyseeEIA(2018),p.56.8Cerdán,C.(2007).LaTalaillegaldecaoba(Swieteniamacrophylla)enlaamazoníaperuanaysucomercializaciónalmercadoexterior.AIDESEP.9Abeshouse,B.andL.DelValle(12August2015).PeopleandPower:Peru’sRottenWood.AlJazeera.http://www.aljazeera.com/programmes/peopleandpower/2015/08/peru-rotten-wood-150812105020949.html10Pautrat&Lucich(2006).AnálisisPreliminarSobreGobernabilidadyCumplimientodelaLegislaciondelSectorForestalenelPeru.WorldBankGroup.11EIA(2012),pp.9,10.12Bajak,F.(18April2017).APInvestigationshowsPerubackslidingonillegallogging.AssociatedPress.https://www.apnews.com/8f4d73bdc605446c9c64bc2aedf7aa3113EIA(2018),pp22-23.14EIA(2012),pp26-27.15Tali,D.(22August2016).“IllegalAmazonloggers:‘AnyonewhobuysthewoodisasguiltyasI’.TheIrishTimes.https://www.irishtimes.com/news/world/illegal-amazon-loggers-anyone-who-buys-the-wood-is-as-guilty-as-i-1.276370616BedoyaGarland,E.&A.BedoyaSilva-Santisteban(2005).TrabajoForzadoenlaExtraccióndelaMaderaenlaAmazoniaPeruana.InternationalLabourOrganization.http://www.ilo.org/global/topics/forced-labour/WCMS_143197/lang--es/index.htm.Citedin:EIA(2018),p.12.17Thelastsuspectwasreleasedfromprisonin2016.EIA(2018)p.17,andBajak,F.(18April2017).18Baccini,A.etal.Tropicalforestsareanetcarbonsourcebasedonabovegroundmeasurementsofgainandloss.Science,28September2017.DOI:10.1126/science.aam5962http://science.sciencemag.org/content/358/6360/23019EIA(2018),p.13.

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20LettertoMinisterofAgriculture,MinisterofEnvironment,andDirectorofSerforfrom75scientists.Ref:PronunciamientosobrelacatagorizacióndeespeciesdeShihuahuaco(29November2016).CitedinEIA(2018),p.13.21EIA(2018),p.13.,andVelezZuazo,A.(13December2016).Shihuahuaco:whatwillbethefutureofthisforestspeciesinPeru?https://es.mongabay.com/2016/12/extincion-amazonia-bosques-biodiversidad-aves/22Ibid,p.12.23DatafromSUNAT-Aduanas(NationalSuperintendenceofTaxAdministration)fortheyear2016.24Osinfor(June2016).ResultadosdelasupervisionesyfiscalizacionesefectuadasporelOsinforenelmarcodelOperativoInternational“OperaciónAmazonas2015”,p61-63.25Gomez,RolandoNavarro,andMelissaBlueSky.(2017),pp.1,14.26Datatakenfrom:Gomez,RolandoNavarro,andMelissaBlueSky.(2017);andEIA(2018).27Ibid,pp.5,14.28US-PeruTradePromotionAgreement,Chapter18,Annex18.3.4onForestGovernance,paragraph1.https://ustr.gov/sites/default/files/uploads/agreements/fta/peru/asset_upload_file953_9541.pdf;andJointDeclarationofIntentbetweentheGovernmentoftheRepublicofPeru,theGovernmentoftheKingdomofNorwayandtheGovernmentoftheFederalRepublicofGermany.23September2014.https://www.regjeringen.no/contentassets/b324ccc0cf88419fab88f2f4c7101f20/declarationofintentperu.pdf29EIA(2018),chapter4:TheYacuKallpaandOperationAmazonas2015.30Ibid.,chapter4andp.47;andOfficeoftheUnitedStatesTradeRepresentative(20October2017).31EIA(2018),p.12.32ChinaDaily.(1Dec2015).FulltextofPresidentXi’sspeechatopeningceremonyofParisclimatesummit.http://www.chinadaily.com.cn/world/XiattendsParisclimateconference/2015-12/01/content_22592469.htm;Xinhua.(22March2017).Xileadsecologicalcivilization.http://www.chinadaily.com.cn/china/2017-03/22/content_28634915.htm;Xinhua.(4Nov2017).FulltextofXiJinping’sreportat19thCPCNationalCongress.http://www.chinadaily.com.cn/china/19thcpcnationalcongress/2017-11/04/content_34115212.htmBruce-Lockhart,A.WorldEconomicForum.TopquotesbyChinaPresidentXiJinpingatDavos2017.https://www.weforum.org/agenda/2017/01/chinas-xi-jinping-at-davos-2017-top-quotes/33BeltandRoadportal.(14May2017).TheBeltandRoadEcologicalandEnvironmentalCooperationPlan.https://eng.yidaiyilu.gov.cn/zchj/qwfb/13392.htm34MinistryofForeignAffairsofChina.(April2016).BasicInformationaboutChina-CELACForum.http://www.chinacelacforum.org/eng/ltjj_1/P020161207421177845816.pdf

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