The Lacey Act Amendment: What Does it Mean to Your Business?

The Lacey Act is a United States (U.S.) law that originally related to illegal trade in wildlife. In 2008, amendments to the U.S. Lacey Act were passed. Effective 22 May 2008, the law makes it illegal to import, export, transport, sell, receive, acquire, or purchase in interstate or foreign commerce any plant, with some limited exceptions, taken or traded in violation of the laws of the U.S., a U.S. State, or relevant foreign law. The U.S. government can use this law to impose significant penalties on individuals and companies who are found guilty of such acts. This new law, and the new import declaration it requires, will affect manufacturers and exporters who ship a variety of products made from wood to the U.S., including paper, furniture, lumber, flooring, plywood and other products made out of wood.

The ban on illegal timber as defined in the Lacey Act amendments has not been supported by a clear framework of regulation that sets guidelines for importers, exporters and traders. However, it is suggested that operators exhibit due care and implement due diligence systems in order to minimize the risk of illegal wood entering supply chains.

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What is considered illegal under the Lacey Act?

The Lacey Act now makes it unlawful to import, export, transport, sell, receive, acquire, or purchase in interstate or foreign commerce any plant, with some limited exceptions, taken or traded in violation of the laws of a U.S. State, or foreign laws.

The following are examples of what is considered illegal under the Lacey Act:

  1. Theft of timber, including from parks and protected areas;
  2. Harvesting without permission;
  3. Failure to comply with harvesting regulations; and
  4. Failure to pay royalties, taxes or fees.

The Lacey Act also makes it unlawful to make or submit any false record, account or label for, or any false identification of, any plant.

It is unlawful as of December 15, 2008 to import any covered plant or plant product without a declaration form collected by Customs and Border Protection, Department of Homeland Security.

What does the Lacey Act require from wood importers and traders?

The U.S. Government requires that all wood imported into the U.S. is accompanied by a "Declaration form."

  1. Declaration must be made at time of importation
  2. Declaration must contain:
    • Scientific name of plant (including genus and species)
    • Value of importation
    • Quantity of the plant
    • Country of origin from which the plant was harvested
    • For paper and paperboard products with recycled content, state the average percent recycled content without regard for species or country of harvest
  3. Declaration requirement does not apply to packaging material used to support, protect or carry another item (unless the packaging material itself is the item being imported)
What is "Due Care"?

In order for companies to ensure that illegal wood does not enter into their supply chain it is expected that they exhibit what is referred to as due care. Due care is defined as "...that degree of care which a reasonably prudent person would exercise under the same or similar circumstances."

Due care is applied differently to different categories of persons with varying degrees of knowledge and responsibility. Greater knowledge requires greater care.

Due care can be established by putting in place supply chain management systems including verification of legality and 3rd party auditing. Even though verification cannot guarantee protection from prosecution, it can serve to limit the risk of illegal timber entering into the supply chain.

What are the penalties and fines for violators?

Violations of the Lacey Act provisions for timber and other plants may be prosecuted in three ways:

  1. Civil penalties – Fines up to $10,000
  2. Criminal penalties:
    • Misdemeanor – fines up to 100,000 for individuals and 200,000 for organizations or imprisoned up to one year, or both.
    • Felony – fines up to $250,000 for individuals or $500,000 for organizations or twice the amount of the gross gain or loss, or imprisonment up to 5 years.
  3. Forfeiture – dispossession of the wood products in question
Will third party certification guarantee that products cannot be held based on suspicion of illegality?

No. Although most certification systems for forest products include legality of harvest among their criteria, these are voluntary, private sector systems, the accuracy of which cannot be readily determined by the government. Nevertheless, such certification systems may provide information useful to manufacturers and importers in their efforts to exercise due diligence regarding sources and species of timber.

How can you protect your business from illegal wood?

Firstly:

  • Make sure your shipments were obtained legally;
  • Make sure your shipments' documentation and records are true and accurate; and
  • Make sure your shipment is properly declared under the Lacey Act declaration requirement.

Additionally:

(The following is an excerpt from Forests Trends, 2008).

Pay attention to your customers – Customers will be asking increasingly detailed questions about wood sourcing. Manufacturers and exporters/importers may be able to attract new customers – or lose them – depending upon what assurances they can provide about the legality of their wood inputs.

Understand your sourcing – Manufacturers and exporters/importers should put a management process in place designed to investigate the product supply chain and provide documented assurance that potentially illegal wood products are not being received and used. Companies and company officials who simply ignore potential sourcing problems can still be found liable for violations of the Lacey Act in not showing due care.

Do not rely on "paper" assurances – Some of the provisions of the Lacey Act apply regardless of whether a firm has actual knowledge of illegalities in the sourcing of a product's raw materials. It is not enough to simply get a letter or contract from your supplier stating that the wood products were legally obtained.

Do not rely solely upon certificates of legality or sustainability – A certificate of legality or sustainability may not provide a shield against enforcement. If the U.S. government has sufficient reason to believe that the wood was obtained illegally, it can take enforcement action regardless of whether the product is accompanied such a certificate. However the implementation of verification or certification in the supply is considered part of due care systems and will significantly reduce the risk of illegal wood entering into the supply chain.

Structure contracts to protect your financial interests – Wood or paper product importers can structure contracts so that they pay for, and take possession of, the product only after it has been cleared through Customs. Similarly, firms manufacturing paper or wooden products can contractually require indemnification from wood suppliers for any financial harm resulting from U.S. government actions taken against products.

How can the Rainforest Alliance help?

The Rainforest Alliance offers both Verification of Legal Compliance (VLC) and Verification of Legal Origin (VLO) services for the sourcing of raw materials. Independent verification is a credible tool for providing due care in relation to laws such as the Lacey Act by verifying legality of non-certified wood within supply chains, reducing the risk of liability for sourcing illegal material. Rainforest Alliance's Legality Verification services were ranked the best of all Legality Verification Systems in an assessment report by Greenpeace.