Acknowledging concerns that plywood "potentially represents an area of high risk", the National Measurement Office (NMO) – the EU Timber Regulation (EUTR) enforcement body in the UK – investigated 16 companies identified as operators under the EUTR.

While the resulting report, released in February, states that "the overall risk is low in relation to the possibility of illegal logging in the supply chain", the NMO found that some companies were not meeting the requirements of the EUTR. Of the 16 companies investigated, 14 had due diligence systems which were deemed insufficient.

The combined value of the imports of the 16 companies amounted to 10% of the UK’s Chinese plywood imports last year and this, said the NMO, indicates "the potential scale of non-compliance in the industry".

The common failing, said the NMO, was "a lack of narrative" explaining how the combination of document gathering, risk assessment and mitigation enabled the company to conclude there was a negligible risk of the timber in the product being illegal.

Also, of the 13 products the NMO tested, nine did not match the declaration of species supplied by each company.

Only one company was found to be compliant with the EUTR as a result of testing and its due diligence system.

The findings are not a surprise to James Latham director Chris Sutton, who is also a past chairman of the UK Timber Trade Federation’s (TTF’s) National Panel Products Division. "Some people have sailed close to the wind with China for a long time," he said.

"It might only represent 10%, but we don’t know whether it’s the good 10% or the bad 10% and why would it be any different for the other 90%?"

He welcomed the report because it showed the NMO had teeth and "that really will put a shot across the bows of a lot of people".

For too long the industry had taken risk to get better rewards and the impact on timber’s reputation was serious, he said.

"It taints the plywood industry at a time when architects and designers are well aware of legality and sustainability. It will tar the reputation of the timber trade if members of either the TTF, or the new Confederation of Timber Industries, are found to be trading in product that’s either not legal or not what it claims to be," said Mr Sutton.

However, International Plywood managing director Ian Attwood believes the NMO report is not representative of the wider plywood industry.

"The majority of importers have taken the EUTR very seriously and invested time and money in ensuring they comply. I would be openly critical of it [the report] because it doesn’t really give the full picture and doesn’t name the offenders," he said.

International Plywood employs product assurance company Track Record to help with its due diligence but Mr Attwood said eliciting information from Chinese suppliers had been difficult at times, although the process was improving as suppliers became more experienced in what was required. However, he believed there was still room for suppliers to deceive.

"China’s reputation is still quite poor concerning legality, so we have had to go further than the TTF’s Responsible Purchasing Policy (RPP) to satisfy our own due diligence systems. The two most important examples are the regular visits to the factories that we make, usually seven or eight times a year, and the involvement of Track Record, but generally, I believe, the EUTR has helped China’s plywood sector to "clean up its act".

"It’s opened everyone’s eyes and the more information the better," said Mr Attwood.

Making improvements
However, Mr Sutton believes UK companies could do more to ensure that Chinese plywood meets EUTR requirements.

"Not everyone should be tarred with the same brush and not everyone is deliberately misrepresenting, and yes, the mills will use the species they have but the UK has quite a lot of influence on how plywood is made in China and we shouldn’t underestimate that," he said.

In the lead-up to the EUTR’s introduction in March 2013, UK operators helped their plywood suppliers make changes to ensure their products’ legality.

"Compromises had to take place on both sides," said Mr Attwood. "Some of the veneer we’re using now is probably not as aesthetically pleasing."

Premier Forest Products has also worked with suppliers to move to a certified supply chain, change species, or improve their reporting.

Scrutinising their supply chains has resulted in some UK operators dropping some suppliers.

International Plywood has nearly halved the number of Chinese plywood suppliers because they "weren’t able to provide sufficient evidence of legality and sustainability on the goods they wanted to supply us" and a few years ago James Latham stopped trading with some mills because they couldn’t meet the company’s requirements.

"We sent someone out there and we didn’t like what we saw so we pulled out. It’s important to go and see," said Mr Sutton. Caledonian Plywood Co (CPC) has also made supply changes. "We’ve consolidated the number of [Chinese] mills we deal with and we have two agents. We’ve streamlined the supply chain so we have more control over the consistency of quality and legality," said director Stuart McKelvie.

Through the agents, CPC has control over the face logs that are peeled and distributed to the mills "so it’s quite straight forward to control it order by order," he said.

The company also changed its product mix, initially ‘championing’ engineered veneer made from poplar, but it was not accepted by the market, largely, Mr McKelvie believes, because of the colour.

"It was disappointing there was a negative response because it would have been an easy fix [for the EUTR]," he said. Premier Forest Products dropped some Brazilian hardwood plywood suppliers because of potential complications.

"Trying to get translations from Portuguese to English and making sure the local licences and taxes were paid was complex," a spokesman said.

And, while UK operators support the EUTR, dealing with these complexities adds a cost to timber businesses.

"Due diligence adds a cost, and it’s a rising cost," the Premier spokesman said.

"I’m spending nearly every day either collating information for ourselves or replying to requests for information from others. The questionnaires we’re getting from customers are more far-reaching than in the past."

Paul Forrest, CPC’s sales manager, north, agrees. "It’s an additional cost which doesn’t add profit or margin," he said, adding that the UK seemed to be taking a more robust approach compared with other EU countries.

There is also some frustration that existing certification does not provide a green light under the EUTR.

"The NMO doesn’t appear to put a lot of credibility on certification and certified bodies that are internationally renowned and accepted by other government agencies, such as CPET," said Mr Forrest.

Timely reminder
The TTF said the NMO report was a timely reminder that the EUTR was being taken seriously by the UK government. The report emphasises the complex risks in products such as plywood and that the trade could do better in its approach to applying due diligence.

However, it is positive, the TTF said, that the report suggests that "the overall risk is low in relation to the possibility of illegal logging in the supply chain".

"This is consistent with both the TTF and Chatham House’s analysis into illegal logging in the UK, conducted in 2014. The challenge therefore primarily continues to be one of procedures and process at the operators’ end and working in partnership in their supply chains," the TTF said.

The federation also points out that the investigation focused on products placed on the market up until March 2014, that many of the NMO’s concerns were also picked up by RPP auditors and through this process, some of the gaps and weaknesses were already being addressed by the TTF and its members.

However, TTF head of sustainability, Anand Punja, told TTJ that the report also showed that, in carrying out due diligence, companies were taking too much on trust and on what the supply chain was telling them.

"They’re doing due diligence but they’re basing that on claims that aren’t accurate," he said.

The UK trade had made the necessary changes to its specifications but these were sometimes not reflected in the products being delivered. The only way to manage such risks, said Mr Punja, was through randomised testing.

"In the longer term, this may be a positive, because it may lead to a better culture of testing in the plywood industry, not just for the EUTR, but glue bonds, durability of species and structural performance," he said.

He added that it was reassuring that the TTF’s audits had identified similar concerns to those of the NMO, although the report revealed a slightly different approach to risk assessments.

Until now, companies’ risk assessments had been specific to the supply chain and more technical rather than narrative, but Mr Punja said the report indicated the NMO wanted the wider context of risk to be considered and documented by the trade.

"The report makes the NMO’s expectations clearer," he said. "It’s saying ‘get your head up a bit and be aware of the wider risks and their potential to impact on your supply chain’."

So what’s next for the NMO? Michael Worrell, NMO EUTR enforcement policy officer, earlier told TTJ that it was now focusing on other high-risk areas, although he would not identify what these were.

The NMO report says it is also continuing to investigate the operators of Chinese plywood that did not comply with the EUTR and says sanctions will be imposed, including the possibility of prosecution. It is also likely to conduct a similar project into Chinese plywood in future.

However, it acknowledges that positive steps have resulted from its "engagement" with the 16 companies. Operators have begun to question the reliability and veracity of the paperwork received from suppliers and one company had suspended supply from Papua New Guinea because it could not reach negligible risk without investing more time and money.

Also, more companies had hired third party organisations to help with their due diligence, some had employed new staff to work on due diligence, and nine companies had begun to implement testing as part of their mitigation procedures.

In addition, Mr Punja said the TTF was speeding up improvements to some of the tools and support systems it offered members, such as improved and more accessible country guidance. These will be rolled out to members over the next few months.