    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

                    H.R. 1497, LEGAL TIMBER PROTECTION ACT

    =======================================================================

                              LEGISLATIVE HEARING

                                   before the

                      SUBCOMMITTEE ON FISHERIES, WILDLIFE
                                   AND OCEANS

                                     of the

                         COMMITTEE ON NATURAL RESOURCES
                         U.S. HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                   __________

                           Tuesday, October 16, 2007

                                   __________

                               Serial No. 110-49

                                   __________

           Printed for the use of the Committee on Natural Resources

      Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                                   index.html
                                       or
             Committee address: http://resourcescommittee.house.gov

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                         COMMITTEE ON NATURAL RESOURCES

                  NICK J. RAHALL, II, West Virginia, Chairman
                  DON YOUNG, Alaska, Ranking Republican Member

    Dale E. Kildee, Michigan             Jim Saxton, New Jersey
    Eni F.H. Faleomavaega, American      Elton Gallegly, California
        Samoa                            John J. Duncan, Jr., Tennessee
    Neil Abercrombie, Hawaii             Wayne T. Gilchrest, Maryland
    Solomon P. Ortiz, Texas              Chris Cannon, Utah
    Frank Pallone, Jr., New Jersey       Thomas G. Tancredo, Colorado
    Donna M. Christensen, Virgin         Jeff Flake, Arizona
        Islands                          Stevan Pearce, New Mexico
    Grace F. Napolitano, California      Henry E. Brown, Jr., South
    Rush D. Holt, New Jersey                 Carolina
    Raul M. Grijalva, Arizona            Luis G. Fortuno, Puerto Rico
    Madeleine Z. Bordallo, Guam          Cathy McMorris Rodgers, Washington
    Jim Costa, California                Bobby Jindal, Louisiana
    Dan Boren, Oklahoma                  Louie Gohmert, Texas
    John P. Sarbanes, Maryland           Tom Cole, Oklahoma
    George Miller, California            Rob Bishop, Utah
    Edward J. Markey, Massachusetts      Bill Shuster, Pennsylvania
    Peter A. DeFazio, Oregon             Dean Heller, Nevada
    Maurice D. Hinchey, New York         Bill Sali, Idaho
    Patrick J. Kennedy, Rhode Island     Doug Lamborn, Colorado
    Ron Kind, Wisconsin                  Mary Fallin, Oklahoma
    Lois Capps, California               Vacancy
    Jay Inslee, Washington
    Mark Udall, Colorado
    Joe Baca, California
    Hilda L. Solis, California
    Stephanie Herseth Sandlin, South
        Dakota
    Heath Shuler, North Carolina

                         James H. Zoia, Chief of Staff
                       Jeffrey P. Petrich, Chief Counsel
                     Lloyd Jones, Republican Staff Director
                     Lisa Pittman, Republican Chief Counsel
                                     ------

                 SUBCOMMITTEE ON FISHERIES, WILDLIFE AND OCEANS

                    MADELEINE Z. BORDALLO, Guam, Chairwoman
         HENRY E. BROWN, JR., South Carolina, Ranking Republican Member

    Dale E. Kildee, Michigan             Jim Saxton, New Jersey
    Eni F.H. Faleomavaega, American      Wayne T. Gilchrest, Maryland
        Samoa                            Cathy McMorris Rodgers, Washington
    Neil Abercrombie, Hawaii             Bobby Jindal, Louisiana
    Solomon P. Ortiz, Texas              Tom Cole, Oklahoma
    Frank Pallone, Jr., New Jersey       Bill Sali, Idaho
    Patrick J. Kennedy, Rhode Island     Don Young, Alaska, ex officio
    Ron Kind, Wisconsin
    Lois Capps, California
    Nick J. Rahall, II, West Virginia,
        ex officio

                                     ------
                                    CONTENTS

                                  ----------
                                                                       Page

    Hearing held on Tuesday, October 16, 2007........................     1

    Statement of Members:
        Bordallo, Hon. Madeleine Z., a Delegate in Congress from Guam     1
        Brown, Hon. Henry E., Jr., a Representative in Congress from
          the State of South Carolina................................     2

    Statement of Witnesses:
        Barringer, Victor Clay, II, President and CEO, Coastal Lumber
          Company, on behalf of the Hardwood Federation..............    21
            Prepared statement of....................................    22
            Response to questions submitted for the record...........    26
        Blumenauer, Hon. Earl, a Representative in Congress from the
          State of Oregon............................................     3
            Prepared statement of....................................     5
        Forester, Craig S., Vice President and General Manager, Rex
          Lumber Company, on behalf of the International Wood
          Products Association and America's Imported Wood Suppliers,
          Distributors, and Users....................................    38
            Prepared statement of....................................    40
        Sobeck, Eileen, Deputy Assistant Attorney General,
          Environment and Natural Resources Division, U.S. Department
          of Justice.................................................     7
            Prepared statement of....................................     8
        von Bismarck, Alexander, Executive Director, Environmental
          Investigation Agency, Inc.,................................    27
            Prepared statement of....................................    28
        Wrobleski, Ann, Vice President, Global Government Relations,
          International Paper Company, on behalf of the American
          Forest & Paper Association.................................    14
            Prepared statement of....................................    16
            Response to questions submitted for the record...........    19

    Additional materials supplied:
        Alley, Patrick, Director, Global Witness, Statement submitted
          for the record.............................................    58
        America's Imported Wood Suppliers, Distributors, and Users,
          Letter submitted for the record............................    68
        Gardiner, Barry, MP, The Prime Minister's Special Envoy for
          Forestry, Statement submitted for the record...............    69
        Gilman, Brad, Robertson, Monagle & Eastaugh, on behalf of
          Trinity Yachts, Inc., Letter submitted for the record......    72
        Grogan, Dr. James, Yale University School of Forestry &
          Environmental Studies, New Haven, Connecticut, Statement
          submitted for the record...................................    73
        Hershowitz, Ari, Director, Biogems Project, Latin America,
          Natural Resources Defense Council, Statement submitted for
          the record.................................................    75
        Hogan, Jane, Secretary-Treasurer, Ontario Hardwood Co., Inc.,
          Letter submitted for the record............................    77
        Hutchins, Lawrence Q., President, Quail's Nest Industries,
          Letter submitted for the record............................    78
        Jenkins, Peter T., Director, International Conservation,
          Defenders of Wildlife, Statement submitted for the record..    79
        World Wildlife Fund and TRAFFIC, Statement submitted for the
          record.....................................................    80

                       LEGISLATIVE HEARING ON H.R. 1497:
                          LEGAL TIMBER PROTECTION ACT.

                                  ----------

                           Tuesday, October 16, 2007

                         U.S. House of Representatives

                 Subcommittee on Fisheries, Wildlife and Oceans

                         Committee on Natural Resources

                                Washington, D.C.

                                  ----------

        The Subcommittee met, pursuant to call, at 10:05 a.m. in
    Room 1324, Longworth House Office Building, Hon. Madeleine Z.
    Bordallo, [Chairwoman of the Subcommittee] presiding.
        Present: Representatives Bordallo, Brown and Sali.
        Also Present: Representative Blumenauer.

          STATEMENT OF THE HONORABLE MADELEINE Z. BORDALLO, A
                  REPRESENTATIVE IN CONGRESS FROM GUAM

        Ms. Bordallo. Good morning, everyone. The hearing will come
    to order. The Subcommittee is meeting today to hear testimony
    on H.R. 1497, the Legal Timber Protection Act, introduced by
    our colleague from Oregon, Mr. Blumenauer.
        Pursuant to Committee Rule 4[g], the Chairman and the
    Ranking Minority Member will make opening statements. If any
    other members have statements they will be included in the
    hearing record.
        H.R. 1497, the Legal Timber Protection Act, would amend the
    Lacey Act to make it unlawful to import any plant taken in
    violation of any foreign law or any product made from such a
    plant. Such restrictions already apply to fish and wildlife
    harvested in violation of foreign laws and have been used
    successfully by fish and wildlife law enforcement agents for
    decades to curb the importation of fish and wildlife harvested
    illegally abroad.
        No such enforcement tool exists today for plants and plant
    products such as timber, however, unless the species is listed
    under CITES. As a result, a wide range of logs harvested
    illegally can currently be imported to the United States, and
    this is a problem for several reasons.
        First, widespread and unsustainable illegal logging
    activities in developing nations throughout Africa, Southeast
    Asia and Latin America and are undermining governance in
    economic growth and development. The World Bank estimates that
    those countries lose more than $10 billion a year in revenues
    as a result of illegal logging.
        Local communities, social structures and conservation
    efforts are also undermined as the forests that indigenous
    peoples and many species of wildlife rely upon for survival are
    wiped out by illegal logging operations. Second, illegal
    logging in foreign countries also impacts the U.S. timber
    industry by creating unfair competition and lowering prices.
        Our witnesses from the Hardwood Federation and the American
    Forest and Paper Association will speak more about this. Yet,
    as the world's largest wood products consumer and one of the
    top importers of tropical hardwoods, the United States may
    inadvertently create more incentive for illegal logging to
    occur to satisfy our demand.
        As the Justice Department will testify, existing U.S. laws
    do not adequately address this particular problem. The
    Department and many others believe that amending the Lacey Act,
    as H.R. 1497 proposes to do, is a sensible way to provide the
    necessary additional legal authority to deter the importation
    of illegally harvested foreign timber, protect domestic forest
    businesses, reduce the incentive for illegal logging in foreign
    countries, and reduce the impacts that such logging is having
    on the people, the environment and the economy in those
    countries.
        While I recognize that there are some concerns with the
    legislation today, I do think it is incumbent upon all of us to
    work together to resolve our differences and move legislation
    that will be an important tool in protecting the communities
    that are so devastated by illegal logging as well as our own
    timber industry. So I look forward to hearing from our
    witnesses today, and to working with you in the future to
    achieve progress on this important issue.
        Now, as Chairwoman of the Subcommittee I recognize Mr.
    Brown, the Ranking Republican Member, for any statement he may
    have.

           STATEMENT OF THE HONORABLE HENRY E. BROWN, JR., A
      REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH CAROLINA

        Mr. Brown. Thank you, Madam Chairwoman. As owner of a small
    family tree farm in Cordesville, South Carolina, I have the
    highest respect for the men and women in this country who grow,
    harvest, mill, manufacture and sell timber products. Tree
    growers are some of our greatest conservationists.
    Nevertheless, there isn't one who can defend the illegal
    logging that may be taking place in some foreign countries.
        While the United States and the government of Indonesia
    signed a bilateral agreement last year to fight this
    indefensible practice the regrettably depressed reports
    continue to indicate the destruction of additional forest
    lands. These reports indicate that millions of wooded acres are
    being destroyed each year and that U.S. companies are annually
    losing almost a half of a billion dollars in export
    opportunities.
        This is a serious problem that will be extraordinarily
    difficult to solve for there are many experts who believe that
    we already have sufficient legal authority to stop and
    prosecute those who are involved in illegal logging. The
    authors of H.R. 1497 suggest an amendment to the Lacey Act as
    an alternative solution.
        At the same time, there are reports that wood and wood
    products are being sold in this country below cost. As a free
    market economy we cannot tolerate the dumping of any goods, and
    it may be time for the U.S. industry to file an antidumping
    petition with the International Trade Commission. However, the
    subject of today's hearing is H.R. 1497, the Legal Timber
    Protection Act.
        During the course of this hearing I look forward to
    learning why the Lacey Act was chosen, why the U.S. Fish and
    Wildlife Service and Department of Agriculture can effectively
    use this statute to stop this practice, if these governmental
    entities have the resources to undertake this effort and why
    existing Federal laws are inadequate.
        At the same time I want to ensure that U.S. importers who
    have not broken any laws are not required to hire a private
    investigative firm to carefully examine each chain of sales
    certificate and they do not risk civil and criminal penalties
    including prison for not intimately knowing the laws of every
    importing timber nation. We must include an innocent owner's
    legal defense.
        We are all committed to stopping the spread of illegal
    logging into the United States. The issue is what is the best
    way or approach to accomplish that goal without making
    criminals of innocent Americans? I also find it ironic that the
    strongest proponent of this bill are the very same
    organizations who have consistently opposed legal logging in
    this country.
        Thank you, Madam Chairman. I look forward to hearing
    testimony this morning.
        Ms. Bordallo. I thank the Ranking Member from South
    Carolina, Mr. Brown, for his statement.
        I would now like to recognize our very first witness,
    Congressman Earl Blumenauer from the State of Oregon, the
    sponsor of this important legislation. Thank you very much,
    Congressman, for being here today and for your leadership on
    this issue. You may go ahead.

    STATEMENT OF THE HONORABLE EARL BLUMENAUER, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF OREGON

        Mr. Blumenauer. Thank you, Madam Chair, Ranking Member
    Brown. I deeply appreciate the Subcommittee making time on your
    crowded schedule to deal with this issue, and I strongly agree
    with the sentiments that were expressed in both your opening
    statements. I think you understand the problem and the
    opportunity that face us here today.
        You know, I was not a member of a community that was
    actively involved in logging, but I became first involved with
    this issue when my son was writing a Master's degree thesis at
    the University of Michigan in business on illegal logging in
    Indonesia.
        I must say that I was shocked at the detail to which he was
    able to document the abuse of this practice and the far
    reaching impact that it had not just on the environment, which
    we understand for threatening endangered species, these people
    are often involved with reckless timber harvest practices, but
    it undermined the fabric of a struggling democratic society, it
    took away resources that otherwise would have been available to
    people in that country and it actually harmed people in the
    United States because the honest timber brokers had to deal
    with people who were cheating.
        The people who took the time to understand where the timber
    came from and paid a premium for having it handled properly
    were undercut. It also drove down the prices in this country
    because we had to compete with things in the marketplace for
    the cheaters.
        It led me on an odyssey here that ends up today with the
    legislation that is before you, and in fact the amendment that
    has been suggested because since this was first introduced we
    have been working with a wide variety of stakeholders to have
    legislation that meets the needs and meets the tests that both
    of you raise.
        I think we ought to put in mind that we are talking about
    not just environmental damage overseas and undercutting
    indigenous societies, but it also is a billion dollar hit on
    the American economy for the people who don't cheat in the
    forest product industry. There will be testimony in a grander
    scale that we talk about half of the world's forests that have
    already disappeared and that the illegal removal of high value
    threatened tree species destined for international trade is
    often the first step toward widespread clearance.
        We could have spent the entire hearing talking about how
    deforestation accounts for 20 percent of the annual greenhouse
    gas emissions, more than the entire transportation sector. The
    trade in illegally harvested timber undermines democratic
    governance, threatens, as I mentioned, the indigenous
    populations because the cheaters bribe, they use fraud, and in
    some cases, and you may have testimony about this today,
    extreme violence are part and parcel of the illegal traffic in
    timber.
        I hope that we will be able in the course of this hearing
    to assuage your concerns that there are any problems associated
    with the Lacey Act in its implementation. The reason that we
    have introduced this bipartisan legislation is because the
    simple extension of the Lacey Act where we have had a century
    of experience shows that we have taken the least burdensome
    mechanism to be able to equip the U.S. Government to be able to
    deal meaningfully.
        I think it is clear that there are mechanisms that can be
    used like in the seafood industry where people don't pay until
    it is cleared by Customs. You will find testimony here today,
    the vast majority of American industry wants to know where that
    lumber comes from. They are playing by the rules, and that
    simple extension of the Lacey Act is an opportunity for us to
    have it both ways.
        We can protect the environment, we can protect American
    jobs and we can have something that protects the actors in
    American industry, both foreign products, and lumber and
    furniture manufacturing, that are playing by the rules. That is
    why you have the unusual array of people that are supporting
    it.
        You would expect that there might be some of our
    environmental friends from the Sierra Club or the Defenders of
    Wildlife. I am proud of the fact that we have worked with
    people in the industry, the Sustainable Furniture Council, the
    Society of Foresters, the Hardwood Federation, individual
    companies that care deeply about this.
        You also see that there are unions, Teamster, Carpenters,
    Steel Workers, who understand that cheaters overseas undercut
    American jobs here at home. As I mentioned, Madam Chair and Mr.
    Ranking Member, the work that we have done since the bill was
    first introduced has produced some changes.
        We have been open to the give and take with the
    environmental community, with the industry, and we have a
    product that is available, the amended product, that I think
    will satisfy the needs that you both have raised. I would like
    to conclude by thanking particularly the American Forest and
    Paper Association, the Hardwood Federation and the
    Environmental Investigation Agency for helping us lead this
    process.
        I deeply appreciate your courtesy and your interest. I look
    forward to working with the Subcommittee on putting forth a
    piece of legislation that can have the broad bipartisan support
    that it merits and that we can protect the environment,
    American jobs and we can reinforce people who are playing by
    the rules. Thank you very much.
        Ms. Bordallo. I thank my colleague, Mr. Blumenauer, the
    sponsor of this legislation, and I hope that you will be able
    to stay and join us here on the dais for the remainder of the
    hearing. We invite you to come forward.
        I would like to recognize our panel of expert witnesses,
    this is Panel No. 2, to please come forward and take a seat at
    the witness table. And, also, for those standing in the back,
    if you would like, I am inviting you to come up and sit around
    the second layer here, the dais, right around here, if you
    would. Don't be shy. Please come forward. You don't want to
    stand through this entire hearing. Please come forward.
        [Pause.]
        Ms. Bordallo. I wish to thank the witnesses who are with us
    on Panel No. 2 and to introduce them at this time.
        Ms. Eileen Sobeck, Deputy Assistant Attorney General of the
    Environment and Natural Resources Division at the Department of
    Justice; Ms. Ann Wrobleski, Vice President of International
    Paper, and testifying on behalf of the American Forest and
    Paper Association; Mr. Victor Barringer, President and CEO of
    Coastal Lumber Company, testifying on behalf of the Hardwood
    Federation; Mr. Alexander von Bismarck, Executive Director of
    the Environmental Investigation Agency; and finally, Mr. Craig
    Forester, Vice President and General Manager of Rex Lumber
    Company, and testifying on behalf of the International Wood
    Products Association.
        I thank you all for being here today, and as Chairwoman I
    now recognize Ms. Sobeck to testify for five minutes. I would
    note for all witnesses that the timing lights on the table will
    indicate when your time has concluded, and we would appreciate
    your cooperation in complying with the limits that have been
    set as we have many witnesses to hear from today.
        Be assured that your full written statement will be
    submitted for the hearing record. Now, I recognize Ms. Sobeck.
        [The prepared statement of Mr. Blumenauer follows:]

        Statement of The Honorable Earl Blumenauer, a Representative in
                       Congress from the State of Oregon

        Chairwoman Bordallo and Ranking Member Brown,
        Thank you for holding this hearing on the Legal Timber Protection
    Act and for the opportunity to testify.
        As the experts you have scheduled will testify in greater depth,
    illegal logging threatens some of the world's richest and most
    vulnerable forests and cost the U.S. forest products industry over $1
    billion every year in lost opportunities and lower prices.
        Half of the world's forests have already disappeared, and the
    illegal removal of high value threatened tree species destined for the
    international trade is often the first step leading to forest
    clearance. The tracks and roads built to access and remove timber
    become entryways for further illegal cutting, hunting and burning.
        As illegal logging contributes to deforestation, the local and
    regional climatic systems are dramatically altered and the water
    balance and dynamics of this fragile ecosystem disrupted. The resulting
    soil erosion induces floods and landslides. In fact, deforestation
    accounts for 20% of annual global greenhouse gas emissions--more than
    the entire global transportation sector.
        Trade in illegally harvested timber undermines democratic
    governance and threatens indigenous populations as bribery, fraud and,
    in some cases, extreme violence are all part and parcel of illegal
    timber trafficking. Moreover, it causes losses to up to $15 billion for
    low-income countries. By avoiding export duties, timber royalties and
    taxes on their profits, companies operating unlawfully are robbing
    national governments of millions of dollars every year.
        In our domestic industry, since as much as 30% of hardwood lumber
    and plywood traded globally could be of suspicious origin, responsible
    U.S. companies lose an estimated $460 million in export opportunities
    every year because of displacement caused by illegally harvested
    timber. On top of that, the annual value of U.S. exports is between
    $500-$700 million lower due to downward pressure on prices from
    illegally harvested timber. For my home states of Oregon, that means
    losses of up to $150 million each year.
        The United States has a number of tools at our disposal to address
    the problems of illegal logging from capacity building in source
    countries to verification through trade agreements, the use of which
    are not mutually exclusive. However, we have not done enough when it
    comes to the demand side of the equation.
        Quite simply, illegal logging is timber theft and yet, unlike other
    kinds of theft, our government lacks the authority to prevent these
    illegal products from entering the United States.
        For this reason I, along with Congressmen Weller and Wexler, have
    introduced H.R.1497, the bi-partisan Legal Timber Protection Act, which
    is designed to prohibit trade in illegally harvested timber in the
    United States. The mechanism by which is does so by extending the
    protections of the Lacey Act to timber and other plants.
        The Lacey Act, which dates back to 1900, prohibits trade in
    wildlife, fish, and plants that have been illegally taken, possessed,
    transported or sold. In this way, Lacey strengthens and supports other
    federal, state, and foreign laws protecting wildlife by making it a
    separate offense to take, possess, transport, or sell wildlife that has
    been taken in violation of those laws.
        What our legislation means is that, if wood has been stolen from a
    forest reserve in Brazil or taken without paying the appropriate
    royalties in Indonesia, the U.S. government will now have the authority
    to prevent its importation into the United States and punish those
    responsible.
        This bill is designed to go after the worst of the worst. It asks
    companies to take very basic responsibility that shouldn't be a problem
    to any legitimate importers: know your sources and be able to document
    what species from what countries are you importing. Civil and criminal
    liability is limited only to those who don't take due diligence or
    those who knowingly import illegal wood. This is a free-market
    solution, helping companies move to more responsible suppliers, instead
    of requiring burdensome inspections or certifications.
        When I first introduced the ``Legal Timber Protection Act,''
    earlier this year, I made clear that I was interested in working with
    all stakeholders to ensure that the bill which eventually emerged from
    the House of Representatives would be as effective as possible and not
    unintentionally harm legitimate businesses.
        Since then, I am pleased that the work of a broad coalition of
    environmental and industry groups has produced a series of
    clarifications and changes that strengthened the original legislation.
    I have circulated this new text to other members of the House and it
    has been introduced in the Senate as S.1930. I am also including it at
    the end of my written statement. The changes include clarifications to
    the types of underlying laws that would trigger a Lacey violation and
    to the documentation requirements.
        I hope that the Legal Timber Protection Act will be soon be marked
    up by this committee or otherwise pass the House. While I remain open
    to the continued input of involved parties, when the bill moves to
    mark-up (or should otherwise come to a vote) I will support the
    adoption of a substitute amendment containing the text agreed to by the
    environmental and industry groups.
        I believe that our solution gets at the heart of the illegal
    logging issue without getting legal timber trade caught up in the net
    or putting over-burdensome regulations on those involved in perfectly
    legitimate international trade. One of the drivers of the illegal
    timber trade is the cost-differential between legal and illegal timber,
    so we've tried our hardest to make sure that we don't impose compliance
    costs with a perverse impact.
        I am particularly pleased by the broad coalition of industry,
    environmental and labor groups who both support this effort and have
    put countless hours into a this process, in order to ensure that our
    legislation would be as effective as possible. It is indeed a coalition
    of strange bedfellows, but by including domestic lumber producers,
    importers, organized labor, and the environmental community, we feel
    confident that we have a solution that meets the needs of all those who
    are involved in legitimate and legal trade. I would like to
    specifically thank the American Forest & Paper Association, the
    Hardwood Federation, and the Environmental Investigation Agency for
    leading this process.
        I look forward to exploring the issues in this bill with you in
    greater detail during the course of this hearing and for your support
    to move this important bill forward.
                                     ______

    STATEMENT OF EILEEN SOBECK, DEPUTY ASSISTANT ATTORNEY GENERAL,
    ENVIRONMENT AND NATURAL RESOURCES DIVISION, U.S. DEPARTMENT OF
                                JUSTICE

        Ms. Sobeck. Thank you, Chairwoman Bordallo, Representative
    Brown, members of the Subcommittee. Thank you for inviting the
    Department of Justice to testify about H.R. 1497, the Legal
    Timber Protection Act, which would amend the Lacey Act to
    extend its protection to plants including timber illegally
    harvested outside of the United States.
        The administration supports the general approach of this
    legislation and would be pleased to have this added authority
    to address the problem of importation of illegal timber and
    timber products so as to further implement the President's
    initiative on illegal logging.
        I am a Deputy Assistant Attorney General of the Environment
    and Natural Resources Division of the U.S. Department of
    Justice. The Environment Division is responsible for
    representing the United States in litigation involving
    environmental and natural resources statutes including
    enforcement cases against individuals or entities that violate
    those statutes.
        Among the statutes that the division is responsible for
    enforcing is the Lacey Act. We work closely with several other
    Federal agencies in enforcing the Lacey Act including the
    Department of the Interior's Fish and Wildlife Service, the
    Department of Commerce, Department of Agriculture and
    Department of Homeland Security.
        First enacted in 1900, the Lacey Act is the United States'
    first major national wildlife protection statute. The current
    version of the Lacey Act, which includes significant amendments
    made in 1981 and 1988, is an anti-trafficking statute and
    provides broad protection with respect to fish and wildlife.
        A unique feature of the Lacey Act is that it allows us to
    prosecute persons who import wildlife into the United States
    that has been taken, possessed, transported or sold in
    violation of a foreign law or regulation. The Lacey Act's
    assimilation of foreign laws is not an effort to police other
    countries.
        Rather, our assimilation of such laws is designed to reduce
    demand in the United States for species poached in foreign
    countries and to encourage international cooperation and mutual
    reciprocal enforcement efforts. While the Environment Division
    has brought many successful cases to prosecute violations of
    the Lacey Act's provisions protecting fish and wildlife, in its
    current form the Act provides only very limited coverage and
    limited enforcement tools with respect to timber or other
    plants.
        As you have already heard, illegal trafficking in timber
    and timber products has been demonstrated to be a major problem
    for both domestic and international interests. Illegal logging
    destroys forest ecosystems, deprives national governments and
    local communities of needed revenues, undercuts prices of
    legally harvested forest products on the world market, finances
    regional conflict and acts as a disincentive to sustainable
    forest management.
        The administration through the President's initiative
    against illegal logging has made it a priority for the United
    States to curb trafficking and illegally logged timber. Under
    President Bush's direction to reduce illegal logging abroad the
    administration has been evaluating existing domestic laws to
    determine their adequacy as tools to stem this importation of
    illegally harvested foreign timber and timber products made
    from illegal timber.
        Based on our review, we believe that existing U.S. laws do
    not adequately address the problem. As you have noted, we
    believe that amending the Lacey Act is a sensible way to
    provide the necessary additional legal authority that would
    serve to deter the importation of illegally harvested foreign
    timber, protect domestic forest businesses and advance the
    President's initiative against illegal logging.
        While we support the general approach of amending the Lacey
    Act, the administration has identified a few concerns with the
    bill. For example, under the proposed legislation the
    definition of plant is very broad. It could indeed encompass
    items such as wooden shipping containers and packing materials
    made from paper and cardboard, and I think the focus of our
    concerns is on timber and timber products.
        But we look forward to continuing to work with the
    committee and with all the others who are testifying here today
    in what has already been a cooperative and collegial effort to
    come up with a solution that will address a problem that we all
    acknowledge needs to be addressed. I welcome the opportunity to
    be here today.
        Ms. Bordallo. Thank you very much, Ms. Sobeck. Now, I
    recognize Ms. Wrobleski to testify for five minutes.
        [The prepared statement of Ms. Sobeck follows:]

        Statement of Eileen Sobeck, Deputy Assistant Attorney General,
     Environment and Natural Resources Division, U.S. Department of Justice

    INTRODUCTION
        Chairwoman Bordallo, Representative Brown, and Members of the
    Subcommittee, thank you for inviting the Department of Justice to
    testify about H.R. 1497, the ``Legal Timber Protection Act,'' a Bill to
    amend the Lacey Act to extend its protections to plants, including
    timber illegally harvested outside of the United States.
        I am a Deputy Assistant Attorney General of the Environment and
    Natural Resources Division (Environment Division), U.S. Department of
    Justice. The Environment Division is responsible for representing the
    United States in litigation involving environmental and natural
    resource statutes, including enforcement cases against individuals or
    entities that violate those statutes. The Environment Division has a
    docket of about 7,000 pending cases or matters, with cases in nearly
    every judicial district in the nation. We litigate cases arising under
    more than 70 different environmental and natural resources statutes.
        Among the environmental statutes that the Environment Division is
    responsible for enforcing is the Lacey Act, discussed in more detail
    below. While the focus of this testimony is the Environment Division's
    role in criminal prosecution of Lacey Act violations, I should add that
    a number of other federal agencies are involved in the implementation
    of the Lacey Act, including the Department of the Interior's U.S. Fish
    and Wildlife Service, the Department of Commerce, the Department of
    Agriculture, and the Department of Homeland Security.
        While the Environment Division has brought a number of cases to
    prosecute violations of the Lacey Act's provisions protecting fish and
    wildlife, in its current form the Act provides limited coverage and
    limited enforcement tools with respect to timber or other plants.
        As I explain in greater detail herein, illegal trafficking in
    timber and timber products has been demonstrated to be a major problem
    for both domestic and international interests. The Administration has
    made it a priority for the United States to do its part to try to curb
    trafficking in illegally logged timber. Under President Bush's
    direction to reduce illegal logging, the Administration has been
    evaluating existing domestic laws to determine their adequacy as tools
    to stem the import of illegally harvested foreign timber and timber
    products. Penalties on illegal imports applied by the U.S. would
    provide additional deterrence and additional protection to forest
    ecosystems overseas and U.S. forest businesses. Based on our review, we
    believe that existing U.S. laws do not adequately address this problem.
    We believe that amending the Lacey Act is a sensible way to provide the
    necessary additional legal authority that deters importation of
    illegally harvested foreign timber, protects domestic forest
    businesses, and advances the President's Initiative Against Illegal
    Logging.
        We appreciate and applaud the cooperative and collegial efforts of
    many of those testifying today and others in the timber industry and
    conservation community regarding this legislative issue. While we
    support the general approach of amending the Lacey Act, the
    Administration has identified a number of specific concerns with the
    language in H.R. 1497. We believe that those concerns, discussed
    further below, warrant further discussion.

    PRESIDENT'S INITIATIVE AGAINST ILLEGAL LOGGING
        Our support for greater protections and enforcement tools with
    respect to plants, including timber, is fully consistent with the
    Administration's efforts to combat illegal logging internationally. In
    February 2002, President George W. Bush directed the Secretary of State
    to develop an initiative against illegal logging. The following year
    then Secretary of State Colin Powell launched the President's
    Initiative Against Illegal Logging (the President's Initiative, or
    PIAIL) as a framework for action to assist developing countries to
    combat illegal logging, the sale and export of illegally harvested
    timber, and corruption in the international forest sector. By illegal
    logging, we are referring to timber that is harvested, transported,
    processed, or sold in contravention of a country's laws. Illegal
    logging destroys forest ecosystems, deprives national governments and
    local communities of needed revenues, undercuts prices of legally
    harvested forest products on the world market, finances regional
    conflict, and acts as a disincentive to sustainable forest management.
    International trade in illegally harvested timber creates economic
    incentives for those who violate the law, and thereby increases the
    magnitude of the problem.
        The World Bank [see ``Strengthening Forest Law Enforcement and
    Governance, Report No. 36638-GLB, August 2006] estimated in 2006 that
    timber harvested illegally worldwide on public lands alone results in
    lost assets and revenue in excess of $10 billion annually in developing
    countries. That money represents funds that could otherwise be used by
    governments in developing countries, where much of the illegal
    harvesting occurs, to meet the basic needs of their people, better
    manage their forests and other natural resources, and reduce their
    international debt. In addition to the ecological damages associated
    with illegal logging, trade in illegal timber also hurts U.S. wood
    products companies.
        The President's Initiative emphasizes identifying and reducing
    threats to protected areas and other high conservation value forests
    from illegal logging through four key strategies:
          Good Governance--Building country capacity to establish
    and strengthen legal regimes and enforcement of laws affecting forest
    management, especially those aimed at illegal logging;
          Community-Based Actions--Enhancing community involvement
    in forest governance and related wildlife issues;
          Technology Transfer--Developing integrated monitoring
    systems and building in-country capacity to monitor forest conditions
    and activities and compliance with laws, including using remote sensing
    and ground-based technologies to monitor changes in forest conditions;
    and
          Harnessing Market Forces--Promoting good business
    practices, transparent markets, and legal trade, including in-country
    capacity to implement obligations under the Convention on International
    Trade in Endangered Species of Wild Fauna and Flora (CITES).
    Several federal departments and agencies, including the Department of
    Justice, as well as U.S.-based international organizations and
    intergovernmental agencies, have been involved in international
    activities to implement the President's Initiative Against Illegal
    Logging. The President's Initiative has included actions in Africa,
    Asia, and Latin America, as well as global activities beyond particular
    countries' borders. While I will not discuss all of these activities,
    let me describe some of the activities in which the Department of
    Justice has recently been involved.
        In November 2006, the United States Trade Representative, Susan C.
    Schwab, signed a Memorandum of Understanding with the Minister of Trade
    for the Government of the Republic of Indonesia on Combating Illegal
    Logging and Associated Trade. The Agreement is designed to promote
    forest conservation by combating trade in illegal timber, and to help
    ensure that Indonesia's legally produced timber and wood products
    continue to have access to markets in the United States and elsewhere.
    Attorneys from the Environment Division have actively participated in
    the bilateral working group established under the Agreement to
    facilitate joint efforts by the United States and Indonesia to combat
    illegal logging and associated trade. In addition, the Environment
    Division will apply a portion of the $1 million that the United States
    has committed to fund projects under the Agreement to assist in
    training judges and prosecutors in Indonesia on methods of prosecuting
    crimes involving illegal timber and timber products. The workshops will
    focus on investigation of illegally harvested timber and related
    ``forest'' crimes in Indonesia, general crimes like money laundering
    applicable to illegal logging, gathering evidence, and successful
    prosecution of such cases. The Environment Division already provides
    training to judges and prosecutors in countries that are participants
    in the Association of Southeast Asian Nations - Wildlife Enforcement
    Network (ASEAN-WEN) on methods of prosecuting crimes involving trade in
    illegally taken wildlife and wildlife parts. This training is conducted
    in conjunction with the ASEAN-WEN Support Group, the U.S. Fish and
    Wildlife Service and several non-governmental organizations.

    THE LACEY ACT--BROAD APPLICABILITY TO FISH AND WILDLIFE
        As I stated previously, the Lacey Act is a key statutory tool
    relied on by federal prosecutors in cases involving illegal trafficking
    in fish and wildlife. First enacted in 1900, the Lacey Act is the
    United States' first major national wildlife protection statute. The
    current version of the Lacey Act, which includes significant amendments
    made in 1981 and 1988, is an anti-trafficking statute that provides
    broad protections with respect to fish and wildlife. The Lacey Act
    applies to all ``wild'' (i.e., non-domesticated) animals from mammals
    to invertebrates, whether alive or dead. It also applies to any animal
    part, product, egg, or offspring, even if bred in captivity. 16 U.S.C.
    Sec. 3371(a). The Act's prohibitions have two ``prongs'': provisions
    relating to wildlife trafficking, both domestic and transnational; and
    provisions relating to false labeling, which proscribe making or
    submitting any false record, account, label for, or false
    identification of wildlife.
        The first ``prong'' of the Lacey Act makes it unlawful (1) to
    import, export, transport, sell, receive, acquire, or purchase any fish
    or wildlife already taken (i.e., captured, killed or collected),
    possessed, transported, or sold, (2) in violation of state, federal,
    American Indian tribal, or foreign laws or regulations that are fish or
    wildlife-related (the so-called ``underlying law'' or ``predicate
    offense''). 1 Together, these are referred to as the ``two
    steps'' necessary for an offense under the Lacey Act. A two-tiered
    penalty scheme exists, creating both misdemeanor and felony offenses,
    distinguished by the defendant's knowledge of the underlying law
    violations. 16 U.S.C. Sec. 3373(d)(1) and (2). For a Lacey Act
    violation to be a felony, the defendant must ``know'' about, or be
    generally aware of, the illegal nature of the wildlife, but not
    necessarily the specific law violated. 2 A misdemeanor
    requires that the defendant ``in the exercise of due care'' should have
    known the facts constituting the underlying law violation. Felony
    violations, in addition to a ``knowing'' scienter or mens rea
    requirement, require either proof that the defendant ``knowingly''
    imported or exported wildlife, or ``knowingly'' engaged in conduct
    during the offense that involved the sale or purchase of, the offer for
    sale or purchase of, or the intent to sell or purchase wildlife with a
    market value over $350.
    ---------------------------------------------------------------------------
        \1\ 16 U.S.C. Sec. 3372 (a)
        \2\ United States v. Santillan, 243 F.3d 1125 (9th Cir. 2001);
    United States v. Todd, 735 F.2d 146 (5th Cir. 1984).
    ---------------------------------------------------------------------------
        The second ``prong'' of the Lacey Act prohibits the making or
    submitting of any false record, account, label for, or identification
    of any wildlife transported or intended to be transported in interstate
    or foreign commerce, or imported, exported, transported, sold,
    purchased, or received from any foreign country. A violation of these
    provisions may be prosecuted as either a misdemeanor or felony,
    depending upon the nature of the offense, paralleling trafficking
    offenses.
        One unique feature of the Lacey Act is that it allows the
    incorporation of foreign law as an underlying law or predicate offense
    that ``triggers'' a Lacey Act violation. Not all foreign laws, however,
    can serve as a trigger to a Lacey Act offense--only foreign laws
    related to fish or wildlife. 3 A person who imports wildlife
    into the United States that has been taken, possessed, transported, or
    sold in violation of a foreign law or regulation can be prosecuted in
    the United States for a Lacey Act offense. The law or regulation must
    be of general applicability, but may be a local, provincial, or
    national law. The defendant need not be the one who violated the
    foreign law; the wildlife itself becomes ``tainted'' even if someone
    else commits the foreign law violation. However, the defendant must
    know or, in the exercise of due care, should know, about its illegal
    nature.
    ---------------------------------------------------------------------------
        \3\ 16 U.S.C. Sec. 3371(d).
    ---------------------------------------------------------------------------
        This assimilation of foreign law under the Lacey Act is illustrated
    by a case involving the prosecution of Taiwanese nationals for
    attempting to import 500 metric tons of salmon that was taken in
    violation of a Taiwanese law that they themselves had not violated, but
    which they nonetheless knew had been violated when the fish were
    harvested. 4 In another example, over 144,000 pounds of blue
    king crab was seized and forfeited when it was imported after being
    harvested and transported in violation of Russian law. 5
    ---------------------------------------------------------------------------
        \4\ United States v. Lee, 937 F.2d 1388 (9th Cir. 1991).
        \5\ United States v.144,774 pounds of Blue King Crab, 410 F.3d 1131
    (9th Cir. 2005).
    ---------------------------------------------------------------------------
        The Lacey's Act's assimilation of foreign laws is not an effort to
    police other countries. Rather, our assimilation of such laws
    potentially reduces demand in the U.S. for species poached in foreign
    countries. Assimilation of foreign laws also encourages international
    cooperation and mutual reciprocal enforcement efforts. The Senate
    Report issued in connection with the 1969 Amendments to the Lacey Act
    described what assimilation of foreign law accomplishes:
            On the international level...[b]y prohibiting the sale in the
            United States of wildlife protected by a foreign government,
            the demand [in the U.S.] for poached wildlife from that country
            will be sharply reduced. In addition, however, such a law is
            also designed to promote reciprocity. If we assist a foreign
            country in enforcing its conservation laws by closing our
            market to wildlife taken illegally in that country, they may in
            turn help to enforce conservation laws of the United States by
            prohibiting the sale within their borders of wildlife taken
            illegally within the United States. 6
    ---------------------------------------------------------------------------
        \6\ S. Rep. No. 91-526, 91st Cong., 1st Sess. 12 (1969), reprinted
    in 1969 U.S.C.C.A.N. 1425.
    ---------------------------------------------------------------------------
        The Lacey Act occupies a central place within the framework of
    federal wildlife laws and is a key enforcement tool for several
    additional reasons. First, the Lacey Act applies to a wider array of
    wildlife than any other single protection law, including the Endangered
    Species Act. Second, it has the stiffest potential penalties. Third,
    its prohibitions have a greater reach, including offenses that start
    out in foreign countries as violations of the laws of another country.

    THE LACEY ACT IS CURRENTLY OF NARROW APPLICABILITY TO PLANTS, INCLUDING
            TIMBER
        Although the Lacey Act provides broad authority and strong
    enforcement tools to combat transnational wildlife trafficking, it does
    not currently apply to international traffickers of plants, including
    timber or associated wood products derived from illegal logging. The
    prohibitions of the Lacey Act that assimilate foreign law were not
    written to include foreign laws relating to plants, only fish and
    wildlife-related laws. 7 Plants were added to the Lacey Act
    enforcement scheme in 1981 to improve the effectiveness of existing
    State laws by providing a federal enforcement tool to crack down on
    those who blatantly violate State laws designed to conserve plants
    threatened with extinction. The 1981 amendments also apply to U.S.
    native plants that are listed under CITES. However, the provisions with
    respect to plants are more limited than those for wildlife. While the
    Lacey Act prohibits the taking, possession, transport, or sale of any
    fish or wildlife in violation of any State or foreign law, it omits the
    assimilation of foreign law for such acts with respect to plants. The
    Act prohibits only the taking, possession, transport, or sale of plants
    in violation of State law.
    ---------------------------------------------------------------------------
        \7\ 16 U.S.C. Sec. 3372(a)(2)(B). However, no similar impediment
    prevents using the false labeling provisions of 16 U.S.C. Sec. 3372(d)
    for violations involving plants.
    ---------------------------------------------------------------------------
        Just as the Lacey Act's plant enforcement reach was deliberately
    limited, the statute's definition of plant was likewise narrowly
    circumscribed. The Lacey Act defines ``plant'' and ``plants'' as ``any
    wild member of the plant kingdom, including roots, seeds, and other
    parts thereof (but excluding common food crops and cultivars) which is
    indigenous to any State and which is either (A) listed on an appendix
    to the Convention on International Trade in Endangered Species of Wild
    Fauna and Flora (CITES), 8 or (B) listed pursuant to any
    State law that provides for the conservation of species threatened with
    extinction.'' 9 (emphasis added). The Lacey Act only reaches
    plants native to the United States which are listed in one of the three
    appendices to CITES or protected by a State law that conserves species
    threatened with extinction. Listing of a plant under CITES does not
    bring a plant under the coverage of the Lacey Act if it is not native
    to the United States. Native plants listed under CITES can also be
    excluded from coverage if they are deemed to be food crops or cultivars
    under the definition of ``plant.'' 0
    ---------------------------------------------------------------------------
        \8\ CITES is an international agreement which entered into force in
    July 1975 and to which the United States and 171 other countries are
    parties. The aim of CITES is to ensure that international trade in
    specimens of wild animals and plants does not threaten their survival.
    CITES currently accords varying degrees of protection to approximately
    30,000 species of animals and plants.
        \9\ 16 U.S.C. Sec. 3371(f)
        \0\ 0One court ruled that American ginseng, listed in Appendix II
    of CITES, was a common food crop or cultivar and not protected by the
    Lacey Act. United States v. McCullough, 891 F. Supp. 422 (N.D. Ohio
    1995).
    ---------------------------------------------------------------------------
    INTERDICTION EFFORTS AGAINST TRAFFICKING IN ILLEGALLY LOGGED TIMBER ARE
            FRUSTRATED BY THE ABSENCE OF BROAD-BASED CRIMINAL SANCTIONS
        Absent protection afforded to various tropical timber species under
    CITES, it appears that no violation of U.S. law occurs upon the
    importation of stolen or illegally harvested logs. In other words, even
    if both the importer and federal enforcement officials know that the
    logs were taken illegally, so long as the documents submitted to the
    United States upon importation are complete, truthful and not false, no
    actionable criminal violation has occurred.
        The Department has reviewed the federal criminal code to determine
    what laws might apply to such conduct. The Department reviewed a number
    of criminal provisions in Title 18 of the United States Code and
    concluded, based on this review, that none of those provisions could be
    applied to interdict and prosecute our hypothetical timber trafficker.
    11 The only possible exception to this conclusion is under
    the unlikely circumstance that a foreign country treats unlawfully
    harvested timber as stolen goods or property and has the evidence to
    prove it, allowing prosecutors here to prosecute the subsequent
    transportation of the stolen timber in foreign commerce to the U.S.
    ---------------------------------------------------------------------------
        \11\ The laws reviewed included those related to transportation of
    stolen goods in foreign commerce (18 U.S.C. 2314); false statement
    crimes (18 U.S.C. 542, 1001); smuggling of goods (18 U.S.C. 545); and
    money laundering (18 U.S.C. 1956 and 1957).
    ---------------------------------------------------------------------------
        One provision of Title 18 of the U.S. Code that is particularly
    useful in prosecuting wildlife traffickers, the smuggling statute at 18
    U.S.C. Sec. 545, has limited utility in prosecuting timber traffickers.
    There are two types of smuggling offenses set forth in the statute that
    are commonly used in cases involving wildlife. But those two types of
    smuggling offenses have limited applicability to plants because the
    offenses require a knowing importation ``contrary to law.'' That term
    has in general been determined by the courts to mean contrary to United
    States law. Therefore, while a case involving wildlife trafficking can
    be prosecuted as a smuggling offense if the importation is contrary to
    either CITES or in rare instances the broad provisions of the Lacey Act
    itself applicable to wildlife, the narrow provisions of the Lacey Act
    applicable to plants and the relatively few timber species listed under
    CITES as described below limit its broader use against illegal logging
    and other illegal plant trade. In the Department's review of criminal
    statutes that we could possibly use to prosecute the importer of
    illegal timber, we also looked at offenses potentially chargeable under
    other titles of the U.S. Code, including conservation statutes, plant
    pest statutes, and cultural property provisions. We concluded that only
    if the importer acts in a manner violating CITES, which would enable us
    to include the violation as a component of a smuggling charge, would we
    have a legal mechanism by which to bring criminal charges.
        CITES seeks to regulate the international wildlife and plant trade
    12 by listing species in one of three ``Appendices,'' based
    on the degree to which a species is at threat of extinction and in
    international trade. CITES regulates trade between countries, imposing
    the greatest restrictions on species found in Appendix I, and the least
    on those in Appendix III.
    ---------------------------------------------------------------------------
        \12\ By international wildlife and plant trade we refer to the
    import, export and re-export of live and dead animals, fish and plants,
    and their parts and derivatives).
    ---------------------------------------------------------------------------
        CITES protections are implemented through a system of permits and
    certificates issued by both member and non-member countries that must
    accompany lawful shipments of listed plants or wildlife. The type of
    permit or certificate required, and the restrictions placed on the
    CITES shipment, depend on the particular appendix in which a species is
    listed: Appendix I, II, or III. CITES, Arts. III, IV, V. Appendix I is
    the most restrictive listing category and bans wildlife trade in listed
    species between countries for commercial purposes. Appendix II permits
    commercial trade under permit for species not yet considered in danger
    of extinction, as long as the trade is not detrimental to the survival
    of the species and the species were obtained in accordance with
    national law. Appendix III includes species identified by a Party as
    being subject to regulation within its jurisdiction and needing
    cooperation of other Parties in the control of the trade. CITES Art. V.
        While CITES may provide a basis for pursuing a smuggling
    prosecution with respect to timber, it provides only a very limited
    basis for prosecuting cases involving the illegal-timber trade due to
    the fact that only a few of the many species subject to illegal logging
    and trafficking are listed under CITES. 13 Furthermore, the
    threshold that must be met for listing species under CITES is high and
    decisions to list species are frequently contentious. 14
    Moreover, many timber species in international trade simply do not meet
    the criteria for listing under CITES. Consequently, even the listing of
    a species in a CITES appendix is no guarantee of effective
    international trade regulation by the member countries. In the United
    States, the Endangered Species Act is the statute by which we implement
    our CITES obligations. 15 To date there is not one reported
    successful criminal prosecution in the U.S. involving CITES-listed
    timber. The only reported civil case arising from U.S. efforts to apply
    the CITES restrictions to illegal logging is Castlewood Products,
    L.L.C. v. Norton, 365 F.3d 1076 (D.D.C. 2004), a case in which the
    court upheld the detention by U.S. officials of a number of bigleaf
    mahogany shipments from Brazil where U.S. officials doubted the
    validity of the accompanying Brazilian CITES export permits. Given that
    CITES currently regulates only a small number of timber species, it is
    not sufficient to cover the broader problem of illegal logging and
    timber trafficking.
    ---------------------------------------------------------------------------
        \13\ Brazilian rosewood, brazilwood, bigleaf mahogany and ramin are
    some of the timber species listed under CITES. A number of other tree
    species are listed. Not all of the tree species listed are traded as
    timber; some are traded as medicinal or horticultural specimens. See
    plant listings under CITES appendices at www.cites.org.
        \14\ For example, an Appendix-II listing requires the CITES Parties
    to agree that the species, although not necessarily currently
    threatened with extinction, may become so unless international trade is
    subject to strict regulation in order to avoid utilization incompatible
    with the species' survival. CITES, Art. II.
        \15\ The Act designates the Secretary of the Interior and the
    United States Fish and Wildlife Service to carry out its functions and
    further the Secretary of Agriculture with respect to enforcement of the
    CITES provisions pertaining to the importation or exportation of
    terrestrial plants, and prescribes criminal penalties with up to one
    (1) year imprisonment and $100,000 fine for an individual, and $200,000
    for an organization, for anyone convicted of ``knowingly'' importing or
    exporting CITES-listed specimens contrary to CITES, or possessing
    CITES-listed specimens traded in violation of the treaty. 16 U.S.C.
    Sec. Sec. 1532(15); 1537a; 1538(c)(1), 1540(b)(1). See United States v.
    Winnie, 97 F.3d 975 (7th Cir. 1996) (possession of cheetah imported in
    violation of CITES illegal, even if imported outside of the statute of
    limitations). While the penalties for CITES offenses themselves are
    low, as noted earlier a CITES violation can support a felony smuggling
    charge.
    ---------------------------------------------------------------------------
    THE DEPARTMENT OF JUSTICE SUPPORTS LEGISLATION TO STOP ILLEGAL LOGGING
            AND TIMBER TRAFFICKING
        In 1981, when Congress overhauled the Lacey Act, it was prompted to
    do so by evidence that had been ``uncovered of massive illegal [and
    highly profitable] trade in fish and wildlife...handled by well
    organized large volume operations run by professional criminals [who]
    utilize ``white collar'' crime tactics such as multiple invoicing and
    other fraudulent documentation to carry out and conceal their illicit
    activities.'' 16 Congress further warned that ``the illegal
    wildlife trade has grim environmental consequences. It threatens the
    survival of many species...we value because of their commercial
    values...and the economic consequences of this trade are...severe.''
    17
    ---------------------------------------------------------------------------
        \16\ S. Rep. No. 97-123, 97st Cong., 1st Sess. 1 (1981), reprinted
    in 1981 U.S.C.C.A.N. 1748.
        \17\ Id.
    ---------------------------------------------------------------------------
        Almost identical language could be used today to describe the
    global problem of illegal logging and timber trafficking and the need
    for stronger enforcement tools to address it. Worldwide, illegal
    logging is estimated to be a multi-billion dollar industry activity.
    The adverse environmental consequences of illegal logging, including
    destruction of forest ecosystems and critical wildlife habitat, are
    enormous. Just as Congress recognized in 1981 that greater enforcement
    tools needed to be added to the Lacey Act to combat illegal trade in
    wildlife, stronger enforcement tools should now be added to address
    trade in illegally-obtained timber.
        In general, the Administration supports amending the Lacey Act to
    provide enforcement agencies with adequate and clearly defined legal
    tools to address illegal logging and trafficking of foreign timber.
    Addition of such enforcement tools to address trafficking in illegal
    timber is consistent with the President's Initiative and would enhance
    our ability to take steps against the multi-billion dollar trade in
    illegally logged timber. Such an amendment would support international
    good governance; it would provide a tool for effective enforcement in
    our domestic markets, thereby reducing demand for illegal timber; and
    it would encourage international cooperation and reciprocal enforcement
    efforts.

    H.R. 1497, THE LEGAL TIMBER PROTECTION ACT
        The Administration has, however, identified a number of concerns
    with the language in H.R. 1497 and issues that must be addressed.
    First, under the proposed legislation, the definition of ``plant'' is
    very broad; it could, for example, encompass items such as wooden
    shipping containers and packing materials such as paper and cardboard.
    We believe the scope should include timber and timber products, because
    there is a clear need for additional enforcement tools to address trade
    in illegal timber and timber products. However, we believe items like
    shipping containers and packing materials should not be included in the
    definition of ``plant.'' We request that the Committee continue to work
    with the Administration on the scope of the term ``plant'' in the Bill.
        In addition, by expanding the current conservation scope of the
    Lacey Act, H.R. 1497 places additional responsibilities on the Federal
    agencies that share responsibility for policing international plant
    trade in the United States. While meeting these responsibilities will
    require agency resources, we note that the President's FY 2008 budget,
    which was proposed some time ago, does not provide funds to responsible
    agencies to implement this legislation.
        Furthermore, H.R. 1497 does not currently specify which government
    agency will lead implementation of the legislation's many operational
    tasks, such as development of regulations, inspection of shipments and
    collection of declaration information, reporting, and investigation of
    significant violations. We also want to ensure that deadlines for
    executive branch agencies to finalize regulations are realistic and
    based on time frames that will allow the agency to conduct the
    appropriate analyses, develop and propose suitable regulatory language,
    conduct the appropriate analyses required by law for such regulations,
    provide for adequate public notice and comment, and finalize the
    regulations. We thus recommend that the Committee consult with the
    affected agencies on appropriate deadlines.
        H.R. 1497 also includes provisions that may raise certain
    complexities in implementation and enforcement. For example,
    prohibitions based on failure to pay ``royalties, taxes, or stumpage
    fees'' could raise complex enforcement issues. We also foresee
    questions surrounding declaration requirements, such as whether
    declarations will be required for all paper and paper products in
    international trade; which Federal agency will collect and analyze
    declaration information; and how that information will be processed.
        Notwithstanding these various issues that must be addressed, we are
    pleased that we all share the goal of finding an effective but prudent
    means of fighting the illegal trafficking in foreign timber and timber
    products. We look forward to working with the Committee to ensure the
    clarity and effectiveness of any potential amendments to the Lacey Act.
    CONCLUSION
        Thank you for the opportunity to appear before the Subcommittee
    today to discuss this important topic. I would be happy to answer any
    questions that you may have about my testimony.
                                     ______

      STATEMENT OF ANN WROBLESKI, VICE PRESIDENT, PUBLIC AFFAIRS,
    INTERNATIONAL PAPER COMPANY, ON BEHALF OF THE AMERICAN FOREST &
                           PAPER ASSOCIATION

        Ms. Wrobleski. Thank you, Madam Chairman, Mr. Brown. Good
    morning. I am Ann Wrobleski, Vice President, Global Government
    Relations for International Paper. I served previously as Vice
    President International at the American Forest and Paper
    Association. I appreciate the opportunity to present the views
    of the Association this morning.
        Let me first tell you about AF&PA. It is the national
    association for the forest, pulp, paper, paper board and wood
    products industry. The industry accounts for about six percent
    of total U.S. manufacturing output, employs more than a million
    workers and ranks among the top 10 manufacturing employers in
    42 states with an estimated payroll of over $50 billion.
        Sales of forest and paper products top $230 billion. AF&PA
    and its 200 member companies and associations have long been
    keenly interested in illegal logging. After recent discussions
    with a wide range of stakeholders we believe there is a
    legislative path forward that will be affective in combating
    global illegal logging.
        I want to discuss three aspects of the problem: economic,
    social, reputational. The economic costs of global illegal
    logging are hard to estimate, and in fact, the only widely
    accepted credible study was published by AF&PA in 2004. The
    study found that illegal logging likely depresses prices for
    legally harvested timber between seven and 16 percent.
        The study estimated that the value of U.S. wood exports
    could increase by almost a half a billion dollars, $460
    million, annually if there were no illegally harvested wood in
    the global marketplace. The social, environmental and political
    costs of illegal logging are less obvious but perhaps more
    destructive.
        Illegal logging takes place generally in very poor
    countries or regions. Illegal logging goes hand in hand with
    corruption among government, military, law enforcement and
    erodes public confidence in what are likely to be already weak
    institutions. Illegal logging is a significant contributing
    factor to deforestation, to loss of biodiversity and to land
    degradation.
        Finally, the forest products industry sees illegal logging
    as a reputational issue. Every time an acre of land is
    illegally harvested in Indonesia, in Russia, in Brazil, there
    is the possibility that the public will react negatively to our
    industry. For these reasons, AF&PA has cooperated with the U.S.
    Government and environmental stakeholders in several programs
    in an effort to combat illegal logging.
        In 2003 we joined with the U.S. Department of State,
    Conservation International and others to launch the President's
    initiative against illegal logging. In 2004 we published the
    landmark report on the economic consequences of illegal
    logging. In 2005 AF&PA joined with Conservation International
    to create the Alliance to Combat Illegal Logging, a partnership
    to help halt timber operations in national parks in Indonesia.
        In 2006 we applauded the announcement that the U.S. had
    signed an MOU with Indonesia to combat illegal logging. We are
    very supportive of the U.S. Government committing $1 million to
    finance on the ground efforts in Indonesia. This year the
    industry commends the administration for including illegal
    logging as a topic of discussion with the Chinese in the
    strategic economic SED dialogue talks.
        Given all of these initiatives and activities we have
    watched the debate over expansion of the Lacey Act with keen
    interest. We applaud the Congress, particularly Mr. Blumenauer
    and Senator Wyden, for their work in this field. We have
    endorsed S-1930, the Combat Illegal Logging Act of 2007,
    introduced in July by Senator Wyden, and we would endorse a
    bill in the House using Mr. Blumenauer's substitute language
    which utilizes the approach taken in the Wyden legislation.
        The Wyden-Blumenauer approach is carefully crafted to
    address harvesting that is in clear violation of specific
    foreign and state laws designed to protect forests from
    criminal activity. While the bill does require companies to
    record specific information it does not require a costly chain
    of custody regime.
        AF&PA and its member companies welcome action that raises
    the risks for the illegal trade without harming the legal
    trade. This is an important step toward leveling a playing
    field that is currently stacked against U.S. producers that are
    committed to trading in legal forest products. Ultimately,
    effective action must be taken where the activity takes place.
        But expansion of the Lacey Act to include timber harvested
    illegally overseas sends a strong signal to governments, forest
    products producers, importers and exporters around the world
    that the U.S. Government, the forest products industry and the
    environmental community recognize the problem and are prepared
    to take corrective action.
        Thank you, Madam Chairman. I look forward to your
    questions.
        Ms. Bordallo. Thank you, Ms. Wrobleski. Now, I would like
    to recognize Mr. Barringer.
        [The prepared statement of Ms. Wrobleski follows:]

         Statement of Ann Wrobleski, Vice President, Global Government
       Relations, International Paper Company, on Behalf of the American
                           Forest & Paper Association

        I appreciate this opportunity to present the views of the American
    Forest & Paper Association and its members regarding H.R. 1497--the
    Legal Timber Protection Act. AF&PA is the national trade association of
    the forest, pulp, paper, paperboard and wood products industry. The
    industry accounts for approximately 6 percent of the total U.S.
    manufacturing output, employs more than a million people, and ranks
    among the top 10 manufacturing employers in 42 states with an estimated
    payroll exceeding $50 billion. Sales of the paper and forest products
    industry top $230 billion annually in the U.S. and export markets. The
    more than 200 companies and related associations AF&PA represents have
    a strong interest in assuring that international trade in forest
    products is based on compliance with the laws of all countries. We have
    held extensive discussions with stakeholders on this issue and believe
    an effective approach can be developed to assist in the world-wide
    effort to control this environmental and economic threat.
    What is illegal logging?
        First, it is important to define what we are talking about. Illegal
    logging and illegal trade in forest products is a complex set of
    interrelated legal, political, social and economic issues. The term
    ``illegal logging'' clearly signifies legal abuses, but the types of
    activities considered to be ``illegal'' that are described in various
    published and web-posted reports are wide-ranging. It is important to
    note that there is no international definition of illegal logging. Yet,
    there are some kinds of abuses that, in the context of policy and trade
    discussions, rise to a level of both domestic and international
    significance. These activities involve organized efforts to outright
    steal trees or otherwise ignore a country's efforts to control and
    preserve its nation's forests, such as harvesting without authority in
    designated national parks or forest reserves, logging in excess of
    authorized amounts, failing to pay taxes or royalties on harvested
    logs, and exporting logs in violation of export limitations.
        The concern surrounding illegal logging is a shared one and is a
    primary example of an area where the business and environmental
    communities are united on the need to develop credible and practical
    solutions to the problem. Illegal logging continues to grow as an
    important international issue that the forest products community
    recognizes and is working to address. It undermines the economic
    viability of legally harvested and traded forest products and
    contributes to deforestation. Illegal harvesting can have deleterious
    impacts on biodiversity and other globally important environmental
    services. Among the factors driving illegal logging are: unclear or
    poorly enforced forest tenure, weak political institutions, poverty,
    corruption, inadequate natural resources planning and monitoring, and
    lax enforcement of sovereign laws and regulations.
    Economic Considerations of Illegal Logging
        Illegal logging, associated illegal border trade, and the use of
    illegally obtained timber in manufacturing distort international trade
    and reduce market opportunities for U.S. suppliers. The very presence
    of illegally procured wood fiber in the international marketplace
    affects the competitiveness of U.S. producers who operate legitimately
    in accordance with national and international environmental and trade
    rules.
        In 2004, AF&PA commissioned what is widely considered to be the one
    of the most credible and informative reports on illegal logging and
    which has been separately submitted for the record. The study measured
    the economic impact on timber production and trade which results from
    illegally harvested wood products. The report concluded that many of
    the estimates on the extent of illegal logging are likely exaggerated,
    but the problem is nevertheless significant and depresses world prices
    by between 7 and 16%. The study also estimated that the value of U.S.
    wood exports could increase by over $460 million annually were there no
    illegally harvested wood in the global market. Eliminating suspicious
    roundwood in the global market would have an effect on domestic prices
    and on the pulp and paper sector which would be in addition to the
    impact on U.S. wood exports.
        Based on the study's analysis, there is credible evidence to
    suggest that illegal logging of the kind that warrants international
    concern does, in fact, represent on the order of 8%-10% of global wood
    products production and a roughly similar share of global wood products
    trade. This includes only the impact on production and trade of logs,
    lumber, and wood panels, and does not include the impact on production
    and trade of secondary wood products, furniture, or pulp and paper. In
    aggregate, about 8% of the world's roundwood production is suspicious
    (likely illegal), somewhat less for lumber (6%), somewhat higher for
    plywood (17%).
        Operators that flout the law are a relatively small segment of the
    total forest products business, but those that choose to engage in
    illegal forest activity do so largely because of the higher profit
    potential and/or shortages of legal material. Typically, higher returns
    are possible because illegal timber is presumably obtained at a lower
    cost than otherwise would be the case if legal.
        Ultimately, the report concluded that to be effective, solutions to
    the illegal logging issue must reduce the spread between the costs of
    operating illegally and the costs of operating legitimately. Thus, to
    lessen the spread, the cost of illegal material needs to rise. This can
    be accomplished by enhancing enforcement making the risk higher and it
    more difficult (more costly) to operate in illegal timber.
    Programs and Initiatives to Address Illegal Logging
        AF&PA and its members are already recognized as leaders in fighting
    illegal logging and have worked proactively on the issue for several
    years. In 2003, AF&PA joined with the U.S. Department of State,
    Conservation International (CI), and others to announce the launch of
    the President's Initiative Against Illegal Logging. In 2004, AF&PA
    released its illegal logging report, as previously referenced, which
    for the first time analyzed the economic impacts of illegally produced
    and traded wood products. And, in 2005, AF&PA joined with CI to create
    the Alliance to Combat Illegal Logging, a partnership designed to help
    put a halt to timber operations in national parks and other protected
    areas.
        Also in 2005, the Sustainable Forestry Initiative (SFI) standard,
    adherence to which is a condition of AF&PA membership, was revised to
    incorporate a new Performance Measure. The new measure states that SFI
    program participants shall have procurement programs in place that
    support the principles of sustainable forestry, including efforts to
    thwart illegal logging and promote conservation of biodiversity.
        AF&PA and its members have also been and continue to be strongly
    supportive of ongoing efforts of the U.S. Administration to address
    illegal logging. In November 2006, AF&PA applauded the announcement
    that the U.S. Trade Representative's office and Indonesia's Ministries
    of Trade and Forestry had signed a memorandum of understanding (MOU)
    through which the United States and Indonesia pledged to combat illegal
    logging and the trade associated with it. The Administration
    subsequently backed up this pledge by committing $1 million in
    financing to support on-the-ground efforts in Indonesia. Our industry
    also commends the Administration for its efforts to combat illegal
    logging through the Strategic Economic Dialogue (SED) talks, taking
    place between the U.S. and China. The recently completed second round
    of SED talks resulted in an agreement to establish a Joint Working
    Group to develop a Bilateral Agreement Addressing Illegal Logging and
    Associated Trade. We welcome and encourage continued discussions on
    this topic.
        In the coming weeks, AF&PA is set to release a second report,
    ``Wood for Paper: A Statistical Analysis of Sustainable and Suspicious
    Fiber Sourcing in the Global Pulp Industry''. Preliminary analysis
    indicates that illegal logging, while an issue of concern in the pulp
    and paper industry, manifests itself much less in this sector than in
    solid wood products manufacturing. On a global basis, credible
    allegations about suspiciously (potentially illegal) procured wood
    fiber for the pulp industry represent less than 2% of the total fiber
    consumption by the pulp producing sector. In the case of the U.S.,
    practically all roundwood used by the U.S. pulp industry is from
    managed natural forests or plantations of indigenous species.
        At International Paper, we believe our wood procurement philosophy
    is among the most stringent in the industry. As a global leader in the
    production of paper and packaging products, integrity in the system
    (i.e. preventing illegal logging) is critical to our business and our
    ability to operate in a global market place. Our company, for example,
    has a long-standing policy of using no wood from endangered forests.
        We comply with all applicable laws and regulations in our
    harvesting and procurement of primary wood (roundwood and chips) and
    market pulp. We do not procure or accept primary wood or market pulp
    for our mills from legally designated conservation areas or wood that
    has been harvested in violation of international trading rules or
    agreements, such as export bans or the Convention on Trade in
    International Species (CITES), or wood that is harvested without
    authorization or in excess of concession permit limits.
        We assess risk, for non-North American fiber supply, of attaining
    illegally logged wood and address significant risk accordingly. We do
    not use wood fiber from tropical rainforests in our products, nor do we
    use any natural wood attained from areas designated by Conservation
    International to be ``Tropical Wilderness Areas'' or ``Biodiversity
    Hotspots.'' Additionally, because we find it difficult to discern legal
    and sustainable forestry from the illegal and unsustainable, we have
    also placed a moratorium on any fiber use from Indonesia.
        AF&PA and its members are doing the right thing and believe that
    any reduction in illegal logging will assist our legal products in
    competing against products manufactured from lower-cost illegal
    material. And we welcome action that raises the risks for illegal trade
    without harming the legal trade. This is an important step toward
    leveling a playing field that is currently stacked against U.S. forest
    producers that are committed to trading in legal forest products.
    H.R. 1497--The Legal Timber Protection Act
        We appreciate the increased interest shown by Congress to this
    important issue. AF&PA recognizes that legislation can potentially have
    a significant impact on the world-wide problem of illegal logging. In
    recent months, AF&PA has discussed legislation on this issue with other
    stakeholders, including the Environmental Investigation Agency (EIA),
    to seek a workable U.S. legislative approach to this problem that would
    minimize the impact on legal trade while creating an effective tool to
    regulate illegal trade coming into the United States.
        These stakeholders have focused on the Lacey Act, a federal law
    designed to control illegal trade in wildlife, as the appropriate
    vehicle to address trade based on illegal logging. We support such an
    approach provided it specifies the types of foreign law violations that
    would trigger Lacey Act liability for forest products. Moreover, to be
    effective, it is critical that any legislation does not inadvertently
    increase the cost of legally-obtained timber and timber products,
    thereby making illegal logging more cost effective. Thus, any
    legislation should avoid costly chain-of-custody requirements that
    place undue burdens upon law-abiding businesses.
        We particularly appreciate the leadership on this issue shown by
    Congressman Earl Blumenauer through his introduction earlier this year
    of H.R. 1497, the Legal Timber Protection Act. The introduction of this
    legislation, which would amend the existing Lacey Act to extend its
    scope to cover plants and plant products taken in violation of foreign
    and state law, has sent a signal that the United States Congress is
    serious about combating illegal logging. In fact, it was the
    introduction of this legislation that resulted in the completion of the
    stakeholders' discussions and a revised approach supported by AF&PA,
    its member companies, other forestry-related groups, labor unions, and
    the environmental community.
        Rep. Blumenauer has drafted legislative language to substitute for
    his bill which utilizes the approach followed in S. 1930, the Combat
    Illegal Logging Act of 2007, introduced in July by Senator Ron Wyden.
    We have endorsed Senator Wyden's bill and would endorse a bill in the
    House that uses Rep. Blumenauer's substitute language. The bill is
    carefully crafted to address harvesting that is in clear violation of
    specific foreign and state laws designed to protect forests from
    criminal activity. While the bill requires companies to record specific
    information about their plant-related imports, it does not require
    companies to prove a negative, that is, to prove to the U.S. government
    that their import is not illegal as a condition of clearing customs.
    AF&PA encourages the Committee to incorporate the bill language from S.
    1930 as it moves forward on H.R. 1497.
        AF&PA stands ready to continue to work with legislators and other
    interested stakeholders to craft appropriate solutions that do not
    hinder legitimate business transactions. We need to work together to
    stop this international problem that hurts the environment, the
    economy, and those companies that are doing right by our forests
    worldwide.
        We believe that the importance of this issue to AF&PA extends well
    beyond the economic value of the trade opportunities lost to the U.S.
    forest products industry. To the extent that the general public
    associates logging, in any country, with ``illegal activity,'' there is
    a danger of a negative impact on the image of our industry and the
    products that we produce.
        Ultimately, we recognize that support for an amendment to the Lacey
    Act will have limited impact on combating illegal logging on the
    ground. But it will send a positive signal to governments, and forest
    product producers and exporters around the world that the U.S.
    government, its forest products industry and environmental community
    recognizes the problem and is prepared to take action.
        On behalf of International Paper, Inc. and the American Forest &
    Paper Association, I appreciate the opportunity to offer our views on
    the issue of illegal logging and on H.R. 1497--the Legal Timber
    Protection Act.
                                     ______

             Response to questions submitted for the record by the
                      American Forest & Paper Association

    Questions from Ms. Bordallo (D-GU)

    1.  It's not often that the forest products industry comes to Congress
            hand in hand with the environmental community to ask for more
            regulation. Why does the industry think this legislation is so
            important? Are you not concerned that your own companies might
            inadvertently be caught up in the Lacey Act?
    AF&PA Response
        We are committed to maintaining healthy forests in the U.S. and
    abroad and are deeply concerned that under-priced, illegally harvested
    wood is creating a negative economic and environmental impact for both
    the forest products industry and society as a whole.
        The companies we represent, including domestic, exporting, and
    importing interests, have been consulted throughout this process. Upon
    considerable discussion they recommended that the Association support
    this legislation, which represents a balanced approach raising the
    risks for illegal trade without harming legal trade and without being
    overly burdensome on responsible industry actors. It is an important
    step toward leveling a playing field that is currently stacked against
    U.S. forest producers that are committed to trading in legal forest
    products.

    2.  Can you provide some more details about the negative impacts that
            imports of illegally harvested timber are having on the
            domestic forest products industry?
    AF&PA Response
        The economic costs of illegal logging are hard to estimate, and in
    fact the only widely accepted, credible study was published by AF&PA in
    2004. A complete copy of this study was submitted for the hearing
    record.
        The study found that illegal logging likely depresses prices for
    legally harvested timber by between 7 and 16%. It also estimated that
    the value of U.S. wood exports could increase by almost a half billion
    dollars annually if there were no illegally harvested wood in the
    global marketplace.
        In certain important foreign markets illegal material significantly
    affects the ability of U.S. producers to export. For example, Russia
    exports hardwood logs to China, a substantial portion of which is
    likely of suspicious origin and which compete directly with U.S.
    hardwoods in the Chinese furniture industry. This trade represents one
    of the most direct examples of competition between illegal wood
    supplies and U.S. exports of wood products.

    Questions from Mr. Brown (R-SC)

    1.  Would your members support the addition of an ``innocent owner''
            provision to H.R. 1497? Why or why not?
    AF&PA Response
        We believe innocent owners are already protected by the Lacey Act,
    as the government must prove intent or negligence to bring any charges
    against an individual. This bill would authorize the forfeiture of
    timber products when U.S. authorities can prove that these items were
    taken illegally. To do otherwise would allow goods proven illegal to
    continue in commerce--a practice that would undermine businesses
    selling legal product and create a perverse incentive to avoid doing
    due diligence.

    2.  How do your members track their logs back to the source of the
            harvest, especially with products like gatewood?
    AF&PA Response
        AF&PA members are committed to implementation of and compliance
    with the principles and objectives of the Sustainable Forestry
    Initiative--Standard (SFIS). Objective 8 of the Standard is focused on
    broadening the practice of sustainable forestry through procurement
    programs. For example, Performance Measure 8.3 requires program
    participants to clearly define and implement policies to ensure that
    mill inventories and procurement activities do not compromise adherence
    to the principles of sustainable forestry. In practice this means that
    participants shall have programs in place that ensure the purchase of
    raw material from qualified logging professionals, wood producers, and
    other wood suppliers. In addition, such programs must ensure that
    harvests of purchased stumpage comply with best management practices.
        Best management practices are defined as: A practice or combination
    of practices that is determined by a federal, provincial, state, or
    local government or other responsible entity, after problem assessment,
    examination of alternative practices, and appropriate public
    participation, to be the most effective and practicable (including
    technological, economic, and institutional considerations) means of
    conducting a forest management operation while addressing any
    environmental considerations.

    3.  How do your members prove that the products they buy and sell were
            not harvested, transported, or sold in violation of any law?
    AF&PA Response
        AF&PA members are committed to implementation of and compliance
    with the Sustainable Forestry Initiative--Standard (SFIS). Objective 11
    requires all SFI participants to comply with applicable federal,
    provincial. state, or local laws and regulations. In addition, SFI
    program participants are committed through their international land
    management and procurement activities to promote the conservation of
    natural forests in areas identified as biodiversity hotspots and major
    tropical wilderness areas. Additionally, Performance Measure 8.5 in the
    SFIS states that ``program participants shall ensure that their
    procurement programs support the principles of sustainable forestry,
    including efforts to thwart illegal logging and promote conservation of
    biodiversity.''

    4.  A recent report by the Seneca Creek Associates for AF&PA found
            that: ``Most illegally produced timber is used domestically and
            does not enter international trade.'' Is this statement
            correct? What percentage of illegally produced timber is
            consumed within each country?
    AF&PA Response
        The Seneca Creek report did estimate that most illegally produced
    timber is used domestically and does not enter international trade. In
    most cases, the majority of illegal wood is consumed in the domestic
    market, where fewer questions may be asked on wood origin than in the
    export markets. In addition, in developing countries where the majority
    of illegal harvesting is taking place, exporting tends to be done by
    larger companies, and those with relatively larger, better quality
    processing facilities. Since these companies are larger and well-known,
    it is logical to assume that government supervision would be heavier on
    these groups, rather than the smaller mills, and that relatively less
    of the wood produced and exported by these more well-known companies
    would be illegal.
        The suspicious volume of roundwood (logs) that enter international
    trade represents on the order of just 1% of global production for both
    softwood and hardwood. However, on a global export basis, the study
    estimates that 12% of global softwood log exports and as much as 17% of
    global hardwood log exports are of suspicious origin. As much as 23% of
    hardwood lumber exports and 30% of hardwood plywood exports might be
    considered suspicious. This is largely attributable to the Indonesian
    situation where a high percentage of production, and hence export, is
    believed to be illegal.
        The percentage of illegally produced timber consumed within
    different countries/regions varies. The Seneca Creek report, submitted
    to this hearing's record, contains more detailed information on a
    targeted list of areas, including Brazil, Indonesia, Malaysia, West
    Africa, China, and Russia.
                                     ______

    STATEMENT OF VICTOR C. BARRINGER II, PRESIDENT AND CEO, COASTAL
          LUMBER COMPANY, ON BEHALF OF THE HARDWOOD FEDERATION

        Mr. Barringer. Madam Chairman and members of the
    Subcommittee, thank you very much for holding this hearing. My
    name is Victor Barringer. I am President and CEO of Coastal
    Lumber Company. As a company and as an industry we recognize
    the critical issues related to illegal logging worldwide and
    appreciate this committee's willingness to address these issues
    today.
        Coastal Lumber Company operates in nine states employing
    1,300 employees at 24 hardwood lumber manufacturing plants
    nationwide. We are proud to be one of the largest employers in
    Chairman Rahall's State of West Virginia. Since January 1,
    2000, there have been 314 furniture plant closures with massive
    layoffs affecting some 69,190 workers.
        Manufactured household names such as Thomasville, Henredon,
    Broyhill, Century Collect now only have one to two
    manufacturing plants left in the U.S. The hardwood lumber
    industry which supplies wood to the furniture industry has lost
    38 percent of its existing mills since 2000. One of the main
    reasons the furniture industry went to China is cheap wood to
    supply these plants.
        Despite this we can compete with legally logged timber from
    around the world no matter where the plant is located. We
    cannot compete with bribes being paid to forestry officials and
    others along the Russian-Chinese border. These people have no
    regard to what this illegal trade is doing to the environment
    or to manufacturing jobs in the U.S.
        The furniture industry aside, there are a lot of jobs at
    stake here. For example, there are 29,000 forest products
    industry related paychecks being generated annually in the
    State of West Virginia. Pennsylvania has about 95,000. In
    short, this is an environmental and economic catastrophe
    unfolding before this committee.
        I have traveled throughout Southeast Asia in recent decades
    and I have personally witnessed large blocks of deforested
    timber land. I have been to the log yards around the northern
    Chinese border trading in illegal timber, and I have witnessed
    this illegal trade from Russia. I am here today to inform the
    Congress that this situation is far worse than any report you
    may have seen.
        Essentially, there exists no enforcement of local
    harvesting laws due to the ranging system of bribes and
    criminal conduct. Joining us in this concern is the Hardwood
    Federation, the largest hardwood forest products industry
    association in the United States, representing 14,000
    businesses, 30 trade associations and over one million hardwood
    families in the U.S. and Canada.
        However, the pressing concerns over illegal logging and the
    need to seek legislative solutions was given a unanimous vote
    of endorsement by the Hardwood Federation board of directors
    earlier this year and it is viewed as the top priority for the
    association. Coastal Lumber Company is obviously not alone
    having seen firsthand the devastation caused by the corruption
    in this logging trade.
        We do not plan to sit by and watch illegal practices create
    an unfair playing field. Our intention to sustainable forest
    practices is a costly element in our business, and as CEO I can
    attest to the fact that abiding by these laws which govern
    private business is costly, but we do it. In the case of
    forestry laws we know that in doing so we are investing in the
    future of our business.
        Earlier this year the Hardwood Federation issued the first
    public statement of support for efforts to end illegal logging
    including the possibility of amending the Lacey Act. Since that
    time, legislation has been developed which we believe will curb
    illegal wood imports and will help protect law abiding forest
    products industries and employees as well as the forest
    ecosystems around the world.
        We applaud Representative Blumenauer's leadership in
    introducing H.R. 1497 and the amendments the Congressman has
    agreed to implement. We urge this committee to continue to
    focus on this issue and pending legislative proposals to
    reflect diversion interest, and we have come together to a call
    for action. Thank you for allowing me to testify before this
    committee.
        Ms. Bordallo. Thank you very much, Mr. Barringer. I now
    recognize Mr. von Bismarck.
        [The prepared statement of Mr. Barringer follows:]

        Statement of Victor Clay Barringer, II, Coastal Lumber Company,
                           Charlottesville, Virginia

        Madam Chairman and members of the Subcommittee, thank you very much
    for holding this hearing. My name is Victor Barringer and I am
    President & CEO of Coastal Lumber Company. As a company and as an
    industry we recognize the critical issues related to illegal logging
    worldwide and appreciate the Committee's willingness to address those
    issues today.
        Coastal Lumber operates in nine states, employing 1300 employees at
    24-hardwood lumber manufacturing plants nationwide. We are proud to be
    one of the largest employers in Chairman Rahall's state of West
    Virginia, and collectively with our sister companies, we are the 3rd
    largest taxpayer in the state of West Virginia.
        In addition, we have extensive business relations in Asia. I have
    traveled throughout Southeast Asia in recent decades, and have
    personally witnessed the sites of large blocks of deforested
    timberland, and have been to the log yards along the Northern Chinese
    border-trading illegal logs from Russia. I am here today to inform the
    U.S. Congress that the situation is far worse than any report you may
    have seen to date. Essentially there exists no enforcement of local
    harvesting laws due to the reigning systems of bribes and criminal
    conduct.
        Joining us in this concern is the Hardwood Federation, the largest
    hardwood forest products industry association in the United States,
    representing over 14,000 businesses, 30 trade associations and over one
    million hardwood families in the United States and Canada. The
    Federation represents the majority of organizations engaged in the
    manufacturing, wholesaling, or distribution of North American hardwood
    lumber, veneer, plywood, flooring, pallets, kitchen cabinets and
    related products. As you can imagine, the Federation is challenged to
    maintain consensus on a myriad of issues given the breadth and
    diversity of the association membership. However the pressing concerns
    over illegal logging and the need to seek legislative solutions was
    given a unanimous vote of endorsement by the HF Board of Directors
    earlier this year and is viewed as a top priority issue for the
    association. Coastal Lumber obviously is not alone in having seen
    first-hand the devastation caused by corruption in the logging trade.
    While we are the largest users of the resource we are also among the
    most fervent guardians of these forests as well.
        Companies in the hardwood industry are predominantly small, family-
    owned businesses, dependent upon a sustainable supply of healthy timber
    resources. Many are operated by third, fourth or even fifth generation
    family owners. Given this history and legacy, our industry maintains a
    long-term view of the valuable forest resources, which are the mainstay
    of our business. In fact hardwoods are by definition a long-term raw
    material given the decades-long growing cycle required for high valued
    wood species. Imagine depending upon a raw material, which takes almost
    an adult lifetime to grow to maturity! Hardwood timber is renewable and
    sustainable, but not readily replaceable once damage is done.
        We do not plan to watch as illegal practices create an unfair
    playing field. When we cannot compete fairly opportunities for
    providing jobs to our families in generations to come and in our local
    communities are lost as well as the wood products prized by consumers
    throughout the world as a universal sign of quality in homes,
    buildings, furniture and decor Our attention to sustainable forest
    practices is a costly element in our business, and as a CEO I can
    attest to the fact that abiding by the laws which govern private
    business is costly. But we do it, and, in the case of forestry laws we
    know that in doing so we are investing in the future of our business.
        Since January 1, 2000, there have been 314 furniture plant closures
    with massive layoffs affecting some 69,190 workers. Manufacturers with
    household names such as Thomasville, Henredon, Broyhill and Century
    collectively now have only two or three manufacturing plants left in
    the U.S. The hardwood lumber industry, which supplies wood to the
    furniture industry, has lost 38% of its existing mills since 2000. One
    of the main reasons the furniture industry went to China is cheap wood
    to supply these plants. Despite this, we can compete with legally
    logged timber from around the world no matter where the plant is
    located. We cannot compete with bribes being paid to forestry officials
    and others along the Russian/Chinese boarder. These people have no
    regard for what this illegal trade is doing to the environment or to
    manufacturing jobs in the U.S. The furniture industry, aside, there are
    a lot of jobs at stake here. For example, there are about 29 thousand
    forest products industry paychecks being generated annually in the
    state of West Virginia. Pennsylvania has about 95 thousand industry
    related paychecks in the state and I would say that most states have
    similar numbers. In short this is an environmental and economic
    catastrophe unfolding before this committee.
        Earlier this year, the Hardwood Federation issued the first public
    statement of support for efforts to end illegal logging, including the
    possibility of amending the Lacey Act. Since that time legislation has
    been developed which we believe will curb illegal wood imports and help
    protect law-abiding forest products industries and employees as well as
    forest ecosystems throughout the world. We applaud Rep. Blumenauer's
    leadership in introducing H.R. 1497 and the amendments the Congressman
    has agreed to implement. We urge the Committee to continue to focus on
    this issue and pending legislative proposals to reflect the divergent
    interests, which have come together to call for action. On behalf of
    Coastal Lumber and the Hardwood Federation we pledge to continue in our
    own active role and work to move towards a strong, effective U.S.
    statute to curb this alarming threat to our industry and to hardwood
    forests throughout the world.
        Thank you for allowing me this opportunity to appear before you
    today.

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             Response to questions submitted for the record by the
                              Hardwood Federation

    Questions from Ms. Bordallo (D-GU)
     Do you believe the forestry industry in the United States will respond
            favorably to a curtailment in illegal logging worldwide? If so,
            how?
        Yes. Were there no illegally harvested wood in global market value
    of U.S. wood exports could increase by over $460 million each year
    based on recent report commissioned by AF&PA.
     Can you provide some additional details on the negative impacts that
            illegal logging overseas has had on the domestic forest
            products industry?
        Raw materials, such as logs, typically account for 60-80 percent of
    the cost of production for hardwood products. It is estimated that 8-
    10% of all wood production globally is due to illegal harvesting
    practices. Illegal trade in these materials allows foreign suppliers an
    additional means to enter the U.S. market in substantial numbers and at
    extremely low prices.

    Questions from Mr. Brown (R-SC)

    1.  In your testimony, you say you have witnessed the sites of large
            blocks of deforested timberland. I recognize how ugly clear-
            cuts can be as I've traveled throughout the Western part of the
            U.S. and have seen this practice first-hand as well. Do you
            know if this was clear-cut legally or illegally? And, was it
            for land conversion to an agricultural use or do you know?
        Only what the farmer told me. The local farmer told me that people
    came in, cut this timber and left, and they did not own it. It was not
    for conversion to agricultural use.

    2.  You also mention corruption in the international logging trade.
            What are your first-hand experiences? Which laws were broken?
        I visited a log yard in Northern China--I don't recall the name of
    the town. The people who operated the log yard were very matter-of-fact
    regarding the timber that was taken from the Russian Government and
    railed into China.

    3.  Do you support adding an ``innocent owner'' protection for
            businesses like yours? Why or why not?
        Innocent owners are already protected by the Lacey Act, as the
    government must prove intent or negligence to bring any charges against
    an individual. It is the government that must prove the illegal
    material's chain of custody, not the owner.

    4.  Do you have documentation that links the loss of jobs to the
            importation of illegal raw material?
        No, there is not formal documentation. However, for example,
    hardwood plywood consumption and wood flooring sales increased by
    approximately 20 percent between 2002--2006, but the increase for these
    products was supplied by imports. U.S. production of these products
    actually declined which in turn impacts the workforce in these areas.

    5.  We continue to see more automation in U.S. plants. How does this
            affect loss of jobs?
        Productivity has increased in forestry as well as in wood products
    manufacturing as in almost ever sector in the economy. The use of new
    technologies and better forest management systems has allowed growth
    and yields to increase significantly which should assist U.S.
    competitiveness. All of which helps to ensure sustainable forestry as
    well as the potential for increased production. Certainly resolving
    issues around illegal countries will level the playing field for our
    producers and allow our industry to take advantage of technology
    improvements which while automating many operations often lead to more
    and better jobs in our sector.

    6.  Would you support certification of chain of custody to ensure that
            no domestic supply of wood is tainted by illegally obtained
            wood?
        No. There is already an array of tools, technologies and resources
    (adopted by numerous industry leaders) that make it possible to work
    with one's suppliers on due care steps to eliminate illegal wood.
    Businesses can practice due care, without a chain of custody, by asking
    the right questions of your suppliers and using resources available
    from the government and private sources to become aware of marketplace
    concerns in country of origin.
                                     ______

       STATEMENT OF ALEXANDER VON BISMARCK, EXECUTIVE DIRECTOR,
                   ENVIRONMENTAL INVESTIGATION AGENCY

        Mr. von Bismarck. Thank you, Madam Chairwoman Bordallo for
    the opportunity to testify before this Subcommittee. We speak
    today of a problem that as the composition of this panel
    demonstrates unites a diversity of stakeholders in a common
    concern.
        I am the Executive Director of the Environmental
    Investigation Agency, and EIA is honored to present this
    testimony as part of a broad coalition of environmental, labor
    and industry organizations who all agree that illegal logging
    and associated trade is bad business for the environment, for
    poor people worldwide and for companies and that the time has
    come for the United States government to take action to curb
    our role in driving this problem.
        The Environmental Investigation Agency is a nonprofit
    organization which has worked 23 years to investigate and
    expose environmental crimes and advocate for lasting solutions.
    EIA's analysis of trade in illegal timber and wildlife have
    been globally recognized, and this year we were honored to
    receive the U.S. Environmental Protection Agency's award for
    our investigations into the chemical trade.
        Since 1999 EIA has used undercover techniques in
    partnership with local organizations to document the impacts of
    illegal logging and the criminal networks that are behind it.
    Our experience has shown us unequivocally that illegal logging,
    which causes the most serious environmental and social harm, is
    driven by international trade and that any solution will
    therefore require action from consuming nations such as the
    United States.
        These findings are collected in our report, No Questions
    Asked, which we have prepared for this hearing. In this oral
    testimony I want to touch on examples of the environmental and
    human cost of illegal logging, point out how we are fighting
    the problem currently with one hand tied behind our backs and
    how the amendment of the Lacey Act to prohibit the import and
    sale of illegally sourced wood and wood products and the
    declaration of some basic information is critically needed.
        Illegal logging has a devastating impact on our global
    environment as pointed out earlier by Representative
    Blumenauer, but perhaps some of the most destructive impact of
    illegal logging is on human lives and society. Revenue from
    illegal logging and export trade supports and perpetuates
    corruption and criminal activities and fuels violent conflicts
    much like the blood diamonds that funded wars in west Africa.
        Honduras is one of many countries where illegal logging is
    a crisis for the country's environment and society. For more
    than a decade the grassroots environmental movement of Olancho
    has opposed logging on their community lands by companies owned
    by Lamas, Noriega and other barons. Between 1996 and 2007,
    eight members are alleged to have been killed for their
    activism.
        Last December, Heraldo Zuniga, Roger Ivan Murillo Cartagena
    became the latest victims put up against the town hall wall and
    shot. At least six members of the organization have fled the
    country over the past year fearing for their lives. The
    government itself estimated that in 2006 one million board feet
    of mahogany were extracted illegally as this slide points to.
        EIA has found that one of the recipients of suspect
    mahogany was a subcontractor slated to build bullet proof doors
    for the Capitol Building. In Indonesia, also, the crimes are
    not only against the forest but against people. Among the
    world's most infamous timber barons EIA has investigated is
    Abdul Rasyid whose company ordered an attack on investigative
    journalist Abi Kusno Nachran, shown here, after his information
    led to government seizure of three illegal timber shipments.
        Abi Kusno was hijacked on the road by a gang of hired thugs
    who hacked him with machetes in the back, arms and head and
    left him for dead. All cases against Rasyid, the timber baron,
    have been dropped, and his empire is building.
        Despite the law that makes sawn timber exported from
    Indonesia expressly illegal, U.S. trade data shows that over
    1,500 shipments declared on Customs forms as Indonesian sawn
    timber worth some $30 million entered U.S. ports between
    November 2004 and November 2006. That is more than two
    shipments a day.
        Indonesia's environment minister has publicly pleaded with
    consumer nations to stop buying Indonesia's illegal timber. The
    trail of this timber, Madam Chair, goes through organized
    crime. This is a short excerpt of an undercover meeting with
    Frankie Chua, a member of a major Southeast Asian timber
    cartel.
        [Videotape]
        Mr. von Bismarck. Madam Chair, if the volume could not be
    heard, he was introduced as timber mafia. He said that timber
    smuggling is good, drug smuggling is bad, and he closed with,
    no buyer, no smuggling. Currently, Madam Chair, we are the
    buyers of this timber. We are the unwitting financiers of this
    crime. This is why, Madam Chair, the opportunity of this
    legislation is so great.
        This legislation will send a powerful signal through the
    international markets that the biggest market for wood
    products, the United States, does not want to support the
    violence and destruction caused by this logging. Thank you.
        Ms. Bordallo. Thank you very much, Mr. von Bismarck, for
    that very compelling testimony. Finally, the Chair recognizes
    Mr. Forester.
        [The prepared statement of Mr. von Bismarck follows:]

                     Statement of Alexander von Bismarck,
                    Environmental Investigation Agency, Inc.

    Introduction
        Thank you, Madame Chairperson and Honorable Members of the
    Subcommittee, for the opportunity to testify before the Subcommittee
    regarding H.R. 1497, the Legal Timber Protection Act, legislation to
    amend the Lacey Act Amendments of 1981 to address global illegal
    logging and associated trade in illegal timber and wood products. We
    speak today of a problem that, as the composition of this panel
    demonstrates, unites a diversity of stakeholders in common concern. I
    am the Executive Director for the Environmental Investigation Agency.
    EIA is honored to present this testimony as part of a broad coalition
    of environmental, labor, and industry organizations who all agree that
    illegal logging and associated trade is bad business--for the
    environment, for poor people worldwide, and for American companies--and
    that the time has come for the United States government to take action
    to curb our role in driving this problem.
        The Environmental Investigation Agency (EIA) is a non-profit
    501(c)(3) organization which has worked for 23 years to investigate and
    expose environmental crimes, and advocate for creative and effective
    solutions. EIA's analyses of the trade in illegal timber, wildlife, and
    ozone-depleting substances have been globally recognized.
        Since 1999, EIA has used undercover methodologies in partnership
    with local organizations to document the environmental and social
    impacts of illegal logging, and its context of corruption and criminal
    activity, in countries including Indonesia, Malaysia, China and
    Honduras. Our experience has shown us unequivocally that the illegal
    logging which causes the most serious environmental and social harm is
    inextricably linked into international trade, and that any solution
    will therefore require action from both producer and consumer nations.
        In this testimony we discuss:
        (1)  The high environmental and human costs of illegal logging and
    associated trade worldwide, and the role played by U.S. market demand
    in supporting these illegal and criminal activities;
        (2)  The lack of adequate tools to address this problem from a
    demand-side perspective;
        (3)  The reasons why EIA and our broad coalition believe that
    amending the Lacey Act to prohibit the import and sale of illegally-
    sourced wood and wood products, and to require the declaration of
    certain basic information, is an effective and elegant way to address
    the problem.
        For a more complete discussion of these points, please see our full
    report, ``No Questions Asked: The Global Impacts of U.S. Market Demand
    for Illegal Timber--and the Potential for Change,'' available at
    www.eia-global.org.

    No Questions Asked
        Illegal logging and associated trade are criminal activities that
    occur in the context of weak and corrupt governance in timber-rich
    countries and shipping and manufacturing hubs. These activities are
    financed and fueled by ever-growing demand from international markets
    that don't discriminate legal from illegal wood products. The profits
    that lie in exporting valuable hardwoods or softwoods is staggering:
    according to current field data, merbau stolen from Indonesia's Papua
    province is worth US$250 per cubic meter in the port, $600 or more upon
    arrival to China--and over US$2200 by the time it winds up as solid
    wooden flooring in an American store.1
        The monetary benefits of timber trafficking are high, and the risks
    of any legal or financial penalty are low. Buyers of wood don't ask
    questions because they don't have to. No one--neither customers nor
    governments--is asking them to do so. Under current U.S. law, with very
    few exceptions, wood imports are legal by default--no questions asked.
    There is no underlying legal framework, within either domestic law or
    trade agreements, that prohibits the import or sale of illegally
    sourced wood products from any other nation. As a result, the millions
    of dollars invested by the U.S. government, non-governmental
    organizations and private companies in anti-illegal logging programs in
    supply side nations are being undermined by our own market and legal
    system.
        The one exception to this lack of legal tools, the Convention on
    International Trade in Endangered Species (CITES), is exceedingly
    limited for addressing the larger problem of illegal logging: EIA's
    analysis of trade data and CITES permits shows that the chief timber
    species now regulated under CITES--ramin and mahogany lumber (any
    mahogany products are exempt)--account for less than 0.05% of wood
    imports to the United States.2
        This problem is so pervasive that we find it even here in these
    historic rooms. EIA has learned that the U.S. Capitol building itself
    came close to hanging Honduran mahogany doors at high risk for illegal
    origin. Had sufficient 2007 appropriations come through for this
    project, we would be left to wonder whether the doors opening onto the
    U.S. House of Representatives were made using endangered trees stolen
    from the internationally protected Rio Platano Biosphere Reserve in
    Honduras.

    The Environmental and Human Costs
        ``Illegal logging'' refers to the extraction and removal of timber
    in contravention of applicable laws. Such activities include a spectrum
    of illegalities ranging from cutting within national parks to
    transporting without permits, from cutting on steep slopes and
    riverbanks to over-harvesting or harvesting protected species. The
    extent of these activities in forests around the world has serious
    consequences in terms of environmental degradation, social conflict and
    the rule of law.

    Environmental degradation
        Illegal logging activities catalyze a chain reaction with major
    consequences for climate change and biodiversity loss. Some of the
    greatest damage results precisely from the export-oriented extraction
    of valuable timber species from ``frontier forests''--the most pristine
    and extensive forests left on earth.
        Consumer demand for high-end hardwood products such as flooring,
    doors, windows or decks drives the economics of frontier logging. The
    prime specimens of large, slow-growing species such as mahogany
    (Swietenia macrophylla), merbau (Intsia spp.), ramin (Gonostylus spp.),
    Russian oak (Quercus spp.) or okume (Aucoumia klaineana), among others,
    remain only in remote and intact forests in Asia, Latin America, and
    Africa. Such forests are national parks set aside to protect habitat
    for low-density large mammals like jaguars, orangutans or forest
    elephants, or the world's few remaining vast tracts ofwilderness in the
    Amazon, the boreal forests of Russia, the islands of New Guinea and
    Borneo, and the Congo basin. The value of these timber species on
    international markets provides sufficient incentive for logging
    syndicates to finance trespass in parks and indigenous territories,
    falsify harvest and shipping permits, and construct miles of trails or
    crude roads into the wilderness to access high density stands or even
    individual trees. The extent and modus of such activities has by now
    been well documented by EIA and other watchdog organizations, as well
    as academic researchers and journalists.
        This uncontrolled activity triggers a cascade of subsequent
    environmental degradation. Logging trails destroy hundreds of other
    trees to reach a few commercially valuable individuals. The creation of
    infrastructure and temporary logging camps brings an influx of people
    and economic activity into remote regions. In the short term, this
    leads to over-hunting of bushmeat or commercial wildlife poaching in
    surrounding forests; in the long term, settlements can become permanent
    while habitat for wildlife shrinks behind the agricultural frontier.
    This chain of events is even more damaging when it occurs in areas
    occupied by forest-dependent indigenous peoples.
        On the other hand, consumer demand for semi-disposable inexpensive
    wood products encourages manufacturers to cut costs and boost
    production--driving the large-scale illegal over-harvesting of natural
    coniferous and hardwood forests from eastern Russia, Indonesia,
    Honduras, Brazil and elsewhere. This type of deforestation contributes
    directly to topsoil exposure and subsequent erosion. Intensive illegal
    logging has been acknowledged as a contributing factor in floods that
    cost thousands of lives in Indonesia, the Philippines, China and
    elsewhere in the past decade. It also has the capacity to disturb
    hydrological and ecological dynamics enough to cause water shortages
    and higher susceptibility to forest fires. The uncontrolled cutting of
    Honduras's rich pine forests, for example, has caused what communities
    document to be the loss of approximately half the water sources in
    populous western Olancho district.3
        As the committee is well aware, deforestation and forest fires are
    a major cause of global greenhouse gas emissions. The UK's recent Stern
    Review on the Economics of Climate Change found that deforestation
    accounts for 18.3% of global carbon emissions annually--more than the
    entire transport or industrial manufacturing sectors.4
    Illegal logging is an integral part of this picture, contributing to
    deforestation both through the direct removal of forest cover and
    through the chain of land use change triggered by logging described
    here. Uncontrolled logging is, in a sense, the `gateway activity' that
    leads to a cycle of harm for the forests and the global climate.
        The human consequences are no less devastating. Revenue from
    illegal logging and export trade supports and perpetuates corruption
    and criminal activities, and is reaped in an atmosphere of fear,
    intimidation and human rights abuses. Illegal logging in some countries
    has been used to finance violent conflicts--much like the ``blood
    diamonds'' that funded wars in West Africa--while in others it is
    linked with wildlife and drug smuggling operations. The following
    examples from around the world hint at the scope of forest crimes both
    social and environmental in nature.
    Examples: Global illegal logging hotshot, and the links to U.S. demand
    Indonesia
        In perhaps no other country has illegal logging been destructive on
    such a massive scale--or the focus of so much concern. In June 2006,
    the U.S. government was spending more than $7 million on initiatives to
    combat illegal logging in Indonesia, with the private sector chipping
    in another $13 million via 30 different projects throughout the
    country.5 And yet a 2007 U.N. Environment Programme (UNEP)
    report forecasts that 98% of Indonesia's forests could be lost within
    15 years, with lowland forests disappearing even sooner.6
        Illegal logging in Indonesia is organized, highly profitable crime
    that continues to operate with almost total impunity for the higher
    echelons. Despite millions of dollars invested in combating illegal
    logging by the national and foreign governments, despite a series of
    crackdowns, arrests, policy initiatives and extensive public attention
    to an issue that has cost the country over US$20 billion, a recent
    survey by EIA and our Indonesian partner organization Telapak confirmed
    that almost no high-level financiers, senior military or government
    officials have even been prosecuted, much less convicted, of logging-
    related crime.7 The country's forestry minister himself
    recently proposed Supreme Court review of several judges involved in
    handing down not-guilty verdicts, openly questioning a judicial system
    that continues to free criminals in the face of strong police
    evidence.8
        These crimes are not only towards the forest but also towards its
    defenders. Among the world's most infamous timber barons are Abdul
    Rasyid and his nephews Sugianto, Agustiar and Yadi, whose Tanjung
    Lingga suite of companies has reaped hundreds of millions of dollars
    from illegal logging or ramin and other species at Tanjung Puting
    National Park. In 2000, Rasyid's employees assaulted two EIA and
    Telepak investigators with head blows, threatened them with death, and
    had them thrown in jail for three days. In November 2001 Rasyid ordered
    an attack on investigative journalist Abi Kusno Nachran after his
    information led to government seizure of three illegal timber
    shipments. Abi Kusno was hijacked on the road by a gang of hired thugs
    who hacked him with machetes in the back, arms, and head, and left him
    for dead.9 All cases against Rasyid, who until recently was
    a member of the Central Kalimantan Parliament, have been dropped due to
    ``lack of evidence.''
        As part of the effort to staunch the illegal flow of its resources,
    Indonesia enacted a log export ban in September 2001. Following this,
    many syndicates changed their methods by cutting the stolen wood into
    sawn timber and concealing it in shipping containers.10 In
    response, Indonesia enacted a sawn timber export ban in October 2004,
    with further strengthening and elaboration of limited exceptions in
    2006.
        Yet despite a law that makes most sawn timber exported from
    Indonesia expressly illegal, U.S. trade data show that 1,570 shipments
    declared on customs forms as Indonesian sawn timber, worth some $30
    million, entered U.S. ports between Nov. 2004 and Nov. 2006: more than
    2 shipments per day.11 Eleven U.S. ports comprised 89% of
    these shipments, with only three ports--Los Angeles, Long Beach and
    Tacoma, WA--responsible for 51%. This concentrated flow demonstrates
    how increased enforcement in the U.S. could be both relatively feasible
    and effective to address an obviously illegal trade stream.
        EIA is hopeful that the Memorandum of Understanding signed by the
    two countries in November 2006 will facilitate such enforcement. As it
    stands, Indonesia is a shining example of the inconsistency of U.S.
    policy on illegal logging. The country's environment minister, Rachmat
    Witoelar, has publicly pleaded with consumer nations to stop buying
    Indonesia's illegal timber.12

    Honduras
        The United States is Honduras's largest market for wood products,
    importing over $47 million in each of the last two years in pine lumber
    and secondary products including mop handles and tomato stakes, as well
    as valuable hardwood products like mahogany doors and
    windows.13
        A host of illegal logging and timber trafficking techniques have
    been documented by EIA, from fraudulent permits, phony community
    ``cooperatives'', and bribe-fueled transport to cutting openly in
    national parks. The illegal timber trade is used to smuggle narcotics
    and launder drug money. Export tax evasion is also rife; EIA
    investigations in 2005 found that declarations may represent only
    around 50% less of actual timber exported.14
        Illegal logging in Honduras is closely linked with social conflict
    and human rights abuses. For more than a decade, the grassroots
    Environmental Movement of Olancho (MAO) has fought logging on
    theircommunity lands by companies owned by Lamas, Noriega, and other
    barons. MAO's struggle has earned the group's members death threats,
    intimidation and harassment through the judicial system. Between 1996
    and 2007, eight members are alleged to have been killed for their
    activism; on December 20th, 2006, Heraldo Zuniga and Roger Ivan Murillo
    Cartagena became the latest victims, put up against a town hall wall
    and shot.15 At least six members of the organization have
    fled the country in the past year, fearing for their lives.
    International outcry over the killings led to the arrest of four local
    policemen. However, there has still been no trial, nor investigation
    into possible logging interests behind the crime such as the Sansone
    company, whose employees MAO has repeatedly denounced for death
    threats.16 Sansone is Honduras's second-largest exporter,
    sending broom and mop handles as well as lumber to U.S. retailers as
    well as Caribbean markets.

    Peru
        Peru is the world's principal exporter of mahogany, particularly
    since Brazil implemented an export ban in 2001. In 2006, this valuable
    wood comprised roughly 20% of the country's total timber exports by
    value (a far smaller quantity by volume).17
        The extent and impact of illegal mahogany logging in the Peruvian
    Amazon is grave. In the southeastern department of Madre de Dios, home
    to the world's highest remaining concentration of old growth mahogany,
    loggers are penetrating the protected territories of several
    voluntarily isolated, 'uncontacted' tribes, resulting in a rise in
    violent encounters with casualties on both sides.18
    Advocates fear that contact with loggers will end in deadly conflict or
    transmission of an infectious disease such as influenza or pneumonia,
    which could kill the entire tribe. The risk is so high that in March
    2007 the Inter-American Court of Human Rights ordered the Peruvian
    government to implement precautionary measures to protect the
    uncontacted groups of Madre de Dios.
        Local timber barons, increasingly linked with drug traffickers,
    take brutal advantage of the poverty and isolation of Amazonian
    communities from Iquitos to Puerto Maldonado.19 A study
    conducted by the International Labor Organization in 2004 estimated
    there to be some 30,000 people living at the time under forced labor
    conditions linked to logging in the departments of Madre de Dios and
    Ucayali.20 This includes men living in a cycle of debt
    slavery and women working as prostitutes in logging camps.21
        The Forest Governance Annex to the pending U.S.-Peru trade
    bilateral contains important measures aimed at strengthening Peru's
    monitoring and enforcement of timber concessions. However, without a
    broader commitment to excluding illegal timber from all its trading
    partners, the U.S. runs the risk that illegal Peruvian mahogany will be
    sent to Mexico or China to become our doors and furniture just the
    same.

    China
        China has become the world's factory for wood products, as with so
    much else. Its booming demand for raw wood material to transform into
    furniture and plywood for Western markets is driving illegal logging
    around the world. China is the world's largest exporter of wood
    products, exporting over $17 billion in timber products in 2005. This
    represents almost 500% growth in less than a decade22--and
    the U.S. is the biggest customer by far. In the last 10 years, the
    United States has increased its imports of Chinese wood products 1290%
    by value.23 We imported 40% of China's wooden furniture in
    2005 (a trade stream worth $US8.8 billion24), and 21% of
    China's plywood exports last year.25
        All this production is fueled by imports. One expert estimates that
    China imports over $US one billion annually in illegally-harvested logs
    alone, largely from Russia, trailed by Papua New Guinea, Congo
    Brazzaville and Gabon.26 EIA and other organizations'
    investigations show systemic disregard for the legality of raw
    materials in the Chinese wood imports sector. In 2005, EIA/Telapak
    undercover investigators posing as buyers spoke with various Chinese
    traders who described their smuggling and document falsification
    techniques to evade the Indonesian log ban.27 In 2004, huge
    discrepancies between Chinese and Malaysian trade data showed that 58%
    of the log imports supposedly arriving from Malaysia were actually
    smuggled overseas from Indonesia--2.7 million m\3\ of timber, a total
    of almost 30% of Indonesia's entire legal harvest for the same
    year.28
        As the demand from its wood products industry grows exponentially,
    Chinese traders' ask-no-questions ethos is cause for alarm. Beyond
    Indonesia and Papua New Guinea, some of the hotspots most affected by
    exports to China include:
          Burma [Myanmar]: The world's final remaining stands of
    old-growth teak (Tectona grandis) are being stripped from Burma's
    forests to finance a long-standing war between the repressive military
    regime and the ethnic Kachin rebel army along the country's northeast
    border with China.29 The cross-border trade in teak and
    other valuable tropical hardwoods reached as much as $350 million in
    2005, according to Global Witness. It primary ends up in high-end
    furniture.
          Cambodia: As laid out in devastating detail by Global
    Witness in their written testimony submitted for this hearing, timber
    barons directly linked to high government officials and military
    officers are felling in protected State Forests, cutting protected tree
    species upon which local people depend for income, clearing vast areas
    of primary forest under dubious permits for large-scale plantations,
    establishing illegal factories, and robbing the Cambodian treasury of
    millions of dollars in revenues through blatant fraud, tax evasion, and
    smuggling.30 Members of this network are also implicated in
    cases of at least three murders and two attempted killings of people
    working to combat forest crime.
              China is the primary recipient of illegal Cambodian timber.
            Despite official Cambodian statistics that record no plywood or
            sawn timber exports in recent years (most recent statistics
            available are from 2003-2004), international trade data show
            China importing approximately US$50 million in plywood and sawn
            timber between 2003 and early 2007.
          The Congo Basin: Large Chinese companies' illegal logging
    activities in this region include evading taxes on forest concessions
    in Gabon and Cameroon; cutting five times the allowable harvest in
    Republic of Congo; and exporting unprocessed logs in violation of
    government log export bans.31
          Tanzania: The coastal forests and woodlands of Tanzania
    are disappearing due to overharvesting of tropical hardwoods, much of
    it illegal and destined for export markets. China is the largest and
    fastest-growing market: in the second half of 2005, China imported 100%
    of the logs exported from Tanzania, and 75% of processed hardwoods.
    Furthermore, trade statistics show that China imported ten times more
    timber products from Tanzania than what appeared on the country's
    official export records--in other words, a loss of 90% of the
    government's revenue, estimated at $58 million dollars annually. The
    deforestation is having noticeable effects on topsoil erosion and water
    quality in the main logging districts.32
          Russia: Nowhere has China's wood manufacturing explosion
    been felt more strongly than in the forests of Russia's Far East, whose
    vast expanses of Korean pine and temperate hardwoods are home to the
    world's largest cat species, the Amur tiger. Russia alone supplied
    approximately 26.4 million m\3\ in 2005--49% of China's total timber
    product imports and fully 80% of its logs.33. Companies
    including Wal-Mart, Armstrong and Ikea are supplied by plants located
    in this border region.34 The Russian Natural Resources
    Minister described the situation in this way on a visit in 2007:
            ``The impression you get there is that illegal logging has
            become an everyday economic affair and common practice.
            Everything is covered with slabs of processed timber; there are
            saws everywhere with Chinese workers, who as soon as we
            approach them forget Russian, and Chinese too. Everybody sees
            it and nobody does anything. ``35

    Extent of U.S. impact
        The United States is the world's single biggest importer and
    consumer of wood products. According to FAO data, in 2005 the U.S.
    imported 17.2% of global ``forest products'' exports, which include
    pulp and paper.36 This figure rises to 20% once furniture is
    included.37 In dollar terms we are speaking of some $56
    billion, including all logs, timber, furniture, pulp and paper, or $38
    billion without pulp and paper.38 These figures have grown
    dramatically: according to ITC data, from 2000 to 2006, U.S. wood
    product imports overall increased by 58%, with furniture imports
    increasing by 78%.
        How much of this consumption involves wood material of high-risk
    origin39? Of course, nobody declares his product to be
    ``illegal'' on a customs form. But estimates converge on approximately
    10% of our imports. A recent in-depth analysis of global timber trade
    statistics, done for the OECD Roundtable on Sustainable Development,
    estimates that U.S. imports of high-risk wood in 2006 were
    approximately 28 million cubic meters of round-wood equivalent (RWE).
    Almost two-thirds of this came from China, followed by Malaysia,
    Indonesia, and Latin America (primarily Brazilian and Peruvian
    hardwoods).40 See Table 1 for a breakdown of the top wood
    product import streams and source countries, which shows that a
    substantial portion of U.S. imports come from high-risk sources.
        The OECD figure indicates that 10% of the U.S.'s imports, or 2% of
    the entire annual global trade in wood-based products, is derived from
    material at high-risk of illegal origin. This 10% figure is
    corroborated by Seneca Creek Associates' 2004 study for the American
    Forest and Paper Association, as well as the World Bank and the Royal
    Institute for International Affairs.41
        While it is inherently difficult to calculate the amount of illegal
    material entering U.S. ports, the impact of our national demand is easy
    to see on the ground, as has been described in the case studies above.
    Action by American policy makers or American consumers should not
    depend on knowing exactly how many dollars worth or board feet of this
    wood enter our borders each year. For critically endangered species
    like Sumatran rhinos or African lowland gorillas, a few hundred trees
    cut in the wrong place can mean the difference between survival and
    population crash. For villagers of northern Burma, several hillsides of
    old-growth teak support the perpetuation of a bloody military
    occupation. For the voluntarily isolated Mashco-Piro people of
    Southeastern Peru, loggers' invasion to steal a few dozen mahogany
    trees from one riverbank can mean contact with disease that wipes out
    their entire tribe. Even where the total board feet are small, the
    damage can be great.

    Amending the Lacey Act as a Demand-Side Solution
        If we understand illegal logging in the context of corruption,
    criminal trafficking and international trade as laid out here and in
    our report ``No Questions Asked,'' then it follows that in order to
    effectively address the problem, we need to change the equation of risk
    and return. We need to lower the incentives for illegal trade--through
    reducing demand and lowering profit margins--while raising the risks.
        Legislative action on illegal logging in consumer countries is not
    a replacement for, but a reinforcement of, domestic enforcement in
    producer countries. On the demand end, the purpose of an effective law
    must be judged by how well it can perform the following broad
    functions: (1) close market access for illegal timber and wood products
    to the most lucrative, hard-currency destinations for these products,
    (2) create the incentive for high standards of due diligence, and (3)
    level the playing field for businesses that want to do the right thing,
    without unduly burdening them.42 An effective law must also
    be feasible to implement.The legislation in question at this hearing
    does precisely this. EIA, after extensive analysis based on over 20
    years of field experience, believes that amending the Lacey Act is a
    powerful and elegant way to address illegal logging and worldwide
    associated trade from the demand side. The Lacey Act, in essence,
    changes the incentives for wood products companies to ask questions.
    And in the complex supply chain that characterizes contemporary
    international trade in timber and wood products, these questions will
    ripple down the chain: from American companies who intend to abide by
    their domestic laws, to the contracts they sign with Chinese
    manufacturers, to the inquiries these manufacturers' suppliers make
    with their Indonesian or Cameroonian or Russian sources.
        Moreover, the Lacey Act does this without being a radical departure
    from existing law, or an unduly burdensome trade measure. For one
    hundred years it has functioned to catch the worst of the worst, the
    serious offenders, and therefore has high burden of proof standards to
    prove ``intent'' for any criminal penalties. Further, it does not
    require specific proof of legality for each shipment. Rather, an
    amendment of Lacey sets up a reasonable set of penalties and
    subsequently relies on American companies' essential integrity,
    creativity, and desire to comply with the law, to set in motion the
    necessary steps that will transform the market for wood products into a
    place where questions get asked.
        EIA fully supports the intent of the Legal Timber Protection Act
    introduced by Congressman Blumenauer, Weller and Wexler. We recommend
    the inclusions of several modifications to the language that were
    agreed upon through intensive consultation with stakeholders among the
    industry, environmental, and enforcement communities, and introduced in
    the Senate by Senators Ron Wyden and Senator Lamar Alexander as S.
    1930, the Combat Illegal Logging Act of 2007.
        These modifications include a provision for basic declaration
    requirements that would include the species, country of origin,
    quantity and measure, and value of the plant import. These requirements
    are modeled after existing regulations for wildlife imports currently
    regulated by the Lacey Act, and resemble declarations for many other
    imported goods. They provide basic transparency for wood shipments. The
    declaration will have critical value for combating illegal logging by:
    1) encouraging importers to ask basic questions regarding the origin of
    their timber and timber products; 2) providing information at the point
    of import that will allow U.S. authorities with limited resources to do
    efficient, targeted inspections and enforcement; and 3) helping
    enforcement agents to immediately identify ``low-hanging fruit,'' such
    as timber expressly prohibited to be exported. The Act's declaration
    requirements will not be unduly burdensome to industry, including the
    manufacturing sector. Factories manufacturing wood products, in China
    or elsewhere, are capable of providing this information to buyers. They
    currently don't provide it because they have not been asked to.
        Passage of this law will bring the United States in line with
    international efforts on this issue. The commitments expressed by G-8
    leaders at the 2005 Gleneagles summit crystallized a growing awareness
    that demand-side measures are needed to effectively curb the roots
    causes of illegal logging. Today the consumer markets of the European
    Union, Japan, New Zealand, and Australia are implementing or
    considering a variety of policies and initiatives to encourage demand
    for legal timber.
        As long as the U.S. lacks similar policies to prohibit illegally
    sourced wood, our market is an enormous open door for suspicious
    material, undermining other countries' attempts to address the problem.
    Conversely, if the world's largest wood products market were to signal
    that it was closing this door, many people believe this action could
    provide the 'tipping point' necessary to bring rapid change in global
    logging and tracking practices.
        Please see Table 2 for our comparison of the characteristics that
    legislation to effectively curb demand for illegally sourced timber and
    wood products should ideally possess, and the characteristics possessed
    by the amendments to the Lacey Act offered in the current legislation.

    The market signal
        Passage of U.S. legislation to curb imports of illegal timber would
    have a rapid and significant effect on the global market.
        The Chinese wood products industry's ability to evolve is a key
    piece of the puzzle. By all accounts, the current state of the Chinese
    industry presents a considerable challenge to companies and other
    stakeholders trying to create supply chains that ensure exports of
    legal or sustainable wood. A recent evaluation by Tropical Forest Trust
    of the potential for guaranteeing legal supply in Chinese wood products
    pointed to various obstacles, but emphasized that Chinese manufacturers
    are extremely flexible and quick to adapt to new business models if
    they prove successful. The study concludes, ``it only takes a few
    examples of 'first-movers' who are seen to be gaining an advantage by
    changing the way they operate for more companies to move in that
    direction.''43
        EIA investigations have shown the untapped potential to improve
    timber sourcing in the private sector. The response of retailers,
    importers and manufacturers to documented illegalities or penalties
    under law demonstrates the capacity for rapid change in the industry.
    In 2003, EIA/Telapak documented several firms exporting baby cribs made
    of illegal ramin to the U.S. With this illegal flow brought to U.S.
    authorities' attention, agents were able to seize several illegal ramin
    shipments in 2004. (The U.S. government has authority to take such
    action for the few timber species listed on CITES. Unfortunately, these
    species in total account for less than 0.05% of total U.S. wood
    products imports.) When EIA/Telapak investigators went back to China in
    2004 and met with a major producer of baby cribs, he had completely
    switched his wood sourcing for baby cribs from endangered ramin wood to
    legal New Zealand plantation pine.
    Conclusion: the need for Congressional action
        ``Expecting or asking one country to combat illegal logging while
    at the same time receiving or importing illegal logs of course does not
    support efforts to combat these forest crimes. In fact ...allowing
    import and trade [in] illegally cut timber and associated products
    could also be considered as an act to assist or even to conduct forest
    crime.''
    Mohamad Prakosa, Indonesia's forest minister, 2003

        Some people will try to argue that illegal logging is not a problem
    of international trade, that illegal logging is done by poor people
    trying to find firewood, that little of this wood even enters the
    export stream, much less the U.S. market. Without denying that
    deforestation is a complex issue linked with poverty, EIA respectfully
    submits that these arguments miss the point. The illegal logging which
    concerns us today is export-oriented extraction, of a scale that can
    only be organized by networks of financiers, brokers, and buyers. To
    take just one example from EIA and our partner Telapak's
    investigations, in 2005 we documented 300,000 cubic meters of logs of a
    species called merbau (Intsia spp.) being smuggled from Indonesia's
    Papua province into Hong Kong and China--every month. This is an amount
    worth $600 million at western retail prices.
        A successful response to this sort of illegal activity must come
    from both ends. The international community must support, and demand,
    on-the-ground efforts by governments in producing countries to curb
    illegal logging and investigate and prosecute the timber barons within
    their borders. But countries like Indonesia and Peru and Papua New
    Guinea cannot cut off the flow of illegal wood products while the
    United States and its market allies continue to nourish it with
    billions of dollars and a no-questions-asked import policy. We need to
    harmonize our domestic policies with the impacts of our consumption.It
    is for this reason that legislation to prohibit the import and sale of
    illegal timber is so vital at this juncture. Not only is there
    consensus among environmentalists, governments, businesses and public
    citizens that illegal logging and timber traffic is a serious problem,
    but there is remarkable agreement about what needs to be done. We need
    an appropriate demand-side legal framework that will empower
    enforcement agencies with new tools and resources, and that will level
    the playing field for companies who want to do things right. We need
    the largest wood products market in the world to own up to its role in
    the illegal logging problem and begin to ask the necessary questions.
        Thank you.

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        [GRAPHIC] [TIFF OMITTED] T8330.017

      STATEMENT OF CRAIG S. FORESTER, VICE PRESIDENT AND GENERAL
     MANAGER, REX LUMBER COMPANY, ON BEHALF OF INTERNATIONAL WOOD
                          PRODUCTS ASSOCIATION

        Mr. Forester. Thank you, Madam Chairperson, Representative
    Brown and Representative Blumenauer. Good morning. My name is
    Craig Forester, Vice President and General Manager of the Rex
    Lumber Company. My company is headquartered in Massachusetts,
    and we employ more than 350 people in manufacturing operations
    in four states. I also serve as Chairman of the International
    Wood Products Association Government Affairs Committee.
        Today, I speak on behalf of a coalition of American wood
    suppliers, distributors and users of legal imported wood. We
    are united in condemning illegal logging. The future of our
    businesses depends on the legal and sustainable supply of
    imported wood.
        Members of our coalition include the National Association
    of Home Builders, the National Federation of Independent
    Business, National Lumber and Building Material Dealers
    Association, the American Home Furnishings Alliance, the
    National Marine Manufacturers Association and the International
    Wood Products Association. As this coalition demonstrates, my
    company is not alone. Together we represent nearly 745,000
    businesses.
        Housing, cabinetry, millwork, recreational vehicles, boats
    and furniture industries all use imported wood in their U.S.
    manufacturing facilities supporting hundreds of thousands of
    skilled U.S. jobs. My family's small business was started by my
    grandfather in 1946. From day one, Rex Lumber Company has been
    a leading advocate for environmental protection.
        We are certified by the Forest Stewardship Council and
    share their economic, social and environmental concerns. I give
    you this background to let you know that Rex Lumber Company is
    playing by the rules. I am proud of our business and our
    environmental leadership. We source legally, we trade legally.
    I travel regularly to Central and South America to visit our
    longstanding suppliers and to interview possible suppliers.
        My testimony before you today will show you that while we
    share the ideals of H.R. 1497 we are very concerned with the
    unintended consequences of this legislation as written. On
    behalf of the coalition, I respectfully request the
    Subcommittee to amend H.R. 1497 to address three specific
    concerns.
        First, define any foreign law to address only natural
    resources laws and regulations. Second, modify the proposed new
    documentation requirement to be consistent with current U.S.
    Customs regulations. Third, add an innocent owner provision. My
    written testimony goes into greater detail on all three of our
    specific concerns. I want to focus on adding an innocent owner
    provision.
        It is important to note that under the provisions of H.R.
    1497 U.S. importers, manufacturers and distributors are all
    held responsible for illegal acts overseas, violations that
    they would have no reasonable expectation to know about, much
    less the underlying laws that exist in all foreign countries.
    The problem is this bill provides no protection for innocent
    owners in the supply chain who handle imported wood products.
        Innocent owner is a simple concept but an important one. In
    essence, it puts the burden of proof on the government. It
    reinforces the key principle of innocent until proven guilty. I
    specifically would like to respond to three comments I have
    heard related to innocent owner. First, Lacey never had
    protection for innocent owner. Innocent owner had been thought
    available in Lacey until a Court case in 2005, the Blue King
    Crab case. We just want to put this protection back.
        Second, I have heard that I don't have to prove legality to
    clear U.S. Customs. This is true, but how do you disprove a
    negative should the government seize your goods? That is, how
    do you prove no law was violated overseas when you are already
    in possession of legal documents? Third, that including
    innocent owner would gut this bill. False. Innocent owner does
    not prohibit the government from taking goods that violate
    foreign laws.
        The government can still prosecute with innocent owner
    provisions. In fact, the Civil Asset Forfeiture Recovery Act,
    or CAFRA, and the Brownfield Revitalization Act both
    specifically had given innocent owner provision and neither has
    stopped the government from prosecuting cases. I want to
    conclude with a caution. To save forests we must face their
    biggest threat: land conversion.
        The World Bank noted, and I quote, ``that more than 90
    percent of the 1.2 billion people living in extreme poverty are
    dependent on forests for some part of their livelihoods.''
    Without any other incentives they chose to clear cut and burn
    their forests for cattle ranching, agricultural purposes and
    fuel wood, life's basic necessities.
        Forests need to remain forests, and the best way to do that
    is to provide economic incentives for countries to harvest them
    wisely and sustainably. Let us amend the bill to make sure we
    do no harm to legal businesses in the United States, and we
    don't give any extra incentive for these developing countries
    to convert their forests to farms.
        Unintended consequences of well-intentioned legislation are
    consequences nonetheless. In addition to making these changes I
    urge the U.S. Government to provide more financial and
    technical assistance to developing countries to enforce their
    laws and to prosecute the offenders. Thank you for this
    opportunity to testify and for your consideration. I look
    forward to your questions.
        Ms. Bordallo. Thank you very much, Mr. Forester.
        [The prepared statement of Mr. Forester follows:]

    Statement of Craig S. Forester, Vice President and General Manager, Rex
         Lumber Company, on behalf of the International Wood Products
     Association and America's Imported Wood Suppliers, Distributors, and
                                     Users

        On behalf of the member companies of the International Wood
    Products Association (IWPA) and the coalition of America's Imported
    Wood Suppliers, Distributors, and Users of legal imported wood, we
    appreciate the opportunity to submit testimony on H.R. 1497 and its
    proposed mark-up to a House companion to S. 1930. Both bills propose
    amending the Lacey Act to include imported wood products.
        For the record, IWPA and its coalition partners are united in
    condemning illegal logging. Our businesses depend on legal, sustainable
    trade in wood products in order to build homes, furniture, flooring,
    kitchen cabinets, boats, recreational vehicles, and other wood-based
    products for American consumers.
        We applaud the many efforts Congress has funded to help developing
    wood exporting countries that are struggling to enforce their forestry
    laws. It is with regret that we cannot support H.R. 1497 or its
    probable mark-up companion to S. 1930.
        Nearly 745,000 businesses are represented by this coalition of:
          National Association of Home Builders
          National Federation of Independent Business
          National Lumber and Building Material Dealers Association
          American Home Furnishings Alliance
          National Marine Manufacturers Association
          International Wood Products Association
        These associations have serious concerns about the unintended
    consequences of how H.R. 1497 or a House companion to S.1930 will
    affect American importers, manufacturers, and users of imported wood.
        The coalition respectfully requests the Natural Resources
    Subcommittee on Fisheries, Wildlife, and Oceans address three concerns
    in its consideration of this legislation.

    1. Define ``Any Foreign Law''
        The lack of specificity in the term ``any foreign law'' is
    troublesome. Would this allow prosecutions if a sawmill in a foreign
    country overloads its trucks when transporting wood to the port? How
    would an importer or supply chain member know what is required under
    ``any'' foreign law?
        Would there be a scenario where imported wood from Canada was
    subject to Lacey provisions because of a provincial government's
    dispute with First Nation citizens over the fishing rights in a
    concession?
        Courts have interpreted the phrase ``any foreign law'' extremely
    broadly in the context of fish and wildlife taken in contravention of
    any foreign law. See e.g., United States v. McNab, 331 F. 3d 1228,
    1235-39 (11th Cir. 2003), interpreting ``any foreign law'' to include
    non-statutory provisions such as foreign regulations, resolutions, or
    decrees; United States v. One Afgan Urial Ovis Orientalis Blanfordi
    Fully Mounted Sheep, 964 F.2d 474,477-78 (5th Cir. 1992), holding that
    ``any foreign law'' need not have been enacted for the protection of
    wildlife but need only to relate or refer to wildlife and that the
    Pakistani Constitution falls within the term.
        We need language in this bill that directly relates to natural
    resources so we are not at the mercy of overzealous interpretations of
    what constitutes the word ``any.''

    2. Eliminate Additional Documentation Requirements
        Our product comes to the U.S. clearing Customs on both exit and
    entrance. Sovereign governments issue documents, permits, and paperwork
    that allow products to be traded legally under international and
    national laws and regulations. Our government accepts those documents
    as legal upon entry at our nation's borders, just as we ask other
    governments to accept our country's issued documents.
        A requirement to identify the countries where sourcing and
    processing occurred should not be included. This requirement goes
    beyond the Customs regulations and adds significant complexity to
    Country of Origin classifications. Customs officials at the ports are
    already overtaxed with national security inspections. There is also
    some question as to which government organization is going to collect
    the data and manage it a meaningful manner.
        Most importantly, how will a database hinder illegal logging in
    foreign countries?
        There are existing tools both in government and in the private
    sector already available to determine trade flows of wood products.

    3. Add ``Innocent Owner'' Protection
        This legislation provides no protection for ``innocent owners'' in
    the supply chain who handle imported wood products. ``Innocent owner''
    is a simple concept but an important one. This is a widely acceptable
    standard used in other areas of federal and state jurisprudence.
    Without an ``innocent owner'' provision, supply chain members are
    vulnerable to civil forfeiture which could cause the loss of their
    businesses and personal savings. Cleary, such damage is as punitive as
    incarceration.
        Under Lacey, the entire supply chain handling imported plant
    material is held responsible for illegal acts of which they would have
    no reasonable expectation to know the violation much less the
    underlying laws that exist in all foreign countries. Courts have
    expanded the liability and coverage of Lacey to create a situation
    where there is ``culpability with no accountability.'' Recent case law
    effectively exempts Lacey Act forfeitures from the ``innocent owner''
    defense. In United States v. 144,744 Pounds of Blue King Crab, 410 F.3d
    1131 (9th Cir. 2005), the Ninth Circuit held that importers of crab
    that was transported on a foreign vessel which failed to maintain its
    vessel monitoring system in violation of Russian law could not assert
    an ``innocent owner'' defense in a forfeiture action.
        Adding an ``innocent owner'' provision will not unduly hinder the
    United States Department of Justice from prosecuting cases. ``Innocent
    owner'' does not prohibit the government from taking goods that violate
    foreign laws. The government can still prosecute with ``innocent
    owner'' provisions. In fact, the Civil Asset Forfeiture Reform Act of
    2000 (CAFRA) and the Brownfields Revitalization Act both specifically
    give an ``innocent owner'' defense, and neither has stopped the
    government from prosecuting cases.
        In essence, ``innocent owner'' puts the burden of proof on the
    government. It reinforces the key principle of ``innocent until proven
    guilty.''
        In an effort to restore the ``innocent owner'' defense in light of
    the Ninth Circuit's opinion, any proposed amendment to the Lacey Act
    should include language specifically adopting the ``innocent owner''
    defense set forth in the CAFRA.
        The proponents of this legislation say that legality does not need
    to be proven to clear U.S. Customs and to import goods. This is true.
    However, how does an importer or a supply chain member disprove a
    negative should the government seize his goods? That is, how does he
    prove no law was violated overseas when he is already in possession of
    legal documents?
        In recent weeks, several articles have been published about illegal
    logging in Canada and in the U.S. If the Lacey Act were amended, how
    would the domestic timber industry prove that no law has been violated
    anywhere in their supply chain?
        Most of the businesses represented by this coalition are small and
    family owned. We are not ``Big Timber'' or ``Big Paper''. We are mom
    and pop businesses who hope to someday pass on our customers to the
    next generation.
        We implore the members of the committee to amend this anti-small
    business bill to protect ``innocent owners'' and save U.S. jobs.
    Wood Trade is Unique
        In our consultations with government officials and Congressional
    staff, we have been challenged with the question, ``The Lacey Act works
    for animals and fish, why not wood?''
        Wood products go through transformations that have no parallel in
    animals or fish. We represent commercial industries that have many
    steps in the chain for transformation of product, unlike the commercial
    fishing industry where commercial boats catch and process at the site
    of harvest. Nor can we be compared to the individual hunter or
    collector who may personally and knowingly pursue a particular specimen
    on the wrong side of the law. Wood products go through many
    transformations, in many countries. For example, logs are harvested in
    the U.S. and exported to Vietnam for primary processing. The veneer
    shipped to China and made into furniture for ultimate export back to
    the U.S. Tracking that U.S. log from point of harvest in Pennsylvania
    and back to the point of import is incredibly complex.
    Illegal Logging Causes and Cures
        The International Wood Products Association and its coalition
    partners are committed to putting in place comprehensive solutions to
    the illegal logging problem. We believe there are already laws in place
    to stop the importation of illegal material into the United States.
        Solving the illegal logging problem is about stopping the problem
    at its source--in the country of origin before the material can enter
    into international trade.
        The root causes have nothing to do with importers or U.S. trade. A
    collaborative report by Seneca Creek Associates and Wood Resources
    International states, ``The suspicious volume of round wood that enters
    international trade represents on the order of just 1 percent of global
    production for both softwood and hardwood.''
        Instead of focusing on criminalizing U.S. citizens involved in the
    importing and building trades, policy should address issues causing
    illegal logging--poverty, forest governance, societal problems, and
    civil conflicts.
        The World Bank noted that ``more than 90 percent of the 1.2 billion
    people living in extreme poverty [are] dependent on forests for some
    part of their livelihoods.'' Without any other incentives, they choose
    to clear-cut and burn their forests for cattle ranching, agricultural
    purposes, and for fuel wood--life's basic necessities.
        Enacting H.R. 1497 or a House companion to S. 1930 will not end
    deforestation or illegal logging because it does not get to the root of
    the problem. These approaches may actually make the problem worse as it
    will add costs to forest management. When impoverished communities see
    no future in forests, they burn them down to make the land available
    for planting crops and ranching.
        We strongly feel the best way to combat illegality is by enforcing
    the laws in place. By definition, illegal logging is not legal;
    therefore, let us work with the foreign governments of most interest
    and concern to make sure there is great compliance with existing laws.
        If the United States is going to position itself as a partner to
    countries that have problems with illegal logging, it must do so as an
    honest broker seeking good resolutions and not because it is responding
    to some domestic industries that are seeking to exploit illegal logging
    issues as a push for protectionist measures to limit competition.
        It does no good to create an illegal logging remedy that is in
    practice a method to reduce competition from imported goods. Such a
    remedy merely becomes an instrument of protectionism that undermines
    U.S. competitiveness, hurts millions of American consumers, and
    penalizes small businesses.
        This bill, as written, does not move us to where we need to be to
    end illegal logging around the world. Our coalition believes it is
    necessary and appropriate to utilize bilateral, regional, and
    multilateral agreements to strengthen commitments in the areas of law
    enforcement, judicial capacity building, and technology. The U.S.
    should work with foreign governments on the ground through bilateral
    trade agreements, such as the Peru Free Trade Agreement with its
    illegal logging annex; Memorandums of Understanding, like the current
    MOU with Indonesia; the U.S.-China Strategic Economic Dialogue Task
    Force to Create Bilateral Agreement Addressing Illegal Logging and
    Associated Trade; and the President's Initiative Against Illegal
    Logging (PIAIL). If this legislation is an attempt to influence wood
    products trade with China, then please propose a trade bill to deal
    with China and do not enact legislation that will harm legal businesses
    while doing nothing to protect the forests from being converted to
    agricultural use.

    Conclusion
        The International Wood Products Association condemns illegal
    logging. This industry's long-standing support for sustainable forest
    management is evidenced by IWPA's Code of Conduct and Board-approved
    Statement on Illegal Logging developed in 1994 and 2002, respectively--
    among the first policy statements adopted about the issue by any
    organization.
        Despite a desire to be proactive on the issue, IWPA and its
    coalition partners oppose H.R. 1497 or a House companion to S. 1930 as
    currently drafted to criminalize the otherwise legal importation of
    wood products where the imports are found to have been taken in
    violation of ``any foreign law.'' These measures would extend civil and
    criminal penalties under the Lacey Act to U.S. citizens who are in
    possession of plants that violate ``any foreign law,'' even when the
    U.S. citizen is an ``innocent owner'' and has relied upon
    certifications of the exporting country.
        Expansion of the Lacey Act as suggested by H.R. 1497 or a House
    companion to S. 1930 would create substantial uncertainty for various
    industries lawfully engaged in and reliant on the importation of wood
    products and other plant materials. Such uncertainty would result
    because of the broad applicability of Lacey Act civil and criminal
    penalties to individuals within the chain of custody of plant materials
    that, unbeknownst to them, may be in violation of ``any foreign law.''
    As discussed previously, U.S. federal courts interpret the term ``any
    foreign law'' extremely broadly, in contravention of the original
    intent of the Act.
        During the 1981 Senate hearing on the Lacey Act Amendments, Dr. F.
    Eugene Hester, Acting Director of the U.S. Fish and Wildlife Service,
    addressed the intent of the amendments:
            ``We do not wish to hinder legitimate trade in wildlife or
            wildlife products. We believe that healthy, viable, sustaining
            wildlife populations should be harvested and trade promoted. It
            is the destructive poaching of fish and wildlife that must be
            controlled...''
    Thus, the current efforts to amend the Lacey Act, which would hinder
    legitimate trade in wood products run counter to the intent of the
    statute.
        The National Stolen Property Act, Cultural Property Implementation
    Act, Convention on International Trade in Endangered Species, Customs
    laws, and existing money-laundering statues are among the tools readily
    available to the U.S. government to prosecute the ``bad actors'' or to
    deal with timber species which are actually at risk. In addition,
    bilateral arrangements can be designed to provide for enforcement by
    the U.S. of other countries' illegal logging laws. Two examples are a
    Memorandum of Understanding signed with Indonesia and the illegal
    logging annex in the Peru-U.S. Free Trade Agreement.
        Forests need to remain forests, and the best way to do that is to
    provide economic incentives to countries that sustainably manage their
    forests. Using tropical forest products is the best tool in our kit to
    promote forest health, encourage legal trade, and promote economic
    development in poverty stricken nations.
        The benefits will also be seen in the U.S. marketplace and in our
    employment numbers. In 2006, over $23 billion worth of legally traded
    wood and wood products entered the U.S., a 38-percent increase over
    2003. Imported wood products are value-added in the U.S. by U.S.
    workers for U.S. consumers. Housing, flooring, decks, cabinetry,
    millwork, recreational vehicles, boats, and furniture industries all
    use imported wood in their U.S. manufacturing facilities. The demand
    for products of a certain look, durability, availability, and price is
    at the center of our market economy. As market demand for imported
    woods and other goods rises, so do jobs. From port to highway, producer
    to distributor, and retailer to end-user, hundreds of thousands of
    family incomes are made possible by international trade, including
    legally sourced imported woods.
        Forest conservation and legal trade are goals that we all share.
    Unfair policy pushed by alliances seeking political gains and market
    advantage should not supersede them.
        Thank you for this opportunity to testify and for your
    consideration. We look forward to working with the Subcommittee as it
    reviews H.R. 1497.
                                     ______

        Ms. Bordallo. Now, consistent with Committee Rule 3[c], the
    Chairwoman will now recognize members for any questions they
    may wish to ask the witnesses allowing five minutes each for
    each member. Should the members need more time we will have a
    second round of questions. I would like to begin first with Ms.
    Sobeck.
        In your testimony you note that the Justice Department
    believes that existing U.S. laws do not adequately address the
    problem of trafficking in illegally logged timber and that
    amending the Lacey Act is a sensible way to provide the legal
    authority that is needed.
        Can you give us some examples where the Department was
    aware of illegal timber being imported but you were unable to
    prevent it from entering the U.S. due to inadequate legal
    authority? How would proposed amendments to the Lacey Act
    change that?
        Ms. Sobeck. Yes, Madam Chairman. Just I think an easy
    hypothetical. If there is a shipment of timber that we have
    found out from foreign authorities was harvested illegally in
    the foreign country, and it is in the process of being imported
    into the United States, if that timber is of a species that is
    not listed under CITES it is our view that there is no
    provision of U.S. law that would prevent its importation as
    long as it was truthfully and appropriately declared upon
    entry.
        I mean, obviously if somebody lies on their Customs forms
    we have a means of going after them, but if it is a CITES
    protected species we would not have a Lacey Act enforcement
    action, but we could bring an enforcement action under the
    Endangered Species Act or the smuggling prohibitions. In the
    absence of CITES listing there is no provision of U.S. domestic
    law that would prevent the importation of illegally harvested
    foreign timber in our view.
        Ms. Bordallo. Let me just follow-up here. Would the sawn
    timber imports from Indonesia mentioned by Mr. von Bismarck be
    an example, would you say?
        Ms. Sobeck. If that timber were not a CITES listed species
    of timber that would be an example, yes.
        Ms. Bordallo. Mr. von Bismarck, would you like to add to
    that question, please, in terms of the problems that you are
    seeing now?
        Mr. von Bismarck. Yes. I think that is what I was referring
    to with one hand tied behind our backs. I think that the
    efforts by the United States government under the President's
    initiative against illegal logging, the efforts by our various
    agencies, have been very well-received and very important.
        Unfortunately, the monies spent and the efforts spent have
    been undermined by the fact that while we are, for example,
    training prosecutors in Indonesia, for example, we are on this
    end financing unwittingly the crooks that they are supposed to
    be going after. It is only with a comprehensive approach that
    we can make our hard work on the ground effective, and this is
    what is missing.
        Ms. Bordallo. Thank you very much. I have a second question
    for you, Ms. Sobeck. Opponents of the bill claim that by
    amending the Lacey Act as proposed it is placing an unfair
    burden on importers of wood and wood products by requiring them
    to be accountable for foreign logs. You note in your testimony
    that importers of fish and wildlife products have been subject
    to similar accountability requirements for more than two
    decades.
        How are these situations similar, and what new requirements
    were placed on fish and wildlife importers in 1981 when the law
    was amended? Did it prove so burdensome that they were unable
    to continue their imports?
        Ms. Sobeck. Well, I can't speak for industry, but I think
    that we have found with respect to fish and wildlife that Lacey
    has been a good tool and that the burden on the government is
    quite high in proving a criminal case. We do have an obligation
    to prove knowledge generally of the foreign law or that a
    person or entity in the exercise of due care should have known
    about a foreign law and that in the absence of that level of
    knowledge we would not be imposing or seeking to impose any
    sort of criminal sanction.
        The standard of due care varies by what line of business
    the person or the entity is in, whether they are regularly
    engaged in business that relates to importing or commerce in
    foreign fish and wildlife, and if this were extended to plants
    or timber products that would be the case as well, but the
    government has quite a burden in proving a criminal case. So we
    from a law enforcement point of view have not seen that this
    has been a big problem for the industry.
        I defer to my colleagues who were testifying here today
    about their views about whether the documentation would be
    burdensome for them or not. It is interesting to me that they
    said that they did not think that it would be.
        Ms. Bordallo. Do any of the other witnesses wish to comment
    on that?
        Mr. Forester. I would like an opportunity to respond.
        Ms. Bordallo. Go ahead.
        Mr. Forester. Thank you. I appreciate the point of view of
    Justice. I think the Lacey Act as it applies to fish and
    wildlife forgets the fact that the supply chain in lumber is
    far longer and more complex than the harvesting of fish and the
    processing of fish and wildlife at the point of harvesting.
        The amendments that we are suggesting to this amendment try
    to place culpability on people who knowingly import illegal
    lumber. When you talk about foreign laws, we are all united
    against illegal logging, and we would like to give you the
    tools to use to combat that, but in doing so the burden on
    business should not be for any foreign law.
        If that is the intent, you know, specifics in the law I
    think are very important, and I think the burden of proof
    should be high on a criminal case, and I think the Justice
    Department would agree. When we ask for innocent owner we are
    merely looking for culpability to be placed upon people who
    knowingly do so, and for the responsibility for illegal acts to
    be placed upon people who are committing those illegal acts.
        Providing an innocent owner provision similar to one that
    is in CAFRA allows businesses whose business is lumber to not
    be subject to foreign laws that they would have no way of
    knowing about. I think it is important to understand that there
    is a long supply chain in the harvesting of lumber, and I think
    with a documentation requirement in place that it is very
    difficult to audit that trail that we expect foreign sovereign
    governments to audit.
        Ms. Bordallo. Thank you. Thank you very much, Mr. Forester.
        Mr. Forester. Thank you.
        Ms. Bordallo. Ms. Wrobleski or Mr. Barringer, would you
    care to comment on that?
        Mr. Barringer. As far as the regulation is concerned we can
    appreciate that. I have heard the same thing for years in West
    Virginia about the regulation on logging. We have a book this
    thick in West Virginia of requirements that are placed on us
    just to log in West Virginia, but we do it, and we get by with
    it and it is OK. This is a dire situation.
        We are talking about 69,000 workers to date that have lost
    their job because the furniture plants are leaving this country
    to chase cheap wood, going after illegally logged timber.
    Something has got to be done.
        Congressman Brown, in your state in South Carolina they
    estimate there were probably 300 small hardwood saw mills.
    Unless something is done, those guys, half of them are toast in
    10 years. If there is 300 sawmills that is 29,000 paychecks in
    the State of South Carolina. We don't know for sure. That is an
    estimate of the number of small sawmills in the state.
        Ms. Bordallo. All right. Would you care to make a
    statement?
        Ms. Wrobleski. I think the point that I would make, Madam
    Chairman, is that the legislation is fairly specific about what
    foreign laws we are talking about, and I think that has been
    the critical issue frankly for AF&PA throughout this process is
    the requirement for specificity.
        Illegal logging is defined as organized efforts to steal
    trees or otherwise ignore a country's efforts to control and
    preserve its nation's forests such as harvesting without
    authority in designated national parks or preserves, logging in
    excess of authorized amounts, failing to pay taxes or royalties
    on harvested logs and exporting logs in violation of export
    limitations.
        I think the point that the legislation is directed with
    this specificity at those particular laws is frankly something
    that AF&PA applauds.
        Ms. Bordallo. Thank you very much, Ms. Wrobleski. Now, the
    Chair recognizes the Ranking Member, The Honorable Mr. Brown
    from South Carolina.
        Mr. Brown. Thank you, Madam Chairman, and thank you all.
    What an interesting panel. I hope we can come to some good
    resolve. It concerns me. Certainly, we don't want any illegal
    products coming into this country, whether it is fish, or wood,
    or whatever else it might be, but to place the burden of
    responsibility on the end user to determine whether it is legal
    or not legal I think is a difficult task for me.
        With that, let me ask this question to Ms. Sobeck. Ms.
    Sobeck, H.R. 1497 requires that U.S. users of imported wood
    products comply with all foreign laws, treaties and
    international agreements. How many forest laws are there in
    Indonesia?
        Ms. Sobeck. I don't know, sir.
        Mr. Brown. My notes say 900.
        Mr. Blumenauer. Madam Chair, just in aid of, that was the
    bill as it was originally introduced. As I tried to make clear
    in my testimony, we have been working with many of the people
    here. The version that is introduced by Senator Wyden reflects
    the consensus that we have developed. My testimony was based on
    using that amended version.
        Mr. Brown. OK.
        Mr. Blumenauer. I don't want us to spend a lot of time on
    something that isn't what I am proposing.
        Mr. Brown. OK, but that was just to get me where I want to
    go next, but thanks, Earl. OK. How do we determine whether the
    product that we are receiving at the port whether it is legal
    or illegal? How do we make that determination, and who makes
    the determination?
        Ms. Sobeck. Well, that determination is going to depend on
    a case by case basis. If we, the United States, are going to be
    making a determination that somebody has broken the law the
    burden is going to be on us to show that the person or entity
    knew or should have known in the exercise of due care in order
    to bring a criminal violation.
        Mr. Brown. And that is my point is that, you know, looked
    like to me the United States government ought to be responsible
    for determining what products are legal and what is illegal. I
    know that those countries have to comply with their own laws to
    I guess credit whether it is legal or not legal.
        I would hope that some time or another we could have that
    in a manifest that when the product comes in that we could make
    that determination and not wait until it becomes a chair or
    whether it becomes some other piece of furniture. That is too
    far down the supply chain I think to bring some criminal
    activity.
        I mean, I would hate to see somebody come in to one of
    those plants and confiscate some boats, or, you know, some
    furniture because somebody missed that checkpoint when it came
    into the United States.
        Earl, that is my real concern is we can get some
    clarification at that level. We don't want it coming in. We
    don't want those mills to close down, we don't want all those
    furniture plants to close either that buy that lumber from
    those hardwood mills, but how do we know when we import
    something from China whether it is coming from lumber that is
    legal or illegal?
        Ms. Sobeck. Well, Congressman, I think that it is going to
    partly be the paperwork that is going to be required to
    accompany the products upon their import, and then it will be
    up to the exercise of due care to importers or others farther
    down the line. If there is somebody farther down the consumer
    line who has no knowledge, the government would not be bringing
    any kind of criminal action under this set of amendments to the
    Lacey Act if they were enacted.
        Mr. Brown. Then you would support innocent owner provision?
        Ms. Sobeck. Well, with respect to the criminal offenses
    obviously somebody who had absolutely no knowledge and no duty
    to know in the exercise of due care to know that the product
    was illegal would not be subject to criminal sanctions. The
    forfeiture provisions are not subject to those knowledge
    requirements under the Lacey Act at the moment with respect to
    the contraband substance itself.
        Mr. Brown. OK. Could I get a comment from the rest of the
    panel on the innocent owner provision?
        Mr. von Bismarck. Thank you, Congressman. I think it is
    helpful to distinguish that for prosecution of individuals it
    is our understanding that the burden is on the government to
    prove intent, so there under this law will be no prosecution of
    individuals that did not know or did not follow due care.
        The discussion over innocent owner relates to seizure and
    forfeiture only, and in that case from our point of view from
    working on enforcement and looking at what deterrents would
    work would be very important to consider that the comment made
    by Mr. Barringer as to the impacts on the economy are largely
    driven by the actual shipments of illegal timber making it into
    the country.
        The problem with the innocent owner and why we say it will
    gut the bill is that if we have the information, if we can
    prove that a shipment is illegal, we should be allowed to seize
    it. That would be so important for the signals that this will
    send in the market.
        Mr. Brown. Right, and I agree we ought to be able to seize
    it, but we ought to be able to seize the original shipment, not
    wait until it has been transformed into some other product.
    That is the reason I was thinking about the innocent provision
    in there. If it goes through Customs, you know, like the normal
    standard process and it is all agreed to then why would the
    next chain of ownership not be OK?
        Mr. von Bismarck. It is actually a critical point,
    Congressman, and it is very important to not look at only one
    point in the supply chain. It is certainly true that the supply
    chain gets very complex in the case of wood products, and I
    think that will lead to the fact that it will be more difficult
    for the government to prove that something is illegal if it is
    highly manufactured, and therefore, somebody dealing in those
    kinds of products is less likely to be prosecuted.
        If it can be proven it is essential that case can be
    brought. Otherwise, if we only look at sawn timber or we only
    look at logs the market will simply respond by manufacturing
    the products in a country that does not have similar laws and
    then shipping all of the illegal material in the form of chairs
    into the United States.
        Mr. Brown. So you think the proof of legality ought to be
    with the receiver or with the government who is actually doing
    the inspection as it comes through? I mean, wherever that end
    product comes, how can they be responsible for an act that took
    place in Indonesia?
        Mr. von Bismarck. Well, they won't be responsible, but the
    good can be seized if the government can bring evidence that
    material is illegal.
        Mr. Brown. But shouldn't that be done at a port of entry?
        Mr. von Bismarck. If it can it certainly should be. That
    would be most efficient, and that is what the on the ground
    work that the U.S. Government is doing now would effectively
    do, but it needs to be buttressed by this legislation that says
    if something gets through you are not going to be able to sell
    it in the United States and therefore have the motivation to
    try to avoid the efforts in Indonesia to solve the problem
    there.
        Mr. Brown. Ms. Sobeck, do you agree with that assumption?
        Ms. Sobeck. I am sorry. I agree with you, Congressman, that
    we should try to get at a violation at the earliest possible
    time. In fact, our preferred enforcement mechanism would be to
    have the foreign country and the country of origin do their
    policing of their own laws to prevent the export of the
    material to the United States.
        Mr. Brown. Sure. Sure. Right.
        Ms. Sobeck. Then of course we would like to catch it at the
    border and have the primary importer. I think that is always
    our preferred enforcement mode for Lacey Act prosecutions even
    if the predicate offense is a state law. We are always going to
    go after the main importer, the main supplier, the wholesaler,
    but as Mr. von Bismarck noted, sometimes you don't get there.
        Sometimes the only thing you have is the illegal product
    itself. I agree that if since what we are trying to do is get
    to not having us be the consumer nation of this illegal
    product, then having an action not against the individual, not
    a criminal action, not something that is going to jeopardize
    their liberty or result in a criminal fine but to forfeit the
    product itself even in the absence of knowledge of the owner
    further down the supply chain or ownership chain, that
    occasionally may have to occur.
        Again, that is the structure that is already in place in
    the Lacey Act. We have limited enforcement resources. We are
    going to try to target them in an intelligent, appropriate way.
        Mr. Brown. Mr. Forester, did you want to respond?
        Mr. Forester. Thank you very much. Innocent owner does not
    prevent the government from seizing goods. In fact, CAFRA, the
    Civil Forfeiture Act, has an innocent owner provision. We were
    looking for Lacey to include the innocent owner similar to what
    CAFRA does. Listen, people import illegal lumber knowingly.
    Criminals should be prosecuted.
        You should prosecute them, and I want you to prosecute
    them. That makes better business for the rest of us who are
    doing it legally. There is no doubt about that. CAFRA, which is
    a forfeiture act, has an innocent owner provision in it. We are
    looking for Lacey to incorporate an innocent owner provision to
    protect people who do not knowingly import illegal timber.
        It is to put culpability on people who knowingly are doing
    criminal activities from a criminal set. It doesn't affect
    forfeiture, and illegal timber should be seized. If the
    government can prove that it is illegal timber they should
    absolutely seize it.
        But from an importer's standpoint, if you have to prove
    legality currently through import documents, export documents
    from the country of export, import documents, I do my due
    diligence with my suppliers to make sure that they are
    providing me with legal documents, I expect foreign sovereign
    governments to do their due diligence in enforcing their laws
    because I cannot substitute for the U.S. Government or more
    importantly a foreign sovereign government to audit the trail
    of legal documents through the long supply chain that happens.
        Lumber is cut, it is sawn, logs travel, people sort their
    logs, and this happens in the United States also, and I think
    it is done legally. It is a long supply chain. If I have legal
    documents from a foreign sovereign country I need to rely on
    that because as a small business I don't have the resources
    that the U.S. Government nor foreign governments have to police
    the activities and the laws in each individual country that I
    am dealing with.
        I think if you have a criminal and that criminal is
    importing lumber, prosecute them. Wonderful. That is the best
    thing that we could have.
        Ms. Bordallo. Thank you very much, Mr. Forester. We are
    going to have a second round of questions here, so I would like
    to tell the Ranking Member he has a second round here. At this
    time I would like to recognize the author of the legislation,
    Mr. Blumenauer of Oregon.
        Mr. Blumenauer. Thank you very much, Madam Chair. I really
    appreciate the line of inquiry that we had a moment ago because
    I think it is starting to get to the focus of what we are
    trying to do here.
        Mr. Forester, in your introduction, it is not in your
    written testimony, but in your introduction, you elaborated
    that you visited overseas. You went over and looked at what is
    going on, on the ground, repeatedly to assure?
        Mr. Forester. Yes.
        Mr. Blumenauer. Now, why do you do that instead of just
    relying on what the Chinese, or the Indonesian, or the Thai
    tell you?
        Mr. Forester. Or the Central and South American locations
    that I go to.
        Mr. Blumenauer. Right. Why do you do that?
        Mr. Forester. We do business domestically and
    internationally, and I choose suppliers the same way
    internationally as I would domestically. You need to meet your
    supplier, you need to visit their location, you need to walk in
    and look at their yard. You need to look around. Do they have a
    neat yard or is there things piled up everywhere?
        You need to meet the people that you are dealing with and
    get a feeling about them. Then you need to work through
    documents and whatever else to determine whether they are doing
    something----
        Mr. Blumenauer. Right, but you just don't rely on
    representation from foreign brokers or for foreign governments.
    You do it yourself on the ground.
        Mr. Forester. As a small business we do directly import out
    of certain Central and South American countries. I do not do
    any business in Asia, so I cannot speak to Asia. We do buy from
    U.S. companies and brokers that have brought product through
    Customs, and many of the IWPA members do that, and I think they
    are relying and I rely on the documentation.
        Mr. Blumenauer. I guess the point I am trying to make is
    that you go to extraordinary lengths to guarantee that those
    areas that you are involved with meet your standards.
        Mr. Forester. To the best extent possible.
        Mr. Blumenauer. Yes, and I guess this to me is an
    illustration, Madam Chair, of why I think we need this
    legislation, because somebody who chooses not to go to that
    length, who just gets a good price, wants to take it, looks the
    other way, is on the same footing. We wouldn't have an illegal
    logging business thriving worldwide if we had higher standards
    in the United States.
        Your mills wouldn't be at risk, or at least as many of
    them, in South Carolina if everybody did what Mr. Forester
    does. The notion that people just kind of can sort of take what
    is thrown over the transom. It is common knowledge to people in
    the industry that these are illegally harvested lumber, that
    they are not all done according to the standards that are in
    place technically but not enforced.
        Mr. Brown. Would the gentleman yield real quick?
        Mr. Blumenauer. Surely.
        Mr. Brown. Earl, I know that he goes and looks at the yard,
    and it looks clean and all that stuff, but legally who has the
    stamp to say whether that is legal timber harvesting or illegal
    timber harvesting? Looked like to me if the country would give
    some kind of a stamp to say that this mill is shipping, or that
    is a legitimate mill, or nonlegitimate mill, the country of
    origin should have some legal responsibility to certify it.
        I would think the United States, as we ship products abroad
    we have some certification to say that, you know, these are
    legal timber products or whatever.
        Mr. Blumenauer. I agree, and I think as you go overseas and
    you look at what is happening. For example, there has been a
    big brouhaha about sweat shop provisions, and you understand
    that again in South Carolina, and what has happened is that the
    industry has created protocols. They have standards for what
    they purchase. Whether it is Adidas or Nike, they have
    protocols. They have things that their mill, the people they
    supply from, their suppliers, that they look for, that they
    agree to a code of conduct.
        Occasionally mistakes will be made, but if a company has in
    place procedures, if these are in fact represented to them, and
    they follow through in a reasonable fashion, and they make
    reasonable effort and they have standards, as I read the bill
    as we have attempted to understand it, that there would be no
    criminal penalty unless--and the Department of Justice has more
    than what they can do, and I appreciate Ms. Sobeck being here,
    but correct me if I am wrong--the criminal liability would not
    kick in unless you could prove that they knowingly accepted
    illegal.
        The civil penalties are, people, they either need to know
    or should have known that due care exercised before they are
    even subjected to civil penalty. Under this legislation there
    would be an additional disincentive, which is an illegal log or
    illegal piece of furniture if it is found out would be
    forfeited so that there is an incentive up and down the chain
    to do what responsible manufacturers are already doing, what
    Mr. Forester is already doing. Isn't that correct? Do I have
    that right?
        Ms. Sobeck. That is correct with respect to criminal
    culpability. There is no innocent owner without any knowledge,
    or a responsibility, a duty to exercise due care, no innocent
    owner will be found guilty of a criminal offense. They will be
    subject to forfeiture of the product. There has been a little
    discussion of CAFRA, and I did want to note that the case that
    you have been mentioning, the crab case, actually found that
    the Lacey Act forfeiture provisions were consistent, were OK
    under that statute, and so they are not inconsistent.
        So to the extent that CAFRA has an innocent owner provision
    that is supposed to apply across the board to civil forfeiture
    statutes Lacey has been found by at least one Court of Appeals
    to be consistent with that standard.
        Mr. Forester. And that is wonderful. That is why I am here
    today. I try to do and do the best job possible, but that said,
    if Lacey is not tied to the innocent owner provisions in CAFRA,
    if there is not a specific tie to it, all the good things that
    I try to do to import legal lumber, which I do--I am here not
    to defend illegal lumber----
        Mr. Blumenauer. I am asking the questions. Excuse me, Mr.
    Forester.
        Mr. Forester. OK. Yes, sir.
        Mr. Blumenauer. I mean, you are debating the Lacey Act. You
    are not debating what we are proposing here. If people want to
    come back and change the Lacey Act to clarify that there is an
    innocent owner provision, so be it. What we have here in this
    legislation is simply extending it to the Lacey Act.
        If your segment of the industry wants to take exception to
    the Lacey Act, go do that. What we are doing is trying to, and
    I really appreciate the broad industry support, the broad labor
    and environmental support, to try and root out of the chain of
    commerce illegally logged timber which is occurring now, which
    is widespread, which is why, Mr. Forester, I hope that you are
    looking on the ground in Latin America to make sure because you
    are representing to your customers that they can count on what
    is going on.
        What the other and I appreciate the majority of the people
    in the industry are here arguing is that everybody ought to be
    able to rely on that under the force of law. The Lacey Act is
    the simplest, most direct way I think to accomplish that. If
    people want to change the Lacey Act, that is a separate issue.
    We are just proposing that the Lacey Act protection apply to
    illegally harvested timber. Thank you, Madam Chair.
        Ms. Bordallo. Thank you very much. I have a couple of
    questions on the second round for Ms. Wrobleski and Mr.
    Barringer. Both of you, the two of you, you know it is very
    unusual for the Congress to be asked by U.S. businesses for any
    expansion of U.S. laws or regulations which may affect their
    particular business. Are you not concerned that your own
    companies may be inadvertently caught up in the Lacey Act and
    forced to prove your own innocence?
        I will ask you, Ms. Wrobleski, first to answer that.
        Ms. Wrobleski. Thank you, Madam Chairman. I think that over
    the course of the last several months of negotiations between
    the many stakeholders who care deeply about the issue of
    illegal logging, the members of AF&PA and certainly
    International Paper have come to the realization and the
    understanding that the current proposal which Mr. Blumenauer
    has proposed is one that we think is the most effective.
        At International Paper we have complete confidence in our
    supply chain. We pay great attention to CITES. We don't log
    anyplace where Conservation international has declared a hot
    spot, we are very careful about tropical forests. I mean, we
    have a long legacy of good stewardship of the forests, and we
    protect that legacy and frankly it is an important part of who
    we are as a company.
        As I say, I think that on behalf of the association and the
    industry the proposal that we have before us we think is
    workable and will be effective.
        Ms. Bordallo. Mr. Barringer?
        Mr. Barringer. Yes. No, I am not concerned. From Coastal
    Lumber Company's standpoint we just do the right thing. Just
    from that standpoint, that doesn't concern me. I have been to
    hundreds of furniture plants in China, and Vietnam, and
    Southeast Asia and so forth, and they all know it is illegally
    logged. They laugh about it. They all know that the wood that
    is sitting in that furniture plant that is going to the United
    States has been illegally logged along the Russian border, and
    they have paid bribes to get it.
        Now, I am not saying that everybody is, you know, perfect
    on this, but something has got to be done. Something has got to
    be done now. Like I have pointed out, in Congressman Brown's
    state you have a lot of jobs at stake right now. You can talk
    to Sumter Furniture in South Carolina where my grandfather
    worked as a forester 75, 50 years ago. Well, they are in China
    now. They are in China.
        Ms. Bordallo. Well, I have been a member of the Small
    Business Committee here in the U.S. Congress, and I know the
    tales of the small businesses. It is really very sad.
        I have a question for you, Mr. von Bismarck. Some have
    questioned whether international trade and U.S. demand is
    really a driver of illegal logging in foreign countries arguing
    that most illegal wood is sold domestically. Given your
    experience on the ground in these countries, how do you respond
    to that assessment?
        Mr. von Bismarck. Thank you. Yes. The current estimates are
    that the illegal portion of international trade is about 10
    percent, and the estimates that we have pulled together in the
    report that we prepared for this hearing we also found that
    best estimates are that about 10 percent of imports into the
    United States are from high risk material which would go to
    about 3.8 billion a year.
        Those are obviously difficult statistics to pull together.
    We are talking about smuggling. They are difficult in any
    smuggling to pull together exact statistics. They also in a way
    miss the point of what we are trying to do here.
        What we are absolutely certain about is that from the point
    of view of uncontacted, indigenous peoples in Peru, or from the
    point of view of the last national parks available remaining in
    the world, and from the point of view of those impacted by
    illegal imports, it doesn't matter what the proportion is
    relative to legal forests, it matters how it is impacting
    things on the ground.
        So even a small proportion coming into the United States
    can have an enormous impact on a national park that is being
    entered by a criminal elements in Honduras, for example. I
    think in terms of the driver it is clear that often illegal
    logging is a first step that begins a chain of events that
    includes the other complex issues as have been rightfully point
    out that determine deforestation.
        Often, illegal logging is one of the first gateway
    activities that occurs in those stories.
        Ms. Bordallo. I have a further question for you. The IWPA
    argues that the best way to combat illegal logging is to
    enforce the laws that are in place in foreign countries. What
    is your response to that?
        Mr. von Bismarck. It is absolutely correct that enforcing
    foreign laws and working on the ground in foreign countries is
    extremely important. What is just missing from the comment is
    that it is currently being undermined by the fact that we are
    in essence unwittingly financing the criminals that we are
    spending money overseas to combat, and it just doesn't make
    sense.
        I think that every approach that we have had to try to deal
    with an illegal trade problem understands that there is a
    demand and a supply side to the problem, and it requires a
    comprehensive approach. This demand side has been missing.
        So specifically, the Lacey Act in its inception 100 years
    ago interestingly was created to support laws in other states,
    so it is precisely for that objective that is pointed out, that
    we need to support the efforts in foreign countries to enforce
    their own laws. That is precisely the objective of this
    legislation.
        Ms. Bordallo. Thank you very much. Now, the Chair
    recognizes for a second round Mr. Brown, our Ranking Member.
        Mr. Brown. Thank you, Madam Chair. With that in mind, how
    can we as an end user of a produce enforce the laws in another
    country?
        Mr. von Bismarck. This legislation is not requiring any
    business to enforce laws in another country.
        Mr. Brown. But to comply with them, right?
        Mr. von Bismarck. Right, and I think enforcement officials
    here will point out that in any prosecution to date in the
    Lacey Act much of the success of that prosecution depends on
    communication with the source country and support from the
    source country in clarifying those issues. I think your point,
    Congressman, of clarification of laws is a very important one,
    and again, is the kind of measure that this legislation will
    instigate and support.
        There are efforts in Indonesia as we speak, very successful
    ones, to condense the 900 laws to a much more compact
    collection of laws that the Indonesian government considers as
    illegal timber. That was precisely driven by initiatives in the
    consuming markets to ask Indonesia, we need clarification.
        This legislation would have the effect of allowing the U.S.
    market to make that same request and result in clearer laws
    overseas.
        Mr. Brown. But don't you agree, and Ms. Sobeck, I guess you
    can chime in on this, that part of the responsibility of the
    United States government is to protect the interests of our
    small businesses to be absolutely sure that they aren't being
    victimized by some criminal element in some foreign country?
        Mr. von Bismarck. Absolutely, Congressman. I think it is
    understandable that with these kind of measures there is
    trepidation on the part of small business. I certainly cannot
    speak for small businesses, but I would say that it is
    certainly our take that this legislation would be an enormous
    boon for businesses such as Mr. Forester's in the United States
    who are taking those measures as were described today.
        Mr. Brown. I don't think Mr. Forester is taking any level
    of precaution that other manufacturers aren't unless there is
    some illegal intent within some of the other, you know,
    manufacturers in the United States. I don't think he is going
    over there looking and see if they are legal. I don't know how
    you can determine that.
        As far as when you go to these other countries, how can you
    tell whether the product is legal or illegal?
        Mr. Forester. When we go to foreign countries we do as much
    investigation as we can, but ultimately, we are still relying
    on the National Forest Service of these foreign countries and
    the national governments of these foreign countries to
    ultimately certify that this lumber is legal. I think I
    misspoke. If I did, I am sorry.
        I am not looking to amend the Lacey Act or make any changes
    to it. This amendment to the Lacey Act is addressing an
    industry with a very long supply chain, and it is different
    from the supply chains that the Lacey Act currently covers. I
    think when you make such an amendment it is necessary to
    understand that long supply chain and the fact that there are
    many people along that supply chain that are responsible for
    the lumber as it moves through the supply chain.
        Somewhere along the line as a business owner I have to rely
    on somebody to say that this is legal. I can do lots of things.
    I can have documents issued by foreign countries, I can have
    CITES documentation, I can have other third-party certifiers
    certify lumber, but ultimately, certification is a standard.
    Laws are a standard. It comes down to enforcement of those laws
    to ensure legality.
        That is true in the United States. When I do business with
    other companies in the United States and they ship me product I
    expect that to be legal. I rely on them to provide me with
    legal documentation, and I rely on the United States government
    to address any illegality that may happen further down the
    chain. I expect foreign governments to do the same.
        I think the United States government, along with USAID and
    many other free trade agreements that they have, need to help
    foreign governments enforce their laws because ultimately that
    is the only true barometer of legality. Because how do I prove
    legality? I mean, how far back should a business go in proving
    legality?
        I cannot audit the entire supply chain, and I cannot audit
    the entire documentation. Criminal behavior is criminal
    behavior. All I can do is work with the best of my knowledge,
    and work with the export documents from foreign countries and
    expect the government to do their due diligence.
        Mr. Brown. Have you ever been subject to illegal products
    coming in to your operation?
        Mr. Forester. No.
        Mr. Brown. When you make an order, do you pay in advance?
    When does the money transfer?
        Mr. Forester. Well, it depends. There are times when we pay
    when lumber hits the docks or at times when we have paid when
    lumber is at a port in a foreign country. In some Central
    American countries we have gone so far as to advance money to
    developing businesses down there to develop--it is within a
    certification system that we are very happy with, but we have
    advanced money before trees have even been cut in an attempt to
    help develop that thing.
        Frankly, we were doing something in parallel with basically
    what USAID was doing in the country. As a private business we
    were doing a very similar action. So it runs along the gamut.
        Mr. Brown. Ms. Sobeck, are you familiar with some cases
    where there has been illegal lumber, illegal logs coming into
    the United States? Have you had any personal cases that you
    have had to deal with?
        Ms. Sobeck. Not that I personally have dealt with. I
    believe there has been one case involving CITES listed timber,
    but that would not have been a Lacey Act case, and other
    illegal logs in the sense that they were harvested illegally in
    a foreign country. Other than CITES species that would not come
    to the Justice Department's attention because it would not be a
    crime under U.S. law.
        Could I just make a couple of points? I want to make clear
    that in a criminal case the burden is never on the defendant to
    prove that imported product was legal. The burden is always on
    the government to prove that it is illegal. Much of the
    discussion today from various industry representatives about
    what they do in terms of looking at the certification or making
    site visits and understanding the supply chain would qualify as
    due diligence and that we wouldn't expect them to go beyond
    that kind of behavior.
        I am not talking in any specific case, but we would not
    prosecute somebody criminally if they had exercised due care. A
    lot of what we have been hearing is the kind of due care that
    would benefit small business. What we don't want is when a
    small business owner knows that the certification from a
    foreign country is false.
        We have heard some discussion of it is well-known that
    there is timber that is illegally logged elsewhere and that
    perhaps because of corrupt practices in foreign governments
    there is a patently illegal or invalid certification. The
    burden would be on the government, but if the government could
    prove that an individual knew that the product was illegally
    logged then we would initiate a criminal case.
        Mr. Brown. Do you know how many cases we have made this
    year? Didn't you say it is like a billion dollars that is
    coming in illegal?
        Ms. Sobeck. We aren't making any cases except in CITES
    listed timber because it is not currently illegal. So in terms
    of how much product is coming in that was taken illegally
    abroad, the Justice Department, we do not deal with that. My
    colleagues here on the panel have some information statistics,
    but none of that timber is illegal under United States law at
    the moment unless it is listed on CITES.
        Just one more thing. I just wanted to let you know that the
    United States, we are training prosecutors abroad and working
    with foreign enforcement officials. That is one of the
    principal things we are doing under the MOU with Indonesia
    because we do want primary enforcement to be in the country of
    origin.
        Mr. Brown. Sure. Sure.
        Ms. Sobeck. We don't want this to be a United States
    problem.
        Mr. Brown. Well, when do you think we would be able to get
    some kind of a certification that when that manifest comes into
    the port, if it has a proper certification on it, it is OK? You
    think we will ever get that standard?
        Ms. Sobeck. It is always going to be relevant to the
    Justice Department in assessing a case what the certification
    says, and depending on whether or not that is adequate is going
    to depend on the circumstances.
        Ms. Bordallo. I think, Ms. Wrobleski, you wanted to
    comment, right, or Mr. Barringer? Yes?
        Mr. Barringer. To answer that question, just in regards to
    the furniture industry segment the market will take care of a
    lot of that. Let us just say you are importing illegal log wood
    product. You go to the plant in China and you say, you know
    what, guys, you have to make that furniture with legally logged
    sustainable timber. OK, fine. They start buying it from the
    United States or they start buying it from some FSC certified
    wood somewhere else.
        That will take care of a lot of it. The price isn't that
    much different. Again, like I said in my earlier statement, the
    saw mills in the United States can be competitive with any
    plant in the world if we just have a level playing field. It is
    difficult for us to compete against illegally logged timber,
    but the market will take care of a lot of this by forcing it
    back on the Chinese furniture plant.
        Ms. Bordallo. Thank you very much. I have one wrap up
    question here for Mr. Forester. I have been listening, and do
    we understand you correctly? You are not opposed to amending
    the Lacey Act to preclude the import to allow the seizure of
    illegal timber at the point of entry? Is that correct?
        Mr. Forester. Could you read that again? You are asking me
    a very specific question.
        Ms. Bordallo. You are not opposed to amending the Lacey Act
    to preclude the import and allow the seizure of illegal timber
    at the point of entry?
        Mr. Brown. Madam Chairman, that is the reason I asked him
    when did he pay.
        Ms. Bordallo. That is correct. Would you want me to read it
    again?
        Mr. Forester. No, no, no, no. I understand. I think it is a
    little bit more than a yes or no question, but yes, if the
    government proves that someone brought illegal timber into the
    United States that timber should be seized. However, if the
    importer did not knowingly import that and is innocent, in this
    amendment because of the supply chain I think there should be
    protection for the innocent purchaser.
        Ms. Bordallo. Protection from what?
        Mr. Forester. From criminal prosecution and civil
    prosecution for that timber coming in if they did not knowingly
    do that. That is my issue with this bill is that as a legal
    importer and doing the right things, if someone further down
    the supply chain does something illegal, yes, that timber is
    illegal, yes, I don't have a problem with that being seized,
    but I don't want to be criminally or civilly liable as a
    business----
        Ms. Bordallo. I am just rather concerned because wouldn't
    everybody say they are innocent?
        Mr. Forester. And I think it is the government has the
    resources to prove that I knowingly imported it? I think that
    is something the government should do. Absolutely. I find it
    difficult with legal documents to determine how I would prove
    my innocence, but I think I can defend my innocence.
        Ms. Bordallo. Would anyone else like to comment on that?
    Yes. Please go ahead.
        Ms. Wrobleski. Thank you, Madam Chairman. I don't want to
    pretend that International Paper is a small business, but I did
    want to pick up on something that Mr. Barringer said and that
    is the pressure of the marketplace. It is not just the pressure
    of suppliers and our supply chain, but frankly it is the
    pressure of our customers.
        Our customers want to know that what they are buying has
    been sustainably produced and is legal. To the extent that we
    can work with Congress, and the government and the
    environmental community to get some legislation on the books
    that helps us reassure our customers, and again, Mr.
    Barringer's point that the market will take us further than
    that, and so I just wanted to say that I think that what we
    have here is a good compromise.
        Everybody has given up a little bit. Nobody is, you know,
    perfectly 100 percent. Everybody has given some. I think that
    the legislation that we have is legislation that needs to go
    forward. Thank you.
        Ms. Bordallo. I thank you all. I thank all of the witnesses
    for their testimony and their informative answers. Members of
    the Subcommittee may have some additional questions for the
    witnesses, and we will ask you to respond to these in writing.
        Yes. Go ahead.
        Mr. Brown. Madam Chair, I hate to interrupt you, but I have
    some letters that support, or do not support this bill, I
    guess. For the record if I could submit them?
        Ms. Bordallo. No objection. So ordered. The hearing record
    will be open, I would like to remind the witnesses, for 10 days
    for these responses, so if you are questioned you have a 10-day
    period to answer. If there is no further business before the
    Subcommittee the Chairwoman again thanks the members of the
    Subcommittee and our witnesses. The Subcommittee now stands
    adjourned.
        [Whereupon, at 11:43 a.m. the Subcommittee was adjourned.]

        [Additional material submitted for the record follows:]

        [A statement submitted for the record by Patrick Alley,
    Director, Global Witness, follows:]

             Statement submitted for the record by Patrick Alley,
                            Director, Global Witness

        Chairwoman Bordallo and members of the Subcommittee, thank you for
    the opportunity to share our experience of illegal logging i
    in Cambodia and its impact on the country and its people.
    ---------------------------------------------------------------------------
        \i\ Throughout this document, illegally logged timber is defined as
    any timber which is in violation of provisions of Cambodian law and
    regulations relating to the acquisition of exploitation rights,
    logging, means of harvesting, sale, purchase, transportation, import or
    export of timber.
    ---------------------------------------------------------------------------
        Global Witness ii first began exposing illegal logging
    in Cambodia and its links with conflict, corruption and human rights
    abuses in 1995. Over the past 12 years we have documented numerous
    cases of illegal logging across the country, and the resulting social,
    economic and environmental consequences.
    ---------------------------------------------------------------------------
        \ii\ Global Witness is an advocacy organisation which exposes the
    corrupt exploitation of natural resources in order to drive campaigns
    that end impunity, resource-linked conflict, and human rights and
    environmental abuses. In 2003, it was co-nominated for the Nobel Peace
    Prize for its leading work on ``conflict diamonds'.
    ---------------------------------------------------------------------------
        In the time that we have been working on this issue the modus
    operandi employed by illegal loggers has changed but the power
    relationships underlying the crime remain the same. Today, as it was
    twelve years ago, the individuals behind the major illegal logging
    operations in Cambodia are those with business or familial links to
    powerful political figures. In other words, the bulk of illegal logging
    in Cambodia is not carried out by poor people in desperate search of
    supplementary income. It is an organised criminal activity which
    enables politically well-connected individuals to generate large
    amounts of money at the expense of the rural poor. They are assisted in
    doing so by those elements of the state nominally responsible for
    protecting the forests and upholding the rule of law: politicians,
    police and military included.
        Whilst our long involvement in Cambodia has given us a detailed
    insight and knowledge of the country's illegal logging industry, the
    patterns of abuse observed there are not unique. In many countries
    where Global Witness works, government and state agents are predatory
    and civil society is correspondingly weak. In such states, forest
    resources are particularly vulnerable and illegal logging can become
    embedded and thrive. This in turn contributes to patterns of
    exploitation that are inequitable and geared more towards the profits
    of individual officials and companies rather than poverty reduction and
    environmental conservation.
        Global Witness views the Legal Timber Protection Act's proposed
    amendment to the Lacey Act as an important first step towards combating
    these practices. Taken on its own, the proposed legislation will not
    completely shut down demand for all illegal timber. However, its effect
    would certainly be felt by those carrying out the logging by decreasing
    demand for their product and, ultimately, reducing their profits.
    Perhaps more importantly though, the proposed changes to the Lacey Act
    would set a precedent for other countries to follow, and thus help fill
    the current legal vacuum which provides illegal loggers and their
    political allies with unfettered access to global markets.
    The Loss of Cambodia's ``Most Developmentally Important Natural
            Resource''
        Illegal logging and human rights abuse have a long history of
    association in Cambodia. Global Witness' early work revealed how, in
    the last years of Cambodia's civil war, both the Khmer Rouge and the
    Phnom Penh government used logging to fund military campaigns which
    resulted in massive loss of life and livelihoods. Our investigations
    revealed a cross-border timber trade with Thailand worth US$10-20
    million per month. Following our expose, the Thai border was closed to
    Cambodian timber--cutting off a critical source of military funding for
    the civil war. This did not spell the end for the illegal logging of
    Cambodia's forests, however.
        Since the war ended in 1998 Cambodia's leaders have found it hard
    to kick the habit of treating the country's forests as a personal slush
    fund for political campaigns, personal enrichment and rewarding key
    clients. The cumulative impact of this epic mismanagement is that the
    country's forests--termed by the World Bank as Cambodia's ``most
    developmentally important natural resource'' 1--have
    contributed very little towards the post-conflict economy. 2
    Instead, funds which should have gone towards the development of this
    damaged state have been siphoned off via illegal or exploitative
    logging practices into the bank accounts of the political elite and
    their cronies.
    The Role of the Concessionaires
        In the mid-1990s, senior government ministers secretly awarded
    between 30 and 40 logging concessions to Cambodian and foreign-owned
    companies. The contracts signed away over seven million hectares of
    forest, i.e. 39% of Cambodia's land area, on terms that greatly
    favoured the interests of the concessionaires over those of Cambodia.
    3 All the concessionaires proceeded to break the law or the
    terms of their contracts or both in order to reap a fast profit (see
    appendix 1 for further details). Throughout the late 1990s and up until
    2002, they were responsible for most of the illegal logging in
    Cambodia.
        During this time, employees of the concessionaires violated the
    rights of people living inside or adjacent to forest concessions on any
    number of occasions. Abuses committed by company staff included denial
    of access to forest areas, intimidation, rape and, in at least one
    case, murder. 4
        The environmental impacts of widespread illegal logging were felt
    both locally and nationally. At a local level, these typically included
    obstruction of streams that form people's water supply as a result of
    poor road and bridge construction. At a national level, the overall
    impacts of the concessionaires' logging were also apparent. Agriculture
    and fisheries are the Cambodian population's main sources of food. Both
    are sustained through natural systems of water management within which
    the forests play an important role. UN agencies cited deforestation as
    a cause of the severe floods in 2000 that cost Cambodia an estimated
    US$156 million. 5
        International donor and NGO pressure did eventually lead the
    Cambodian government to suspend the concessionaires' logging operations
    in early 2002. This was followed by a period of donor-government
    consultations, culminating in a ``road map'' for forest sector reform.
    6 However, despite public commitments to these reform
    processes, Cambodia's shadow state has continued to illegally generate
    money from the timber sector. The same officials charged with
    implementing reforms have actively subverted them, with the result that
    illegal logging has continued in a variety of forms and is causing
    severe damage to Cambodia's remaining forests. The last global forest
    cover survey by the Food and Agriculture Organization (FAO) found that
    Cambodia had lost 29% of its primary tropical forest over a five year
    period. 7
    The New Face of Illegal Logging in Cambodia
        In June of this year, Global Witness published its latest report on
    illegal logging in Cambodia which exposed some of the scams used by
    illegal loggers in recent times. The report, ``Cambodia's Family
    Trees'', is the result of several years research and details the
    activities of a group of timber barons who together constitute
    Cambodia's most powerful logging syndicate. With familial links to some
    of the country's key political figures, their careers illustrate how
    the country's political elite has successfully subverted forest
    management reforms and continued looting a valuable public asset.
        The individuals behind the Seng Keang Company logging syndicate
    featured in our report, although undoubtedly major players in the
    illegal logging industry, are not the only timber barons in Cambodia.
    However, their activities and the way in which the group has conducted
    its business are illustrative of the deleterious impact of illegal
    logging across Cambodia as a whole. Global Witness investigations into
    the group's activities over a number of years have charted just how
    damaging their ``business'' has been to local communities, the
    environment, rule of law and the national economy.Their behaviour has
    encompassed not only illegal logging but also acts more normally
    associated with a Mafiosi organized-crime mob, including extortion,
    bribery, kidnapping, forced imprisonment and attempted murder. The
    findings of our investigations are summarized below. Further detail and
    references for the points covered in this document can be found in the
    main body of ``Cambodia's Family Trees''. iii
    ---------------------------------------------------------------------------
        \iii\ The report can be downloaded from http://
    www.globalwitness.org/media_library_detail.php/546/en/
    cambodias_family_trees
    ---------------------------------------------------------------------------
    Introducing the Seng Keang Company: Cambodia's Premiere Logging
            Syndicate
        The syndicate is led by Dy Chouch, also known as Hun Chouch, his
    ex-wife Seng Keang, and their business partner Khun Thong. Seng Kok
    Heang, the brother of Seng Keang, also works for the syndicate. Dy
    Chouch is the first cousin of Prime Minister Hun Sen. Seng Keang is a
    friend of the Prime Minister's wife, Bun Rany. Khun Thong is the
    brother-in-law of Minister for Agriculture, Forestry and Fisheries,
    Chan Sarun, and father-in-law of the Director General of the Forest
    Administration, Ty Sokhun. While this syndicate has operated under
    various different labels over the years, most recently it has been
    known as the ``Seng Keang Import Export Company Ltd.''
        Members of the Seng Keang Company iv first came to
    Global Witness' attention as logging subcontractors for some of the
    leading concessionaire companies operating in Cambodia in the 1990s.
    One of their key customers was a logging concessionaire company called
    Kingwood Industry.
    ---------------------------------------------------------------------------
        \iv\ For the purposes of this document, members of the Seng Keang
    Company are understood to be Dy Chouch, Seng Keang, Khun Thong and Seng
    Kok Heang.
    ---------------------------------------------------------------------------
        Despite generating large profits from illegally logging within and
    outside its concession area, Kingwood underwrote its activities by
    borrowing money from a number of banks and individuals--including from
    Seng Keang. A source close to the company claimed that it needed to
    borrow because its directors were laundering sales revenue through
    affiliated companies in Indonesia, Singapore and Taiwan. 8
    By late 2001, Kingwood owed Seng Keang US$1.9 million. The government
    suspension on concession logging in early 2002 effectively shut down
    Kingwood's operation and destroyed the company's chances of keeping up
    with debt repayments.
        A source close to the Kingwood operation informed Global Witness
    that, in August 2002, Kingwood's Managing Director--a Taiwanese
    national named Lia Chhun Hua--attempted to cut his losses and leave
    Cambodia for good. According to this source, he was prevented from
    doing so by Seng Keang, whose entourage abducted Lia, confiscated his
    passport and held him hostage in the factory. At this point, the Seng
    Keang syndicate took control of the Kingwood timber processing factory
    and all of its equipment. The last confirmed sighting of Lia Chhun Hua
    was in 2005. Global Witness does not know his current whereabouts.
    9
        With the imposition of the logging moratorium in concession areas,
    the Seng Keang Company needed to look elsewhere to continue sourcing
    timber for processing at the Kingwood factory. An opportunity presented
    itself in the shape of the government-mandated rubber plantation in
    Tumring, Kompong Thom Province. The Tumring Rubber Plantation is
    situated in the heart of Prey Long Forest--mainland Southeast Asia's
    largest lowland evergreen forest and an important part of Cambodia's
    natural heritage.
        In October 2002 Chan Sarun's Ministry of Agriculture, Forestry and
    Fisheries gave permission to the Seng Keang Company to collect wood
    within the rubber plantation's boundaries. 10 The syndicate
    soon proved itself uninhibited by the plantation's perimeters, and went
    on to illegally log in the surrounding Prey Long Forest. The trees
    felled in the forest were then laundered via the rubber plantation.
    This formula--officially-sanctioned clear-felling within a valuable
    forest--provided almost unlimited scope for laundering illegally-logged
    timber between 2002 and 2006.
    Anatomy of an Illegal Logging Operation
    Damage to the local economy
        With the rubber plantation project enjoying political support from
    the highest level, the syndicate were able to log outside the
    plantation boundaries with impunity.
        Employees concentrated on logging Dipterocarp trees as the most
    suitable throughput for the syndicate's processing plants.
    Unfortunately for those people living in and around Prey Long forest,
    liquid resin collected from the Dipterocarp tree is a key source of
    additional income.
        In recognition of the centrality of resin trees to rural incomes,
    Cambodia's 2002 Forest Law made it illegal to cut ``trees of species
    that people tap for resin''. Between 2002 and 2006 the company's
    illegal targeting of resin trees seriously damaged the livelihoods of
    hundreds, if not thousands of families living in the area.
        Interviews with loggers and visits to cutting sites in Prey Long
    suggest that resin-producing trees accounted for at least 50% of the
    wood processed in the Seng Keang Company factory in its local factory.
    11 Resin tappers in Tum Ar village on the edge of the
    plantation told Global Witness in 2006 that in the past all of the 100
    families living there had owned 200-300 resin trees each. In 2006, only
    5-6 families had any trees left at all. 12 In Rumchek
    village in Sokchet Commune villagers reported losing 800 resin trees to
    representatives of the Seng Keang Company in mid-2005 alone.
    13
        According to resin tappers, Seng Keang Company employees would
    sometimes pay them compensation for cutting their trees. The sums
    involved were derisory however--US$1.25-US$12.5 for a tree whose timber
    might sell for as much as US$1,000 in Phnom Penh. 14 These
    payments were made on a ``take it or leave it'' basis.
    Intimidation and threats of violence against the local population
        The syndicate was able to maintain their control over the local
    population through a combination of familial connections, bribery and
    threats of violence. Their representative in Tumring, Seng Kok Heang,
    used this technique to establish his own personal fiefdom in the area.
    A report on plantations published in November 2004 by the UN Office of
    the High Commissioner for Human Rights made a clear link between this
    intimidation and the presence in Tumring of Seng Kok Heang, alias Mr
    95:
        ``A man who goes by the name of ``Kae Pram'' [meaning 95 in Khmer]
    (his radio call sign is 95) heads the security guards of Mieng Ly Heng
    Company, and has a particularly brutal reputation. He is the brother of
    Seng Keang, the director of Seng Keang Company, the main subcontractor
    of Mieng Ly Heng. In Roniem village, people reported that they have
    been frequently threatened with death for their attempts to block
    illegal logging and illegal transport.'' 15
        Persistent intimidation of this sort gave way to outright violence
    on 10 July 2005, when Seng Kok Heang is reported to have tried to kill
    two local men who had played a leading role in protecting villagers'
    resin trees.
        In March 2006 Minister Chan Sarun issued a decree revoking his
    earlier authorisations for Seng Keang Company operations, and by
    September 2006 practically all traces of the Seng Keang Company
    operation were gone. 16 The precise rationale behind the
    decision to close the company's operations is unclear. However, it
    seems likely that the attempted shooting of two community forest
    activists in 2005, and the international attention this generated,
    played a role.

    Loss to the National Economy
        The loss of income and violence suffered by the local population at
    the hands of Seng Kok Heang and his cohorts stands in stark contrast to
    the profits reaped by the company during its reign in Tumring. Because
    of the illegal nature of Seng Keang Company's activities, there are no
    credible official statistics on the amount of timber the firm has cut
    in Prey Long. Nonetheless, from interviews and Global Witness
    observations, it is clear that the returns on its logging and timber
    processing operation have been considerable. Calculated at the 2006
    Phnom Penh price for sawn grade II wood of US$235 per cubic metre,
    Global Witness estimates that the Seng Keang Company's minimum yearly
    output of processed timber from Tumring would be worth over US$13
    million. 17
        According to Minister Chan Sarun, between the point at which it
    officially commenced operations in Tumring and the end of 2005, the
    Seng Keang Company paid just short of US$600,000. In a sense questions
    regarding the amount Seng Keang Company paid in taxes are academic,
    given that the vast numbers of trees it cut illegally should not have
    been felled in the first place. Nevertheless, it is indicative of the
    overall loss to Cambodia, if only in financial terms, when one
    considers that taxing the syndicate's 100,000 m\3\ annual round log
    consumption at the royalty levels applied to grade II wood--US$54 per
    cubic metre--would have netted the treasury US$5.4 million per year.
        Whilst Cambodian government timber export figures nosedived after
    the imposition of a logging moratorium, 18 international
    trade figures paint a rather different picture of the volume of the
    country's timber exports. 19 These figures show that,
    between 2003 and the end of 2006, China imported from Cambodia a total
    of 28,000 m\3\ of plywood worth US$16 million. Both plywood and sawn
    timber exports from Cambodia are taxed at 10% of their value and the
    total loss to the Cambodian government on untaxed plywood shipments to
    China between 2003 and 2006 may have amounted to US$1.5 million.
    20 Losses on un-registered sawn timber appear to be double
    that figure.21 Global Witness is unable to say with certainty what
    percentage of these exports involved the Seng Keang Company. However,
    as the only known industrial-scale producer of plywood and veneer
    active in Cambodia at the time, it is highly likely that the firm
    played a significant role in the multi-million dollar trade in plywood.
    As perhaps the largest sawmill operator in the country, there is a
    strong possibility that it accounted for a sizeable share of the sawn
    wood trade as well.

    Impunity in Cambodia's Forest Sector
    Legal Protection
        The prevalence of widespread illegal logging in Cambodia stands in
    stark contrast to the legal protections offered to the country's
    forests and forest-dependent people. Over the past seven years, the
    Cambodian government has passed a plethora of different laws geared
    towards clarifying the ownership and governance of forested land. Legal
    provisions relating to Cambodia's forests include a Land Law, Forest
    Law and a Community Forestry Sub-Decree.
        In spite of these laws, prosecutions for illegal logging in
    Cambodia are rare and convictions rarer. The impunity offered to the
    Seng Keang Company over the years offers an insight into how those with
    high-level political connections have been able to bypass the legal
    protections afforded to the country's forests and forest-dependent
    people, thus undermining the rule of law. Appendix 2 of this paper
    provides a table documenting issues that Cambodia's judicial authority
    should investigate relating to the activities of the Seng Keang
    Company.
        So far, Global Witness' calls for a credible investigation into
    evidence of illegal logging presented in ``Cambodia's Family Trees''
    appear to have been ignored. Instead, the Cambodian government has
    banned the report and confiscated copies, the Prime Minister's brother
    is reported to have issued a death threat against Global Witness staff
    entering Cambodia, 21 and the Cambodian Embassy in London
    issued a press release demanding a change in Global Witness' leadership
    and a call to the organisation's donors to cut funding. 22
    How U.S. Legislation to Amend the Lacey Act will Help to Combat Illegal
            Logging and Associated Human Rights Abuse in Cambodia
        Despite the Cambodian government's reluctance to investigate the
    evidence of widespread and systemic illegal logging and high-level
    corruption presented in the Global Witness report, it seems other
    governments may be more willing to take action. Global Witness welcomes
    the leadership that has been demonstrated by the U.S. in this regard.
          The recently passed 2008 U.S. Senate Foreign Operations
    contains a provision that the Secretary of State shall send a list to
    the appropriate congressional committees of Cambodian officials, and
    their immediate family members, who he has credible evidence to believe
    are involved in corruption relating to the extraction of natural
    resources. The following restrictions will then apply:
            A ban on visas to enter the US.
            A ban on ownership of property within the U.S. and
    confiscation of any existing property.
            A ban on any U.S. citizen engaging in financial
    transactions to benefit the named officials.
          The proposed amendment to the Lacey Act to help combat
    illegal logging will help to take this message one step further in a
    move which would be felt not only by the corrupt officials who enable
    illegal logging in Cambodia, but also by the loggers themselves.
        The Lacey Act currently regulates trade in fish, wildlife and a
    limited subset of plants by making it unlawful to import, export,
    transport or purchase any that are taken, possessed, transported or
    sold in violation of any U.S. State or, with respect to fish and
    wildlife only, any foreign law. The new Act would expand the Lacey Act
    so that violations of foreign law that apply to plants and plant
    products (and hence trees) fall within its domain.
        If implemented effectively, the proposed amendments would help to
    address the problem of illegal logging in Cambodia in the following
    ways:

    1. Cutting the Demand from Manufacturers: Addressing Regional Timber
            Flows
        Cambodia's illegal loggers are driven by a strong economic
    incentive to export their products to overseas markets. Past Global
    Witness investigations have revealed that much of the logged Cambodian
    timber is illegally exported to China, Thailand or Vietnam. Statistics
    suggest that a large proportion of that timber is then processed and
    re-exported to other markets. 23 The U.S. has been the
    single largest importer of Chinese goods since 2000 and its share of
    total imports of wooden furniture, flooring and plywood reached 43
    percent of Chinese exports in 2006. 24 It is also a major
    importer of timber products from Vietnam and Thailand. In 2006, the
    U.S. imported just short of US$881 million of timber products from
    Vietnam and US$514 million from Thailand. 25 It follows that
    some of the illegally-sourced timber flowing through China, Thailand
    and Vietnam could well end up on the U.S. market. By making it illegal
    to import or sell illegally logged timber, the legislation will
    increase pressure on Chinese, Thai and Vietnamese buyers to carefully
    source their products and to avoid the current practice of purchasing
    illegally logged Cambodian timber. With a reduced income stream flowing
    from these countries, the economic incentive for illegal logging in
    Cambodia could be significantly curtailed.

    2. Cutting the Demand from Consumers: Red Flags for Cambodian Timber
            Products entering the US
        Proposed changes to the Lacey Act would also expose imports of
    Cambodian timber to greater scrutiny. Cambodia's laws protecting
    forested land, combined with a government moratorium on industrial
    logging in concession areas, make legal, large-scale export-based
    logging in Cambodia almost impossible. It is worth noting that the only
    current form of large-scale legal logging in Cambodia--known as the
    ``annual cutting coupe''--is explicitly designed to provide for
    domestic timber demand only. 26 The proposed changes to the
    Lacey Act to include a requirement for basic information on the country
    where the timber was harvested and species of timber on all timber
    products would immediately allow U.S. law enforcement officials to
    identify products manufactured using timber taken from Cambodia as
    suspect and encourage greater caution on the part of U.S. purchasers.
        If the proposed amendments to the Lacey Act had been in place at
    the time of our report's publication, or indeed a over a decade ago,
    U.S. law enforcement agencies could have been empowered to seize
    suspect timber products from Cambodia and would have helped to prevent
    imports such as the special brand of plywood veneer produced by the
    Seng Keang Company, produced at such a high cost to the Cambodian
    population, from entering the U.S. market.

    3. Setting an international precedent to combat illegal logging
        The global lack of legislation to prevent illegally logged timber
    from entering consumer markets has inevitably meant that over the
    years, the US, together with every timber importing country, has
    unwittingly purchased illegally logged timber from large-scale
    organized crime networks, similar to the Seng Keang Company. By doing
    so, U.S. markets will have helped to fund the activities of money
    launderers, corrupt officials and human rights abusers.
        US leadership on this issue would provide impetus for proactive
    actions in other markets such as the EU and other G8 countries. The
    logical next step for the U.S. would be to take leadership in this
    field one stage further, and encourage other importers of timber
    products to adopt similar legislation to put a stop to the unregulated
    trade in illegal timber. Such leadership is sorely needed. Only when we
    have strong international action of this nature, will we able to crack
    down on the activities of ruthless, organized crime networks and their
    political patrons, who have historically been able to exploit the
    global gaps in legislation to their advantage.
        Thank you.
        [GRAPHIC] [TIFF OMITTED] T8330.005

        [GRAPHIC] [TIFF OMITTED] T8330.006

        [GRAPHIC] [TIFF OMITTED] T8330.007

    REFERENCES
    ____

    1 World Bank, ``Structural Adjustment Credit to Cambodia'',
            2000.
    2 Global Witness, ``Deforestation without limits'', July
            2002, p.3. Between 1994 and 2000, the Cambodian government
            collected US$92 million in timber royalties.
    3 The World Bank, Cambodia--A Vision for Forestry Sector
            Development, 1999, p.i; Asian Development Bank Sustainable
            Forest Management Project, Cambodian Forest Concession Review
            Report, 2000, p.20.
    4 Global Witness interviews with local residents, 2000; UN
            Cambodia Office of the High Commissioner for Human Rights, Land
            Concessions for Economic Purposes in Cambodia, November 2004.
    5 Cited in Global Witness, ``Deforestation without Limits'',
            July 2002, p.3.
    6 The ``road map'' for forest sector reform is also known as
            the Independent Forest Sector Review. It can be downloaded from
            http://www.cambodia-forest-sector.net/.
    7 FAO, Global Forest Resource Assessment 2005, Annex 3--
            Global Tables, p. 233, ftp://ftp.fao.org/docrep/fao/008/A0400E/
            A0400E14.pdf. (Last downloaded 18 March 2007)
    8 Interviews with a confidential source, 2003 and 2004.
    9 In February 2007 Global Witness wrote letters to Lia Chun
            Hua as well as Seng Keang, Dy Chouch and Khun Thong and other
            Kingwood shareholders to ask about Lia's current whereabouts.
            At the time of publishing, Global Witness has not received any
            responses to these letters.
    10 This authorisation is referred to in Ministry of
            Agriculture, Forestry and Fisheries ``Permission to Establish a
            Veneer Factory Granted to Seng Keang Import Export Co. Ltd'',
            September 2004.
    11 Interviews with loggers 2005; field observations 2005 and
            2006.
    12 Interviews with resin tappers, 2006.
    13 Interviews with local residents, 2005.
    14 Interviews with villagers and loggers, 2005.
    15 UN Cambodia Office of the High Commissioner for Human
            Rights, Land Concessions for Economic Purposes in Cambodia, A
            Human Rights Perspective, Annex 1, November 2004.
    16 Global Witness field observations, September 2006.
    17 Interviews with timber traders, 2006.
    18 Forest Administration, ``Cambodia: Forestry Statistics
            2004'', May 2005.
    19 World Trade Atlas (for 2003 and 2004), http://
            comtrade.un.org/; China Customs Statistics Yearbook (for 2005)
            and China Customs (for January to November 2006).
    20 UNESCAP, ``Trader's Manual for Least Developed Countries:
            Cambodia'', 2003, http://www.unescap.org/tid/publication/
            t&ipub2320_part3.pdf. (Last downloaded 10 April 2007); National
            Bank of Cambodia, ``Stock Taking on Restrictions of Capital
            Flows'', August 2006, http://www.aseansec.org/carh/
            Capital%20Account%
            20regime%20files/Cambodia%20Capital%20Account%20Regime.pdf.
            (Last downloaded 10 April 2007).
    21 References to this threat are drawn from an article by
            Douglas Gillison and Yun Samean, published in the Cambodia
            Daily on June 5 2007. In it, the Prime Minister's brother and
            Kompong Cham provincial governor Hun Neng is quoted as saying:
            ``If they (Global Witness staff) come to Cambodia, I will hit
            them until their heads are broken.''
    22 The press release can be viewed at http://
            www.globalwitness.org/media_library_
            detail.php/566/en/global_witness_must_stop_
            activities_and_defamation_to_
            discredit_the_image_of_the_royal_
            government_of_cambodia_from_now_
            and_for_good.
    23 See for example http://assets.panda.org/downloads/G8_
            meeting_June2002.pdf; http://www.globaltimber.org.uk/china.htm;
            http://www.globaltimber.org.uk/indochina.htm; Deutsche Press
            Agency, Vietnam's furniture exporters running out of wood, June
            11, 2007; in its Tropical Timber Market Report of 1-15 November
            2006, the ITTO states that roughly 70% of timber which China
            imports is subsequently exported.
    24 Forest Trends, China and the Global Market for Forest
            Products: Transforming Trade to Benefit Forests and
            Livelihoods, March 2006, p.11; Peter Goodman and Peter Finn,
            ``Corruption Stains Timber Trade--Forests Destroyed in China's
            Race to Feed Global Wood-Processing Industry'', April 2007.
    25 United States International Trade Commission, ITC Trade
            Dataweb, http://dataweb.usitc.gov/.
    26 Statement on Agriculture Sector Development, Delivered by
            H.E. Dr. Chan Sarun, Minister of Agriculture, Forestry and
            Fisheries at Cambodia Development Cooperation Forum, June 19-
            20, 2007, http://www.cdc-crdb.gov.kh/cdc/first_cdcf/session1/
            statement_chansarun_eng.htm (last downloaded on September 7,
            2007).
                                     ______

        [A letter submitted for the record by America's Imported
    Wood Suppliers, Distributors, and Users follows:]

    [GRAPHIC] [TIFF OMITTED] T8330.009

    [GRAPHIC] [TIFF OMITTED] T8330.010

        .eps[A statement submitted for the record by Barry
    Gardiner, MP, The Prime Minister's Special Envoy for Forestry,
    follows:]

      Statement submitted for the record by The Honorable Barry Gardiner,
     Member of Parliament, The Prime Minister's Special Envoy for Forestry

        My name is Barry Gardiner. I am a Member of Parliament in the
    United Kingdom and I welcome the opportunity to give evidence to the
    committee hearing in my capacity as the United Kingdom Prime Minister's
    Special Envoy for Forestry and also as the Co-Chair of the Illegal
    Logging Dialogue of the GLOBE Legislators Forum.
        In my evidence I wish to suggest to the Committee that the eyes of
    the world are fixed on the leadership role that the United States has
    taken on the need to combat illegal logging. Your recognition that
    illegally harvested timber imports are undercutting domestic timber
    producers is one that resonates around the globe. A recent study by the
    American Forest and Paper Association has suggested that such imports
    depress prices of wood products by between 7 and 16%. This is a
    substantial loss to domestic producers.
        This finds its counterpart in producer countries where losses from
    illegal logging are estimated to cost governments in the region of
    $15--20 billion per year in lost revenues. These are revenues that
    could be utilised for education, healthcare and other social programmes
    in some of the poorest regions of the world. This suggests that illegal
    logging not only distorts free and fair trade, but is also a
    significant contributor to global poverty and the need for aid.
        It is not my purpose in this evidence, however, to reiterate the
    powerful economic, environmental and ethical reasons for taking strong
    legislative action against the illegal logging trade. I am confident
    that these will be made more appropriately by other individuals and
    organisations from within the United States. Rather, I wish to provide
    information to the Committee about the debate and actions being taken
    elsewhere in the international community that may be seen to complement
    and anticipate your country's decision.
        International efforts over the last two decades as part of donor
    development programmes have largely focussed on supply-side measures by
    seeking to tackle forest governance. Their success has been limited.
    Private sector forest certification schemes which aimed to improve
    forest management by creating market incentives were adopted primarily
    by producers in temperate regions and even then did not always see the
    premium return on investment they anticipated.
        The result is that there has been little impact on reducing illegal
    logging. Timber from illegal harvests, worth billions of dollars
    annually, has continued to pour into western consumer markets. This has
    led to the conclusion in certain countries that demand side, as well as
    supply side measures were essential if we were to succeed in tackling
    the problem.
        Government Procurement Programmes are one way in which European and
    other national governments have sought to give a lead to the market. By
    insisting that timber and timber products used in any contract of
    public works must be legally sourced and sustainably managed,
    governments have sought to encourage major contractors to develop
    supply chains where timber and timber products are both legal and
    sustainable. Whilst such schemes play an important role in providing
    leadership, the fact that government procurement covers only a
    relatively small percentage of construction projects has meant that
    they have not proven effective in transforming market practice.
        European Union Member States have adopted a Forest Law Enforcement,
    Governance and Trade (FLEGT) process whereby producer countries receive
    assistance to improve governance under a Voluntary Partnership
    Agreement (VPA). These VPAs enable countries to improve their capacity
    and due diligence through aid whilst developing credible licensing
    systems to verify that timber imported to the European Union has been
    legally produced.
        VPAs are presently being negotiated with Malaysia, Indonesia, Ghana
    and Cameroon. Other African countries have indicated their interest in
    developing such partnerships under which border agencies in the EU
    would be able to deny entry to shipments of timber from partner
    countries unless they were covered by a FLEGT license.
        Whilst FLEGT voluntary partnership agreements may prove a
    significant step in combating illegal logging it is important to note
    that the first VPA is not expected to become operational before 2009.
    The GLOBE Legislators dialogue on Illegal Logging, which I co-chair,
    has examined the potential for a wider licensing scheme at a recent
    conference in Berlin. Here representative legislators from a range of
    G8, as well as producer countries such as Indonesia, Brazil, Malaysia,
    DRC, Congo Brazzaville, Gabon, Cameroon and Ghana, indicated that a
    global licensing scheme might provide a strong measure to combat
    illegal logging. It is highly likely that such a scheme may form part
    of the recommendations made by the Globe dialogue to the G8 summit in
    Japan in June 2008.
        Were a global licensing scheme to be adopted by the G8, it is
    important to appreciate the very real limitations that even such a
    comprehensive measure might suffer. Certain countries might still
    choose not to enter into the requisite voluntary partnership
    agreements. Furthermore, it is possible for illegally harvested timber
    from a voluntary partner country to circumvent the regime via trade
    through third (non-VPA) countries.
        It is for this reason that the EU is currently examining a range of
    additional options which would be able to close off such loopholes.
    Chief amongst these is an option modelled upon the U.S. Lacey Act that
    effectively mirrors the provisions of the Combatting Illegal Logging
    Act 2007. The European Commission has completed a public consultation
    on these options and is currently undertaking an impact analysis which
    is expected to report in early 2008.
        The G8 plus 5 dialogue on Illegal Logging that was launched at the
    Gleneagles Summit in 2005 is due to conclude under the Japanese
    presidency next June. The US, therefore could not be considering this
    legislation at a more important time. It is not too strong to suggest
    that decisive action by the U.S. to combat illegal logging through this
    legislation could set a precedent that would be followed, not only by
    the European Union, but by much of the rest of the world.
        In a telephone conversation with the Japanese forestry Minister
    earlier this year, before his untimely death, Minister Matsuoka stated
    to me that he considered the possibility that the United States might
    pass the Combatting Illegal Logging Bill as ``Epoch Making''. Minister
    Matsuoka was a personal friend and long standing champion of the battle
    against illegal logging. I knew him not to be a man of grandiloquent
    statement. I therefore asked the translator whether she was sure that
    she had translated him correctly in saying this. She spoke with him
    again and confirmed that these were indeed the words he intended.
        I believe that Minister Matsuoka was right. The United States has
    the capacity to precipitate a global fightback against illegal logging.
    The legislation proposed is elegant and non-bureaucratic. It applies
    Occam's razor to the problem by forcing due diligence back down the
    supply chain, rather than by insisting on specific burdensome
    documentation. It encourages suppliers to take the trouble to do things
    properly from the very beginning.
        It is my firm view that both supply side and demand side measures
    must be employed in our determination to end this unfair and illegal
    trade. It is a trade that undercuts legitimate businesses and
    impoverishes still further some of the poorest communities in the
    world. If we examine the different ways of tackling the problem, we
    find:
          Governance reform in producer countries through donor
    assistance.
          Systems of forest certification.
          Procurement regimes that favour legally harvested and
    sustainable timber in consumer countries.
          Licensing schemes.
        All of these have a role to play in the fight against illegal
    logging. But the Combatting Illegal Logging Act 2007 is far and away
    the least cumbersome, and most elegant weapon in our armoury. It adds
    no burden to the people who are already getting it right and it
    incentivises those who know they are currently getting it wrong,
    prompting them to do the right thing. That is what good law should be
    all about.
                                     ______

        [A letter submitted for the record by Brad Gilman,
    Robertson, Monagle & Eastaugh, on behalf of Trinity Yachts,
    Inc., follows:

    [GRAPHIC] [TIFF OMITTED] T8330.011

    [GRAPHIC] [TIFF OMITTED] T8330.012

        [A statement submitted for the record by Dr. James
    Grogan, Yale University School of Forestry & Environmental
    Studies, New Haven, Connecticut, follows:]

    Statement submitted for the record by Dr. James Grogan, Yale University
     School of Forestry & Environmental Studies, New Haven, Connecticut, &
     Instituto do Homem e Meio Ambiente da Amazonia (IMAZON), Belem, Para,
                                     Brazil

        I welcome this opportunity to provide a statement supporting H.R.
    1497, Legal Timber Protection Act, legislation that would amend the
    Lacey Act Amendments of 1981 to prohibit trade in the United States in
    timber harvested illegally from any domestic or international source.
        I received a PhD in Forest Ecology from Yale University's School of
    Forestry & Environmental Studies in 2001. I have spent a total of 12
    years conducting fieldwork in the Brazilian Amazon, five of those years
    researching my doctoral dissertation, ``Bigleaf Mahogany (Swietenia
    macrophylla King) in Southeast Para, Brazil: A Life History Study with
    Management Guidelines for Sustained Production from Natural Forests.''
    I have also participated in the policy debate about mahogany's
    commercial and conservation status by providing technical advice to the
    forest products industry, the Brazilian government, and the
    international community through CITES Working Groups on Mahogany.
        In my view, the proposed amendment to the Lacey Act would provide a
    powerful mechanism for preventing illegally sourced supplies of high-
    value Amazonian timber from entering the U.S. market. This would: 1)
    protect highly vulnerable natural timber populations from commercial
    extirpation and encourage the transition to sustainable forest
    management systems; 2) reduce pressure on unlogged primary forests,
    thereby slowing rates of deforestation and associated emissions of
    greenhouse gases; and 3) reduce conflict between loggers and indigenous
    peoples facing illegal incursions into their territories.
        I began my study of mahogany after the unsuccessful 1994 proposal
    to list mahogany on CITES Appendix II. While relatively little was
    known at that time about the natural history of mahogany or its
    ecology, there was agreement in the field that an accurate assessment
    of the commercial and conservation status of mahogany would require
    this information. Consequently, I went to Brazil looking for field
    sites to study mahogany. The USDA Forest Service's International
    Institute of Tropical Forestry was the principal funder for my doctoral
    research. Since beginning this work I have published numerous
    scientific and technical articles on mahogany and related topics. A
    copy of my curriculum vita is attached to this statement.
        International demand for high-value tropical timbers like mahogany,
    Spanish cedar (Cedrela odorata), ipe (Tabebuia spp.), and ramin
    (Gonystylus spp.) is the root cause of continued illegal exploitation
    of these species from ever more remote American, African, and Asian
    tropical forests. But illegal logging contravenes forest laws in all
    producer nations meant to protect renewable natural resources from
    uncontrolled, unsustainable exploitation. Further, by allowing illegal
    supplies into our markets, we undermine the business model of legal
    producers by sustaining demand for cheaper, destructively harvested
    supplies.

    The impact of illegal logging on natural populations
        Being highly sedentary creatures, timber trees are especially
    vulnerable to illegal exploitation--there is little hiding a mahogany
    tree worth thousands or even tens of thousands of dollars in finished
    lumber, no matter how remote its forest habitat. Plants are at least as
    vulnerable to population collapse after illegal harvests as animals and
    fish, and in my view should be afforded the same protections under the
    Lacey Act.
        Tropical trees typically occur at extremely low densities across
    large areas. In the densest commercial stands of big-leaf mahogany
    recorded in Brazil, one commercial tree occurred in every five acres of
    forest, while more common densities were one commercial tree in 20
    acres. Facing no constraints on harvest intensity or methods, illegal
    loggers locate and fell 95% or more of trees that can pay their way out
    of the forest, including trees smaller than legal minimum diameter
    felling limits. While adult and sub-adult populations are removed at
    extremely high rates, seedlings and saplings are rarely in place in
    closed forest at the time of logging to replace harvested trees. In
    combination, this means that population recovery after logging will
    take a century or more, if it will be possible at all, assuming that
    logged forests can be left to recover without further intervention.
        As timber species become commercially extirpated at local scales,
    illegal loggers shift their activities deeper into unlogged primary
    forests in search of fresh supplies, and local zones of commercial
    exhaustion coalesce into regional and then national zones where future
    harvests are imperiled. This has been the pattern for big-leaf mahogany
    in Latin America for over two hundred years now, but especially in
    recent decades in South America. This pattern currently continues in
    Peru in spite of mahogany's 2002 listing on CITES Appendix II, and is
    being repeated for other high-value species in the Amazon such as
    Spanish cedar, ipe, and jatoba (Hymenaea courbaril).

    The impact of illegal logging on forests
        Illegal logging is driven by market demand creating prices high
    enough to offset risk associated with unlawful activities in remote
    forest regions. Illegal loggers open roads extending hundreds of miles
    from frontier sawmill processing centers into unlogged forests.
    Researchers at the Instituto do Homem e Meio Ambiente da Amazonia
    (IMAZON), my institutional affiliation in Brazil, estimate that
    mahogany could be profitably--if currently illegally--logged within up
    to 99% of its natural range in Brazil, including some of the most
    remote southwestern Amazon forests remaining in the states of Amazonas
    and Acre. As has been well documented, these roads open previously
    inaccessible regions, including Indigenous Lands and protected areas,
    to agribusiness, cattle ranchers, and small-holder agriculturists,
    initiating large-scale deforestation and land-use transformation. By
    occurring rapidly and without planning, this process is generally
    chaotic, destructive, and frequently marred by violence.

    The impact of illegal logging on people
        Illegal logging brings with it a host of unavoidable negative
    consequences for forest communities. In the Amazon, indigenous peoples
    generally have few resources to defend against loggers illegally
    extracting high-value timbers from their territories. Indigenous Lands
    were exploited throughout Brazil during the 1980s and 1990s for
    mahogany, with or without consent from indigenous communities, often by
    violent means costing indigenous lives. This occurred as well in
    Bolivia and Ecuador, and continues today in Peru. As logging fronts
    penetrate deeper into primary rainforests, bringing land-use changes
    and market centers with them, indigenous communities must cope with
    deforested border areas prone to frequent fires, and with repeated
    incursions by loggers, ranchers and settlers into their territories.
        Rather than building a trained labor force capable of planned,
    best-practices forest management in regions with vast potential for
    long-term sustainable timber production, illegal loggers provide low-
    wage employment for unskilled workers under extreme and exploitative
    working conditions. I have seen many of these operations in the field;
    disease, injury, and even fatality from logging accidents are common,
    in sharp contrast with legal logging outfits that comply with forest
    and labor laws, producing timber under current best-practices
    management systems.

    How H.R. 1497 would help curtail illegal logging
        Big-leaf mahogany's eventual listing on CITES Appendix II in 2002
    was in large measure an international response to widespread illegal
    logging in Brazil during the 1990s. But this response came very slowly,
    after nearly a decade of wrangling among nations, and only after the
    Brazilian timber sector specializing in mahogany--and its principally
    North American clients who underwrote their activities--essentially got
    what it wanted, which was time enough to exploit Brazil's remaining
    high-density stands before the gates closed against illegal supplies.
    No legal mechanism existed in the US, destination for more than 90% of
    internationally traded volumes of mahogany during that period, to
    address widespread illegality in the trade that was acknowledged by
    industry and government sources alike. This problem has persisted with
    Peruvian mahogany even after the 2002 CITES listing.
        H.R. 1497, the Legal Timber Protection Act, the proposed amendment
    to the Lacey Act, would combat and curtail illegal logging by creating
    a powerful mechanism to challenge the legal status of timber supplies
    arriving in the US, the largest market in the world for timber
    products, where demand for high-value timber drives illegal and
    unsustainable logging practices in many tropical regions. Such a
    mechanism could have been used to halt imports of illegally harvested
    mahogany from Brazil during the 1990s, to the benefit of natural
    populations that would today be available for sustained-yield
    management, of vast forested regions where deforestation rates would
    have been much slower (and greenhouse gas emissions from burned forests
    much lower), and of forest communities for having fewer conflicts and
    high-value forest resources preserved for future use.
        The Legal Timber Protection Act could halt the entry of illegal
    timber supplies into the U.S. market. By doing so, it could as well
    slow the current rapid loss of high-value timber populations, reduce
    rates of deforestation in the tropical world with associated greenhouse
    gas emissions, and prevent conflicts between loggers and indigenous
    peoples.
        I thank the Subcommittee on Fisheries, Wildlife, and Oceans for
    this opportunity to comment on the proposed change in U.S. federal
    legislation.
                                     ______

         A statement submitted for the record by Ari Hershowitz,
    Director, Biogems Project, Latin America, Natural Resources
    Defense Council, follows:]

        Statement submitted for the record by Ari Hershowitz, Director,
       Biogems Project, Latin America, Natural Resources Defense Council

        I am pleased to submit this statement for the record regarding H.R.
    1497, the Legal Timber Protection Act on behalf of the Natural
    Resources Defense Council and our more than one million members and
    activists. We strongly support this bill and its simple goal to make it
    illegal to import and trade in illegal timber.
        As the Subcommittee has heard, the trade in illegal timber supports
    a worldwide network of criminal activities that devastates forests and
    wildlife, contributes to global warming, and causes more than a billion
    dollars in yearly losses to U.S. industry. NRDC can provide additional
    information, from our direct experiences in Peru, on the impacts of
    this illegal trade.
        This statement, however, focuses on the forfeiture provisions of
    the bill, and clarifies some of the misleading information presented by
    the bill's opponents. This bill would authorize the forfeiture of
    timber and timber products when U.S. authorities can prove that these
    items were taken illegally. This is consistent with decades of U.S.
    precedent for other stolen or illegal goods, including natural resource
    products such as wildlife and plants.

    ILLEGAL PROPERTY HAS BEEN SUBJECT TO FORFEITURE UNDER LONGSTANDING U.S.
            LAW
        Whether the subject is protected parrots, illegally imported
    salmon, pilfered Inca artifacts, or stolen art, U.S. law has
    consistently provided for in rem forfeiture, regardless of the
    knowledge of the person in possession of the items. To do otherwise, as
    opponents of this bill recommend, would allow illegal goods to continue
    in commerce even after the government had proven that they were
    illegal. This is a brazen proposition. It would be a radical departure
    from existing law and longstanding practice.
        Contrary to the claims of this bill's opponents, the Lacey Act has
    consistently and repeatedly been interpreted to provide for forfeiture
    of illegal wildlife regardless of the knowledge of the importer. In a
    case involving the imports of parakeets from Peru, the court held that
    ``the legislative history of the applicable amendments of the Lacey Act
    unequivocally establishes that the defense of ``innocent owner'' is not
    available in forfeiture actions of wildlife brought pursuant to this
    Act.'' U.S. v. 2,507 Live Canary Winged Parakeets, 689 F. Supp. 1106
    (S.D. Fla., 1988) (emphasis added). In an even earlier decision, the
    Ninth Circuit Court of Appeals upheld forfeiture of Indonesian parrots
    that were imported through Singapore, although the importer did not
    know that the original export from Indonesia was illegal. The court
    held that ``[t]he conservation purpose of the statute could be
    undermined significantly by permitting such importers to avoid the
    application of the statute by trading through intermediary countries.''
    685 F.2d at 1134 (emphasis added).
        This is no less true for timber: allowing anyone to maintain
    possession and profit from illegal property, as opponents of the bill
    recommend, creates a perverse incentive for foreign timber mafia to
    pass off their merchandise through unsuspecting intermediaries.
        Indeed, the Civil Asset Forfeiture Reform Act (CAFRA), which
    opponents of H.R. 1497 hold up as their model, makes it clear that ``no
    person may assert an ownership interest under [CAFRA] in contraband or
    other property that it is illegal to possess.'' 18 USC Sec. 983(d)(4).
    This simply restates the traditional U.S. rule that a purchaser of
    stolen or otherwise illegal property--even a good faith purchaser--does
    not get good title to the property. The courts have consistently
    applied this rule to wildlife trade, both before and after CAFRA. Deep
    Sea Fisheries, Inc. v. 144,774 Pounds of Blue King Crab, 410 F.3d 1131
    (9th Cir. 2005). (Rejecting an importer's ownership claim to 600,000
    pounds of salmon exported from Taiwan without the necessary permits and
    finding that, by violating the Lacey Act, the salmon constitutes
    ``contraband or other property that it is illegal to possess.'')
        The Lacey Act's forfeiture provisions are also consistent with the
    treatment of other kinds of illegally obtained property under U.S. law.
    For example, imported cultural artifacts are subject to forfeiture
    regardless of the knowledge or culpability of the importer. See David
    N. Chang, Stealing Beauty: Stopping the Madness of Illicit Art
    Importation, 28 Hous. J. Int'l L. 829, 857 (2006). The Convention on
    Cultural Property Implementation Act (CPIA) empowers U.S. officials to
    seize illegally imported foreign cultural property and restrict its
    importation. Under the CPIA even a ``good faith purchaser''--while
    immune from criminal prosecution--must still give up the pieces,
    usually to be turned over to the country of origin. Some foreign
    jurisdictions, like Switzerland, previously allowed good faith
    purchasers to keep stolen goods, but ``U.S. courts have generally
    rejected application of the Swiss rule. See, e.g., Autocephalous Greek-
    Orthodox Church of Cyprus v. Goldberg & Feldman Fine Arts, Inc., 917
    F.2d 278 (7th Cir. 1990)(rejecting defendant's claim to have acquired
    good title to stolen Byzantine mosaics and applying Indiana's rule that
    a thief cannot transfer good title even to a good-faith purchaser).''
    Patty Gerstenblith & Bonnie Czegledi, International Cultural Property,
    40 Int'l Lawyer 441, 445 n.25 (2006). See also U.S. v. An Antique
    Platter of Gold, 184 F.3d 131 (2d Cir. 1999) (Holding that there is no
    ``innocent owner'' defense to forfeiture of an item of ``classic
    contraband, an item imported into the United States in violation of
    law.'')
        Opponents of this bill do not present a single example of illegally
    sourced property that is not subject to forfeiture under U.S. law. Yet
    they say that timber should be treated differently--that the chain-of-
    custody of timber is too hard to trace. This claim simply does not
    stand up to decades of experience with stolen cultural artifacts, World
    War II era paintings or wildlife. Timber is far more massive than any
    of these items; in many cases, timber-bearing trucks can be seen from
    satellite imagery. And timber has a single, identifiable geographic
    source: a tree. If any item in commercial trade could be traced, it is
    timber. The fact that the chain-of-custody of timber generally cannot
    be traced today points precisely to the need for this legislation.
        It is the nature of an illegal trade network that the origins of
    its products are hard to trace, and this makes it harder for honest
    people to do business. It is the job of governments to create
    incentives to bring such trade into the open.
        H.R. 1497, with the amendments introduced by Congressman
    Blumenauer, will create these necessary incentives. That is why we
    proudly join a broad coalition of industry, labor and environmental
    groups to support this bill, and we thank the Subcommittee again for
    the opportunity to submit these comments.
                                     ______

        [A letter submitted for the record by Jane Hogan,
    Secretary-Treasurer, Ontario Hardwood Co., Inc., follows:

    [GRAPHIC] [TIFF OMITTED] T8330.013

        [A letter submitted for the record by Lawrence Q.
    Hutchins, President, Quail's Nest Industries, follows:]

    [GRAPHIC] [TIFF OMITTED] T8330.014

        A statement submitted for the record by Peter T.
    Jenkins, Director, International Conservation, Defenders of
    Wildlife, follows:]

            Statement submitted for the record by Peter T. Jenkins,
         Director of International Conservation, Defenders of Wildlife

        Madam Chairwoman and members of the subcommittee, I am writing on
    behalf of Defenders of Wildlife (``Defenders'') regarding the
    legislative hearing on H.R. 1497 to amend the Lacey Act Amendments of
    1981 to extend its protections to plants illegally harvested outside of
    the United States, and for other purposes (``Legal Timber Protection
    Act''). Defenders endorses the testimony provided by Alexander von
    Bismarck of the Environmental Investigation Agency (``EIA'') on the
    above Act, and would like to present additional background information
    to support this position.
        Defenders of Wildlife was founded in 1947 and is a national non-
    profit organization with more than 500,000 members and supporters
    dedicated to the protection and restoration of all wild animals and
    plants in their natural communities. The major cause for the current
    decline in biodiversity is habitat loss and fragmentation. Defenders is
    working to protect important habitats and keystone species, with the
    understanding that the protection of these species is vital to the
    health and stability of the greater ecosystem and other species.
        Global forests represent critical habitats for a variety of
    species, and are under threat worldwide by unsustainable harvesting and
    illegal logging. Curbing the trade in illegally sourced wood and wood
    products is vital in protecting species that rely on intact and
    unfragmented forest habitat.
        Wildlife are affected by illegal logging primarily through the loss
    and fragmentation of habitat, but also through a subsequent rise in
    illegal hunting and trade in meat products, through increased human-
    wildlife conflict, and by the heightened risk of emerging diseases
    transferred between humans and wildlife. On a broader level, illegal
    logging affects people and wildlife worldwide through the loss of
    ecosystem services such as carbon sequestration and the regulation of
    climate and rainfall. As documented in the Stern Report in 2006,
    deforestation causes 24% of global carbon dioxide emissions and 18% of
    global greenhouse gas emissions, amounting to more emissions than all
    transport worldwide.
        The following are examples of species under threat largely because
    of deforestation. These species would benefit directly from increased
    protection through the passing of H.R. 1497:

    Borneo and Sumatra--Home of the Orangutan:
        Orangutans require a large home range. Bornean forests generally
    support no more than one to three orangutans per square kilometer, and
    Sumatran forests at most six or seven. Indonesia is undergoing some of
    the most rapid deforestation in the world, and is likely to lose all of
    its primary forest by the year 2012. By 2022, Sumatra and Borneo are
    likely to lose 98% of their remaining forest. A report published by the
    United Nations Environment Programme (UNEP) in 2007 declared a state of
    emergency for the orangutan, predicting the species to go extinct
    within the next 20 years. Approximately 80% of timber exported from
    Indonesia is believed to be illegally sourced.

    The Congo Basin--Apes, Bushmeat and Emerging Diseases:
        The Congo Basin constitutes the world's second largest forest, and
    is home to a rich diversity of plants, animals, and indigenous peoples.
    Due to poor local legislation and law enforcement and often backed by
    international financial institutions and foreign-owned banks, illegal
    logging remains a large problem. In addition to the obvious problems
    associated with habitat loss and fragmentation, the illegal timber
    trade in this region is also associated with the illegal trade in wild
    meat, or bushmeat, including gorillas and chimpanzees, and other
    protected species. This carries not only risk of extinction for local
    ape populations, but also poses a serious disease risk to the local
    human population, as documented by repeated outbreaks of the Ebola
    virus and other zoonotic diseases associated with the handling and
    consumption of bushmeat.

    Russia's Far East--Habitat of the Amur Leopard and Siberian Tiger:
        Illegal logging does not merely affect tropical species. In the
    Russian Far East, approximately half of all timber harvested is done so
    illegally, and contributes to lasting corruption within state forest
    management and the timber industry. The Amur leopard is the rarest
    felid species on earth, with only 25-34 individuals currently remaining
    in the wild. Though also critically endangered, the Siberian tiger
    fares slightly better with up to 520 remaining individuals in the wild.
    A report by the World Wildlife Fund in 2002 linked the future risk of
    extinction for the Amur leopard and the Siberian tiger to illegal
    logging.

    Amazon Basin--Mahogany:
        Illegal logging of mahogany is not only detrimental to the survival
    of the species and to the ecosystem at large; it also constitutes a
    grave threat for several indigenous peoples that have been living in
    chosen isolation in the Peruvian Amazon, through forced labor in
    indentured servitude, exposure of novel diseases, and direct violent
    conflict with representatives of the illegal logging industry. In 2005,
    83% of all mahogany exporters from Peru were involved in the trade in
    illegally-sourced mahogany, in direct violation of the Convention on
    International Trade in Endangered Species of Wild Flora and Fauna
    (CITES). Mahogany represents a species that is difficult to regenerate.

    CONCLUSION
        For the reasons stated above and in the EIA testimony, we endorse
    an amendment to the Lacey Act as proposed in H.R. 1497.
                                     ______

        [A statement submitted for the record by the World Wildlife
    Fund and TRAFFIC follows:]

    Statement submitted for the record by the World Wildlife Fund & TRAFFIC

        Thank you for the opportunity to provide written testimony on the
    Legal Timber Protection Act (H.R. 1497). World Wildlife Fund (WWF) is
    the largest private conservation organization working internationally
    to protect wildlife and wildlife habitats. We currently sponsor
    conservation programs in more than 100 countries, thanks to the support
    of 1.2 million members in the United States and more than 5 million
    members worldwide. TRAFFIC is the wildlife trade monitoring program of
    WWF and IUCN-World Conservation Union (IUCN), and is a global network,
    with 25 offices around the world. TRAFFIC works to ensure that trade in
    wild plants and animals is not a threat to the conservation of nature.
    This testimony is on behalf of both WWF and TRAFFIC. The testimony
    discusses the following: (1) WWF's interest in H.R. 1497; (2)
    background on the illegal timber trade; (3) current efforts to address
    illegal timber trade; (4) the importance of H.R. 1497; (5) WWF's
    comments on H.R. 1497; and (6) implementation of H.R. 1497; and (7) a
    conclusion.

    1. WWF Interest in H.R. 1497
        WWF's interest in H.R. 1497 stems from its work conserving
    important forest eco-regions across the globe. These include Borneo-
    Sumatra, the Congo Basin, the Amazon, Russia (the Amur) and China (the
    Heilong). The illegal timber trade threatens our work in each of those
    eco-regions. For example, in the Russian Far East, we have witnessed
    the widespread use of ``cleansing logging'' permits--issued to remove
    wind-fallen trees--as tools to remove commercial volumes of timber at
    an industrial scale. We have also witnessed logging in legally
    designated protected areas. Such logging frequently occurs in and has
    destroyed some of the best available habitat for the critically
    endangered Siberian (Amur) tiger. WWF has documented the extensive and
    complicated supply chains of this illegally logged oak, ash and birch
    wood from the stump in the Russian Far East to specific Chinese
    factories and all the way to the shelves of specific, well-known
    American flooring and furniture retailers. In an effort to stem this
    trade flow, WWF has trained Russian and Chinese border guards on how to
    identify forged or falsified timber documents and has worked directly
    with Russian wood suppliers and Chinese buyers towards phasing out
    illegally logged wood from their supply chains.
        In Indonesia, our Eyes on the Forest ground team (http://www.eyeson
    theforest.or.id/) issues regular eyewitness reports of high-value wood
    being harvested in legally protected areas, sometimes in collusion with
    government officials, and sent to high volume pulp and paper mills with
    markets in the U.S., Japan, China and Europe. WWF has worked with the
    government of Indonesia, World Bank, USAID and others for several years
    to develop practical trade and policy-related solutions to the illegal
    logging problem in that country.
        In the Peruvian Amazon harvest and trade of valuable timber species
    such as big-leaf mahogany and Spanish cedar, a key national economic
    development activity, has been seriously undermined by illegal logging.
    WWF is leading a dynamic partnership with selected private forest
    concessions, enterprises and indigenous communities, in cooperation
    with Peruvian government agencies and regional and local governments
    and international aid agencies such as USAID and WWF-Netherlands, to
    promote a legal and sustainable forest trade in this region. The
    partnership vision is that, by 2015, 2 million hectares of forest
    concessions and 500 thousand hectares under indigenous communities will
    be certified; an economically viable and socially responsible forest
    sector, based on competitive and innovative forest enterprises,
    offering high quality wood products legally will be established and;
    Peru's forest exports will top U.S. $500 million per annum, from legal
    and verifiable sources and chains of custody, directly benefiting local
    communities and forest enterprises.
        Given the significant investment that WWF has made in protecting
    these and other forested eco-regions around the world, and our
    significant investment in supporting the development of legal and
    sustainable wood products trade globally, we take the threat of illegal
    logging very seriously. It is our belief that H.R. 1497 will help drive
    the demand for legally sourced wood, and as such, will contribute
    significantly to global forest conservation and sustainable use.

    2. Background on the Illegal Timber Trade
        Illegal logging, defined here as the harvesting, transporting,
    processing or trading of wood in contravention of national and
    international laws, plagues the global forest products industry. The
    criminal wood trade transpires in a number of ways, including: logging
    in protected areas or national parks; over-harvesting or disobeying
    cutting permit prescriptions; and avoiding government tax and royalty
    payments. Roughly one-third of hardwood products traded globally are
    thought to be of suspicious origin and 10% of U.S. wood-based imports
    are sourced from areas of high risk for illegal wood export. While
    illegitimate forest harvesting is mostly relegated to developing and
    transitional economies marked by poor national governance and
    corruption, much of this wood enters the world-wide market. The United
    States is the largest forest products consumer in the world, imports
    20% of global forest products exported and is a significant importer of
    ``emerging market'' wood where illegal logging is at its worst. Over
    the last 6 years, according to ITC data, U.S. wood product imports
    increased by almost 60%. As such, American consumers are unwittingly
    complicit in driving illegal logging overseas.
        From an environmental perspective, illegal logging contributes to
    uncontrolled deforestation and degradation; each year we permanently
    lose 50 million square miles of forest, roughly the size of Louisiana,
    to non-forest land uses of lesser environmental value. Forests, in
    protecting wildlife and fish habitat, biodiversity, soil, water and air
    quality, play an irreplaceable role in ecological and human health.
    Illegal logging jeopardizes these values. Additionally, deforestation
    contributes up to 20% of global carbon emissions and thus has a
    significant impact on climate change.
        Furthermore, illegal logging has been associated with a number of
    separate but indirectly related natural resource crises such as
    wildlife smuggling, flooding, the criminal setting of large-scale
    forest fires for the purpose of land conversion to monoculture
    commodities such as palm oil, and the building of non-sanctioned and
    poorly designed road systems throughout once pristine tropical
    ecosystems. These serious environmental issues are oftentimes
    accompanied by even more serious social issues. Over 50 million
    indigenous people depend on forests for their livelihood and cultural
    identity. Illegal logging can put native customary land rights, whether
    communal or otherwise, for hunting, fishing, and farming and
    subsistence at risk. Competition over resources sometimes results in
    violence and human rights violations. In many developing economies
    where gazetting of land and legal establishment of land tenure are
    incomplete, local communities and indigenous groups are especially
    challenged with defending their land and forest rights. Poor forest
    governance contributes both to environmental and social degradation.
        For some, even more alarming than these environmental and social
    impacts are the economic repercussions of the illegal timber trade.
    Illegal timber can be bought at half the price of legal timber in
    certain regions, artificially depressing global wood prices by 7-16%.
    The World Bank estimates that illegal logging costs the forest industry
    over $10 billion per year and governments an additional $5 billion
    annually. In the United States alone, the domestic forest product
    industry loses approximately $1 billion a year in export opportunity
    costs and undervalued sales. For the American forest products industry
    where purchased wood inputs can comprise up to 40% of the cost of
    production, these losses represent a significant hit on margin.
        The myriad impacts of illegal logging are clearly demonstrated in
    the case of Indonesia, where the forest products industry accounts for
    20% of the nation's non-energy exports. Even the most conservative
    estimates indicate that over 60% of Indonesia's natural hardwood
    production is illegitimate. The country is losing forests at an
    unprecedented level, with nearly 7,800 square miles disappearing
    annually. Most of its tropical lowland forests are expected to be cut
    over within the next decade, jeopardizing the thousands of endemic
    species which inhabit them, and the long-term survival of some of the
    most charismatic fauna in the world such as the endangered tiger, Asian
    elephant, Sumatran rhinoceros, and orangutan. Valuable tropical tree
    stands are cut unsustainably, at times replaced with acacia and palm
    oil monocultures, leading to a decrease in tropical timber wood supply,
    a simplification of the forest products economy and a creation of
    unfortunate opportunity costs to national economic development.
    Furthermore, the Indonesian government is deprived of over one third of
    its potential forest industry revenues in unpaid taxes and fails to
    collect on $650 million annually in reforestation fund repayments and
    royalties alone. Losses of potential revenue translate to lost
    opportunity for sustainable economic development. Clearly Indonesia is
    suffering on several levels as a result of the unlawful timber trade.
        While deforestation is caused by both conversion and illegal
    logging, it is important to recognize that the ``informal'' timber
    industry is typically the gateway to other major drivers of
    deforestation. By its very nature, illegal logging is devoid of long-
    term planning for a sustained timber-based economy, thus facilitating
    land use conversion to other uses. For example, large-scale and illegal
    forest clearing of both low- and high-value hardwoods in Sumatra by the
    pulp and paper industry has made way for the palm oil industry to
    establish itself. Large-scale and illegal clearing and road building of
    the Brazilian Amazon jungles for tropical plywood and sawn-wood has
    made way for the soy bean industry to greatly expand its presence. Both
    the initial social, environmental and economic impacts of the
    ``informal'' timber industry, as well as its gateway effect, should
    give rise to deep concern on the part of the U.S. government.

    3. Current Efforts to Address Illegal Timber Trade
        Given the significant negative impacts of illegal logging on the
    lawful wood products industry, President George W. Bush created the
    ``Initiative Against Illegal Logging'' (PIAIL) in 2002 to support
    supply-side solutions to illegal logging within developing, producer
    countries. More than $15 million were contributed to partnership
    projects under the PIAIL, adding to the millions more invested under
    complementary public-private partnerships supported by non-governmental
    organizations like WWF over the last decade. As a result of these
    efforts, several useful tools were created, enhanced or adapted to
    combat the illegal wood trade including legality verification, remote-
    sensing forest monitoring, timber tracking, reduced impact logging,
    community-based forest management and protection and corporate
    responsible procurement programs. TRAFFIC has even helped to develop
    legality standards for Malaysia, Vietnam, China, Republic of Congo,
    Democratic Republic of Congo, Gabon, and Central African Republic
        Although these supply-side measures are important steps to
    addressing the problem, illegal logging continues relatively unabated
    because there is still a market for cheap, criminally procured, raw
    materials. As long as the buying market remains neutral on the legality
    issue, rampant unlawful logging will persist. In the words of
    Indonesian Forest Minister Mohamad Prakosa, ``Expecting or asking one
    country to combat illegal logging while at the same time receiving or
    importing illegal logs of course does not support efforts to combat
    these forest crimes. In fact ``allowing import and trade [in] illegally
    cut timber and associated products could also be considered as an act
    to assist or even to conduct forest crime.''
        Industry players on the buying side have responded to this
    challenge in a number of different ways including seeking legality
    verification, certified chain of custody and controlled wood, creating
    wood traceability and supplier audit programs, using technology such as
    Radio Frequency Identification (RFID) tags and genetic testing to
    verify log origin, partnering with environmental groups on stepwise
    programs to identify and eliminate unwanted wood such as the WWF Global
    Forest & Trade Network (GFTN), and even boycotting entire geographic
    regions in order to minimize their risk of inadvertently procuring
    illegitimate wood. These actions have yielded some positive results.
    For instance, over 13% of globally traded wood is managed under GFTN's
    stepwise program to eliminate unwanted wood from supply chains.
    However, market penetration of these voluntary and sometimes costly
    efforts is not deep or broad enough to keep up with the rapid pace of
    illegal logging and deforestation. Industry-wide actions are needed to
    really transform the marketplace.
        Recognizing the need for universal demand-side measures, the EU is
    developing Voluntary Partnership Agreements (VPAs) with several
    producer countries identified as being at high risk for trading in
    illegal wood. Under the VPAs, licensing systems are being developed
    that will help importers distinguish between sanctioned and non-
    sanctioned exports. Timber products originating from partner countries
    but lacking the appropriate license will not be allowed entry into the
    EU.
        The United States has also recognized the need for demand side
    measures, stating at the 2005 G8 in Gleneagles, ``We agree that
    tackling illegal logging requires action by both timber producing and
    consuming countries...We will act in our own countries...to halt the
    import and marketing of illegally logged timber.''

    4. The Importance of H.R. 1497
        Despite a desire by the U.S. government to address illegal logging,
    the U.S. government still lacks a legal mechanism to identify or
    exclude most categories of illegal wood as it enters the U.S. Unless a
    tree species happens to be one of the relatively few covered under the
    Convention on International Trade in Endangered Species (CITES) or the
    Endangered Species Act (ESA), there is no legislative or regulatory
    remedy available to address the illegal wood import issue. Under the
    status quo, even if the Department of Justice has full knowledge of
    imports of wood illegally harvested elsewhere but not listed under
    CITES or the ESA, it can take no action against the perpetrators.
        Without a universal requirement to conduct some credible level of
    due diligence when importing wood from risky regions, lawful U.S.
    industry actors must continue to compete with unlawful or less than
    scrupulous industry actors who enjoy cheaper wood prices afforded by
    illegal production and/or who expend less time and resources in
    monitoring their supply chain. However, any universal requirement for
    due diligence must not be overly-prescriptive, create unnecessary
    documentation or push costly bureaucratic solutions that would severely
    disrupt or harm businesses that are taking due care in their importing.
    A balance must be struck between protecting lawful businesses from
    undue bureaucracy and ensuring careful due diligence that excludes
    illegal wood from the supply chain.
        WWF's Global Forest & Trade Network works with wood importers and
    retailers in the United States, as well as wood product manufacturers
    and forest managers in many of the regions where illegal wood trade is
    an issue such as Southeast Asia, West Africa, and Amazonia, to identify
    and address illegal wood in the supply chain. We, and the American
    companies that we work with, including Wood Flooring International and
    Lowe's, ask the U.S. government to support our efforts by passing laws
    that will create disincentives for trading in illegal wood; such an
    action on the U.S. government's part will even our playing field.

    5. WWF's comments on H.R. 1497
    Suggested changes for H.R. 1497
        WWF strongly supports H.R. 1497 with amended language that would
    reflect the language in Senator Wyden's Companion bill S.1930, the
    ``Combat Illegal Logging Act''. Senator Wyden's bill language, as
    mentioned by Ms. Wrobleski of International Paper/AF&PA in her
    testimony, was the result of significant compromise among environmental
    and industry representatives belonging to a coalition to support H.R.
    1497 and S.1930.
        Primary changes between H.R. 1497 as introduced and as WWF would
    recommend be approved by Committee, consistent with S. 1930, are as
    follows:
        Creates same regime for interstate and foreign law by amending 16
    U.S.C. 3372(a)(2)(B) instead of adding a new section 3372(a)(2)(C).
    This measure was taken in order to assure compliance with WTO.
        Alters wording of 16 U.S.C. 3372(a)(2)(B)(i). The new clause is
    tightened in some ways (by eliminating verbs ``transported or sold'')
    and expanded in others (by referencing ``laws to prevent illegal
    logging''). The intent has been to provide greater clarity regarding
    what ``laws'' are intended. The result is language that, as Ms.
    Wrobleski stated, is ``carefully crafted to protect forests from
    criminal activity''.
        Adds ``transport and export'' to 16 U.S.C. 3372(a)(2)(B)(ii). This
    captures an important subset of fraud against foreign government that
    the original wording did not.
        Removes the original ``documentation'' clause (v) from 16 U.S.C.
    3372(a) and creates a new section 16 U.S.C. 3372(f) that specifies
    information that must be declared. This new section, in essence,
    mandates transparency in timber shipments. It requires specific
    information and sets a timeframe for compliance, which allays industry
    fears while at the same time precluding the risk inherent in the
    original approach, of an indefinite or nonexistent process to
    promulgate regulations. It also establishes the requirement for a
    report on implementation success after the first two years, at which
    point recommendations for alterations to declaration requirements can
    be made.
        Given the careful negotiations between industry and environmental
    groups and their many members in coming to language that these
    disparate stakeholders could agree upon, we support amendments to H.R.
    1497 that would make it consistent with the language provided in the S.
    1930.

    Relationship to Lacey Act
        WWF firmly believes that amending the Lacey Act is the optimal
    means for meeting the goal of prohibiting illegal timber products into
    the U.S. This goal is consistent with the history of the Lacey Act, and
    the operational provisions of the Lacey Act.
        The Lacey Act, first passed in 1900, makes it unlawful to ``import,
    export, transport, sell, receive, acquire, or purchase'' fish, wildlife
    and plants taken in violation of domestic law, and domestic and foreign
    law where applied to wildlife and fish. H.R. 1497 would expand the
    Lacey Act such that plant and plant products, like fish and wildlife,
    would also be subject to relevant foreign laws.
        At its inception, the Lacey Act was designed to conserve native
    wildlife species, particularly those threatened by introduced exotic
    species and excessive hunting and poaching, facilitated by interstate
    trade. As with other laws, the Lacey Act has been amended several times
    over the years to effectively address the evolving scale and scope of
    the threat to the long-term survival of wildlife, plants and fish. Most
    significantly, Congress amended the Lacey Act in 1981 in specific
    response to the substantial increase in the international criminal
    trade in fish and wildlife.
        As case law and history demonstrate, the law was thought to be
    deficient in meeting the threat so Congress expanded its scope,
    increased civil and criminal penalties, and introduced strict liability
    forfeitures and seizures of illegal goods even if the recipient had no
    knowledge that they were aiding and abetting a crime 1.
    ---------------------------------------------------------------------------
        \1\ For more information on Lacey case law and history see Robert
    Anderson, 16 Pub. L.L.R. 27 ``The Lacey Act: America's Premier Weapon
    in the Fight Against Unlawful Wildlife Trafficking, Public Land Law
    Review and Michele Kuruc ``The Lacey Act: Stemming the Flow of
    Illegally Commercialized, Fish, Wildlife, and Plants'', NOAA.
    ---------------------------------------------------------------------------
        As the U.S. Court of Appeals for the 11th Circuit on U.S. v. McNab,
    Blandford 2 stated:
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        \2\ http://www.uniset.ca/other/cs3/331F3d1228.html
    ---------------------------------------------------------------------------
            The legislative history reflects that ``the [main] thrust of
            Congress's intention in amending the Act was to expand its
            scope and enhance its deterrence effect.'' [FN20] 594,464
            Pounds of Salmon, 871 F.2d at 828. Indeed, Congress clearly
            stated that the amendments were meant to strengthen the
            existing wildlife protection laws and to ``provide [the
            government] the tools needed to effectively control the massive
            illegal trade in fish, wildlife and plants.'' 127 Cong. Rec.
            17,327 (remarks of Senator Chafee); see also 127 Cong. Rec.
            26,537 (1981) (remarks of Representative John Breaux). The
            Senate Report provided [*1239] that the amendments ``would
            allow the Federal Government to provide more adequate support
            for the full range of State, foreign and Federal laws that
            protect wildlife.'' S.Rep. No. 97-123, at 4. The amendments
            were intended to ``raise both the civil and criminal penalties
            of the current laws and target commercial violators and
            international traffickers.'' 127 Cong. Rec. 17,328 (remarks of
            Senator Chafee). By strengthening the penalty provisions of the
            Lacey Act, Congress intended ``to give the Federal Government
            stronger enforcement tools to stop the large-scale importation
            and taking of fish--which enjoy protection under other
            foreign--laws.'' Id. at 17,329 (remarks of Senator James Strom
            Thurmond).

    ``Innocent Owner'' Provision
        WWF does not believe that H.R. 1497 should provide for an
    ``innocent owner'' defense. I.e., allow wood products that the U.S.
    government proves to come from illegal sources (and by doing so proves
    such products are contraband) from entering the U.S. Some opposed to
    H.R. 1497 have claimed that the wood supply chain is much more
    complicated than the fish or wildlife product supply chain and thus the
    Lacey Act language should be softened to contain an ``innocent owner''
    defense. WWF and TRAFFIC, in their work with fish, wildlife and wood
    product supply chains, can testify to the fact that, as a function of
    globalization of commodity markets, all of these supply chains are
    equally complicated. For example, through its Marine Stewardship
    Council work, WWF is intimately familiar with helping U.S. seafood
    retailers to track their fish supply and assure that it is coming from
    sustainable sources. The seafood industry is highly complex. For
    processed seafood coming into U.S. it is not uncommon for the primary
    sources originating from various regions around the globe to be mixed
    and processed in a different global region, undergo yet additional
    value-added processing in still another global region and then finally
    shipped into the U.S. The seafood can be passed through a number of
    hands, distributors, brokers, and manufacturers, before entering the
    U.S. marketplace. Despite this complexity, the seafood industry has
    managed to abide by the Lacey Act, with its existing seizure,
    forfeiture, civil and criminal penalties, for over 25 years and has
    even found it useful in protecting its business from unsustainable
    offshore harvesting of seafood. 3
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        \3\ http://www.alaskajournal.com/stories/091006/
    hom_20060910060.shtml
    ---------------------------------------------------------------------------
        As has already been mentioned in this testimony, the 1981 Amendment
    of the Lacey Act intentionally added the seizure and forfeiture on
    strict liability, and increased penalties, in order to make the Lacey
    Act effective in addressing the issue it was designed to address:
    threat to the conservation of fish, wildlife and plants as a result of
    illegal activity. As is often said with respect to the Lacey Act, one
    of its greatest strengths is its deterrence effect. Any softening of
    the language, such as the inclusion of an ``innocent owner'' protection
    of contraband goods, would render the law ineffective in this regard.
        In United States v. 144,774 Pounds of Blue King Crab ((410 F.3d
    1131, 9th Circuit 2005), the 9th Circuit held that the innocent owner
    provision in the the Civil Asset Forfeiture Reform Act of 2000 (CAFRA)
    is not inconsistent with, or contrary to, the Lacey Act. In that case,
    the U.S. sought forfeiture under Lacey of frozen blue king crab taken
    in violation of Russian Federation law. Respondents raised the
    ``innocent owner'' defense under CAFRA, claiming that because they did
    not know the crab was caught in violation of Russian law they should be
    exempt from forfeiture. Despite the complexity of the king crab supply
    chain, the 9th Circuit Court, based on Lacey Act law, history and
    congressional intent, deemed the products to be unlawful, though not
    criminal, and thus subject to forfeiture, a tool deemed by the Court to
    strengthen the effectiveness of the Lacey Act.
        In terms of general enforcement of the Lacey Act, apart from
    criminal cases, the government must have a preponderance of evidence in
    order to establish a case. The investigative procedures to make such
    cases are exhaustive, as described by Paul Ortiz of NOAA. 4
    In proving a Lacey violation, U.S. prosecutors will go to great lengths
    to confirm that a foreign law has been violated, and will work closely
    with foreign government officials to determine the relevant laws and to
    ascertain whether there were any violations. They will often bring in
    translations of laws, expert witnesses from the foreign country, and
    other evidence to prove a violation. WWF expects that the same steps
    would be taken in enforcement of an alleged Lacey Act violation
    regarding timber products.
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        \4\ http://www.high-seas.org/docs/Lacey_Act_Paper.pdf
    ---------------------------------------------------------------------------
        In summary, the fish and wildlife supply chains that the Lacey Act
    currently governs are just as complicated as the wood supply chains
    that we would like to include under Lacey, so there is no need to
    redress the Lacey Act in order to make it ``fit'' the wood product
    situation. The Lacey Act 1981 Amendments strengthened enforcement
    measures and penalties, including adding a strict liability clause, in
    order to make Lacey more effective in meeting the ever-increasing
    global threat perpetrated by the illegal fish and wildlife trade. Lacey
    Act case law demonstrates that it is designed to, first and foremost,
    capture and punish those who are knowingly complicit in illegal
    wildlife and fish trade. Secondarily, Lacey establishes some measure of
    accountability by exercising an appropriate level of due care. Lacey
    puts the burden of proof on the government to establish culpability and
    rewards those who are already practicing appropriate due diligence
    relative to their risk of procuring illegal products by evening the
    playing field in terms of punishing their less scrupulous competitors.

    6. Implementation of H.R. 1497
        WWF firmly believes that, through a risk-assessment based approach,
    it is possible to distinguish wood that has a high probability of
    coming from illegal sources within one's forest products. Using
    existing tools, technologies and resources already adopted by several
    industry leaders, it is possible to work with one's suppliers to
    eliminate illegal wood, even within long and complicated supply chains.
    WWF, through its Global Forest & Trade Network, collaborates with
    retailers, importers, factories, distributors, brokers, suppliers, and
    forest managers throughout their global supply chains to identify and
    address illegal wood in the system. Given over a decade of experience
    helping companies on this issue, we can attest to the fact that it is
    possible to assess risk for illegal wood within forest products of all
    product category types and it is possible to take appropriate actions
    with suppliers to minimize and mitigate the risk.
        In our experience, the first step in assessing risk level is to
    know the species and country and forest management unit origin of wood
    for a given product. Having worked with many wood product buyers and
    retailers, we can safely say that even the most well-intentioned
    companies do not necessarily know the origin of wood for their products
    beyond knowing the physical location of their primary and direct
    suppliers such as factories in China or brokers in Singapore. Foreign
    factories and brokers often resist providing their customers with wood
    origin information because they either lack systems to track their wood
    or they are protecting what they consider to be a competitive trade
    secret. Unfortunately, without knowing where, geographically, wood
    originates, it is virtually impossible to assess and address risk of
    illegal wood within one's supply chain. Those who are committed to
    knowing the origin of wood to identify risk must often expend excessive
    time and resources simply getting information needed to identify any
    red flags. Their less diligent competitors actually save time and
    resources by conducting ``business as usual.''
        The proposed Lacey Act amendment would require shipments of forest
    products to be accompanied by a declaration stating the species,
    country of origin for the raw material, quantity and measure, and
    value. The documentation requirement should help law enforcement agents
    and, more importantly, the wood product buyers, to identify relative
    risk of imports for illegal wood, which vary country by country, in
    order to prioritize their efforts. The requirement should also serve to
    motivate factories, brokers, distributors and others importing into the
    United States to establish wood traceability within their procurement
    programs. Wood traceability through the complicated global supply chain
    is possible if the foreign factories and their suppliers put systems in
    place to capture needed information. WWF has in fact worked with many
    factories within China, Southeast Asia and Latin America to put these
    tracking systems in place so we can attest to the fact that it can
    indeed be done. The problem is that without significant demand for this
    information, the factories will not change their current practices.
        Moving from the current voluntary data exchange model to a
    mandatory documentation model would greatly benefit U.S. companies who
    are making every effort today to procure wood responsibly from the
    hassle of trying to persuade their suppliers to provide critical supply
    chain information on which to base their risk assessments. Increasing
    supply chain transparency in this manner would also help to shine a
    light on the less scrupulous wood buyers and, again, even the playing
    field.
        Once transparency is established, there are a multiple tools that
    one may use to assess and address risk (see Appendix A for more
    information). As mentioned previously, chain-of-custody certification,
    controlled wood certification, legality verification, first and 2nd
    party random supplier audits, Radio Frequency Identification (RFID)
    tags and genetic testing to verify log origin, remote-sensing, and
    step-wise programs like Rainforest Alliance's Smartsource Program and
    the Tropical Forest Trust program are all viable methods of minimizing
    and mitigating illegal wood risk and are all being used effectively
    within the forest products sector by market leaders who have actually
    integrated legality checks into their routine quality assurance
    programs. In fact, and as an interesting aside, American Forest & Paper
    Association (AF&PA) members, who support H.R. 1497, voluntarily
    instituted programs to assess and address illegal wood within their
    supply chains in 2002, as part of the Sustainable Forestry Initiative.
    As AF&PA includes several companies who import wood products from high
    risk regions, this is not a trivial matter. The fact that this
    association has proactively met the illegal logging issue with
    appropriate due care may in part explain their confidence in and
    support for H.R. 1497.
        While some forest product companies and associations recognize that
    their level of due care must match the level of risk within their
    business, others unfortunately do not. This is particularly
    disconcerting when considering that the odds of sourcing illegal wood
    products are 2:5 from China, 4:5 from Indonesia, 1:5 from Malaysia, 3:5
    from Honduras, 2:5 from Vietnam, and 2:5 from Peru, all countries
    exporting large volumes of wood products to the U.S. With such high
    odds of sourcing illegal wood, it is puzzling to us that more companies
    and associations are not raising their level of due care to be
    commensurate with their level of risk. While several companies and
    associations have codes of conduct and publicize high-level statements
    against illegal logging, they are not taking appropriate measure to
    implement these policies across the board, and unfortunately have a
    competitive advantage over those companies that are practicing
    appropriate due care. Indeed, if all market players were using the same
    voluntary and abundant due diligence mechanisms available to exclude
    illegal wood from their supply chains, then amending the Lacey Act
    would become unnecessary.
        The current importing of suspicious wood products into the U.S. is
    not only damaging the U.S. forest products industry and the social,
    economic and environmental situation of many developing countries, but
    it is also harming the American consumer who is in fact the end user of
    these products. Consumers have a right to trust that the products they
    buy, if not necessarily sustainable, are at the very least sourced
    legally. Consumers, unlike the forest product industry, have few ways
    of distinguishing between legally and illegally sourced products and
    they should not be put in this position anyway. We believe that the
    U.S. government, in partnership with exporting nations and the global
    forest products industry, has a responsibility to the American consumer
    to screen out unlawful products from the U.S. retail shelf.

    7. Conclusion
        Congressional approval and enactment of this legislation, with
    amendments suggested in this testimony, would place the United States
    in a strong leadership role in addressing the illegal timber trade.
    Given the serious environmental and social impacts of illegal logging
    to developing and transitional economies, and the economic impacts to
    the global forest products industry, it is critical that actions be
    taken by both individual companies and governments to address the
    problem. Although public-private partnerships and multiple supply-side
    measures have shown promising results, we cannot expect these actions
    to significantly abate illegal logging without being accompanied by
    strong demand-side signals. Several companies have voluntarily
    undertaken steps to exclude illegal wood from their supply chain.
    However, market penetration of these voluntary and sometimes costly
    efforts is not deep or broad enough to keep up with the rapid pace of
    illegal logging and deforestation. Industry-wide actions are needed to
    really transform the marketplace.
        H.R. 1497, amending the Lacey Act to address illegal timber
    imports, provides an effective and business-friendly tool for enabling
    the U.S. government to punish criminal actors, encourage a credible
    level of due diligence among all U.S. forest products industry, and
    drive foreign suppliers to put systems in place that would enable them
    to trace their wood to forests of origin. Knowing where the wood
    originates is the first step in assessing and addressing risk of
    illegal wood within a given supply chain. Amending the Lacey Act should
    help level the playing field for responsible U.S. businesses and remove
    the perverse incentives that currently exist for wood procurement that
    causes irreparable social, economic and environmental harm.
        Finally, along with the passage of H.R. 1497, we ask Congress to
    provide sufficient appropriations to the agencies tasked with
    implementing this critical legislation. The key to whether this law
    succeeds on the ground is whether adequate personnel, training and
    6funding are dedicated to enforcement efforts.
        Thank you for the opportunity to provide this testimony to the
    Subcommittee.
                                     ______

                   Some Tools and Resources for Companies to
          Address Illegal Logging in Their Supply Chains 5
    ---------------------------------------------------------------------------

        \5\ The tools and resources listed here are in no way exhaustive or
    comprehensive. We recommend that Department of Justice convene a multi-
    stakeholder working group to develop a comprehensive list of available
    resources
    ---------------------------------------------------------------------------
          Voluntary legality verification See http://
    www.rainforest-alliance.org/programs/
    forestry/smartwood/legal_verification.html for an example.
          Keep It Legal Guidelines-- http://assets.panda.org/
    downloads/keep_it_
    legal_final_no_fsc.pdf.
          FSC Controlled Wood Certification -- http://www.fsc.org/
    controlled_wood
          FSC Chain of Custody Certification -- http://www.fsc.org/
    keepout/ en/content_
    areas/77/134/files/FSC_STD_ 40_004_V1_0_EN_CoC_ for_Suppliers_
    and_Manufacturers.pdf
          Other 3rd Party forest chain of custody certifications
          First and second party supplier audit systems--for a few
    real-life examples see:
            http://w3.upm-kymmene.com/for/internet/ upm_
    tracing_russia_wood.nsf/start
            http://search.storaenso.com/mini/woodprocurement/main.html
          Stepwise Programs to Identify and Eliminate Illegal Wood
    in Supply Chain:
            WWF-GFTN -- http://www.panda.org/about_wwf/what_we_do/
    forests/our_solutions/responsible_forestry/gftn/index.cfm -- includes
    Risk Assessor database tool which cross-references country and species
    and rates relative risk of illegal logging
            Rainforest Alliance--Smartsource and Smartstep -- http://
    www.rainforest-alliance.org/programs/forestry/trees/services/
    smartsource.html
            Tropical Forest Trust--Third party verification -- http://
    www.tropical
    foresttrust.com/third-party.php
          Helveta and TFT Tracelite RFID tracking -- http://
    www.tropicalforesttrust.com/tracelite.php
          Remote sensing -- http://www.illegal- logging.info/
    item_single.php?item=news
    &item_id=1819&approach_id=1