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China Delivers Double-Punch to Pandemic

The world is now focused on fighting a common enemy: COVID-19. For most of us, this is an unprecedented moment of global struggle. The first hit nation, China, has seemingly emerged from the most difficult stage and is forging ahead with exceptional measures to address the root causes of the pandemic. Notably, upon learning that the outbreak could have been related to wild animal markets, the Chinese government immediately adopted a new regulation banning the consumption of wild animals for food and has committed to cracking down on the illegal wildlife trade (however, there are exemptions for certain species classified as livestock and the ban notably does not cover the consumption of wild animals for purposes other than food, such as the production of traditional medicine or ornamental items).

While the wildlife trade ban addresses one root cause of pandemics, it does not tackle another contributing factor—deforestation. As a new study points out, deforestation could increase the likelihood of outbreaks of highly contagious diseases. In fact, China did begin to address this phenomenon before the COVID-19 outbreak. On December 28, 2019, China’s Standing Committee of National People’s Congress (NPC) announced a revision to the Forest Law. For non-domestic audiences, perhaps the most note-worthy revision is Article 65, which proclaims a nationwide ban on buying, transporting, and/or processing illegally sourced timber. It marks the first time that “illegally sourced timber” is highlighted since the Forest Law’s inception in 1984.

To better understand what could be the next victory punch to a pandemic like COVID-19, it will be helpful to take a closer look at the exact wording of the Article 65 and examine how this version evolved from out of previous versions of the Law and through different drafts of this latest round of amendment.

The final text of the Article 65 reads (unofficial translation):

“Timber operating and processing enterprises shall establish the input and output ledger for raw materials and products. No entity or individual may purchase, process, or transport timber that are knowingly sourced illegally from logging without or beyond official permits.”

According to the official explanation, the main purpose for this round of amendment is to establish a modern forest governance system with an aim to promote sustainable development. Article 65 is located in section VI “Operation and Management,” which lays the foundation of a sustainable forest governance system. It does so by classifying national forests into two categories of usage – commercial logging or public interest – based on their ecological value. By including an Article to ensure that timber is sourced legally, the revised Forest Law signals that timber legality is a crucial component of sustainable forest governance.

Looking back at previous three versions of the Forest Law (the 1984 original, and two revisions in 1998 and 2009), we are pleased to find the 2019 revision significantly expands the coverage of applicable environments. While all previous versions almost exclusively focus on plantations, the 2019 revision aims to cover components of the full timber supply and utilization chain. In addition to illegal activities related to timber logging, permitting, and transportation, Article 65 highlights “timber operational and processing enterprises” which for the first time covers downstream actors in the timber industrial chain. For instance, plywood and furniture manufacturers now must ensure their timber be sourced legally.

Accordingly, Article 65 also mandates extended liability of relevant stakeholders and mandates that they perform their own due diligence checks on timber source legality. In addition to logging entities, the revised Forest Law covers all relevant players on the industrial chain, including those in the timber transporting and processing businesses. Although neither Article 65 nor the rest of the revised Forest Law provide details on how to undertake due diligence, these expansions of liability and requirements of due diligence are steps in the right direction.

In fact, the Article 65 does highlight one important measure that has the potential to become part of a future due diligence package. As mandated by the Article, all timber operating and processing enterprises are required to establish and maintain a timely updated input and output ledger for raw materials and products. If these ledgers are well kept at every point of transaction, they will serve as key tools for tracing the sources of certain timber products.

The ledger requirement was proposed at the beginning of this round of Forest Law amendment. But the specific wording of Article 65 has changed over the course of a few revised drafts. Earlier versions of the text were phrased as one continuous sentence in Chinese, which meant that the only liable entities were timber operating and processing entities. However, by separating the Article into two sentences and adding the phrase “no entity or individual may” at the beginning of the second sentence, the final version of Article 65 subtly indicates that the responsibility of checking source legality expands beyond timber operators and processors. It could very well cover timber-trading entities that import from the international market.

By delivering a double blow to wildlife and timber trafficking, China has disarmed the foot-soldiers of COVID-19. Banning the illegal timber trade to achieve sustainable global forest governance could deliver the knockout blow to future pandemic threats. To do this, Chinese authorities now need to take several key steps to support, enforce, and safeguard Article 65:
– First, Chinese authorities must clarify and confirm that Article 65 does apply to imported timber;
– Release an official implementation plan for the new Forest Law, which lays out the enforcement mechanism for Article 65 on the international timber trade;
– Charge the relevant administrative agencies, including the National Forest and Grassland Administration (NFGA), the Ministry of Commerce (MOFCOM), and the General Administration of Customs (GAC), with forming a cross-agency task force to actively enforce Article 65 and its implementation plan;
– Enact an administrative measure exclusively focusing on the management of timber imports, detailing due diligence requirements for relevant stakeholders;
– Commission the design of a new business service and supporting tools on the transparency and traceability of both domestic and international timber trade.
– Adopt sustainable forest governance as one of the flagship programs in the Green Belt and Road Initiative.