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Lacey Act Update: Industry & Environmental Groups Jointly Request Clarifications on Implementation

July 17, 2009

A coalition of environmental non-governmental organizations (“NGOs”), manufacturing and trade groups, retail and other industry associations today released a letter outlining consensus positions regarding interpretation and implementation of the recent amendments to the Lacey Act, which prohibit trade in wood or wood-fiber-containing products incorporating illegally-harvested trees. The coalition’s letter is likely to result in changes in how the U.S. government proceeds in implementing the Lacey Act and therefore should be of interest to retailers, distributors, importers and foreign manufacturers engaged in trade in wood and wood-fiber-containing products.

Troutman Sanders was involved in the negotiating process culminating in this letter and is available to advise clients as to their legal obligations in complying with the Lacey Act requirements.

LACEY ACT BACKGROUND:

The Lacey Act is an environmental protection law prohibiting trade in protected wildlife and plant species. Last year, the Lacey Act was expanded to prohibit trade in plants and plant products containing wood fiber from trees that were illegally logged according to U.S. or foreign laws.

The Lacey Act creates new burdens on U.S. retailers, distributors, importers and foreign vendors to exercise “due care” in sourcing wood products and other products containing wood components in accordance with the new law. Penalties range from strict forfeiture of the goods all the way to criminal penalties of up to five years for knowing violations of the Lacey Act. In its present form the law does not provide any “innocent owner” defense.

The Lacey Act has two components, the “prohibited acts” and the “declaration requirement.”

Companies and individuals engaged in trade in wood and wood products must know the acts prohibited under the new law. The prohibitions include not only the illegal taking of protected species, but also the harvesting of trees without paying appropriate fees or royalties even where the trees are not protected or environmentally sensitive. Liability for violations at harvest flows through to companies and individuals trading in downstream articles incorporating illegal wood, such as furniture, flooring, lumber and paper. It is critical that entities engaged in the manufacture or sale of wood-fiber-containing products adopt compliance procedures in order to minimize the risk of trading in illegal wood and to demonstrate that the company exercised “due care” which is an important element in mitigating penalties.

The Lacey Act amendments also create a new compliance burden for importers to file declarations with US Customs and Border Protection which identify the species and country of origin of wood and wood components incorporated into imported articles. For products containing a variety of wood components the declaration requirement can be burdensome since information must be gathered all the way up the supply chain to identify the original country of harvest and scientific name of the trees incorporated into the finished article.

The declaration requirement is being phased-in by the agencies charged with administering the Lacey Act, including US Customs and Border Protection and the U.S. Department of Agriculture’s Animal & Plant Health Inspection Service (“APHIS”). The phase-in schedule is arranged so that the first items subject to the declaration requirement are those that are “closest to the tree.” APHIS requested comments from the public in early 2009 as to future modifications to the phase-in schedule. APHIS is expected to issue a Federal Register notice soon to provide additional guidance as well as to begin the process of defining “common food crop” and “common cultivar” which are excluded from the Lacey Act but presently undefined.

THE COALITION’S “CONSENSUS STATEMENT”

There is a wide range of stakeholders interested in the Lacey Act, including environmental NGOs , manufacturing industry trade associations, importing and retailing associations, as well as individual companies engaged in trade in products covered by new law. Last October, a diverse group of stakeholders established a small working group to try to reach consensus positions regarding how the administering agencies should implement and interpret the new law. They then mobilized broader stakeholder support and rallied key members of Congress to issue a “guidance letter” to the administering agencies. As a result of that letter, APHIS made some modifications to its initial implementation plan for Lacey Act which improved its initial administration.

This spring, the coalition of environmental NGOs and industry groups continued working to reach consensus regarding issues needing further clarification to further the objectives of the law while minimizing unnecessary, overly burdensome or impossible requirements on the retailing and importing community.

Today, the coalition released a Consensus Statement addressing the following six major areas:

  • Blanket Declaration

The coalition proposes that the agencies permit companies importing the same products from the same sources to file a period declaration with the required information, rather than separate declarations with each shipment. The option has restrictions that are likely to limit its appeal to relatively few importers. We can provide further details to interested companies.

  • Species Groupings

The declaration currently requires the importer to identify both the scientific genus and species of each wood article or wood component. However, there are situations where there are multiple species within a genus which cannot reliably be determined according to existing and practical scientific means. The coalition proposes that groupings be established by an independent scientific body, the U.S. Forest Products Laboratory, which could be used in the event an importer is unable to identify the wood down to the specific species.

  • Composite Materials

The Lacey Act statute covers wood and wood products, whether made from solid wood or composite wood fiber materials, such as particle board and fiberboard. It is difficult and sometimes impossible to trace the species and country of origin for all fiber included in such composite board. The coalition proposes that declarations should not be required for imports of particleboard under HTS 4410 and fiberboard under HTS 4411 or for particleboard or fiberboard components of other finished articles, such as furniture. Importers would still need to declare the solid wood components of finished articles and the solid wood parts of composite wood components. For example, an importer would still need to declare the information for the veneer layers of veneer-covered particleboard. But the declaration information could be omitted for the particleboard portion.

  • Addition of Solid Wood Product Categories to Current and Future Phase-in Schedule

The coalition proposes that the declaration requirement be limited only to solid-wood components of finished articles otherwise covered by products within the current phase-in groupings. After the April 1, 2010 phase-in period, the coalition suggests that future products be added where the essential character of the item is wood. Additionally, for future products, declaration should not be required until one year after first notice is provided in the Federal Register that a particular product will be subject to a declaration. The purpose of this notice period is to permit stakeholders sufficient time to begin collecting information necessary for the declaration. No declaration should be required for goods manufactured prior to the date of the publication of the new phase-in schedule in the Federal Register. “Manufacture” is defined as “final assembly or processing of the product to be imported.”

  • Date of Manufacture

The coalition concurs that the Lacey Act amendments do not apply to goods manufactured prior to the enactment of the Lacey Act. This proposal was intended to address difficulties in providing the declaration for antiques or raw materials that were in inventory before the change in law.

  • Recycled Wood Products

The coalition proposes that the Lacey Act be interpreted to permit flexibility in reporting recycled or recovered content for wood products, as it does for paper products, in order to encourage efficient use of wood fiber. The group proposes that this issue be considered during the statutorily-required review of the Lacey Act’s implementation.

NEXT STEPS:

It is expected that the Consensus Statement will result in interest by the various oversight bodies in Congress concerned with implementation of the Lacey Act. The committees of jurisdiction previously exhibited interest in encouraging consensus implementation of the Lacey Act by the various agencies, consistent with the objectives of the legislation. That interest manifested in oversight activity and a “guidance letter” from Congress to the agencies. It is anticipated that similar activity will follow the delivery of the coalition’s consensus letter to Congress and the agencies.

Separately, APHIS is still due to release proposals for comment on the definitions of “common food crop” and “common cultivar”, which are excluded from coverage under the Lacey Act. In addition, APHIS indicated it would provide feedback on the public comments received in response to APHIS’s February 3, 2009 Federal Register notice regarding the declaration requirements. It is not known what impact the coalition’s consensus letter will have on APHIS’s schedule for the anticipated Federal Register notices or the substance of APHIS’s announcements.

Troutman Sanders was involved in the negotiating process culminating in the coalition’s consensus letter and is well-equipped to counsel retailers, distributors, importers and foreign suppliers as to their legal obligations in complying with the Lacey Act amendments. For further information, please contact the attorneys listed in this alert.

A copy of the Consensus Statement is attached here.

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