SHANGHAI—While the legitimacy and/or necessity of various green movement initiatives can be debated, recent laws, standards and regulations enacted at both the federal and state levels in the U.S., as well as in other parts of the world, have made it clear that certain practices will no longer be tolerated. These are specifically related to wood products—be they hardwood or laminate—and deal with deforestation, illegal logging and the destruction of exotic wood species, along with the materials used to manufacture and handle wood floors.
Though many may have heard of the major laws and regulations, specifically the Lacey Act and CARB (phases I and II), except for executives at the major national associations from around the world and, to an extent, the manufactures themselves, there is still a great lack of understanding by most people in the supply chain concerning the consequences of these rules.
As a result of this confusion, at the 3rd International Wood Flooring Summit, held here during the annual Domotex asia/China- Floor (DACF) market and co-sponsored by Floor Covering News, the panel, which consisted of representatives from the major wood and laminate associations in the U.S., Europe and China, turned its attention to these and other recently or soon-to-be enacted regulations, such as Europe’s Forest Law Enforcement, Governance and Trade (FLEGT) rule.
Jim Gould, the panel’s moderator and president of the Floor Covering Institute and co-sponsor of the event with FCNews, told the audience, which included a host of international media, the meeting was “not a lecture, but simply a discussion and a way to form cooperation between the various countries. This is a unique event in that it is a way for people from different parts of the world to speak freely on issues and to come up with ways for everyone to work together in a productive manner.”
To update, here is a quick review of what some of the laws being discussed are about. The Lacey act is described as the world’s most far reaching and punitive law of its kind. It holds the entire wood products supply chain responsible for avoiding illegal wood and imposes a standard of “due care” on every per- son in the supply chain, including specialty retailers—only consumers are excluded.
CARB is actually a California law, though other states are in the process of enacting their own, but similar versions, aimed at cleaning up product emissions by regulating the production of lumber once it has been harvested. Limits have been set for numerous volatile organic compound (VOCs) emissions in composite wood products as they have typically utilized formaldehyde glues or resins during construction and continue to release harmful toxins throughout their life cycle.
Juergen Fruechtenicht, president of the European Federation of Parquet Importers (EFPI), Europe’s version of the National Wood Flooring Association (NWFA), said FLEGT is that continent’s latest rule dealing with illegal logging but differs from Lacey in what importers and manufacturers must prove.
He also noted, that beyond the laws and regulations, people must understand “Sustainable forestry is usually legal, however, legal foresty does not necessarily mean to be sustainable.”
Shortly after the summit, the house of representatives in the state of Massachusetts passed a bill that would punish anyone who owns or uses illegal sealant or lacquer products, such as certain wood finishes that can ignite at temperatures below 100 degrees. Other states have similar bills as well.
Though the passage of Lacey is now “old news,” Mark Elwell, board member of NWFA, noted there have been some recent “developments” that show how the act will be enforced and the consequences of being in violation of it.
He pointed to recent headline news about federal agents from the U.S. Fish and Wildlife Service seizure of property and investigation of Gibson Guitars for supposedly using rosewood, an endangered species from Madagascar.
Elwell said while things have been relatively quiet, Gibson could be the “first of many who get investigated.”
Of all the rules and regulations, Lacey affects the most people in the entire selling chain—from the person/company that first cuts the tree to the final seller.
As Gould noted, “There is no ‘innocent owner’ defense and illegal flooring can be seized at any point in the chain; relying solely upon others to comply may be insufficient in the face of investigations. To be in violation of the Lacey Act one only needs to have participated in the supply chain that received, transported or sold it. A Lacey violation can also lead to prosecution under other laws.
So what are the specifics, and how can a dealer be impacted? Put simply, it is illegal to import, export or traffic (sell) materials that are harvested in violation of either local or foreign laws. Any violations may result in civil and criminal fines and forfeiture, not to mention the negative publicity that can follow. Forfeiture can also include vehicles and equipment in criminal convictions.
How can someone be in violation? Some examples of what is considered illegal logging include: theft of timber from parks and protected areas, harvesting without permission, failure to comply with harvesting regulations, failure to pay royalties, taxes or fees. To comply with the law, parties must have declarations showing the wood in the product was obtained legally.
Declarations are also necessary for any protective packaging material that is being imported as the act covers paper and paperboard products.
Where it hurts
So beyond having to turn over the goods you purchased and explaining to a community why you were involved in the illegal activity, violators of the Lacey Act can be hit with severe penal- ties that could literally put a retailer out of business— and behind bars.
As for the types of penalties and what they mean, the following came from the U.S. Department of Agriculture:
- Civil penalties: The Lacey Act allows for the imposition of civil administrative monetary penalties against a party who in the exercise of due care should have known of the illegal nature of the [product] in question, or who knowingly commits a false labeling offense or knowingly violates the declaration requirements. Penalties of up to $10,000 may be imposed, with the size of the penalty depending on the nature, circumstances, extent and gravity of the prohibited act committed and the violator’s culpability, ability to pay and such other matters as justice may require. In addition, any person who commits a marking offense or violates the declaration requirements, except for knowing violators, may be assessed a penalty up to $250.
- Criminal penalties: Criminal penalties may also be imposed for certain violations, with the offense being either a felony or misdemeanor depending on, primarily, the defendant’s knowledge, or mens rea, of the underlying illegality of the product at issue. In order to impose a misdemeanor criminal penalty, the government must show that the defendant “in the exercise of due care” should have known of the illegal nature of the [product] in question, although not necessarily the specific law violated. A defendant found guilty of a Lacey Act misdemeanor shall be fined not more than $100,000 for individuals or $200,000 for organizations, or imprisoned not more than one year, or both, for each violation.
For a felony, the government must show that the defendant “knew” or was generally aware of the illegal nature of the [product], although not necessarily the specific law violated. Felony violations, in addition to a “knowing” scienter or mens rea requirement, require either proof that the defendant knowingly imported or exported [products], 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 [products] with a market value of over $350. A defendant found guilty of a Lacey Act felony shall be fined not more than $250,000 for individuals or $500,000 for organizations or twice the amount of the gross gain or loss, or imprisoned not more than five years, or both, for each violation.
In conclusion, Gould said the key to avoiding or minimizing penalties with regard to the Lacey Act is to exercise due diligence in buying products. “This is true for everyone in the chain from manufacturers to retailers.”
One final note, for the recently passed bill in Massachusetts, which is being considered by the senate, violators would be fined $500 for a first offense; subsequent offenses would carry a $1,000 fine or a one-year jail term. The regulations were created following the deaths of three contractors at homes where lacquer finish was being used.