The main task of Ukraine in the forest sector is to ensure the forest management system sustainability. In particular, that is what the Arbitration Commission in Switzerland concluded on December 11, 2020.
In the EU, traceability in the timber market is the basic principle on which the entire sector’s efficient operation is built. Minimization of corruption risks at all stages of timber harvesting and sale, the ability to quickly track the timber location, open sale mechanisms — it all begins with ensuring traceability of origin. Ukraine is gradually taking steps to bring our legislation in line with EU laws by implementing best practices and creating conditions for the inclusive timber market development.
The Better Regulation Delivery Office (BRDO) is actively involved in drafting legislation to improve the timber market’s business environment and ensure the transparency of all business processes: from timber harvesting to sales. In the process of drafting amendments to the legislation, BRDO relies on researches conducted. In particular, the BRDO Agriculture sector conducted a comprehensive review of the timber market.
Thanks to BRDO experts’ work, the timber trade traceability principle was partially implemented in the electronic timber accounting (hereinafter — ETA) system introduced with the adoption of Government Resolution No. 1142 in 2019. An important step was introducing a mechanism for selling raw timber at electronic auctions due to the Resolution of the Cabinet of Ministers of Ukraine No. 1178 adopted in 2019.
BRDO experts’ position remains unchanged: only a comprehensive approach and systemic reform will facilitate the sustainable forest sector development.
The following steps should be taken to continue reforming the forest sector:
- Starting work on a national forest inventory by introducing a system to collect data on the forest fund for further planning, rational forest management, creation of a state forest cadastre, and monitoring of forests.
- Providing access to information on the activities in the forest sector and timber trade in open data formats.
- Developing transparent and competitive rules for selling timber in the market.
In particular, it is necessary to develop and adopt the Law of Ukraine “On Timber Market” providing equal access of market participants and non-discrimination, the introduction of liability of parties to sales contracts in terms of violation of trade rules and failure to comply with basic conditions of contracts in case of changing classification, price and quality of goods (if it is impossible to deliver the full volume of goods, except for reduced quantity).
- Identifying the state’s basic forest management strategy. Approving the State Forest Management Strategy of Ukraine until 2035, taking into account all stakeholders’ proposals.
- Further work on improving the efficiency of the electronic timber trade system to prevent illegal logging and illegal timber trafficking by amending some legislative acts of Ukraine to improve forestry legislation:
- introducing liability for the purchase and sale of illegal or dubious timber (the law provides for liability only for illegal logging);
- introducing liability for entering inaccurate information into the ETA system;
- introducing a single unified approach to the issuance of permits (logging cards) exclusively by state authorities (State Forest Resources Agency and its territorial bodies) through the termination of such powers for state-owned enterprises (permanent forest users) to carry out sanitary and other cuttings;
- amending the legislation to eliminate inconsistencies in the issuance of certificates of origin of timber and certain timber products. Expanding other UCG FEA (Ukrainian Classification of Goods of Foreign Economic Activity), for which such certificates of origin are issued to ensure 100% traceability;
- developing and approving the Order of the Ministry of Ecology “On approval of the Instruction on electronic timber accounting”: step-by-step rules on entering information into the ETA system, generating reports and the timber trade cycle traceability from harvesting to sales in domestic and foreign markets;
- Increasing the efficiency of state-owned forestry enterprises by creating conditions for the rational use of forest resources (reforestation and afforestation, conservation and protection of forests from illegal logging, fires, and pests) and meeting the needs for public funding:
- developing and approving the Law of Ukraine “On the Forestry Financing Fund”;
- developing and approving the Law of Ukraine “On Amendments to the Tax Code of Ukraine Regarding Cancelation of Double Taxation of Forest Lands” to reduce the tax burden;
- developing and approving the Law of Ukraine “On Peculiarities of Management of State-Owned Forestry Objects” to reform state forestry enterprises’ activities.
Only a comprehensive approach to forest sector reform will help improve law enforcement and sustainable forest management, allowing Ukraine to meet its obligations under the Association Agreement (para.294).