Merchants, joinery manufacturers and distributors will not face prosecution if they handle illegally harvested timber after the UK government said it would not bring in legislation banning possession of the material throughout the supply chain.

The government, through a letter by forestry minister James Paice to Green Party leader Caroline Lucas, said it would not pursue legislation, similar to the US Lacey Act, at this time because of the progress of European legislative proposals, which focus on the the first point of market entry – the importer.

Ms Lucas criticised the coalition government for reneging on its promise to bring in legislation banning the import and possession of illegal timber in the supply chain. She also expressed concern that operators might set up “shell” companies to import illegal timber.

But in his letter, Mr Paice said he was confident the EU regulation’s focus on the importer would stop illegal timber coming into the UK. He said the setting up of shell companies would be an illegal activity and the UK could punish offenders using the EU regulation.

“There will always be a criminal element looking to break the law, and this would still be true if the prohibition applied down the supply chain.

“We should also recognise that much illegal timber comes into the country through negligence rather than deliberate criminal activity, and we anticipate that this negligence will be stamped out by the [EU] regulation.”

A Defra spokesperson confirmed to TTJ that it would no longer seek a ban in the light of progress of European due diligence legislation, designed to do the same.

“The UK will now seek to put in place a robust and effective enforcement regime, including criminal penalties, to implement the [European] regulation and eliminate illegal timber from the UK market.”

“The due diligence legislation is due to be ratified by the European Council next month and all member states will have the power to introduce illegal logging laws if it comes into force,” he added.

However, the spokesperson warned that Defra reserved the right to legislate further it it became clear that extra measures were needed.

The regulation is not due to come into force until 2012.

The Timber Trade Federation (TTF) said it had originally supported a ban on illegal timber trading across the supply chain but it was happy with the current EU regulation.

“This actually goes further than many thought would be possible until very recently, and we’re content with the fact that we’ve been able to make this much progress towards stamping out the illegal trade,” said TTF chief executive John White.

Kingfisher and WWF hosted a meeting in London last week attended by Mr Paice, Ms Lucas and former environment secretary Hilary Benn to welcome the new EU legislative proposals