Acknowledging concerns that plywood "potentially represents an area of high risk" of illegality, the National Measurement Office (NMO) – the EU Timber Regulation (EUTR) enforcement body in the UK – probed 16 importers of Chinese material, identified as ‘operators’ under the EUTR.

While the resulting report, released in February, states that "the overall risk is low in relation to the possibility of illegal logging in the supply chain", the NMO found that most of the companies were not meeting EUTR requirements. In fact, of the 16, 14 had inadequate due diligence systems.

The combined value of the imports of the businesses amounted to 10% of the UK’s Chinese plywood imports last year. But the NMO said the level of non-compliance indicated the potential scale of the problem in this sector.

The common failing, said the NMO, was "a lack of narrative" explaining how the combination of document gathering, risk assessment and mitigation enabled the company to conclude there was a negligible risk of timber in the product being illegal. In addition NMO tested 13 product samples from the importers and nine did not match the declaration of species supplied.

Only one company was deemed EUTR compliant on both testing and due diligence.

The findings are no surprise to James Latham managing director Chris Sutton, who is also a past chairman of the TTF’s National Panel Products Division. "Some people have sailed close to the wind with China for a long time," he said. "The NMO investigation might only represent 10% of Chinese plywood imports, but we don’t know whether it’s the good 10% or the bad 10% and why would it be any different for the other 90%?"

He welcomed the report because it showed the NMO had teeth and "that really will put a shot across the bows of a lot of people".

For too long the industry had taken risk to get better rewards, he said.

"It taints the plywood industry at a time when architects and designers are well aware of legality and sustainability. It will tar the reputation of the trade if members of the TTF or new Confederation of Timber Industries are found trading in product that’s either not legal or not what it says on the tin," said Mr Sutton.

But International Plywood managing director Ian Attwood believes the NMO report is not representative of the wider plywood industry.

"The majority of importers have taken the EUTR very seriously and invested time and money in ensuring they comply. The report doesn’t really give the full picture or name the offenders," he said.

International Plywood employs product assurance company Track Record to help with due diligence, but Mr Attwood said eliciting information from Chinese suppliers had still been difficult. More suppliers are taking on board what is required, but there was still room for some deception.

"China’s reputation is still quite poor concerning legality, so we have had to go further than the the TTF’s Responsible Purchasing Process (RPP) to satisfy our due diligence. This includes regular visits to the factories, usually seven or eight times a year, and the involvement of Track Record."

Generally, however, Mr Attwood believes, the EUTR has helped China’s plywood sector to "clean up their act". "It’s opened everyone’s eyes and the more information the better."

UK operators could do more
But Mr Sutton feels UK firms could do more to ensure Chinese plywood is EUTR-compliant.

"The UK has quite a lot of influence on how plywood is made in China and we shouldn’t underestimate that," he said.

In the lead-up to the EUTR’s introduction in March 2013, he added, UK operators helped their plywood suppliers make changes to ensure their products’ legality.

"Compromises had to take place on both sides," agreed Mr Attwood. "For instance, some of the veneer we’re using now is probably not as aesthetically pleasing."

Premier Forest Products has also worked with suppliers to move to a certified supply chain, change species or improve reporting.

Some UK operators have also axed suppliers. International Plywood, for one, has nearly halved its number of Chinese plywood suppliers because they "weren’t able to provide sufficient evidence of legality and sustainability on the goods they wanted to supply us".

James Latham also stopped trading with mills if they couldn’t meet its requirements.

"We sent someone out there and we didn’t like what we saw so we pulled out. It’s important to go and see," said Mr Sutton.

Streamlining supply
Caledonian Plywood Co (CPC) has also made supply changes. "We’ve consolidated the number of [Chinese] mills we deal with and streamlined the supply chain so we have more control over consistency of quality and legality," said director Stuart McKelvie.

Through its two agents, CPC has control over the face logs peeled and distributed to the mills "so it’s quite straight forward to control it order by order", said Mr McKelvie.

The company also changed its product mix, initially "championing" engineered veneer made from poplar, but it was not a hit, largely, Mr McKelvie feels, due to the colour.

"It was disappointing because it would have been an easy fix [for the EUTR]," he said. Premier Forest Products dropped some Brazilian hardwood plywood suppliers because of potential complications.

"Getting Portuguese to English translations of the key documents and making sure the local licences and taxes were paid was complex," a spokesperson said.

Counting the Compliance cost
But while UK operators support the EUTR, dealing with these issues inevitably brings unwelcome expense for timber businesses.

"Due diligence adds a cost, and it’s a rising cost," the Premier spokesperson said. "I’m spending nearly every day either collating information for ourselves or replying to requests for information from others. The questionnaires we’re getting from customers are more far reaching than in the past."

Paul Forrest, CPC’s sales manager north, agrees.

"It’s an additional cost which doesn’t add profit or margin," he said, adding that the UK seemed to be taking a more robust approach compared with other EU countries.

There is also some frustration that existing certification does not provide a green light under the EUTR.

"The NMO doesn’t appear to put a lot of credibility on certification and certified bodies that are internationally renowned and accepted by other government agencies, such as CPET," said Mr Forrest.

Timely reminder
The TTF said the NMO report was a ‘timely reminder’ that the EUTR was being taken seriously by the UK government. It said it emphasised the complex risks in products such as plywood and that the trade could do better in its approach to applying due diligence.

At the same time the organisation stressed the positive aspect of the NMO’s probe into these plywood businesses, that "the overall risk was low in relation to the possibility of illegal logging in the supply chain".

"This is consistent with both the TTF and Chatham House’s analysis into illegal logging in the UK, conducted in 2014. The challenge therefore primarily continues to be one of procedures and process at the operators’ end and working in partnership in their supply chains," the TTF said.

The Federation also points out that the investigation focused on products placed on the market up until March 2014. It maintained that many of the NMO’s concerns were earlier picked up by its RPP auditors and consequently process gaps and weaknesses were already being addressed by the TTF.

But TTF head of sustainability Anand Punja cautioned too that the report highlighted companies were still taking too much on trust in their due diligence and relying on what the supply chain was telling them.

"They’re doing due diligence but they’re basing it on claims that aren’t accurate," he said.

The UK trade had made the necessary changes to its specifications but these were sometimes not reflected in the products being delivered. The only way to manage such risks, said Mr Punja, was through randomised testing.

"In the longer term, this may be a positive because it could lead to a better culture of testing in the plywood industry, not just for the EUTR, but glue bonds, durability of species and structural performance," he said.

He added that it was reassuring that the TTF’s audits had identified similar concerns to the NMO’s although the report revealed a slightly different approach to risk assessments.

Until now, companies had focussed them on the specific supply chain and made them more technical than narrative. But Mr Punja said the report indicated the NMO wanted the wider context of risk to be considered and documented by the trade.

"The report makes the NMO’s expectations clearer," he said. "It’s saying get your head up a bit and be aware of the wider risks and their potential to impact on your supply chain."

So what’s next for the NMO? Michael Worrell, NMO EUTR enforcement policy officer, earlier told TTJ that it was now focusing on other high-risk areas, although would not identify what these were.

The NMO report says it is also continuing to investigate some of the Chinese plywood importers it found to be falling short on the EUTR and says sanctions could be imposed. It may also probe Chinese plywood again.

However, it acknowledges that positive steps have resulted from its "engagement" with the 16 companies. Operators have begun to question veracity of paperwork from suppliers, and one company had suspended supply from Papua New Guinea because it could not easily or affordably ensure reach negligible risk.

More had also hired third-party organisations to help with due diligence, or expanded their own teams to cope, and nine companies had started testing as part of risk mitigation.

Mr Punja said the TTF is also speeding up improvements to its tools and support systems for members, such as improved and more accessible country guidance. These will be rolled out soon.