Country Risk Profiles

Ban on trade in wood and wood-based products originating from Russia 

25 February 2023

On 25 February 2023 the EU adopted its tenth package of sanctions in response to Russia’s invasion of Ukraine through the Council Regulation (EU) 2023/426 of 25 February 2023 amending Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine, prolonging the ban on custom codes for pulp, paper, wood products. 

6 October 2022

As part of the 8th round of sanctions (6 October 2022), via Council Regulation (EU) 2022/1904 of 6 October 2022 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine, the EU added additional pulp and paper customs codes to the list of prohibited products for import, as outlined in Annex XXI of the regulation. These include:

• 4703 chemical wood pulps
• 4801 newsprints
• 4802 uncoated paper and paperboards
• 4803 toilet or facial tissue stock, towel or napkin stock and similar paper for household or sanitary purposes
• 4805, 4810, 4811 various paper and paperboard types
• 4818 toilet paper and similar papers
• 4819 cartons, boxes, cases, bags and other packing containers, of paper, paperboard
• 4823 paper, paperboards 

Prohibition of the new CN codes begins as of 7 October 2022, however it does not apply to contracts concluded before 7 October 2022, until 8 January 2023. 

Russia enacted a ban on the export of certain goods outside the territory of the Russian Federation to a list of countries including the EU Member States. The ban covers four HS codes (4401 21, 4401 22, 4403 and 4408) and will be in force until 31st December 2022. 

These products, imported from Russia, would be considered as illegal if placed on the EU market. A military conflict involving the Russian invasion of Ukraine has taken place with the support and collaboration of Belarus authorities.  

08 April 2022

On 08 April 2022, the European Union approved a fifth round of sanctions against Russia, which includes specific product-import prohibitions. Wood-products are included as one of the products. The detail of the sanctions can be found in Council Regulation (EU) 2022/576 of 8 April 2022 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine.  

The list of wood-products to which the prohibition is applicable can be found in Annex XXI of the regulation, and includes the following EU Customs (CN) codes: 

• All Chapter 44: Wood and articles of wood; wood charcoal 
• 4705: Wood pulp obtained by a combination of mechanical and chemical pulping processes.  
• 4804: Uncoated kraft paper and paperboard, in rolls or sheets, other than that of heading 4802 or 4803 
• 9403: Other furniture and parts thereof 

Chapter 44 is wide-ranging and includes customs codes for many wood-products, including round logs, sawn timber, biomass, plywood and composite boards, among others. 9403 is also a major customs code for many types of furniture. The scope of sanctioned products is similar to Annex 1 of the EUTR, although some customs codes in relation to pulp and paper products appear to be excluded. According to this regulation, it is prohibited to: 

• purchase, import or transfer (directly or indirectly) the wood-products listed above into the European Union if they originate in Russia or are exported from Russia (Article 3i, Paragraph 1).  

Additionally, the regulation (Article 3i, Paragraphs 2a/b) adds additional prohibitions to: 

• provide technical assistance, brokering services or other services related to the listed wood-products, and to the provision, manufacture, maintenance and use of those wood-products, directly or indirectly in relation to the prohibition. 
• provide financing or financial assistance related to the listed wood-products for any purchase, import or transfer of those wood-products, or for the provision of related technical assistance, brokering services or other services, directly or indirectly in relation to the prohibition. 

It is important to note that the prohibition on imports refers both to wood-products originating in, or exported from, Russia. Also, the prohibitions in paragraphs 1 and 2 do not apply to contracts concluded before 9 April 2022, until 10 July 2022. 

For wood-products excluded from sanctions, risk assessments for wood-products of Russian origin, should include consideration of the prevalence of armed conflict. Risk assessments should also take into account the possibility that individuals or entities which have been sanctioned by the EU, are owners or beneficiaries of forest-sector industries within the supply chain. The list of sanctioned individuals and entities is growing over time. 

Recent statements from PEFC and FSC have stated that wood products sourced from Russia can be interpreted as conflict timber, or at least that this risk exists. PEFC categorizes timber from Russia as “conflict timber” while the FSC Controlled Wood Risk Assessment for Russia states that “…any forestry activities are inherently associated with violent armed conflict that threatens national and regional security…” and that there is a risk that “…Operators in the area under assessment are involved in conflict timber supply/trade”. Companies considering sourcing from Russia, may wish to consult the European Commission guidance on the prevalence of armed conflict and sanctions in Due Diligence Systems . FSC and PEFC-certified (or controlled) material will cease to be available from Russia. 

Given the situation and challenges described above, the prevailing views expressed by several EUTR Competent Authorities is that it would be extremely arduous for operators sourcing timber/timber derived products from Russia, to carry out a full risk assessment of illegality or to mitigate the non-negligible risk. 

Note on the EU export prohibition to Russia 

Council Regulation (EU) 2022/576 also includes specific product-export prohibitions. Wood-products are included among the list of products subject to an export ban. This list can be found in Annex XXIII of the regulation, and includes selected customs codes from each of the following European (CN) Customs Code chapters: 

• 38 Miscellaneous Chemical products (specifically 3807 00) 
• 44 Wood and articles of wood; wood charcoal (specific species included, in some cases) 
• 45: Cork and articles of cork 
• 47: pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard 
• 48: Paper and paperboard; articles of paper pulp, of paper or of paperboard 
• 9403 30 Wooden furniture of a kind used in offices 
• 9406 10 Prefabricated buildings of wood 

Chapter 44 is wide-ranging and includes customs codes for many wood-products, including round logs, sawn timber, biomass, plywood and composite boards, among others. 9403 is also a major customs code for many types of furniture. This scope of products differs in some respects - and also extends beyond - Annex 1 of the EUTR.  

According to this regulation, it is prohibited to: 

• sell, supply, transfer or export, directly or indirectly, the wood-products listed above, to any natural or legal person, entity or body in Russia or for use in Russia (Article 3k, Paragraph 1). 

Additionally, the regulation (Article 3k, Paragraphs 2a/b) adds additional prohibitions to: 

• provide technical assistance, brokering services or other services related to the listed wood-products and to the provision, manufacture, maintenance and use of those the wood-products, directly or indirectly to any natural or legal person, entity or body in Russia or for use in Russia;
• provide financing or financial assistance related to the listed wood-products for any sale, supply, transfer or export of those the wood-products, or for the provision of related technical assistance, brokering services or other services, directly or indirectly to any natural or legal person, entity or body in Russia, or for use in Russia.

The prohibitions in paragraphs 1 and 2 do not apply to contracts concluded before 9 April 2022, until 10 July 2022.

Guidance:

For companies based in the European Union:

• Cease to source/import into the EU wood-products traded under HS codes (4401 21, 4401 22, 4403 and 4408), based on Russia export ban. 
• Based on EU Council Regulation 2022/576, cease to purchase, import into the EU or transfer (directly or indirectly) wood-products under the following HS codes, if they originate in Russia or are exported from Russia: 
• 44 Wood and articles of wood; wood charcoal
• 4705 Wood pulp obtained by a combination of mechanical and chemical pulping processes. 
• 4804 Uncoated kraft paper and paperboard, in rolls or sheets, other than that of heading 4802        or 4803
• 9403 Other furniture and parts thereof

According to the EU Timber Regulation, for products containing wood which are not covered by the EU prohibition on purchases or imports from Russia, due diligence needs to be applied on imports. Companies must assess risks in relation to the prevalence of armed conflict, including the risk that funds derived from harvesting/trade fuel the outbreak - or continuation - of violent conflict or other gross violations of international humanitarian law. Companies must also evaluate the risk of sanctioned individuals or entities being owners or beneficiaries of forest industries in their supply chains. However, Operators are advised to heed the following guidance:

1. The Ninth meeting of the Multi-Stakeholder Platform on Protecting and Restoring the World’s Forests, including the EUTR/FLEGT    (29April22) concluded that, in the present circumstances, “it is impossible for operators – sourcing timber from [Belarus] – to carry out a full risk assessment and to effectively mitigate the non-negligible risk of acquiring illegally harvested timber”. The prevailing view of national (EUTR) competent authorities was expressed such that operators “refrain from placing on the EU market for the first time all timber harvested in [Belarus] and timber products from there”
2. EC guidance on armed conflict and sanctions in Due Diligence Systems
3. Summary record of the Eighth Meeting of the Multi-Stakeholder Platform on Protecting and Restoring the World’s Forests, including the EUTR/FLEGT (16March22)

• The purchase of wood-products and the related payment should not be making funds directly or indirectly available to one of the sanctioned entities or individuals. When a company is owned or controlled by a listed individual (oligarch), no transactions should be carried out with the company as this would be considered as making funds indirectly available to this listed person. Preferred by Nature notes that obtaining information on the ownership (including beneficial ownership) and corporate structure of suppliers and their affiliates – as well as understanding whether payments have been made to sanctioned individuals is extremely challenging.

For companies exporting to Russia:

• Based on EU Council Regulation 2022/576, cease to sell, supply, transfer or export, directly or indirectly, wood-products under the HS codes listed in Annex XXIII of the regulation, to any natural or legal person, entity or body in Russia or for use in Russia.  

For companies based outside of the European Union:

• Carefully monitor the situation, and exercise additional caution in their due diligence process, if timber is being sourced from Russia.
• Although companies sourcing from Russia may not be bound by the EU Timber Regulation or EU-imposed sanctions, other regulations (Lacey Act, Australian Illegal Logging Prohibition Act, etc…) may apply. Also, wood-products from Russia may be covered by sanctions imposed by other countries. Robust due diligence requires that companies should still assess risks in relation to the prevalence of armed conflict, as well as the risk that sanctioned individuals or entities being also owners of forest industries.

Timber Legalirt Risk Assessment for the European Part of Russia

The scope of the Risk Assessment includes the Central Federal District and the Northwestern Federal District of the Russian Federation.

The Central Federal District includes 18 constituent entities of the Russian Federation: Belgorod, Bryansk, Vladimir, Voronezh, Ivanovsk, Kaluga, Kostroma, Kursk, Lipetsk, Moscow, Oryol, Ryazan, Smolensk, Tambov, Tver, Tula, Yaroslavl regions and the city of Moscow.

The territory of the district is 650 205 km² or 3.8% of the territory of the Russian Federation. It is home to 39.43 million people (about 27% of the total population of the Russian Federation).

The Central Federal District is located on the East European Plain, in general, the territory of the district can be considered flat, the highest point is 347 m. The climate throughout the Central Federal District is moderately continental. The territory of the district is located in the zone of mixed and deciduous forests, steppe, and forest-steppe.

The Central Federal District accounts for about 8% of the Annual Allowable Cut (AAC) in Russia. The key activity of the timber sector of the Central Federal District is the production of high value added products: plywood, wood-based panels, furniture.

The Northwestern Federal District includes 11 constituent entities of the Russian Federation: Arkhangelsk, Vologda, Kaliningrad, Leningrad, Murmansk, Novgorod, Pskov regions, the Nenets Autonomous District, the Republic of Karelia, the Komi Republic, the city of St. Petersburg.

The territory of the district is 1 686 972 km² or 9.85% of the territory of the Russian Federation. The population of the district is 13.98 million people (9.53% of the population of Russia).

The district is located in the northern part of the East European Plain. A characteristic feature of the district's relief is a combination of flat areas with peaks in the western part and the northeast with heights of about 1000-1500 m.

The climate in the northern regions of the Northwestern Federal District is subarctic, in the southern ones it is temperate.

The territory of the district is located in the zone of mixed forests, taiga, forest-tundra, and tundra.

More than 17% of the AAC of Russia is concentrated in the Northwestern Federal District. The forestry complex of the Northwestern Federal District is represented by a full range of industries: logging, pulp, and paper industry, production of wood-based panels, and furniture.

Ownership and use of the forest resources

Forest areas within the lands of the Forest Estate are in state ownership. The concept of a forest is defined as an ecological system or as a natural resource, and, based on this, the use, guard, protection, reproduction of forests is carried out. A forest area is a land plot that is located within the boundaries of a Forest District and is formed in accordance with the requirements of land legislation and the Forest Code.

For forest areas within the lands of the Forest Estate, the following rights of its use are established:

• the right to permanent (unlimited) use of the forest area;
• the right to use free of charge;
• the right to lease (concession).

Forest legislation regulates forest relations, and property relations related to the circulation of forest areas, forest stands, timber, and other harvested forest resources are regulated by civil legislation, as well as by the Land Code of the Russian Federation. Thus, property relations in the Forest Code of the Russian Federation are based on the concept of forest areas as land plots.

The rights to land, including the lands of the Forest Estate, are subject to state registration in accordance with the Federal Law on State Registration of Real Estate. The right to real estate (land plots) is entered into the Unified State Register of Real Estate.

The use of forests is carried out with or without the assignation of a forest area, with or without the establishment of an easement, a public easement, with or without the harvesting of forest resources. The Forest Code defines 16 types of forest use, for example, harvesting of timber, resin, harvesting and collecting non-timber forest resources, farming, hunting, carrying out religious activities, etc.

Forest management

The authorized federal executive authority is the Federal Forestry Agency (Rosleskhoz), which is under the jurisdiction of the Ministry of Natural Resources and Environment of the Russian Federation.

The Federal Forestry Agency carries out its activities directly, through its territorial bodies and subordinate organizations in cooperation with other federal executive authorities, executive authorities of the Constituent Entities of the Russian Federation, local self-government authorities, public associations, and other organizations.

The main territorial units of management in the field of use, guard, protection, reproduction of forests are Forest Districts, as well as Forest Subdistricts, which can be created as part of Forest Districts.

Forest legislation regulates the use, guard, protection, and regeneration of forests and afforestation (forest relations). In accordance with the Constitution of the Russian Federation, the forest legislation of the Russian Federation is under the joint jurisdiction of the Russian Federation and the Constituent Entities of the Russian Federation. Forest legislation consists of the Forest Code, other federal laws, and laws of the Constituent Entities of the Russian Federation adopted in accordance with them. The main federal laws that are relevant to forests:

• Land Code;
• Civil Code;
• Tax Code;
• On the Transfer of Land or Land Plots from One Category to Another;
• On the Wildlife;
• On Environment Protection;
• On the Specially Protected Nature Areas; and others.

On the basis of and in pursuance of the Forest Code of the Russian Federation, the Government of the Russian Federation issued by-laws such as:

• Rules for Timber Harvesting and the Specifics of Timber Harvesting in Forest Districts Specified in Article 23 of the Forest Code of the Russian Federation;
• Types of Logging Operations, the Order and Sequence of their Implementation, the Form of the Technological Map of Logging Operations, the Form of the Report of the Inspection of the Cutting Area and the Procedure for the Inspection of the Cutting Area;
• Rules of Reforestation, Content of a Reforestation Plan, Procedure of its Development and Modification;
• Rules for the Care of Forests;
• Rules of Sanitary Safety in Forests;
• Rules of Fire Safety in Forests; and others.

The planning of measures for the use, guard, and protection of forests is carried out for each Constituent Entity of the Russian Federation on the basis of a Forest Management Plan of a Constituent Entity (Forest Plan). On the basis of the Forest Management Plan of the Constituent Entity of the Russian Federation, a Forest District Management Plan is developed for each Forest District. On the basis of the Forest District Management Plan, Forest Concession Management Plans are developed for each leased forest area (concession).

Classification of forests

Forests located on the lands of the Forest Estate are divided into the following types:

• Protective forests;
• Commercial forests;
• Reserve forests.

Commercial forests are subject to development for sustainable, maximum efficient production of high-quality timber and other forest resources, products of their processing while ensuring the preservation of the useful functions of forests. In commercial forests, it is allowed to carry out all types of forest use provided for by the Forest Code.

Protective forests include forests that are of particular value, and in respect of which a special legal framework for the use, guard, protection, reproduction of forests is established. Protective forests are subject to development in order to preserve the environment-forming, water-protective, protective, sanitary-hygienic, recreational, and other useful functions of forests with the simultaneous use of forests for economic purposes, provided that this use is compatible with the intended purpose of the protective forests and the useful functions they perform. In protective forests, it is prohibited to carry out activities incompatible with their intended purpose and useful functions.

The following categories of protective forests are distinguished:

1. forests located in specially protected natural areas;
2. 2forests located in water protection zones;
3. 3forests that perform the functions of protecting natural and other objects;
4. valuable forests;
5. urban forests.

Reserve forests include forests in which timber harvesting is not planned for twenty years. It is allowed to use reserve forests without cutting forest stands. Cutting of forest stands in reserve forests is allowed after they have been assigned to commercial forests or protective forests, except for cases of felling of forest stands in reserve forests when performing work on a geological study of subsoil resources and wood harvesting by citizens for their own needs.

According to the Federal State Agency website for 2020, the share of protective forests in the Russian Federation is 24.9%, commercial – 51.9%, reserve – 23.2%.

How timber harvesting is regulated

Timber harvesting in forests is planned based on its intended purpose. In protective forests, harvesting is planned in order to preserve the environment-forming, water-protective, protective, sanitary-hygienic, recreational, and other useful functions of forests with the simultaneous use of forests, provided that this use is compatible with the intended purpose of protective forests and the useful functions they perform. In commercial forests – in order to meet the market demand for timber - the AAC of timber harvesting is established for each Forest District based on the availability of forests for different purposes, ages, species, geographical location, conditions of growing places.

Harvesting is planned in young stands, middle-aged stands (forest care), and felling of mature and over-mature stands. It is prohibited to harvest timber in an amount exceeding the size of the AAC. The purpose of planning is to achieve the optimal distribution of age groups of stands to ensure the uniform use of forest areas for a long-term period, to improve the species and quality composition of stands.

The AAC, alongside other target figures as part of the Forest District Management Plan of the Forest District, undergoes a state examination with the participation of interested parties and is approved by the executive authority of the constituent entity of the Russian Federation for 10 years.

The planning of the volumes of timber harvesting in forest areas assigned for long-term use for timber harvesting is also carried out. The sum of the volumes to be harvested under long-term use shall not exceed the AAC for the region. 

Authority of a Forest District controls the assignment (allotment) of forest areas to felling for compliance with planning documents for the location, area, and volume of timber. After felling, users report on the harvested volumes of timber, each site where harvesting was carried out is inspected by the Authority of a Forest District for compliance with planning documents and regulatory requirements. All information about the volumes of allocated (planned for felling), harvested timber is placed in the Unified State Automated Information System (EGAIS), the operator of which is The Federal Forestry Agency.

Changes in the Russian legal framework

The legal framework covering forestry are currently being updated and the process is expected to continue over the next couple of years. This means that legal requirements are expected to change. This risk assessment has covered legislation up until February 2021. Some minor changes have occurred between February-October 2021, but the risk conclusions of this report are to our knowledge accurate as of the date of publication.

One significant current change concerns timber accounting and transactions. Until July 2021, companies and individual entrepreneurs created accompanying transport documents and reports on the forest use in the Unified State Automated Information System for Timber Accounting and Associated Transactions (EGAIS) (https://lesegais.ru/). It should be noted that from July 2021 to January 2023, some of documents must be submitted electronically through the State Services Portal or EGAIS. This applies to forest declarations, reports on the use and protection of forests from fires. Currently, companies and individual entrepreneurs have the right to prepare and submit most of the documents on paper. In the future, this possibility will be excluded (please see a link to the Federal Law of 04.02.2021 N 3-FZ below).

New regulations will also affect the storage and processing of wood. From July 2021 to January 2023, storage of wood after its removal from the cutting area, as a general rule, will be allowed only in warehouses, information about which was entered into the EGAIS. Processing will be possible only at the facilities specified in this system.

At the time of risk assessment, there is no practice of law enforcement for the newly introduced requirements.

Sources relevant to the introduction

• Forest Code of the Russian Federation of 04.12.2006 N 200-FZ.
• Open Data. The Federal Forestry Agency official website.
• 
  
• Forests of Russia. Official website of The Federal Forestry Agency and FSBI «Roslesinforg».
• Federal Law of 04.02.2021 N 3-FZ (last edition) on Amendments to the Forest Code of the Russian Federation and Certain Legislative Acts of the Russian Federation in Terms of Improving the Legal Regulation of Forest Relations.