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Applicable to: Forest management enterprises which have contracted / leased collective forest plantations or land, only in:
Hainan, Yunnan, Guangxi, Guangdong, Hunan, Jiangxi, Fujian, Zhejiang, Hubei.
In China, land tenure and management rights are quite clearly defined following the collective forest tenure reforms that have been taking place since 2008.
• Collectively owned Forest tenure reform has been carried out in a stepwise fashion in China, with the core thrust of recent reforms being the decentralization of forest/forest land use rights and management rights. Since 2008, forest land tenure has been decentralized to farmers, with Forest tenure certificates issued to farmers, forest management enterprises (FME’s) and forest farms by the government at or above county level - or by the forestry authority authorized by the State Council. According to China Forestry Yearbook (2018), as of the end of 2017, there was a total of 180 million ha collectively owned forest land. 98.97% of collectively owned forest land has been demarcated and 97.65% allocated to individual farmers and FME’s, and their rights and obligations are very clearly defined. However, there is still some forest land that fails to be registered and issued with a certificate, which poses a potential risk in the context of tenure disputes. From the beginning of forest tenure reform to February 2012, more than 800,000 disputes over tenure have been identified, 97% of which has been resolved. This can be interpreted to mean that there are still some disputes which have not been resolved. This problem mainly occurs between plantations companies and local communities in the southern collective forest areas, including Hainan, Guangdong, Guangxi, Yunnan, Hunan, Jiangxi and Fujian.
• Processing Measures for the Disputes of Forest Trees and Forest Land Tenure and Ownership is a regulation describing how to deal with forest tenure disputes, issued 14 October 1996 and for which related procedures have subsequently been developed. In addition, other national laws enact related regulations relating to resolution of forest tenure disputes (Forest Law 2019, Rural Land Contracting Law 2002 etc.). The Interim Measure for Unified Identification and Registration of Nature Resources Ownership and Tenure was issued on 23 July 2019 for further identification and registration of forest land ownership and tenure to better manage the forest resources based on the clear tenure.
• In the past, some civil society organizations (e.g., Rights and Resources Initiative), published articles and media reported conflicts in relation to land rent between private forest companies and local communities, occurring mainly in Hainan, Guangxi, Guangdong and Yunnan Provinces. These conflicts focused on insufficient transparency in land tenure lease procedures. There were also related reports for Fujian, Jiangxi and Hunan Provinces. The process of land contract signing did not comply with legal requirements. For example, in some cases, the transfer of forest use rights did not comply with Village committee organization law- no evidence existed to show the transfer was agreed by the required percentage of villagers. Reports on non-Chinese forest companies revealed the fact that foreign forest companies have in the past secured forest land tenure by inappropriate means, which often violated (or at least insufficiently protected) individual farmers’ land rights. However, after the implementation of the tenure reform and forest land tenure transfer mechanism (2008 onwards), such reports relating to land tenure conflicts have appeared less often in recent years and arguably only relate to plantations. The National Forestry Grassland Administration has also issued a set of rules in 2009 requiring a comprehensive review of historical problems associated with large-scale transactions of collective forest land rights that occurred prior to the forest reform.
• With the above in mind, Personal Communication with various experts highlighted the case that forest tenure disputes still have the potential to occur. This is, in part, due to the history of land tenure in China including a significant number of policy changes over recent decades, as well as old practices to which local authorities have become accustomed. However, while issues may still arise today, existing law is clear on this matter.
• Previous investigations by the Chinese Academy of Forestry (CAF) have shown that timber from conflicted forest tenure constitutes a small proportion compared to the total amount produced.
• CAF also highlighted the fact that forest tenure certificates are not issued for the forests on ‘non-forestry land’, which refers to the land around villages, along roadsides and waterfronts, cultivated land and wasteland – not included in forestry land subject to planning. This could be considered a potential risk. However, these non-forestry lands are included within Rural land contract management certificates, which can serve as evidence that the certificate holder owns the use right of land and the right to use the resources on the land. At any rate, to safeguard the interests of farmers, China now allows the issuing of forest tenure certificates for forest on non-forestry land, and some cities or provinces have been implementing the policy. VIEW LESS
The Constitution, General Principle of Civil Law, and the Forest Law of China provide that forest resources are owned by the State except for those owned by collectives.
In China, there are two types of ownership and two types of use right to the forest land, forest (or timber).
1) Ownership of forest land
2) Ownership of forest (or timber)
3) Use right to forest land
4) Use right to forest (or timber)
For forest land, there are two forms of ownership:
• State-owned forest land (such as government, state forest management enterprise/farm, other state-owned company).
• Collectively owned forest land (such as village committee, sub-village or other management bodies. Note: most of the use rights of collectively owned forest land are now assigned to individual households).
For the other three types of ownership and use right (ownership to forest or timber, use right to forest land and use right to forest or timber), these can be owned by the forest managers (households, individuals, entities or other organizations via renting agreements, transference agreements, or other mechanisms, according to Article 15 and 16 of the Forest Law.
For state-owned forest land, normally the state-owned organisations or governments have the ownership and use right of both forest land and forest or timber.
The Regulation of the Implementation of the Forest Law provides that the State implements the registration and certificate issuance system for forest, timber and forest land, with the format of the forest tenure certificate developed by the National Forestry and Grassland Administration (NFGA). Since 18 April 2000, the NFGA has used forest tenure certificates with a nationally integrated format and series number to register the owner of forest land, use right owner of forest land, owner of forest or timber, as well as the use right owner of forest or timber.
Subsequently, forest tenure is registered, and the forest tenure certificate (in the nationally standardised format) is issued in line with the Administration Measures for Forest and Forest land Tenure Registration. If there is a dispute regarding ownership, the forest tenure certificate will be issued after the disputes are settled, according to Processing Measures for the Disputes of Forest Trees and Forest Land Tenure and Ownership.
As of 2019, forest resources that have not registered on forest tenure certificate will be uniformly registered on natural resource tenure certificate on which the information enters into national immovable property information database, according to the Interim Regulation of Immovable Property Registration and Interim Measures of Confirmation and Registration of Natural Resources.
In line with the principle of separation of forest land ownership from use rights, and on the condition that the collective ownership of land remains unchanged, the transfer of ownership of forest, use right of forest and land from collective to private persons, private or state-owned organizations is being encouraged to guide the reasonable distribution of forest resources and to promote scaled and intensive forest management by realising the optimal configuration of forest resources. The transfer of forest, forest trees and forest land must be conducted under a contract, in which the name and address of both parties, the condition of the forest to be transferred, the period of transfer including start and finish date, transfer price, and method of payment shall be clearly indicated. Generally, the duration of the transfer contract can last 30–50 years and will be no more than 70 years. After the transfer, both parties must apply for a change in registration of tenure at the level of county forestry authority or above; and the county government or above must register the change in accordance with the law.
China implements a control system for forest land acquisition. According to Regulations Governing Examination and Approval of Occupation and Requisition of Forest Land, exploration and extraction by mines and other projects shall, where possible, avoid acquiring forest land. If necessary, the acquisition shall be reviewed and approved by forestry authorities and then go through an approval process in accordance with land management laws and regulations.
A regulation (Processing Measures for the Disputes of Forest Trees and Forest Land Tenure and Ownership dated 14th October 1996) describing how to deal with forest tenure disputes has been issued and related procedures developed. In addition, other national laws enact related regulations relating to resolving forest tenure disputes, including: Forest Law of China, Land Reform Law, and Land Contract Law in Rural Areas. In Minority Autonomous Regions, some local unwritten laws regulate the detailed procedures governing resolution of conflicts on forest land borders.
The Company Law of China requires that an established company be issued a business license by the Market Regulation Bureau at the county level or above to carry out business activities. Forest entities shall hold a business license.
Preferred by Natures’ Legality Specialist staff in China has not experienced issues with companies operating without business license when conducting supply chain validation, or Forest and Chain of Custody certification. Further research through internet search did not reveal further information suggesting there is an issue related to lack of valid business license. According to stakeholder consultation, there is strict supervision from the government and without valid business license a company is not able to issue VAT invoice that customers need. Business licenses can be verified online. VIEW LESS
In China, there is no facility or legal instrument similar to a concession.
There are State-owned and collectively owned forest lands in China. The former is managed by State-owned forest management enterprises or State-owned forest farms. The latter are often managed by village committees.
Since forest tenure reforms began in 2008, collectively owned forests have been decentralized to individual farmers, who enjoy the forest management and disposal rights and can decide whether to manage the forests as individuals or transfer or lease forest land for others to manage. This transfer is different from a forest concession, which is characterized by conceding use rights of natural resources owned or possessed by government. In this sense, there are no practices or instruments similar to a concession. VIEW LESS
Since forest tenure reforms began in 2008, collectively owned forests have been decentralized to individual farmers, who enjoy the forest management and disposal rights and can decide whether to manage the forests as individuals or transfer or lease forest land for others to manage. This transfer is different from a forest concession, which is characterized by conceding use rights of natural resources owned or possessed by government. In this sense, there are no practices or instruments similar to a concession.
• The Forest Law (2019) requires State-owned forest enterprises to develop forest management plans and also stipulates the liability of a Forest management plan not being developed nor implemented. In some provinces (Shanxi, Liaoning, Heilongjiang, Fujian, Henan, Chongqing, Xinjiang, etc.), all State-owned forest enterprises completed the FMPs. In addition, in July 2018 NGFA required the state-owned forest enterprises must complete the development of Forest management plan (FMP) as soon as possible and for those which had not developed the FMP by the end of 2020, the harvest quota of the 14th five-year plan (2021-2025) would not be approved. Furthermore, some provincial forest authorities required the State-owned forest enterprises to complete the development of FMP earlier. For example, Jilin province required all State-owned forest enterprises must complete FMP by the end of 2018. Anhui province required the FMP must be completed by the end of 2019. Based on the expert consultation, the state-owned forest enterprises should have a forest management plan.
• However, there is no strong administrative or monitoring system in place and, therefore, oversight of planning process and the implementation of forest management plan is not strongly regulated nor enforced.
• Requirements for collectively owned forests and company-managed forests to develop management plans are not mandatory. They are only encouraged to develop the simplified forest management plan.
• Personal Communication with various experts highlighted that the state-owned forest enterprises should have forest management plan (FMP) in place and normally the defined harvest plan is followed (actual harvest volume is less than the harvest plan) but it is possible that the whole forest management plans are not appropriately implemented and do not meet the desired outcome. However, China is now making efforts to put more focus on science-based forest management planning and implementation. Future changes in policy and forest administration and management are likely to reflect this change of focus.
• For bamboo forest, the state-owned forest enterprises normally follow the management plan because the silviculture and harvesting system is very simple, which only selective cut is applied without any other disturbing activities except fertilizing and weeding would be slightly used in some regions of China.
China has a score of 41/100, at position 80 (of 183 countries/regions assessed), according to Transparency International’s 2019 Corruption Perceptions Index. With regard to the Worldwide Governance Indicators, China scores as follows according to the 2019 perceptions ratings (on a scale of -2.5 to +2.5): Government Effectiveness: 0.52; Regulatory Quality: -0.24; Rule of Law: -0.27; Control of Corruption: -0.32. VIEW LESS
According to the Forest Law (2019) and the Regulation of the Implementation of Forest Law, the State-owned forest management enterprises and state-owned forest farms shall develop forest management plans which shall be approved by the county forest authority. Key State-owned forest management enterprises shall have their management plan approved by NGFA, whatever the types of the forest they manage (including natural forest, plantation, or bamboo).
The forest management plan covers a ten-year period while the management plan of the industrial raw materials (such as rubber, pine gum, medicine, etc..) forest spans five years. When the time comes, new management plans must be prepared.
Harvest quota management is a basic practice adopted in China's forest governance system based on the principle that timber production volumes shall not be more than the growth volume of the forest. To achieve the objective, every five years the provincial forest department submits annual timber harvest quota to the provincial government for final approval following asking the opinions from the Forest competent authority (NFGA) of the State Council, according to the Forest Law (2019).
• For Key State-owned forests, the NFGA develops the quota and submit to the State Council for final approval.
• For other State-owned forests, the state forest management enterprises or forest farms submit the quota to the provincial government for final approval.
• For collective forests, forest authorities at county level will be responsible for preparing and submitting the quota, which will be pooled and balanced by provincial forestry departments and approved by the provincial government and then submitted to State Council for final approval.
Overall, implementation and enforcement of the forest harvest quota system; the permitting mechanism for forest harvesting play a role in combating illegal harvesting and related trade in China.
To enhance the supervision over harvesting permit issuance, the National Forest Harvesting Management System has officially operated since 2015, which runs as an online national network for harvesting permit issuance and monitoring, as well as supporting the verification of the harvesting permit. It only provides an internal enquiry system, which is unavailable publicly up to now.
Since 2015, NGFA has applied satellite remote-sensing images to identify suspected illegal activities in forest land.
Based on the evaluation reports of IUCN/TNC, Greenpeace, WWF, Forest Trends and TFT, among others, the Chinese government is aware of the significance and importance of legally harvested and traded timber and forest products and has taken measures to improve domestic forest management and address illegal domestic harvesting.
In 2017, 83.98 billion m3 commercial timber was produced nationwide. 32,000 forestry criminal cases and 173,300 forestry administrative cases occurred. 193,000m3 illegal timber was confiscated via criminal cases and 163,700m3 via administrative cases. The total (356,700m3) of confiscated illegal timber accounts for 0.42% of the total harvested timber. Compared to 2007, the number of forestry administrative cases in 2017 decreased from 376,700 to 173,000 (by 54%). Again, comparing 2007 and 2017, the volume of illegal timber confiscated by criminal cases decreased by 78.7% from 905,200 m3 to 193,000 m3 (78.7%) while the produced commercial timber increased by 20.4% from 69.77 billion m3 to 83.98 billion m3.
According to NGFA advice on the phase-out of commercial logging in natural forests, commercial harvesting was prohibited in all-natural forests by the end of 2017. In China, there is State-owned natural forest and collective-owned natural forest. The calendar for the progression of this policy, which comes under the National Forest Protection Programme (NFPP), is as follows:
• April 2014: Trial of Natural Forest commercial logging ban in key State-owned forests in Heilongjiang. The logging ban already covered (since 1998) natural forest within mid- to upper watersheds of the Yellow and Yangtze Rivers.
• April 2015: Trial of natural forest commercial logging ban in Heilongjiang extended to include Jilin and Inner Mongolia Autonomous Regions.
• 2016: Natural forest commercial logging ban was extended to all State-owned forest enterprises in China, within the 17 provinces of the NFPP.
• Starting 2017: Natural forest commercial logging ban was extended to collectively owned land (which can be managed by either individuals or entities).
In 2017 NGFA checked on 99 state-owned forest units in Northeast of China, including all 87 Key state-owned forest bureaus (a total of 32.66 million ha land) and 6 nature reserves and 6 state-owned forest enterprises. It was found that 2,648 m3 standing trees at 85 sites (a total of 210.72ha) were harvested without permits. In the context of the sampling methodology and checks made, this is considered to be a small volume, which also indicates that illegal harvesting has been curbed since the commercial logging ban of natural forests.
According to the revised Forest Law of China (2019), the commercial logging of natural forest is strictly prohibited across China. In addition, NGFA is prohibiting natural forest from clear-cutting in the name of “forest reconstruction” (in some regions, the natural forest was classified as “low-functioning forest” and allowed to be clear-cut for the establishment of more productive and profitable forest because of loopholes in regulations). It should be noted that the permitted tending cuts (for maintenance) in Key state-owned natural forests in Northeast and Inner Mongolia will not produce dimensional timber (Government Source 3). This is because, according to stakeholder consultation, the limit of log size is >2m in length and >8cm at the small end.
In this way, only plantations are permitted to be commercially harvested, and the problems of overcutting beyond quota are being more-or-less consigned to history. For collective plantation forests, since tenure has been identified and protected, managers can apply for harvesting permits with their forest tenure certificate using a simplified procedure.
For bamboo forest, a harvest permit is not required for the bamboo forests outside nature reserves. In China, the harvest of bamboo applies selective cutting only. The monitoring and governance of harvesting of bamboo forest is loose compared to that of arboreal forest. Measures have been taken to provide farmers with greater freedom to manage bamboo forests.
Preferred by Nature’s experience supporting organisations’ due diligence on Chinese sources of wood-supply, also supports this view, with harvest permits being available (where applicable) in almost all supply chain legality assessments. Within our evaluations of such licences a very small fraction (significantly less than 1%) appear to be falsified.
During public stakeholder consultation, which took place during February and March 2021, stakeholder input was received regarding illegal harvesting of particular species. A specific case was raised, related to harvesting of native species Acacia confusa in the Hainan province using documentation for Acacia mangium, which is an introduced exotic species from plantations and therefore easier for the authorities to issue harvest permits. Acacia confusa is largely from natural forests with very limited supplies in Hainan province, and harvesting is restricted under the national ban of harvesting in natural forest. It is difficult to tell the difference between Acacia mangium and Acacia confusa if only based on species names indicated in harvest permits, because often only “Acacia” is indicated in these documents. Further investigation (including further stakeholder consultation) was made to estimate the scale of this issue. It was concluded that there are indications that unlawful harvesting has occurred in the recent past, and some level of illegal activity may continue to take place. However, there was insufficient evidence to indicate that illegal logging of Acacia confusa is a widespread issue relevant to a large proportion of mainland China and that it remains an on-going issue of significant concern. VIEW LESS
In China, harvesting permits are legally required before the harvesting operation.
China's harvest quota system is carried out with the intention of limiting harvests to volumes below annual incremental growth. To achieve the objective, every five years the provincial forest department submits annual timber harvest quota to the provincial government for final approval following the opinions from the Forest competent authority (NFGA) of the State Council, according to the Forest Law of China (2019).
• For Key State-owned forests, the NFGA develops the quota and submits this to the State Council for final approval.
• For other State-owned forests, the state-owned forest enterprises or forest farms submit the quota to the provincial government for final approval.
Harvesting permitting system:
Article 56 of the Forest Law of China (2019) provides that a harvesting permit shall be obtained for the harvesting of forests or trees on the forest land. The harvest permit is not required for bamboo forest outside nature reserves but should follow relevant harvesting procedure. Individual farmers are exempted from this requirement when they cut their own forest or trees on private plots and surrounding their houses.
When applying for a harvesting permit, the applicant must submit the documents and/or information on the location, forest type, species, area, volume, mode of harvesting, renewal measures and forest ownership/use right relating to the harvesting. If the harvest area or volume exceeds the limit defined by the provincial forest authority, the documents on survey and design of the harvesting area shall be submitted.
Harvesting activity must also follow the conditions indicated on the permit relating to harvest area, plant species, harvesting method, etc.
Harvesting permits are issued by forest authorities at different levels (although all contain broadly the same information):
• Forest authority at the county level: State-owned forest enterprises administered by the county government, private forest companies and collective organisations.
• Forest authority at county level or the township government with authorisation by country forest authorities: individual farmers cut the forest or trees from their family hill or contracted collective forest.
• Forest authority at province level: provincially owned forest farms, prefecture-owned forest farms or enterprises, provincially managed nature reserves or forest parks, non-forestry units.
• National Forestry and Grassland Administration: Key State-owned forest farms or forest management bureaus, nature reserves or forest parks of key national importance, or other forests with important ecological values.
According to Forest Law, organisations and individuals holding harvesting permits must carry out forest operations in accordance with harvesting area operation rules, and authorities issuing harvesting permits are empowered to check the completed operation. If an offence is identified, the harvesting organisation may face seizure of the harvesting permit and termination of harvesting operations.
Management of harvesting areas is implemented in China to administer and monitor inventory and design, timber production, harvesting, regeneration of the harvested area and inspection of harvesting quality.
The Criminal Law provides a detailed description of penalties in terms of illegal timber harvesting, along with Forest Law and Regulation on the Implementation of Forest Law. The document, Explanation of Several Issues of the Supreme People’s Court on Specific Application of Laws for Hearing the Criminal Case in Forest Resources Damages, specifically stipulates the basis for determining a penalty in terms of species, quantity of timber illegally harvested as well as corresponding charges and penalty.
This category is currently concluded as N/A. It is considered unlikely that the suspensions on the afforestation fee and quarantine fee will be lifted, considering the governmental trends to increasingly investment in, and subsidizing of, afforestation and forest protection. VIEW LESS
According to Measures for the Administration of Collection and Use of Afforestation and Regulation of Plant Quarantine, the following royalties or fees are required to be paid by forest managers or companies:
Afforestation fee: this special fee came into force in 1961 and is collected by government to restore, cultivate and protect forest resources as a supplement to national input for forest management. Buyers of timber, bamboo timber and other forest products − as primary products − are subject to the payment of this fee.
In 2016, the Ministry of Finance and State Taxation Administration issued Notice on Abolishing, suspension, and Combination of partial administrative fund project (date: 29th January 2016), all kinds of organisations or individuals are exempt from the afforestation fee.
Plant quarantine fee: collected by plant quarantine bodies for quarantine and relevant actions required for seeds and seedlings as well as other plant products.
In 2014, the Ministry of Finance and State Taxation Administration issued the Notice on Cancelling, Exempting and Discontinuing a Batch of Administration Business Fees (effective date: 1st January 2015), including provisions to exempt the plant quarantine fee for small and micro-sized companies.
In 2015, the Ministry of Finance and State Taxation Administration issued the Notice on Cancelling and Exempting a Batch of Administration Business Fees (effective date: 1st November 2015), including provisions to exempt the plant quarantine fee for all kinds of companies or individuals.
Currently China exempts all kinds of forest managers (including individual farmers) and companies from forestry-related royalties and fees to loosen their burden financially. VIEW LESS
Description of Risk at the forest level and exporting:
VAT is exempted for organisations or individuals operating at the forest level.
Description of Risk at the supply chain (processing and domestic market trading):
Based on a review of publicly available information on VAT issues, there is still some illegal activity with regard to the non-payment of VAT. To avoid tax payments, some companies or individuals utilise different methods, such as:
• Providing receipts that indicate only the transaction amount and value. However, receipts do not have the same legal status as invoices in China and cannot be used as evidence of payment of tax.
• To avoid VAT taxes, companies (especially small sized companies) may refuse to issue invoices or indicate smaller volumes or values on invoices than the reality.
• Individual business involved in taxable activities (such as trading and processing) may refuse to issue invoices when the sales value is approaching the applicable VAT exemption threshold, otherwise the individuals must pay VAT on the full sales value.
However, according to Interim Regulation of VAT, VAT is exempt for exporters.
China has a score of 41/100, at position 80 (of 180 countries assessed), according to Transparency International’s 2019 Corruption Perceptions Index. With regard to the Worldwide Governance Indicators, China scores as follows according to the 2019 perceptions ratings (on a scale of -2.5 to +2.5): Government Effectiveness: 0.52; Regulatory Quality: -0.24; Rule of Law: -0.27; Control of Corruption: -0.32. VIEW LESS
In addition, VAT can be reimbursed on different percentage:
· 70% VAT abatement for companies using residues from harvesting, primary processing and manufacturing. This will likely apply to companies such as manufacturers of MDF, particleboard, OBS, etc.
· 50% VAT abatement for pulp or paper manufacturers using recycled paper.
Fapiao have uniform requirements and format and are printed on special paper or in digital form (electronic VAT Fapiao). Booklets are printed by the designated tax authority, which monitors and supervises tax collection based on these documents.
To combat the nation-wide problem of false or falsified invoices (produced as a means to avoid tax payments), invoicing is connected with the taxation control system, through which every invoice can be visualised, traced or controlled by local tax authorities at or above county level. It is possible to check invoices online via a publicly available database (https://inv-veri.chinatax.gov.cn/). It is therefore possible for anyone to check if the invoice is legitimate or not, using the online checking facility.
A thesis by Liu Xia and Docin library, consider that according to laws and notices, zero income tax is effectively now implemented in China for forest management companies. These analyses highlight the fact that − after the issue by central government of a series of notices to lessen the tax burden on forestry companies − most forest-related companies are exempt from paying income tax, particularly forest management units and primary processers.
The analyses also consider that income tax avoidance is not considered a risk of any significant proportion. VIEW LESS
In China, income and profit tax are controlled in the following way:
• According to Article 27 and 28 of the Law on Enterprise Income Tax, companies must pay income tax at 25% of their taxable income. The law also provides for income tax exemptions and reductions. There are some provisions related to forestry companies:
i) Forestry, agriculture, farming, and fishery business activities and primary processors (logs, bamboo, sawn timber) may be exempted from income tax requirements; and
ii) Small and micro-enterprises (annual taxable income no more than 300,000 CNY) pay the income tax at 20% of their income.
• Furthermore, according to Implementation of Law of the People’s Republic of China on Enterprise Income Tax, income tax and profit tax exemptions may apply in two cases:
i) Enterprises engaged in forest management, seedling production, and primary timber processing are exempt from income tax and profit taxes.
ii) Secondary processing companies that use small-diameter logs, logging residues or materials processing residues to process wood-based panels, wood chips, fodders, pulp, charcoal, particles, etc. are also exempt from paying income tax.
• Additionally, income tax exemption is permitted in the case of some State-owned forest enterprises at the borders with other countries.
All other companies shall pay income tax.
If a company is also engaged in business activities other than forest management, seedling production and primary timber processing (i.e., activities that are exempt in the context of income tax, as above), the company shall manage the finances of the business separately from the tax-exempted business. If combined, all income tax shall be collected for the entire business. VIEW LESS
According to the CAF investigation on FSC Controlled Wood in different counties nationwide, State- and locally owned forest enterprises broadly follow the legislative requirements relating to harvesting plan design, publicising of the harvesting operation, and technical requirements relating to harvesting. The CAF investigation also considers that local forest authorities properly implement their duty to inspect the quality of harvesting operation with the priority concerns being the protection of young trees and minimisation of waste during harvesting.
The forest managers (entities or individual) must apply for harvesting permits in line with the national and regional regulations, to harvest the trees on the forest land. The forest authorities at different levels conduct various harvesting inspection and are concerned about the compliance with legal requirements related to harvesting activities. An evaluation, made by Preferred by Nature, of a random sample of inspection results by different forest authorities across China on the public domains found no significant issues, though the inspection would apply sampling methods in many cases. These results also echo the FSC audit findings based on the analysis of FSC-FM audit reports of Chinese certificate holders.
Natural forest is not permitted to be clear-cut due to logging ban of natural forest nationwide that China has implemented by law. Only tending cutting (including sanitary cutting) is allowed to maintain and enhance the functions of natural forest. Albeit there are strict limitations to the dimensions of the trees which may be harvested, the harvested small size wood could have commercial value to make wood products, such as finger-jointed board, MDF, particleboard, etc. For the purpose of risk assessment, no evidence (public information and expert consultation) indicated there is a concern that the harvest permit for tending cutting could be misused (for example, the terms on harvest permit is not followed, like species, volume, size of trees to be harvested) which was also mirrored in the check result by NGFA (see below).
In 2017 NGFA checked on 99 state-owned forest units in Northeast of China found, including all 87 Key state-owned forest bureaus (a total of 32.66 million ha land) and 6 nature reserves and 6 state forest companies, 389 m3 standing trees at 3 sites (a total of 22.87ha) were over-harvested (beyond the permitted volumes as described within the harvest permit). The checks concluded, overall that illegal harvesting has been curbed since the commercial logging ban of natural forests. VIEW LESS
In China, Forest Law and a number of regulations act to regulate harvesting operations, via specific stipulations relating to timber harvesting.
The Forest Law provides that companies/ individuals must apply to the county-level forestry authority in the vicinity of the forest land to obtain a timber harvesting permit in accordance with annual harvest quotas. The operation must follow the requirements of operational design, harvesting operation practices, forest regeneration, health and safety, post-harvesting checks, etc.
State-owned forestry enterprises must submit the harvesting area inventory design plan to the National Forestry and Grassland Administration (NFGA) as part of the process of applying for the harvesting permit.
Other organisations, when applying for a harvesting permit, must submit documents indicating the harvesting objective, location, species, condition, area, volume and regeneration method.
If the harvesting operation does not meet the design plan, the authorities issuing the harvesting permit have the right to seize the harvesting permit and terminate the operation. The harvesters must achieve forest regeneration outcomes as per the details included on the harvesting permit including area, plant species and period; with the regenerated area not to be less than that harvested.
All harvesters must meet the relevant technical requirements. Five types of forest harvesting are adopted in China:
(i) Mainstay cutting (final cutting).
(ii) Tending (thinning) cutting.
(iii) Regeneration cutting; and
(iv) Low-efficiency forest cutting for improvement (not permitted for natural forest).
(v) Others (e.g., expropriation by governments for infrastructure construction)
Mainstay and tending cutting are used for wood production in commercial forests, while regeneration cutting is used for improving the functions of protective forests and special-purpose forests. Low-efficiency forest cutting is intended to improve wood quality in stands for commercial use. Selective cutting, clear-cutting and gradual cutting are the major silvicultural methods used for forest harvesting. Forest companies must choose the right method based on the condition of the forest to be harvested.
Natural forest is not permitted to be clear-cut due to logging ban of natural forest nationwide that China has implemented by law. Only tending cutting (including sanitary cutting) is allowed to maintain and enhance the functions of natural forest. In this case, the harvest permit for tending cutting is required for which the harvest rate is usually lower than 20%. In addition, there are strict limitations to the dimensions of the trees which are to be harvested.
Before the harvesting operation, forest managers must prepare the cutting area inventory. They must identify and define boundary and area of harvesting sites; investigate stand factors including density, volume, species composition and age class etc.; investigate the volume to be harvested; and select the harvesting method. Based on the inventory results, the harvesting methods and harvesting preparation plan will be designed, which finally results in the creation of the harvesting plan. Following agreement on the plan by the various forest management agencies, the plan must be submitted to higher forestry authorities. The design plan is valid for two years.
The harvesting operation must strictly follow the design plan and the conditions on the harvesting permit, with these documents required to be available at the harvesting site. The harvesting area, volume and timber produced must not exceed the error levels assumed in the design plan. Additionally, harvesting must not cause significant damage to the remaining forest resource, and young trees must be well-protected. Large quantities of wood wastage are not permitted, and the operation must adhere to a minimal waste principle. After the harvesting operation, residues must be removed from the harvesting area, with the primary objective of enhancing regeneration, with this activity also required to follow the Technical Code for Forest Logging Operations 2005.
Also, after harvesting, the harvesting operation shall be inspected. State-owned forest bureaus or forest management bureaus inspect harvesting operations carried out by forest farms, while operations by locally owned forest farms are inspected by higher forestry bureaus. Following successful inspection, a certificate (Inspection and Acceptance Certificate) will be issued to forest farms. Operations by collective committees and individuals (village committees and forest farmers) undertake a self-inspection process for their harvesting operations, with forestry authorities at county or province levels carrying out checks through sampling only. VIEW LESS
• There have been no recent reports of adverse impacts of forest management or harvesting activities on protected areas or species. In protected sites, only thinning and intermediate harvesting are permitted after review and approval by forest authorities at or above provincial level. Also, sufficiently robust protection and management systems have been adopted for wildlife, development and utilization of non-wood resources, roads and other infrastructure. Complete forest closure without harvesting is practiced in areas with fragile ecological environments, core and buffer areas of nature reserves, ecological forest that is difficult to regenerate after harvesting, etc.
• As a signatory country to the Framework Convention on the Conservation of Biological Diversity, China has developed a plan for biodiversity protection activities, and has submitted national reports on the implementation of the Convention. According to the Fifth China National Report, China has made significant achievements in establishing biodiversity protection and management systems.
• There are well-established administrative organizations in charge of natural reserve protection. The State Council environment administrative department is responsible for national reserve management. Forestry, agriculture, mining, water conservation, marine (and related administrative departments) manage natural reserves in their own areas of responsibility.
• The governments at different levels have been intensifying the supervision and management of forest nature reserves. By the end of 2017, a total of 2,750 nature reserves (including 469 national class nature reserves) covering 147 million ha were established, accounting for 14.88% of the national land area. Within the nature reserves, there are more than 35 million ha natural forests and 20 million ha natural wetland. The nature reserves protect the most important forests, rare and endangered species and typical nature landscapes, including 90.5% of land ecosystem representatives, 85% wild fauna and flora, 65% higher plant communities, more than 300 keys protected wild animals species and 130 key wild plants species. Since 2015, a total 10 of national parks have been established covering 220,000 km2 spanning 12 provinces and China is spending up the legislation and establishment of National parks.
• The Chinese government have been combatting the illegal trading of wild fauna and flora through a well-established multi-departments mechanism. Cases of illegal trading are more common in relation to protected animals rather than protected tree species.
• There appears to be a well-established system and set of laws protecting natural reserves. No evidence, nor significant body of reports has been identified relating to the threat to these natural reserves by forest management or harvesting activities. VIEW LESS
In China, forests located in protected areas and supporting protected species are mostly classified as ecological forests (protective forests and special-purpose forests) at different levels, including national, provincial, and local, thereby affording these maximum protections. These sites or species are well-protected and approval for harvesting in the protected area − or of protected trees − is possible only after review by various designated forestry authorities.
Forests are divided into commercial forests and ecological forests based on their principal function. The category ’ecological forest’ is mainly reserved for the protective and special-purpose functions, in areas with significant ecological importance. Ecological forests are mainly established in areas of important or fragile ecological conditions or in areas with an important role in safeguarding ecological security, biodiversity conservation or sustainable and social development. The Technical Code for Ecological Forest Establishment 2013 defines the method, mode and species selection for establishing ecological forests of different types, as well as the management and tending of these forests.
The Wild Plant and Wildlife Protection Regulations require that the government shall enhance the protection of wild plant and wildlife resources and actively develop as well as responsibly encourage their utilisation. The governments at different levels shall take measures to rescue key threatened national or local wild plant and wildlife to protect and restore their habitats and, when necessary, other measures such as establishing a propagation base, germplasm bank, etc. To protect wildlife and wild plant, the State Council approved the lists of National Key Protected Wildlife and Wild Plant List, while key local protected wildlife lists are approved and released by provinces.
• It is prohibited to collect wild plants that are under national Class I protection. If there is a need to collect these for scientific research or artificial cultivation, a collection permit must be acquired from national forestry authorities or their designated agencies, after obtaining consent from provincial forestry authorities.
• Wild plants under national Class II protection shall be collected only with a collection permit issued by provincial forestry authorities after a consent is obtained from county forestry authorities. The collection permit has a standardized format that shall be utilized by National Forestry and Grassland Administration.
China has a well-established system of natural reserves and has set up laws and a regulatory system to protect these. Besides this, there are well-established, administrative organisations in charge of natural reserve protection, including the Ministry of Ecology and Environment and National Forestry and Grassland Administration. These ensure a robust level of protection of protected areas and species.
The Nature Reserve Regulation requires that China adopts economic and technical policies and measures consistent with developing nature reserves, and also includes nature reserve development planning in conjunction with national and social development planning. In 2019, the Central government released Guidance on Establishment of National Park-led Nature Reserve System to enhance nature protection. Natural protected areas are classified into three levels by significance of conservation value and protection intensity:
- National park
- Nature reserve
- Nature park
The monitoring system of nature reserves and other protected areas are also being enhanced, including the use of big data and satellite remote-sensing images.
According to Article 26 of the Nature Reserve Regulation, harvesting, hunting, grazing of livestock, fishing, land reclamation, mining and quarrying are not permitted in nature reserves. In the core and buffer areas of nature reserves, no tourism or production activities are permitted; and the core area is not be accessed unless for scientific research with permission from nature reserve administration authorities.
In areas where key national- or local-level protected species occur, a nature reserve must be established to protect the species. Appropriate signage must be established, and it is prohibited to damage or destroy this. Wildlife population growth shall be monitored to protect the species and its habitat. If projects have negative impacts on wildlife habitat, an evaluation must be carried out by the project manager and be reviewed and approved by environment protection authorities after consultation with other relevant organisations.
Besides the natural reserve protection system, in general ecological forests (and associated conservation values) are unlikely to be subject to harvesting activities. According to relevant laws and regulations relating to the establishment of non-commercial forests, commercial harvesting is not permitted in ecological forests: logging is solely for the purpose of forest management and to encourage natural regeneration. An integrated system has been established focussing on protection and management relating to wildlife, NTFP resource survey and utilisation, and construction of roads and other infrastructure. VIEW LESS
According to advice relating to China's 13th Five-Year Plan (2016−2020) which includes new requirements on ecological and environmental forestry, the government has requested the enhancement of ecological values by implementing ecological restoration projects and strengthening the delivery of projects such as: natural forest protection; conversion of agricultural land to forest so as to conserve water; retention of water and soil; preventing sand loss; and establishment of wind breaks as well as protecting biodiversity. Thus, there is a clear indication that environmental requirements are increasingly valued and better implemented, even though some shortfalls may currently exist.
The information available on website stated China designates ecological areas (called “The Red Lines of ecosystem protection”) by functions covering the nature reserves, important water catchment, biodiversity hot areas, ecologically fragile areas, etc., which are protected strictly. It is reported that in Zhejiang province, ecological values of the ecological forests have improved after the government has taken measures to protect ecological forests and different management on the forest types and primary functions.
Since the flood disaster in Yangtze river occurred in 1998, China initiated Natural Forest Protection Program. In the upstream of Yangtze and Yellow River, natural forest is excluded from commercial harvesting. Since 2014, the natural forest logging ban has expanded in a stepwise fashion from northeast China to nationwide and is now enshrined in law. Forest water conservation has increased significantly, and soil erosion is reduced in the Yangtze and Yellow River basins.
There appears to be a sufficiently well-established system related to the identification and/or protection of environmental values. No evidence, nor significant body of reports has been identified relating to the threat to these values nor to any systematic and/or large-scale non-compliance with legally required environmental protection measures. VIEW LESS
In terms of China’s environmental laws:
• It is legally required to protect environmental values during forest harvesting. For example, harvesting along riverbanks is not permitted and a buffer zone must be maintained for soil and water protection according to the Technical Code for Forest Logging Operations. In addition, clear cut area limits are defined based on the gradient of harvesting site as well as the considerations related to the impact on ecological values, as well as soil and water conservation.
• The Law on Environmental Impact Assessments applies to land use planning and architecture/infrastructure projects implemented by governments and relevant agencies. An Environmental Impact Assessment (EIA) is required during planning for construction, development and utilisation relating to land use, and the planning-related text shall also have a specific chapter or explanation relating to the EIA. Architecture/infrastructure projects implemented by governments and agencies relevant to industry, agriculture, forestry, energy, transportation, etc. shall have an EIA before the project plan is submitted for approval. According to law, land use planning for forest establishment also requires an EIA to be developed by government or designated agency.
• The Forest Law provides that efforts shall be taken by government at different levels to protect the areas of significance ecologically, such as representative areas of forest cover, ecologically fragile forest areas, habitats of rare species, tropical forests and others special conservation value forests and prohibits natural forest from commercial harvesting. Government, at different levels, shall establish the system to prevent and control forest fires. The Forest Fire Prevention Regulation states that local government shall define a forest fire responsibility zone, in which a system is established for regular checking of the potential factors relevant to forest fires and to prevent their potential occurrence. At the same time, government at or above county level shall define a forest fire prevention period based on forest conditions and fire occurrence rules. During this period, no forest access is permitted unless approved by government.
• The Soil and Water Retention Law provides that plants and vegetation be protected from soil and water loss in ecologically fragile areas. Harvesting operators/forest owners have the obligation to implement measures, while Environmental protection and forest authorities oversee implementation. Deforestation is prohibited within soil- and water-loss prone areas and forest harvesting must be conducted in a responsible manner, while clear-cutting is not permitted. Only thinning and regeneration cutting are allowed for water conservancy forests, windbreak forests or other protective forest types. Measures must be adopted to prevent soil and water loss in harvesting areas and skidding roads.
• Soil and water retention measures shall also be adopted by the forest owner for establishment activities and young forest thinning on slopes greater than 5 degrees, according to article 23 of Soil and Water Retention Law.
• Forest Disease and Pest Prevention Regulation requires that the governments above county level are responsible to prevent the occurrence of forest diseases and pests, prevent the introduction of overseas diseases and pests and to protect healthy specimens in the forest. Forest managers cannot use the seedlings with dangerous pest or disease for afforestation and are required to remove trees that are infected by pest or disease during tending operations. Severe forest disease and pest outbreaks must be reported to forestry authorities at different administrative levels (as appropriate depending on severity) for immediate control.
1) China has made progress in improving the health and safety of workers and has also worked with the Beijing Regional Office of ILO (Ilo.org., 2019). which has carried out some programs in close cooperation with the Ministry of Human Resources and Social Security, such as the Decent Work Program, Green Job Program and Sustainable Enterprise Development Program etc. According to related reports by ILO (Non-government source 2), significant progress has also been made with the social protection of workers.
2) According to expert consultation conducted during 2019-2020, forest management enterprises normally establish systems and procedures in terms of health and safety and provide some safety equipment, but there has been less progress with the compulsory requirements for workers to use safety equipment. Further, forest workers lack awareness of wearing appropriate personal protective equipment as the safety training provided by the employer is insufficient, especially in the small and medium-size FMUs. Some workers, especially older or skilled ones, are reluctant to use the safety equipment, such as helmet, protection trousers, gloves, boots for safety consideration.
3) According to China Forestry Yearbook (2015, 2016 and 2017), it is reported in 2015 that 32 workers died, 16 workers were injured seriously, and 327 workers were slightly injured in various accidents in forest activities. In 2016 the number was 35, 34 and 365 respectively, and 34, 36 and 442 respectively in 2017. Personal Communication with experts highlighted that health and safety is an area in which some improvement is still required, while the situation has improved following improvements to health and safety law and regulations (Stakeholder consultations with forest experts from CAF, forest authorities, forest companies, third party certification body, etc.).
4) Based on Preferred by Nature local experts’ experience and academic study on the audit findings of FSC forest management (FM) certification audits in China, cases where the health and safety issues are raised are still noticeable. Improvement of health and safety concerns is still required for certified forest management enterprises, let alone the non-certified ones. The main issues identified in FSC-FM audits in China include forest workers are not equipped with appropriate personal protective equipment.
5) Currently there is neither a regulation nor a national/forestry standard on personal protective equipment used in bamboo forest activities, but there are general H&S requirements for the entities managing bamboo. Based on experience by Preferred by Nature local experts’ and interviews with local experts during 2019-2020, bamboo forest management activities generally do not involve harvesting machines such as chain saws, skidders, forwarders, etc. In addition, the intensity of bamboo forest activities is relatively low and a single bamboo stem is relatively light when compared to timber. For example, the average weight of moso bamboo (Phyllostachys heterocycla cv. Pubescens) which is commonly used in China and the main material for many bamboo products, is approximately 20kg/bamboo stem. Therefore, risks regarding health and safety in bamboo forest activities can be considered low. VIEW LESS
China has formulated and implemented a legal system to ensure and protect the safety and health of workers employed within organisations, including the health and safety of forest management enterprise employees.
• Organizations are required to establish a worker health and safety system and comply with requirements in this regard against accidents in the workplace and in reducing occupational hazards. Organizations must ensure adequate health and safety conditions exist and the necessary materials and equipment for employees are provided in line with national requirements. Regular health checks must be provided to those who engage in dangerous work.
• According to Work Safety Law, the organizations shall establish and implement a training plan concerning work safety to ensure the worker acquire necessary knowledge and safety procedures. Employees engaging in special operations must be specially trained and qualified.
• Work Safety Law provides that employees of a business entity shall be safeguarded against unsafe work practices and be able to perform safe work practices. According to article 42, the organization that hires workers must provide the workers the appropriate personal protective equipment (PPE) which is in line with national or professional standards. Workers must be supervised and trained to use the PPE. Note: PPE requirements to do not apply in the case of bamboo harvesting as there is no legal requirement nor standard on PPE use.
• According to Article 22 of Law of Prevention and Control of Occupational Disease, Organizations that hire workers must create an enabling working environment consistent with occupational sanitary requirements, including provision of PPE, to prevent the occupational diseases. At the national level, the labour authorities shall establish a treatment system for accidents and occupational diseases − and monitor/ pool data on these to facilitate reporting on and addressing accidents, deaths and occupational diseases.
• China provides special labour protection to women by prohibiting (or not recommending) that women engage in jobs with a certain level of work intensity. Women enjoy no fewer than 90 days’ maternal leave. Women who are breastfeeding shall not engage in work above a certain level of intensity; or which is incompatible with breastfeeding; or work overtime or night shifts.
• China has also issued regulations to protect female workers' work safety conditions and requires business entities to adopt measures to provide training to female workers and to improve their health and safety and working conditions.
• The legal requirement on health and safety is not applicable to the smallholders who manage their own forest land and perform forest activities themselves, which means there is no employer in this case, although they apply to the organization that hires workers. VIEW LESS
Health and safety (H&S) procedures must be followed.
• Discussion with various experts found that normally the forest management enterprises have a rule and procedure to protect the rights of workers. Workers can participate in labour unions and carry out negotiations with regards the protection of legal rights by participating in employer representative meeting and others. Workers' are protected from bias or discrimination based on nationality, ethnicity, gender, and religion as long as they are willing and suitable to conduct the work.
• The Central government requires that the workers in state-owned forest enterprises are covered by national social security scheme (including accident insurance), according to State Forest Management Organization Reform Plan released in 2015. As of the end of 2018, 4,612 out of 4,855 (95%) state-owned forest enterprises have completed the State Forest Management Organization Reform, all of which became non-profit organizations financially supported by the government. 100% of the employees and workers have been registered in national social security scheme (including pension insurance, accident insurance, etc.). The average of annual salary exceeded the local minimum wage (State Council, 2015; National Forestry and Grassland Administration, 2019.
The social insurance registration indicated that the employment contract was in place which is a precondition of social insurance. In the case of private forest companies or other organizations, they normally sign contracts and pay social security for the full-time employees. VIEW LESS
China has paid significant attention to legal employment issues in recent years, and the revised Labour Law makes detailed provisions relating to many aspects of legal employment, including the following:
• Workers enjoy the right to be equally employed, choose their own occupations, receive payment, enjoy leave, get health and safety protection, receive professional and work-related training, have social security and other welfare, apply for settlement of labour disputes and other labour rights in line with laws and regulations. Those employing workers shall establish and improve the rules and procedures to protect the rights of workers.
• Workers enjoy the right to participate in, or organise, labour unions that can independently carry out activities and represent and safeguard the legal rights of workers. Workers can also participate in the management of an organisation or carry out negotiations with regards the protection of legal rights by participating in employer meetings, employer representative meeting and others.
• Workers' rights to be employed are protected from bias or discrimination based on nationality, ethnicity, gender, and religion. Women enjoy equal rights to men and cannot be refused employment because of gender. Employment of juveniles (under 16 years old) is prohibited.
• Organizations are obliged to sign labour contracts with workers to establish the labour relationship and clarify the rights and obligations of both parties. Contracts include the duration of the work relationship, specific work requirements, issues relating to work protection or conditions, payment, working rules, contract cessation conditions, responsibilities for breach of contract, etc. In addition, employees are empowered to engage in collective bargaining with their employers for issues relating to payment, working hours, leave and rest arrangements, work-related health and safety, insurance, and welfare issues; and may sign a collective labour contract. The draft contract shall be discussed and approved in employer representative meetings or by all employers. The collective contract shall be signed by the labour union on behalf of employees and, if no labour union exists, representatives of employees will sign the contract with the organization.
• According to Labour Law of China, workers' daily working hours cannot exceed 8 hours and working time per week cannot exceed 44 hours. Organisations must guarantee that workers have one day of rest per week and must arrange for leave by workers during legally required holidays. The employer can request overtime work as necessary but must negotiate with the labour union and workers, and the overtime work cannot be more than one hour in principle and no more than 3 hours in special circumstances and overtime work per month cannot exceed 36 hours. If workers engage in overtime work, organisations shall compensate the overtime by paying no less than 150% of the normal day payment, or 200% of normal payment if working at weekends (although there is no compensation for rest) or 300% of the normal payment if working on a legally required holiday.
• China implements a minimum pay (minimum wage) system. Minimal pay is defined by provincial governments and documented by the State Council. Organisations shall pay their workers no less than the local minimum pay.
• China has established and is further developing its social security system to enable workers to receive assistance and compensation when retired, ill, unemployed or requiring maternity leave. According to article 10 of Social Security Law, the workers should be registered in basic social security system which is paid by both employer and workers by different percentage of salary. Non-full-time workers and those under a flexible working hour system are encouraged to pay the basic social security themselves.
• According to Work Safety Law of China, Organizations must pay employment injury insurance, which is required to be included in employment contract. The People's Government is required to ensure the oversight and governance of employment-related injuries to ensure employees receive compensation in accordance with laws.
• During any dispute between an employer and employee, the worker has the right to apply for mediation or arbitration or even take legal action. The employer may set up a labour dispute mediation committee, composed of an employee representative, a representative of the organisation and a labour union representative who also chairs the committee.
• The Labour Security Supervision Regulation requires that the national labour security supervision authorities are responsible for the overall supervision nationwide of labour laws while local supervision authorities are responsible for the work in their jurisdictions as well as supervising the implementation of labour laws. Labour unions safeguard the legal labour rights of workers, and supervise the organisations' compliance with relevant laws, regulations, and rules.
• Forest management enterprises, as legal entities, need to comply with all the above general laws and regulations, including signing labour contracts, paying social security and insurance on behalf of their staff, providing vocational training, respecting the right of staff to be employed, etc.
• According to Regulation on Foreigner work in China, the employer must apply for work permit for the worker to be employed. The foreigner worker can be employed only when having obtained the work permit. VIEW LESS
With recognized and equitable processes through the regional autonomous systems - the villagers' self-government system and the court system in China - there is a legal framework for protecting traditional rights, for which there is little evidence to suggest it is not working well with regards to conflicts related to community traditional law. VIEW LESS
China has since ancient times been a multi-ethnic country. The rights and interests of ethnic minorities are addressed within Chinese law and society.
The State Ethnic Affairs Commission was established specifically to be responsible for dealing with minority affairs, including harmonising ethnic relationships, and ensuring the traditional rights of minorities. A regulation on resolving forest tenure disputes has been issued and the related procedure developed.
In China there is no special regulations for customary rights related to forest harvesting and forest resources. All Chinese people including ethnic minorities enjoy the same rights to forest land and forest resources which are subject to the same forest-related regulation.
In some areas, especially in Minority Autonomous Regions, some local unwritten laws regulate the detailed procedure to resolve conflicts relating to forest land borders and forest resource use rights.
Conflicts in relation to community traditional rights are resolved according to the Organization Law of the Villagers Committees of the People’s Republic of China and People’s Mediation Committee Organisation Regulation. The villager committee, which is a rural self-governing organisation, is responsible for administering − according to mediation regulations − affairs concerning traditional rights disputes. If mediation fails, the parties concerned can apply to government for mediation, or apply to the People’s Court for a judicial procedure. VIEW LESS
This indicator is not applicable in China:
• There are no laws or regulations in China that contain the requirement of Free Prior and Informed Consent.
• All forest land and forest resources are owned by the State or collectives. However, farmers may have ownership of forest timber and use rights to forest land, and these are protected by property law.
• After the collective forest tenure reform of 2008, forest management and use rights were further identified and clarified. Farmers have the right to harvest their planted forest only if they meet the relevant legal requirements. Such requirements are also applicable in areas where ethnic groups are present.
• The establishment of forest concessions is not normal practice in China. State-owned forests are managed by State-owned forest enterprises, while collectively or individually managed forests are managed by the managers themselves. VIEW LESS
• A review in 2020 by Preferred by Nature of FSC FM audit reports of Chinese certificate holders identified that minority people have a more or less traditional culture, different languages, and religions, but have same rights to forest resources or land compared to the HAN people, which is also reflected in the laws and regulations, such as Forest Law, Property Protection Law, Regional Ethnic Autonomy Law, etc.
• The above-mentioned autonomous agencies of self-government have developed relevant policies and regulations to protect traditional culture and traditional rights, including the resolution mechanism on traditional rights conflicts.
• In some cases, ethnic minorities enjoy extra care compared to Han people (major nationality in China) because of the favourable policy for ethnic minorities. for example, access to NTFP in state forests, despite no such obligation are required by the FME. Therefore, if no access to NTFP is provided, this will not cause a legal violation.
• In China, many minority people live in the forest regions and are commonly owners of forest lands. No evidence has been identified to suggest that their forest resource-related rights, which is comparable with Han people, are not broadly guaranteed. VIEW LESS
According to the definition of Indigenous peoples recognised by organisations such as the International Labour Organisation (ILO), there are no Indigenous/traditional people in China and, as a result China has not signed ILO Convention 169.
There are however, 56 nationalities in China. The 55 ethnic minorities (excluding Han people) in total account for 8.49% of the total population in China, according to Sixth Demographic Census in 2000, so they are termed minorities. Each has identifying characteristics, languages and customs of their own. At present there are five autonomous regions on a provincial level: Inner Mongolia, Guangxi Zhuang, Tibet, Ningxia Hui and Xinjiang. In addition, there are 30 autonomous prefectures and 117 autonomous counties in China. The Law of the People’s Republic of China on Regional National Autonomy has been issued to ensure the minority nationalities can practice regional autonomy in areas where they live in concentrated communities and can set up agencies of self-government allowing them to exercise the power of autonomy. However, there is no special law formulated and implemented for the right to nature resources including forest for the minority nationalities in China. The Constitution provides that all land are owned by the state, and minority nationalities have the same right as Han People do for the forest land and forest growing. VIEW LESS
This indicator is Not Applicable. There are no specific regulations related to Classification of species, quantities, qualities in China. VIEW LESS
This indicator is Not Applicable. There are no specific regulations related to Classification of species, quantities, qualities in China.
• Note: Regulation on the Implementation of the Forest Law of the People's Republic of China, Article 44 (has been phased out since 1st July 2020 according to newly amended Forest Law) required that transportation permits for raw materials requires details including species, quality and quantity, in addition to the essential information on transportation method, route, starting and end point. This information is retained here for the evaluation of shipments which has taken place before this date.
• In 2017 The State Council issued a notice of enhancing the control of forest pest and disease. The legal requirements on forest pest and disease control is also integrated into the latest forest law (amended in December 2019). According to China Forestry Yearbook, there were only 4 illegal cases related to forest plant quarantine in 2016 and 4 in 2017 respectively. Additionally, no information in the public domain suggested that there is a significant problem with the compliance with legal requirements related to forest plant quarantine.
Note that the transportation permit has been phased out, as of 1st July 2020 according to the revised Forest Law. The risk description for timber transport described below is included for shipments which take place before this date.
• The Forest Governance Integrity Report China, 2011, raised some issues in relation to the transport licence, including the risk of bribery of officials to ignore the lack necessary documents.
• However, based on government source (source 1), the number of illegal timber transportation cases has been decreasing. Cases in 2017 decreased by 40.28% to 29,649 compared to 2016. In 2016, 4.98 million transport permits were issued through national timber transportation certificate verification system. Even though illegal timber transportation - transportation without a transport permit or with a fraudulent transport permit - were reported occasionally, the risk of illegal transport is relatively low, considering the transport permit is difficult to be forged because it can verify via public database and the check points are established in forest regions.
• Based on Preferred by Nature’s local expert, there is significant variability across China in terms of how the timber transport licence is enforced; strictly in some areas (Fujian) while in other provinces less so. Summarising expert comments, broadly speaking there is little cause for concern with regard to compliance. VIEW LESS
China has implemented a governance system for wood timber processing, trade and transport. However, note that the transportation permit was phased out, as of 1st July 2020 according to the revised Forest Law.
• The requirements for timber transport described below are included for shipments which take place before this date: Timber transported from one forest region to another has historically required a transportation permit. It was required that the permit (and phytosanitary permits if required) travel with timber goods from the starting to the end point of their journey. The total volume of timber that could be transported out of the forest with the approval of the legally issued timber transportation permit could not exceed the total volume that the local annual timber production plan allowed for sales and transportation. Transportation permits were issued by different levels of forestry authority depending on the importance of the region in terms of forestry. The transportation permit for timber from key forest regions, such as Northeast China, was issued by the National Forestry and Grassland Administration (NGFA). However, for timber from other regions, the licence may have been issued by forest authorities at or above county level. To apply for a transportation permit, applicants must usually submit the harvesting permit, phytosanitary permit, as well as any other relevant documents required by provinces or cities. However, in terms of the process and requirements, these are in constant change and vary across China.
For primary forest products, transportation permits applied to both Chinese and imported materials. However, transportation directly from ports to mill/factory did not require a permit.
NFGA provided online checking of transportation permits to make their issue and traceability more transparent.
• According to Bylaw of the Implementation of Plant Quarantine Regulation (Forestry Part), quarantine certificate is required when the forest plant and products (including trees, wood, and bamboo) is transported out from the epidemic areas of forest pest and disease designated by government. Based on article 35 Forest Law (amended in 2019), the forest authority at province level and above is responsible to designate the epidemic areas and plant species/material types to be quarantine inspected. The forest authorities at county level are responsible for monitoring, quarantine inspection and prevention of forest pest and disease. VIEW LESS
• Chinese tax laws are minimal with regard to offshore trading. Furthermore, laws relating to transfer pricing and regulation of anti-tax avoidance are not extensively developed (in order to encourage foreign investment), but China has strengthened its international cooperation in this context.
• In China, the increasing sophistication of the STA and the local tax authorities, in terms of their TP knowledge and the enhanced tools at their disposal, means that taxpayers are constantly on the surveillance radar. As noted in this chapter, non-trade payments and equity transfers are key transactions that will constantly be reviewed by the Chinese tax authorities.
• According to European Council, China is not an EU-listed non-cooperative jurisdiction which for tax purposes helps EU member states deal more robustly with countries that encourage abusive tax practices.
• In terms of enforcement, tax authorities have a poor record of tracking transfer pricing because of the tax authorities’ relatively poor experience and poor foreign language skills. In addition, law enforcers have only very limited sources of information and have little opportunity to conduct transfer pricing investigations in other countries. It is very difficult for them to investigate transfer pricing.
• Expert consultations confirmed that there is minimal tax law on offshore trading in China and confirmed that the focus of Chinese companies (such as through the use of tax havens in China) can − in the main – be viewed in the light of avoidance of profit tax rather than tax evasion. VIEW LESS
• The State Taxation Administration Circular on Issues Dealing with Taxation on Foreign Invested Companies related to their Subsidiaries (2002) requires that foreign-invested companies that provide services to subsidiary companies shall sign a service contract to define the service to be provided, and payment criteria. The income from the service provision shall be included in the taxation base for income tax and operational tax. The investment cost and the loss shall not be deducted from the base for income taxation and shall also not be shared with its subsidiary companies. In other words, foreign-invested companies cannot collect fees from their subsidiary companies, nor ask their subsidiary companies to share their operational costs. The companies must pay or collect fees from their subsidiary companies according to the arm’s length principle - in a way similar to that which would occur between two separate independent companies for the same services or goods. If payment is considered by tax authorities to be less than what is considered a normal level, the authorities have the right to raise it for tax collection purposes.
• This is similar for the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises (which refers to enterprises established with foreign investment and registered as foreign companies with some preferential policy) which requires that foreign-invested companies shall pay or collect fees from their subsidiary companies using a similar mechanism as between two separate independent companies for the same services or goods. VIEW LESS
• With the introduction of the Wildlife Import and Export Licensing system in 2014, China has been strengthening its administration over wildlife import and exports over the last 5 years. China actively implements the CITES Convention by designating ports specifically for import or export and carries out joint enforcement with other relevant authorities.
• China has a score of 41/100, at position 80 (of 180 countries assessed), according to Transparency International’s 2019 Corruption Perceptions Index. With regard to the Worldwide Governance Indicators, China scores as follows according to 2019 perceptions ratings (on a scale of -2.5 to +2.5): Government Effectiveness: 0.52; Regulatory Quality: -0.24; Rule of Law: -0.27; Control of Corruption: -0.32.
• China has developed an online customs declaration system where all information is recorded. The value of products can be cross-checked by Foreign Exchange Control office and banks. In addition, many major ports in China have equipped advanced X-ray machines to verify the product type and quantity, assisting in checking if the product type and quantity is incorrectly declared.
• However, expert consultations and local expert experiences highlighted the potential risk of reporting species incorrectly when exporting forest-products made of natural species, because of people’s limited knowledge on species scientific names or intention to avoid stricter checks of natural species by customs.
• In China, it is arguable that all bamboo products are made of bamboo materials derived from China, not other countries. There are a variety of bamboo species in China (as many as 500) but commercial solid bamboo products are usually derived from moso bamboo (Phyllostachys heterocycla (Carr.) Mitford cv. Pubescens). Bamboo pulp and paper products can be made from a number of bamboo species. Nevertheless, most commercialized bamboo species are low value, and none are CITES listed. There appears to be little incentive for the business community to misreport the bamboo species. It is a legal requirement that the bamboo species be declared as “bamboo” when exporting as many bamboo species are difficult to identify visually to non-experts.
Risk conclusion:
• Potential risk of reporting species incorrectly exists when exporting forest products, due to limited knowledge of species scientific names or intention to avoid stricter checks of natural species by customs. VIEW LESS
In China, import or export licencing is a legal requirement for the import and export of all products, not only for timber or wood products.
• In China, only a person or company registered with the General Administration of Customs is qualified to make declarations regarding the import or export of goods. Customs Law of People’s Republic of China 2017, Article 42 requires the correct goods classification. The Customs Law provides that the customs declaration must be submitted by registered companies or individuals as consigner or consignee, to ensure the correct declaration of import/ export goods. Companies that entrust customs declaration companies to declare or pay duties on their behalf must provide a true declaration related to commodity import/ export to its customs declaration company, which shall check the information for authenticity.
• Administration Provision of General Customs Administration on Classification of Import/Exported Goods 2007, Article 6 requires that importers shall correctly declare the name, specification, quantity, etc. of imported or exported goods. When exporting or importing commodities, the consigner or consignee must provide the correct species, specification and quantity for the duty or tariff payment. Customs Law also provides that Customs could require consigner and consignee of the imported/exported commodity to provide – as part of the declaration form − the document describing the commodity classification. If necessary, Customs could organise an inspection or testing, and use the results as the basis for commodity classification.
• Harmonized Commodity Description and Coding System (HS) codes must be correctly provided according to related Customs and Taxation regulations. Customs may ask the consignee and consigner to provide information that could help identify the classification. If the parties refuse to provide such information, Customs could identify the classification according to the declaration. If Customs finds the classification to be incorrect, Customs could re-identify the commodity classification and also revise the declaration.
• The Entry/ Exit Animal and Plant Quarantine Law requires that quarantine inspections are carried out for imported/exported timber or timber products to ensure they do not contain any bacteria or other harmful organisms when imported, transit exported or generally exported. Consignees shall make a quarantine declaration by submitting the phytosanitary certificate issued by exporting countries when importing or exporting timber or timber products. If the goods pass quarantine, a phytosanitary certificate will be issued. If found with bacteria or other harmful organisms, a note addressing quarantine issues will be issued, requiring the importer or exporter to take further action. Measure may include the refusal to accept - or the requirement to destroy - the infected commodity. When applying for quarantine at port, applicants shall submit the quarantine application form and the phytosanitary certificate, certificate of origin, commercial invoice and other relevant documents. If no such certificate exists, the port quarantine bodies could require the commodities to be returned or destroyed.
• The Wildlife Import and Export Licensing system is implemented when importing or exporting wildlife and wildlife products, including CITES species; Only with the import/ export permission certificate and species certificate issued by National Endangered Species Import and Export Administration Offices can wildlife and their products be allowed to be imported or exported. These certificates are issued by the National Endangered Species Import and Export Administration Office and its affiliated offices. The format of these certificates is nationally standardized and printed by the National Endangered Species Import and Export Administration Office. When importing or exporting wildlife or wildlife products that are listed in the wildlife commodity catalogue, importers or exporters shall declare this to Customs, present the certificates and complete the import or export in accordance with the requirements of the certificate with respect to species, volume, port and timeframe. These offices also work closely with Customs providing training on wildlife to Customs officials to improve their enforcement capacity. If it is found that the imported or exported wildlife and products fail to be consistent with the information indicated on certificates, Customs has the right to address this. But if the declared volume is not higher than the allowed volume, and there are no other inconsistencies, the commodity will be cleared.
• Public sources showed the false declaration for imported CITES species were occasionally detected by the customs. The traders declared the CITES species as non-CITES species intentionally to avoid regulatory and therefore the certificate for import CITES species.
• According to Biennial reports for total number of seizures and prosecutions for all CITES species, 928 seizures and 60 prosecutions for CITES species imports in 2010, 1024 seizures and 114 prosecutions for CITES species imports in 2011.
• Risk of false reporting (effectively smuggling) of imported CITES species. These are difficult to quantify and occur to some extent in all countries, although may be viewed in the light of China’s very significant role as a global wood-processing hub, and medium position in a number of key governance and corruption indicators. Given the above considerations, risk in associated with this category requires it to be assessed as Specified. VIEW LESS
• As per exports, in China, only a person or company registered with the General Administration of Customs is qualified to make declarations regarding the import or export of goods. The Customs Law provides that the customs declaration must be submitted by registered companies or individuals as consigner or consignee, to ensure the correct declaration of import/ export goods. Companies that entrust customs declaration companies to declare or pay duties on their behalf must provide a true declaration related to commodity import/ export to its customs declaration company, which shall check the information for authenticity.
CITES-listed trees species from China and their export:
China appears to carry out reasonably strict control over the export of endangered species, particularly CITES species:
• China is not a listing country for any CITES Appendix III tree species. However, the following agarwood and yew tree species included in Appendix II include at least part of China in their native ranges:
- Aquilaria spp. (specifically A. grandiflora, A. sinensis, A. yunnanensis);
- Taxus chinensis; T. cuspidate; T. fauna; T. sumatrana; T. wallichiana.
- Dalbergia spp. including all species under this genus (approximately 26 Dalbergia species grow in China).
- No bamboo species falls within the current CITES appendices.
However, none of CITES-listed species from China is commercially traded because they are strictly protected from harvesting.
• The volume of international trade of wildlife to/from China has been growing while protection and utilisation present more prominent challenges. In this sense, China is facing pressure to protect its own rare and endangered wildlife. As a result, China is placing significant focus on the protection of CITES species. In line with existing laws, key protected wildlife may not be cut or collected unless with permission by forestry authorities. Trading of CITES species is also not permitted unless this occurs with the certificate issued by the National Endangered Species Import and Export Administration Office.
• The CITES species growing in China is classified as national protected species and being protected strictly from harvesting. The National Endangered Species Import and Export Administration Office has sought to ensure strict supervision of the implementation of CITES-related laws and regulations.
• Additionally, data from the period 2009 to 2012 indicate that China is not complacent in enforcing CITES laws, given the number of CITES import seizures and prosecutions (928 seizures and 60 prosecutions in 2010, 1024 seizures and 114 prosecutions in 2011) while - perhaps as an indication of a functioning system - the number of seizures and prosecutions for species to be exported is minimal, amounting to less than 5, year on year. No evidence was found that these are related to tree species.
Imports and re-exports:
• There are reports of Chinese demand is contributing to driving the demand of illegal logging CITES listed species in other countries. An example is Rosewood from Ghana, where Chinese traffickers have been pointed out as having a complicit role in the illegal harvest, transport, export from Ghana and CITES-licencing of the timber. This includes forging of documents and retrospective issuing of CITES permits, which is in contravention with the Convention (Non-government Source 7), and there is a risk of it being illegally introduced to the Chinese market.
Based on the available information, the risk associated with this category is considered as Low for China sourced CITES-listed trees species and their export.
The risk for imported/re-exported CITES species is specified because of non-reporting or misreporting of imported CITES species as non-CITES species. VIEW LESS
The Forest Law, the Wild Plant Protection Regulation and Regulations on the Administration of Import and Export of Endangered Species of Wild Animals and Plants have provisions relating to the protection of rare and endangered wildlife species. As a party to the CITES Convention, China also applies these laws to CITES species protection.
• The Forest Law (2019) provides that protection shall be provided to rare species and plant resources with special values situated outside nature reserves. No cutting or collection of wildlife may be carried out without the permission of provincial forestry authorities.
• Wild Plant Protection Regulations require the protection of wild plants and their habitats. No organisation or individual is permitted to engage in illegal collection of wild plants or damage their habitat. Wildlife under national Class I protection shall not be traded. The trading of wildlife under national Class II protection shall be approved by provincial-level wildlife authorities or their designated bodies, while the trading is also supervised and checked by provincial wildlife authorities. Article 20 provides that the export of national key protected wild plants, or of CITES species, shall be reviewed by provincial wildlife authorities and then submitted to national wildlife authorities for approval. Following approval, application shall be made for an export permission certificate from the Administration Office of Endangered Species Import and Export Customs shall clear the export against the certificate. Information about wild plant export shall be copied to the national Environment Protection Authority. In addition, it is prohibited to export unnamed or newly found species with important values.
• According to the Regulation on the Administration of Import and Export of Endangered Species of Wild Animals and Plants and the Administration Measures of Wildlife Import and Export Certificate, the import of CITES species shall be approved by national wildlife authorities. In case of re-export, following the approval, application shall be made for an export permission certificate from the Administration Office of Endangered Species Import and Export. Importers shall declare this to Customs, present the certificates and complete the import in accordance with the requirements of the certificate with respect to species, volume, port and timeframe. In applying for import certificate, the CTIES export certificate issued by the country of origin shall be provided. In applying for re-export certificate, the import customs document and the former import certificate checked by the customs shall be provided. The format of the certificate is nationally standardised and printed by the National Endangered Species Import and Export Administration Office. Customs shall clear the import or re-export against the certificate. If it is found that the imported or exported wildlife and products fail to be consistent with the information indicated on certificates, Customs has the right to address this.
• CITES Appendix I species are prohibited from being imported or exported. If there is a need for scientific research, propagation or domestication, or cultural exchange, their import or export shall be approved by the National Endangered Species Import and Export Administration Office. If import or export approval is required by the State Council, this shall be obtained. Unnamed or newly found species with high value are prohibited from being exported, as are certain other wildlife and related products. Import or export of other CITES species shall be approved by the National Endangered Species Import and Export Administration Office.
• The Administration Office of Endangered Species Import and Export is set up as the enforcement authority of CITES under National Forestry and Grassland Administration (NFGA) in charge of the administration and governance of wild fauna and flora, including imports and exports of CITES-listed or national protected species. There is a total of 14 branches in the capital cities of major provinces.
• The main functions of the NFGA are to participate in the formulation of policies, laws, regulation and directives in terms of wildlife nationwide, represent the Chinese Government to be responsible for the management of CITES species and other CITES affairs, prepare the import/export quota plan based on the overall annual quota for wildlife hunting, collection and utilization approved by the State Council, review and approve the import/export allowance certificate, register the organization and individuals importing or exporting wildlife, etc.
While it is being widely interpreted that the Chinese companies will be obliged to verify the legality of both domestic imported timber and timber products (similarly to the requirement of timber legality due diligence regulations in other parts of the world, e.g., EUTR), according to article 65 of new Forest Law requires, this is yet to be confirmed. How article 65 will be implemented will depend on the coming implementing regulation of the new forest law – which is expected to provide more detailed requirements for some of the articles – and other and judicial interpretations. Also, there is some ambiguity about the definition of ‘illegal timber’ which needs to be clearly defined.
However, as of December 2020, the implementation regulation of the new forest law has not been published yet. Therefore, risk in relation to this category can be considered not applicable, at this point, but may be updated as necessary once the implementing regulation is published and comes into force. VIEW LESS
Article 65 of amended forest law states that timber processing companies should establish incoming and outgoing accounting records of raw material and product. Any organization and individual cannot purchase, process and transport the known illegal timber/trees harvested unlawfully.”
According to article 65 of the new Forest Law (amended December 2019), manufacturers of timber and timber products shall establish book-keeping records of material inputs and product outputs, for their facilities. Any organization or individual shall not knowingly purchase, process, or transport timber or logs harvested unlawfully. VIEW LESS
As the world’s manufacturing hub, China is the biggest importer and consumer of wood products. Over 60 percent of tropical logs on the global market are imported to China. Much tropical wood comes from species and origins which could be considered specified/ high risk for illegal harvesting or trade. A large proportion of the wood China imports is processed and then re-exported (NGFA, 2019). According to the most recent figures from NGFA, China imported $ 83.72 billion and exported $815.6 billion of wood products in 2018, including imports of 59.67 million m3 logs and 36.74 million m3 sawn timber.
It is noticeable that approximately 17.5% of total imported logs to China by volume and 45% of total imported sawn timber by volume were from Russia in 2019.
However:
• China had no regulations relating to timber legality Due Diligence in the past. <on 1st July 2020, the new forest law came into force in which the article 65 is being unofficially interpreted to require due diligence of companies, although it is yet to be seen how the amended law will be implemented. Detailed requirements for this article are expected in the coming implementing regulation of the new forest law and other judicial interpretations.
• As a result, at present time, China has only developed non-mandatory guidelines for Chinese enterprises to implement green supply chain management measures for overseas sourcing. This leaves a lot of Chinese companies in the middle of supply chains in a difficult situation, when supplying into regulated markets for timber legality. Some level of risk exists in relation to the forgery or manipulation of documents, in order to meet buyers demands, where companies struggle, or are unable to obtain information on the origin or legality of their timber sources.
• In 2015, the UK National Measurement and Regulation Office conducted tests into plywood coming from China. Results show that of the 13 samples tested, nine did not match the species of wood declared (SGFA, 2020).
• In 2016 and 2017, ninety-eight percent of Russia’s total exports of oak logs and eighty four percent of Russia’s total exports of oak sawn wood lumber were destined for China, which together represent almost exclusively the types of oak product that Russia exports. While there is a legal supply of oak exports from Russia to China, discerning legal from illegally harvested and traded oak can be challenging, especially once the wood from multiple Russian exporters is mixed in Chinese log yards. Commercially available Mongolian oak is endemic in, and available from four provinces in the Russian Far East. The species is potentially the most valuable hardwood in the region, which increases the risk of fraudulent activity. Even though Chinese-origin Mongolian oak (Quercus mongolica) is not listed CITES listed, Mongolian oak is CITES III listed by Russia. The potential risk exists that Chinese-origin oak is mixed or substituted by Russian-origin oak within a Chinese mill, either deliberately or accidentally. China has been implementing a commercial logging ban on natural forests nationwide - including those in North-eastern China - citing the need for the cessation of commercial harvesting from these forests to allow forest health and stock status regeneration. The resulting diminished supply of Chinese-origin Mongolian oak will likely have increased demand for Russian-origin Mongolian oak and may have generated incentives for some mills to substitute Russian oak for Chinese oak without proper due diligence measures and legality checks (WWF, 2018).
• In recent years, China government and forestry business have been making good efforts to combat and reduce the illegal timber flowing to China. However, China’s timber processing sector is characterised by many middle and small-sized companies. As a result, many companies have little or no-procedures in the areas of wood traceability, due diligence, or the identification of illegal timber. Additionally, supply chains are usually complex which adds to the difficulty of tracing the origin of timber and identifying potentially illegal timber sources. So, it is unsurprising that some proportion of timber-supplies into the Chinese market are of unknown or potentially illegal origin (SGFA, 2020).
• Local expert consultations indicate that a majority of Chinese companies – and particularly smaller-sized enterprises – have no traceability or segregation system in place. It is likely that timber from different sources is mixed within their facilities, as long as they have the same or similar qualities that can meet clients’ needs and product standards. This includes the mixing of non-certified material with certified, in the production of certified products.
Link: http://www.gsxt.gov.cn/index.html