Terms of Reference

Independent review of the impact of the illegal logging regulations on small business

The Australian Government is committed to combating the trade in illegally logged timber, which has significant environmental, economic and social costs on both a regional and global basis. In Australia, the trade in illegal timber disadvantages legitimate Australian businesses by undercutting market prices and threatening local investment, profitability and jobs. In light of these impacts, the government has established an illegal logging legislative framework.

The government is also committed to creating an efficient regulatory framework and ensuring that its regulations do not burden Australian businesses any more than absolutely necessary. This is particularly true for small businesses, which are often time and resource poor and unlike large organisations do not have dedicated compliance staff to deal with the regulatory burden placed on them.

The Illegal Logging Prohibition Amendment Regulation 2013, made under the Illegal Logging Prohibition Act 2012, was registered as a legislative amendment in May 2013. The Regulation came into effect on 30 November 2014 and requires affected businesses to assess and manage the risk that the timber they are dealing with has been illegally logged. This is known as carrying out ‘due diligence’.

The illegal logging legislative framework continues to be an important part of the government’s overarching strategy to foster a competitive and sustainable domestic forest industry, recognising that forestry plays a vital role in many regional economies.

Scope of the review

The illegal logging legislative framework seeks to achieve an appropriate balance between ensuring that illegally sourced products do not enter the Australian market and achieving a compliance process that imposes only as much burden as is necessary on business.

The new due diligence requirements  affect a wide range of businesses, with up to 17,000 importers and 460 domestic timber processors having to carry out due diligence. A significant proportion of these are likely to be small businesses, with regulatory costs potentially impacting more strongly on the sector.

To ensure that the compliance costs of the new requirements do not unduly impact on small business, the government has commissioned an independent review of the impact of illegal logging regulations on small business. Key elements of the review will include:

  1. A better understanding of the role played by small businesses within the ‘regulated community’. This will include further detailing small businesses affected by the new requirements; the type and nature of the timber products they are dealing with; and their potential costs in complying with the new requirements.
  2. An assessment of whether applying the Regulation in its current form to small business will make a material difference in reducing the entry of illegally logged timber products onto the Australian market.
  3. An assessment of whether the existing due diligence requirements achieve an appropriate balance between the cost of compliance for small businesses and reducing the risk of illegally logged timber entering into the Australian market. Achieving an appropriate balance should have regard to broader global regulatory trends in combating illegal logging, Australia’s international commitments and obligations and other economic considerations.
  4. If the balance is not considered to be appropriate, an assessment of, and recommendations on, appropriate options for reducing or removing the regulatory impacts of the due diligence requirements on small business, having regards to Australia’s international trade obligations.
  5. Any related matters.

Implementation of the review

The review will be conducted by an independent consultant and will report back to the Parliamentary Secretary to the Minister of Agriculture, Senator the Hon. Richard Colbeck, by March 2015.

The review will undertake targeted consultations with small business and other relevant stakeholders throughout this process.
The government will also develop in parallel a supplementary Regulation Impact Statement.

All members of the ‘regulated community’ (including small businesses) will still need to comply with the Regulation’s due diligence requirements while the review is being undertaken.

The government recognises that it may take time for some businesses to transition to the new requirements. For this reason, for the 18 months following the Regulation’s commencement, the government’s focus will be on raising awareness and promoting compliance.