In the aftermath of the Environmental Investigation Agency’s (EIA) report and video on illegal logging and export of wood covered by the Convention on International Trade in Endangered Species (CITES), Dejia has denied wrongdoing. The EIA has responded.
This blog post also notes the various enforcement actions brought in the U.S. to prevent the importation of wood imported in contravention of CITES and the Lacey Act, some with the help of environmental non-governmental organizations, using data analytics, another action with the help of the bilateral customs enforcement agreement. It also describes a recent call for consultation requested by the United States Trade Representative to raise with Peru the apparent violation of the United States – Peru Trade Promotion Agreement (PTPA) by compromising the independence of the agency charged with policing illegal logging and export of illegally harvested wood. Finally, the blog post mentions the role of environmental protection and enforcement in free trade agreements, such as the Trans-Pacific Partnership (TPP).
In response, EIA has released two “raw intelligence” videos about the Dejia case following the release of the report that corroborating its allegations:
Other cases in which the U.S. Department of Justice (DOJ) has prosecuted violations of the U.S. Lacey Act, which implements CITES, is in February 1, 2016, when Lumber Liquidators Inc. agreed to pay more than $13 million in criminal fines and forfeitures to resolve a DOJ investigation into the import of wood. Much of its illegal importation of hardwood flooring was manufactured in China from timber that had been illegally logged in far eastern Russia, in the habitat of the last remaining Siberian tigers and Amur leopards in the world. Lumber Liquidators also agreed to a five-year term of organizational probation and mandatory implementation of a government-approved environmental compliance plan and independent audits.
The illegal cutting of Mongolian oak in far eastern Russia is of major issue because those forests are home to the last 450 wild Siberian tigers, Panthera tigris altaica. Illegal logging is the primary risk to the tigers’ survival, because they depend on intact forests for hunting and because Mongolian oak acorns are a chief food source for the tigers’ prey species. Mongolian oak forests are also home to the highly endangered Amur leopard, Panthera pardus orientalis, of which fewer than 50 remained in the wild in 2016. In June 2014, in response to illegal logging and the decline in tiger populations, Mongolian oak was added to the CITES Appendix III.
The EIA has shown the use of data analytics in investigating and showing the illicit trade in wood and timber.
For many years EIA’s investigative work focused on reconstructing the routes that timber takes from the Amazon to the warehouses of U.S. importers, through use of official information obtained under Peru’s Transparency and Access to Public Information Law. The links in this chain are willfully obscured to perpetuate confusion about the origins of almost all timber traded in Peru. EIA was able to reconstruct the chain of custody for trade in cedar (Cedrela odorata) and bigleaf mahogany (Swietenia macrophylla) only because both species are protected under the CITES and hence require specific export permit documents. For how EIA penetrated the chain of illegal exports, see the Laundering Machine: How Fraud and Corruption in Peru’s Concession System Are Destroying the Future of its Forests https://content.eia-global.org/assets/2012/04/The_Laundering_Machine_ENG.pdf.
In 2018, EIA released a new report titled “Moment of Truth”: https://eia-global.org/reports/momentoftruth
EIA’s new report describes important advances since 2012 in Peru’s fight against illegal logging, timber laundering, and its associated international trade – as well as the backlash against these new approaches.
The evidence of persistent illegal logging, systemic corruption, laundering, and illegal timber in Peru’s exports remains overwhelming. While the U.S. has begun to crack down on illegal Peruvian timber, major importing countries like China and Mexico are turning a blind eye.
An analysis of hundreds of pages of official documents shows systematic exports of illegal and high-risk timber from Peru’s main port of Callao during 2015, by dozens of companies and to 18 countries. However, due to revelations of wrongdoing, the analysis for 2016 or 2017 cannot occur, since the Peruvian forest authority has stopped making available the necessary data.
On January 18, 2017 the DOJ announced that 24 pallets of timber seized by the U.S. Department of Homeland Security, Homeland Security Investigations (HSI) on December 20, 2015, at the Port of Houston, Texas for violation of the Lacey Act and customs law were destroyed in accordance with a settlement agreement reached by the United States and the importer of the timber, Oregon-based Popp Forest Products Inc. The agreement prevented the timber that was allegedly harvested in violation of Peruvian law would not enter the U.S. stream of commerce. The allegations were based on a report HSI obtained from the Peruvian government under a Customs Mutual Assistance Agreement, providing the results of an inspection carried out in the areas in which the timber was allegedly harvested. The report showed the timber could not be the species authorized for harvest. The U.S. Forest Service’s Forest Products Laboratory tested samples and corroborated the finding that samples taken from the shipment were not the species authorized for harvest.
On January 4, 2019, the Office of the U.S. Trade Representative (USTR) requested consultations with Peru under the Environment Chapter of the United States – Peru Trade Promotion Agreement (PTPA). Through these environment consultations, the U.S. and Peru will discuss and try to resolve concerns regarding a recent Peruvian action to move the Agency for the Supervision of Forest Resources and Wildlife (OSINFOR) from its position as a separate and independent agency to a subordinate position within Peru’s Ministry of Environment (MINAM). This is the first request for consultations made under the PTPA.
According to the PTPA’s Annex on Forest Sector Governance, “OSINFOR shall be an independent and separate agency and its mandate shall include supervision of verification of all timber concessions and permits.” Peru’s Supreme Decree 122-2018-PCM, published on December 14, 2018, seems to conflict with this provision.
Ambassador Robert Lighthizer, head of USTR, said that by requesting consultations, the Trump Administration is showing that “it takes monitoring and enforcement of U.S. trade agreements seriously, including obligations to strengthen forest sector governance.” According to Lighthizer, “(s)ince its creation in 2008, OSINFOR has played a critical role in Peru detecting and combatting illegal logging, and we are gravely concerned that its independence is threatened.”
On April 10, 2019, in a dramatic reversal of its position, the Peruvian government published a decree that restores the independence of OSINFOR.
Chapter 20 of the Trans Pacific Partnership refers to Multilateral Environmental Agreements (MEAs), but only requires Parties to “adopt, maintain, and implement” CITES rather that the seven MEAs listed for FTA inclusion in the May 2007 bipartisan agreement and in accordance with “fast track” procedures. In spite of these obligations, the MEA commitments do not contained in the text of the TPP. The TPP has two potential enforcement mechanisms in its Environment Chapter: a dispute settlement process available for Parties to the agreement and a framework for what may become a citizen suit provision. While environmental groups have properly criticized the environmental provisions of the TPP, these provisions offer the Parties and their citizens, including environmental groups, mechanisms to use in order to raise illegal logging and wood trade. The fact that the Trump Administration decided not to join the TPP means that it has no provisions with many of the parties to the TPP to raise these issues. The Canadian government explains that the enforcement of the Environment Chapter through the TPP’s dispute settlement mechanism is a first for Canada. In addition, the TPP Environment Chapter also establishes a framework for cooperation in areas of mutual interest in support of the Chapter’s commitments. This includes, for example, working together to address illegal trade in wood and climate change.
The work by environmental NGOs working with data analytics, reviewing customs and trade documentation, and using sophisticated undercover techniques can result in persuading law enforcement agencies and prosecutors to investigate and prosecute illegal trade in wood, especially in violation of CITES. As EIA has shown in the Dejia case, usually illegal wood harvesting and international trade involves multiple criminal violations, such as bribery in obtaining the license to log, false customs declaration, tax crimes in falsely declaring to governments the value of the logs, and money laundering arising from the movement of proceeds of crime and efforts to conceal the same. In addition, wire and mail fraud, predicates to money laundering, are often implicated.
EIA’s use of customs and trade data illustrates the successful use of data analytics to stop illegal wood trade. Three types of data analytics are predictive modeling; outlier detection; and network analytics.
Predictive modeling can generate a profile of a bad actor. The computer can use prior audit cases of customs declarants or taxpayers to ascertain which characteristics of the customs declaration or tax return were the most highly correlated with a successful audit (i.e., geographical region, industry, corporate structure, income bracket). The resulting list of characteristics is called a model. The model can then be used to evaluate customs declarations or tax returns for likelihood of customs or tax evasion.
Outlier detection occurs when the computer is used for customs declarants and taxpayers by like characteristics and looks at customs declarations and tax returns that fall outside the normal. It can be helpful to find new segments to audit that were previously ignored. It may show an inordinately low level of valuation of the wood on the customs declaration or very high level of deductions on the tax return from the prior year. In some cases officials may be able to ascertain outlier characteristics by comparing customs and tax data.
Network analytics (connections) are built on the implicit relationships between individual companies (i.e., people who share addresses, phone numbers or bank accounts). An example is the data from the Panama Papers and/or the Paradise Papers. Investigators can easily detect and visualize corporate structure, the complex flow of financial transactions. Investigators can identify structures and transaction flows as “high risk.” Network analytics is especially useful for complex cross border activities or corporate structures such as pass through entities.
In the coming months and years, if the U.S. and the world are going to come to grips with climate control, environmental NGOs, citizen groups, journalists, law enforcement, and prosecutors will need to cooperate in preventing forest crimes. In this effort, data analytics will play a key role.
*This article is a follow-up to a piece published in the May 2019 edition of the IELR titled: “EIA Releases Report Showing Illegal Logging and Wood Trade by Chinese Company in Congo and Gabon.” You can read the original piece here: https://bit.ly/2LyjVWr.
 U.S. Department of Justice, Lumber Liquidators Inc. Sentenced for Illegal Importation of Hardwood and Related Environmental Crimes, Press Rel. 16-116, Feb. 1, 2016 https://www.justice.gov/opa/pr/lumber-liquidators-inc-sentenced-illegal-importation-hardwood-and-related-environmental
 DOJ, Justice Department Reaches Agreement to Ensure Destruction of Timber Believed to Have Been Harvested in Violation of Peruvian Law, Press Rel. 17-093,January 18, 2017 https://www.justice.gov/opa/pr/justice-department-reaches-agreement-ensure-destruction-timber-believed-have-been-harvested
 Office of the U.S. Trade Representative, USTR Requests First-Ever Environment Consultations Under the U.S.-Peru Trade Promotion Agreement (PTPA), Jan. 4, 2019 https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/january/ustr-requests-first-ever.
 Global Witness, The Forest Avengers, Jan. 17, 2019 https://www.globalwitness.org/en/campaigns/forests/forest-avengers/ (accessed June 17, 2019).
 Office of the United States Trade Representative, Trade Facts: Bipartisan Agreement on Trade Policy 2 (May 2007), https://ustr.gov/sites/default/files/uploads/factsheets/2007/asset_upload_file127_11319.pdf. Additionally, the exclusion of the six MEAs is noteworthy, given that all Parties to the TPP are also party to at least two of these MEAs left out of the agreement. Sierra Club TPP Text Analysis at 3.
 19 U.S.C. § 4201(b) (10) (A).
 Center for International Environmental Law, The Trans-Pacific Partnership and the Environment:
An Assessment of Commitments and Trade Agreement Enforcement 2 (Nov. 2015) https://www.ciel.org/wp-content/uploads/2015/11/TPP-Enforcement-Analysis-Nov2015.pdf
 Id. at 3, citing 5 See TPP Article 20.9 (describing the “Public Submission” process); see also TPP Articles 20.20-20.23 (describing “Environmental Consultations,” “Senior Representative Consultations,” “Ministerial Consultations,” and “Dispute Resolution,” respectively).
 Government of Canada, What does the CPTPP mean for the environment sector? ps://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/sectors-secteurs/environment-environnement.aspx?lang=eng.
 Predictive Modeling: The Only Guide You’ll Need, MircroStrategy, (last accessed June 17, 2019), https://bit.ly/2ZsWMrR.
 Sergio Santoyo, A Brief Overview of Outlier Detection Techniques, Towards Data Science, (Sept. 11, 2017), https://bit.ly/2H1eCgx.
 ICIJ, The Panama Papers: Exposing the Rogue Offshore Financial Industry https://www.icij.org/investigations/panama-papers.
 Alienor, Network Analytics: What It Is, How Its Used, and Who Benefits the Most, Plixer, (Oct. 26, 2018), https://bit.ly/2Imiecw.