In this article we examine the Forests (Regulation of Log Traders and Forestry Advisors) Amendment Act 2020 and consider its impact on those operating in this space.
The precursor bill to the Forests (Regulation of Log Traders and Forestry Advisors) Amendment Act 2020 (“Act”) was originally introduced amidst public discussion around the high proportion of logs directly exported in raw form to international trading partners – and the comparatively lower proportion of logs left for processing in New Zealand sawmills.
This protectionist context informed certain stated purposes of the Act, including “to support the continuous, predictable, and long-term supply of timber, and equity of access to timber, for domestic processing and export”, but also “to support a more transparent and open market for log sales through the provision of professional advice” as well as “to improve the confidence and informed participation of businesses and investors in the forestry and wood-processing sector”.
The Act seeks to achieve these objectives by introducing a number of consumer style protections with respect to traders and advisors operating in Forestry, notwithstanding the ‘business to business’ context.
What activities are captured by the Act?
The Act captures ‘log traders’, being a person in trade who:
- Buys logs either pre-harvest or post-harvest;
- Exports NZ logs;
- Processes NZ logs they have grown; or
- Acts as agent in respect of the above.
There is a prescribed volume threshold of 2,000cubic metres of NZ logs per year for the Act to apply. We note this would generally capture operators in the commercial log exporter market. Businesses involved in logistics and shipping or transportation of logs are not caught by the Act.
The Act also captures those undertaking ‘forestry advisor services’. This is defined as someone who, in the ordinary course of business, provides advice on:
- Establishment, management or protection of a forest;
- Management or protection of land used, or intended to be used, for any purpose in connection with a forest or proposed forest;
- Appraisal, harvest, sale or utilization of timber or other forest produce;
- Appraisal of a forest, forest land or forestry sector assets;
- The application of the emissions trading scheme to forestry activities;
- The beneficial effects of forests (including for example how they contribute to environmental and economic outcomes).
It also captures those acting on behalf of others in relation to their sale or purchase of timber or other forest produce, however the Act does not apply to those professionals already regulated by another professional bodies such as real estate agents, lawyers, financial advisors and accountants, assuming they are acting in their professional capacity.
Ongoing compliance and reporting standards
Those seeking to register as a log trader or forestry advisor will need to satisfy the Forestry Authority (established under the Ministry of Primary Industries) that they meet the ‘fit and proper person’ standard. They may also have to provide evidence of their qualifications and experience in the forestry and wood processing sector – although clarity is yet to be provided on minimum qualifications.
Additionally, ongoing compliance, reporting and record keeping obligations are imposed on registered log traders and advisors. A disputes/complaints body is also established under the Act to hear and administer complaints.
The Forestry Authority may, on the recommendation of the Minister, set standards for any matter relating to forestry operations and delivery of forestry advisor services including:
- Land preparation, planting, forest management, harvest planning and site preparation and valuation
- Biosecurity, sustainable land use, biodiversity and emissions trading;
- Sale and purchase agreements for domestic transactions or exports; and
- Other sale and purchase requirements.
The rules do not, however, impose any condition or requirement which would be a matter for commercial agreement between parties.
Penalties are established under the Act for those failing to comply, with potential fines of up to $40,000 for individuals and otherwise up to $100,000.
Timing for Registration
Te Uru Rākau – New Zealand Forest Service is currently developing a registration system which is due to commence on 6 August 2022. Under the Act, log traders and forestry advisers must register to operate from this date.
There is a one-year transition period from 6 August 2022 for log traders and forestry advisers to get registered before penalties will apply.
If you would like further information about the Forests (Regulation of Log Traders and Forestry Advisors) Amendment Act 2020, or how it may affect your business, please get in touch with our Business Advice or Trade & Transport teams or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.