The Verkhovna Rada finally considered the bill №4197-d “On the wood market” (it was developed more than a year ago) and even after finalization approved it in the first reading on 18.11.2021. The draft law was supported by 276 people’s deputies of Ukraine.

It should be noted that the domestic timber market has long needed a final settlement that would satisfy both parties: those who grow, harvest and sell timber, and those who buy and use it primarily for industrial purposes. Previous attempts at such an arrangement have not been successful.

Why is the Wood Market Act important for the furniture industry?

The global furniture market is undergoing a significant transformation due to changes in global supply chains caused by the COVID19 pandemic. Professional buyers of furniture for retail, as well as custom furniture for hotels, restaurants and other projects, are looking for new partners – furniture manufacturers in Europe. The volume of exports of furniture and their parts (groups 9401, 9402, 9403) in January-October 2021 amounted to $ 735.8 million, which is 49.7% more than in the same period last year. In preparation for the Furniture of Ukraine Business Expo, the organizing team processes requests for furniture supplies from Europe, the USA, Canada and the Middle East on a daily basis. Competitive advantages of the Ukrainian furniture industry are:

• Availability of raw materials, namely wood and metal, and large powerful manufacturers of board materials for furniture production, such as Kronospan, Sviskrono, Krono Ukraine, Rezult and others.
• Availability of human capital. More than 100,000 people work in the furniture industry of Ukraine, and the organization of furniture clusters together with local authorities organizes educational institutions for training.
• The geographical location of Ukraine is in the centre of Europe with access to the Black Sea, which provides affordable logistics, both by road and by sea and rail.

For the effective growth of the furniture industry, stable and transparent conditions for the supply of raw materials for furniture production are needed, which needs to be regulated in the legislative market in the form of the adoption of the Law of Ukraine “On the Wood Market”.

Expectations of the authors of the bill

The authors of the bill and the deputies who support it believe that the adoption and entry into force of this law will ensure sustainable development of the wood and wood products market, introduce transparent conditions for market participants, properly protect the rights and interests of all market participants, minimize corruption in the industry. , will enable the state and the public to control the volume of timber harvesting and sale, which will resolve the issue of illegal timber harvesting and sale. Moreover, they are confident that the future law will be key to reforming several sectors of the Ukrainian economy related to the procurement, sale and processing of Ukrainian timber.

The main provisions of the draft Law “On the wood market”

The draft law is supplemented with a new section on guarantees of sustainability of international circulation of unprocessed wood, which proposes to resolve some issues related to the ban on exports of timber and certain wood products of rare wood, to determine the list of documents required to export timber and unprocessed timber. In other words, the law, when finally adopted, will also be a response to the recommendations of the arbitration in the dispute between Ukraine and the EU to ban the export of raw wood (introduced in 2015), which recognized that Ukraine has the right to restrict forest exports in certain circumstances. However, he noted that such a ban should be adjusted to take into account Ukraine’s full right to regulate this area of ​​activity in accordance with Articles 290 and 293 of the Association Agreement.

So, while finalizing the draft law before the first reading, one of the initiators of this document, Roksolana Pidlas – she is the Deputy Chairman of the Parliamentary Committee on Economic Development – said that the norm on lifting the moratorium on Ukrainian timber exports would be removed, despite European partners’ insistence.

“If the parliament supports the bill in the first reading, our next step is the work of the Ukrainian delegation to the EU on further communication of such a decision. A meeting of the Trade Committee will be held in Brussels at the end of November, and the issue of arbitration is already on its agenda. During the meeting, our delegation will present the planned steps and prove that we are working in good faith to implement the recommendations of the arbitration. “

She also said why the final streamlining of the timber market is still urgent: “In recent months, deputies have received alarming signals from both local processors and large enterprises about a significant deterioration in the timber market. This is about creating an artificial deficit, and about the intensification of corruption and, as a consequence, the deterioration of business conditions for representatives of the woodworking and furniture industries. Therefore, our main task now is to give these industries certain legal, economic and organizational principles for the functioning of the timber market. “

The bill proposes to introduce wood certification and determine how and who will monitor its compliance with national standards. This will guarantee the origin of each cubic meter of wood. Clear mechanisms for interaction between wood market participants and the provision of transparent information on the wood market to the general public are outlined. This will be achieved through the introduction of the Forest Portal, the use of which will be mandatory for all market participants. Declaring all operations with wood will allow you to see the chain of movement of wood: from the forest where the wood is cut down, to the final processor. This will make the illegal market impossible. It is important that businesses can objectively plan their development and market strategy, so the bill provides for the open publication of timber harvesting plans.

Corruption and artificial restrictions on the access of woodworking companies to the purchase of wood – such annoyances often lurked buyers of woodworkers and furniture. Therefore, the draft law provides for the introduction of uniform, clear and transparent rules for the sale of timber for all market participants. That is, timber should be sold exclusively in electronic auctions in a two-tier electronic trading system, which combines any number of private marketplaces, platforms and exchanges and which provides full transparency of information about the auctions themselves and their results, including the publication of information regarding the sale prices at each auction; winners; sales volumes, etc. The pilot project on the sale of 25% of unprocessed wood through the state electronic trading system implemented by the State Forestry Agency has proved its need, so the authors of the bill propose to use this mechanism to sell wood that will be sold outside the offer mechanisms.

The Ukrainian Association of Furniture Manufacturers actively supports the initiative “For the wood market” and hopes for the adoption of the law in the second reading in the near future. After all, the market is changing very quickly and furniture makers may lose the chance to move to LLC-10 furniture exporters in the coming years.