The Indonesian government and business actors are ambitious to boost exports of wood products and derivatives to the United States (US). Various existing challenges will be sought solutions together so that the market share of wood products in Indonesia in the US can continue to increase.

Indonesian Ambassador to the U.S., Rosan P. Roeslani revealed that Indonesian wood product producers must work seriously on the US market, because the demand for Indonesian wood products in the US continues to grow supported by furniture products for residential and office needs.

"In the next few years, the demand for furniture products is projected to continue to increase along with changes in tastes for products that suit an environmentally friendly lifestyle," Rosan said in a press release, Friday (17/2).

Director General of Sustainable Forest Management of the Ministry of Environment and Forestry (KLHK) Agus Justianto revealed, Indonesia has added indicators related to sustainability aspects so that SVLK is now transformed into a Legality and Sustainability Verification System (SVLK) which guarantees the legality and sustainability of wood products exported abroad.

"Based on SVLK, exports of Indonesian wood products were recorded at US $ 14.51 billion, the highest in history and rose 7% year on year (YoY) where in 2021 exports were recorded at US $ 13.5 billion," said Agus.

Agus added, the US became the second largest export destination under China with a value of 2.23 billion US dollars. Products that U.S. consumers are interested in are wood furniture, plywood (wood paneling), and paper.

Chairman of Apkindo Bambang Soepijanto revealed, one of the products that the US market is interested in is thin plywood with a thickness of 2.7 mm which is used for the manufacture of caravan cars.

Chairman of FKMPI, who is also Chairman of the Indonesian Forest Entrepreneurs Association (APHI) Indroyono Soesilo stated that Indonesia has the opportunity to continue to increase exports. One reason is that the U.S. imposes high duties on products from the PRC, which is the largest exporter of wood products there.

In addition, Indonesia also received a Generalized System of Preferences (GSP) facility from the US so that some wood products are duty-free. "If our market share can be increased by 100% from the current around 2 billion U.S. dollars, only about 4 billion U.S. dollars. It is still small compared to its potential of reaching 63 billion US dollars," said Indroyono.

He said, vigorous and joint promotion needs to be done so that consumers in the US can increasingly accept Indonesian wood products. Indroyono also agreed on the need to build a permanent display center in the US as proposed by HIMKI and prepare a warehouse.

Abdul Sobur, Chairman of the Presidium of HIMKI, stated that the US market needs to be worked on seriously because of the export of Indonesian forest products, furniture ranks the largest. This is also in line with the direction of President Joko Widodo (Jokowi) who targets furniture exports to reach 5 billion US dollars by 2024.

"The competitive value of furniture products needs to be improved, among others in terms of design and logistical support, considering that most of HIMKI's members come from SMEs," said Sobur.

Sobur stated that the experience and success of the Indonesian diaspora from Be-Hu Line LLC in cooperating with SMEs to enter the US furniture market can be a reference and learning.

Halim Rusli, President Director of Integra Group, an integrated wood products producer that routinely exports to the U.S., agreed on the need to take advantage of the current U.S. fiscal U.S. policy of imposing high import duties on products from China.

"Support and regulation are needed from the Indonesian government so that Indonesian wood products can be stronger in the US market, including related to favourable import duties for Indonesian entrepreneurs, as well as strengthening the wider diaspora network of Indonesian entrepreneurs," Halim said.

Executive Director of the American Indonesian Chamber of Commerce Wayne Forrest reminded about the importance of understanding the provisions for importing wood products in the US regulated through the Lacey Act. The provision requires that imported products are not only legal but must also be sustainable. Forrest also agreed on the need for more massive promotion, design improvements for Indonesian wood products and education to consumers on the source of raw materials for wood products.

The government is intensively driving national exports. Exhibitions of Indonesian products to various countries continue to get support so that more and more Indonesian products are known in the global market. The results are quite encouraging. In the 2023 German Ambiente exhibition, as many as 72 national companies managed to reap potential transactions of up to IDR 151 billion.

"During the exhibition, Indonesian pavilions and booths received a number of potential interests and transactions of IDR 151 billion. The buyers come from the Netherlands, France, Denmark, Italy, the United States, Korea, Egypt, Morocco, and India," said Berlin Trade Attaché Bayu Wicaksono.

The 2023 German Ambiente exhibition will be held from February 3-7, 2023 in Frankfurt, Germany.This exhibition was attended by no less than 3,600 companies from all over the world. Indonesia sent the largest number of companies as many as 72 companies.

Ambiente is an annual exhibition that showcases a group of wood handicraft products and household appliances or products with HS 44,94,57,63,69, and 70.Products on display include kitchen utensils, glass/glass utensils, ceramics, wood crafts, light furniture, and home décor. The exhibition will return in 2023, after a hiatus in 2021 and 2023.

Bayu Wicaksono revealed that the participation of Indonesian companies is also the most in ASEAN. The next highest number of ASEAN is the Philippines with 35 companies, Vietnam (35 companies), Thailand (34 companies), Singapore (4 companies), and Malaysia (4 companies).

At this exhibition, the Indonesian Pavilion featured 11 companies. Meanwhile, 61 other Indonesian companies are spread across halls 10, 11, and 8. In addition to Atdag Berlin, the opening of the Indonesian Pavilion was also attended by the Indonesian Ambassador to Germany Arif Havas Oegroseno, Director of Small and Medium Industries of Chemical, Clothing, Miscellaneous and Handicraft of the Ministry of Industry Ni Nyoman Ambareny, Consul General of the Republic of Indonesia in Frankfurt Acep Somantri; and Head of Indonesian Trade Promotion Center (ITPC) Hamburg Eka Sumarwanto.

Bayu said, on the second day of the exhibition, the Indonesian Embassy in Berlin witnessed the signing of a trade contract by the Indonesian Art Classic company for decorative lighting products. In addition, several other companies outside the Indonesian Pavilion that received potential trade transactions, namely PT Inspira Furnexindo for wooden cutting board products, and CV Nuansa Kayu Bekas for outdoor wooden furniture products, with a total transaction of Rp6.6 billion.

"Even more encouraging, all participants of the Indonesian Pavilion exhibited handicraft and home decoration products from processed wood already have Forest Law Enforcement, Governance and Trade (FLEGT) Indonesian Legal Wood certificates," said Bayu.

Bayu added that the majority of participants also used Ambiente to strengthen networks with old partners, especially after 2 years of postponement of Ambiente due to the pandemic. "Participants use the exhibition as an initial networking event ahead of the Indonesia International Furniture Expo (IFEX) which will be held March 9-12, 2023 in Jakarta," he added.

The EU EUDDR takes effect immediately. Can it prevent deforestation?

The European Parliament and the Council of the European Union have agreed to issue new rules against deforestation and forest degradation for commodities entering its 27 member states. The regulatory agreement called the European Union Due Diligence Regulation (EUDDR) took place in December 2022.

There are seven commodities that are prohibited from entering Europe if they are related to deforestation and forest or land degradation. EUDDR's commodity coverage is soybeans, palm oil, timber, beef, cocoa, rubber, and coffee as well as derivative products, such as leather, chocolate, furniture. EUDDR does not close the scope extended to other commodities.

In a discussion at the EU office in Jakarta, EU Ambassador Vincent Piket said the EUDDR had not applied penalties for deforestation in the past. That is, this rule applies going forward. Tentatively, the rule will come into effect in May-June 2023.

Despite coming into force, the implementation of obligations for operators importing seven commodities and their derivative products into the European Union will only start in December 2024. Especially for small and medium-sized enterprises, Europe will implement it in June 2025.

Vincent Piket said that the background to this rule was made and agreed politically because of the desire of European countries to contribute to the mitigation of the climate crisis. He cited data from the World Food Organization (FAO) which said that in 1990-2020 420 million hectares of forest were lost.

The area of forest loss is greater than the area of all countries in Europe. Deforestation, Picket said, is driving climate change. The IPCC, a panel of UN scientists, said that 11% of greenhouse gas emissions that cause global warming come from loss (deforestation) and damage (degradation) of forests. "As much as 90% of deforestation is triggered by the expansion of agricultural land," he said.

The European Union is a consumer of agricultural commodities related to deforestation and forest degradation. Every year, EU countries import agricultural commodities included in the seven commodities in the EUDDR worth 85 billion Euros.

If implemented, the European Union is estimated to stop the production of greenhouse gases equivalent to 32 million tons per year. "This regulation will increase EU demand for legal trade as well as deforestation-free products and commodities," Picket said.

For the seven commodities in the EUDDR, the EU imports 6.4 million tonnes of palm oil annually or 83.3% of their needs. Wood 8.4%, rubber 6.5%, coffee 1.3%, soybeans 0.1%, and beef 0.1%.

For importers of seven EUDDR commodities and their derivative products, based on this rule, they must meet due diligence. The trick is to declare that imported products are not related to deforestation and forest destruction.

In response to the new regulation, the Indonesian government expanded the Timber Legality Verification System (SVLK). First of all by changing its name to the Sustainability Legality Verification System. Products that must be deforestation-free are not only timber, but extend to non-timber forest product commodities (HHBK) (explanation of the scope of SVLK changes in this link ).

Under SVLK's new rules, an independent assessment and verification agency (LPVI) can audit the certification process in an industry. So far, SVLK's big hole is the opening of conflicts of interest between certification bodies and industry.

The industry, which wants green certificates for the commodities it produces, invites audit bodies to examine the origin of products. However, the work of certification bodies paid for by industry makes them mere green product stamp institutions.

As a result, the certificate becomes a kind of greenwashing. Violations of sustainability and legality become legal until the product reaches the buyer. In response, Vincent Piket established independent supervisory cooperation to prevent conflicts of interest of certification bodies.

This includes monitoring Indonesia Sustainable on Palm Oil (ISPO). If SVLK is a timber legality system and non-timber forest products, ISPO specifically becomes an oil palm sustainability system. Of the 16 million hectares of oil palm plantations, only 7 million hectares have entered ISPO.

According to Piket, SVLK provides an advantage for Indonesia because the system is relatively compliant with the Deforestation Free Law or EUDDR. "The company's competitiveness will increase in the global market as demand for environmentally friendly products increases," he said.

Follow the conversation about deforestation at this link

The European Union also praised and expressed readiness to establish formal cooperation to support the success of Indonesia's FOLU Net Sink 2030 agenda.

The EU's stance follows three other major countries, namely Britain, the United States, and Norway, which have already expressed support for the FOLU Net Sink agenda.

The EU's stance was conveyed during a bilateral meeting between the Director General of Sustainable Forest Management of the MoEF Agus Justianto accompanied by the Director of Forest Product Processing and Marketing of the MoEF Krisdianto and the Director General for the Environment-EU Commission, Florika Fink-Hooijer accompanied by Assistant to the Director General for the Environment, Luis Planas Herrera on the sidelines of the UNFCCC COP27 Climate Change Conference in Sharm El Sheikh, Egypt, Monday, November 14, 2022.

"The EU expressed interest in strengthening cooperation to support the implementation of FOLU Net Sink through the preparation of an MoU with the scope of filing the gap MoU on cooperation between Indonesia and the United States, Norway, and the United Kingdom," Agus said.

The bilateral meeting opened with discussions leading up to the COP15 CBD biodiversity protection conference meeting in Montreal, Canada, this December.

In this regard, Indonesia is positioned to support the final stage of negotiations on the post-2020 Global Biodiversity Framework (post-2020 GBF).

Agus then explained the progress of the implementation of Indonesia's FOLU Net Sink 2030 agenda.

This is a national policy that includes various efforts, mainly controlling deforestation, preserving biodiversity, protecting and restoring peatlands, and accelerating afforestation and reforestation actions on degraded lands.

Through the FOLU Net Sink agenda, Indonesia aims to achieve a level of greenhouse gas (GHG) absorption that is greater or at least balanced than its emissions in the forestry and other land use (FOLU) sectors.

Through FOLU Net Sink, Indonesia targets to achieve an emission level of minus 140 million tons of carbon dioxide equivalent (CO2e) by 2030 in the forestry and land sectors.

The FOLU Net Sink agenda will support Indonesia's greenhouse gas emission reduction commitments contained in the Nationally Determined Contributions (NDC) document.

The FOLu Net Sink agenda has attracted the attention of a number of major countries. In a dialogue with Minister of Environment and Forestry Siti Nurbaya at the Indonesia Pavilion, Wednesday, November 9, 2022, the UK's Minister of State for Asia, Energy, Climate and Environment Lord Goldsmith, Norwegian Minister of International Development Tvinnereim, and Deputy Special Envoy of the President of the United States for Climate Rick Duke, also expressed praise and expressed readiness to work together to support the achievement of the agenda.

In addition to discussing FOLU Net Sink, the bilateral meeting between Director General Agus Justianto and Director General Florika Fink-Hooijer also discussed the development of the EU's deforestation free supply chain commodities policy.

The EU claims this policy will benefit Indonesia, as Indonesia has run a partnership to promote legal timber trade, FLEGT-VPA, well.

Indonesia will be included in a low risk country and given ease in implementing EUDR (EU Deforestation Regulation).

In this regard, Director General Agus explained various advances in SVLK implementation in Indonesia, and hoped that the EU could continue to strengthen efforts to socialize any developments in EUDR regulatory policies that could have implications for non-tariff barriers globally.