Business calls for a balanced approach to the law “On the wood market”

09/ 04/ 2021

On April 8, there was a press conference dedicated to the necessity of developing and supporting a law On the wood market, which would stimulate the growth of the domestic woodworking industry. Business representatives and experts discussed market problems and critical provisions that should be taken into account when developing an up-to-date regulation of the timber market. https://youtu.be/nESIIf-aH-M According to the EBA Woodworking & Furniture Committee member companies, the woodworking industry operates in conditions of acute shortage of raw materials which hinders the development of production, leads to loss of markets, staff reductions, and as a whole creates a range of negative consequences for the economy. Yevhen Kuzmenko. EBA Committee Manager. As noted by woodworkers, the main problems of the market today include the lack of planned auctions, the realization of auctions in violation of regulations, overstatement of starting prices at auctions, and cases of non-compliance by state with forestry obligations to supply raw materials under auction contracts which lead to the failure of company’s production programs and non-fulfillment of obligations to supply products to customers. The EBA experts consider that this situation is due to imperfect regulation of the sale of raw wood and control over its sale. According to Government Resolution №1178 from February 1, 2020, to April 1, 2021, the state forestry enterprises should have sold 25% of the monthly planned volumes of raw timber through the electronic trading system ProZorro.Sales as participants of the pilot project, and in case of their non-compliance with the established criteria - through other electronic auctions. Currently, the central executive bodies are in the process of approving a CMU draft resolution which proposes to sell untreated wood exclusively through electronic auctions, except in a limited number of cases – through ProZorro.Sales. The EBA Committee representatives, while generally supporting the need to increase transparency in the timber market, would like to draw attention to the fact that the mechanism for selling timber, provided by Resolution №1178 with consideration of the changes it proposes, has significant shortcomings and needs to be improved. Draft laws №4197 and №4197-1 “On the Wood Market”, registered in the Verkhovna Rada, also need revision. Bohdan Tsupryk. Chair of the Woodworking & Furniture Committee Manager. The rules in the wood market should be established by a respective sectoral law. However, the draft laws submitted to the Parliament are extremely imperfect and need significant revision from the representatives of the relevant associations of furniture makers and woodworkers. In the current versions, the draft laws do not solve the problems of the industry, but on the contrary, create new difficulties and risks for the development of all domestic production, which is contrary to the national interests of Ukraine. That is why the EBA appealed to the Prime Minister of Ukraine, the Minister of Environmental Protection and Natural Resources of Ukraine, relevant MPs to consider the position of the industry players and their proposals to improve these regulations. A balanced draft law on the timber market should be based on the following principles of market functioning. First, it is necessary to provide for the possibility of selling timber, both on the terms of auctions and under long-term (annual) contracts and on the cascade principle of auctioning. This will guarantee priority access to raw materials from real producers, stimulate deep wood processing, and efficient use of forest resources. Secondly, it is necessary to establish a transparent mechanism for forming the cost of raw wood or the starting price of the lot, which must take into account the real situation on the market of finished products. Third, the woodworking divisions of state forestry enterprises should participate in the process of purchasing wood on equal terms with all woodworking enterprises. Besides, effective liability measures should be established for violating bidding rules both for sellers who do not buy timber purchased at auctions, while overpricing it and for state forestry enterprises for non-performance of contracts for the supply of timber purchased through auctions. The Woodworking & Furniture Committee Manager offers to provide its expert support during the development and discussion of the draft law On the wood market to develop a document that will contribute to the integrated development of the woodworking industry. For reference: Among the participants of the press conference were Yevhen Kuzmenko, Woodworking & Furniture Committee Manager; Bohdan Tsupryk, Chair of Woodworking & Furniture Committee Manager; Natalia Pokinska, CEO KRONOSPAN UA LLC; Vitalii Ovsiiuk, Head of the Legal Department, ODEK Ukraine LLC; Oksana Donska, Member of the Board, the Ukrainian Association of Furniture Manufacturers; Oleksandr Kovalchuk, Peoples Deputy of Ukraine, Deputy Chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy. Be the first to learn about the latest EBA news with our Telegram channel – EBAUkraine.

On April 8, there was a press conference dedicated to the necessity of developing and supporting a law “On the wood market”, which would stimulate the growth of the domestic woodworking industry. Business representatives and experts discussed market problems and critical provisions that should be taken into account when developing an up-to-date regulation of the timber market.

According to the EBA Woodworking & Furniture Committee member companies, the woodworking industry operates in conditions of acute shortage of raw materials which hinders the development of production, leads to loss of markets, staff reductions, and as a whole creates a range of negative consequences for the economy.

Yevhen Kuzmenko EBA Committee Manager

As noted by woodworkers, the main problems of the market today include the lack of planned auctions, the realization of auctions in violation of regulations, overstatement of starting prices at auctions, and cases of non-compliance by state with forestry obligations to supply raw materials under auction contracts which lead to the failure of company’s production programs and non-fulfillment of obligations to supply products to customers.

The EBA experts consider that this situation is due to imperfect regulation of the sale of raw wood and control over its sale.

According to Government Resolution №1178 from February 1, 2020, to April 1, 2021, the state forestry enterprises should have sold 25% of the monthly planned volumes of raw timber through the electronic trading system “ProZorro.Sales” as participants of the pilot project, and in case of their non-compliance with the established criteria – through other electronic auctions. Currently, the central executive bodies are in the process of approving a CMU draft resolution which proposes to sell untreated wood exclusively through electronic auctions, except in a limited number of cases – through “ProZorro.Sales”.

The EBA Committee representatives, while generally supporting the need to increase transparency in the timber market, would like to draw attention to the fact that the mechanism for selling timber, provided by Resolution №1178 with consideration of the changes it proposes, has significant shortcomings and needs to be improved. Draft laws №4197 and №4197-1 “On the Wood Market”, registered in the Verkhovna Rada, also need revision.

Bohdan Tsupryk Chair of the Woodworking & Furniture Committee Manager

The rules in the wood market should be established by a respective sectoral law. However, the draft laws submitted to the Parliament are extremely imperfect and need significant revision from the representatives of the relevant associations of furniture makers and woodworkers. In the current versions, the draft laws do not solve the problems of the industry, but on the contrary, create new difficulties and risks for the development of all domestic production, which is contrary to the national interests of Ukraine.

That is why the EBA appealed to the Prime Minister of Ukraine, the Minister of Environmental Protection and Natural Resources of Ukraine, relevant MPs to consider the position of the industry players and their proposals to improve these regulations.

A balanced draft law on the timber market should be based on the following principles of market functioning.

First, it is necessary to provide for the possibility of selling timber, both on the terms of auctions and under long-term (annual) contracts and on the cascade principle of auctioning. This will guarantee priority access to raw materials from real producers, stimulate deep wood processing, and efficient use of forest resources.

Secondly, it is necessary to establish a transparent mechanism for forming the cost of raw wood or the starting price of the lot, which must take into account the real situation on the market of finished products.

Third, the woodworking divisions of state forestry enterprises should participate in the process of purchasing wood on equal terms with all woodworking enterprises.

Besides, effective liability measures should be established for violating bidding rules both for sellers who do not buy timber purchased at auctions, while overpricing it and for state forestry enterprises for non-performance of contracts for the supply of timber purchased through auctions.

The Woodworking & Furniture Committee Manager offers to provide its expert support during the development and discussion of the draft law “On the wood market” to develop a document that will contribute to the integrated development of the woodworking industry.

For reference:

Among the participants of the press conference were Yevhen Kuzmenko, Woodworking & Furniture Committee Manager; Bohdan Tsupryk, Chair of Woodworking & Furniture Committee Manager; Natalia Pokinska, CEO KRONOSPAN UA LLC; Vitalii Ovsiiuk, Head of the Legal Department, ODEK Ukraine LLC; Oksana Donska, Member of the Board, the Ukrainian Association of Furniture Manufacturers; Oleksandr Kovalchuk, People’s Deputy of Ukraine, Deputy Chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy.