International non-profit organisation the Forest Stewardship Council (FSC) has stripped Vietnamese wood pellet producer An Viet Phat (AVP) Energy of its ethical sourcing endorsement for 3½ years following allegations that it sold pellets with false certificates. The company's trademark licence has also been revoked for the same period.
A notice on the FSC website alleges that AVP "falsely" claimed a large volume of wood pellets were made of 100pc FSC-certified raw material, according to a March 2021 transaction verification loop issued by the FSC and its assurance partner, Assurance Services International (ASI). AVP said the suspension is the result of a mix-up in raw materials used in the manufacturing of pellets sold to South Korea and material used in the manufacturing of pellets sold to Japan. Both countries' renewable energy schemes have different sustainability requirements.
The second phase of the transaction loop verification process revealed a discrepancy in buying and selling volumes, according to the FSC notice. An investigation by the FSC and ASI found that AVP had provided documents showing the purchase of FSC-certified raw materials from certificate holders in 2020. But some of AVP's suppliers denied that harvests had taken place at certified forests, the FSC said.
AVP told Argus it received a letter from the FSC through AVP's certifying company SGS before the notice was posted on FSC's website but it had little time to react apart from notifying its customers.
AVP said it has contacted the FSC and SGS seeking more details on the reason for the suspension. It plans to discuss ways of resolving the issue after gaining more clarity. It is extending full co-operation with the FSC in resolving the issue, with it willing to rectify any errors in its operations once it receives more details.
AVP said that there could have been a misunderstanding surrounding the volume of raw material it purchased for the manufacturing of wood pellets to be sold to Japan, as well as for pellets to be manufactured and sold to the South Korean market. AVP does not only buy FSC-certified raw material, as most pellets sold to South Korea do not require the same certification requirements as material sold to Japan. This may have resulted in a mismatch in raw material volumes meant for the Japanese and South Korean markets during the investigation, it said.
AVP has stopped producing FSC-certified wood pellets since the suspension last month and is holding back "a few thousand tonnes", it said, although it declined to clarify the exact volume. It is also working closely with its Japanese customers to supply pellets certified by other international certification bodies.
Japanese consumers under the country's feed-in-tariff scheme are required to provide proof of legality and sustainability of their biomass, with the majority utilising FSC's certification to do so. Japan is thelargest importer of FSC-certified wood pellets, according to the FSC, while Vietnam is the main producer and exporter of FSC-certified wood pellets.
Some market participants estimate AVP exported around 400,000-500,000t of wood pellets to Japan in 2021, with shipments to South Korea at around 200-300,000t. AVP declined to give its exact export volumes but said its production capacity totals 1.8mn t/yr, although some market participants said actual production is likely lower. AVP's suspension and expulsion from the FSC system is likely to tighten supplies.
AVP is continuing to export wood pellets to other regions where buyers do not require FSC-certified material, such as South Korea.