Hefty fines for shipbuilders using "blood" teak from Myanmar

December 28, 2024

Oceanco violated the European Timber Regulation (EUTR) and reached a €150,000 settlement with the Netherlands Public Prosecution Service. Meanwhile, Sunseeker International was fined £358,759.64 for contravening the UK Timber Regulations for 11 specific imports of 'blood' teak originating in Myanmar.

Oceanco

The case concerns the use of Myanmar teak, which does not comply with the EUTR. This regulation imposes strict requirements on the origin and control of timber to prevent illegal logging. OceanCo allegedly used Myanmar teak when building a superyacht. 

Ensuring compliance within global supply chains and sourcing materials ethically and legally is becoming more complex. The EUTR prohibits the import of illegally logged timber into the European Union and requires companies to conduct due diligence to verify the legal origin of the wood they use.

In March 2022, the prosecution launched a criminal investigation into Oceanco after it emerged that the teak from Myanmar had been used in the Koru superyacht. Teak timber in on-board furniture and finishing materials did not comply with EUTR requirements.

The teak was sourced from a Turkish company, and Oceanco was the first party to place the timber on the European market. It could not conclusively verify whether the wood had been legally or illegally harvested. This lack of traceability, rather than confirmed illegal sourcing, constitutes a breach of the EUTR.

While Oceanco acknowledged its failure to comply with the regulation, it maintains that the violation was unintentional, pointing to its 2019 decision to stop using Myanmar teak in new projects. The order for Koru, however, predated this policy change. Oceanco cooperated fully with authorities throughout the investigation, demonstrating its commitment to transparency.

Sunseeker International

In November 2024, Sunseeker International was fined £358,759.64 for 11 specific imports relating to "blood' teak originating in Myanmar. It was the first prosecution under the UK Timber Regulation legislation that replaced the EU Timber Regulation after Brexit.

In 2018, the London-based Environmental Investigation Agency (EIA) formally reported Sunseeker's US distributors to the US Department of Justice after uncovering that illegally traded teak, in breach of the EU Timber Regulation (EUTR), had entered the company's supply chains. The US Lacey Act was also implicated, which bans imports of goods in violation of foreign laws protecting or regulating plant species.

Sunseeker's charges included failing to exercise due diligence as an operator when placing timber products on the market, failing to maintain and evaluate a due diligence system for timber or timber products, and failing to comply with article 5(1) of the Commission Implementing Regulation (EU) No 607/201, which pertains to record-keeping obligations for operators.

During the court proceedings, it was revealed that Sunseeker's timber imports included teak from Myanmar, wenge from Africa, and European oak, with a combined value of just over £60,000.

Timber traceability

The cases reflect the broader challenges shipyards and the wider market face today. Supply chains involving multiple intermediaries are becoming increasingly convoluted to obscure materials' origin, perhaps purposefully. 

Intermediaries in countries like Turkey, Singapore and Thailand often act as conduits for Myanmar teak, further complicating traceability efforts.

In February 2021, a military coup in Myanmar brought a brutal junta to power. The regime, seeking to finance itself, relied heavily on the export of the country's prized teak, renowned for its water-resistant properties and highly sought after by yacht builders. The State-controlled Myanmar Timber Enterprise, which oversees all sales and exports of teak, became central to these operations.

Since 2020, EU member state enforcement authorities have concluded that it is impossible to conduct adequate due diligence on the legal origin of Myanmar timber. This position violated the EUTR for all timber imports from Myanmar. Subsequently, the EU, UK, and US imposed sanctions on Myanmar and its timber enterprise, effectively making the importation of teak from the country illegal under international trade regulations.

Ed’s note: The Koru superyacht is owned by billionaire Jeff Bezos and, at 410 feet long, is the largest true sailing yacht in the world. 

Sources: Superyacht News articles by Conor Feasey on 25 Nov 2024 and 2 Dec 2024.

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