Why Industry Needs To Contribute

Currently those benefiting from trade in endangered flora and fauna do not contribute to the cost of regulating and managing the trade. The only payments made by businesses trading legally under CITES are for obtaining export permits. Those making all the profits – importers in wealthy countries – pay nothing in almost all cases.

This would not be a problem if CITES and national governments were properly resourced to regulate the trade and monitor and enforce those regulations. CITES receives annual core funding of just US$6million to regulate and monitor the trade in 36,000 listed species. All enforcement activities and related costs fall on national governments and disproportionally on (mainly poor) exporting countries. With the legal trade worth over US$320billion pa and the illegal trade worth somewhere between US$100-250 billion pa, the current model for regulation is clearly not working.

CITES is in effect the ‘industry regulator’ for the international trade in endangered flora and fauna, which means it has responsibility for maintining the integrity of the trade and preventing the illegal trade. But in reality the illegal trade is as large as 80% of the volume of legal trade. This means the illegal trade is out of control and regulation is not set up properly. In a well-regulated industry (such as aircraft components), the level of illegal parts is <10%.

Wildlife trafficking is not a priority for national governments or customs anywhere in the world, so resourcing even in wealthy countries is minimal. The GEF, US, EU, Germany and World Bank have provided funding to governments to address the illegal wildlife trade at about USD $200million pa in recent years, but the illegal trade continues to grow faster than the world economy by factor of 2-3 (as reported by UNEP). Businesses importing CITES listed flora and fauna are ‘free riding’ on the system – they get all the benefits (and profits) and cover none of the costs.

The disparity between funds available for regulation and monitoring compared to the scale of the trade can only be resolved by making industry pay the cost of regulation. In other industries regulated based on the Precautionary Principle, the industry mostly covers the cost of regulation and enforcement. For example, in the pharmaceuticals industry all costs of research, clinical trials and assessments demonstrating safety of products are borne by the industry. The FDA in the US and the EMA in Europe are large, well-resourced regulators which derive most of their revenue from fees (e.g. EMA has ~€317million revenue with 90% coming from fees).

Mechanisms For Industry Contribution

Our ‘industry cost contribution’ proposal recognises that costs to regulate the CITES trade need to be shared by industry, as is the case in all other industries based on the Precautionary Principle. There are two options for doing this under CITES:

Using Reverse Listing

Under reverse listing the assessment process to list species for trade falls into the hands of the regulator (CITES), which means it needs to get the resources to be able to set appropriate standards and evaluate proposals for listings with utmost care. This could be done through charging ‘application fees’.

The ongoing industry contribution can then be raised as annual listing fees. Because ongoing enforcement is critical to the success of tackling the illegal trade and reducing the legal trade to ecologically sustainable levels, the listing fees would be annual fees. Such annual fees should be volume based – thereby falling disproportionally on highly valuable commercial species (e.g. timber, botanicals for cosmetics, skins/furs for luxury products) and paid by importers, not exporters.

For the annual fees we are advocating a distribution mechanism via the GEF to keep industry and CITES at arms lengths from how annual listing fees are used to help enforcement.

Under Current Direct Listing

Obviously going to reverse listing requires a change to the articles of the convention. A number of possible mechanisms to introduce an industry contribution to the costs of regulating the legal trade under the current direct listing model of CITES are outlined below:

  1. Using Import Permits for Appendix II listed species

    Probably the most equitable way to get industry to contribute to the cost of regulation under CITES as it currently is implemented would be via value-based charges attached to import permits. Currently Appendix II listed species do not require import permits, but countries are free to set tougher regulations than CITES (and the US already requires import permits). If the EU, Japan and China introduced import permits for all Appendix I listed species and together with the US all 4 major importers committed to adding a values-based fee to the cost of the import permit, significant funds could be raised to support the cost of regulation and enforcement. Monies raised by these 4 signatories could be remitted to CITES using the CITES Extended Fund.

  2. Registration or Certification Fees for Major Importers

    An alternative mechanism would be to introduce a registration or certification process for high-volume importers under CITES. These could again be national schemes in the 4 major import markets (US, EU, China, Japan) or an international scheme run by a NGO. Obtaining registration/certification could be made a requirement for importing Appendix II listed species above a certain annual value. Fees should be based on trade volume and could again be remitted to CITES via contributions to the Extended Fund.