1. Credit System FSC-STD-40-004V2 Key Topic Version: 29 Sep 2008

2. 2 Contents Definition of the Credit System Defining FSC Product Groups Inputs to the Credit System The System FSC-labeling Sales & FSC Claims Exercises 3647512

3. 3 Outputs may be sold with an FSC credit claim in proportion to the converted quantity of FSC-certified and/or post-consumer reclaimed inputs FSC credit balance shall be recorded in a credit account FSC credit based on inputs to one FSC product group FSC credit based on inputs at a single site Typical for –Continuous production –Systems that do not allow segregation –Operations with lower FSC input volumes 1. Definition 1 of 3 optional systems for making FSC Product Group claims

4. 4 Important Terms: 1. Definition Conversion Factor (C.F.) Ratio between input and output volume of a product/component Controlled Wood (CW) FSC CW – non-FSC virgin material controlled by an FSC-certified organization Controlled material – non-FSC virgin material controlled by the organization using the input Eligible Input Inputs eligible for use in FSC Product Groups (see material category) FSC Claim FSC Pure, FSC Mixed X%, FSC Mixed Credit, FSC Recycled X%, FSC Recycled Credit, FSC Controlled Wood Material Category Category of inputs: FSC Pure, FSC Mixed, FSC Recycled, FSC CW, Controlled material, post-consumer reclaimed, pre-consumer reclaimed (Uncontrolled material is ineligible) Minor Component Uncontrolled wood-based component <5% of the product volume and specifically approved for use in an FSC Product Group Site A single physical unit located at one locality, geographically unique from other units Post-consumer Reclaimed (PCR) Reclaimed from a consumer or commercial product that has gone through its final end-use

5. 5 One FSC Product Group shares the same basic input characteristics –Species –Quality of inputs –Conversion factor FSC product groups shall be approved by the CB and represented in the Product Group Schedule (PGS) 2. Defining FSC Product Groups A variety of components and species may be used in one product group provided they are consistent Define product groups for which FSC credit is accumulated

6. 6 All eligible inputs are possible: 3. Inputs Input Material Category Potential FSC Claims FSC Pure FSC Mixed Credit FSC Mixed FSC Mixed Credit FSC Recycled FSC Mixed Credit, FSC Recycled Credit FSC Controlled Wood FSC Mixed Credit Post-consumer / Pre-consumer Reclaimed FSC Mixed Credit, FSC Recycled Credit Controlled Material FSC Mixed Credit Minor Component FSC Mixed Credit It is possible to make FSC Controlled Wood claims for any eligible inputs/combinations

7. 7 Input Material Categories FSC Claim FSC Pure + controlled material FSC Mixed Credit FSC Mixed + Post- consumer FSC Mixed Credit Post-consumer + Pre-consumer FSC Recycled Credit Inputs of different material categories are transformed (or combined) for an FSC credit claim, e.g., FSC/PCR CW/Pre-C “FSC Mixed Credit” “FSC Recycled Credit” “FSC Controlled Wood” 4. The System

8. 8 Credit system as bank account However there are some banking rules... 4. The System BUY FSC (&/or PCR) raw material To earn credit SELL FSC products To spend credit

9. 9 1. Define raw material inputs 2. Calculate conversion factors 3. Apply the conversion factors on input volumes 4. Add the converted amount of FSC/PCR to the credit account Earning Credit Keep inputs segregated until the volume is added to the account (may be applicable when material is physically withheld from production, e.g., drying time) 4. The System

10. 10 Transfer system - essentials Purchasing & Receiving Accounting Final Storage & Sales material categorySpecify material category FSC claimCheck supplier documentation for FSC claim FSC % / Credit claimUse the specific input FSC % / Credit claim when adding credit Use converted volume for each input type Co-mingle all inputs to the same product group Define period of time for updating the account, no greater than 3- months (claim period) AddAdd credit after ownership but no later than input entry to processing No future predictions No overdraws Deduct credit greater than that added over the past 12-months All necessary staff shall be aware of the balance &/orUse distinguishing marks (labels), &/or Designated areas DeductDeduct credit once product is FSC-labeled &/or sold with FSC claim FSC credit claimMake FSC credit claim on invoice Final product cross- references with invoice & transport docs 4. The System

11. 11 4. The System Where: FSC Credit = FSC credit earned Input = Amount of purchased material C.F.= conversion factor for input to output FSC Credit = Input X C.F. Sample: Input = 40 cbm of logs C.F. = 0.5 (0.5 cbm lumber produced from 1 cbm roundwood) FSC Credit = 40(0.5) = 20 cbm

12. 12 4. The System Where: FSC Credit = FSC credit earned Input = Amount of purchased material % = the FSC percent claim on input C.F. = conversion factor for input to output A bit more complicated: FSC Credit = (Input X %)C.F. Sample: Input = 40 cbm of logs (FSC Mixed 70%) C.F. = 0.5 (0.5 cbm lumber produced from 1 cbm roundwood) FSC Credit FSC Credit = [40(0.7)]0.5 14 cbm = 14 cbm % = 0.7

13. 13 Illustration of a Credit Account 4. The SystemMonth FSCTotalPCRTotal FSC C.F. FSC C.F. (0.9) PCR C.F. PCR C.F. (0.7)Tally Total Tally FSC Sales Balance July2040 18 (20X0.9) 28 (40X0.7) 46 (18+28) 4630 16 (46-30) Aug152013.51427.5 43.5 (27.5+16) 3013.5 Sept255022.53557.5713041 New Credit Balance = [(Inputs X C.F.) + Previous Balance] – FSC Sales Claim period = one month Inputs New credit for claim period New credit + previous balance

14. 14 5. Sales & FSC Claims The invoice essentials Each FSC Product Group is clearly identified with the applicable FSC claim –“FSC Mixed Credit” –“FSC Recycled Credit” –“FSC Controlled Wood” (optional for products not sold as FSC Mixed or FSC Recycled) FSC certificate code of the Organization is clearly represented –SW-COC-00XXXX for “FSC Mixed Credit”, “FSC Recycled Credit” –SW-CW-00XXXX for “FSC Controlled Wood” Same details required for transport docs when invoice does not accompany product Transport / shipping documents

15. 15 5. Sales & FSC Claims Optional but encouraged; there will always be products sold without an FSC Credit claim Required in the CoC certificate scope (evaluation against 40-005 parts 4 and 5) Does not apply to final end-products Shall only be to other FSC-certified organizations FSC CW claim only possible when FSC credit claim is not made No FSC-labeling! (some provisions for segregation marks) A system shall be in place to track input and output volumes (e.g., separate data columns in the credit account) “FSC Controlled Wood” claims:

16. 16 FSC Mixed Sources Label (FSC Mixed) 6. FSC-labeling FSC Mixed Sources = any combination of eligible inputs, including some virgin content FSC Mixed Credit To apply a variation of the FSC Mixed Sources label the credit account shall have an adequate balance to cover the volume sold as FSC Mixed Credit 20% Note: generally, the moebius loop with the PCR content cannot be used under the credit system since the percentage is not specifically known.

17. 17 FSC Mixed Label (Minimum Requirements) 6. FSC-labeling FSC Mixed = PCR + CW inputs FSC Mixed = PCR + CW inputs (no FSC virgin inputs) Label shown here is minimum elements example required for this combination of inputs FSC Mixed Credit To apply an FSC Mixed label on-product the credit account shall have an adequate balance to cover the volume sold as FSC Mixed Credit Mixed Sources Cert no. SW-COC-00XXXX © FSC 1996 Example that illustrates the required elements

18. 18 FSC Recycled Label (Minimum Requirements) 6. FSC-labeling FSC Recycled = 100% reclaimed content (may include some pre- consumer) FSC Recycled Credit To apply the FSC Recycled label the credit account shall have an adequate balance to cover the volume sold as FSC Recycled Credit Label shown here is minimum elements style required when less than 100% post-consumer Recycled Cert no. SW-COC-00XXXX © FSC 1996 NB: the recycled moebius loop shall be omitted as the exact percent of PCR is unknown in a credit system

19. 19 LINKS TO ANY EXERCISES 7. Exercises

20. 20 THANK YOU!