The Auditor-General has rejected demands by Northland conservation groups for an inquiry into the swamp kauri industry - but backed their claims that systems designed to prevent illegal timber extraction were open to abuse.
She also left open the definition of what constitutes a "finished product" - unprocessed timber cannot be exported - saying that was up to the courts to decide.
In May the Northland Environmental Protection Society, along with Far North Forest and Bird, lodged a complaint with Auditor-General Lyn Provost calling for an urgent inquiry into the swamp kauri trade.
They alleged the Ministry for Primary Industries (MPI) and Customs were turning a blind eye to the export of unprocessed kauri logs, planks and slabs, despite a ban under the Forests Act.
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Advertise with NZME.They also claimed timber was being superficially disguised as carvings or table tops to get around export rules, and that protected wetlands were being destroyed by uncontrolled extraction.
In a response released on Thursday, Ms Provost said it was clear some exporters had been "testing" the level of modification required before swamp kauri could be exported. There were also differing interpretations of what constituted a finished product.
However, Ms Provost found no evidence that timber was being exported illegally. Photos purporting to show swamp kauri logs overseas had been taken in New Zealand, she said.
She agreed, however, that the system used until a few months ago for verifying the source of swamp kauri was not effective.
Milling statements, which were supposed to prove logs had been extracted legally, were issued on a "high-trust system" with minimal inspections before or after extraction.
MPI believed protecting the environment was the regional council's job but because extraction of swamp kauri from non-indigenous sites was a permitted activity, no council approval was needed.
That meant extraction was carried out with little central or local government oversight, "creating a possibility that milling statements had been approved based on inaccurate, incorrect or false information".
Ms Provost said new rules brought in by MPI in July would reduce that risk. Now operators had to inform the council any time they wanted to extract swamp kauri, and MPI would try to visit every site as part of its new milling statement approval process.
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Advertise with NZME.MPI was also planning to produce a new guide outlining what it considered a finished product, and had agreed to increase staffing in Whangarei to improve inspections of sawmills and export shipments.
Better and more readily available information about swamp kauri would also help alleviate public concern, Ms Provost said.
Northland Environmental Protection Society chairwoman Fiona Furrell said her only disappointment with Ms Provost's response was that she had taken MPI's word that the swamp kauri log photos had been taken in New Zealand.
Group members had been to swamp kauri factories in the US and verified that some photos had been taken there. In one video clip port workers could be heard speaking Italian as they unloaded swamp kauri.
She agreed with Ms Provost that the definition of finished product would have to be tested in court. The society was planning legal action to do exactly that, she said.
