Young Living fined for using illegally sourced essential oils, highlighting issue of supply chain transparency

By Hank Schultz

- Last updated on GMT

© iStock
© iStock
Young Living, a multilevel marketing company that sells products based on essential oils, has entered into a plea agreement for illegally trading in oils from endangered species. The company will pay fines totaling $760,000, the Justice Department announced this week.

According to DOJ, Young Living, based in Lehi, UT, pleaded guilty in federal court to federal misdemeanor charges regarding its illegal trafficking of rosewood oil and spikenard oil in violation of the Lacey Act and the Endangered Species Act. The Company voluntarily disclosed its rosewood oil violations and has been cooperating with government investigators.

As part of the plea agreement, Young Living was sentenced to a fine of $500,000, $135,000 in restitution, a community service payment of $125,000 for the conservation of protected species of plants used in essential oils, and a term of five years' probation with special conditions. The conditions include the implementation of a corporate compliance plan, audits, and the publication of statements regarding its convictions.

Huge and growing market

Essential oils have become a huge part of the herbal products business. One recent estimate put the global market in these products at $7.5 billion in 2015. Another report postulates that the global market could hit $14 billion by 2024.  Young Living was recently listed at No. 22 in the annual Global 100 list assembled by the publication Direct Selling News​ of the world’s largest network marketing companies.​ DSN pegged Young Living’s 2016 annual revenue at $1 billion. It’s the largest MLM on the list that focuses on essential oils. Young Living sells products based on essential oils that include diffusible oils, topical personal care products and cosmetics, as well as a line of dietary supplements, some of which include the ingredients.

"The importation of illegally harvested wood and timber products harms law-abiding American companies and workers and threatens forest resources around the world," ​said Acting Assistant Attorney General Jeffrey H. Wood of the Environment and Natural Resources Division. "Our Division was proud to work alongside the U.S. Attorney's Office in the District of Utah, the U.S. Department of Agriculture, the U.S. Fish and Wildlife Service, and the Department of Homeland Security to bring this case to a positive conclusion."

Attorney John W. Huber for the District of Utah said that while the violations were wilfully and knowingly committed by certain Young Living employees, the company was to be commended on its voluntary compliance and on initiating its own internal investigation. "This sentence reflects both the seriousness of the offenses and the acceptance of responsibility and cooperation by the company,"​ he said.

Multiple applications for products from wood

Aniba rosedora​, or Brazilian rosewood, is a prized tropical hardwood used in fine furniture applications and in musical instruments, including guitar manufacture.  The essential oil of the species is an important fragrance ingredient and is said to have skin health properties and reportedly has been used by aromatherapists to treat depression. Spikenard oil is derived from a flowering plant of the valerian family and is used in some Ayurvedic preparations, where it goes by the name of Jatamansi.

In the plea agreement, DOJ said that from June 2010 to October 2014, several Young Living employees and contractors harvested, transported, and distilled rosewood (Aniba roseaodora​ or Brazilian rosewood) in Peru.  They then circumvented Peruvian law, which prohibits the unauthorized harvest and transport of the wood or its by products, by shipping some of the oil through Ecuador, according to the DOJ. The species is also protected under the Convention on International Trade in Endangered Species (CITES).  The Young Living employees had neither export nor CITIES authorization, according to the plea agreement.

The DOJ investigation also found that Young Living employees exported spikenard oil harvested in Nepal to the United Kingdom without a CITES permit. That shipment apparently had been previously rejected by another company and was re-exported with a backdated CITES permit.

The investigation also revealed that between November 2014 and January 2016, Young Living purchased more than 1,100 kilograms of rosewood oil from a supplier/importer in the United States without conducting sufficient due diligence to verify lawful sourcing of that oil.  The plea agreement pegs that total value of products marketed by the company with unlawful ingredients at between $3.5 million and $9 million. 

"As part of Young Living’s commitment to comply with applicable laws and regulations wherever it does business, the company has developed a new comprehensive Lacey Act Compliance Program to help ensure that plant products come from legal and sustainable sources. Young Living is the first and only essential oils company to have a comprehensive Lacey Act-specific compliance program that has been reviewed and accepted by the government,"​ Young Living said in a statement. 

Supply Chain Transparency webinar

Being transparent about the provenance of ingredients has become a hot button issue within the herbal products industry. More pressure is being brought to bear on companies that trade in endangered species, especially in high demand ones like Brazilian rosewood, to make sure that no corners are cut. The American Herbal Products Association provides a primer on how to legally trade in endangered species​ as a resource for members.  Ed Fletcher, a principal in the firm Herbal Ingenuity and who helped develop AHPA’s good harvesting practices, will participate in an NutraIngredients-USA webinar on Supply Chain Transparency, which airs tomorrow.  To register for the webinar, click here​.

Related topics Regulation & Safety South Asia