Agarwood is a fragrant resinous wood coming from trees belonging to the genera Aquilaria, Gyrinops and Gonystylus. When these trees are injured, damaged or infected, for example by insects or fungal disease, they produce a brown resin in reaction to the wound. This resin can help protect the tree from further infection so it is considered to be a kind of defense mechanism or immune response.

Agarwood trees grow naturally in South and Southeast Asia. It has many names including eaglewood, aloeswood, gaharu (Indonesia), ood, oudh, oodh (Arabic), chen xiang (Chinese), pau d'aguila (Portuguese), bois d'aigle (French)and Adlerholz (German).

Currently most agarwood comes from trees growing in natural forests and due to habitat destruction and unsustainable harvesting many species of agarwood are now potentially threatened with extinction.

For this reason the genera of Aquilaria, Gyrinops and Gonystylus that include around 30 species from which agarwood comes are now listed on Appendix II of the Convention for the International Trade of Endangered Species (CITES). This means that agarwood cannot be traded internationally without a CITES permit. A CITES Scientific Authority appointed by the national government of the producing country is required to determine that trade is not detrimental to the species' survival or to the ecosystem in which it occurs - in effect, to confirm that the species has been harvested at a sustainable level.
See: http://www.fao.org/docrep/008/y5918e/y5918e10.htm

Much of the agarwood currently traded does not qualify for CITES permits so it is traded across borders illegally (smuggled). This further adds to the costs because smugglers expect high margins in return for the bribes they pay and the risks they take.

Agarwood is traded in the form of wood pieces, chips, powder and oil. International trade in agarwood is estimated at 6 million kilograms per year but this does not include the trade of other agarwood products like oil and incense. The value of agarwood re-exported from Singapore alone each year has been estimated to exceed US$1.2 billion.

The main importing countries are Taiwan, the UAE, Saudi Arabia and Japan.

Prices of agarwood from natural forests can exceed $10,000/kg. Cultivated agarwood from plantation trees is currently retailing at the equivalent of US$5,000/kg. See: http://www.scentedmountain.com

Oil prices are typically around US$8,000/kg but high quality oil can sell for over US$50,000/kg.
See: http://www.cropwatch.org/agartrading.htm

Agarwood smoke (from burning agarwood) and oil are used as customary perfume in the Middle East.In Europe, agarwood oil is a key component in the perfume M7 by Yves Saint Laurent.
See: http://cognoscented.blogspot.com/2007_03_01_archive.html

In the East, agarwood is valued in Aurvedic, Tibetan and East Asian medicine for its ability to treat a range of disorders. Agarwood is also used by Muslims, Buddhists and Hindus as incense in religious ceremonies. Agarwood essences are used to fragrance soaps and shampoos, and the popularity of highly priced essential oils reinforces the value of agarwood derivatives. In Taiwan agarwood is an aromatic ingredient in local wines.

Japanese-style incense made from sustainable Cultivated Agarwood is now being marketed via Internet: http://www.scentedmountain.com