EU Deforestation Regulation (EUDR) summary
Date of publication: July 6th, 2023
On June 9th, 2023, the final text of the EU Deforestation Regulation (EUDR) was published in the Official Journal of the European Union (OJEU). The Regulation enters into force 20 days after the publication date, on June 29th, 2023. A copy of the published regulation can be found at EUR-Lex - 32023R1115 - EN.
The new regulation aims to accomplish the following:
- Prevent the listed products Europeans buy, use, and consume contribute to deforestation and forest degradation, both in the EU and globally
- Reduce carbon emissions caused by EU consumption and production of the relevant commodities by at least 32 million metric tons per year.
- Address all deforestation driven by agricultural expansion to produce the commodities in the scope of the regulation, as well as forest degradation.
What you need to know
The EUDR requires seven commodities and certain specified products made from them to be "deforestation-free" in order to be sold on the EU market or exported from it. EUDR also mandates extensive due diligence on the value chain for all operators and traders dealing with these products. A list of relevant commodities within the scope of this regulation, along with corresponding HS number, can be found in Annex 1 of the regulation.
Included Commodities | Examples of Derived Products |
|---|---|
Cattle |
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Cocoa |
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Coffee |
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Oil Palm |
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Rubber |
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Soy |
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Wood |
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Exception
: The EUDR does not apply to goods made before the EUDR's entry into force (save for timber and timber products), or goods produced entirely from material that has completed its lifecycle and would otherwise have been discarded as waste.Under the EUDR, "deforestation-free" means that the good does not contain, has not been fed with or been made using, relevant commodities that were produced on land not subject to deforestation (i.e., the conversion of forest to agricultural use, whether human-induced or not) since December 31, 2020. Certain products containing or having been made from wood must not use forest degradation-inducing wood, i.e., wood collected in a manner causing structural changes to the cover of certain forest.
Operators shall not place relevant products on the market, or export them, without prior submission of a “Due Diligence Statement.” The Due Diligence Statement should be based on completing the risk assessment process as outlined in the regulation (Articles 10 & 11), which includes thirteen specific criteria (due diligence systems should undergo a review annually).
Prior to placing relevant products on the market or exporting them, operators must exercise due diligence with regard to all relevant products supplied by each particular supplier. Operators shall communicate to operators and to traders further down the supply chain of the relevant products they placed on the market, or exported, all information necessary to demonstrate that due diligence was exercised and that no, or only a negligible risk was found, including the reference numbers of the due diligence statements associated to those products.
The EU Commission will develop an electronic interface based on the European Union Single Window Environment for Customs, to enable the transmission of required data. This electronic interface shall be in place by June 30, 2028. Additionally, By December 30, 2024, the Commission shall establish and subsequently shall maintain an information system which shall contain the due diligence statements made available.
This is just another indication of a regulation that requires companies to have solid visibility into their supply chain and the various parties they do business with (including suppliers to the lowest possible tier).
Country benchmarking
The EUDR establishes a three-tier system for the assessment of countries or parts thereof with respect to risk. This assessment will be conducted by the EU Commission based on the guidelines spelled out in the regulation. Products from low-risk countries will be subject to a simplified due diligence procedure. Member States and third countries, or parts thereof, will be classified into one of the following risk categories:
Risk categories | Description |
|---|---|
High Risk | Refers to countries or parts thereof, for which the assessment results in the identification of a high risk of producing in such countries or in parts thereof, relevant commodities for which the relevant products do not comply. |
Standard Risk | Refers to countries or parts thereof which do not fall in either the category ‘high risk’ or the category ‘low risk.’ |
Low Risk | Refers to countries or parts thereof, for which the assessment concludes that there is sufficient assurance that instances of producing in such countries or in parts thereof, relevant commodities for which the relevant products do not comply, are exceptional; |
These risk categories are not expected to be published until January 2025; however, it will be essential information for companies to incorporate to their own due diligence and risk assessment process for products in scope based on country of origin.
Penalties for non-compliance
Penalties for non-compliance will be established under national law by Member States. Subsequently, the intention is for the EUDR to be subject to criminal penalties. Member states will inform the Commission of final judgments against legal persons within 30 days. The Commission will then publish the name, date and a summary of the activities that infringed the EUDR and the nature and amount of penalty imposed.
Under the EUDR, penalties can include the following:
- Fines proportionate to the environmental damage and the value of the relevant commodities or relevant products concerned, calculating the level of such fines in such way as to ensure that they effectively deprive those responsible of the economic benefits derived from their infringements.
- The maximum amount of such a fine shall be at least 4 % of the operator’s or trader’s total annual Union-wide turnover in the financial year preceding the fining decision.
- Confiscation of the relevant products concerned from the operator and/or trader.
- Confiscation of revenues gained by the operator and/or trader from a transaction with the relevant products concerned.
- Temporary exclusion for a maximum period of 12 months from public procurement processes and from access to public funding, including tendering procedures, grants, and concessions.
- Temporary prohibition from placing or making available on the market or exporting relevant commodities and relevant products, in the event of a serious infringement or of repeated infringements.
- Prohibition from exercising the simplified due diligence.
Corrective action by the operator will be required by the competent authority in the cases of non-compliance (within a specified and reasonable period of time). The competent authorities will have the powers to order:
- Correction of any formal non-compliance (i.e., failure to maintain due diligence statements);
- A ban on the item being sold in the EU or exported;
- Immediate withdrawal or recall of the item; or
- Donation to charity or public interest purposes or disposal of the products if that is not possible.
How to prepare
- Review the complete regulation, which can be found at EUR-Lex - 32023R1115 - EN, and
- Determine if any of your goods/products fall within scope of the regulation (Annex I)
- Review the required data that will be necessary for reporting purposes (Annex II and Article 9) – do you currently have this information, and if not, how will you obtain it (e.g., geolocation of all plots of land where the relevant commodities were produced)?
- Review the Due Diligence Guidance when published. This guidance will be important in developing internal procedures and controls to ensure compliance. Operators and traders wanting to market products in scope of this regulation in the EU (or export them from the EU) must conduct extensive diligence, down to the geolocation of all plots of land where the relevant commodities were produced, as well as the date or time range of production, or face penalties. Responsibilities will fall on both exporters and importers. Understand your role and what will be expected.
- Conduct an internal review of data points required under the law – understand reporting requirements - do you have the data, from whom will you obtain the data, how will you manage the process and store the data. Recordkeeping requirements will require a minimum of 5-year retention period.
- For EU companies, identify suppliers whose products are in scope and initiate communication regarding necessary due diligence and data capture.
- For companies selling/exporting to the EU, review the regulation and initiate dialogue with EU customers on what will be expected from your company on future transactions.
Key dates
Date | Event |
|---|---|
June 29, 2023 | EUDR enters into force. |
Coming Soon | EU Commission to publish Guidelines surrounding EUDR. |
June 2024 | EU to consider including other ecosystems to the EUDR scope. Will occur every 1 year. |
January 2025 | First reporting requirements are due. At this time, the benchmarking system for country risk (low/medium/high) will also be published. |
June 2025 | EU will consider expanding the EUDR scope to include additional commodities, raw materials, and derived products). This will occur every two years. |
July 2025 | SME obligations will enter into force. |
June 2028 | General review of the EUDR to review efficacy, expansion, or adjustment of scope, etc. |