An Overview of the EU Deforestation-free Regulation (EUDR)

ABOUT THE EUDR

This ban on deforestation-linked goods is also expected to reduce emissions of greenhouse gases and conserve biodiversity. The following blog post will explain what is the EU Regulation on Deforestation-free Products (EUDR) and for further information on recommendations for compliance, get your copy of the extended guide on How to Comply with EUDR.

What is the purpose of the EUDR?

The main goal of the EU Deforestation-free Regulation is to ensure that the production of certain goods and commodities will not contribute to the further degradation of forest ecosystems. This is also expected to reduce emissions of greenhouse gases and conserve biodiversity.  

Under the EUDR, operators and traders (continuously called companies) who place goods on the EU Market, or export goods from the EU Market, must be able to prove that this commodity does not originate from a deforested land from 2020 and onwards.  

Companies will only be allowed to sell products in the EU if the supplier of the product has issued a “due diligence statement”. Having stringent due diligence in place is needed to confirm that the product does not come from deforested land nor has led to forest degradation, including irreplaceable primary forests, further the Due Diligence Statement shall be based on the country risk benchmarking system provided by the European Commission at the end of 2024. 

Who is impacted by EUDR? 

Scope of Operators 

• All operators and non-SME traders placing on or exporting from the EU market the following commodities: Soy, beef, palm oil, wood, cocoa, coffee, and rubber, as well as some of their derived products, such as leather, chocolate, tires, or furniture, are in scope. 
• In terms of leather products, this translates to the leather suppliers and traders importing or exporting raw, part-processed, or finished leather into the EU, being in scope, not the retailer or brand. However, this scope might widen in the review of the regulation. 

Definition of SME:  

• medium companies (defined as those <250 employees and turnover of <€50 million), 
• small companies (defined as those with <50 employees and a turnover of <€10 million) 
• micro-enterprises (defined as those with <10 employees and a turnover of <€2million) 

Scope of products  

The Regulation mainly impacts the textile and apparel industry in the context of the use of leather and rubber, and you will find the detailed list that is pertinent to Fashion and Textiles in the How to Comply with EUDR Downloadable Guide. Below is a sample of some of the more commonly used goods by the apparel industry, the list is not exhaustive. Note: MMCF products are not in the scope of the regulation as of today.  

key dates to remember

• On June 29th, 2023, EUDR is enforced  
• Operators and traders are now in the 18 months of transposition period to abide by the new obligations, by December 30th, 2024.  
• Around June 29th, 2024, the European Commission will publish an impact assessment on the potential extension of the scope of the Regulation to other products.  
• The European Commission will also provide the risk benchmarking of countries based on an objective and transparent assessment by December 2024. 
• By June 30th, 2025, SMEs will also be subject to the obligations. 
• By June 30th, 2028, and every five years thereafter, there will be a revision of the regulation.  

Requirements

FOR COMPANIES 

The products in scope may be placed on, or exported from the EU market only if all the following conditions are fulfilled: 

1. The commodities are deforestation-free. Meaning that they were “produced on a land that was not subject to deforestation after December 31th, 2020” To prove this the companies must first have traceability and evidence to back up the origin of the hide, down to the plot of land where the cattle was bord or the plantation or forest for rubber or wood.  
2. Companies will also have to make sure and verify that these products comply with the relevant legislation of the country of production including human rights and that the rights of affected indigenous people have been respected. 
3. The commodities should be covered by a Due Diligence Statement and submitted to the European Commission through their information system provided at the end of 2024 and shall contain:
   • A description of the commodity, including the quantity and the country of production. 
   • The disclosure of the plot of land where the commodity was produced, with geo-location information. 
   • The date or time range of the production on the specific plot of land. 
   • Information and identification of suppliers, traders, and businesses in the supply chain of that commodity.  

Small-sized operators will have the possibility to rely on larger operators to prepare their due diligence declarations.  

FOR Member States

Member States shall designate one or more competent authorities responsible for carrying out the obligations arising from this Regulation.

Compliance Checks and Controls

The designated authorities will be required to carry out checks within their territories to establish whether operators and traders comply with this Regulation. The checks shall include:

• An examination of the operator and trader’s due diligence system, including risk assessment and mitigation procedures.
• An examination of the due diligence statement related to the specific relevant product, containing the documentation proving that it complies with this Regulation.
• In case the above examination raised questions or doubts, the authorities with the required expertise will have access to pertinent data submitted by business, including geolocation coordinates, and utilize satellite monitoring equipment and DNA analysis to verify the origin of goods.
  
  

Risk-based Controls

By 18 months after the entry into force (December 2024), the Commission will issue a categorization of countries or regions based on their risk of deforestation. After conducting an objective and transparent assessment, they will be considered either low-risk, standard-risk, or high-risk.

A simplified due diligence process will be applicable to products originating from countries or regions categorized as low-risk.

The proportion of checks performs on operators will also vary according to the countries’ risk level:

• 9% for high
• 3% for standard
• 1% for low risk level

Consequences

Penalties for non-compliance will be proportionate and dissuasive and the maximum fine must be at least 4% of the total annual turnover in the EU of the non-compliant operator or trader.

Regular inspections will be carried out on shipments and > 9% of operators sourcing from high-risk countries will be checked. Not meeting any of the obligations will result in penalties and prohibition from placing the products on the market.

Recommendations for EUDR Compliance

To sell products made from commodities that come from forested lands, the seller must be able to show valid and verified evidence of the original plot of land which the raw materials have been harvested from, as well as the time of harvest, and a connection to the product and supply chain.  

A Due Diligence statement must be submitted to the European Commission via an IT portal / platform (more info here). Depending on the risk classification of the countries from which the materials are source the content of the Due Diligence. Get your copy of the detailed guide on How to Comply with EUDR.

How TrusTrace can help

TrusTrace offers digital traceability and compliance data management solutions that streamline, structure and store supplier declarations, scope certifications and due diligence reports with less clicks in a single digital place. Learn more about TrusTrace products.

Book a demo to find out more about how TrusTrace can support you with due diligence and certification collection upstream of your value chains.

Last Updated: This article was updated on May 29th, 2024 with clarifications to the who is impacted and requirements.

Disclaimer: At TrusTrace, we want to keep you informed on laws and regulations, but this information in the blog should not be considered or used as legal advice.

Sources:

https://www.europarl.europa.eu/news/en/press-room/20230414IPR80129/parliament-adopts-new-law-to-fight-global-deforestation

https://www.reuters.com/markets/europe/eu-parliament-approves-law-banning-imports-deforestation-linked-goods-2023-04-19/

https://www.consilium.europa.eu/en/press/press-releases/2022/12/06/council-and-parliament-strike-provisional-deal-to-cut-down-deforestation-worldwide/

https://data.consilium.europa.eu/doc/document/ST-14151-2021-INIT/en/pdf