EU DEFORESTATION AND FOREST DEGRADATION REGULATION (EUDR)

Authors: Špela Arsova, Kaja Franko and Ana Močivnik

 

Deforestation and forest degradation are a major part of the pressing global climate crisis, significantly increasing greenhouse gas emissions, reducing essential carbon sinks and having a significant negative impact on biodiversity, as well as threatening the livelihoods of indigenous peoples. Despite existing efforts, every year the world continues to lose 10 million hectares of forest, and the European Union (the “EU”) consumption is a considerable driver of deforestation and forest degradation. It is estimated that (without appropriate regulatory intervention) the EU’s consumption and production of seven most problematic commodities alone would rise to approximately 248,000 hectares of deforestation annually by 2030.

 

In order to monitor and regulate forest products more effectively, Regulation (EU) 2023/1115 (hereinafter: the “EUDR”) was adopted on 31 May 2023¹, which introduces traceability and transparency requirements in the supply chain.

 

Which products are covered by the EUDR?

 

The EUDR applies to various products produced after 29 June 2023. The EUDR distinguishes between relevant commodities, which are the largest contributors to deforestation in the EU:

 

• • oil palm (34.0%)
  • soya (32.8%)
  • wood (8.6%)
  • cocoa (7,5%)
  • coffee (7.0%)
  • cattle (5,0%)
  • rubber (3,4%)

 

and relevant products that contain, have been fed with or have been made using the above relevant commodities. This list contains a wide variety of products (e.g. meat of cattle, cocoa beans, rubber tyres, fuel wood, wooden furniture, prefabricated buildings of wood, etc.) and thus extends the application of the EUDR to a rather large and diverse range of obliged parties.

 

Who is bound by the EUDR?

 

The EUDR binds any natural or legal person who, in the course of a commercial activity, places relevant products on the EU market or exports them from the EU (hereinafter: an “operator”). These operators include producers, importers, distributors and traders, whatever their size or legal form.

 

What are the requirements of the EUDR?

 

Relevant commodities and relevant products shall not be placed or made available on the EU market or exported from the EU, unless all three of the following conditions are fulfilled:

 

• they are deforestation-free: the relevant products contain, have been fed with or have been made using relevant commodities that were produced on land that has not been subject to deforestation after 31 December 2020.
• they have been produced in accordance with the relevant legislation of the country of production: the laws applicable in the country of production concerning deforestation and the legal status of the area of production in terms of land use rights, environmental protection, forest-related rules, including forest management and biodiversity conservation, labour rights, human rights, the rights of indigenous peoples, tax, trade and customs regulations.
• they are covered by a due diligence statement.

 

 

Due diligence

 

Prior to placing relevant products on the EU market or exporting them from the EU, operators shall exercise due diligence. The due diligence shall include the collection of information, data and documents, risk assessment measures and risk mitigation measures.

 

1. Information requirements

 

The operator shall collect and keep information and documents demonstrating compliance with the requirements of the EUDR (e.g. product description, the quantity of the relevant products, the country of production, geolocation of plots of land, information about suppliers and traders). The operator shall keep this information for five years from the date of the placing on the market or of exporting relevant products and shall make it available to the competent authorities upon request.

 

2. Risk assessment and risk mitigation

 

On the basis of gathered information, the operators shall carry out a risk assessment to establish whether there is a risk that the relevant products are non-compliant with the requirements of the EUDR. The relevant products may only be placed on the market or exported if the risk assessment reveals no or only a negligible risk.

 

If the risk assessment shows that the risk is not negligible, the operator shall adopt risk mitigation procedures and measures prior to placing the relevant products on the market or exporting them. Such procedures may include requiring additional information, carrying out independent surveys, supporting compliance with the EUDR by operator’s suppliers, and so on.

 

Operators shall review their due diligence system at least once a year and update it regularly. They shall keep a record of such updates in their due diligence systems for five years and large companies shall, on an annual basis, publicly report on their due diligence system.

 

Operators who, on the basis of the due diligence exercised in accordance with the EUDR, conclude that the relevant products comply with the EUDR shall, before placing the relevant products on the market or exporting them, make available a due diligence statement to the competent authorities through the information system which shall be established by 30 December 2024. An exception applies to micro, small and medium-sized enterprises (hereinafter: “SMEs”), which are not required to exercise due diligence for relevant products contained in or made from relevant products for which a due diligence statement has already been submitted.

 

Member State reviews

 

Member States shall designate one or more competent authorities responsible for fulfilling the obligations arising from this EUDR. The annual checks carried out by its competent authorities shall cover a certain percentage of the operators placing on the market or exporting the products concerned, and the percentage required varies according to the country’s risk category. The annual checks shall cover at least 9% of operators in high-risk countries, at least 3% in standard-risk countries and at least 1% in low-risk countries. The list of countries by risk category is to be published by 30 June 2025 at the latest. In Slovenia, the Government of the Republic of Slovenia has designated Administration for Food Safety, Veterinary Sector and Plant Protection as the competent authority.

 

Corrective action and penalties

 

Where competent authorities establish that an operator has not complied with this EUDR, they shall require the operator to take appropriate and proportionate corrective action to bring the non-compliance to an end. The corrective action shall include, in addition to rectifying any formal non-compliance, preventing the relevant product from being placed or made available on the market or exported, withdrawing or recalling the relevant product immediately, donating the relevant product or disposing of it.

 

In addition, Member States shall lay down rules on penalties applicable to infringements of the EUDR, which must be effective, dissuasive and proportionate to the environmental damage caused. Penalties shall include:

 

• Monetary fines which effectively deprive those responsible of the economic benefits derived from their infringements. In the case of a legal person, the maximum amount of such a fine shall be at least 4 percent of the operator’s total annual Union-wide turnover.
• Confiscation of the relevant products and of revenues gained by the operator from a transaction with such products.
• Temporary exclusion from public procurement processes and from access to public funding.
• 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.

 

When does the EUDR apply?

 

On 14 November 2024 the European Parliament postponed the implementation of the EUDR for 12 months, therefore the regulation shall apply to large companies from 30 December 2025 and to SMEs from 30 June 2026.

 

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¹ Regulation (EU) 2023/1115 of the European Parliament and of the Council on making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010