EU DEFORESTATION REGULATION (EUDR)
The European Union (EU) has implemented a Regulation aimed at combating deforestation and forest degradation driven by agricultural expansion. This Regulation encompasses specific commodities and their derived products, stipulates obligations for various actors in the supply chain, and applies equally to both EU-produced and imported goods.
In this article we will go through the following topics:
Commodities Covered by the EU Deforestation Regulation
The Regulation targets seven primary commodities identified as the main drivers of deforestation due to agricultural expansion:
- Palm Oil
- Cattle
- Soy
- Coffee
- Cocoa
- Timber
- Rubber
Derived products such as beef, furniture, and chocolate are also included. These commodities were selected based on a thorough Impact Assessment, scientific data, and research, highlighting the significant contribution of European production and consumption to global deforestation. The list of regulated products is detailed in Annex I of the Regulation, and it is subject to regular reviews and updates to adapt to changing deforestation patterns.
Annex I and Product Coverage
Products listed in Annex I are subject to the Regulation, irrespective of their origin. This even-handed approach ensures no discrimination between EU-produced and imported goods. Products not listed in Annex I are exempt, even if they contain relevant commodities. For instance, soap containing palm oil is not covered by the Regulation.
Examples:
- Relevant Product in Annex I: Subject to the Regulation if made from the listed commodities.
- Other Products: Not subject to the Regulation, regardless of the commodity content.
Obligations of Supply Chain Operators
Operators in the supply chain are categorized based on their role and size, with specific obligations outlined for each.
Downstream Operators
Operators transforming a product listed in Annex I into another product listed in Annex I must perform due diligence, ensuring the legality of their products. The obligations vary for Small and Medium-sized Enterprises (SMEs) and larger entities.
Non-SME Operators:
- Must verify due diligence was performed earlier in the supply chain.
- Retain legal responsibility for any breaches of the Regulation.
- Required to submit a due diligence statement in the Information System.
SME Operators:
- Subject to similar obligations as non-SME operators but with some simplifications.
- Must provide due diligence reference numbers from earlier supply chain steps.
- Required to perform full due diligence and submit a statement for parts not previously checked.
Non-SME Traders
Non-SME traders, such as large supermarket or retail chains, have obligations similar to large downstream operators. They must:
- File a due diligence statement.
- Ensure compliance with the Regulation, even if relying on due diligence carried out earlier in the supply chain.
- Be liable for any breaches, including those from upstream operators.
Specific Scenarios and Applications
Standing Trees and Harvesting Rights
The EU Deforestation Regulation applies at the moment of harvesting. The ‘operator’ could be the forest owner or the company with harvesting rights, depending on who places the relevant product on the market or exports it.
Exports and Commercial Activity
The Regulation applies to both imports and exports. Operators must include the due diligence statement reference number in export declarations and can use simplifications if the commodities have already been covered by due diligence.
CN and HS Codes
The Combined Nomenclature (CN) and Harmonized System (HS) codes are used to classify goods under the Regulation. Annex I products are classified using CN codes, which are essential for import and export declarations within the EU.
Packaging, Recycled Materials, and Natural Disasters
- Packaging: Only standalone packaging is covered by the Regulation. Packaging supporting other products is exempt.
- Recycled Paper/Paperboard: Exempt if produced entirely from recycled material. If containing non-recycled material, due diligence is required.
- Natural Disasters: Deforestation includes human-induced and natural conversions of forest to agricultural use. Affected areas are subject to the Regulation’s prohibitions and requirements.
Other Ecosystems
The Regulation may expand to include ‘other wooded land’ and ecosystems beyond forests, following assessments and reviews scheduled within the first two years of its implementation.
The EU Deforestation Regulation is a detailed effort to address global deforestation through stringent due diligence requirements and equal treatment of products regardless of origin. By understanding the scope and obligations under this Regulation, businesses can ensure compliance and contribute to sustainable production and consumption practices.
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