EUDR DEFORESTATION-FREE LEGISLATION

The EUDR is a regulation launched by the EU Commission to limit deforestation caused by the consumption of products within the EU. The regulation requires companies within scope to comply with the relevant obligations.

The regulation applies to seven commodities (and products derived from them) which have been found to hold the greatest impact on deforestation – cattle, cocoa, coffee, palm oil, rubber, soya and wood. These commodities should not have been produced on land that has been deforested after 31st December 2020. The EUDR requirements expand upon the scope of (and will eventually replace) the EU Timber Regulation (EUTR).

The EUDR applies to all market operators or participants (manufacturers, suppliers, importers, exporters and traders) which are involved in the production, importation and exportation of the aforementioned commodities and their derivatives. Furthermore the EUDR requirements are applicable to both large, medium-sized and small businesses.

In order to produce, import and export the specified products and their derivatives certain operators must execute a due diligence, to demonstrate that the products do not originate from areas which have been deforested after 31st December 2020.

The relevant products (and/or derivatives) need to comply with three key aspects:

1. Deforestation-free.
2. Produced in accordance with local legislation (forest and environment related, human rights and labour rights, land-use and rights of indigenous people or governance-related such as absence of corruption).
3. Availability of a due diligence statement: confirmation that no or only negligible risk has been found, by providing relevant information as evidence. 

The EUDR requires that a due diligence should include 3 elements:

• Collection of information: collection and storage of data to confirm the location, nature and date of the initial production; conclusive and verifiable information that the relevant products are deforestation-free as well as conclusive and verifiable information that the relevant commodities have been produced in accordance with the relevant and applicable local legislation. 
• Risk assessment: At least an annual verification and analysis of information coming from the supplier (‘trader’ or ‘operator’) and establishment of the risk of non-compliance with the EUDR requirements for each specific raw material or each specific product.
• Risk mitigation: Indispensable collection of additional information if a risk has been detected; execution of independent audits or surveys in which suppliers are included (in particular small and medium-sized companies) through application of measures related to risk management, policies, controls, procedures and research into applied investments.

Penalties for non-compliance can include fines up to 4% of the company’s EU revenue on top of confiscation of revenues gained from the sale of the products and temporary prohibition to place these products on the market.