Are you ready for the EU Deforestation Free Products Regulation (EUDR)?

In brief 

• The EUDR repeals and replaces the EU Illegal Timber Regulation, significantly extending the range of regulated commodities beyond wood to include cattle, cocoa, coffee, oil palm, rubber, soya and derived products.
• Irrespective of volumes involved, it imposes strict due diligence requirements on companies that, in the course of commercial activities, place in-scope commodities or derived products on the EU market for the first time, export them from the EU, or make them available in the EU.
• This includes companies that make use of in-scope commodities or derived products in their own businesses.
• The EUDR applies to any business registered, headquartered or with a permanent business establishment in the EU, so non-EU registered businesses with EU branches or subsidiaries should consider its relevance to them.
• Originally intended to take effect from 30 December 2024, the European Commission has proposed a 12-month delay to allow affected parties more time to prepare.

What is the intent of the EUDR? 

Entering into force on 29 June 2023, the EUDR aims to reduce global deforestation, and associated contributions to greenhouse gas emissions and biodiversity loss. It imposes mandatory due diligence obligations on companies that wish to place or make available on the EU market (or export from the EU) products that consist of, are fed by or are made using relevant forest risk commodities.

Per Article 3, such products are prohibited from the EU market unless they are:

1. Deforestation-free, i.e., produced on land that has not been subject to deforestation or induced forest degradation since 21 December 2020.
2. Produced in accordance with relevant legislation in the country of production.
3. Covered by a due diligence statement, confirming that due diligence has been carried out in accordance with the requirements set out in the EUDR, and that this has identified "no or negligible risk" of non-compliance with points 1 and 2.

(For a full list of in-scope commodities and derived products, see Annex 1 of the regulation.)

To whom does the EUDR apply and when does it take effect?

The EUDR applies directly to both 'operators' and 'traders' established in the EU.

Operators are those who, in the course of a commercial activity, place relevant commodities or products on the EU market for the first time or export them from the EU. As well as importers and exporters, this includes operations that convert one in-scope commodity or product into another and make that product available in the EU for the first time (e.g., a company that uses cocoa butter sourced from an EU importer to produce chocolate would still be considered an operator).

'Traders' are those who, in the course of a commercial activity, make relevant commodities or products available for distribution, consumption or use on the EU market. In essence, this includes anyone in the supply chain between the operator and the eventual end-user, such as dealers, distributors and retailers (whether traditional or online).

Originally intended to take effect from 30 December 2024, the European Commission has proposed a 12-month delay to allow affected parties more time to prepare. For large companies that exceed at least two of 250 employees, €50 million net turnover and €25 million balance sheet total, this would make the law applicable from 30 December 2025. For smaller and micro enterprises that don't exceed these thresholds, simplified requirements would apply from 30 June 2026.

Seven key things to know 

• Supply chain due diligence requirements: before making relevant commodities and products available on the EU market, operators and traders must carry out due diligence in accordance with the detailed requirements of Article 8. These include:
  • Collecting information about the commodity or product, the supplier and the country of production to demonstrate compliance with Article 3.
  • Verifying and analysing that information to evaluate the risk of relevant commodities or products being non-compliant (Article 10).
  • Taking and documenting adequate mitigation measures to ensure that any identified risks become negligible (Article 11).
• Due diligence statements: : operators and traders must submit due diligence statements to competent authorities in the relevant member state. As well as confirming that due diligence has been carried out in line with EUDR requirements, and that no or negligible risk has been found, these statements should also include details regarding:
  • Quantities of relevant commodities or products. 
  • The country of production and geolocation of land where the relevant commodities or products were grown, harvested, raised on or obtained from. 
  • The reference number of any statement from higher up in the value chain that is being relied upon (note: the operator or trader must ascertain that due diligence was carried out and remains legally responsible for compliance with Article 3).
• Special provisions: simplified requirements apply if all relevant commodities or products have been produced in countries assessed by the European Commission as low risk. Other simplified requirements apply to small and micro undertakings, which needn't submit detailed statements if relevant products have already been subject to due diligence higher up in the supply chain. They may simply provide the competent authorities with reference numbers of statements they are relying on. 
• No minimum thresholds: unlike the proposed Forest Risk Commodities Regulation in the UK, which is only expected to apply to large undertakings using more 500 tonnes of relevant commodities and products, no such minimum thresholds affect the scope of the EUDR. 
• Enforcement and penalties: undertakings found by competent authorities to be breaching their EUDR obligations could face several penalties, from seizure and confiscation of the relevant commodities and products to maximum fines of no less than 4% of EU turnover in the preceding financial year. 
• "Making available on the market" and "in the course of a commercial activity": it should be noted that these definitions are not limited to supplying relevant commodities or products for distribution, consumption or use in return for payment. They also include their use "in the business of the operator or trader itself." This conceivably means that a business could find itself in scope of the EUDR if, for example, the paper used in its offices is not made from 100% recycled content. 
• Relevance to non-EU based undertakings: the EUDR could have both direct and indirect impacts on businesses registered outside the EU. For example: 
  • The definition of "established in the Union" includes not only businesses that are registered or headquartered in the EU, but also those that have a permanent establishment there. Thus, non-EU registered undertakings with an EU branch or subsidiary may find themselves needing to comply with EUDR requirements. 
  • While non-EU undertakings exporting in-scope commodities or products to the EU are outside the direct scope of the EUDR, they may still find themselves impacted indirectly. Although due diligence responsibilities pass to the first EU-based recipient of the commodity or product, in reality, those importers are likely to prefer suppliers who can furnish them with the information necessary to fulfil their compliance obligations.  

How can we help? 

The Mishcon Purpose team can help you to:    

• Determine if the EUDR or other sustainability-related regulations are likely to apply your business.  
• Prepare for and fulfil associated compliance obligations. 
• Improve your ability to address multiple regulatory requirements by implementing the policies, practices and processes necessary to fully embed sustainability matters into strategy, governance, and risk management. 

To discuss your needs, get in touch to arrange a free 30-minute consultation .