The EU Regulation on Deforestation-Free Products (EUDR) remains in limbo: update and prospects 

After months of pressure from industry representatives and several third countries (including the United States, India and Brazil), on 14 November 2024, the European Parliament voted in favour of the European Commission's proposal to delay the EU Regulation on Deforestation-Free Products (Regulation (EU) 2023/1115) (EUDR) timeline by one year. Additionally, eight amendments on key provisions, presented only one week before the plenary by the European People's Party (EPP) have been adopted, including proposals to introduce a "no-risk" category. The legislation will now be subject to inter-institutional negotiations and must be approved by the Council and Parliament before it can be enacted.

The Regulation, which entered into force on 29 June 2023 (see our December 2023 update), sets out rules for certain commodities and derived products associated with deforestation and forest degradation. Provided the Council and Parliament reach an agreement on the amendments, medium and large sized companies will be required to comply with the EUDR as of 30 December 2025 (30 June 2026 for micro and small enterprises). However, if an agreement is not reached before the original implementation date, operators must comply with the regulations from 30 December 2024 until a resolution is reached.

Key takeaways

• Operators and traders of certain commodities and products will be required to establish a due diligence system to ensure that these products and their derivatives have not been produced on deforested land or on forest subject to forest degradation – otherwise the commodities and products cannot be placed or made available on or exported from the Union market.
• The European Commission will assess the risk of deforestation and forest degradation and establish a benchmarking scheme based on a three-tier system for classifying countries or regions as low, standard or high risk. The EPP amendments foresee the creation of a new category of countries posing "no risk", which will be subject to less stringent requirements. With the extension of application, the European executive will publish the results of the assessment on 30 June 2025. According to the general principles on the benchmarking methodology, the vast majority of countries will be classified as low risk; it remains to be seen whether this will still be the case once the EPP amendments are officially adopted, with the introduction of a "no risk" category potentially also raising concerns with regard to WTO compatibility.
• With the adoption of new amendments, the final status of the EUDR remains unclear: the amendments need to be approved by the European Parliament and the Council in order to enter into force. The Group of the Progressive Alliance of Socialists and Democrats (S&D) has called on the European Commission to withdraw its proposal for postponement to avoid legal uncertainty for businesses.
• If the inter-institutional negotiations on the amendments do not result in an agreement by the original implementation date (30 December 2024), operators and traders will have to comply with the EUDR while its postponement is still under negotiation.
• The European Commission has stated that it will analyse the results of the vote before taking a position. In a press conference after the vote, the EPP declared they are confident that an agreement can be reached before the Christmas break.

Overview of the regulation

The EUDR prohibits the placing or making available on the EU market or export of relevant commodities and products, unless they are 

• "deforestation-free", meaning that the 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 (i.e., not been converted from forest to agricultural use, whether human-induced or not), or in the case of relevant products containing or having been made with wood, that the wood has been harvested from forest without inducing forest degradation after 31 December 2020;
• produced in accordance with the relevant legislation of the country of production, and
• covered by a due diligence statement stating that there is no more than a negligible risk of non-compliance.

The Regulation also covers deforestation that is legal in accordance with the laws of the country of production.

Key commodities and products covered

The regulation targets seven commodities, due to their significant role in driving deforestation and forest degradation:

• cattle;
• cocoa;
• coffee;
• palm oil;
• rubber;
• soya; and
• wood.

Additionally, certain derived products, (listed in the Combined Nomenclature code in Annex I of the EUDR) are covered. Those not included are not subject to the requirements of the Regulation, even if they contain relevant commodities in the scope of the Regulation. The list is expected to be reviewed and updated regularly.

The Regulation applies to products listed in Annex I regardless of whether they are produced in the EU or imported from outside the EU.

However, the EUDR does not apply to products that were produced before 29 June 2023, with the exception of timber and timber products (which are covered if produced before that date and placed on the EU market after 31 December 2027).The EUDR also does not apply to goods if they are produced entirely from material that has completed its lifecycle and would otherwise have been discarded as waste. 

Within two years of the EUDR entering into force, the European Commission will evaluate and, where appropriate, present a legislative proposal to extend its scope to further commodities or to other natural ecosystems, including grasslands, peatlands and wetlands.

Due diligence requirements

Operators (i.e., any natural or legal person who, in the course of a commercial activity, places relevant products on the market, or exports them) and traders (i.e., any person in the supply chain other than the operator who, in the course of a commercial activity, makes relevant products available on the market) who place a relevant product on the market for selling, with or without transformation, or for the purpose of processing or distribution to commercial or non-commercial consumers, or for use in the context of its commercial activities will be subject to the due diligence requirements. The same applies to any person who exports the relevant products in the course of a commercial activity. 

In order to comply with the EUDR, operators and traders must upload a due diligence statement to their competent national authority, through a dedicated information system designed by the European Commission. The statement must confirm that a due diligence system has been established and implemented, that consists of: 

• the collection of detailed information;
• carrying out a risk assessment; and
• adopting risk mitigation measures and procedures.

Step 1: Collect information

For each relevant commodity and product, operators and traders must collect detailed information showing that the product is deforestation-free and legal. The information must include: trade name, quantity, country of production, geolocation of all plots of land, contact details of suppliers and customers. The information must be kept for five years, from the date on which the products were placed on the market or exported. 

Step 2: Risk assessment

Operators have to analyse and verify the collected information. Based on this verification and other relevant criteria such as the assignment of risk to the country of production, the presence of forests and indigenous peoples in the production area, the complexity of the relevant supply chain, the risk of circumvention of the regulation and other complementary documentation, businesses must assess the risk of non-compliance. Operators need to demonstrate how the information gathered was checked against the risk assessment criteria and how they determined the risk. Products are only allowed on the Union market if there is no or negligible risk.

Step 3: Risk mitigation

If a risk is identified, businesses must adopt measures to mitigate it to achieve no or negligible risk. This may include obtaining additional information, conducting independent audits and/or supporting suppliers in compliance efforts. These procedures and measures must be documented and reviewed at least once a year.

Simplified due diligence 

Steps 2 and 3 are not required when the relevant commodities and relevant products have been produced in countries (or parts thereof) that are classified as low risk. In these cases, operators are subject to simplified due diligence requirements, unless the operator obtains or is made aware of any relevant information (including substantiated concerns) that would point to a risk that the relevant products do not comply.

Due diligence statement

Once the due diligence has been completed, businesses must submit a due diligence statement to competent authorities confirming that the relevant commodities and products are compliant or there is negligible or no risk of being non-compliant before they can be placed or made available on the Union market or exported. Annex II of the EUDR sets out the information that the due diligence statement must contain. It is the responsibility of the operators / traders to then communicate to businesses further down the supply chain all information necessary to demonstrate due diligence was exercised.

For products made from multiple relevant commodities, operators must ensure that due diligence is conducted for each component. 

Due diligence statements must be submitted electronically via the Deforestation Due Diligence Statement Registry created by the European Commission. Since 6 November 2024, economic operators, traders and their authorised representatives have been able to register on the Information System. 

Review

The due diligence system must be reviewed at least once a year and businesses must keep records of due diligence statements for five years from the date when the statement is submitted in the Information System and make them available to competent authorities upon request. Companies which are also subject to reporting obligations under other EU legislation on value chain due diligence (such as the EU Corporate Sustainability Due Diligence Directive) may include the information required by the EUDR when reporting under other legislation in order to avoid double reporting.

Penalties and Enforcement

Member States are responsible for enforcing the EUDR. National competent authorities will be responsible for checking compliance with the EUDR, on the basis of the due diligence statements submitted by the operators. 

Enhanced scrutiny will be applied to relevant products from high-risk countries. As of 29 June 2023, all countries have been assigned a standard level of risk but this will change with the adoption of a high / standard / low risk classification system by the European Commission.

Competent authorities will have the possibility to take immediate interim measures, such as the suspension of the placing or making available on the market or the export, or the seizure of the relevant commodities / products, in cases of potential non-compliance with the EUDR. If a competent authority concludes that the EUDR has not been complied with, the operator or dealer may be ordered to take corrective action within a specified period of time. 

Penalties for infringing the EUDR are established by the Member States and may include confiscation of products, confiscation of the gained revenues, temporary exclusion from public procurement processes, prohibition from exercising the simplified due diligence regime, and in cases of serious infringements even temporary exclusion from the EU market in regard to the targeted products, and fines of up to 4% of total EU-wide turnover in the previous financial year for legal persons. Penalties can be avoided if operators / traders take corrective actions: for example, immediately withdrawing or donating to a charity the relevant product, as established by the national competent authorities.

Guidance

Businesses involved in the production, import, and trade of the relevant commodities and products must prepare to comply with the due diligence requirements by the specified deadlines. To avoid penalties and ensure compliance, establishing comprehensive and clear due diligence systems and maintaining detailed records is key.

To facilitate a coherent and effective implementation of the EUDR both by third countries and affected operators, the European Commission published a strategic framework for stronger international cooperation and a guidance document to clarify certain aspects of the EUDR, in particular the interpretation of some key definitions. The document covers also the due diligence requirements, providing additional information on the different steps foreseen by the Regulation. 

Final observations

The commitment to deforestation-free supply chains dates back to 2019, when the European Commission published its Communication on "Stepping up EU action to protect and restore the world's forests", and was reaffirmed in the European Green Deal. The EUDR forms part of the EU's overarching objective to reduce greenhouse gas emissions, limit its impact on global deforestation and prevent infringement of the rights of indigenous people. In recent months, however, the European Commission has been attempting to balance different interests at stake: environmental protection and the creation of sustainable value chains on the one hand, and the practical implementation concerns of industry and third countries on the other.

As of now, the destiny of the EUDR is not entirely clear. According to the EPP, no one in Brussels intends to endanger the one-year extension of the application timeline. We advise affected businesses to continue preparing and coordinating with their downstream and/or upstream supply chains to ensure the relevant information is available for due diligence statements.

Ashurst will continue to monitor developments closely, with a particular focus on the inter-institutional negotiations on the adopted amendments and the release of the European Commission's risk classification list. We stand ready to assist our clients with any questions or issues on related matters.