Countdown to Compliance With European Union’s Deforestation Regulation
Companies are preparing to comply with the European Union’s new deforestation regulation (EUDR).
On June 29, 2023, the European Parliament and Council formally adopted the EUDR. The EUDR goes into effect on December 30, 2024 for large companies (operators and traders)[1] and June 30, 2025 for micro and small exporters.[2]
The EUDR seeks to ensure that products brought into or exported from the EU market are deforestation-free. Thus, seven commodities including cattle, cocoa, coffee, palm oil, rubber, soy and wood items will be banned from the EU market if they are found to be grown on land that was deforested after December 31, 2020.
Companies importing any of these seven commodities into the EU will need to provide “conclusive and verifiable information” proving that the product did not originate from recently deforested land or contribute to forest degradation. Operators and traders will need to identify the plot of land where the product came from and prove that no forests have been cleared on that site since 2020.
The law requires EU national authorities to check nine percent of shipments coming from countries it considers to have a high risk of deforestation, three percent for nations it labels standard risk and one percent from low risk nations.
Operators or traders failing to meet the new rules face fines of up to four percent of the operator’s or trader’s total “annual Union-wide turnover in the financial year preceding the fining decision.”
The purpose of the EUDR is to reduce deforestation and forest degradation, which contribute to global warming and biodiversity loss. Trees absorb carbon dioxide, and forest loss and damage is estimated to have caused around 10 percent of global warming, according to nonprofit World Wildlife Fund.
Thus, the new Regulation aims to:
- prevent Europeans from buying, using, or consuming products that contribute to deforestation and forest degradation,
- reduce carbon emissions caused by EU consumption and production by at least 32 million metric tons per year, and
- decrease deforestation driven by agricultural expansion.
EUDR critics are concerned that the EUDR will disproportionately hurt small farmers in Southeast Asia due to the high costs associated with monitoring and tracing these products. For example, Malaysia’s rubber and palm oil farmers have asserted that the EUDR will exclude smallholders from the European market and worsen rural poverty. As a result, they have already filed a petition to the EU protesting the “unilateral and unrealistic” demands set forth in the EUDR.
Rubber farmers in Vietnam are also grappling with the compliance hurdles presented by the EUDR since almost all Vietnamese rubber is mixed with rubber from Cambodia and Laos, making traceability “almost impossible,” according to research by Forest Trends.
[1] Per the Regulation, “operator” means any natural or legal person who, in the course of a commercial activity, places relevant products on the market or exports them, and “trader” means 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.
[2] Per the Regulation, “micro, small and medium-sized enterprises” or “SMEs” means micro, small and medium-sized undertakings as defined in Article 3 of Directive 2013/34/EU of the European Parliament and of the Council.