Regulation on Deforestation-free products

The implementation of the new EU regulation on Regulation on Deforestation-free products (EUDR) poses new challenges for initial distributors. After the Supply Chain Due Diligence Act (LkSG), this is the next major task that regulates the supply chain from an environmental and social perspective. You can view the current status in this area.

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Brief overview

Regulation (EU) 2023/1115 came into force on 29.06.2023 following approval by the EU Parliament and the member states. Industrial companies and retailers as well as import and export companies now only have a few months to adapt to the new rules on Regulation on Deforestation-free products. The Regulation is intended to ensure a European contribution to the reduction of global deforestation and thus to the mitigation of climate change and the reduction of biodiversity loss and greenhouse gas emissions as well as the promotion of human rights and the rights of indigenous peoples.

To this end, certain products should only be legally marketed or exported from the EU if they have been produced without deforestation and comply with the laws of the producer countries.

The key principles of the Regulation are transparency and non-discrimination – domestic and imported goods and products are treated equally. Imports, exports and internal trade are covered.

The products concerned must be deforestation-free from 30.12.2024.

This means that there has been no conversion of forests to agricultural land on the production areas of the relevant raw materials since 31.12.2020 and that there have been no harvesting operations that are unsustainable and lead to a reduction or loss of biological or economic productivity and complexity of forest ecosystems.

Which raw materials or downstream products are affected?

Relevant raw materials

The Regulation currently covers the raw materials listed below, which, according to thorough analyses, are considered to be the main cause of deforestation due to the expansion of agriculture. This list is reviewed regularly and revised as necessary to take account of changing patterns.

Oil palm, soy, wood, beef, cocoa, coffee, rubber

Relevant downstream products

Products containing these raw materials or animals fed with these raw materials are also affected. Here are a few examples:

Beef: live animals, meat, offal, leather prepared after tanning or drying
Cocoa: raw or roasted cocoa beans, cocoa mass, cocoa butter, chocolate
Oil palm: palm oil, palm kernel oil
Rubber: tyres made of rubber, clothing and clothing accessories for all purposes made of soft rubber (e.g. gloves)
Wood: charcoal, furniture, paper

Which companies are affected?

Market participants affected by the Regulation are companies that place products on the market within the EU (manufacturers and importers), supply them (retailers) or export them from the EU (exporters).

The Regulation classifies non-SME-traders as well as manufacturers and importers as market participants who must fulfil the full obligations.

The Regulation provides relief only for small and medium-sized enterprises within the meaning of Directive 2013/34/EU.

SMEs (micro, small or medium-sized enterprises) are companies with less than 250 employees and/or 40 million euros in annual turnover and/or 20 million euros in total assets.

Requirements resulting from the Regulation

Relevant raw materials and products may only be placed on the market, made available on the market and exported if the following three requirements are met:

They are deforestation-free.
They have been produced in accordance with the relevant legal provisions of the country of production (human rights, labour law, anti-corruption laws, nature conservation laws, etc.).
A declaration of due diligence is available.

Before relevant products are exported, placed on the market or made available on the market

1. information, data and documents must be collected to prove that the above three points have been fulfilled:

This includes, for example, the following information:

Precise description, quantities of products, list of all relevant raw materials/products included or used for production; addresses of companies from which products were sourced and addresses of all companies to which products were supplied; geolocalisation of all land used for production; conclusive and verifiable information that products are deforestation-free and that the country's legislation has been complied with.

2. risk assessments of the information and documents must be carried out by the companies for conformity.

Relevant products may only be placed on the market or exported if the risk assessment shows no or only a negligible risk that the products are non-compliant.

For example, the following criteria must be taken into account:

Individual risk (as categorised by the EU Commission) of the producer country
Presence and cooperation of indigenous peoples
Source, reliability and validity of the information collected
Concerns about the producer country (corruption, lack of criminal prosecution, respect for human rights, etc.)
Complexity of the supply chain and processing stage of the relevant products (allocation of properties)
Prevalence of deforestation or forest degradation
Risk of circumvention of the EUDR or risk of mixing with products that have been created with the help of deforestation
Conclusions of the Commission's expert group

The affected companies must document the risk assessment and review it at least once a year and make it available upon request. The risk assessment must also be comprehensible.

3. risk minimisation measures must be initiated.

If the risk assessment shows that there is a non-negligible risk, the market participant must initiate measures to minimise risks (audits, request for additional documentation).
Due diligence declarations in accordance with Annex II of the Regulation must be submitted to the competent authorities prior to placing on the market or export.
By submitting the due diligence declaration, the market participant assumes responsibility for ensuring that the products comply with the Regulation. A fulfilled due diligence obligation upstream in the supply chain does not release subsequent market participants from the obligation to fulfil the due diligence obligation on their part.

In order to comply with due diligence, a framework of procedures and measures must be put in place and kept up to date by market participants = "due diligence system".
The due diligence system must be reviewed at least once a year to ensure that it is up to date, and records of this must be kept for at least five years.
Non-SME market participants must report annually in as much detail as possible, in a publicly accessible manner, on their due diligence system.

Information system of the EU Commission

By 30 December 2024, the Commission shall establish and maintain an information system containing the due diligence declarations. Legal system requirements are:

registration of market participants and retailers and their authorised representatives in the Union
registration of due diligence declarations, including the transmission of a reference number for each due diligence declaration transmitted through the information system to the market participant or retailer concerned
provision of the reference numbers of existing due diligence declarations
if possible, the conversion of data from relevant systems to determine geolocalisation
registration of the results of due diligence declaration checks
interconnection with customs through the European Union Customs Single Window environment referred to in Article 28, including to enable the notifications and requests referred to in Article 26(6) to (9)
provision of relevant information to support the preparation of the risk profiles for the control plan, including the control results, the risk profiles for market participants, retailers and relevant raw materials and relevant products for the purpose of identifying, on the basis of electronic data processing techniques, market participants and retailers and relevant products to be controlled by the competent authorities
facilitating mutual assistance and co-operation between competent authorities and between competent authorities and the Commission in the exchange of information and data

The deliberations on the information system are taking place within the framework of the EU Commission's expert group "Multistakeholder platform on protecting and restoring the world's forests". Its members are exclusively business organisations and NGOs from relevant sectors along the entire supply chain. Retail is represented with two seats through EuroCommerce. The platform already existed before the Deforestation Registration – there is very little knowledge among the participants of the sometimes highly technical requirements for the suitability of the information system.