June 5, 2024 • Reading time: 11 Min
In the middle of a dense forest of rules and regulations under EU law: the EUDR. The EU Deforestation Regulation (EUDR/VO 2023/1115) introduces new requirements for companies along the supply chain of timber and forest products. This requires affected companies to comprehensively review their supply chains and implement effective measures to ensure compliance with the strict requirements. In particular, transparency and traceability are crucial to ensure that products are manufactured without deforestation and comply with all legal requirements. Companies are therefore faced with the challenge of reviewing and, if necessary, adapting their procurement practices to meet the requirements of the EUDR. It is crucial that companies start implementing the required measures early to avoid potential risks and sanctions while contributing to forest protection and sustainable development. In our blog post, you will get an overview of all the important topics of this regulation, its implications and how companies can prepare for the new due diligence requirements.
The EU Deforestation Regulation (EUDR/Regulation 2023/1115) replaces the EU Timber Regulation (EUTR/EU 995/2010), which first banned the import of illegally produced timber into the EU in 2010. The EUDR came into force in June 2023, with large companies required to fully comply with the regulations by December 2024. Comprehensive due diligence is required before placing certain products such as timber, coffee, soy, palm oil, and others on the market.
The EUDR sets clear responsibilities for companies to ensure the protection of forests and respect for human rights along the supply chain. This includes verifying the origin of products and ensuring fair working conditions and human rights. The rights of indigenous peoples are gaining importance, and transparency and traceability are crucial to ensure that products are free from deforestation and comply with all legal requirements. Due diligence procedures consist of three stages and require information on the goods, risk assessment, and risk mitigation. Early implementation of these measures is recommended to avoid potential risks and sanctions and contribute to forest protection.
The introduction of the EUDR brings opportunities and challenges. By complying with the regulations, companies can contribute to environmental protection, promote sustainable practices, and build long-term partnerships. However, it requires additional investments, increased complexity along the supply chain, cost increases, and bureaucratic effort. To successfully implement the EU Regulation on Deforestation-Free Supply Chains, certain key points must be considered. These include analysing the supply chain and existing solutions, designing and implementing due diligence requirements, clarifying responsibilities, monitoring, and reporting on implementation. Additionally, efficient communication with partners, accurate capture and use of geodata, and the use of technologies and tools for compliance support are crucial. It is also important to keep track of legal developments.
Overall, the EUDR provides clear guidelines for companies to ensure forest protection and promote sustainable development. It is important to understand the impact on companies and supply chains, respond appropriately, and remain competitive in the long term. Compliance with the regulation is subject to checks, following a risk-based approach. Sanctions are provided for violations of the regulation.
Receive regular insights and updates on the latest developments in the areas of LkSG, CSDDD, CSRD, ESRS, compliance, ESG and whistleblowing. Our newsletter helps you to simplify your compliance processes.
In the midst of global forest loss and the increasing threat to biodiversity, the EU Commission has adopted the EU Deforestation Regulation (EUDR/ REGULATION 2023/1115). The EU regulation obliges companies that import products into the EU market to strictly monitor goods from risk areas such as soy, beef, palm oil and cocoa. The aim of this law is to promote sustainable development by combating deforestation and illegal timber products and to reduce the carbon emissions caused by EU consumption and production of the goods in question by at least 32 million metric tons per year.
Companies along the supply chain are confronted with comprehensive requirements in order to fulfill their due diligence obligations with regard to their products and raw materials. The EUDR requires market participants to provide comprehensive transparency and documentation of their procurement processes for forest products and to adhere to strict compliance guidelines. By implementing measures to comply with the EUDR regulations, companies can not only support the protection of forests, but also create long-term opportunities for sustainable business. The regulation thus provides a clear guideline for companies to fulfill their responsibilities in the context of preserving forests and protecting the environment. As a result, environmental degradation should be reduced and the diversity of animal and plant species preserved.
Forests are vital for people and the environment. They provide multiple benefits such as timber production, climate protection, water storage and biodiversity conservation. Deforestation not only threatens the livelihoods of many people and indigenous communities, but also reduces important carbon sinks and increases the risk of disease outbreaks due to contact with wildlife.
According to estimates by the Food and Agriculture Organization of the United Nations (FAO), around 420 million hectares of forest were lost worldwide between 1990 and 2020, which corresponds to around 10% of the world's remaining forests. This deforestation is a cause of global warming and the loss of biodiversity, two key ecological challenges. A further 10 million hectares of forest are lost every year, which highlights the urgency of taking action.
The European Union has adopted a regulation to promote sustainable development and reduce environmental damage caused by EU imports. EU consumption contributes significantly to global deforestation, particularly of six commodities: Cattle, cocoa, coffee, oil palm, soy and timber. Without adequate regulatory measures, deforestation could increase by around 248,000 hectares per year by 2030 alone.
In November 2021, the EU Commission presented a draft law for deforestation-free supply chains. On December 5, 2022, a final draft law on the requirements for companies was agreed by the EU Commission, the Council of Ministers and the European Parliament. The EUDR came into force the following year, on June 29, 2023. Large companies must fully implement the regulations from December 30, 2024, while micro and small companies have a further six months and the regulations will therefore apply to them from June 30, 2025. A review of important points is planned after just one year.
In the context of the EUDR, the promotion of sustainable development and environmental protection is becoming increasingly important. Companies must pay more attention to the impact of their supply chains on forests and ecosystems. The EU Commission sets out clear requirements to combat deforestation and prevent trade in illegal timber products. Due diligence along the entire supply chain is thereby strengthened to ensure that only products from legal and sustainable sources are used. Market participants are required to provide transparent information about the origin of their raw materials and to act responsibly. By complying with these regulations, companies are making an important contribution to protecting forests and promoting sustainable development.
In detail, the production of the goods must also comply with the environmental, labor and human rights regulations of the country of production. This is enshrined in Article 3(b), which stipulates as an absolute condition for trade that the relevant raw materials and products have been produced in accordance with the relevant legislation of the country of production. According to Article 2(40), such relevant legislation includes labor rights, human rights protected under international law and the rights of indigenous peoples.
The protection of labor rights is becoming increasingly important in the context of the EU Deforestation Regulation. This regulation aims to reduce the impact of deforestation on global supply chains and combat illegal deforestation and human rights violations.
In this context, labor rights are also of great importance, as deforestation often goes hand in hand with abusive working conditions. These include fair working conditions, appropriate remuneration, health and safety standards in the workplace and respect for human rights. In addition, the regulation emphasizes the importance of compliance with international labor standards. This includes measures to prevent forced labor, child labor and discrimination.
Labor rights are essential to ensure a fair and sustainable economy. By complying with appropriate regulations, companies can help to promote ethically correct working practices and assume social responsibility. This not only helps to protect workers, but also strengthens consumer and investor confidence in companies.
The EU Deforestation Regulation primarily protects the human rights of indigenous peoples, who are often directly affected by deforestation. The regulation strengthens their rights to land ownership, self-determination and traditional ways of life, as they are often under great pressure when their livelihoods are destroyed by deforestation. Awareness of the link between human rights and environmental protection has increased significantly in recent years. More and more companies are also recognizing the importance of social responsibility and sustainable action. The regulation obliges companies to translate these values into practical measures and to ensure compliance with human rights along the supply chain.
The importance and appreciation of indigenous peoples plays a central role in the regulation. The recognition of their traditional knowledge and their sustainable use of natural resources serve as an important basis for a responsible approach to the environment. The EU Deforestation Regulation ensures that corporate deforestation is strictly regulated in order to minimize the negative impact on the environment and ensure the protection of indigenous communities. By incorporating indigenous perspectives, innovative solutions are developed that promote sustainable development while respecting the rights and interests of indigenous peoples. The regulation thus creates a platform for dialog and cooperation between different stakeholders to achieve common goals for the protection of the environment and respect for indigenous ways of life.
The rights of indigenous peoples, such asFree, Prior and Informed Consent(FPIC), are of crucial importance and must by no means be neglected. FPIC grants indigenous communities the right to be informed of and give prior consent to all decisions that affect them. This consent must be free, predictable and informed in order to guarantee that their rights and interests are safeguarded.
Recognizing and implementing the FPIC norm is essential to protect the rights of indigenous peoples and ensure that their voices are heard. This principle is not only morally imperative, but also legally enshrined, both at the international level and in numerous national legislations. It is the responsibility of all actors - governments, companies, NGOs and society as a whole - to ensure that FPIC regulations are respected and implemented.
Indigenous rights are inalienable and must be treated with the utmost respect. Respect for their self-determination, traditions and ways of life is of paramount importance for fair and respectful cooperation.
The EUDR has far-reaching implications for companies and their supply chains. Companies that place products on the market that are associated with deforestation must meet strict requirements. This applies not only to direct forest loss, but also to indirect effects on the environment and social conditions in supply chains. The EU Commission attaches great importance to transparency and due diligence along the entire production chain. Market participants are therefore called upon to closely examine their supply chains and ensure that no illegal timber or forest products are used.
The EU regulation on deforestation sets out clear responsibilities for companies to ensure sustainable development in their business processes. The due diligence obligations are enshrined in Articles 8, 9, 10, 11 and 13 and must be complied with in full, otherwise there is a risk of a ban under Article 3.
The companies concerned must therefore go through a three-stage due diligence process: This comprises the collection of information (Art. 9), risk assessment (Art. 10) and risk mitigation measures (Art. 11). Compliance with these obligations must be reviewed annually and publicly documented, and all relevant documents must be kept for five years.
The introduction of the regulation presents companies with numerous potentials and hurdles that need to be overcome. It is crucial to identify and exploit the opportunities in order to position themselves successfully on the market. At the same time, the associated challenges must also be overcome in order to ensure long-term success.
The EUDR offers companies incentives to develop innovative solutions and position themselves as pioneers in environmental protection. The benefits include strengthening environmental protection, promoting sustainable forestry practices and reducing deforestation. In this way, companies can help to protect biodiversity and mitigate climate change.
Safeguarding human rights in the supply chain also brings numerous benefits for companies. By ensuring that the working conditions and rights of workers in their supply chains are respected, companies can not only act ethically, but also strengthen their reputation with customers, investors and other interest groups. This is because more and more consumers attach importance to the fact that the products they buy are manufactured under fair conditions. By respecting human rights in the supply chain, companies can also reduce the risk of reputational and legal disputes, which can have a positive impact on their business success in the long term.
In addition, transparent supply chains and responsible business practices can build long-term partnerships with suppliers based on trust and shared values. Companies that are committed to respecting human rights in their supply chain send a strong signal of social responsibility and sustainability.
Furthermore, the regulation creates a clear legal framework for the handling of forest products, which leads to greater transparency and accountability in supply chains. By proactively addressing the requirements of the regulation, companies can benefit in the long term from a positive brand image, increased competitiveness and sustainable corporate growth.
However, the implementation of the EU regulation on supply chain due diligence is also proving to be extremely demanding and challenging for companies. The origin of products is becoming a key issue, as it is often difficult to trace back to the source of origin. The required changes and adjustments along the entire supply chain can lead to a significant increase in complexity. This has a direct impact on the procurement of raw materials and therefore poses major challenges for operational processes. A transparent and sustainable review of all processes is required. The management of supplier relationships and the monitoring of working conditions are becoming key aspects that companies need to keep a close eye on. A structured approach to implementing this regulation is essential to manage the complexity while ensuring compliance with legal requirements.
Cost increases are a key aspect that must be taken into account when switching to deforestation-free supply chains. Companies must be prepared for the fact that compliance with the stricter requirements will require additional investment. These investments could temporarily lead to higher costs, which can affect competitiveness. It is crucial to develop long-term strategies to increase efficiency in order to minimize this cost burden while ensuring forest protection.
Another important consideration that needs to be taken into account is the potential risks for suppliers, particularly in developing countries. They could be negatively impacted by the EU regulation, as they may not be able to meet the new standards in order to continue working with European companies. Such a situation could jeopardize their livelihoods and therefore requires an extremely thorough assessment of the opportunities and risks involved in implementing these new regulations.
The bureaucratic burden associated with complying with the documentation and reporting requirements of the regulation should also not be underestimated. Companies need to be prepared for additional administrative processes that can tie up resources and complicate business processes. It is important to implement efficient data collection and management systems to minimize bureaucracy and ensure compliance with the regulations.
Innovative solutions and technologies are needed to overcome all these challenges. Implementing digital tools to monitor and analyze the supply chain can help companies meet the requirements of the regulation while achieving their sustainability goals.
Overall, it can be said that the EU Deforestation Regulation can have both positive and negative effects on companies. It is therefore important for companies to make an informed assessment of the pros and cons in order to respond appropriately to the regulation and remain competitive in the long term. However, with careful planning and implementation, many of the potential problems can be overcome, while the long-term benefits in terms of environmental protection and sustainable development outweigh the disadvantages.
Almost one in five European timber importers are unaware of the imminent validity of the EU regulation on deforestation-free supply chains, according to a study by technology company iov42. Although around 27% of respondents say they are well prepared, there are clear differences between countries. In the UK, 44% feel somewhat prepared, while in Belgium almost a quarter have not even started preparing. Companies must strictly comply with the EUDR, as violations can result in high fines of up to 4% of annual turnover - a challenge for the industry.
The Global Forests Report 2024 by CDP and AFI also shows that many companies struggle to provide transparent information on deforestation in their supply chains. While European companies are leading the way in implementing deforestation-free supply chains, overall transparency regarding impacts on forests and land remains insufficient. Although 881 companies disclosed information on commodity supply chains through CDP, only 186 companies showed clear evidence of their progress in tackling deforestation. Only 64 companies reported achieving at least one deforestation-free supply chain.
This data underlines the urgent need for companies to work at full speed to implement the regulation.
The EU regulation on deforestation-free supply chains has a significant impact on companies and their supply chains. Companies that sell products that are linked to deforestation must meet strict requirements. Market participants are therefore obliged to carefully review their supply chains and ensure that no illegal wood or forest products are used.
Here are eight key points that should be carefully considered:
The EU regulation on deforestation-free supply chains marks significant progress towards greater sustainability and environmental protection. Companies and market participants are required to implement the requirements of the regulation in order to counteract the negative consequences of deforestation.
Successful compliance with the EU Deforestation Regulation requires companies to implement appropriate measures with precision. The rules of the EUDR must be seamlessly integrated into operational processes in order to meet the requirements. This includes checking and adapting supply chains as well as the conscientious procurement of wood, products and raw materials. Companies are called upon to ensure transparency along the supply chain and to provide information about the origin of their products.
The use of innovative technologies is proving to be a key aspect in meeting the constantly increasing legal requirements and guidelines. Through the targeted use of technology, companies can work more efficiently, optimize processes and at the same time ensure compliance with all legal requirements. With a modern technological infrastructure, companies can not only meet their compliance requirements, but also lead the way in terms of legal conformity.
By taking consistent measures to comply with regulations, companies can not only meet legal requirements, but also actively contribute to the protection of forests - a significant step towards a sustainable future for us all.
The EUDR replaces the EU Timber Regulation(EUTR EU 995/2010). The EUTR first banned the import of illegally produced timber into the EU in 2010 and obliged importers to provide evidence of legally harvested timber. An important step towards reducing the risk of illegal timber imports.
However, it remains valid for three years for timber products derived from trees felled before the EUDR entered into force and entering the EU market during the transitional period between the EUDR and the EUTR (Article 37(2)).
The transitional period extends from the adoption of the ordinance on 30.06.2023 until its application from 30.12.2024.
In this respect, it is questionable what will happen to raw materials that were placed on the market before the regulation was applied but will be placed on the market or exported in another form in 2025.
As an example, a relevant raw material, namely cocoa, was introduced during the transition phase. No geolocalization data was recorded. Now the chocolate made from these beans (relevant derived product) with CN code 1806 is to be placed on the market from 30.12.2024.
During the transitional period before the application of the EUDR, an operator (and non-SME trader) placing a derived product on the market must be able to prove, e.g. by means of evidence, that the relevant raw material was on the market before the Regulation came into force. If the raw material is placed on the market or exported after 30.12.2024, the standard obligations under the EU Regulation apply.
"Market participants" are affected. The definition can be found in Article 2(15) EUDR, according to which an operator is a natural or legal person who places relevant products on the market (including via an import) or exports them in the course of a commercial activity. Commercial activity is understood to mean processing, distribution and use, see Article 2(19).
An example of further processing would be if company A imports cocoa butter (HS code 1804) and company B uses it to produce chocolate (HS code 1806) - in this case, both are considered operators. Operators who import Annex I products into the supply chain without prior due diligence (e.g. importers of cocoa) are obliged to submit a due diligence declaration, regardless of the size of their company.
Under the EUDR, companies that place products on the EU market are obliged to comply with the full due diligence obligation. This obligation also applies to traders and includes the assumption of due diligence by micro-enterprises and natural persons if this has been passed on. The specific form of the obligation depends on the country of origin of the goods and requires a risk analysis and, if necessary, mitigation measures.
SMEs have less stringent due diligence obligations than non-SME market participants and traders. Micro, small and medium-sized enterprises (SME operators) that trade are not required to carry out their own due diligence, but they must ensure that the traded goods have been produced without deforestation and in compliance with the law. This requires information on buyers and sellers as well as reference numbers of the due diligence declaration, which must be kept for five years.
The regulation on deforestation-free supply chains defines small and medium-sized enterprises on the basis of balance sheet total, net turnover and number of employees in accordance with Article 3 of Directive 2013/34/EU. Thus, small enterprises are those with a balance sheet total of EUR 4 million and net sales of EUR 8 million and no more than 50 employees during a financial year. Medium-sized companies are defined as those with a balance sheet total of at least EUR 20 million, net sales of at least EUR 40 million and no more than 250 employees.
Nevertheless, it is important to emphasize that it is the responsibility of every company to comply with due diligence obligations.
Article 7 EUDR describes this case in more detail. In this respect, it should be noted that the first natural or legal person established in the Union who makes these relevant products available on the market is considered to be an operator within the meaning of this Regulation.
This means that the first company based in the EU to place the products on the market must comply with the due diligence obligations.
The relevant raw materials and products are listed in Annex I. According to Article 2(2) EUDR, "relevant products" are defined as products listed in Annex I that contain, have been fed with or have been produced using relevant raw materials.
The relevant raw materials are listed below:
This is an exhaustive list. No threshold values apply. The requirements apply to products manufactured both in the EU and outside the EU. The regulation therefore applies to all products listed in Annex I, regardless of their place of manufacture.
However, the list can be amended by the Commission by means of a delegated act. The European Commission will examine whether it makes sense to extend the scope of the regulation to other raw materials. This will be done on the basis of an impact assessment that takes into account the effects of the raw materials on deforestation and forest degradation. The first review is planned within two years of the Regulation coming into force.
The raw materials and products must fulfill the following conditions cumulatively in accordance with Article 3 EUDR:
The term deforestation is defined in Article 2(3) of the EUDR as follows: "deforestation" means the conversion of forests into agricultural land, whether or not caused by human activity.
By contrast, "agricultural use" means the use of land for agricultural purposes, including agricultural plantations and abandoned agricultural land, as well as land for the rearing of animals, according to Article 2(5). This means, for example, that wood from a legally logged forest area for road construction does not fall under the definition of deforestation.
In the EUDR, not only illegal deforestation is excluded, but also any form of deforestation in general. Products are considered deforestation-free if they are produced on land that has not been deforested or degraded since December 31, 2020, see Article 2(13)(a) and (b).
As far as forests are concerned, Article 2(4) is based on the FAO definition. This means land with an area of more than 0.5 hectares with trees over 5 meters high and a canopy cover of more than 10% or with trees that can reach these values in the respective location. Areas that are predominantly used for agricultural or urban purposes are excluded.
A forest is considered degraded if structural changes to the forest cover, such as the conversion of primary forests into plantations or plantation forests, are carried out (Article 2(7)).
The EU Commission will regularly review the effectiveness of the EUDR and adapt it if necessary(Article 34 EUDR). After one year, an impact assessment must show whether the regulation should also protect "other wooded land" ecosystems in order to protect further biodiverse landscapes from deforestation for EU consumption (see paragraph 1). The term "other wooded land" is defined by the Food and Agriculture Organization of the United Nations (FAO) and Article 2(12) EUDR:
Other wooded areas" are areas not classified as "forest" of more than 0.5 hectares with trees over 5 m high and a canopy cover of 5 to 10 % or with trees that can reach these values on the respective site, or areas that are overgrown with shrubs, bushes and trees by more than 10 %, with the exception of areas that are predominantly used for agricultural or urban purposes.
Two years after the law comes into force, the EU will review whether further ecosystems, such as peatlands and wetlands, should be protected (see paragraph 2). The inclusion of additional high-risk raw materials such as maize and biofuels as well as the possible obligation of financial institutions to prevent investments in deforesting companies is also being examined (see paragraphs 3 and 4). This should help to curb the promotion of deforestation by the financial sector.
Five years after entry into force, the first general review is carried out with a report to the EU Parliament and Council. The focus is on the impact on producer countries, in particular small producers, as well as indigenous peoples and local communities (see paragraph 6). The need for further trade facilitation instruments will also be examined. An important aspect is the possible shift in trade flows with potential attempts at circumvention.
The main obligations can be found in Articles 4, 5, 8, 9, 10, 11 and 13 of the EUDR. For example, operators must comply with the due diligence obligation under Article 8 before placing on the market or exporting relevant products in order to demonstrate that the relevant products comply with Article 3, Article 4(1). In other words, it is not permitted to place the product on the market without first having complied with this obligation. Similarly, traders who are not SMEs ("non-SME traders") must comply with the obligations in Articles 8 to 13 in relation to the relevant raw materials and relevant products that they make available on the market, Article 5(1).
No separate due diligence shall be required for SME operators if those products have already been subject to due diligence in accordance with paragraph 1 and a due diligence declaration has already been submitted for them in accordance with Article 33 (Article 4(8)). In such cases, SME operators shall provide the reference number of the due diligence declaration to the competent authorities upon request. Note: For components of relevant articles that have not yet been subject to due diligence, the due diligence obligation referred to in paragraph 1 shall be fulfilled by SME operators.
Market participants and traders that are not SMEs must carry out a three-stage due diligence procedure in accordance with the EUDR in order to minimize the risk of deforestation(Article 8). The product may only be sold or exported on the Union market once the procedure has been completed.
In accordance with Article 6, it is also possible to appoint an authorized representative to submit the due diligence declaration. However, the authorized representative remains responsible for compliance.
After risk mitigation measures have been implemented and reduced to a minimum level, it is possible to submit the due diligence declaration and distribute the product on the internal market. The information or due diligence declarations are transmitted to authorities and customs via the information system in accordance with Article 33 in order to facilitate the exchange between Member States. The exact requirements and contents of a due diligence declaration are set out in Annex II of the Regulation.
It is important to note that the supporting documents must be kept for five years(Article 9(1)). This is particularly important as companies are obliged to transparently present the risk assessment process and any risk mitigation measures taken and to carry out regular reviews (at least annually)(Article 10 (4) and Article 11 (3)). If necessary, the measures must be adapted.
The introduction of the Regulation entails country benchmarking(Article 29), which is to be published by the EU Commission by 30.12.2024 at the latest. According to Article 29(2), the Commission is required to develop a system and publish the list of countries or regions no later than 18 months after the Regulation enters into force, as soon as the essential obligations of the Regulation become effective. This system is based on an objective and transparent assessment analysis that takes into account both quantitative and qualitative criteria.
This means that a risk analysis or risk categorization is carried out according to country of origin. Initially, all countries are assigned a normal risk. With the help of assessment criteria that take into account quantitative, objective and internationally recognized data, a distinction will be made in future between low, normal and high risk countries.
List of criteria under Article 29(3) EUDR:
a) Extent of deforestation and forest degradation;
b) Extent of expansion of agricultural land for relevant raw materials;
c) Production trends for relevant raw materials and relevant products.
In the assessment under the Regulation, additional criteria such as provision of information by governments, NGOs and industry, agreements to combat deforestation, national laws, transparent data availability, protection laws for indigenous peoples and international sanctions may be taken into account in accordance with Article 29(4).
The extent of monitoring by the authorities should be in line with the risk classification. Accordingly, the requirements for the risk analysis are lower if it is a low-risk country. However, this does not exempt from precise knowledge of the origin of the goods and the associated exclusion of deforestation and illegal practices. However, this does not exempt from precise knowledge of the origin of the goods, whereby the exclusion of deforestation and illegal practices remains guaranteed.
The authorities of the respective member state are responsible for checking the due diligence declaration and associated documents prior to customs release in accordance with Article 14 EUDR. The frequency of checks depends on the risk of non-compliance, with country benchmarking playing a role. This is known as the risk-based approach (Article 16(3)): The risk criteria are based on a comprehensive analysis that takes into account factors such as the relevant commodities, supply chain length and complexity, stage of processing, forest boundaries, past non-compliance, risks of circumvention and other relevant information. For goods from high-risk countries, the inspection rate is 9 percent of operators and products; for standard and low-risk countries, it is 3 percent and 1 percent respectively (Article 16(8) to (10)). Other factors can influence the frequency of checks.
The scope of the checks is governed by Article 18, with the main focus on information provided by the parties, such as due diligence checks, including risk assessment and mitigation procedures (paragraph 1(a)), but sample checks, including on-the-spot checks, are also possible (paragraph 2(e)). In accordance with Article 19(1), the documents and records of SME traders are also checked.
Operators and non-SME traders are obliged to assist the authorities in carrying out checks in accordance with Article 18 (Article 4(6), Article 5(6)). This includes, among other things, access to the premises and the provision of documents and records.
The traceability of products is a decisive factor when it comes to protecting our forests. Through transparent processes and clear documentation, we can ensure that wood and wood products come from sustainable and legal sources. But how exactly does traceability work and what does geolocalization mean?
Traceability refers to the ability to trace the entire path of a product from its origin to the end consumer. This includes all stages of the supply chain, from timber harvesting to processing and marketing. Through an effective traceability system, companies can guarantee that their products comply with environmental and sustainability guidelines.
In this respect, Article 2(28) EUDR clearly defines what is meant by "geolocation": The geographical location of a parcel of land, indicated by latitude and longitude coordinates in the form of at least one latitude and one longitude value and using at least six decimal places;
for land with an area of more than four hectares used for the production of the relevant commodities other than cattle, this shall be indicated in the form of polygons, using sufficient latitude and longitude values to describe the outline of each parcel.
The geolocation of all relevant properties in accordance with Article 9(1) is a key focus of the requirements under EUDR. In this area, companies face a variety of challenges. Particularly as no relief is possible with regard to the length or complexity of their supply chains.
This is because even in the case of bulk goods such as soya, all land involved must be identified upon delivery and no mixing with raw materials of unknown origin or from damaged areas is permitted. This also applies to composite products such as wooden furniture.
If a part of a relevant product does not comply with the regulations, it must be separated before being placed on the market or exported. If this cannot be done, the entire product is considered non-compliant. Proof of compliance with Article 3 is crucial. The operator must record the geolocation of all properties involved, otherwise the product may not be placed on the market.
The origin of each raw material and product must be proven without exception.
The geolocation of a property can be done using cell phones, portable GNSS devices and digital applications such as GIS.
It should be emphasized that there are no exceptions. If a part of a relevant product does not comply with the regulations, it must be separated before being placed on the market or exported. If this cannot be done, the entire product is considered non-compliant. Proof of compliance with Article 3 is always crucial. The operator must record the geolocation of all properties involved, otherwise the product may not be placed on the market.
Article 9(1)(d) explains the requirements for geolocation. It is also important to record the time or period of production or the harvest date and the production period. This is necessary in order to verify that the product is actually deforestation-free in accordance with Article 3(a). The cut-off date of 31.12.2020 is therefore relevant.
There are special features with regard to cattle: The geolocation must include all farms where the cattle were kept, i.e. including grazing areas and slaughterhouses.
The EUDR allows natural or legal persons to raise substantiated concerns with the competent authorities if they consider that one or more operators or traders are in breach of this Regulation (Article 31(1)).
The authorities examine possible violations of the Regulation. If there are justified concerns, they carry out checks, listen to market participants and traders and, if necessary, take the necessary measures to stop trade in the products concerned (para. 2). The competent authority shall inform the persons who have expressed justified concerns of the measures taken within 30 days (para. 3).
Ensuring transparency and efficiency in the enforcement of the aforementioned regulation is the central concern of the official measures. These measures are intended to ensure the integrity of the market and strengthen consumer confidence. In view of this, companies are faced with a significant challenge. The aim is to fully comply with the legal requirements while always acting in line with social expectations.
Member States may take provisional measures in case of possible infringements of the Regulation, such as seizure of raw materials or products, suspension of placing on the market, making available or export (Article 23).
Where infringements are detected, authorities shall require operators or distributors to take appropriate and proportionate corrective action (Article 24(1)). These measures include rectifying the infringements, preventing the further distribution of the product concerned and, if necessary, recalling or disposing of the product (para. 2). In addition, the market participant must take preventive action to avoid future infringements (para. 3). If the necessary measures are not taken, the authorities intervene to ensure implementation (para. 4).
Sanctions must also be imposed in the event of infringements; these must be effective, proportionate and dissuasive in accordance with Article 25(2). They include fines, confiscation of products and revenue and trade bans.
Article 25(2)(a) should be emphasized in particular: With regard to the fines, there should be an appropriate relationship to environmental damage and the value of the goods. The amount is based on the fact that the economic benefit from the infringements is withdrawn. In the case of repeated infringements, the fines increase gradually, with a maximum amount of at least 4 percent of the turnover or total annual turnover.
EU member states will define specific sanctions by 20.12.2024. The EU Commission publishes lists of sanctioned companies for risk assessment and consumer information.