The intention of the regulations is to help ensure that new products bought by consumers don't contribute to the global problem of deforestation.
The rules apply to seven commodity products (soy, wood, cocoa, coffee, palm oil, cattle and rubber) as well as a wide range of products derived from those commodities (for example chocolate, coffee and leather products).
Any person or organisation responsible for placing products on the EU market, making them available on the EU market, or exporting them from the EU market to other parts of the world, will need to comply.
What do businesses need to do to comply?
Steps need to be taken to verify the geolocation of any of the relevant commodities contained within a product. This can include multiple commodities within one product – for example if meat is produced from cows that are fed soy, data may be required on both the cattle and the soy.Data will need to be included in a return which is submitted to the relevant authorities. That return must also be supplied to any customers you sell the product on to. A portal is currently under construction, which will be used to submit returns.
Companies will not be able to rely on written confirmation from suppliers, and must provide their own geolocation data to prove the origins of their product and all commodities used to produce it. The entity placing the product on the EU market will be the one primarily responsible for ensuring that it is deforestation-free.
Importantly, intra-company transactions between group subsidiaries (for example a food retailer transfers products between its German and French subsidiaries) will not be exempt. The same level of verification is required for those sales as for a sale to an external customer.
Another nuance of the regulations is that when buying commodities from a specific country, not only must you comply with the deforestation regulations, but you must comply with all legislation in the supplying country. This might include labour law - making you responsible for ensuring that labour practices were safe and legal – as well as wider sustainability laws.
The last year has at least allowed the EU time to publish more guidance and more information on the technology platform central to its operation. This detail is key for all to understand in order to put in place the necessary implementation strategy for your business.
What are the potential implications?
The sanctions for breaching the regulations can be severe and, among other things, could include:
- Suspension of trade within the EU
- Destruction of the goods
- Mandatory donation of the goods, where destruction is considered more harmful
- Significant fines
The EU will also be risk-assessing individual countries and will provide gradings for each to indicate the risk of contributing to deforestation when trading with that country.
How to prepare for the EUDR?
As you can see, the rules are complex and your exact needs will very much depend on the specific characteristics of your business.
We have advised a number of clients already on EUDR and this usually includes taking the following steps:
- Analysis of your supply chain and export activities
- Review of your product listBased on the outcomes from the above, you may also need bespoke advice on specific countries that you deal with.
Given the complexity of the regulations, and the impending application of them, we strongly recommend that you seek advice promptly.
You should also pay close attention to the ongoing Omnibus changes. While at present the deforestation regulation has not been drawn in, there is every prospect that before the implementation date there will be another attempt to either delay this law or change it, with strong rumours of a new Omnibus law covering deforestation in September or October.
If you have any questions or would like to discuss any of these topics and what they mean for you and your business, please get in touch with our Consumer sector and Regulatory experts.
