Regulation 1115/2023 (EU) on Deforestation and Degradation (EUDR) has been in force since June 2023. Companies subject to the EUDR must be ready to apply the Regulation by 30 December 2024 (SMEs by 30 June 2025). The European Commission published FAQs in June and December 2023 and released the Forest Observatory. Non-EU companies seeking to import relevant products to the EU market should be prepared for extensive questions and requests for information by their European clients.

The EUDR applies to the commodities cattle, cocoa, coffee, palm oil, rubber, soya, wood and products listed in Annex I of the Regulation. The machinery, retailer, agriculture and furniture sector should be prepared as international inter-company supply of relevant spare parts will be affected.

Import/export and trading ban in the case of non-conformity

As of 30 December 2024 (for SMEs from 30 June 2025 on), companies may place relevant products on the EU market, make them available to the EU market or export them from the EU market only if such products meet the requirements of the EUDR. The EU Commission has now clarified that customs procedures other than “release for free circulation”, such as customs warehousing, inward processing and temporary admission, are not subject to the EUDR. Re-imports, however, are deemed imports and the EUDR applies. The EUDR differentiates between companies that import, produce in the EU and export relevant products (operators) and such companies that place these products on the market, i.e. by selling (trader).

Conformity subject to body of evidence

In order to enter or leave the EU market, products must be deforestation- or degradation-free and produced in accordance with the relevant legislation of the country of production, and a Due Diligence Statement (DDS) must have been issued.

Companies, meaning non-SME traders and operators, must communicate a DDS to the information system provided by the European Commission. According to the EU Commission, a DDS can be amended or cancelled within 72 hours. This is not the case if the DDS has already been used (e.g. by peers further down the supply chain). Furthermore, it was clarified that frequently used data cannot yet be saved for future statements. The EU Commission announced it would complete the testing phase for the information system by the end of January 2024. In the DDS, companies need to specify the geolocation of the plot of land where the relevant commodity was planted and harvested, or grown in the case of cattle. In relation to complex supply chains, the EU Commission has stated that all relevant plots of land must be indicated, even where over 100 plots might be involved. Furthermore, the DDS requires companies to confirm their compliance with the due diligence obligations under the EUDR. Information in this regard does not have to be submitted in the DDS; however, such information is essential for companies as it makes up the body of evidence needed in cases where authorities investigate the conformity of certain products.

Extensive due diligence obligations

According to Article 8 of the EUDR, companies are required to collect comprehensive information and perform risk analysis. Furthermore, risk mitigation measures must be taken and all measures must be documented. The EU Commission made clear that the due diligence obligations must be fulfilled regardless of the expected country-related risk of deforestation. Further, it reiterated that non-SME traders are subject to all due diligence obligations and need to submit a DDS. The due diligence obligations are described below.

First, information must be collected. This concerns the abovementioned geolocalisation data and general information on commodities, such as HS Code, weight and measurements, but also date/duration and range of production. The EU Commission emphasized that any relevant product entering the European market must be traceable to its origin and may not –in the case of bulk cargo – be mixed with non-compliant products. The collected information must show that the products are deforestation-free, or also degradation-free in the case of wood, and have been produced in compliance with the relevant legislation of the country of origin.

The level of deforestation and degradation can now be identified through the Forest Observatory, which the European Commission published in December. The EU Commission emphasized that the Forest Observatory is non-binding and non-exclusive. The Forest Observatory shows whether deforestation took place after 31 December 2020. This is a requirement for both wooden products and other relevant products. The EU Commission made clear that forest degradation means a structural change to a forest – mostly as a result of plantations. The Forest Observatory indicates different types of forest change, e.g. due to fire or disturbance. However, companies should make themselves familiar with the Observatory to detect risks of degradation early and link them to their supply chains.

Although the list of relevant legislation of the country of origin is quite long and even more abstract, the EU Commission did not define it comprehensively. Instead, the EU Commission announced that detailed guidance will be provided in due course. The EU Commission stated that the EUDR presents a “non-exhaustive list of legislation” and that any legislation enlisted must be linked to the area of production. Environment protection shall refer to “protection of forests, the reduction of greenhouse gas emissions or the protection of biodiversity”. With regard to the information collection requirement, it was emphasized that evidence should be collected to prove compliance with the relevant legislation, such as official records, court decisions, licences, contracts and official papers.

The EU Commission made clear that certification schemes can be used to cover the information needed – i.e. given the chain of custody. However, the EU Commission specified that such schemes will only be considered as supplementing and supporting compliance with EUDR.

The second step after collecting the aforementioned information is to conduct an analysis of risks of non-compliance of the products concerned. In this context, only a negligible risk is permitted. Similar to the German Supply Chain Act (SCA), this means that relevant supplier information must be linked risk indices which are not yet specified. Companies should consider using AI-based tools to assess relevant risk-related information. 

As a third step, risk mitigation measures must be taken. This includes a risk management system including a responsible compliance role – similar to what German companies already know as Human Rights Officer under the SCA.

Your next steps

Regardless of whether you are directly, or as non-EU company, indirectly affected by the EUDR, it is always advisable to prepare a risk analysis and a risk management report in order to organise the collection and analysis of information that will be required along the supply chain. This means that supply chain due diligence expertise must be combined with foreign trade expertise.

Need guidance? Feel free to contact us.