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    EUDR Explained

    EUDR Explained

    • EUDR is part of the broader EU strategy to protect the world’s forests and limit carbon emissions
    • EUDR will create mandatory due diligence requirements for EU businesses, expanding upon the scope of EU Timber Regulations (EUTR) and in time replacing it. The key difference is that the EUDR will affect more commodities and requires prove that a product is ‘deforestation-free’ and not just sourced legally
    • EUDR regulation will affect seven specific commodities: soy, cattle, palm oil, timber, cocoa, coffee, and rubber. Subject to adjustment.

    DEFINING A ‘DEFORESTATION-FREE’ PRODUCT

    The new Regulation will require companies importing or exporting the impacted commodities from the EU to prove the products are deforestation-free. This is defined the same way as in the EUTR – ‘the product itself, its ingredients or its derivatives were not produced on land subject to deforestation or forest degradation’.

    OPERATORS AND TRADERS

    Operators (companies who first place products in the single market) will be required to implement the due diligence requirement on their supply chains to ensure they are deforestation and forest-degradation-free, while traders will be responsible for storing and sharing information on their supply chain to operators.

    COUNTRY BENCHMARK SYSTEM

    The European Commission (EC) will conduct risk assessments by country. The EC information system will list countries as low, standard, or high risk. For products from low-risk countries, a simplified due diligence process is applied which includes an exemption from risk analysis and mitigation measures.

    FEES AND PENALTIES

    Potential sanctions include:

    • Fines – Proportional to environmental damage, the value of the product, and turnover (max 4%)
    • Confiscation – of the relevant product and operator’s/trader’s revenue from relevant products
    • Temporary exclusion – from public procurement tender procedures (for up to 12 months). A temporary ban on the placing on the EU market or export of the product
    • Suspension – from the use of the simplified due diligence procedure

    EUDR DUE DILIGENCE SYSTEM

    Whether they do it themselves or via expert third parties, companies wishing to import or export in scope products will be required to perform proper due diligence. EUDR suggests including the following steps:

    1. Gather geographic information (i.e. vector profiling) on the plot of land the commodities were sourced from
    2. Assess the risk of non-compliance to the EU deforestation-free regulation
    3. Mitigate risks to negligible levels

    A Due Diligence Statement (DDS) must be produced and uploaded onto the European Commission Information System, expected to go live in December. Doing so, allows the EC to ensure compliance and provide compliant products with a reference code. Without an approved DDS reference code, products may be held at customs causing delays to the supply of goods.