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10 questions answered about new European deforestation legislation(EUDR)

From the end of this year, the European deforestation law (EUDR) will apply to large companies. By mid-2025, it will also apply to SMEs. But what exactly does the legislation entail? And what do you need to watch out for as a food producer? This article lists 10 questions and answers about the EUDR legislation.

Deforestation is regularly caused worldwide by the expansion of agricultural land and the cultivation of products. These products also find their way to Europe, for example for consumption. Deforestation has environmental and social impacts, such as loss of biodiversity, climate change and loss of home territory for indigenous communities.

As part of the Green Deal, last year the European Union (EU) adopted a new regulation called the European Union Deforestation Regulation (EUDR for short). With this new law, the EU wants to ensure that products imported to the EU market or exported from the EU have not led to deforestation or forest degradation in the production process.

The regulation takes effect from December 30, 2024 for large companies, and on June 30, 2025 for SMEs. To avoid deforestation before these effective dates, the regulation requires companies to ensure that the products in question have not contributed to deforestation as of Dec. 31, 2020.

1. Which products are involved?

The products covered by the regulation are livestock, palm oil, soy, cocoa, coffee, rubber and timber. In addition, also the finished products specified in the regulation that have these products as ingredients. So to know exactly whether a product is covered by the regulation, it is important to look at Annex 1 of the regulation, which lists the products with HS codes.

2. What is at the heart of the EUDR?

In summary, the EUDR means the following:

  • a ban on the marketing, placing on the market or export of raw materials or products if they have contributed to deforestation or degradation;
  • a so-called due diligence obligation for entrepreneurs who market or export the raw materials or products in question;
  • the obligation to maintain a due diligence system to ensure compliance.

3. What does due diligence entail?

Due diligence is a term also found in other sustainability legislation. It refers to a duty of effort for companies to act with due diligence. The EUDR elaborates on this through the following obligations for companies:

  • Companies must collect information about the product or raw material, quantity, production date, supplier, country of production and location of lots using so-called geographic coordinates. This traceability using geo-location applies to every lot imported or exported.
  • Based on this, a company must do a risk assessment of whether the product or raw material is compliant with the EUDR. The risk depends on the product and the production country. Business owners must be able to show how they conducted this risk assessment.
  • Should the previous step reveal that a "non-negligible" risk exists, a company is required to first take so-called mitigating measures. These may consist of a company requesting additional information, conducting further research or commissioning external audits. They can also provide support, in the form of investment, to its supplier to ensure that it can begin to comply with the law. These measures must be documented.
  • After performing this due diligence, a company must submit a so-called due diligence statement. This must be uploaded into an EU Information System, including the HS code of the product in question and the geo-location. By the way, this EU Information System does not exist yet, it is still under development.

4. Why do geographic coordinates need to be submitted?

The geographic coordinates are intended to trace where the product or commodity in question was produced. They are like proof that no deforestation has taken place at that location. Without the geographic coordinates, a product cannot be imported or exported.

5. How can a company obtain these geographic coordinates?

Collecting the geographic coordinates of a plot is expected to be done by the producer of the product or commodity in question. This can be done through cell phones or, for example, geographic information systems (GIS). For plots of more than

than 4 hectares, the geo-location should be provided using polygons: latitude and longitude points with six decimal places to describe the perimeter of each plot. For plots smaller than 4 hectares, a polygon or a single latitude and longitude point with six decimal places may be used.

6. Is there a format of such a due diligence statement?

No format is currently available, but it is expected to be provided by the EU during 2024. This is to prevent each company from drafting a different type of statement, with all the potential confusion that would entail.

7. Does the EUDR take into account trade in bulk products?

For products traded in bulk, such as soy or palm oil, this means that the importer must ensure that all plots involved in a shipment are traceable and that these products or raw materials are not mixed in the chain with raw materials or products of unknown origin or from areas deforested after Dec. 31, 2020. If this does happen, the entire lot will be considered non-compliant.

8. What does the EUDR mean for traders who are not importers or exporters?

A trader must also submit a due diligence statement in the EU Information System. He may refer to the statement previously made by the importer, stating the relevant reference number. The trader is obliged to ensure that the due diligence by the importer has been carried out correctly. Therefore, this trader remains legally responsible if it is found that the law has been violated.

This chain responsibility entails that an importer must communicate with its downstream trading partners about the products and the due diligence efforts it conducted, including the reference numbers of the due diligence statements associated with those products.

9. Do the same requirements apply to SMEs?

No, lighter requirements apply to SMEs. For them, the law goes into effect June 30, 2025. An SME acting as a trader does not have to enter a due diligence statement in the EU Information System. It is sufficient for them to mention the reference number of the previous due diligence statement (from the importer).

10. Who oversees this law and what are the penalties for violation?

EU member states have been designated as supervisors, but at this time it is not yet clear which Dutch body will ensure enforcement of this law. In case of non-compliance, the maximum fine is set at 4% of the company's annual turnover.

Want to know more about European deforestation legislation?

Contact us at info@precongroup.com or +31 30 65 66 010 / +32 (0)3 616 08 69.

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