Entering into force on 29/06/2023, the new EU regulation on deforestation-free products (EUDR) < Link to P regulation on deforestation-free products (europa.eu)> sets demanding but essential rules to end deforestation and forest degradation worldwide. Banning the European import and export of products that contribute to deforestation, this regulation creates new challenges and obligations for those involved in supply chains. Only goods accompanied by a due diligence statement, a procedure that varies according to the level of risk in the producer country, will be authorised for marketing on European territory. Operators will be subject to border controls and risk substantial penalties in the event of non-compliance.
Operators have 18 months (until 30 December 2024) to implement the new obligations contained in this regulation, while micro and small enterprises benefit from an adaptation period of 24 months (until 30 June 2025), with the exception the products listed in the annex of the previous European regulation, EUTR.
The primary aim of these new rules is to prevent deforestation and forest degradation. Achieving this ambition could reduce the EU's global contribution to climate change and biodiversity loss, and secure the livelihoods of millions of people, including indigenous peoples and local communities heavily dependent on forest ecosystems. Companies will have to demonstrate that their products respect their rights. European consumers will also have a guarantee that the products they are buying do not contribute to the destruction or degradation of forests, particularly irreplaceable tropical forests.
- Scope of application
Unlike its predecessor, the EUDR has a much broader legal coverage. Products covered by the new legislation include timber, rubber, beef, cocoa, coffee, palm oil and soy. Products derived from these materials are also concerned (leather, chocolate, furniture, paper, charcoal, etc.). Although no countries or goods are prohibited, the import and export of EUDR products will be banned if they originate from deforested land or, in the case of timber, have contributed to forest degradation after 31 December 2020.
Deforestation is understood as the conversion of forests into farmland. Forest degradation refers to the transformation of primary forests or naturally regenerating forests into plantation forests or other wooded land, and the conversion of primary forests into planted forests.
This regulation will be reviewed and updated as deforestation progresses. No later than one year after the text comes into force, the commission will assess the advisability of extending its scope to "other wooded land". After 2 years, it will study the possibility of extending the scheme to other commodities (such as corn), other ecosystems and the need to impose obligations on certain financial institutions.
- Companies' obligations
The regulation requires companies to prove that their supply chains do not contribute to the destruction or degradation of forests, and that their products comply with the legislation in force in the country of production. The future analysis system, developed by the European Commission, will facilitate this work by identifying the different risk levels of producer countries.
Non-SME operators and traders
All operators i.e., according to the regulation, all companies wishing to be the first to place goods covered by this new legislation on the European market, or to export them outside the EU, will have to carry out the due diligence procedure and submit a due diligence statement to the competent authorities. This system attests to the negligible risk of deforestation or degradation associated with their products.
"Traders", i.e., according to the regulation, companies that trade in goods already placed on the European market and that are not small and medium-sized enterprises (SMEs), are considered as operators. They will also be required to carry out the due diligence procedure and submit a due diligence statement because of their influence in the supply chains.
Non-SME operators and traders must communicate about their due diligence system and the measures taken to ensure compliance with their obligations annually and publicly, including online. They must appoint a compliance officer at management level. They must also have an independent audit function, responsible for verifying strategies, controls and procedures to ensure risk management.
Small and medium-sized enterprises (SMEs)
Operators who are SMEs do not have to carry out due diligence if it has already been carried out for products placed on the market. In this situation, they must obtain and share the reference numbers of their suppliers' due diligence statements. If due diligence has not yet been carried out on their products, SMEs are required to do so.
Traders who are SMEs do not have to carry out due diligence, but they are obliged to collect and retain the following information for five years:
- contact details of their suppliers and the reference numbers of their due diligence statements
- contact details of the companies they supply
Obligations of forestry operators in Belgium
Die Forstwirtschaftsteilnehmer bringen zum ersten Mal Holz auf den EU-Markt. Diese Akteure müssen daher eine Due-Diligence-Prüfung durchführen und die Due-Diligence-Erklärung über das elektronische System einreichen, das derzeit entwickelt wird (siehe 3.4). Belgien wird wahrscheinlich als Land mit geringem Risiko eingestuft (siehe 3.3), was bedeutet, dass die Sorgfaltspflicht eingeschränkt sein wird.
- information on the timber marketed (including species name)
- geolocation of the area where the timber was harvested
- date on which the timber was harvested
- contact details of operators and traders to whom they supply timber
- clear justification that products are deforestation-free and that relevant national legislation has been complied with (e.g. logging permits)
An operator who is a natural person or a micro-enterprise can instruct the next operator or trader in the supply chain to submit the due diligence statement on its behalf. However, it is the responsibility of the initial operator, i.e. the small business or individual, to ensure that the product complies with the EUDR directive.
- Applying the "due diligence" system (DDS)
3.2.2 Applying the "due diligence" system (DDS)
Only operators and traders who are not SMEs with a due diligence for their goods subject to the EUDR will be allowed to sell them in the EU or export them from the EU. Due diligence is a statement guaranteeing that your items:
- have not contributed to deforestation or forest degradation anywhere in the world after 31 December 2020.
- have been produced in accordance with the legislation of the country of production.
The regulation defines 3 main stages of due diligence and specifies the requirements for each phase.
Phase 1- Guaranteeing access to information
As an importer, you'll need to provide information on your commodities, quantity, supplier, country of production, etc. You are responsible for your supply chain. You must also have the geographic coordinates of the plots of land on which the goods you are placing on the European market have been produced. Essential for controlling deforestation, this information is used to establish a clear link between the commodity or good placed on the EU market and the plot of land on which it was grown. You must also check compliance with the legislation of the country of production, particularly in terms of human rights, and ensure that the rights of indigenous populations have been respected. The purpose of collecting this information is to inform the risk assessment.
How do you obtain this geographic information? Geolocation is the most efficient way of providing the authorities with the data they need to verify that your good is not contributing to deforestation. The traceability of your products using geolocation data can be combined with remote monitoring via satellite images to improve the efficacy of the regulation.
Phase 2- Risk analysis and assessment
As a company, you must use the information gathered in phase 1 to analyse and assess the risk of non-compliance in the supply chain. The assessment of the risk of non-compliance of products must include in particular:
- the risk classification of the country of production,
- the presence of forests,
- the presence of indigenous peoples,
- the extent of deforestation or forest degradation,
- national issues such as corruption, fraud, human rights violations, supply chain complexity and suppliers' history of non-compliance. This risk analysis must be repeated at least once a year.
Phase 3- Adopt risk reduction measures
If the risk analysis carried out during phase 2 shows that the risk is not negligible, you will need to take appropriate and proportionate mitigation measures. For example, you may request additional information or documents, or carry out independent audits. The procedures and measures taken to reduce the risk must be reviewed at least annually.
If your products come from low-risk areas, according to the European Commission's benchmarking system, only the first phase of due diligence is mandatory. If the producer country is considered a high- or medium-risk zone, you are required to carry out phases 2 and 3.
- A European risk assessment system
Within 18 months of the entry into force of this regulation, the Commission will develop a list of national benchmarks for producer countries <link to list>. Scheduled for 30 December 2024, this benchmarking system will rank the countries concerned according to the level of risk of deforestation and forest degradation (high, standard or low risk) for the production of raw materials. Pending the creation of this list, all countries are classified as "standard".
The obligations applicable to operators and authorities will vary according to the risk level of the country or region of production. Companies importing products from low-risk areas will be authorised to exercise simplified due diligence, i.e. only the first phase of the due diligence process. Conversely, they will be subject to enhanced scrutiny if the goods come from standard or high-risk zones. National authorities will have to increase their surveillance for high-risk countries and reduce it for low-risk countries.
In addition to the risk of deforestation and forest degradation, countries may also be assessed in terms of respect for human rights, the rights of indigenous peoples and local communities.
- A future centralised information system
Operators will have to submit their due diligence statements using a centralised system. This system will generate a reference number for each statement. This reference number must be made available to Customs via the customs declaration.
Currently in development, this information system will have to be accessible to national and customs authorities. It offers several features
- registering operators and merchants;
- registering due diligence statements;
- generating a reference number for each statement and making them available;
- recording inspection results;
- identifying risk profiles among operators and goods.
- Monitoring and penalties
Each EU member state has the duty to enforce the non-deforestation requirements set out in the new regulation. In Belgium, federal inspectors will have access, on request, to information provided by companies attesting to the proper functioning of the due diligence system, including risk assessment and risk mitigation procedures.
The proportion of operator checks will be based on the country's level of risk: 9% for high risk, 3% for standard risk and 1% for low risk. For high-risk countries, Member States will also have to inspect 9% of total volumes. For example, they could check the origin of certain products using satellite monitoring tools and DNA analysis.
Penalties for non-compliance must be proportionate and dissuasive. They can take various forms: payment of fines, confiscation of products or income, disqualification from procurement processes and/or exclusion from procurement procedures and access to public funding.
- Annual report by Member States
Every year, Member States are required to report to the Commission and the public on the application of this Regulation. This report must include the following elements:
- Plans of checks and the risk criteria on which those plans were based;
- The results of the checks;
- The corrective measures imposed.