Planning was that customs would initiate enforcement as of December 30th, 2024 . Recently the European commission requested the European Parlement and the council of ministers to agree with a one-year delay for the commencement. While formal decisions are still pending, companies must continue preparing for the EUDR's eventual implementation. Below we explain exactly what this implies.
What is the EUDR?
Between 1990 and 2020, a forested area the size of the European Union was lost. To put a stop to this deforestation, the EU Regulation on Deforestation Free Products (EUDR) will apply from 2023. The EUDR is the successor of the European Timber Regulation (EUTR), which applied to the import of timber and derived products since 2013. Under the EUDR, certain products may not be produced, imported or exported on the European market that originate from areas that were deforested after December 30th, 2020.
Which products does the regulation cover?
The EUDR applies to the following products:
- Cattle
- Cocoa
- Coffee
- Palm-oil
- Soy
- Timber
- Rubber
The regulation also applies to (half) derived products such as leather, chocolate, furniture, paper, beef, and charcoal. Not all products are subject to an import ban from the EUDR. The Dutch Food and Consumer Product Safety Authority (NVWA) maintains and periodically publishes the full list of prohibited raw materials and products derived from them, classified by commodity code (so-called 'HS codes').
Obligations for large importers and SME’s in the chain
Do you import products that are in scope of the EUDR? Then you must declare that the components of these products have not contributed to deforestation of agricultural land that has been deforested after December 30th, 2020 (the 'cut-off date'). Products are prohibited and therefore cannot be imported if they originate from farmland that has been deforested after December 30th, 2020.
For this purpose, so-called due diligence requirements should be met. This implies that you should demonstrate where the raw materials came from. Upon import, you should provide precise geographical information about the relevant agricultural land, with satellite images and GPS coordinates. Based hereon, Customs will compare the situation upon import with the situation as per December 30th, 2020, to determine whether the products were obtained from deforestation after December 30th, 2020.
This obligation does not only apply to you as an importer. Every subsequent link in the supply chain should also assess whether they meet the due diligence requirements based on information received from its supplier. The regulation draws a distinction between large importers and small- and medium (‘SME’) importers. Large importers (more than 250 FTE, or a turnover > 50 million euros and a balance sheet total > 43 million euros) are subject to a full due diligence and information obligation for products to be imported or traded.
SME importers are generally exempt from the due diligence requirement but do have an information obligation. This group should also demonstrate (for example, by including references) from whom they obtained the products and that the imported products were not produced as a result of deforestation.
Sanctions for non-compliance with the EUDR
EU-countries will carry out on-site checks for compliance with the EUDR. For the import of goods, they will conduct a risk analysis of the countries and sectors where the risk of deforestation is considered the highest. Possible sanctions for non-compliance are:
- Fines, up to four percent of the sales of the previous year. An even higher fine can be imposed if this is necessary to eliminate the economic benefit.
- Confiscation of the revenue of these products.
- Refusal of "forbidden" products at the border and seizing hereof by authorities.
- Temporary exclusion from public tenders (with a maximum of 12 months) in case of serious or repeated violations.
- Temporary prohibition from marketing, offering or exporting the goods in question.
The European Commission will publish the offender and the sanction imposed on its website.
When does the EUDR take effect?
The EUDR has been in effect since May 31st, 2023, with a transition period of 18 to 24 months, for which the European commission has requested a delay for one additional year. For large companies, the obligations resulting from the EUDR will be effective as from December 30th, 2024, but it is likely that these will be delayed with a one-year period to December 30, 2025. For SME’s, these obligations in principal will apply from June 30th, 2025, but also here a delay of one year has been requested.
The regulation will be evaluated after two years. Possibly, wetlands and savannas will then also be regarded as protected "forest", and corn and biodiesel may be added to the list of prohibited products.
Start now!
Even though a possible delay may be granted, the obligations under the EUDR will become relevant faster than may be expected. In other words: there is work to be done. It is vital to map out the supply chain to be able to demonstrate where and from whom the product in question originates. Engage with suppliers, so that they are prepared to meet the requirements and provide the relevant data. Make an overview of the risks and challenges resulting from the EUDR for your company.
Need help with that or want to learn more about the EUDR and its impact on your business? Feel free to call or email us, we are happy to show you the way.
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