The regulation aims to minimise the EU’s contribution to deforestation and forest degradation.

The European Deforestation Regulation (EUDR) entered into force on 29 June 2023, following publication in the Official Journal of the European Union. However, the main requirements and prohibitions of the EUDR will apply from 30 December 2024, 18 months after the entry into force.

The regulation forms part of the European Green Deal (for more information on the Green Deal, refer to Latham’s blog post here), which includes a proposal to ensure EU consumption does not contribute to deforestation and forest degradation. The EUDR will repeal and broaden the scope of the existing EU Timber Regulation.[i]

Applicable Products

The seven products covered by the new legislation are: cattle, cocoa, coffee, palm-oil, rubber, soya, and wood, including products that contain, have been fed with, or have been made using these commodities (such as leather, chocolate, and furniture).[ii] These commodities represent the largest share of EU-driven deforestation.

Requirements Under the Regulation

Under the EUDR, companies will only be permitted to sell products in the EU (or export them from the EU) if the supplier of the product has issued a “due-diligence” statement. This statement includes confirmation that the product has been produced on land that has not been subject to deforestation or forest degradation, including of irreplaceable primary forests, since 31 December 2020.

The EUDR will also require the supplier of the product to verify that such products comply with relevant legislation of the country of production, including on human rights, and that the rights of affected indigenous people have been respected.

Whilst the EUDR primarily will impose obligations for those operators and traders in the EU, there will be wider implications for those producers of the relevant commodities and those producers of products that contain, have been fed with, or have been made using these relevant commodities (including such producers outside the EU) as such products will need to meet the requirements under the EUDR to be sold in, or exported from, the EU.

Unlike the EUDR, the proposed Corporate Sustainability Due Diligence Directive (CSDDD) will oblige certain EU and non-EU companies, regardless of sector, to conduct due diligence activities to address several negative human rights and environmental impacts along their value chains. The broad scope of the proposed CSDDD may complement the product-specific focus of the EUDR, with the EUDR applying to all operators and traders placing the regulated goods on the EU market or exporting products from the EU market.

Enforcement

The Commission will classify countries, or parts thereof, as low-, standard-, or high-risk, based on an objective and transparent assessment within 18 months of EUDR entering into force (therefore by 31 December 2024). Products from low-risk countries will be subject to a simplified due diligence procedure. The proportion of checks performed by relevant enforcement agencies on operators will be according to the country’s risk level: 9% for high-risk, 3% for standard-risk, and 1% for low-risk countries.

Penalties will be laid down under national law. Per the EUDR, these penalties should be proportionate and dissuasive, with the maximum fine amounting to at least 4% of the total annual turnover in the EU of the non-compliant operator or trader.

Next Steps and Preparation

Operators and traders wishing to sell the products covered by the EUDR in the EU market (or export them from the EU) will be required to conduct extensive diligence procedures, including understanding the date and location where the commodities were produced in order to avoid facing penalties. Companies will need to conduct risk assessments in order to ensure that their products are deforestation-free and produced in accordance with relevant local legislation. Further, operators and traders should adopt procedures and measures such as requesting additional information, or carrying out independent audits of suppliers, in order to mitigate potential risks.

Latham & Watkins will continue to monitor relevant developments in the EU and globally.

Endnotes

[i] Regulation (EU) No 995/2010.

[ii] By 30 June 2025, the Commission will determine whether it is required to amend or extend the list of relevant products, including in respect to biofuels.