The EUDR has a product-based approach and imposes extensive due diligence requirements on enterprises to ensure that such products do not result from deforestation, forest degradation or breaches of local environmental and social laws.

Key takeaways:

• The EUDR covers a wide range of commodities and products
• The EUDR will introduce extensive due diligence obligations for enterprises
• A delay of 12 months has been approved for the implementation of the EUDR by the Member States

Forests offer a wide array of environmental, economic and social benefits. However, deforestation and forest degradation are taking place at an alarming rate. Therefore, the European Union (“EU”) has taken a significant step with the introduction of the Regulation (EU) 2023/1115 concerning the making available on the EU market and the export from the EU of certain commodities and products associated with deforestation and forest degradation (“EUDR”).

The EUDR repeals and replaces the EU Timber Regulation (995/2010) which only applied to timber and certain types of timber products. The scope of the EUDR is much broader.

(Updated) date of application

The EUDR entered into force on 29 June 2023. In principle, large and medium-sized enterprises would be subject to the EUDR starting from 30 December 2024, and micro and small-sized enterprises would follow as from 30 June 2025.

However, in response to concerns raised by countries and companies both within and outside the EU, the European Commission proposed in October 2024 to delay the EUDR’s application by 12 months. This proposal was approved by the Council on 16 October 2024 and by the European Parliament on 14 November 2024. Subsequently, the European Parliament referred the file back to the committee for interinstitutional negotiations. On 3 December 2024, negotiators from the European Parliament and the Council reached a provisional political agreement to postpone the application of the new rules under the EUDR.

Large and medium-sized enterprises will have to respect the obligations under EUDR as of 30 December 2025, whereas micro- and small enterprises will have time until 30 June 2026.

The additional timeframe is designed to help companies in implementing the rules more smoothly as from the very beginning, without compromising the EUDR’s objectives. In order for the postponement to enter into force, the agreed text has to be endorsed by both the European Parliament and the Council and published in the EU Official Journal before the end of this year.

Scope

The EUDR applies to six commodities: cattle, cocoa, coffee, oil palm, soya, rubber and wood. The EUDR also applies to certain relevant (derived) products if they contain, have been fed with or have been made using any of the above-mentioned commodities (e.g. leather, chocolate), which are listed in Annex 1 of the EUDR. These products can be identified by their Combined Nomenclature tariff classification code.

A specific check using the tariff classification code is essential for a final determination of whether derived products are subject to the EUDR.

Obligations

The EUDR distinguishes between operators and traders. An operator is anyone who makes a relevant product available on the EU market for the first time or exports it from the EU. A trader is anyone who makes a relevant product available on the EU market repeatedly. It is possible that the same company qualifies as both an operator and a trader (for different products) due to the product-based approach of the EUDR. Non-SME traders (based on the thresholds of the Accounting Directive) have the same obligations as operators.

The EUDR requires operators and (non-SME) traders to ensure that relevant products placed or made available on the EU market, or exported from the EU:

• are deforestation-free (i.e. must have been produced on land that has not been subject to deforestation or forest degradation after 31 December 2020);
• have been produced in accordance with the relevant legislation of the country of production; and
• are covered by a due diligence statement.

If operators and (non-SME) traders fail to comply with any of the above requirements, the relevant product may not be traded on the EU market or exported from the EU. Therefore, they must develop a due diligence system, which is a framework of procedures and measures to collect relevant information (e.g. geolocation data), undertake risk assessments and adopt risk mitigation measures (if the risk assessment shows that the risk is not negligible). Such due diligence system must be reviewed annually.

Operators and (non-SME) traders may conduct a simplified due diligence if the relevant products originate from countries or regions classified as low risk according to the benchmarking (low risk / standard risk / high risk) that will be performed. In addition to the existing 3 categories, the European Commission had also proposed to create a new category of countries posing ‘no risk’ on deforestation. Such no risk countries would face significantly less stringent requirements as there is a negligible or non-existent risk of deforestation. However, in the provisional political agreement reached on 3 December 2024, it was decided that no changes would be made to the existing rules of the EUDR.

In an initial phase, all countries will be assigned a standard level of risk. The European Commission ensured that the proposal for the risk classification will be available as soon as possible but not later than 6 months before the EUDR enters into application. In a simplified due diligence system, only relevant information must be collected (and the risk assessment and risk mitigation can be excluded).

The due diligence statement must be submitted via an information system that will be accessible to the Member States’ competent authorities and customs authorities.

SME-traders are subject to fewer obligations compared to non-SME traders. They only need to collect (and retain for 5 years) certain information about the operators or traders who have supplied the products to them or the traders to whom they have supplied the products (e.g. name, postal address).

Enforcement

The Member States’ competent authorities must oversee the compliance with the EUDR and determine the specific penalties (which must be effective, proportionate and dissuasive). The EUDR provides some examples, such as:

• fines, where the maximum amount for legal persons is at least 4% of the annual turnover generated within the EU from the previous year (which can be increased to exceed the potential economic benefit gained);
• confiscation of the relevant products or the revenues gained from transactions from the relevant products;
• temporary exclusion for a maximum duration of 12 months from public procurement processes and from access to public funding;
• in the event of a serious infringement or of repeated infringements, temporary prohibition from placing or making available on the EU market or exporting and prohibition from exercising the simplified due diligence.

Furthermore, in case of non-compliance with the EUDR, Member States’ competent authorities may take interim measures (e.g. to suspend the placing or making available on the EU market) or take corrective actions (e.g. withdrawing or recalling the relevant product immediately).

Substantiated concerns about the non-compliance with the EUDR may also be reported to the Member States’ competent authorities by natural or legal persons.

Lastly, the EUDR also foresees that the European Commission can publish the name of the company that infringed the EUDR and the conduct that caused the infringement.

Action points

• Determine whether your company’s commodities and products fall under the scope of the EUDR;
• Determine what role your company has under the EUDR;
• Review your existing supplier contracts in view of the upcoming requirements under the EUDR;
• Start as soon as possible as ensuring compliance with the EUDR requires considerable lead time;
• Contact your EY Law contact in case of questions.

At EY Law, we have the right expertise and experience to assist you to become EUDR compliant. Via our product scope impact assessment, we can help you to obtain a high-level overview of the overall impact of the EUDR on your business operations and suggest immediate next steps to help you through the EUDR compliance process. Furthermore, we can help you to develop risk mitigation tactics. Feel free to reach out to us in case you have any questions!