Importers into the EU faced Due Diligence Reporting requirements under the Regulation on Deforestation-Free Products (EUDR) which will NO LONGER apply starting on December 30, 2024, and instead will be phased in beginning December 30, 2025 (for larger companies) and June 30, 2026 for small and medium sized EU enterprises. See., https://www.euronews.com/my-europe/2024/10/07/eu- proposes-delaying-landmark-deforestation-law-amid-industry-pressure
The EUDR effectively prohibits the import, sale, or export of listed commodities and derivatives within the EU unless they are certified online with the EU as “(1) deforestation-free,” (2) produced in accordance with relevant local laws in their country of production, and (3) covered by a due diligence statement submitted electronically to an information system accessible to competent and customs authorities. Top of the list are palm oil, cattle, soy, coffee, cocoa, timber, rubber, and products derived from the listed commodities (such as beef, furniture, or chocolate). See., Annex I of the Regulation – https://eur-lex.europa.eu/legal- content/EN/TXT/?uri=CELEX%3A32023R1115&qid=1687867231461#d1e32-243-1 . The same obligations apply to specific relevant products listed in Annex I if made from, containing, or fed with those commodities.
Covered companies are banned from placing and making available in the EU market or exporting from the EU any covered commodities and products unless the items have a “reference number” which proves that a due diligence statement was filed with the Commission demonstrating that the covered commodity or product is deforestation-free and legally produced. Learn how to comply with the regulations here – https://green-business.ec.europa.eu/deforestation-regulation-implementation_en
Products not listed in Annex I are not subject to the Regulation, even if they contain commodities listed in Annex I. For example, soap will not be covered by the Regulation, even if it contains palm oil. Check your CN codes against the Annex I listings first then decide whether to register. The Combined Nomenclature (CN) is the EU’s eight-digit coding system, comprising the Harmonised System (HS) codes with further EU subdivisions. Each subdivision of the nomenclature used in Annex I is known as a ‘CN code’. The CN code has an 8-digit code number followed by a description and a duty rate. Depending on the case, it may contain a supplementary unit code.
The Information System where businesses will register their due diligence statements is ready to start accepting registrations in early November and for full operation in December. Operators and traders will be able to register and submit due diligence statements even before the law’s entry into application. https://green-business.ec.europa.eu/deforestation-regulation-implementation/deforestation-due-diligence- registry_en . Conducting due diligence is a core obligation of operators and traders under this regulation, which is not subject to any exemption.
The regulation, fortunately, does not extend to the packaging materials used to ship the Annex I listed items. In the case of a producer selling packaging to manufacturers (to protect the final product – not to be sold as a final product to consumers), the text “not including packaging material used exclusively as packaging material to support, protect or carry another product placed on the market” in Annex I under Wood HS code 4415 should be understood as follows:-
- If any of the concerned packaging is placed on the market or exported as a product in its own right (i.e. standalone packaging), rather than as packaging for another product, it is covered by the Regulation and therefore due diligence requirements apply.
- If packaging, as classified under HS code 4415, is used to ‘support, protect or carry’ another product, it is not covered by the Regulation.
- Packaging material used exclusively to support, protect or carry another product placed on the market is not a relevant product within the meaning of Annex I of the Regulation, regardless of the HS code under which they fall.
Most recycled paper/paperboard products contain a small percentage of virgin pulp or pre-consumer recycled paper (for example, discarded paperboard scraps from cardboard box production) to strengthen the fibres. Annex I states that the Regulation does not apply to goods if they are produced entirely from material that has completed its lifecycle and would otherwise have been discarded as waste as defined in Article 3, point (1), of Directive 2008/98/EC. Note – no obligation applies under the Regulation in respect of the recycled material. In the case of paper/paperboard which constitutes a recovered (waste and scrap) product, such paper and paperboard is exempt from the scope according to Annex I (see Chapters 47 and 48 of the Combined Nomenclature).
Beware – If the product contains any percentage of non-recycled material, then it is subject to the requirements of the Regulation and the non-recycled material will need to be traced back to the plot of origin via geolocation. Annex I also clarifies that generally, by-products of a manufacturing process are subject to the Regulation.
This exemption is important for manufacturers of commodities packaging in particular when operating in non-EU jurisdictions (frequently with more favorable cost structures). How the packaging materials get to the exporter of the Annex I items will become important part of the supply chain for the manufacturers of packaging products.
The EUDR entered into force on June 29, 2023, repealing the EU Timber Regulation, which focused primarily on illegal logging. The EUDR’s regulatory ambition is broader, aiming to curb global forest degradation and deforestation, protect biodiversity, and reduce greenhouse gas emissions, by placing significant new obligations and restrictions on companies that import, export, or sell certain products in the EU. The EU Deforestation Regulation aims to ensure that a set of key goods placed on the EU market will no longer contribute to deforestation and forest degradation in the EU and elsewhere in the
world. Deforestation and forest degradation are important drivers of climate change and biodiversity loss
— the two key environmental challenges of our time. The Food and Agriculture Organization of the United Nations (FAO) estimates that 420 million hectares of forest — an area larger than the European Union — were lost to deforestation between 1990 and 2020. Based on 2015–2020 deforestation rates, every hour the world is losing over nine times the forest surface of Brussels’ Bois de la Cambre, or every minute three times the surface of the Parc Léopold bordering the European Parliament in Brussels.
To comply with the forest degradation element of the ‘deforestation-free’ definition, companies will need to establish whether the forest type prior to and including 31 December 2020 was primary forest or naturally regenerating forest (the two forest types to which the ‘forest degradation’ definition applies), then assess whether the forestry activities associated with wood harvesting, as well as planned post- harvesting activities, could cause or bring about (induce) a conversion, or have caused a conversion, to a different forest type amounting to forest degradation. If there is evidence indicating that harvesting activities may induce forest degradation*, then the wood product cannot be placed on, made available on, or exported from, the EU market unless this risk is mitigated to no or negligible level.
If a company places a relevant commodity or product on the market or exports them, it is considered an “Operator” under the EUDR. An Operator can be the company that harvests wood and then sells it, but an Operator can also be the company that processes wood and then sells a relevant product (e.g. tables) and places this product for the first time on the market. The message to companies is that if your team is or has any plans to export into the EU anything related to palm oil, cattle, soy, coffee, cocoa, timber, rubber, and products derived from the listed commodities (such as beef, furniture, or chocolate) then this Regulation is more likely than not either going to apply to the CN coded products or an official at the port of entry will assume it applies. Plan accordingly.
Regina Mundi Global Advisors 