The EU Deforestation Regulation
("EUDR") will become applicable at the
end of 2025 (having previously been delayed from the end of 2024).
The last couple of months have seen many companies refocussing
their efforts on achieving EUDR compliance by the end of the year,
notwithstanding the broader ongoing debate around the future of
sustainability regulation in the EU as result of the recent
"Omnibus proposals" relating to the Corporate
Sustainability Reporting Directive and Corporate Sustainability Due
Diligence Directive.
With 6 months to implementation, in this article we provide a brief
overview of EUDR requirements and recent developments, as well as
setting out the key steps companies need to take to ensure
compliance by the end of the year.
Background
EUDR aims to ensure that relevant products made from one of seven key commodities (being cattle, cocoa, coffee, palm-oil, rubber, soy and timber) do not contribute to global deforestation. It does this by imposing due diligence obligations in respect of various products made from these commodities (e.g. beef, leather, furniture and chocolate etc) as listed in Annex I to the Regulation. Companies exporting, importing or making available these products on the EU market have to ensure due diligence has been exercised to check the products are deforestation-free and that their constituent commodities have been produced in compliance with relevant laws in the country of production. Companies then need to submit confirmatory Due Diligence Statements (DDSs) to the EU Information System. Products that do not comply with EUDR requirements are prohibited from export, import and being "made available" in the EU.
EUDR entered into force on 29 June 2023 and the requirements were originally due to apply to companies from 30 December 2024 (or 30 June 2025 for micro and small enterprises). However, in October 2024, following months of lobbying by stakeholders, the Commission announced a proposal to delay these dates by 12 months to provide for additional time for companies to prepare (as well as for the Commission to finalise its guidance and set-up the new Information System).
Recent developments
Since the October 2024 announcement there have been a number of helpful developments for companies subject to EUDR requirements, including:
- Publication (in October 2024 and then again in April 2025) of a
revised Guidance Document and FAQs. These documents provide several helpful
clarifications including:
- A simplified approach for downstream operators and traders: When "ascertaining" that another entity in the supply chain has already exercised due diligence for the relevant commodities within their products, the FAQs confirm that as a minimum companies should be collecting DDS reference and verification numbers from upstream entities, and verifying their validity via the Information System.
- Confirming a single entity approach for corporate groups: Corporate groups can appoint a single entity (as an "authorised representative") to be responsible for submitting DDS on behalf of the entire group.
- Packaging, pallets, samples and correspondence: The FAQs provide helpful clarifications on the circumstances in which these items will be treated as in or out of scope of EUDR requirements.
- Publication of a (draft) Delegated Act to refine the list of products
falling within Annex I, and therefore falling within the scope of
EUDR, and introduce targeted "technical fixes". This
includes:
- Accessory materials: Clarifying that user manuals, leaflets, catalogues and marketing materials are not in scope of EUDR when accompanying a main product. This is essentially the same principle as previously confirmed in respect of packaging.
- Waste and second hand/used products: Confirming that products meeting the legal definition of "waste" are not in scope, as well as various used and second-hand products.
- Sample and test products: Confirming that sample products of negligible value and quantity as well as products which are to undergo technical analysis or testing are not in scope of EUDR.
- Completion of the Commission's first benchmarking exercise in May 2025 and the adoption of the relevant Implementing Regulation classifying countries as either low, medium or high risk. Products identified as originating from low risk countries, which includes all EU countries, the UK, the US, Canada, China, Japan, Australia and South Africa amongst others, benefit from simplified due diligence obligations.
- Finalisation of the EU Information System through which obligated companies will be able to submit their electronic DDS to show that their products comply with EUDR. The EU has also created a replica training platform (called ACCEPTANCE SERVER) to help companies familiarise themselves with the process and formalities of submitting a DDS.
Consequences of non-compliance
Like other EU legislation, EUDR requires Member States to adopt their own penalty regimes. However, it does specify that the maximum fine for non-compliance should be at least 4% of annual EU turnover (and Member States can theoretically set higher levels). Additionally, non-compliant products may be stopped by customs, confiscated, and companies could face temporary bans from public procurement or supplying their products on the EU market.
With obligations becoming applicable to companies (other than micro or small entities) within the next six months the table below summarises the key steps that companies should be considering.
ScopeReview whether any products that you "import", "export" or "make available" (i.e. supply) on the EU market are in scope.
Products will only be in scope if they are made from one of the seven commodities covered by EUDR (e.g. cattle, cocoa, coffee, palm-oil, rubber, soy and timber) and if they fall within one of the HS codes specified in Annex I to the Regulation. Legal input may be required for these complex assessments.
RoleDetermine the role that your company has under EUDR based on its position in the supply chain for the relevant product or commodity i.e. are you an "upstream operator" and so the first entity in the supply chain required to issue a Due Diligence Statement (or DDS) under EUDR, or will you be a "downstream operator" or "trader" and so able to refer to existing DDS published by upstream suppliers? Do you qualify as an SME or non-SME?
Note, these are legally defined terms and so need to be considered carefully.
Due Diligence System – Requirements for upstream operatorsUpstream operators (i.e. companies who are not able to rely on an existing DDS prepared by an upstream supplier) will need to put in place an EUDR due diligence system encompassing the full due diligence obligations applicable under the Regulation.
The extent of the requirements depend on whether the products come from low, medium or high-risk countries.
- Where products are identified as coming from low-risk countries companies must collect the data required under Article 9, which includes geolocation information for all products.
- For medium and high-risk countries, companies must undertake the risk assessment required by Article 10 and put in place risk mitigation measures as required by Article 11, where the risk assessment identifies more than a negligible risk of non-compliance. (Note, risk assessment and risk mitigation is also required for products coming from low-risk countries where there are substantiated concerns or the company is aware of information that points to a risk of non-compliance.)
Put in place an EUDR due diligence system to "ascertain" that upstream entities have already exercised full due diligence which, as a minimum, requires collection of reference numbers and verification numbers of DDS submitted by upstream entities.
Companies should consider whether additional steps are required to verify suppliers' compliance with EUDR based on their supplier risk assessment and bearing in mind that downstream operators and traders can still ultimately be held liable for supplying a non-compliant product even where due diligence has been exercised upstream.
Information System / TRACESRegister with the EU Information System/TRACEs and put in place procedures for collecting DDS from suppliers and issuing own DDS.
Note there is a replica training platform (called ACCEPTANCE SERVER) available to help companies familiarise themselves with the process and formalities.
Customs alignmentEnsure your EUDR processes align with customs procedures and that practical/operational procedures are in place so that DDS reference numbers are available for timely inclusion on customs declarations and/or that appropriate TARIC codes are identified.
Internal accountability / Governance arrangementsCompanies need to identify persons within their organisation who will be responsible for EUDR compliance and put in place appropriate governance arrangements and processes to ensure and monitor EUDR compliance going forwards.
Record keepingPut in place appropriate processes to record and keep data and evidence required under EUDR.
Contractual protectionsReview upstream and downstream contractual clauses and incorporate EUDR provisions where appropriate. Key points to consider are adequacy of compliance with laws/compliance with EUDR clauses, requirements to provide information/evidence for EUDR compliance and obligations to supply DDS reference and verification numbers.
Public reporting – Non SME operators and traders onlyPut in place process for preparing and reviewing EUDR report which has to be made publicly available, including on the internet.
The first report will be in respect of actions taken in 2026 (and so will need to be published in 2027) and it can be incorporated into other ESG reporting (e.g. the CSRD report if one will be published to cover the relevant period).
Investigations ToolkitEnsure existing internal investigations toolkits and protocols are adequate to deal with any suspected EUDR non-compliances and regulatory investigations, as well as considering impacts on product insurance if they are not permitted into the market.
Next steps
We continue to work extensively across the EUDR Regulation. Please feel free to reach out to any of our specialists if you would have any queries you would like to discuss or would like help assessing your organisation's current preparedness for EUDR compliance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
