The European Union Deforestation Regulation (EUDR) is designed to combat global deforestation by placing responsibility on companies that import, export, or produce key commodities associated with deforestation. The regulation applies across all European Economic Area (EEA) countries, including the 27 EU member states, as well as Norway, Iceland, and Liechtenstein. These businesses, regardless of size, must ensure they meet the requirements set by the EUDR to maintain access to the EU market.

What Businesses Does the EUDR Apply To?

The EUDR applies to all market participants and traders involved in the production, importation, or exportation of commodities covered by the regulation. This includes businesses in palm oil, soy, coffee, cocoa, timber, rubber, and cattle products, as well as derived goods like beef, furniture, chocolate, and tires.

Whether you are a large multinational company or a sole trader, if you deal with any of the regulated commodities or products within the EEA, you must comply with the EUDR. This applies to businesses regardless of whether they are producing goods within the EU or importing them from other regions of the world. Compliance is mandatory if the products will be placed on the European market.

Market Participant or Trader?

Under the EUDR, businesses are categorized into two main groups: market participants and traders. Each group has different levels of responsibility when it comes to compliance.

• Market Participants: These are companies that are directly involved in the production or first placement of regulated products on the EU market. They are required to implement their own due diligence system to ensure their products comply with the EUDR. This involves conducting a detailed risk assessment of their supply chain, ensuring that the products do not contribute to deforestation or forest degradation. Market participants must provide a due diligence statement to their national authority via the European Commission’s dedicated information system, which will be in place by December 2024.

• Traders: Traders who buy and sell products already placed on the EU market by market participants have fewer obligations. They are allowed to rely on due diligence statements provided by their suppliers, which reduces their direct compliance burden. However, large traders—defined as those exceeding certain turnover or employee thresholds—are subject to the same due diligence requirements as market participants. This means they must also set up their own due diligence systems to verify compliance throughout their supply chain.

This distinction between market participants and traders ensures that businesses at different stages of the supply chain can manage their compliance obligations more effectively.

Do Private Individuals Need to Comply with the EUDR?

The EUDR primarily targets commercial entities, but private individuals can also be impacted if they are importing regulated products into the EU.

• Personal Use: If you are a private individual purchasing products for personal use, such as a wooden table, a bag of coffee, or a special chocolate, you are exempt from the EUDR obligations. Personal use means that the product is for your own consumption or enjoyment and will not be resold or used in a commercial context.

• Commercial Use: If you import these products for commercial use, even as a small-scale operation, you are required to comply with the EUDR. Commercial use refers to instances where the products are intended for resale, or if they are being given as a gift in a business context. In these cases, you are treated as a trader and must ensure that the products meet the regulation’s due diligence requirements.

What Does Due Diligence Involve?

Under the EUDR, due diligence means that companies must assess and mitigate risks in their supply chain to ensure that their products are not linked to deforestation. This involves several steps:

1. Risk Assessment: Companies need to gather information about the origin of their products, including the land where the raw materials were sourced, and assess whether deforestation or forest degradation has occurred.

2. Risk Mitigation: If a risk is identified, companies must take steps to address it, such as changing suppliers or obtaining further proof that the product complies with the regulation.

3. Reporting: A due diligence statement must be submitted to the relevant national authority, outlining the steps taken to ensure compliance. This statement will be reviewed by authorities to verify the company's adherence to the EUDR.

By issuing a due diligence statement, companies assume legal responsibility for their products' compliance with the EUDR.

Penalties for Non-Compliance

Failure to comply with the EUDR can result in significant penalties, including fines, the suspension of trade licenses, and restrictions on market access. Non-compliance risks are particularly high for businesses that operate in high-deforestation-risk sectors, such as palm oil, soy, and timber.

Stay Informed and Compliant

The EUDR represents a major regulatory shift for companies that trade in deforestation-linked commodities. Ensuring compliance with the regulation is essential to maintain access to the EEA market and avoid penalties. Whether you are a market participant or a trader, the time to act is now. By implementing robust due diligence systems and staying informed about regulatory updates, companies can continue to operate smoothly within the EEA.

For more tools and resources to help you comply with the EUDR, stay connected with our platform for updates, guidance, and solutions tailored to your business needs.