Regulation (EU) 2023/1115, known as the EUDR, is a major step forward for the European Union in the fight against climate change and biodiversity loss. This legislation sets out strict rules for the listing of selected commodities and products to the Union market, as well as for their export, in order to minimise the EU's contribution to global deforestation and forest degradation.

Scope and key terms

The regulation focuses on seven basic commodities: cattle, cocoa, coffee, oil palm, rubber, soy and timber. But it also applies to a wide range of relevant products that contain, were fed by, or were made from these commodities – from chocolate and tires to furniture and paper.

The basic condition for legal placing on the market is that the product is „"deforestation-free". This means that the relevant commodities must not come from land that has been December 31, 2020 subject to deforestation. In addition, for timber, it is required that its harvesting does not cause forest degradation after this date. According to the regulation, a forest is considered to be land with an area of more than 0.5 hectares with trees taller than 5 meters and a crown coverage of more than 10 %.

Obligations of economic operators

The main obligation of the controllers is to implement due diligence. This process consists of three phases:

1. Information collection: Entities must collect data on quantity, country of production and, in particular, geolocation coordinates of all land where commodities were produced. Geolocation must be accurate to six decimal places and for land over 4 hectares it must be provided in the form of polygons.
2. Risk assessment: Based on the information collected and criteria such as the level of corruption in the country of origin or the presence of indigenous people, the entity must assess the risk of non-compliance with the regulation.
3. Risk mitigation: If a risk other than negligible is identified, the entity must take measures, such as additional audits or supplier support, to eliminate the risk.

Before placing a product on the market, the operator must submit due diligence statement via the EU central information system. This takes responsibility for ensuring that the product meets all requirements.

Country benchmarking and control mechanism

The European Commission will introduce a three-tier system for classifying countries according to their deforestation risk: high, standard and low risk. This classification determines the intensity of the checks carried out by the competent authorities of the Member States. For products from high-risk countries, checks are required 9 % entities and volume of goods, at standard risk 3 % and at low risk 1 %.

Interestingly, simplified regime for micro and small primary entities, which are exempt from certain administrative obligations and may only submit a one-time simplified declaration.

Strict sanctions and effectiveness

The regulation introduces tough penalties for non-compliance. Member States must set fines proportionate to the environmental damage, with the maximum fine for legal persons being at least EUR 100,000. 4 % of their total annual turnover in the EU. In addition to financial penalties, there is a risk of confiscation of products, income from transactions, or temporary exclusion from public procurement.

Most of the provisions of the Regulation, including due diligence obligations, will enter into force December 30, 2026. For micro and small enterprises established before the end of 2024, a deferral applies until June 30, 2027, with the exception of wood products covered by previous regulations. The EUDR thus represents an ambitious tool to transform supply chains into more transparent and environmentally friendly systems. JRi&CO2AI