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Many countries around the world have made significant efforts over the past decade to reduce deforestation, for example by introducing moratoria or measures to improve transparency in the supply chain, yet deforestation and forest degradation continue at an alarming rate, contributing more than 10% of global greenhouse gas emissions.
This level of destruction has significant social, economic, and environmental consequences locally and globally. Deforestation contributes significantly to climate change and the loss of biodiversity.
The European Union has a significant role in this issue because it consumes a large number of products that contribute to deforestation. As a result, the EU has a responsibility to help fight against and ultimately stop deforestation.
The European Union’s regulation on deforestation-free products (EUDR) aims to promote the use of products that do not contribute to deforestation within the EU. This regulation is specific to certain products and will prevent companies from selling these products in the EU. Specifically, the regulation focuses on commodities such as cattle, cocoa, coffee, oil palm, rubber, soy, and wood, (some of the products that cause 90% of the world's deforestation) along with products derived from these commodities.
The regulation will come into effect on December 30, 2024 (or June 30, 2025, for micro or small businesses) and is part of the EU's broader commitment to protecting the environment and addressing climate change. The goal is to transition to supply chains that are free from deforestation.
The EU Deforestation Regulation (EUDR) is a significant legislative measure aimed at curbing the European Union's impact on global deforestation and forest degradation. The regulation was introduced to promote deforestation-free supply chains, reduce greenhouse gas emissions, and protect biodiversity, human rights, and the rights of indigenous people.
Relevant commodities and relevant products shall not be placed or made available on the market or exported, unless all the 3 following conditions are fulfilled:
1. they are deforestation-free;
a) that the relevant products contain, have been fed with or have been made using, relevant commodities that were produced on land that has not been subject to deforestation after 31 December, 2020; and
b) in the case of relevant products that contain or have been made using wood, that the wood has been harvested from the forest without inducing forest degradation after 31 December, 2020;
2. they have been produced in accordance with the relevant legislation of the country of production in terms of:
- land use rights;
- environmental protection;
- forest-related rules, including forest management and biodiversity conservation, where directly related to wood harvesting;
- third parties’ rights; labour rights; human rights protected under international law;
- the principle of free, prior and informed consent (FPIC), including as set out in the UN Declaration on the Rights of Indigenous Peoples;
- tax, anti-corruption, trade and customs regulations.
3. they are covered by a due diligence statement (DDS), linked to a traceability system with evidence of chain-of-custody from the source of origin demonstrating that the product is deforestation-free and produced in accordance with relevant legislations.The due diligence shall include:
a) the collection of information, data and documents needed to fulfil the requirements set out in Article 9;
(b) risk assessment measures as referred to in Article 10;
(c) risk mitigation measures as referred to in Article 11.
For more detailed information, please refer to the official European Commission's resources on the EUDR.
The EUDR aims to significantly reduce the EU's contribution to global deforestation, forest degradation, and associated greenhouse gas emissions. Over time, the regulation is expected to help cut greenhouse gas emissions and limit biodiversity loss. The Commission may extend regulatory protections to include other threatened ecosystems in the future.
The new rules aim to:
By adhering to these steps and ensuring all required documentation is in place, businesses can effectively prepare their supply chains for the upcoming implementation of the EUDR, thereby minimizing risks and enhancing their sustainability practices.
The regulation, which officially came into force on June 29, 2023, traces its inception back to long-standing concerns over the detrimental environmental effects of deforestation. Key events within EUDR’s timeline include:
The EUDR applies to seven key commodities and their derived products, however, the regulation does not apply to goods made entirely of material that has completed its life cycle and would otherwise have been disposed of as waste. Specifically, the regulation focuses on commodities such as cattle, cocoa, coffee, oil palm, rubber, soy, and wood (some of the products that cause 90% of the world's deforestation), along with products derived from these commodities. The EUDR mandates that these products must not contribute to deforestation or forest degradation, be produced in compliance with the relevant legislation of the country of production, and be accompanied by a due diligence statement.
These products are identified in the EUDR by their HS code (customs code), which should be use to collect information for the due diligence:
Relevant commodity / products
Cattle
0102 21 , 0102 29 Live cattle
ex 0201 Meat of cattle, fresh or chilled
ex 0202 Meat of cattle, frozen
ex 0206 10 Edible offal of cattle, fresh or chilled
ex 0206 22 Edible cattle livers, frozen
ex 0206 29 Edible cattle offal (excluding tongues and livers), frozen
ex 1602 50 Other prepared or preserved meat, meat offal, blood, of cattle
ex 4101 Raw hides and skins of cattle (fresh, or salted, dried, limed, pickled or otherwise preserved, but not tanned, parchment-dressed or further prepared), whether or not dehaired or split
ex 4104 Tanned or crust hides and skins of cattle, without hair on, whether or not split, but not further prepared
ex 4107 Leather of cattle, further prepared after tanning or crusting, including parchment-dressed leather, without hair on, whether or not split, other than leather of heading 4114
Cocoa
1801 Cocoa beans, whole or broken, raw or roasted
1802 Cocoa shells, husks, skins and other cocoa waste
1803 Cocoa paste, whether or not defatted
1804 Cocoa butter, fat and oil
1805 Cocoa powder, not containing added sugar or other sweetening matter
1806 Chocolate and other food preparations containing cocoa
Coffee
0901 Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion
Oil palm
1207 10 Palm nuts and kernels
1511 Palm oil and its fractions, whether or not refined, but not chemically modified
1513 21 Crude palm kernel and babassu oil and fractions thereof, whether or not refined, but not chemically modified
1513 29 Palm kernel and babassu oil and their fractions, whether or not refined, but not chemically modified (excluding crude oil)
2306 60 Oilcake and other solid residues of palm nuts or kernels, whether or not ground or in the form of pellets, resulting from the extraction of palm nut or kernel fats or oils
ex 2905 45 Glycerol, with a purity of 95 % or more (calculated on the weight of the dry product)
2915 70 Palmitic acid, stearic acid, their salts and esters
2915 90 Saturated acyclic monocarboxylic acids, their anhydrides, halides, peroxides and peroxyacids; their halogenated, sulphonated, nitrated or nitrosated derivatives (excluding formic acid, acetic acid, mono-, di- or trichloroacetic acids, propionic acid, butanoic acids, pentanoic acids, palmitic acid, stearic acid, their salts and esters, and acetic anhydride)
3823 11 Stearic acid, industrial
3823 12 Oleic acid, industrial
3823 19 Industrial monocarboxylic fatty acids; acid oils from refining (excluding stearic acid, oleic acid and tall oil fatty acids)
3823 70 Industrial fatty alcohols
Rubber
4001 Natural rubber, balata, gutta-percha, guayule, chicle and similar natural gums, in primary forms or in plates, sheets or strip
ex 4005 Compounded rubber, unvulcanised, in primary forms or in plates, sheets or strip
ex 4006 Unvulcanized rubber in other forms (e.g. rods, tubes and profile shapes) and articles (e.g. discs and rings)
ex 4007 Vulcanised rubber thread and cord
ex 4008 Plates, sheets, strips, rods and profile shapes, of vulcanised rubber other than hard rubber
ex 4010 Conveyer or transmission belts or belting, of vulcanised rubber
ex 4011 New pneumatic tyres, of rubber
ex 4012 Retreaded or used pneumatic tyres of rubber; solid or cushion tyres, tyre treads and tyre flaps, of rubber
ex 4013 Inner tubes, of rubber
ex 4015 Articles of apparel and clothing accessories (including gloves, mittens and mitts), for all purposes, of vulcanised rubber other than hard rubber
ex 4016 Other articles of vulcanised rubber other than hard rubber, not elsewhere specified in chapter 40
ex 4017 Hard rubber (e.g. ebonite) in all forms including waste and scrap; articles of hard rubber
Soya
1201 Soya beans, whether or not broken
1208 10 Soya bean flour and meal
1507 Soya-bean oil and its fractions, whether or not refined, but not chemically modified
2304 Oilcake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of soya-bean oil
Wood
4401 Fuel wood, in logs, in billets, in twigs, in faggots or in similar forms; wood in chips or particles; sawdust and wood waste and scrap, whether or not agglomerated in logs, briquettes, pellets or similar forms
4402 Wood charcoal (including shell or nut charcoal), whether or not agglomerated
4403 Wood in the rough, whether or not stripped of bark or sapwood, or roughly squared
4404 Hoopwood; split poles; piles, pickets and stakes of wood, pointed but not sawn lengthwise; wooden sticks, roughly trimmed but not turned, bent or otherwise worked, suitable for the manufacture of walking sticks, umbrellas, tool handles or the like; chipwood and the like
4405 Wood wool; wood flour
4406 Railway or tramway sleepers (cross-ties) of wood
4407 Wood sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded or end-jointed, of a thickness exceeding 6 mm
4408 Sheets for veneering (including those obtained by slicing laminated wood), for plywood or for other similar laminated wood and other wood, sawn lengthwise, sliced or peeled, whether or not planed, sanded, spliced or end-jointed, of a thickness not exceeding 6 mm
4409 Wood (including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rebated, chamfered, V-jointed, beaded, moulded, rounded or the like) along any of its edges, ends or faces, whether or not planed, sanded or end-jointed
4410 Particle board, oriented strand board (OSB) and similar board (for example, waferboard) of wood or other ligneous materials, whether or not agglomerated with resins or other organic binding substances
4411 Fibreboard of wood or other ligneous materials, whether or not bonded with resins or other organic substances
4412 Plywood, veneered panels and similar laminated wood
4413 Densified wood, in blocks, plates, strips or profile shapes
4414 Wooden frames for paintings, photographs, mirrors or similar objects
4415 Packing cases, boxes, crates, drums and similar packings, of wood; cable-drums of wood; pallets, box pallets and other load boards, of wood;
pallet collars of wood
(not including packing material used exclusively as packing material to support, protect or carry another product placed on the market)
4416 Casks, barrels, vats, tubs and other coopers’ products and parts thereof, of wood, including staves
4417 Tools, tool bodies, tool handles, broom or brush bodies and handles, of wood; boot or shoe lasts and trees, of wood
4418 Builders’ joinery and carpentry of wood, including cellular wood panels, assembled flooring panels, shingles and shakes
4419 Tableware and kitchenware, of wood
4420 Wood marquetry and inlaid wood; caskets and cases for jewellery or cutlery, and similar articles, of wood; statuettes and other ornaments, of wood; wooden articles of furniture not falling in Chapter 94
4421 Other articles of wood
Pulp and paper of Chapters 47 and 48 of the Combined Nomenclature, with the exception of bamboo-based and recovered (waste and scrap) products
ex 49 Printed books, newspapers, pictures and other products of the printing industry, manuscripts, typescripts and plans, of paper
ex 9401 Seats (other than those of heading 9402 ), whether or not convertible into beds, and parts thereof, of wood
9403 30 , 9403 40 , 9403 50 , 9403 60 and 9403 91 Wooden furniture, and parts thereof
9406 10 Prefabricated buildings of wood
*Source: Annex 1 of the EUDR.
The Regulation affects both large companies and SMEs, although obligations for the latter are delayed until 30 June 2025 (with simplified obligations for SME traders).
Large companies would have 18 months to comply with the EUDR requirements, and small and medium-sized enterprises would have up to 24 months, setting the dates as Dec. 30, 2024, and June 30, 2025, respectively.
As for subjects, the EUDR’s definition of ‘operator’ is key. Are they:
- Operators: An operator is any natural or legal person who, in the course of a commercial activity, places relevant products on the market or exports them. For example, a company that imports cocoa butter and another company that uses that cocoa butter to produce chocolate and places it on the market would both be considered operators.
- Traders: Any person in the supply chain other than the operator who makes relevant products available on the market. For example, a company that buys chocolate from an EU-based producer and sells it on to retail chains without further processing it would be a trader under this definition.
Given its scope, the EUDR affects numerous industries, particularly companies involved in the processing or export of rubber, wood, and oil palm. These impacts will include: (i) higher costs for both manufacturers and exporters connected to reporting and supply chain checking and verification; (ii) the possible loss of competitiveness for smaller players if these cannot meet the EUDR requirements; and (iii) the gradual exclusion of players from manufacturing supply chains and the diversion of global investment flows away from the country classified as high risk by the EU.
Blockchain technology has become indispensable for ensuring traceability and transparency within supply chains, particularly under the European Union Deforestation-free Regulation (EUDR). Finboot's MARCO Track & Trace, a no-code/low-code digital suite that leverages blockchain, enhances the security and immutability of data, ensuring that all recorded information is authentic and unaltered. This capability is vital for maintaining a chain of custody that can withstand rigorous audits.
Key Features and Benefits:
By leveraging blockchain technology, companies can ensure robust traceability and transparency, thereby meeting EUDR compliance and fostering sustainable business practices.
The core aim of the EUDR is to ensure that products associated with deforestation and forest degradation are not available on the EU market. This initiative targets a significant reduction in the EU's carbon footprint by minimizing carbon emissions from the production and consumption of certain commodities.
The EUDR is likely to reconfigure trade and supply chains across deforestation-linked commodities over the next decade. Operators and traders are required to compile comprehensive documentation that proves the deforestation-free status of the commodities and their adherence to the relevant legislation of the country of production.
By creating a tamper-proof record of all transactions and product movements, MARCO Track & Trace provides a robust foundation for compliance with deforestation regulations.
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