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EU Deforestation Regulation likely delayed until 2025
At the beginning of October, the European Commission proposed postponing the implementation of the EU Deforestation Regulation by one year in order to give global stakeholders more time to prepare. The Commission cited feedback from “international partners about their state of preparations” as a driving cause behind the potential delay.
So far, the European Council has agreed to extend the date of application. If the European Parliament also agrees to this proposal, the regulation would go into effect for large operators and traders on 30 December 2025 and on 30 June 2026 for micro- and small enterprises.
Background on the regulation
The EU Deforestation Regulation sets mandatory limits for all companies who sell, produce, trade or export products containing palm oil, beef, timber, coffee, cocoa, and soy from the EU market. These so-called due diligence rules also apply to several derived products including leather, chocolate, and furniture. After two years, EU authorities will conduct a review to determine if more products need to be listed.
Under the regulation, retailers will also be required to trace products they sell back to the plot of land where they were produced. The rules seek to reduce the administrative burden for retailers and administrators. However, when the regulation was initially proposed, some third countries impacted by the rules, notably Brazil, Indonesia, and Colombia, said those rules will be burdensome and costly to implement.
The law establishes a new benchmarking system under which third countries and EU Member States are assigned a level of risk related to deforestation: either low, standard, or high. The assigned risk level determines the specific obligations for companies and regulatory authorities to carry out inspections for commodities sourced from those countries. According to the Commission, a “large majority of countries worldwide will be classified as ‘low risk’.”
Member State competent authorities will create national frameworks to conduct checks on companies for compliance. The authorities must carry out checks on nine percent of companies trading products from high-risk countries, three percent trading from standard-risk companies, and one percent trading from low-risk countries. Enforcement measures include the imposition of fines of up to four percent of a company’s turnover in the EU. Other penalties for noncompliant companies include temporary exclusion from EU public procurement processes and from access to EU public funding.
Looking ahead
In announcing the proposed delay, the Commission released a draft guidance that clarifies several key provisions of the rule. Companies should closely review the guidance and evaluate whether their processes are aligned or if changes need to be made.
While we await Parliament’s decision on the proposed delay, companies impacted by the Deforestation Regulation should also continue their efforts to implement its provisions. This includes registering their due diligence statements in the Commission’s new online Deforestation Due Diligence Registry. The Commission confirmed that the registry will be fully operational in December 2024 and noted that due diligence statements can be submitted before the Deforestation Regulation becomes applicable.
Companies should use any extra time to familiarise themselves with the online portal and ensure they are fully compliant with other measures in the regulation. It would also be prudent to audit supply chains to ensure all aspects of their product’s life cycle are adhering to the new rules.
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