EU Deforestation Regulation: Postponement of EUDR's entry into application and other latest developments

On 2 October 2024 the European Commission ("Commission") made public its proposal to postpone application of the EU Deforestation Regulation ("EUDR").¹ It also circulated long overdue draft guidelines and updated FAQ in order to assist operators and traders as well as EU Member States and third countries authorities in their preparations for the implementation of the EUDR. Finally the Commission released information with respect to the upcoming country benchmarking.

1. Postponement of EUDR's entry into application

The Commission is proposing an amendment to the EUDR that would postpone (a) its date of entry into application from 30 December 2024 to 30 December 2025 (and till 30 June 2026 for small and micro-enterprises) and (b) benchmarking deadline to 30 June 2025. Same as the EUDR itself, amendment is subject to the Ordinary Legislative Procedure that requires a consent of the Council of the European Union ("Council") as well as of the European Parliament ("Parliament").

On 16 October 2024 the Permanent Representative Committee, Council’s main preparatory body, agreed the Commission’s proposal without amendments. As follows from the Council’s letter, its approval is contingent on the Parliament supporting the Commission’s proposal equally without amendments.It is expected in this context that during the week of 21 October 2024 the Parliament will decide to consider the Commission’s proposal under urgent procedure envisaged by Article 170.6 of the Parliament’s Rules of Procedure, i.e. without a report or on the basis of an oral report by the committee responsible. If the Parliament takes a decision to employ the urgent procedure, it should adopt its position on the Commission’s proposal during the plenary scheduled for 13 or 14 November 2024. If so, the amendment is likely to be adopted and published in advance of the currently applicable deadline of 30 December 2024 thus postponing its entry into application till 30 December 2025 (and till 30 June 2026 for small and micro-enterprises).

2.Implementation Guidelines

On the same day the Commission released EUDR Draft Guidance Document ("Guidance Document")² as well as an updated version of the EUDR Frequently Asked Questions ("FAQs").³ Both documents are not legally binding and cannot replace, add to or amend the provisions of the EUDR, which is the only binding document establishing the legal obligations. Nevertheless, the Guidance Document as well as the FAQs provide a useful reference for anyone who must comply with the EUDR. They will also guide national competent authorities in the process of implementing and enforcing the EUDR.

Guidance Document as well as the FAQs clarify and elaborate on the key definitions and obligations imposed by the EUDR. In particular, they detail definitions of “placing on the market”, “making available” and “an operator”; elaborate on the date of effect and on the time-frame for application; describe due diligence and define “negligible risk”; explain what it means to “ascertain” that due diligence was properly exercised upstream; clarify “complexity of supply chain” and guide on the legality requirement, product scope, composite products and agricultural use. Finally, they also discuss the role of certifications and third party verification schemes in risk assessment and risk mitigation.

Most notable aspects of the Guidance Document and the Updated FAQs are discussed below.

• FAQ 5.19 clarifies that a due diligence statement can cover multiple physical batches/shipments. However, their supply should occur during a period not longer than one year from the time of submission of the statement, because a longer time period could lead to difficulties in demonstrating the correspondence between declared products and products actually (intended to be) placed on the market or exported. It also indicates that, in principle, a due diligence statement should cover commodities that have already been produced/harvested and operators should be able to link a due diligence statement to existing commodities.
• FAQ 2.10 provides a definition of supply that is key for triggering the EUDR application. It clarifies that ‘supply’ presupposes an agreement (written or verbal) between two or more legal or natural persons for the transfer of ownership or any other property right concerning the product in question after the product has been manufactured.
• Chapter 2 of the Draft Guidance Document and FAQ 2.10 contain information that will help to determine which supply chain actor has a status of an operator. The guidance differs with respect to the relevant products produced in the EU and those imported:
  • in the case of a domestic relevant product being placed on the market, the operator is normally the person that owns the commodity or product at the point of selling, however this may depend on the individual circumstances of the contractual agreement;
  • in the case of a relevant product produced outside of the EU and intended to be placed on the Union market, the operator is the person acting as the importer and the definition of 'operator is independent of the change of ownership of the product and of other contractual arrangements.
• Chapter 2 of the Guidance Document as well as FAQ 3.7 clarify Article 7 of the EUDR and confirm that non-EU based operators placing relevant products on the Union market may submit a due diligence statement subject to having a valid EORI number and exercising due diligence. However, in such cases pursuant to Article 7 of the EUDR there will be two operators within the meaning of the EUDR as the first natural or legal person to make the relevant products available on the market is also deemed to be an operator. The requirement with respect to the second operator comes on top of the normal obligation of the operator established outside the Union and aims at ensuring that there is always one responsible actor established in the EU pursuant to the EUDR recital 30.
• FAQ 1.3 confirms that operators are only required to conduct due diligence on the main commodity group (as per link between the relevant product and the relevant commodity in Annex I) for derived products that contain multiple relevant commodities.
• FAQ 1.17 is likely to be of help for producers employing continuous manufacturing cycles and processing compliant and non-compliant relevant products/commodities. It implies that in such cases operators may declare the source plots of land of relevant commodities/products used in the production process during a certain period of time that ensures that finished products contain only compliant commodities and provides an example of silos that are not regularly emptied: "when downloading part of the goods stored in the silo, this could be safely done by declaring the geolocation of all previous goods that entered the silo up to a minimum of 200% of the silo capacity, provided that the silo works in first-in first-out system".
• FAQ 1.18 discusses declaring "in excess" and, in particular, circumstances under which operators can declare more plots of land in a due diligence statement than those actually concerned by the production of the specific commodity placed on the market. FAQ notes that declaring an excessive amount of plots of land (for instance, on a regional or country-wide basis) are “generally not in line” with the EUDR since such practices would not allow operators to comply with their core due diligence obligations. It would also hinder the work of EU Member States Competent Authorities, making it difficult (or even impossible) to carry out checks.
• FAQ 1.25 provides in writing a long-awaited confirmation that the EUDR does not apply to cattle and cattle derived products if the cattle was born before the EUDR's entry into force, i.e. before 29 June 2023. Noteworthy, according to Summary Record of the 29th Meeting of the "Multi-Stakeholder Platform on Protecting and Restoring the World’s Forests"⁴, the Commission confirmed that the commodities harvested before 29 June 2023 are not in scope, regardless of date of processing and that derived products made entirely from commodities produced before entry into force are not in scope, even if released after entry into application.
• FAQ 2.10 (example 3) and Annex to the Guidance Document (scenarios 3a, 3b, and 5) emphasise that pursuant to EUDR recital (39) operators placing on the market or exporting relevant products that contain or have been made using cattle which have been fed with relevant products that contain or have been made using other relevant commodities or relevant products, should ensure, as part of their due diligence system, that the feed is deforestation-free.
• FAQ 1.25 also deals with the ‘date or time range of production’ and clarifies that the crop year and/or harvesting season could be used as a time range of production of the relevant commodities if more precise information is not available due to the specificities of production.
• FAQ 2.11, FAQ 2.10 (examples 7 and 8) and Annex to the Guidance Document (scenario 9b) address processing of relevant commodities/products into other relevant products by vertically integrated businesses and clarifies what constitutes placement on the market and when a due diligence statement must be submitted. Note, however, the clarifications contained in FAQ do not converge with those contained in Draft Guidance.
• FAQ 1.31 addresses challenges faced by operators to report the geolocation data when certain governments prohibit the sharing of such data. The FAQ states that operators and traders cannot rely on the existence of national laws prohibiting the sharing of such (public) data with operators and that they must submit the geolocation information as part of their obligations to submit a due diligence statement. Otherwise they cannot place on the Union market the relevant products containing or made of commodities sourced from such countries.
• FAQ 3.6 and Chapter 9 of the Draft Guidance Document state that upstream operators will be able to decide whether the geolocation information contained in their due diligence statements submitted in the Information System will be accessible and visible for downstream operators via the referenced due diligence statements inside the Information System. That suggests essentially that downstream operators in their due diligence statements should be capable of simply referencing upstream operators’ DDS statements without providing exact geolocation data.
• FAQ 5.20 clarifies that for the commodities produced in the EU due diligence statement should be submitted by the latest by the date when the product is physically available on the Union market and a purchase/supply agreement is executed.
• FAQ 9.2 describes what evidence is necessary to prove that the product was placed on the market before the date of entry of the EUDR into application.
• Chapter 4 of the Draft Guidance Document provides a greater detail on how to perform risk assessment and in line with FAQ 5.9 sets a rather high threshold to establish a ‘negligible risk’. Namely, the concept of negligible risk should be understood that commodities or products show “no cause for concern” as being not in compliance with Article 3(a) (deforestation-free) or (b) (produced legally, in accordance with the applicable legislation in the country of production).
• Chapter 6 of the Draft Guidance Document deals with the legality requirement. It provides further details on the national legislation to comply with. Proper due diligence with regard to the legality criterion requires that operators must be aware of what relevant legislation exists in each of the countries from which the relevant commodities are sourced. It also clarifies which information, including documents and data showing compliance with applicable legislation in the country of commodities' production/harvesting, must be collected as part of the due diligence obligation.
• Chapter 10 of the Draft Guidance Document discusses third-party certifications and verifications schemes and specifies under which circumstances operators can rely on them in the context of risk assessment.

3. Country Benchmarking

General Principles on the Benchmarking Methodology[5] released by the Commission on 2 October 2024 suggest that a large majority of countries worldwide are expected to be classified as low risk. This is encouraging news for operators since no risk assessment and risk mitigation would need to be performed for products containing or made of commodities originating in low risk countries. Nevertheless, the compliance burden remains high as even for low risk countries operators must collect not only geolocations of the source plots of land, but also adequately conclusive and verifiable information that (a) the relevant products are deforestation-free and (b) the relevant commodities have been produced in accordance with the relevant legislation of the country of production/harvesting, ensure traceability of the relevant products back to the source plots of land as well as no mixing with non-compliant relevant commodities or relevant products throughout the whole supply chain.

4. Other

On 30 September 2024 the Commission disclosed TARIC data created for the EUDR that will facilitate the implementation of the regulation at customs. Additional codes will be created for the importation into the EU of the relevant products accompanied by a due diligence statement as well of the products that fall under CN codes listed in Annex I to the EUDR but are subject to various exemptions and derogations. When importing relevant products accompanied by a due diligence statement or products that fall under Annex I CN codes but are subject to exemptions specific codes will need to be indicated in the customs declaration in addition to the 10-digit TARIC Code / 8-digit CN code itself.

The Commission is also starting to test Application Programming Interface (API) that will allow large operators dealing with many products and suppliers to manage due diligence statements in bulk using a machine-to-machine connection to the Information System via an API. Operators interested in connecting their own systems to the Information System through the API can get in touch with the Commission to start the process or get support. A successful conformance test towards a test environment is required before access is granted to the production system.

5. Conclusion

Stakeholders should closely monitor the progress of the legislative procedure that is dealing with the Commission’s proposed amendment to the EUDR application deadline. While there appears to be a wide political support to the Commission’s proposal in the Council and in the Parliament, time is very short for the adoption and publication of the amendment in advance of the currently applicable 30 December 2024 deadline.

Furthermore, operators and traders as well as third country suppliers should carefully examine the Guidance Document as well as FAQs and adjust their due diligence accordingly. Highlights of both documents provided above do not comprehensively summarize the contents of the Guidance Document and the FAQs and operators and traders are well advised to thoroughly peruse them and apply to their specific product and supply chains. We also note that the Commission is already working on the fourth addition of the FAQs.

For more detailed discussion on the latest EUDR-related developments you can also join our upcoming legal webinar that will discuss the contents and the implications of the latest Commission’s initiatives.