Deforestation Regulation (EU) No 2023/1115 definitively establishes the due diligence criteria to be followed to ensure the socio-environmental sustainability of critical raw materials. Cattle (meats and dairy products but also hides), cocoa, coffee, oil palm, soybean, rubber and wood-as well as products containing them or derived from them listed in Annex I-can only be imported and circulated in the European Union if operators can demonstrate that they are not derived from deforestation after December 31, 2020 (1,2).
The extraordinary innovation introduced by EUDR lies precisely in the primary responsibility of downstream operators in the aforementioned supply chains. Importers, industries, retailers must guarantee that the products they handle are 100 percent ‘deforestation-free’ in the face of the risk of exemplary penalties, proportionate to their turnover. And this is the only suitable way to protect primary forests that have survived decades of land grabbing and deforestation. All the more effective if these principles are also applied by other legislators.
Deforestation, global scenario, premise
FAO estimates that in the 1990-2020 period alone, deforestation devoured 10 percent of the then available primary forests (about 420 million hectares) and is continuing at a rate of about 10 million hectares/year. This phenomenon leads to the increase in greenhouse gas emissions due to the fires that destroy them and the loss in carbon absorption capacity. (3) According to the IPCC, deforestation alone is responsible for 11 percent of global emissions (recitals 2 and 3).
The European Union, according to reductive estimates, is responsible for at least 10 percent of the deforestation that took place between 1990 and 2008, as an importer of the commodities that cause it. Palm oil (34 percent) and GMO soybeans (32.8 percent) top the list, followed by wood (8.6 percent), cocoa (7.5 percent), coffee (7 percent), beef (5 percent) and rubber (3.4 percent). (4) Germany and Italy top the EU ranking, responsible for 36 thousand hectares of deforestation each year. (5)
1) Deforestation Regulation. Goals
The goal of Deforestation Regulation (EU). No 2023/1115 is to reduce the Old Continent’s contribution to deforestation and thus to global biodiversity loss, as well as to the generation of greenhouse gases (EUDR, Article 1).
Raw materials and derived products affected by the regulation will only be allowed to be placed on the European market or exported if the operator can guarantee that they are ‘deforestation-free‘.
Dec. 31, 2020 is the date after which the European legislature will no longer tolerate ecocides carried out to supply Europe with palm oil, GMO soybeans, cocoa and coffee, beef, and deforestation timber.
2) Definitions
‘Deforestation’ means the conversion of forest to agricultural use, whether human-induced or not‘.
‘Forest’ means‘land of more than 0.5 hectares with trees more than 5 meters in height and tree cover of more than 10 percent, or with trees capable of reaching these thresholds in situ, excluding land in predominantly agricultural or urban use.’
‘Forest degradation’:‘structural changes in forest cover, in the form of conversion of:
– Primary forests or naturally renewed forests in forest plantations or other forest land; or
– Primary forests in planted forests’.
‘Deforestation-free’ (‘zero deforestation’):
– ‘affected products contain or have been fed or manufactured using affected raw materials produced on land that has not been subject to deforestation after December 31, 2020; and
– in the case of affected products that contain or were manufactured using wood, the wood was harvested without causing degradation of the forest of origin after December 31, 2020′ (EUDR, Article 2).
2.1) Geolocation, local legislation
‘Geolocation’: ‘the geographical location of a plot described by means of latitude and longitude coordinates corresponding to at least one point of latitude and longitude and using at least six decimal places; for plots larger than four hectares used for the production of commodities concerned other than cattle, it must be provided using polygons with sufficient points of latitude and longitude to describe the perimeter of each plot.’
Local legislation (‘relevant legislation of the country of production’: ‘the laws applicable in the country of production regarding the legal status of the production area in terms of:
– land use rights,
– environmental protection,
– Forest-related regulations, including forest management and biodiversity conservation, where directly related to timber harvesting,
– Rights of third parties,
– workers’ rights,
– human rights protected under international law, -principle of free, prior and informed consent, including what is provided in the UN Declaration on the Rights of Indigenous Peoples,
– fiscal discipline, on anti-corruption,
trade and customs’ (EUDR, Article 2).
3) General requirements and prohibitions
‘The raw materials and products concerned shall not be placed or made available on the market or exported unless they meet all the following conditions:
(a) are zero deforestation,
(b) have been produced in compliance with the relevant legislation of the country of production, and
(c) are subject to a due diligence declaration’(Deforestation Regulation EU No 2023/1115, Article 3).
4) Operator’s responsibility
The operator – understood as ‘The natural or legal person who in the course of a business activity places the products concerned on the market or exports them‘ (EUDR, Article 2.1.15) – exercises the due diligence In accordance with Article 8 ‘Before placing the products concerned on the market or exporting them, in order to prove that the products concerned comply with Article 3‘. Also through an agent (EUDR, Articles 4 and 6).
The due diligence statement – to be recorded in special electronic register available to the authorities (EUDR, Art. 33)-must include the data and documents necessary to ensure fulfillment of the duties of information, risk assessment and risk mitigation (see Annex II), to be kept for five years after registration.
The placing on the market of raw materials and products is prohibited when they are found to be non-conforming, or when the operator-who assumes primary responsibility in this regard at the time of registration (or placing on the market, or export)-has failed to fulfill due diligence duties. Or again, when due diligence shows a ‘non-negligible risk’ of non-compliance with the requirements of Article 3. (6)
4.1) Updates on non-compliance risks.
It is the duty of the operator ‘who obtains or becomes aware of relevant new information, including substantiated indications, indicating a risk of non-compliance with this Regulation of an affected product‘ already placed on the market ‘toimmediately inform:
– The competent authorities of the member state where the placing on the market took place, as well as
– merchants to whom he supplied the product concerned,
– in the case of exports, the competent authorities of the member state that is the country of production‘(Deforestation Regulation EU No 2023/1115, Article 4.5).
4.2) Responsibilities of downstream operators in the supply chain
The first importer into the EU is responsible operator (EUDR, Article 7). Operators and traders downstream of the supply-chain in turn must acquire from the operator who placed on the market or exported the products concerned ‘All information necessary to demonstrate that due diligence has been exercised and that the risk encountered is zero or negligible, including reference numbers of due diligence statements associated with these products‘ (EUDR, Article 4.7).
The compliance of the due dilig ence statement recorded by the first responsible operator must also be ascertained by downstream operators in the supply chain (industries, traders, retailers), who in turn must exercise due diligence, with equal responsibility. Small and Medium Enterprises (SMEs) only can only verify and record due diligence statements entered into the electronic register. Subject also to their duty of due diligence on parts of affected products that are not registered (EUDR, Articles 4 and 5).
5) Due diligence
Before placing the affected products on the market or exporting them, the operator shall exercise due diligence in relation to all affected products supplied by each supplier(Deforestation Regulation EU No 2023/1115, Article 8). Due diligence includes:
– information duties (EUDR, Art. 9). Description and quantity of goods, country of production, geolocation of agricultural areas of origin, traceability, information ‘adequately probative‘ on compliance with local legislation. ‘Any deforestation or forest degradation in the allotments automatically excludes the placing or making available on the market or from export all raw materials and all affected products from such allotments’,
– risk assessment (EUDR, Art. 10). Criteria to be considered include the presence of forests, the extent of forest degradation, the establishment of indigenous communities and ‘good faith consultation and cooperation‘ with them, and the degree of risk attributed to the country. In fact, the European Commission classifies all countries into three risk categories, based on the recurrence of deforestation related to the production of critical raw materials (EUDR, Art. 29),
– risk mitigation (EUDR, Art. 11). Outside of cases where due diligence reveals ‘the presence of no or only negligible risk that the products concerned are noncompliant (…), the operator shall adopt appropriate risk mitigation procedures and measures to achieve a zero or only negligible level of risk.’ These procedures include requesting additional information and conducting ‘independent investigations or audits‘.
The due diligence system should be reviewed once a year (small and medium-sized enterprises excluded). Operators must also publish an annual report (and give it wide dissemination, including through web) on the risk assessment carried out, the measures taken, and-where applicable- ‘A description of the consultation process with indigenous peoples, local communities and other customary land rights holders or civil society organizations present in the area of production of the commodities and products concerned‘ (EUDR, art. 12).
6) Competent authorities
Member states shall appoint competent authorities to carry out official controls on compliance with the Deforestation Regulation of products placed on the market by operators in the territory. Controls are based on risk criteria such as the type of raw materials, the extent of the supply chain, and the risk level of the country.
Control authorities must develop annual control plans, based on the above risk criteria, with a requirement to conduct audits on at least:
– 9 percent of operators who import or use raw materials or products arriving from high-risk countries,
– 3 percent of operators importing or using raw materials or products arriving from medium-risk countries,
– 1 percent of operators who import or use process raw materials or products from countries considered low-risk.
The results of inspections must be kept for at least 10 years(Deforestation Regulation EU No 2023/1115, Art. 16).
7) Corrective measures
The authority that identifies a high risk of noncompliance can take immediate measures to prevent the product from being placed on the market or exported(Deforestation Regulation EU No 2023/1115, Articles 17,23). Seizure of the affected products, suspension of placing and/or making available on the market and/or export of the products. If the products are to cross European borders, the inspection authority shall request the customs authorities to block their passage for three days, extendable for another three days, in order to carry out investigations.
Nonconforming products already placed on the market or exported are subject to corrective measures necessary to end the nonconformity. In proportion to the severity of non-compliance, rectification to formal non-compliance, blocking of placing on the market and export, immediate withdrawal or recall with an order to donate the products, where possible, for charitable or public interest purposes. Ultimately, disposal. With operator’s duty to remedy due diligence deficiencies (EUDR, Art. 24).
7) Major and incidental penalties, name & shame
Penalties should be established by member states, following the principles of effectiveness, proportionality and deterrence. Monetary penalties must come commensurate with the environmental damage and the value of the product and in any case be such as to effectively deprive the operator of the benefit gained by the transgression. In the case of legal persons, ‘the maximum amount of the penalty shall be at least 4 percent of the total annual turnover, at the Union level, of the operator or trader in the financial year preceding the year of the decision on the penalty (…) and raised, if necessary, to exceed the potential economic benefits obtained.’
Incidental penalties may include:
– Confiscation of the products concerned or the proceeds obtained,
– temporary exclusion (for up to 12 months) from public procurement procedures, access to public funds, grants and concessions,
– Loss of the ability to exercise simplified due digence. Penalties should be reported to the European Commission for publication on the appropriate website(Deforestation Regulation EU No 2023/1115, Art. 25). (7)
Dario Dongo
Notes
(1) Regulation (EU) 2023/1115 on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010 https://tinyurl.com/3nur34uz
(2) Dario Dongo. Due diligence and deforestation, stop unsustainable imports of commodities. Proposed EU regulation, the ABC. GIFT(Great Italian Food Trade) 6.3.2022
(3) World’s most comprehensive analysis of forest resources launched today in an innovative format. FAO (2020). https://www.fao.org/news/story/pt/item/1298929/icode/
(4) Regulation (EU) 2023/1115, Recital 38. Towards deforestation-free commodities and products in the EU https://www.europarl.europa.eu/RegData/etudes/BRIE/2022/698925/EPRS_BRI(2022)698925_EN.pdf
(5) Stepping up? The continuing impact pf EU consumption on nature worldwide. WWF. April 2021 https://wwfeu.awsassets.panda.org/downloads/stepping_up___the_continuing_impact_of_eu_consumption_on_nature_worldwide_fullreport_low_res.pdf
(6) ‘negligible risk’ means the level of risk that applies to relevant commodities and relevant products, where, on the basis of a full assessment of product-specific and general information, and, where necessary, of the application of the appropriate mitigation measures, those commodities or products show no cause for concern as being not in compliance with Article 3, point (a) or (b)’ (EUDR, Art. 2.1.26)
(7) See also Dario Dongo. Due diligence and deforestation, stop unsustainable imports of commodities. Proposed EU regulation, the ABC. GIFT (Great Italian Food Trade). 6.3.22
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
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