The EU Regulation 2023/1115 (EUDR) introduces new due diligence obligations for companies operating in the European market with the aim of preventing deforestation and forest degradation. Specifically, companies must ensure that products placed on the EU market, marketed, or exported from the EU are not associated with deforestation or forest degradation practices.

Main updates and affected products

The EUDR applies to the following raw materials: livestock, cocoa, coffee, palm oil, rubber, soy, wood, and the derivative products listed in Annex I to the EUDR (the “Affected Products”).
The Affected Products can only be placed on the EU market, exported, and traded in the EU if they are “compliant” with the EUDR. To be compliant, the Affected Products must meet all of the following conditions:

• zero deforestation (i.e., they must come from land that has not been deforested or subject to environmental degradation after December 31, 2020),
• produced in compliance with the laws of the country of origin,
• accompanied by a due diligence statement certifying that the risk of non-compliance detected is null or negligible.

The EUDR does not apply to goods produced entirely from materials that have completed their life cycle and would thus be disposed of as waste.

Obligations for operators and traders

When defining obligations, the EUDR distinguishes between:

• operators: entities that, in the course of a commercial activity, import or export Affected Products,
• traders: entities within the supply chain, other than operators, that, in the course of a commercial activity, make the Affected Products available on the EU market.

Operators and non-SME traders are required to carry out due diligence, which includes the following steps:

• collecting information on the Affected Products (including geolocation of the land from which the raw material is sourced),
• assessing the risk of non-compliance,
• mitigating any non-negligible risks if necessary,
• issuing a due diligence statement for each Affected Product.

Exemptions and simplified procedures are provided for SME operators and traders.
If Affected Products are placed on the EU market by a non-EU entity, the due diligence obligations under the EUDR fall on the first entity (natural or legal person) established in the EU that makes the Affected Products available on the EU market.

For goods originating from “low-risk” countries (as per the European Commission’s classification expected by June 2025), operators can conduct simplified due diligence, limited to collecting information on the Affected Products.

Operators must establish adequate internal policies, procedures, and control systems to detect, monitor, and manage the risks of non-compliance with the EUDR. Non-SME operators must also introduce an independent audit function and appoint a compliance officer at a managerial level.

Applications deadline

In October 2024, the Council approved the Commission’s proposal to postpone the application date of the EUDR by one year from the original deadline of December 30, 2024. Therefore, subject to the European Parliament’s agreement, the obligations arising from the EUDR will be binding from:

• December 30, 2025, for medium and large enterprises,
• June 30, 2026, for small and micro enterprises,

and will apply to goods produced after June 29, 2023 (with the exception of wood and derived products, which, even if produced before this date, can only be placed on the EU market from December 30, 2025, if compliant with the EUDR).

Sanctions

Failure to comply with the obligations set out by the EUDR will result in significant sanctions, including:

• monetary fines,
• confiscation of the Affected Products and any profits obtained,
• temporary exclusion from public procurement procedures and access to public funding,
• publication of the conviction,
• in severe cases, temporary suspension of operations and disqualification from simplified due diligence procedures.

How to prepare?

While waiting for the EUDR to come into effect, companies have the opportunity to prepare by adopting measures that will help them be ready and competitive concerning future requirements and avoid operational disruptions. Recommended actions include:

• organizing training sessions on the new regulatory obligations and best practices to be adopted,
• developing due diligence procedures that comply with the new EUDR requirements,
• building tracking and monitoring systems for the supply chain,
• monitoring the risk classification of countries by the European Commission to align due diligence strategies accordingly,
• implementing risk management and internal control systems with assigned roles and responsibilities.

The ESG Team at LEXIA is available to assist clients in preparing for the new regulatory requirements, offering specialized legal advice to mitigate risks and maximize opportunities resulting from the adoption of the EUDR.