Deforestation Regulation: Impacts Of A Possible Delay In Risk Classification Of Countries And Other Recent Developments

• Published date: 27 March 2024
• Subject Matter: Finance and Banking, Financial Services, Commodities/Derivatives/Stock Exchanges
• Law Firm: Mayer Brown
• Author: Mr Nikolay Mizulin, Paulette Vander Schueren, Dylan Geraets and Irina Antoshevska

On 9 June 2023, the European Union published 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 (the "Deforestation Regulation" or the "EUDR"). The EUDR entered into force on 29 June 2023, although the main prohibitions and obligations will not apply until 30 December 2024.¹

Pursuant to the EUDR, beginning 30 December 2024, relevant products (derivatives of palm oil, soya, wood, cocoa, coffee, cattle, and rubber, as listed in Annex I to the EUDR) may be placed or made available on the EU market, or exported from the European Union, only if they meet the following requirements:

(1) Deforestation-free: Relevant products must be traceable to the plot of land where the relevant commodities were produced/harvested, and such plot of land must not have been subject to deforestation (or to forest degradation with respect to wood) after 31 December 2020

(2) Legality: Production/harvesting of the relevant commodities on the respective plot of land must be compliant with relevant legislation of the country of production

(3) Due diligence statement (DDS): Each batch of relevant products must be covered by a DDS, which must be submitted into the Information System by an EU operator or trader upon conducting due diligence, or upon ascertaining that due diligence was carried out in accordance with EUDR in a prior step of the supply chain.

In order to meet these requirements, EU operators and traders are required to obtain adequately conclusive and verifiable information along the entire supply chain, starting from the producers of the relevant commodities.

1. FREQUENTLY ASKED QUESTIONS ON THE DEFORESTATION REGULATION

To clarify complex EUDR requirements, the European Commission ("Commission") published Frequently Asked Questions ("FAQ"). The FAQ is a non-binding working document drafted by the Commission to provide guidance to national authorities and EU operators and traders for the implementation of the EUDR. National authorities and economic operators may make use of this guidance based on the text, context and purpose of the EUDR, to achieve its uniform application across the European Union. Among other things, the FAQ clarifies the following:

• Placement on the market during the transitional period (FAQ 80): Obligations of EU operators/traders with respect to: (1) products placed on the market before 30 December 2024 and (2) products produced from the commodities or products placed on the EU market before 30 December 2024, will be limited to gathering adequately conclusive and verifiable evidence to prove that such relevant commodity, or relevant product, was placed on the market before the entry into application of the Regulation Such products will be exempted from the full due diligence requirements that are otherwise imposed on EU operators and traders placing relevant products on the EU market as of 30 December 2024.
• Granularity of traceability requirements (FAQ 2 and 4): The traceability requirements apply to each batch of imported, exported, or traded relevant commodities, meaning that the deforestation-free and legality requirements must be fulfilled for each batch of commodities or products placed on the EU market In that context, mass balance chains of custody which allow for the mixing'at any step of the supply chain'of deforestation-free commodities with commodities of unknown origin or non-deforestation-free commodities are not allowed, because they do not...