EUDR: 5 things to know about the new regulation

The European Union's Deforestation Regulation (EUDR), though not exclusive to the natural rubber industry, will bring sweeping changes to it.

Stefano Savi, director of the Global Platform for Sustainable Natural Rubber, described the new regulation and its requirements as a "gargantuan task" for an already complex supply chain.

Whitney Luckett, founder and president of supply chain solutions firm Simko North America, called the regulation a "sea change," the largest since the 1970s, when technically specified rubber was developed.

And many associations have criticized the execution of the new law for its lack of clarity, tight deadlines and logistical headaches.

The European Commission—working to alleviate the regulation's pain points—sees EUDR, however, as a necessary step in its efforts to reduce global deforestation.

"As a major economy and consumer of these commodities linked to deforestation and forest degradation, the EU is partly responsible for this problem," the EC states, "and it wants to lead the way to solving it."

Here are five things you need to know about EUDR.

Officially called the EU Regulation on Deforestation-Free Products, EUDR entered into force in June 2023 to reduce the EU's impact on global deforestation and forest degradation.

The regulation will ban the import and entrance into the EU market of natural rubber—as well as cattle, wood, cocoa, soy, palm oil and coffee—and its derived products if the commodities fail to meet certain requirements. Most important of these requirements is that the importer of record must verify that the commodities do not come from land deforested after Dec. 31, 2020.

In addition, the commodities must have been produced "in accordance with the relevant legislation of the country of production" and be covered by a due diligence statement, according to Article 3 of the regulation.

The regulation is part of the EU's broader plan of actions outlined in its European Green Deal and Biodiversity Strategy for 2030.

With EUDR, the European Commission said it aims to avoid having products in its market that contribute to global deforestation and forest degradation, and thereby reduce carbon emissions caused by EU consumption and production of the listed commodities by at least 32 million metric tons per year.

EUDR is set to go into effect by the end of 2025. Specifically, large traders and operators must comply to EUDR regulations by Dec. 30, 2025, and micro- and small enterprises will need to comply by June 30, 2026.

The law was originally slated to come into effect by the end of 2024, but the EC proposed delaying the implementation in October after mounting concerns from global partners pertaining to the rate of preparedness.

Members of the European Parliament officially approved the extension on Nov. 14, which passed with 371 votes to 240, and passed a provisional agreement, along with the EC and European Council, on Dec. 3. Parliament then adopted this provisional agreement during its plenary session Dec. 16-19, with 546 votes to 97.

Micro-, small and large enterprises are defined by meeting two of three criteria under Article 3 of the Directive 2013/34/EU of the European Parliament, according to the regulation.

Micro-enterprises are defined as undertakings that do not exceed a balance sheet total of €350,000 (about $368,000), net turnover of €700,000 ($735,000), or an average number of 10 employees in a given financial year.

Small businesses are defined as undertakings that do not exceed a balance sheet total of €4 million (about $4.2 million) net turnover of €8 million (about $8.4 million), or an average number of 50 employees in a given financial year.

Large enterprises are undertakings with balance sheets that exceed €20 million, net turnover of €40 million, or have more than 250 employees.

The directive also defines medium-sized undertakings, which is not explicitly listed under the EUDR regulation. Medium undertakings are defined as having a balance sheet total not exceeding €20 million (about $21 million), net turnover not exceeding €40 million (about $42 million), or an average number of 250 employees.

As it stands, EUDR has three risk categories—high, standard and low—in a country benchmarking system operated by the EC, which are based on the risk of producing in countries of commodities that are not deforestation-free.

The classifications, according to the regulation, "shall be based on an objective and transparent assessment by the (EC), taking into account the latest scientific evidence and internationally recognized sources."

Assessment criteria primarily include rate of deforestation and forest degradation; rate of expansion of agriculture land for relevant commodities; and production trends of relevant commodities and of relevant products. And the EC must engage in dialogue with countries identified as high risk to reduce their level of risk, according to the regulation.

When the European Parliament approved the deadline extension for EUDR compliance in November, it also included an amendment to create a "zero" or "no risk" category, proposed by the European People's Party.

The new category, according to the amendment, would remove the need for border controls on commodities imported from countries deemed deforestation-free.

The European Tyre Manufacturers' Association and Global Platform for Sustainable Natural Rubber both voiced opposition to the amendment, urging EU governing bodies to maintain the "substance of the regulation," as the amendment would be likely to add confusion to an already complex regulation.

The EC, European Council and Parliament omitted the amendment in their provisional agreement on the extension on Dec. 3, adding, however, that they would consider the introduction of measures to simplify the implementation of EUDR as part of a scheduled review in 2028.

To prove EUDR compliance, operators and traders (non-SMEs) must exercise "due diligence," meaning the companies need to have a system in place to verify the commodities they are placing on the EU market are EUDR-compliant.

This is done with the accompaniment of a "due diligence statement" for relevant products placed on the EU market.

"Operators should formally take responsibility for the compliance of the relevant products that they intend to place on the market or export by making available due diligence statements," the regulation states, noting there are "simplified due diligence obligations" for countries deemed "low risk" in accordance with the risk zones.

To exercise due diligence, operators must collect information, documents and data on the commodities to show the product is deforestation-free via geolocation coordinates, quantity and country of production, among other information requirements outlined in Article 9 of the regulation.

Using this information, operators also must assess the risk of a product being non-EUDR compliant by considering the risk zone of the country of origin, the presence of forests in the country, and "the consultation and cooperation in good faith with indigenous peoples in the country," among other criteria outlined in Article 10 of the regulation.

"Operators need to demonstrate how the information gathered was checked against the risk assessment criteria and how they determined the risk," according to the EC, adding that a review of the risk assessment must be conducted once a year.

Finally, operators must have risk mitigation procedures in place if there is risk of a product being non-EUDR compliant.

Risk mitigation, according to the regulation, may require obtaining additional information, data or documents, or carrying out independent surveys or audits, among other information requirements outlined in Article 9 of the regulation.

Once a due diligence statement is established for the relevant commodities or products, these statements are to be electronically submitted to a deforestation registration created by the EC called the Information System.

The Information System is a digital database of due diligence statements that acts as a "specialized tool," according to the EC, that "streamlines the creation" of these statements.

This registry allows operators, traders and representatives to submit due diligence statements to the relevant authorities, proving the compliance of relevant commodities, it states.

Prior to EUDR receiving a 12-month extension for implementation, several associations earlier this year expressed concern over the readiness of the Information System and the rejection of a second test phase for it.

Namely, the ETRMA, along with several others, issued a joint letter in May to the EC calling for a second round of testing; making API specifications ready for businesses; a lift on the 25MB limitation for uploading files as part of the due diligence statement; the acceptance of geographical data formats other than GeoJSON files; and an earlier opening of the information system.

With the implementation of EUDR delayed, the EC has since published additional guidance and avenues of support for industry stakeholders, including an updated FAQ page, a "myth buster" page for the regulation, and virtual training and user manuals in all EU languages.

While no second test phase was rolled out, the Information System went live in early December, along with a replica training server, called the Acceptance Server. The Acceptance Server, according to the EC, is intended to support users in familiarizing themselves with the Information System's submission process. This also is available in all EU languages.