The European Commission has released new FAQ clarifications and a guidance document on the EU Deforestation Regulation (EUDR), offering detailed insights into various aspects such as traceability, geolocation and due diligence requirements. In response to global feedback, the Commission proposed a 12-month extension for implementation of the regulation. If accepted by the EU Parliament and Council, this will give larger operators time until December 2025 and SMEs until June 2026 to fully comply with the new regulation.
The European Commission’s latest updates include two crucial documents: updated FAQs and a guidance document. Additionally, a user guide on the Information System has been also published along with online training appointments. These resources aim to help businesses navigate the complexities of the new regulation on deforestation-free products by clarifying key aspects, such as traceability requirements, legal requirements and geolocation standards, and the obligations of SMEs.
While the updated documents provide clarity on certain aspects of the EUDR, preparing for compliance remains a significant challenge for companies. On the other hand, the additional timeline allows businesses to refine their processes and better align with sustainability goals, particularly in light of the forthcoming Corporate Sustainability Due Diligence Directive (CSDDD) regulation.
What is the EUDR?
The EUDR is an environmental regulation that prohibits the placement of certain commodities linked to deforestation on the EU market. The EUDR focuses on the below high-risk commodities and related products:
- palm oil
- soy
- coffee
- cocoa
- wood
- cattle
- rubber
Based on the EUDR, the commodities and products in scope must fulfil three cumulative requirements to be compliant and allowed on the EU market:
- No or negligible risk of deforestation.
- Produced in accordance with local legislation.
- Accompanied by a Due Diligence Statement (DDS).
Some highlights from the updated FAQ
Guidance document gives more details on the legality requirements
The determination of whether a relevant commodity or product has been produced in accordance with the legislation of the country of production relies on the specific laws governing the area where the commodity was grown, harvested, or raised. The EUDR adopts a flexible stance by acknowledging a range of laws relevant to the legality of production without specifying which laws, as they can vary by country and change over time. However, only those laws that directly affect the legal status of the production area are deemed relevant. This includes laws related to land use rights, environmental protection, forest management, third-party rights, and labor rights, among others. Operators are required to gather information about applicable legislation in the countries and specific areas from which they source commodities, ensuring that they comply with national and international laws. Specificities that need to be collected include for example official documents from authorities, contracts with local communities, and environmental assessments. Additionally, operators must be vigilant regarding the risk of corruption in the countries of production, taking extra measures to verify the authenticity of documents where corruption risks are high.
New TARIC document codes created for EUDR
Directorate-General Taxation and Customs Union has also published new TARIC codes addressing the requirements of EUDR. For example, a new TARIC document code C716 has to be used to declare that a company is in possession of the required due diligence statement (DDS). Code Y129 has been established for products listed with an HS code in the regulation but not derived from the relevant commodity. This allows the declarant to indicate that, while the product falls under a nomenclature code impacted by the EUDR, it is not subject to the regulation because it is not produced from the specified commodity.
Outstanding clarifications and future developments for EUDR Compliance
Although the updated documents provide additional guidance for companies, certain areas still need further clarification. The Commission is developing a benchmarking system to classify countries based on their deforestation risk, enhancing risk assessments for operators. It will also further clarify the role of certification schemes in risk mitigation and is developing specific criteria for sufficient documentation in complex supply chains. Moreover, guidance is being prepared on the definition of “agricultural use,” agroforestry practices, and other legal aspects of interest. The Commission continues to engage with stakeholders to provide informal guidance and good practice examples while addressing commodity-specific aspects.
How PwC can support you
The numerous requirements under the EUDR present significant challenges for companies. Strong governance frameworks and effective data management are crucial to navigate these obligations. We recommend conducting a thorough assessment of your current compliance status and identifying any potential gaps. We can assist in several key areas to ensure EUDR compliance:
- Impact Assessment: Support with identifying if your company qualifies as an operator or trader handling affected commodities.
- Due Diligence Processes: Assistance with setting up due diligence procedures, identifying risks, and ensuring compliance with EUDR requirements.
- Governance Model: Assistance in setting up a governance model and implementing a control framework for yearly reviews and audit preparation.
- Supply Chain Redesign: Support in creating a sustainable supply chain and adapting distribution processes to meet regulatory requirements, which go beyond EUDR.
