As part of the European Green Deal, the European Commission published a proposal for new Regulation to curb EU-driven deforestation and forest degradation (COM(2021) 706 final).
The proposed EU Regulation on deforestation-free products aims to minimise deforestation and forest degradation caused by EU consumption and production and to enlarge the demand on the EU market for deforestation-free products. The new rules concern cattle, palm oil, soy, cocoa, coffee and wood and related products (e.g. beef and paper), which are considered to be the main drivers of deforestation. Potentially, the scope will be expanded to other products, such as maize and rubber, or other ecosystems, as savannas and marshes.
The cornerstone of the proposed Regulation is that the commodities/products in scope may be placed or made available on the EU market or exported from the EU market only when:
they are deforestation-free;
they have been produced in accordance with the relevant legislation of the country of production (legally produced); and
they are covered by a due diligence statement.
Companies have to demonstrate that their goods are legally produced and deforestation-free following mandatory due diligence rules. The due diligence procedure includes the obligation that companies collect the geographic location of where the relevant commodities/products were produced. Furthermore, processes to manage and mitigate the risk of non-compliance should be established, including for large companies an independent audit function and the appointment of a compliance officer.
The exact due diligence obligations depend on a benchmarking system of the European Commission to assess countries and their level of risk of deforestation and forest degradation driven by the commodities in the scope of the Regulation. A deforestation-free good should be produced on land that has not been subject to deforestation or forest degradation after 31 December 2020.
To enforce the proposed Regulation, certain minimum inspection standards are set for competent authorities. Their annual checks should cover at least 5% of the companies trading each of the relevant commodities on their market and 5% of the quantity of each of the relevant commodities. For commodities/products with higher risk according to the benchmarking system, 15% should be checked. The Regulation further introduces a complaint procedure for third parties and certain measures to enhance cooperation and information sharing among authorities.
The Regulation implies extensive obligations for companies trading in (products related to) cattle, palm oil, soy, cocoa, coffee and wood. Despite the proposal status of the Regulation, they are recommended to prepare measures, for example the identification of the commodities/products in scope of this Regulation. The Regulation gives a transition period of 12 months (24 months for microenterprises). Enforcement authorities (e.g. NVWA, customs) should also start preparing.