What companies should remember about regulation on deforestation and the EU Deforestation Regulation
The EU Deforestation Regulation (EUDR) continues to be subject to various interpretations and even misunderstandings. Despite its general name, the EUDR does not only apply to wood and timber, nor does it only apply to EU forests; its scope is broader. The scope of application is determined schematically based on of a list of items. However, in practice, the scope and applicability of the list, for example with regard to components and parts, may be surprisingly broad.
The EUDR entered into force on 29 June 2023. The Regulation will apply from 30 December 2025.
The transition period for micro and small enterprises will continue until 29 June 2026. However, this transition period does not apply to products covered by the EU Timber Regulation.
In this article, we outline the key points to remember:
1. The scope of the EUDR is broad.
The EUDR covers seven different commodities or raw material groups. The Regulation applies to the commodities and products listed in Annex I. These products are made from or derived from wood, beef and other parts of cattle, coffee, cocoa, soy, oil palm and rubber. Such derived products include, for example, meat products, leather, chocolate, palm oil products, glycerol, rubber products and components, soybeans, soy flour and oil, wood fuels, wood products, paper pulp, paper and printed books.
The EUDR may therefore apply to companies (and natural persons) operating in the food chain, the wood and paper industry, and other industrial sectors if the company's product portfolio includes products listed in Annex 1 to the EUDR.
2. Products falling within the scope of the EUDR must comply with the EUDR.
Products covered by the EUDR must comply with the EUDR in order to be imported into the EU.
Products comply with the EUDR when a) they do not cause deforestation; b) they have been produced in accordance with the relevant legislation of the country of production; and c) a due diligence statement regarding the products has been submitted.
3. The definition of deforestation does not apply only to the EU, and compliance with the national laws of the country of origin must be ensured.
The definition of deforestation does not only apply to the EU, but globally to all deforestation and forest degradation. Products are defined as 'deforestation-free' if they have been produced on land that has not been converted from forest to agricultural use after 31 December 2020. The provision also covers legal deforestation, unlike previous EU laws.
Compliance with the EUDR also requires compliance with local laws. Products must comply with the laws of the country of production, including laws regarding land use rights, environmental protection, forestry legislation, labor rights, human rights and the rights of indigenous peoples. Confirming compliance with local laws may be challenging, or it may be difficult to address non-compliance.
4. The confirmation that products are deforestation-free and the due diligence statement required for this require detailed information about the product and its raw material supply and value chain, as well as detailed location data (known as geolocation data).
Data collection, setting up the data collection process and the inclusion of data requirements in contracts are some of the most labor-intensive stages when preparing for the EUDR. Generally, data must be collected for each batch of products and their raw-materials and the accuracy of the data must be verified. The Regulation requires risk assessment and risk mitigation, where the reliability of the collected data is assessed and verified.
5. The EUDR imposes a due diligence obligation
The EUDR requires operators to exercise due diligence and to establish an appropriate due diligence system.
The due diligence system (DD-system) is a company's internal "risk management system". It includes procedures, measures and processes by which the operator systematically ensures that the products it places on the EU market comply with the EUDR.
The scope of the due diligence obligation and the DD-system depends, among other things, on the scope and complexity of each operator's supply chain as well as the risk level of the products' country of production.
The due diligence obligation includes:
Collecting detailed information (the required information is listed in Article 9 of the EUDR)
Carrying out a risk assessment in accordance with Article 10 of the EUDR
Mitigating risks in accordance with Article 11 of the EUDR, e.g. by requesting additional information and conducting independent audits
Compliance with due diligence is confirmed with a due diligence statement (DD-statement), which is submitted to the EU's information system. The information in the DD-statement is forwarded to the next business customer in the supply chain.
6. The importer has the greatest responsibility, but other operators and traders also have roles and obligations under the EUDR.
The obligations imposed by the EUDR are depend by the company's role in the supply chain and its size. The Regulation divides companies into operators, who are subject to broader obligations, and traders, who are subject to lighter obligations.
In principle, companies which import or export are considered 'operators' within the meaning of the Regulation. In the EUDR, import means import from third countries to the EU and export means export to third countries from the EU. Companies which import or export are considered operators regardless of their size.
The EUDR also applies to domestic and intra-EU trade when the products fall within the scope of the EUDR. The scope of the obligations of traders is determined based the size of the company. Large companies are required to take more comprehensive measures than smaller companies.
In domestic production and further processing, the EUDR applies to raw materials and products made from them that are listed in Annex I of the Regulation. The role defined in the Regulation can be that of an operator or a trader.
7. A national deforestation law, which stipulates possible sanctions, is currently being prepared.
A national deforestation law, which sets forth rules regarding the competent authorities and their powers, as well as the penalties for violating the EUDR, is currently being drafted. The deforestation law supplements the EUDR, and they will be applied in parallel.
The Finnish Food Authority and the Customs supervise compliance with the EUDR and may carry out inspections. Private parties may report justified concerns to the authorities.
Penalties for violating the EUDR may include:
An administrative penalty of up to 4% of the EU-wide turnover – in Finland through the mechanisms of the Act on Conditional Fines
Suspension of exports, imports or trade of products and imposition of corrective measures
Temporary exclusion from public procurement
Temporary prohibition from trading if corrective measures have not been taken.
In addition, the new EU Environmental Crime Directive makes it a criminal offence to intentionally engage in activities that violate the EUDR, i.e., placing non-compliant products on the EU market. This will be regulated nationally in the Criminal Code, and preparations for this are currently underway. The deadline for implementing the Environmental Crime Directive is 21 May 2026.
8. The EUDR may have significant business and contractual implications
Although the EUDR will not apply until 30 December 2025, companies need to prepare for it now. Companies must establish a due diligence system and processes, obtain the information on their products required by the Regulation and ensure that their products comply with the requirements so that the import and trade of products can continue without interruption when the Regulation enters into force at the turn of 2026.
This may require companies to make significant changes to their supply chain management, risk management and contract management to ensure that the products continue to have access to the EU market.
The EUDR may also have a direct or indirect impact on prices.
9. The interpretations of the EUDR are becoming more specific.
The Commission has continuously clarified the interpretations of the application of the EUDR and issued detailed application guidelines, which are advised to be followed closely. Interpretative documents include communications from the Commission and updated Q&A lists. In addition, the Finnish Food Authority provides guidance, advice and training to companies on general issues relating to the application of the EUDR.