Introduction

Deforestation is an urgent global problem that contributes significantly to climate change, biodiversity loss and ecosystem degradation. The European Union (EU) has introduced strict regulations to combat deforestation and forest degradation associated with imported, exported or placed on the EU market. This article discusses the definitions, scope, required measures, and due diligence processes outlined in the EU Anti-Deforestation Regulation.

Important definitions

Understanding the terminology used in the regulation is critical to compliance and effective implementation. Here are the main definitions:

• Relevant goods: cattle, cocoa, coffee, oil palm, rubber, soy and wood.

• Relevant products: Products listed in Annex I that contain, have been fed with or are made from relevant goods.

• Deforestation: The conversion of forest to agricultural use, whether man-made or not.

• Forest: Land areas of more than 0.5 hectares with trees taller than 5 meters and a canopy of more than 10%, excluding agricultural or urban land.

• Agricultural use: Use of land for agriculture, including plantations and livestock.

• Forest degradation: Structural changes in forest cover that convert primary forests into plantation forests or other forested areas.

• Operator: A natural or legal person who places or exports relevant products on the market as part of a commercial activity.

• Distributor: Any person in the supply chain, other than the operator, who makes relevant products available on the market as part of a commercial activity.

Scope of the Regulation

The regulation applies to:

1. The placing on the market and making available on the EU market and the export of relevant products listed in Annex I that contain, have been fed with or produced from relevant goods.
2. The regulation aims to: o Minimise the EU's contribution to global deforestation and forest degradation. o Reduce greenhouse gas emissions and biodiversity loss.

Exceptions are made for relevant products manufactured before certain dates, as detailed in Article 37(3).

Measures to be taken in detail

prohibition and compliance

Operators must ensure that relevant products meet the following conditions before they are placed on the market or exported:

1. Deforestation-free: products must not contain, have been fed with, or have been made from goods that have been sold after 31. December 2020 on deforested land.
2. Legally compliant production: products must comply with the relevant laws of the country of production.
3. Declaration of Care: A due diligence declaration must be submitted confirming compliance with the regulation.

Obligations of the operators

Operators must exercise due diligence by:

1. Collect information: Collect necessary data and documents that demonstrate compliance with the regulation.
2. Risk Assessment: Assess the risk of non-compliance based on the information collected.
3. Mitigation: Take steps to mitigate the identified risks and ensure that the risk of non-compliance is negligible.

Operators must keep due diligence records for five years and make them available to the relevant authorities upon request. They also need to help authorities with audits and share relevant compliance information along the supply chain.

Merchant obligations

Merchants must:

1. Collect and store information about the relevant products traded, including details of suppliers and buyers.
2. keep records for at least five years and make them available to the relevant authorities upon request.
3. Assist the relevant authorities in conducting compliance checks.

Authorized Representatives

Operators and dealers may appoint authorized representatives to submit due diligence declarations on their behalf. However, the responsibility for compliance remains with the original operator or dealer.

Due diligence process

Information Requests

Operators need to collect and retain information such as:

1. product description and trade name.
2. quantity of products.
3. Country of production and geolocation of the country used for production.
4. Information about suppliers and buyers.
5. Proof of deforestation-free status and compliant production.

Risk assessment

Operators must review and analyze the information collected to assess the risk of non-compliance. Criteria for risk assessment include:

1. Risk levels assigned to the country of production.
2. Presence of forests and indigenous peoples.
3. Frequency of deforestation and forest degradation.
4. Reliability of documentation and information sources.

When a non-negligible risk is identified, operators must take mitigation measures such as:

1. Obtaining additional information.
2. Perform independent checks.
3. Supporting compliance efforts among suppliers.

Operators must document and review risk mitigation decisions annually.

Penalties for non-compliance

Penalties for non-compliance include:

fines:

• Fines that are proportionate to the environmental damage caused and the economic benefits resulting from the violation.

• For legal persons, fines may amount to up to 4% of the total annual turnover of the operator or trader in the Union in the year preceding the decision to impose the fine. The fine can be increased to ensure that it exceeds the potential economic benefits from non-compliance.

Confiscation:

• Seizure of non-compliant products and all revenue generated from transactions with these products.

Temporary exclusion:

• Temporary exclusion from public procurement procedures and access to public funding, including grants and concessions, for up to 12 months.

ban:

• Temporary ban on the placing on the market or making available on the market of non-compliant products, in particular in the case of serious or repeated infringements.

IT reporting obligations for operators and retailers

Information System

The EU regulation provides for the establishment of an information system by 30 September 2019. December 2024. This system will:

1. Register operators and distributors: Including their authorised representatives in the Union.
2. Save due diligence declarations: Assign and communicate reference numbers for each declaration.
3. Convert geolocation data: From relevant systems for accurate geolocation identification.
4. Record the results of checks: On due diligence.
5. Integrate with customs: By the European Union Single Window Environment for Customs.

How can the ComplyMarket team help you?

1.      ComplyMarket provides a system-to-system interface for due diligence reporting.

2.      ComplyMarket can collect due diligence information from your suppliers using ComplyDoC.

3.      ComplyMarket offers Ad hoc advice.