How the new EU Deforestation Regulation (EUDR) will impact UK business
Andrew Thurston · Posted on: July 9th 2024 · read
The European Commission published the EUDR
in June 2023 as its attempt to promote the consumption of ‘deforestation free’ products, thereby reducing the EU’s impact on the global issue of deforestation and forest degradation.
In this article we will provide an overview of the EUDR and how this regulation will directly or indirectly impact UK businesses.
What is the EUDR?
Effective from 30 December 2024, the EUDR will impact EU importers and exporters who trade in the products listed in Annex 1 of the Regulation.
These products include:
- Cattle
- Cocoa (including Chocolate)
- Coffee
- Soya
- Certain forms of Oil Palm
- Certain forms of Rubber
- Wood (Inc. books, seats and furniture)
Products specified in Annex 1 must be evidenced as "deforestation-free", meaning they must not contain, or have been fed with or been made using, relevant commodities that were produced on land not subject to deforestation since 31 December 2020.
Additional controls on products containing or having been made from wood as these must not use forest degradation-inducing wood. For example, wood sourced in a manner that causes the structural changes to the cover of certain forest.
Evidence must be retained by the EU business to ensure that any Annex 1 products can be established as ‘deforestation-free’ otherwise ‘effective, proportionate and dissuasive’ penalties will be issued, along with seizure of any illegal goods.
EUDR Penalties
Article 25 of the Regulation confirms the penalties as per below. As you can see, these are wide-ranging and potentially business-ending. It is therefore important for good communication within the supply chain to ensure all facts are obtained and the status of the products are confirmed.
(a) |
fines proportionate to the environmental damage and the value of the relevant commodities or relevant products concerned, calculating the level of such fines in such way as to ensure that they effectively deprive those responsible of the economic benefits derived from their infringements, and gradually increasing the level of such fines for repeated infringements; in the case of a legal person, the maximum amount of such a fine shall be at least 4 % of the operator’s or trader’s total annual Union-wide turnover in the financial year preceding the fining decision, calculated in accordance with the calculation of aggregate turnover for undertakings laid down in Article 5(1) of Council Regulation (EC) No 139/2004 (24), and shall be increased, where necessary, to exceed the potential economic benefit gained; |
(b) |
confiscation of the relevant products concerned from the operator and/or trader; |
(c) |
confiscation of revenues gained by the operator and/or trader from a transaction with the relevant products concerned; |
(d) |
temporary exclusion for a maximum period of 12 months from public procurement processes and from access to public funding, including tendering procedures, grants and concessions; |
(e) |
temporary prohibition from placing or making available on the market or exporting relevant commodities and relevant products, in the event of a serious infringement or of repeated infringements; |
(f) |
prohibition from exercising the simplified due diligence set out in Article 13 in the event of a serious infringement or of repeated infringements. |
Although the EUDR will impact EU businesses, there is likely to be a significant compliance obligation placed on UK businesses who trade in affected goods with the EU.
How are UK businesses impacted by the EUDR?
Where UK businesses export goods falling within Annex 1 of the Regulation, it will have to provide certain information to the EU importer to facilitate the completion of a ‘Due Diligence Statement’ (DDS). Annex 2 of the Regulation confirms the information required on the DDS which includes a requirement to provide the ‘Country of production and the geolocation of all plots of land where the relevant commodities were produced’. This is a key consideration for UK businesses either selling to EU customers as the customer will require this information, either periodically or per consignment to provide the DDS to the customs authorities.
Failure to provide the DDS, at time of importation, is a breach of the legislation and the importer will be subject to stringent penalties (TBC) and delays in customs clearance at the EU Port.
Where UK businesses transfer own stock or sell into the EU under the DDP Incoterm, there will be a requirement, as the declared importer, to organise the completion of the DDS.
As a non-established entity, the UK business must ensure that the nominated EU customs agent is able to submit the registration of the UK business, and the DDS, via the EUDR Portal. We foresee potential issues with customs agents acting as an ‘Indirect Representative’ for products affected by the EUDR, due to the additional reporting requirements and risk this poses on the agent.
To ensure the supply chain is not affected by the EUDR, we recommend early communication with the EU customs agent(s) to ensure they can act as the representative and submit the DDS to the customs authorities.
How to prepare for the EUDR
Depending on the scope of your EU trading activities, there will be a number of considerations that should be reviewed before December 2024 to ensure the business is ready for the EUDR.
- Review Annex 1 of the Regulation to confirm scope of EUDR on the business.
- If impacted, the business must start process of obtaining the required data for the DDS for all Annex 1 products.
- Check geolocation of the raw materials against the EUDR Map to confirm if products may be considered as being produced from ‘forest-degrading’ materials.
- Communicate with EU customers to confirm process for supplying DDS data.
- Establish procedure for reviewing EUDR impact.
If your business is uncertain about how the EUDR will impact its EU activities, MHA’s Customs Team is available to discuss your concerns and identify a way forward.
The EUDR represents a significant shift in regulatory requirements for businesses trading with the EU. By understanding the regulation, communicating effectively within the supply chain, and preparing early, UK businesses can ensure compliance and avoid potential penalties.
For more detailed guidance and support, contact MHA’s Customs Team.
To facilitate the EU customer, it is recommended that UK exporters initiate communication with their customers to confirm the data requirements and frequency of reviews.
For further information
For more detailed guidance and support, please contact our Customs Team.
