On 19 April 2023, the European Parliament formally approved a new European Union Deforestation Regulation on commodities and products associated with deforestation and forest degradation. The new Deforestation Regulation will impact companies selling products or packaging in or exporting them outside the EU if they contain certain commodities, including wood and rubber. The text that has been approved by the Parliament is unlikely to change before it becomes law.
Below, we’ve explained the main requirements of the Deforestation Regulation.
The European Commission proposed the Deforestation Regulation in 2021 to address deforestation and forest degradation in Europe and globally. It has now been agreed upon by the Council of the EU and the Parliament, and formally approved by the Parliament. The Deforestation Regulation will replace the existing EU Timber Regulation 995/2010.
To whom and what does it apply?
The Deforestation Regulation will apply to any person or company marketing specific products in the EU or exporting them from the EU if the products contain, have been fed with or have been made using any of the following commodities:
- Palm oil
Examples of such products include wood packaging (such as cases, boxes and crates), tableware, kitchenware and furniture; clothing and clothing accessories made with vulcanized rubber and articles of hard rubber; and printed books, newspapers, pictures and other printing industry products, such as leaflets and brochures.
What is it about?
The Deforestation Regulation will introduce, among others, the following requirements:
- Operators are banned from placing on the EU market and exporting from the EU products containing, fed with or made using the relevant commodities that:
- Are not deforestation-free.
- Have not been produced in accordance with the relevant legislation of the country of production.
- Are not covered by a due diligence statement.
- Operators must carry out due diligence for in-scope products and commodities to determine whether they are deforestation-free and have been produced in accordance with relevant legislation in the country of production.
- Operators must submit a due diligence statement to the competent national authorities before placing the products on the EU market or exporting them out of the EU.
- Competent authorities in Member States can ask operators to take corrective measures, including preventing the sale or distribution in the EU of relevant commodities and products; product withdrawal, recall and/or destruction; or measures requiring them to donate to charitable or public interest entities.
- Competent authorities also can impose sanctions, including fines, confiscation of products and revenues, and temporary prohibition from placing on the EU market or exporting from the EU in-scope products.
- Third parties (e.g., nongovernmental organisations, competitors and consumers) can submit substantiated concerns to the competent authorities when they believe that operators do not comply with the Regulation, and the competent authorities will be required to assess the concerns.
What is the anticipated timeline?
The Parliament approved the agreed text of the Deforestation Regulation at its plenary session on 19 April, 2023. The text now will pass to the EU Council for formal approval (usually a rubber-stamping exercise) and then will be published in the Official Journal of the European Union (OJEU).
The Deforestation Regulation will enter into force 20 days after it is published in the OJEU, and the obligations set out in the Regulation will be enforceable 18 months later. We anticipate that the requirements will become applicable by Q1 2025. Microenterprises and small enterprises will have a longer period of 24 months to comply with the new rules.
Why does it matter?
The Deforestation Regulation will have a significant impact on businesses marketing a broad variety of products in the EU or exporting those products outside the EU, and it will require them to undertake due diligence in order to comply with the new rules. Companies will need to ensure that they carry out the relevant due diligence and submit the statements to authorities before they market products impacted by the new Regulation. For product manufacturers, this likely will involve more in-depth quality control with their suppliers. This is part of a broader trend we are seeing of the EU adopting rules that push companies to do more due diligence and have a better handle on their supply chains. For example, similar requirements are included in the upcoming EU Batteries Regulation, the upcoming ban on products made with forced labour and the Corporate Sustainability Due Diligence Directive.
Where can I find it?
The EU Council posted the text of the provisional agreement it reached with the Parliament in December