Overview of the new EU Deforestation Regulation (EUDR)

On 29 June 2023, Regulation (EU) 2023/1115 on deforestation-free supply chains (EUDR) came into force. It creates a new system that imposes far-reaching obligations on operators and traders. Both will now have to ensure that products obtained from certain relevant commodities (so-called relevant products) are deforestation-free and have been produced in accordance with the national regulations of the respective country of production. Non-compliance may result in trade prohibitions, financial penalties and, in future, even criminal liability.

When does the EUDR apply?

The EUDR came into force on 29 June 2023. Following a last-minute postponement of the EUDR at the end of December 2024 (see here), however, a transitional period of 30 months after the date of entry into force remains before their requirements of the EUDR must be implemented. The first companies will therefore only have to comply with the EUDR regulations by 30 December 2025, with the EUDR gradually applying to more companies, depending on their size. As it is a regulation, the EUDR will be directly applicable in all EU member states at the same time, without the need for a separate transposition act. 

Who is affected and when?

• From 30 December 2025, the provisions of the EUDR will apply to large and medium-sized companies. 
• From 30 June 2026, the provisions of the EUDR will also apply to small and micro-enterprises.

Note: Whether your own company will be classified as a "micro or small", "medium-sized" or "large" company depends on the thresholds defined in the Accounting Directive (Directive 2013/34/EU) and their implementation in the national law of respective Member states. This means that slightly different thresholds may exist between the European Member States when defining SMEs. In Germany, the Accounting Directive was implemented in Sec. 267 of the German Commercial Code (HGB). In its current version, a company is no longer considered an SME if it exceeds two of the following three criteria:

• Balance sheet total > EUR 25,000,000 
• Net sales > EUR 50,000,000 
• Average number of employees > 250

These thresholds are particularly relevant to the question of which scope of obligations must be fulfilled by the company under the EUDR (see below for the distinction between SME and non-SME obligations).

However, with regard to the date of application of the EUDR, the “old” SME thresholds still apply. This is because the decisive factor in terms of the date of application (30 December 2025 / 30 June 2026) is whether the company was classified as a micro-enterprise or small enterprise on 31 December 2020. At that time, other thresholds applied under the Accounting Directive. These “old” thresholds must thus be taken into account when determining the date of application, depending on their transposition into national law by 31 December 2020. In this previous version of Sec. 267 HGB, a company was no longer considered an SME if it exceeded two of the following three criteria:

• Balance sheet total > EUR 20,000,000 
• Net sales > EUR 40,000,000 
• Average number of employees > 250

Note: This distinction between thresholds is only necessary for the date of application. Otherwise, the thresholds in the current version of Sec. 267 HGB apply in Germany.

To which products does the EUDR apply?

The EUDR is product-related in that it is based on so-called "relevant commodities" and "relevant products". The "relevant commodities" are the following seven raw materials: cattle, cocoa, coffee, oil palm, rubber, soy and wood. 

The "relevant products" are then those resulting from the relevant commodities, i.e. if they contain, are fed by or manufactured using them. "Relevant products" are therefore listed directly in Annex I of the EUDR on the basis of their specific customs tariff numbers. 

Practical tip: Compare the products listed in Annex I with your own products. Even if you are unable to assign your own product exactly to a customs tariff number, this can already give you a steer on whether your product could fall within the scope of application. Annex I of the EUDR contains at least general descriptions of the products covered by the EUDR, whereby a final and binding assessment always requires a specific review by comparing the customs tariff number. Use our EUDR Quick Check to check whether your products may fall within the scope of the EUDR.

Note: It is possible that a product is relevant even if the customs tariff number is not explicitly listed in Annex 1. This is because the EUDR also refers to the so-called "Combined Nomenclature" (Annex I of Regulation (EEC) No. 2658/87), which can contain other custom tariff headings not explicitly listed in Annex I of the EUDR. For example, in relation to the relevant commodity wood, reference is made in general terms to “Chapters 47 and 48 of the Combined Nomenclature”. “Chapters 47 and 48 of the Combined Nomenclature”, in turn, contain further customs tariff numbers that are not expressly listed in Annex I EUDR. 

The EUDR also provides for an extension of the relevant commodities and products, to be published by 30 June 2025 at the latest. However, the EU Commission has already announced that it does not intend use this option for the time being (as of 7 July 2025).

Are there any exceptions?

Relevant products that were already produced before 29 June 2023 are not covered by the scope of application. Similarly, relevant products that were already placed on the Union market before the date of application, i.e. before 30 December 2025 or 30 June 2026, do not have to comply with the extensive requirements of the EUDR. Instead, for these products, only evidence (e.g. customs declarations, delivery notes, invoices, etc.) must be collected to show that the relevant products were already placed on the Union market during the transition period.

Also, relevant products that are made exclusively (i.e. 100%) from recycled material do not fall within the scope of the EUDR.

The most significant exception in practice concerns packaging products (e.g. pallets, crates or cartons). Such packaging products do not fall under the EUDR if they are supplied together with another product and serve to protect, support or carry that other product and that they do not constitute the essential characteristic of the product being protected. Similarly, they no longer fall within the scope of the EUDR from the moment they are first used as packaging material. This means that, for example, no EUDR obligations need to be fulfilled in connection with the usual “pallet ring exchange” (= return of empty pallets after receipt of the goods) or when selling only used pallets. However, if packaging material is supplied as a separate and unused product (e.g. by pallet manufacturers or pallet dealers), the EUDR obligations must be fulfilled in full.

In future, user manuals, information brochures, catalogues, marketing materials and labels accompanying other products shall also be covered by this exemption provided that they are not placed on the market or exported as stand-alone products.

The same applies to so-called items of correspondence within the meaning of Art. 1 No. 26 and Art. 141(2) of Delegated Regulation (EU) 2015/2446. These are not to fall within the scope of the EUDR. Such items of correspondence refer to letters, postcards, mail for the visually impaired and printed matter that are not subject to import or export duties.

Samples and products used for examination, analysis or testing purposes should also not fall within the scope of the EUDR, depending on the individual case.

What does the regulation cover?

The EUDR primarily provides for a ban on the market or export of relevant commodities and relevant products (Article 3 EUDR). Companies may only place or make such commodities or products available on the market or export such products if they are:

(1) deforestation-free,
(2) produced in accordance with the relevant legislation of the country of production and
(3) accompanied by a due diligence statement, which must be submitted for the relevant product.

If any one of these requirements is not met, the relevant product may not be traded by the company on, or exported from, the EU market. The obligation to comply is absolute.

Note: By submitting the due diligence statement to the competent authority, the company assumes responsibility for ensuring that the relevant products comply with the requirements of EUDR. The due diligence statement must be submitted via the EU information system using the input mask provided there. No evidence needs to be submitted in the EU information system; only the “mandatory fields” need to be filled in.

Practical tip: The EUDR itself does not specify how often the due diligence statement must be submitted. According to the EU Commission, a due diligence statement can also be submitted for several shipments over a period of up to one year.

What measures need to be taken?

The EUDR distinguishes between operators and traders, although they are basically subject to the same obligations.

An "operator" is anyone who makes a relevant product available on the EU market for the first time or exports it from the EU. A "trader" is anyone who makes a relevant product available on the EU market repeatedly. As a result, traders are downstream of operators in the value chain. There are also so-called downstream operators, i.e. companies that process relevant products which are already on the EU market into a new relevant product and then make this available on the EU market.

Note: The purchase of relevant products does not fall under the term ”making available” if the purchase takes place within the EU (e.g. purchase of office furniture in Germany). Similarly, the internal use of relevant products (e.g. copy paper) within a company does not trigger any obligations under the EUDR. The only exception to this rule is if relevant products are purchased from outside the EU and must therefore pass through customs. In this case, the purchase itself triggers EUDR obligations, regardless of the actual purpose of the purchase.

Practical tip: The term “first making available” is particularly relevant when importing products into the EU. However, the EUDR only applies to relevant products imported under the customs procedure “release for free circulation”. “Export” within the meaning of the EUDR only refers to the customs procedure of ‘export’. If goods are imported or exported under a different customs procedure (e.g. inward or outward processing, etc.), EUDR obligations may be reduced.

Due to the product-based approach, the same company can be an operator and a trader (with regard to different products).

Note: The EUDR distinguishes between "SMEs" and "non-SME" operators and traders. If a company is considered an SME a different standard of obligation may apply, depending on the individual case. SME traders, for example, need only collect very manageable information in relation to the upstream and downstream supply chain.

Practical tip: If you identify products within the scope of the EUDR, determine the role of your own company. In other words, you should check whether and in which situations your company is to be regarded as an operator and/or trader. You should also check whether there may be a reduced scope of obligations, as your company qualifies as an SME.

Operators that are not SMEs are subject to a comprehensive program of obligations. They must fulfill due diligence obligations proving that the relevant products are deforestation-free and have been produced in accordance with the relevant legislation of the country of production. These obligations have to be guaranteed by submitting a due diligence statement.

The due diligence obligations include:
(1) collecting information,
(2) carrying out a risk assessment, and
(3) if necessary, taking measures to reduce the risk.

Collecting information is the first step in fulfilling the due diligence obligations. Companies must collect information, data and documents that show that the relevant products comply with the regulation.

An important component of this information is the geodata of all land where the relevant raw materials contained in the relevant product were produced. This geodata must be included in the due diligence statement. By means of a before-and-after comparison, the geodata can determine whether deforestation or forest degradation has taken place after the "deadline " of 31 December 2020.

Note: If deforestation or forest degradation is identified by means of geodata, the product is no longer "deforestation-free", meaning that there is a violation of Article 3 EUDR, and the trade ban applies.

Evidence must also be collected that the relevant legal provisions of the country of production have been observed in the production of the relevant commodities.

Note: In order to obtain this evidence, intensive cooperation with your upstream supply chain is required (since presumably only they have the necessary information). If the information cannot be obtained, the product must not be traded. The EUDR does not provide for an exception in this regard.

Practical tip: Make sure that you can obtain the necessary information from your suppliers before purchasing the products. This is because the due diligence statement must be submitted before the products are placed on or made available to the market or exported. If it turns out afterwards that the products cannot be traded due to a lack of available information, this could result in a loss of sales.

In the second step, companies must carry out a risk assessment based on the information gathered. The risk assessment must determine whether there is a risk that the relevant products to be traded are non-compliant within the meaning of the EUDR. The EUDR specifies a large number of criteria to be used for the risk assessment. For example, the extent to which there is an abstract risk of deforestation in the country of production must be taken into account, as well as the reliability of the sources from which the collected information originates.

Note: The risk assessment checks the plausibility of the findings already collected in the first step, whereby abstract factors (such as the general deforestation risk in the producing country) and more concrete factors (such as the reliability of the information) must be taken into account.

If the risk assessment reveals there is no or only a negligible risk, the due diligence statement can be submitted and the relevant product can then be traded.

If the risk assessment shows that the risk is not negligible, the company must take measures to reduce the risk in the third step. Risk mitigation measures may include, for example, requesting additional details and conducting independent surveys or audits to ensure that the product is actually compliant. Measures to support suppliers are also conceivable.

Note: If it's not possible to conclude that there is at least a negligible risk, even taking into account risk mitigation measures, the due diligence statement cannot be submitted. This is because it expressly requires a statement that no risk or only a negligible risk has been identified.

Traders and downstream operators are also subject to the same obligations in principle. Due to their downstream position within the supply chain, they have the significant advantage of being able to make reference to the previous due diligence declaration(s) of upstream operators for their own diligence statement. This means that traders and downstream operators will usually not have to collect extensive information or assess and mitigate risks itself. Instead, they may reference upstream due diligence statements after “ascertaining” that the EUDR due diligence obligation was already met upstream. For the required assessment, merely obtaining the reference and verification number of the due diligence declaration statement by their supplier and verification of its validity in the EU information system are sufficient. Further measures (e.g. questionnaires or similar) are only optional but nevertheless advisable. Despite a trader or downstream operator merely needing to refer to an upstream due diligence statement, it bears full responsibility for the EUDR compliance of its products. Traders and downstream operators are thus vulnerable to sanctions if they merely rely on possibly incorrect information provided by their upstream suppliers.

Practical tip: As a trader or downstream operator, contact your suppliers at an early stage to find out whether they can provide the necessary data. It is also advisable to put a contractual guarantee in place for the relaying of relevant information. Questionnaires, for example, may be useful in gaining insight into the conscientiousness your suppliers’ compliance with the EUDR, bearing in mind the existing risk of sanctions.

Are there other obligations?

As part of risk mitigation, non-SME companies must also appoint an EUDR compliance officer at management level. Furthermore, an independent audit body must also be set up to verify compliance with EUDR. Measures and processes put in place must be reviewed at least once a year. These compliance measures must be reported annually with the first report due at the beginning of 2027 for the year 2026.

Practical tip: The EUDR expressly provides that the reporting obligation can deemed as met if the company already reports on their measures elsewhere. The EUDR refers in particular to the reporting obligations under the CSRD or the CSDDD. To avoid additional work, opportunities for harmonising of steps should be considered.

What control and sanction mechanisms does the EUDR have?

To ensure that the requirements of the EUDR are met, the competent authorities have various control and monitoring powers. Control options include scientific and technical analysis to determine the place of origin and the absence of deforestation when it comes to the relevant commodities and the relevant product.

Note: The EUDR provides for a higher number of controls for operators and traders whose products originate in a country that is classified as high risk under the EU benchmarking system. To date, Russia, Belarus, North Korea and Myanmar are classified as high-risk countries.

Where there is a high risk of non-compliance, the competent authorities may take interim measures to suspend the placing or making available on the EU market. To end an infringement as quickly as possible, companies may be required to take immediate corrective action. The authority may impose distribution and export bans on the relevant products and order their withdrawal or recall. The competent authority may also order a donation of the relevant product for charitable or public interest purposes.

With regards enforcement, EU member states must adopt "effective, proportionate and dissuasive" rules on penalties. According to the EUDR, this includes the following measures:

• Fines or penalties
• Recovery of the relevant products
• Collection of revenue from the relevant products
• Exclusion from award procedures
• Prohibition on placing or making available on the EU market and for export
• Prohibition of the application of simplified due diligence

In addition, there are also significant criminal liability risks in the future. The new Environmental Criminal Law Directive (Directive (EU) 2024/1203), which must be transposed into national law by Member States by 21 May 2026, provides that violations of the prohibition laid down in Article 3 of the EUDR may also be punishable by imprisonment of up to five years.

Practical tip: There are also risks of criminal liability at the executive and management level due to possible organizational negligence. Obligations should thus be delegated in a binding manner, e.g. through delegation guidelines and approval processes, to prevent this. Moreover, it should be ensured that those carrying out the duties are adequately trained and regularly checked for proper implementation.

Furthermore, there are reputational risks. The EU Commission will publish EUDR violations committed by companies and established by a court on the Internet. In particular, the EU Commission will publish the name of the company and the conduct that caused the infringement.

What is the advice?

In view of the prohibitive nature of this regulation, there is a latent risk that companies will no longer be able to trade their own products in the future if they do not meet the requirements of the EUDR.

Companies should therefore obtain a focused overview of their operations as quickly as possible, to establish: (i) whether their products fall within the scope of the EUDR, (ii) what role they have under the EUDR, and (iii) how to ensure that the information required to submit due diligence declarations is available. We would be happy to support you in implementing the EUDR.