The application timeline for the EU Deforestation Regulation will be extended

The Deforestation Regulation entered into force on 29 June 2023. Its obligations were originally set to be applicable from 30 December 2024. However, on 2 October 2024, the Commission proposed to postpone the applicability to 30 December 2025 for large companies and 30 June 2026 for micro- and small enterprises. The purpose was to give EU Member States, operators, traders and exporting countries more time to prepare for implementation, including by fully establishing due diligence systems covering relevant commodities and products. On 16 October 2024, the Council agreed to this extended application timeline, and on 14 November 2024, the European Parliament granted its approval, thus making the postponement applicable. 

Products made available on the EU-market must be deforestation-free

The Deforestation Regulation applies to cattle, cocoa, coffee, oil palm, rubber, soya and wood, as well as to products that contain, have been fed with or have been made using these commodities. Any natural or legal person who introduces such commodities or products on the EU market, or who makes them available on the EU market, must be able to document that the commodities/products:

• Are deforestation-free, i.e. that they do not originate from recently deforested land or have contributed to forest degradation.
• Have been produced in accordance with the legislation in the country of production.
• Are covered by a due diligence statement (a statement describing, amongst others, the geolocation of the places of production)

Due diligence obligations

Moreover, the Deforestation Regulation imposes due diligence obligations on two groups of persons and entities:

• Operators, defined as any natural or legal person who, in the course of a commercial activity, places relevant products on the market or exports them.
• Non SME-traders, i.e. any natural or legal person in the supply chain who supply relevant products that are already on the EU market.

The due diligence must be carried out before the relevant products are exported, imported or made available on the EU market. The purpose is to ensure that the commodities/products are deforestation-free and that they have been produced in accordance with the legislation in the country of production. As part of the due diligence in-scope companies and persons shall:

• Collect information, documents and data which demonstrate that the relevant products are deforestation-free, and that they have been produced lawfully.
• Perform risk assessments relating to deforestation, based on the information collected. The risk assessments shall take into account a set of criteria contained in the Deforestation Regulation, including geographical risk factors, the presence of forests and indigenous people in the area of production, the prevalence of deforestation in the area of the production, the complexity of supply chains, and the stage of processing. The Commission shall establish a three-tier risk classification system relating to specific countries or regions, categorising them as "high", "standard" and "low" risk. This risk classification system will form an important part of the companies' risk assessments.
• Adopt risk mitigation measures, such as requiring additional information, or carrying out surveys or audits. Companies must establish adequate and proportionate policies, controls and procedures to mitigate the risks of non-compliance. If the company's risk assessments show that there is no risk of non-compliance, or only a negligible risk, no risk mitigation measures are required. 

If the commodities or products have been produced in countries or regions classified as "low risk" by the Commission, companies do not need to perform risk assessments or adopt risk mitigation measures.

In-scope companies must review their due diligence system at least once a year, and shall on an annual basis report publicly on their due diligence system, including on steps taken to fulfil their due diligence obligations.

Traders that are SMEs (micro, small and medium-sized enterprises) do not need to perform due diligence or report on their due diligence system, However, they must obtain information that the relevant products are deforestation-free, lawfully produced and covered by a due diligence statement. 

Enforcement and sanctions

The Deforestation Regulation sets out that Member States shall designate competent national authorities that shall be responsible for ensuring compliance with the provisions of the Deforestation Regulation. Competent authorities may take interim measures, including by seizing non-compliant products and suspending the import, export and sales of such products. Moreover, competent authorities shall require companies to take appropriate and proportionate corrective action to bring the non-compliance to an end. Additionally, non-compliance may be sanctioned with fines of up to 4% of the company's annual turnover in the EU.

What does this mean for your company?

Importantly, the obligations of the Deforestation Regulation apply to all products that contain, have been fed with or have been made using cattle, cocoa, coffee, oil palm, rubber, soya and wood, regardless of whether the commodities in question have been transformed or incorporated into other products in the production process. This means that companies in a wide range of industries, including food and grocery retail, cosmetics, the pharmacological industry and the transport sector, will have obligations under the new rules. These companies should use the phase-in period to establish systems and routines for complying with the requirements once they become applicable on 30 December 2025.

The Deforestation Regulation has been marked as EEA relevant, but has not yet been implemented into Norwegian law. The Norwegian Environment Agency has estimated that implementation will take place in the course of 2025, in which case the obligations contained in the Deforestation Regulation will also be applicable to Norwegian entities.