The European Union Deforestation Regulation (EUDR) sets mandatory due diligence rules for companies placing palm oil and other commodities on the EU market. Unlike earlier voluntary schemes, the EUDR is a legal requirement with enforcement and penalties.
What the Regulation Requires
Importers must prove three things for each shipment: the product is deforestation-free, it was produced in compliance with relevant local laws, and a due diligence statement has been filed.
Deforestation-free means the palm oil was produced on land that has not been subject to deforestation after 31 December 2020. This includes both legal and illegal deforestation. The definition also covers forest degradation.
Legal compliance requires verification that the producer adhered to all applicable laws in the country of production, including land-use rights, labour rights, environmental protection, and tax rules.
The Due Diligence Process
Importers must collect information, assess risk, and take mitigation steps. The process has three steps:
- Information gathering: Collect the geolocation coordinates of all plots where the palm fruit was grown. For plots larger than four hectares, polygon coordinates are required. This data must be submitted to the EU information system.
- Risk assessment: Evaluate the risk of non-compliance based on factors such as country of origin, presence of forests, and history of deforestation. The European Commission classifies countries into low, standard, or high risk.
- Risk mitigation: If risk is not negligible, importers must take measures such as third-party audits, certification, or additional documentation.
Geolocation and Traceability
Geolocation is the cornerstone of the regulation. Each shipment must be traceable back to the individual plots of land. This requires a chain of custody system that links the crude palm oil or processed fractions to specific plantations.
Smallholder inclusion remains a practical challenge. Many smallholders lack formal land titles or the ability to provide precise coordinates. Importers must work with suppliers to map smallholder plots and establish traceability systems.
Documentation and Filing
A due diligence statement must be submitted to the competent authority in the EU member state of first entry. The statement confirms that the product complies with the regulation and includes all supporting evidence. Statements are valid for a limited period and must be renewed.
Penalties for Non-Compliance
Penalties vary by member state but can include fines proportional to the environmental damage, confiscation of products, temporary suspension of market access, and exclusion from public procurement. Repeat offenders may face criminal liability.
Practical Steps for Buyers
Procurement managers should:
- Request geolocation data from suppliers well in advance of shipment.
- Verify that suppliers have a traceability system covering all tiers of production.
- Assess the risk category of the country of origin.
- Prepare internal due diligence procedures and designate a compliance officer.
- Keep records for at least five years.
The EUDR represents a shift from voluntary certification to mandatory legal compliance. Importers who build robust traceability and documentation systems will be best positioned to maintain market access.