With just over three months until EU Deforestation Regulation (EUDR) compliance is scheduled to start, the European Commission has announced it is considering another one-year extension. Read more about this development in this post.
In a September 23 letter, Jessika Roswall, Commissioner for Environment, Water Resilience and a Competitive Circular Economy, sent letters to the Parliament and Council indicating that the Commission's information system for transactions covered by the EUDR currently is not expected to be able to adequately handle all of those transactions. The EUDR applies to cattle, cocoa, coffee, oil palm, rubber, soy(a) and wood, as well as many derived products.
From the letter:
"Based on the available information, the Commission's assessment is that this will very likely lead to the system slowing down to unacceptable levels or even to repeated and long-lasting disruptions, which would negatively impact companies and their possibilities to comply with the EUDR. Operators would be unable to register as economic operators, introduce their Due Diligence Statements, retrieve the necessary information from the IT system, or provide the necessary information for customs purposes where relevant. This would severely impact the achievement of the objectives of EUDR, but also potentially affect trade flows in the areas covered by the legislation."
"Despite efforts to address the issues in time for the entry into application of the EUDR, it is not possible to have sufficient guarantees that the IT system will be able to sustain the level of the expected load."
The one-year postponement is intended to allow time to remedy the identified risks.
With EUDR compliance looming, expect the Commission to quickly release a "stop the clock" proposal. To secure quick approval by the Council and Parliament – which is not necessarily a given – it is likely that the proposal will be limited to timing and will not seek to address the substance of the EUDR. As further discussed below, other initiatives underway may separately seek to further scale back or otherwise modify the EUDR.
The EUDR has been controversial from the start. Some skeptics view the readiness of the information system as a pretext for slowing down the EUDR.
As noted above, EUDR compliance already has been delayed by a year. In addition, in April, updated guidance and FAQs were published by the European Commission that simplified some aspects of EUDR compliance (see this Ropes & Gray post). According to the Commission, these measures will in the aggregate result in an estimated 30% reduction in administrative costs and burden for companies.
Over the past year, there have been numerous calls to further delay and streamline the EUDR. The calls have gotten louder with the initial compliance date drawing near. For example:
- This summer, the European Commission conducted a call for evidence on an environmental omnibus proposal, which is expected to result in a simplification package in the fall. According to some sources, this omnibus will among other things sweep in the EUDR. The call for evidence closed on September 10. The call for evidence is further discussed in this Ropes & Gray post.
- In July, the European Parliament adopted a non-binding resolution objecting to the country risk classifications adopted by the European Commission in May (see this Ropes & Gray post) and calling on the risk classifications to be revisited. The resolution is discussed in this Ropes & Gray post.
- A position paper titled Simplification of the EU Deforestation Regulation (EUDR): difficulties in implementing the EUDR and the need for substantial simplification was submitted for discussion at the May 26 meeting of the Agriculture and Fisheries Council (AGRIFISH). The submission asserts that the requirements imposed on farmers and foresters by the EUDR remain high, may be impossible to implement and are disproportionate to the objective of the Regulation. The submission calls on the European Commission to include the EUDR in its simplification plans and, pending the Commission's proposals, further postpone the start date of the EUDR. The paper was supported by 11 EU member states. See this Ropes & Gray post for a discussion of the position paper.
- In July, 18 Ministers of Agriculture published a joint letter calling for the further simplification of the EUDR. The signatories urge the European Commission to swiftly include the EUDR in its simplification plans and, pending the Commission's simplification proposals, to consider further postponing compliance. Among other things, the letter expresses the view that the EUDR in its current form does not sufficiently take into account countries with effective forest protection laws and a negligible risk of deforestation, instead imposing disproportionate bureaucratic obligations on those countries. The letter also expresses the view that full EUDR traceability within the EU market will be extremely difficult if not impossible for some companies. The joint letter is further discussed in this Ropes & Gray post.
- The US also has taken aim at the EUDR. The August 21 announcement that the US and EU have agreed on a Framework on an Agreement on Reciprocal, Fair, and Balanced Trade indicates that "Recognizing that production of the relevant commodities within the territory of the United States poses negligible risk to global deforestation, the European Union commits to work to address the concerns of US producers and exporters regarding the EU Deforestation Regulation, with a view to avoiding undue impact on US-EU trade." The Framework Agreement is further discussed in this Ropes & Gray post.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
