EU Council and Parliament Strike Provisional Deal to Reduce Deforestation
On December 5, the Council and the European Parliament reached a provisional deal on a proposal to minimize the risk of deforestation and forest degradation associated with products that are imported into or exported from the European Union (EU).
Scope
It has been agreed to increase the scope of products under the Regulation. The due diligence rules will therefore apply to imports and products presented on the European market of palm oil, beef, timber, coffee, cocoa, rubber, and soya beans. The rules also apply to a number of derived products. It has been agreed to include additional by-products, notably from palm oil, with particular emphasis on those used as components of personal care products. Biodiesel and maize will not be included for now.
Cut-off Date
It was agreed to set 31 December 2020 as a benchmark for assessing the link to deforestation. In this regard, only products that have been produced on land that has not been subject to deforestation or forest degradation after 31 December 2020 may be placed on the EU market or exported.
Due Diligence Obligation
Only products under the scope that present due diligence statements demonstrating that they are not linked to deforestation will be allowed to enter and be marketed. Although the final technical details of the exact wording are still being worked out, it has been agreed to introduce mechanisms to avoid duplication of obligations and reduce the administrative burden. It has also been clarified in the final text that small operators will be able to rely on larger operators to prepare due diligence declarations.
Geo-location
The final text includes the obligation to precisely geo-locate the plot of land involved in the production/farming of the products and commodities.
Benchmarking System
The model will be based on three levels – low, standard, or high – deforestation risk. The system will determine the number of inspections and controls to be carried out and the level of obligation to perform risk assessments. The implementing act with the list and ranking of third countries will be published 18 months after the publication of the Regulation.
Checks
The Council and Parliament also tasked the competent authorities to carry out checks on 9% of operators and traders marketing products from high-risk countries and on 9% of the quantity of each of the relevant raw materials and products, 3% in the case of standard risk countries and 1% in the case of low-risk countries, in order to verify that they are effectively complying with the obligations set out in the Regulation.
Sanctions
The entry of products linked to deforestation will be prohibited and all products linked to deforestation will be withdrawn from the market if they are already present in the EU market. In case it is proven that due diligence actions have not been carried out, fines proportional to the environmental damage found, and of a minimum of 4% of the annual turnover of the operators in the EU will be imposed. It will also include a temporary exclusion from public procurement processes and access to public funding.
Human Rights
Respect for human rights will be considered an obligation for a product to be considered deforestation-free. These obligations will include the right to free, prior, and informed consent of indigenous peoples.
Next Steps
This draft agreement will now have to be voted by the Parliament and the Council in order to be published in the Official Journal of the EU. After publication of the text, the rules will enter into force 18 months later. The review of the Regulation will take place two years after publication.
In preparation, companies need to map their supply chains as the first reports will likely be due to the EC by April of 2024. End-to-end supply chain mapping provides the foundation for building a risk management, due diligence, and responsible sourcing strategy.