This article aims to support companies in navigating their path to EUDR compliance by providing practical guidance on implementation steps. It summarizes the EUDR’s scope of application and due diligence requirements, and provides practical next steps to achieve EUDR compliance. Please refer to our previous alerts here and here for additional insights (e.g., on the consequences in case of non-compliance).
Scope of Application
The EUDR will apply from 30 December 2024 to all companies placing or making available relevant products on the Union market or exporting them from the Union. Only for micro and small companies, the EUDR will become applicable as of 30 June 2025.
Unlike the CSDDD, the EUDR follows a commodity / product-based approach, meaning that it applies irrespective of any turnover or employee thresholds. Consequently, the assessment for its applicability is two-fold:
- First, companies should examine whether they have relevant commodities or products in their supply chain.
- Second, companies should assess whether they place or make available relevant commodities or products in their commercial activities.
Commodity / product-based approach
The EUDR’s strict product-based approach means that it only applies to products listed with their HS code in Annex I that contain, have been fed with or have been made using relevant commodities. Relevant commodities are cattle, cocoa, coffee, oil palm, rubber, soya and wood.
Besides that, the EUDR does not impose any further requirements for its application in relation to the relevant product. The quantity and value of the product are just as irrelevant as whether it was produced in the EU or not.
When looking at Annex I, it becomes clear that the range of products is extensive. Annex I not only covers products relevant for the food industry, but also encompasses various products traded and used across many different industries.
A couple of examples from Annex I of the EUDR highlight the broad scope of the EUDR:
- Meat or leather of cattle,
- Cocoa beans, chocolate and other food preparations containing cocoa,
- Coffee, whether or not roasted or decaffeinated,
- Different forms of oil palms such as glycerol with a purity of 95% or industrial fatty alcohols,
- Natural rubber or new pneumatic rubber tyres or conveyer or transmission belts or belting, of vulcanised rubber,
- Seats of wood and packing cases, boxes, crates, drums and similar packings, of wood; cable-drums of wood; pallets, box pallets and other load boards, of wood; pallet collars of wood (not including packing material used exclusively as packing material to support, protect or carry another product placed on the market),
- Printed books, newspapers and other products of the printing industry.
In contrast, the EUDR is not applicable to derived products made out of relevant products if this derived product is not listed in Annex I.
Placing and making available on the market
Trigger for the EUDR’s applicability is the placing or making available of relevant products on the Union market by operators or traders.
In simple terms, this means that companies that supply relevant products for distribution, consumption, or use in the course of commercial activities are subject to the EUDR. Thus, the EUDR applies to relevant products upon their import into the EU via various stages of the supply chain and ends with the supply to the end customer or the export from the Union market.
To date, it remains unclear whether sourcing relevant products for the use in a company's own operations is subject to the EUDR obligations.
Due diligence obligations
The EUDR prohibits the placing or making available of relevant products on the Union market unless those comply cumulatively with the following requirements, i.e., unless they are
Most notably and in addition to the requirements under both the German Supply Chain Due Diligence Act ("SCDDA") and the CSDDD, the EUDR contains strict and far-reaching requirements concerning the traceability of commodities and products by means of geolocation to the plots of land where the relevant commodities were produced. This is to demonstrate that these products are deforestation-free.
The EUDR also requires that products be produced in accordance with defined local legislation concerning, inter alia, land use rights, forest-related rules, labour rights, human rights, and tax, anti-corruption, trade and customs regulations.
To comply with the above prohibition, in-scope companies (designated as operators or traders depending on their role in the supply chain) are obliged to comply with comprehensive and stringent due diligence obligations. Please refer to our previous insight for more detailed information on the due diligence obligations.
The due diligence process to be followed prior to placing or making available relevant products can be summarized as follows:
Risk management system incl. responsibilities, processes and reporting
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Practical next steps
With the soon elapsing transition period, in-scope companies should implement concrete steps to ensure compliance and effectively mitigate commercial implications (such as supply chain disruptions) and compliance risks stemming from the EUDR (e.g., heavy fines, confiscation, “naming and shaming”, prohibition to place products on the market).
Setting the course with relevant internal stakeholders includes
A EUDR roadmap for the remaining six months until 30 December 2024 could comprise the following steps:
- Preparation: Identify relevant commodities and products as well as in-scope group entities.
- Phase 1 implementation: Define responsibilities and processes while ensuring documentation (management system).
- Phase 2 implementation: Communicate with suppliers and implement necessary measures.
- Go live on 30 December 2024: Create due diligence statements.
When implementing the EUDR requirements, in-scope companies can create synergies with existing supply chain due diligence and risk management systems (e.g., implemented to comply with the German SCDDA). Also with regard to the CSDDD, in-scope companies can strive for streamlined and uniform processes to effectively manage the different requirements.
Given the rapidly evolving global ESG landscape associated with considerable risks, the EUDR illustrates once more that a comprehensive and robust governance organization is key to steer the course when navigating companies through stormy waters.
Authored by Sebastian Gräler, Christian Ritz, Felix Werner, and Gernot Dederichs.
