In our series “Product Law News in a Nutshell” we regularly present new developments and judgments in the field of product safety, product liability and sustainable products. Most of these diverse innovations originate from the pen of European institutions. 

We start with Regulation (EU) 2023/1115 on products associated with deforestation (EUDR), which enters into force on 29 June 2023. Larger undertakings only have 18 months to adapt to the new obligations; micro and small sized companies are given 6 months more time.

1. Purpose
   The purpose of the new EUDR is to reduce global deforestation which contributes to the climate crisis in multiple ways. One reason for this is the high consumption and production of commodities in the EU, for the cultivation of which forests are converted into agricultural land. As part of its EU Green Deal, the Commission has therefore once again focused on supply chains: through bans and due diligence, the EUDR aims to ensure that only products whose commodities were produced on land that has not been deforested since 1 January 2021 are made available on the Union market or exported.
2. Commodities and products covered
   The largest share of deforestation caused by the Union is due to the cultivation or rearing of the following commodities: Oil palm (34%), soya (32.8%), wood (8.6%), cocoa (7.5%), coffee (7%), cattle (5%) and rubber (3.4%). These are precisely the commodities covered by the EUDR. 
   However, the linchpin of the EUDR is not the commodities themselves, but so-called “relevant products”, i.e. products which contain, have been fed with or have been made using relevant commodities, and which are listed in Annex I of the EUDR. Decisive is therefore this list of products, which are specified by customs tariff numbers and the goods covered by them. The scope of the EUDR therefore does not only include meat of cattle, chocolate, roasted coffee or palm oil, but also, for example, leather, books, tyres, or wooden furniture.
3. Assessment of countries
   The rate of deforestation and of expansion of agricultural land for relevant commodities, as well as production trends themselves vary around the world. For this reason, the Commission will classify all countries into one of three risk categories by the end of 2024 at the latest. Countries with a “high risk” are those for which there is a high risk that relevant commodities will not be deforestation-free; in countries with a “low risk” deforestation is assumed to be the exception. The country list itself is then published by means of implementing acts.
4. Central prohibition
   In future, relevant commodities and relevant products may only be placed or made available on the market or exported if they fulfil three conditions:
   1. They are deforestation-free, meaning that no forests have been converted into agricultural use since 1 January 2021;
   2. They have been produced in accordance with the relevant legislation of the producing country in terms of land use rights, environmental protection, forest-related rules – but also in terms of non-deforestation-related aspects such as labour and human rights, as well as tax, anti-corruption, trade and customs regulations;
   3. They are covered by a due diligence statement.

   If these conditions are not met, the products listed in Annex I will no longer be marketable in a few months.

5. Obliged persons
   The obligations of the EUDR primarily affect operators, i.e. persons who place the relevant products on the market for the first time or export them in the course of a commercial activity. 
   Non-SME traders are, however, also covered by the full range of obligations under the EUDR. This is justified by the fact that they have a significant influence on supply chains and play an important role in ensuring that supply chains are deforestation-free. 
   SME traders, in contrast, are only subject to rather limited obligations. 
6. Three due diligence obligations 
   As in general supply chain legislation, the EUDR due diligence obligations are to be understood as obligations of effort, not of success. This means that operators have ensured that products are deforestation-free and in compliance with local regulations if they had followed, documented, and annually verified the following three due diligence obligations before marketing the products:
   1. Collection of information, data, and documents. These range from a description of the products and contact details of all suppliers, to data on the geolocation of all land on which the commodities were produced, to agreements on the land use.
   2. Risk assessment of the information and documents collected based on various criteria laid down in the EUDR. Product may only be marketed if this risk assessment shows that there is no or only a negligible risk of non-compliance. 
   3. Risk mitigation measures when a risk is identified, such as requesting further information or conducting independent surveys or audits.

   Easing of these due diligence obligations applies to SME market participants: If a due diligence statement has already been submitted for the relevant product, they no longer have to fulfil the due diligence obligations themselves, but only have to provide the reference number of the due diligence statement to the competent authority upon request.
   In addition, simplified due diligence obligations apply to all operators if they have ascertained that all relevant commodities and products were produced in low-risk countries. In this case, the due diligence obligations to be complied with are limited to the collection of information, data, and documents. A risk assessment and risk mitigation measures are then only to be carried out if the operator has to assume a risk that the products do not comply with the EUDR or that the rules are circumvented.

7. Due diligence statement
   As evidence of the fulfilment of all due diligence obligations to ensure that relevant products are deforestation-free and comply with local legislation, operators, including non-SME traders, must submit a due diligence statement. The specific information that must be included in such a statement can be found in Annex II EUDR. The due diligence statement must made available to the authorities before the products are placed on the market or exported via an information system that is to be set up by the end of 2024, and must be kept for 5 years thereafter.
   If a due diligence statement has already been submitted for a relevant product, other non-SME operators may refer to it if they have previously established that the due diligence obligations have been fulfilled. However, they remain responsible for the compliance of the relevant products.
8. Legal consequences of non-compliances
   If the requirements of the EUDR are not met, the relevant products are not marketable. If the non-compliance is not formal and can be rectified, products must be recalled or withdrawn, donated or disposed of.
   In addition to possible competition law and civil law claims, there will also be several regulatory penalties for EUDR infringements. These range from the exclusion from public procurement processes and confiscation of revenues to severe fines with a maximum amount of at least 4% of the total annual Union-wide turnover.
   On the Commission’s website, final judgments for infringements and imposed penalties will also be published in a non-anonymised manner – which increases the reputational risk.

The EU is serious. 

Authors:
Dr. Astrid Seehafer, M.Sc.
Eva Ritte, M.A.