The EUDR has simplified due diligence for products from low-risk countries. How do you know if you're eligible?

Earlier this summer, the EU published its benchmark of low, standard and high risk countries for the EU Deforestation Regulation, with the majority of countries labelled as ‘low risk’. While that list was recently rejected by EU Parliament, the EU Commission is expected to publish an updated benchmark before the EUDR goes into effect on December 30th. Barring any updates to the adopted text, products originating from low risk countries will be subject to simplified due diligence requirements under the law. Here’s what that means: 

Simplified Due Diligence for EUDR

When placing relevant products on the EU market or exporting from it, operators are not required to fulfill obligations under Article 10 - deforestation analysis or legality due diligence for associated plots of land - or Article 10a - risk mitigation measures - provided that they can ascertain that all relevant products have been produced in low risk countries without risk of mixing with products of unknown origin, or circumvention of the law. Operators will still be required to attach all maps of all farms and forests used to produce the raw materials when submitting due diligence statements from low risk countries to the EU TRACES system. 

Operators must also be prepared to make any relevant documentation proving that there is negligible risk of mixing or circumvention of the law available to competent authorities in the event of an audit. 

How to demonstrate negligible risk of mixing or circumvention

To ensure there is negligible risk of mixing, operators must first assess the complexity of the supply chain for their products. This can be achieved by mapping the supply chain upstream from finished goods back to raw material while collecting transportation and payment records - otherwise known as chain of custody documentation - as a means of verifying each step. While chain of custody documentation is not a requirement to submit due diligence statements to EU TRACES, it can be collected as evidence that sufficient due diligence was carried out to ensure that the products in question actually came from the farms and forests that were mapped, and that companies can thus legally take advantage of simplified due diligence requirements per the law. 

Risk-based approach 

Companies looking to comply with the EU Deforestation Regulation are understandably concerned about placing any additional burden on their suppliers on top of the data collection explicitly required by the law. Rather than collecting this documentation for every product and commodity, a risk-based approach is recommended when assessing which supply chains warrant additional verification. The following criteria may be used to assess such risk: 

• Access to traceability systems that meet industry standards: Operators should be sure that their direct suppliers have access to traceability systems that meet industry standards, clearly segregating and tracing in-scope commodities so that the country or countries of production are known. In supply chains where direct suppliers do not have access to such systems or are manually tracing the origin of their goods, additional verification may be warranted.    

• Certified vs non-certified commodities: Commodities such as cocoa and coffee may receive third party certifications demonstrating that they have met certain standards in their harvesting and production. Certifications that require segregation - as opposed to mass balance - may provide assurance to operators that the information collected is accurate and verified. However, many companies utilize a combination of both certified and non-certified commodities. Non-certified commodities may benefit from additional means of verification that there is negligible risk of mixing by mapping upstream supply chains and collecting chain of custody documentation. 

• Derived products vs raw commodities: Derived products are in scope for EUDR if they share an HS code that is listed in Annex I of the adopted text. Many derived products may have a high likelihood of being produced using commodities from several countries than commodities from a single country of origin. Operators placing derived products on the EU market or exporting from it may elect to collect additional verification that these products have negligible risk of mixing with products of unknown origin.

Finally, as this evidence would only need to be produced in the event of an audit by competent authorities, some operators may elect to “pressure test” their suppliers ability to produce requisite evidence that there is negligible risk of mixing. Periodic testing of high risk suppliers may offer additional insight into whether suppliers are prepared before an official audit has been conducted. 

About the EU Deforestation Regulation 

The EU's Deforestation Regulation (EUDR) requires companies to submit a map of all the farms and forests that produced seven commodities and many of their derived products, including cocoa, coffee, soy, wood, cattle, natural rubber, and palm oil. If those products originated in ‘Standard’ and ‘High’ risk countries, they must be evaluated across seven risk categories including land rights, labor and human rights, corruption and trade compliance to ensure the goods were produced in accordance with the legislation in their countries of production. This process is often referred to as EUDR legality due diligence. Furthermore, companies must obtain proof that every single plot of land is free of deforestation by collecting geolocation data and conducting deforestation analysis, either on the ground or via deforestation maps often generated from satellite imagery. Only products that are deforestation-free and that have been produced in accordance with the legislation in their country of production may be placed on the EU market. All relevant products must be accompanied by a Due Diligence Statement submitted to the EU TRACES system. Operators may elect to submit a bulk DDS corresponding to a large number of products that will be placed on the market within 12 months of submission, or a DDS for each shipment placed on the EU market or exported from it. 

The EUDR is transformative because it requires proof of due diligence before products are placed on or exported from the EU market, fundamentally changing how companies assess the impact of their supply chains. 

To learn more about how the EUDR will impact your business, and how Sourcemap can help you comply, reach out to our team of experts.