Background
On June 29, 2023, the EU’s Regulation on deforestation-free products entered into force, with an 18-month transition period until enforcement begins on December 30, 2024. The rationale for the regulations is to limit the expansion of agricultural land that is linked to the production of specific products, currently defined as cattle, wood, cocoa, soy, palm oil, coffee, rubber, and some of their derived products, such as leather, chocolate, tires, and furniture. As a major economy and consumer of these commodities, the EU acknowledges that it is partly responsible for the problem and is claiming the high road by saying it wants to lead the way in solving it.
What it Means
Under the regulation, any operator or trader who places the listed commodities on the EU market must be able to prove that the products do not originate from recently deforested land or have contributed to forest degradation.
The due diligence and traceability requirements in the regulation are onerous, for example:
- The Regulation requires operators or traders to collect geographic coordinates of the plots of land where the commodities were produced.
- The Regulation requires that operators or traders trace every relevant commodityback to its plot of land before exporting it. Consequently, geolocation information is a requirement for the relevant products to be imported into the EU.
- For products traded in bulk, such as soy or palm oil, the operator or trader must ensure that all plots of land involved in a shipment are identified and that the commodities are not mixed at any step of the process with commodities of unknown origin.
Many U.S. stakeholders maintain that the requirements may be impossible to meet. In 2023, U.S. exports of products covered by the EU’s deforestation-free regulation exceeded $8 billion.
It has been reported that on May 30, the U.S. sent a letter to the EU Commission from Commerce Secretary Gina Raimondo, Agriculture Secretary Thomas Vilsack, and USTR Tai requesting that the Commission delay the implementation of the regulation and subsequent enforcement of penalties until the substantial challenges faced by U.S. exporters have been addressed. Other trading partners, particularly major palm oil-producing countries Indonesia and Malaysia, have also urged Brussels to postpone the application of the law.
Please contact Ed Farrell (efarrell@ofwlaw.com) for further information or if you have any questions.
