PURPOSE: to combat deforestation and forest degradation by reducing EU consumption that contributes to it.

LEGISLATIVE ACT: Regulation (EU) 2023/1115 of the European Parliament and of the Council on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010.

CONTENT: the Regulation aims to minimise the risk of deforestation and forest degradation associated with products placed on or exported from the EU market. It also aims to reduce the EU's share of global greenhouse gas emissions and biodiversity loss.

Due diligence

The Regulation lays down mandatory due diligence rules for all operators and traders who place, make available or export the following commodities from the EU market: palm oil, cattle, wood, coffee, cocoa, rubber and soy .

These rules also apply to a number of by-products such as chocolate, furniture, printed paper and certain palm oil derivatives (used, for example, as components in personal care products).

Due diligence systems should be designed to make accessible information on the sources and suppliers of commodities and products placed on the market, including information demonstrating compliance with no deforestation and forest degradation and legality requirements, inter alia by identifying the country of production or parts thereof and providing the geographical coordinates of the plots concerned.

Smaller operators will be able to call on larger operators to prepare the due diligence statements.

By making the due diligence declaration available to the competent authorities, the operator will assume responsibility for the conformity of the product in question. Operators will be required to keep a record of due diligence declarations for five years from the date of submission of the declaration.

Operators will verify and analyse the information collected and any other relevant documentation. Based on that information and documentation, the operators will carry out a risk assessment to establish whether there is a risk that the relevant products intended to be placed on the market or exported are non-compliant.

Product checks

The competent authorities will use a risk-based approach to identify the checks to be carried out. Special attention will be paid to the situation of countries or parts of countries classified as high risk, the history of non-compliance by operators or traders and the risks of circumvention. Products from low-risk countries will be subject to a simplified procedure.

The Regulation creates a benchmarking system , which assigns a level of risk related to deforestation and forest degradation ( low, standard or high ) to countries inside and outside the EU.

The competent authorities will have to carry out checks on 9% of operators and traders trading in products from high-risk countries, 3% in the case of standard-risk countries and 1% in the case of low-risk countries, in order to verify that they are actually fulfilling the obligations laid down in the regulation. In addition, the competent authorities will carry out checks on 9% of the commodities and products concerned placed on, made available on or exported from their market by high-risk countries.

The checks on operators and non-SME traders will include:

- on-the-ground examination of relevant commodities or of the relevant products with a view to ascertaining their correspondence with the documentation used for exercising due diligence;

- any technical and scientific means adequate to determine the species or the exact place where the relevant commodity or relevant product was produced, including anatomical, chemical or DNA analysis;

- any technical and scientific means adequate to determine whether the relevant products are deforestation-free, including Earth observation data such as from the Copernicus programme and tools or from other publicly or privately available relevant sources.

Human rights aspects

The new rules also take into account the protection of human rights in relation to deforestation. Respecting the rights of indigenous peoples in relation to forests and the principle of free, prior and informed consent, as set out in particular in the UN Declaration on the Rights of Indigenous Peoples, will help to protect biodiversity, mitigate climate change and address related public interest concerns.

Penalties

Member States should ensure that sanctions are effective, proportionate and dissuasive . Fines commensurate with the environmental damage and the value of the commodities or products concerned must be set at a minimum of 4% of the operators' annual EU turnover and accompanied by temporary exclusion from public procurement procedures and access to public funding.

Cut off date

The regulation sets the date of application of the new rules at 31 December 2020 , which means that only products that have been produced on land that has not been subject to deforestation or forest degradation after 31 December 2020 will be allowed on the EU market or authorised for export.

ENTRY INTO FORCE: 29.6.2023.

The European Parliament adopted by 552 votes to 44, with 43 abstentions, a legislative resolution on the proposal for a regulation of the European Parliament and of the Council on making available on the Union market as well as export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010.

The European Parliament's position adopted at first reading under the ordinary legislative procedure amends the Commission's proposal as follows:

Subject matter and scope

This Regulation lays down rules regarding the placing and making available on the Union market as well as the export from the Union of relevant products, that contain, have been fed with or have been made using relevant commodities, namely cattle, cocoa, coffee, oil palm, rubber, soya and wood , with a view to:

- minimising the Union’s contribution to deforestation and forest degradation worldwide , and thereby contributing to a reduction in global deforestation;

- reducing the Union’s contribution to greenhouse gas emissions and global biodiversity loss.

Relevant commodities and relevant products should not be placed or made available on the market or exported, unless all the following conditions are fulfilled: (a) they are deforestation-free; (b) they have been produced in accordance with the relevant legislation of the country of production; and (c) they are covered by a due diligence statement.

The amended text defines ‘forest degradation’ as structural changes in forest cover, taking the form of conversion of: a) primary or naturally regenerated forests to plantation forests or other wooded areas; or b) primary forests into planted forests.

Obligations on operators

Operators should not place relevant products on the market or export them without prior submission of a due diligence statement . Operators that obtain or are made aware of relevant new information, including substantiated concerns, indicating that a relevant product that they have placed on the market is at risk of not complying with this Regulation should immediately inform the competent authorities of the Member States in which they placed the relevant product on the market, as well as traders to whom they supplied the relevant product.

Operators that are SMEs should not be required to exercise due diligence for relevant products contained in or made from relevant products that have already been subject to due diligence in accordance with this Regulation.

Information requirements

Operators should collect, organise and keep for five years from the date of the placing on the market or of the export of the relevant products the following information, accompanied by evidence, relating to each relevant product:

- a description, including the trade name and type of the relevant products as well as, in the case of relevant products that contain or have been made using wood, the common name of the species and their full scientific name; the product description shall include the list of relevant commodities or relevant products contained therein or used to make those products;

- the quantity of the relevant products; for relevant products entering or leaving the market, the quantity is to be expressed in kilograms of net mass;

- the country of production and, where relevant, parts thereof;

- the geolocation of all plots of land where the relevant commodities that the relevant product contains, or has been made using, were produced, as well as the date or time range of production.

Assessment of countries

This Regulation establishes a three-tier system for the assessment of countries or parts thereof. For that purpose, Member States and third countries, or parts thereof, should be classified into one of the following risk categories: ‘high risk’; ‘low risk’ and ‘standard risk’ .

On the entry into force of the Regulation, all countries should be assigned a standard level of risk. The Commission should classify countries or parts thereof, that present a low or high risk on the basis of an objective and transparent assessment within 18 months of the entry into force of the legislation.

Checks on operators and non-SME traders

The competent authorities should use a risk-based approach to identify the checks to be carried out. Special attention will be paid to the situation of countries or parts thereof classified as high risk, the history of non-compliance of operators or traders with this Regulation, risks of circumvention, and any other relevant information. The proportion of checks is performed on operators according to the country’s risk level: 9% for high-risk countries, 3% for standard-risk and 1% for low-risk.

The checks on operators and non-SME traders should include an examination of their due diligence system and an examination of documentation and records attesting that specific relevant product in question is compliant. It should also include:

- on-the-ground examination of relevant commodities or of the relevant products with a view to ascertaining their correspondence with the documentation used for exercising due diligence;

- any technical and scientific means adequate to determine the species or the exact place where the relevant commodity or relevant product was produced, including anatomical, chemical or DNA analysis;

- any technical and scientific means adequate to determine whether the relevant products are deforestation-free, including Earth observation data such as from the Copernicus programme and tools or from other publicly or privately available relevant sources.

Penalties

The penalties for non-compliance should be effective, proportionate and dissuasive. The maximum amount of such a fine shall be at least 4 % of the operator’s or trader’s total annual Union-wide turnover. Penalties also include: (i) temporary exclusion for a maximum period of 12 months from public procurement processes and from access to public funding, including tendering procedures, grants and concessions; (ii) temporary prohibition from placing or making available on the market or exporting relevant commodities and relevant products, in the event of a serious infringement or of repeated infringements.

The European Parliament adopted by 453 votes to 57, with 123 abstentions, amendments to the proposal for a regulation of the European Parliament and of the Council on making available on the Union market as well as export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010.

The matter was referred to the committee responsible for inter-institutional negotiations.

The main amendments adopted in plenary are as follows:

Broadening the scope

While the Commission proposal covers cattle, cocoa, coffee, palm oil, soya and wood, including products that contain, have been fed with or made from these products, Parliament also wants to include swine, sheep and goats, poultry, maize and rubber, as well as charcoal and printed paper products .

Members defined ‘zero deforestation’ as goods produced on land that has not been deforested or degraded after 31 December 2019 , one year earlier than the Commission proposes.

The Commission should:

- present, no later than one year after the date of entry into force of the regulation, an impact assessment accompanied, if appropriate, by a legislative proposal to extend the scope of the regulation to other natural ecosystems , including land with a high carbon stock and land with a high biodiversity value, such as grasslands, peatlands and wetlands, in addition to forests and other wooded land;

- assess, no later than two years after entry into force, whether the rules should be extended to other commodities such as sugar cane, ethanol and mining products , and to what extent this is feasible.

Provision of financial services

Members included a new article stipulating that financial institutions should provide financial services to customers only when the financial institutions conclude that there is no more than a negligible risk that the services in question potentially provide support directly or indirectly to activities leading to deforestation, forest degradation or forest conversion.

Due diligence obligations of operators

Companies placing products on the EU market would be required to carry out due diligence to assess the risks in their supply chain.

Operators should make a due diligence statement available to the competent authorities before placing the commodities and products concerned on the EU market or exporting them. The statement, which should be transmitted and certified electronically , should confirm that due diligence has been carried out, disclose the steps that have been taken in this regard to verify the compliance of the relevant commodities and products concerned with the Regulation and explain why the assessment found no or negligible risk.

The operator should assume responsibility for the compliance of the relevant commodity or product with the requirements of this Regulation. Operators should therefore undertake reasonable, documented efforts to support the compliance of smallholders with the provisions and requirements set out in this Regulation. They should keep record of the due diligence statements for 5 years from the date of making available via the information system and share the due diligence statements with subsequent operators and traders in the supply chain.

Operators should also: (i) engage meaningfully with vulnerable stakeholders , such as smallholders, indigenous peoples and local communities, in their supply chain; (ii) ensure that those vulnerable stakeholders receive adequate assistance and fair remuneration so that their commodities and products can comply with the rules.

Human rights and indigenous peoples

Members also wanted companies to ensure that goods are produced in accordance with human rights provisions in international law and with respect for indigenous peoples. Operators should:

- collect adequate and verifiable information disclosing the views of any indigenous peoples, local communities and other groups that claim tenure rights in respect of the area used for the purpose of producing the relevant commodities and products regarding the production of those relevant commodities and products;

- ensure, where relevant, that risk assessments and mitigation measures are adopted which provide for the participation and consultation of indigenous peoples, local communities, and other customary tenure rights holders that are present in the area of production of the relevant commodities and products.

Country monitoring and assessment

Members believe that the Commission should classify countries, following a transparent and objective assessment process, as low, standard or high risk , within six months of the proposed regulation coming into force.

Each Member State should ensure that the annual checks carried out by their competent authorities cover at least 10 % of the operators placing, making available on or exporting from the Union market each of the relevant commodities and products on their market as well as 10 % of the quantity of each of the relevant commodities and products placed or made available on or exported from their market. Where commodities have been produced in a country identified as high risk, annual checks should cover at least 20% of operators. For commodities from countries considered low risk, Member States could reduce annual checks to 5% .

Satellite imagery and access to forest data

The Commission should establish a platform using satellite imagery, including Copernicus Sentinel, that covers forest areas worldwide and is accompanied by a range of tools to enable all parties to quickly move towards no-deforestation supply chains.

Guidelines

No later than one year after the entry into force of the Regulation, the Commission should issue user-friendly commodity-specific guidelines to clarify due diligence responsibilities and traceability rules of operators that are tailored to fit their respective supply chains.

The Committee on the Environment, Public Health and Food Safety adopted the report by Christophe HANSEN (EPP, LU) on the REPORT on the proposal for a regulation of the European Parliament and of the Council on making available on the Union market as well as export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010.

The committee responsible recommended that the European Parliament's position adopted at first reading under the ordinary legislative procedure should amend the proposal as follows:

Subject matter and enlarged scope

This proposal lays down rules regarding the placing and making available on the Union market, as well as the export from the Union market, of cattle, cocoa, coffee, oil palm, soya and wood (relevant commodities) and products, as listed in Annex I, that contain, have been fed with or have been made using relevant commodities (relevant products), with a view to minimising the Union’s contribution to deforestation, forest degradation and forest conversion worldwide and contributing to a reduction in global deforestation.

The report also stipulated that the proposed Regulation should also lay down obligations for financial institutions headquartered or operating in the Union that provide financial services to natural or legal persons whose economic activities consist, or are linked to, the production, supply, placing on or export from the Union market of the relevant commodities and products.

As regards the scope , Members want to include pigmeat, sheep and goats, poultry, maize and rubber, as well as charcoal and printed paper products, and bring the cut-off date one year forward, to 31 December 2019.

The report called on the Commission to evaluate, no later than two years after the entry into force, whether the rules need to be extended to other goods such as sugar cane, ethanol and mining products , and how feasible this is. Members also wanted them to cover other natural ecosystems such as grasslands, peatlands and wetlands, if deemed appropriate by the Commission, within one year after the entry into force.

Prohibition

Members included a new article stipulating that financial institutions should provide financial services to customers only when the financial institutions conclude that there is no more than a negligible risk that the services in question potentially provide support directly or indirectly to activities leading to deforestation, forest degradation or forest conversion.

Due diligence obligations of operators

While no country or commodity will be banned, companies placing products on the EU market would be obliged to exercise due diligence to evaluate risks in their supply chain. This due diligence information, which will be provided in a harmonised and digital manner via a due diligence statement, will then be passed on to the other operators and traders in the supply chain. They can for example use satellite monitoring tools, field audits, capacity building of suppliers or isotope testing to check where products come from. EU authorities would have access to relevant information, such as geographic coordinates. Anonymised data would be available to the public.

The operator assumes responsibility for the compliance of the relevant commodity or product with the requirements of this Regulation. Operators should therefore undertake reasonable, documented efforts to support the compliance of smallholders with the provisions and requirements set out in this Regulation. They should keep record of the due diligence statements for 5 years from the date of making available via the ‘Register’ Information System and share the due diligence statements with subsequent operators and traders in the supply chain.

Due diligence should also be strengthened to consider international human rights and the rights of indigenous people .

Checks and assessment of countries

Members considered that the Commission should classify countries, following a transparent and objective assessment process, into low, standard or high risk within six months of entry into force of the proposed Regulation.

Each Member State should ensure that the annual checks carried out by their competent authorities cover at least 10 % of the operators placing, making available on or exporting from the Union market each of the relevant commodities and products on their market as well as 10 % of the quantity of each of the relevant commodities and products placed or made available on or exported from their market. For commodities or products from countries or parts thereof categorised as low-risk, Member States should reduce the annual checks to 5 % .

PURPOSE: to curb deforestation and forest degradation that is provoked by EU consumption and production.

PROPOSED ACT: Regulation of the European Parliament and of the Council.

ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure and on an equal footing with the Council.

BACKGROUND: deforestation and forest degradation are taking place at an alarming rate. The Food and Agriculture Organization of the United Nations estimates that 420 million hectares of forest – about 10% of the world’s remaining forests and an area larger than the European Union – have been lost worldwide between 1990 and 2020. In addition, deforestation and forest degradation contribute to the global climate crisis in multiple ways. Most importantly, they increase greenhouse gas emissions through associated forest fires, permanently removing carbon sink capacities, decreasing climate change resilience of the affected area and substantially reducing its biodiversity. Deforestation alone accounts for 11 % of greenhouse gas emissions.

The existing EU legislative framework focuses on tackling illegal logging and associated trade and does not address deforestation directly. Therefore, this new draft regulation set out measures to address Union-driven deforestation and forest degradation.

CONTENT: this proposal aims to curb deforestation and forest degradation that is provoked by EU consumption and production. It lays down rules regarding the placing and making available on the Union market, as well as the export from the Union market, of cattle, cocoa, coffee, oil palm, soya and wood (‘relevant commodities’) and products, as listed in Annex I, that contain, have been fed with or have been made using relevant commodities (‘relevant products), with a view to:

- minimising the Union’s contribution to deforestation and forest degradation worldwide;

- reducing the European Union’s contribution to greenhouse gas emissions and global biodiversity loss.

The definition of deforestation-free sets a cut-off date of 31 December 2020. This means that no commodities and products in the scope of the regulation would be allowed to enter or exit the EU market if they were produced on land subject to deforestation or forest degradation after that date.

Due diligence and enhanced scrutiny

In order to achieve the objective of minimising the EU’s contribution to deforestation and forest degradation, the proposal lays down a tiered, mandatory due diligence system, relying on a deforestation-free definition, combined with a benchmarking system to assess countries and their level of risk of deforestation and forest degradation driven by the commodities in the scope of the regulation. The benchmarking system will assign each country or parts thereof one of three possible levels of risk: low, standard and high risk. The objective of this system is to incentivise countries to ensure stronger forests protection and governance, to facilitate trade and to better calibrate enforcement efforts by helping competent authorities to focus resources where they are most needed, and to reduce companies’ compliance costs.

Competent authorities should carry out the risk analysis of due diligence statements by electronic data processing techniques integrated in the information system.

When relevant commodities and products are sourced from a country or parts thereof that has been assessed as high risk according to the country benchmarking system, they are subject to enhanced scrutiny by the relevant competent authorities. Competent authorities should ensure that the checks they carry out on an annual basis cover at least 15% of the operators, as well as 15% of the quantity of relevant commodities and products produced in high-risk countries or parts thereof.

The proposal also stipulates that operators should collect the geographic coordinates of the land where the commodities they place on the market were produced. This strict traceability is meant to ensure that only deforestation-free products enter the EU market – and that enforcement authorities in Member States have the necessary means to control that this is the case.

Penalties

The proposal establishes the obligation of Member States to lay down rules on penalties applicable to infringements of this Regulation. These may include fines, the confiscation of the relevant commodities and products as well as the confiscation of revenues, the suspension or prohibition of relevant economic activities and the exclusion from public procurement processes for the operators and traders that violate the Regulation.

Reporting

Member States should make available to the public and the Commission, at the latest by 30 April of each year, information on the application of this Regulation during the previous calendar year. This information shall include their plans for checks, the number and the results of the controls carried out on operators and traders, including the contents of these checks, the volume of relevant commodities and products checked in relation to the total quantity of relevant commodities and products placed on the market, the countries of origin and of production of relevant commodities and products as well as the measures taken in case of non-compliance and the costs of controls recovered.

The Commission services should make publicly available, on an annual basis, a Union-wide overview of the application of this Regulation.

Budgetary implications

A total budget of EUR 16 519 000 is foreseen for the setting up and implementation of the Regulation during the first five years of operation (provisionally foreseen from 2023 to 2027.) This includes a budget of EUR 6 650 000 under Heading 7 of the Multiannual Financial Framework (MFF) for human resources and other administrative expenses. It also includes a budget of EUR 9 869 000 under Heading 3 of the MFF. The latter is linked to support various implementation tasks related to the legislative provisions that will be carried out by Commission services from 2022 to 2027, including procurement and potential administrative arrangements.