Kevin Mason

The European Union’s Deforestation Regulations (EUDR) are set to come into force by the end of this year, but many market participants feel that too many questions remain unanswered. The regulations would apply to seven commodities, including timber (fibre/pulp/paper/board). Producers must be able to prove that their production did not contribute to deforestation at the source (including within Europe) and must include specific geolocation data for raw-material inputs. Participation in existing certification schemes (e.g., FSC, PFEC) can provide some, but not all, of the required documentation and assurances.

There has been a range of reactions to the EUDR deadline across the companies in our universe, from “non-event” to “unworkable,” with far more in the latter camp. Huge hurdles to implementation remain, including the lack of a sufficiently robust European Union IT system to receive information (the test systems crashed with data from a single company!), insufficient auditors and potential conflicts between very granular geospatial data and privacy regulations. One aspect of the regulation has already been pushed back, with all countries initially classed as “standard” risk rather than the ulimate high/standard/low rating system (which will initially disadvantage low-risk countries). Senior U.S. administration officials have asked for delayed implementation, citing “critical challenges” for timely compliance.

Most of our contacts expect some form of the regulation to eventually be put in place, but timing—at least regarding enforcement—is likely to be pushed back. There will be costs for compliance, but there may be benefits too, with spot suppliers and/or producers with a weaker focus on sourcing and documentation simply choosing not to ship to Europe. Given the scope of the regulations, we see an extended (Brexit-like) adjustment period.” [END]