EUDR in Practice: Does It Apply to Your Company? Correct Identification of Roles and Products is Key

The EU Deforestation Regulation (EUDR) will impact a wide spectrum of companies – from manufacturers and importers/exporters to distributors and traders. The first and most critical step is to correctly determine whether the EUDR applies to your company, what your specific role is within the supply chain, and which of your products fall under this regulation. Without this initial analysis, it is impossible to correctly implement the subsequent obligations required by the regulation.

Why is determining the impact of EUDR on your company crucial?

EUDR is not "just another ESG requirement." It is a regulation that directly dictates whether a company can place a specific product on the EU market or export it. In practice, this is not merely about formal compliance; it involves the risk of supply chain disruption, seizure of goods, reputational damage, and significant potential sanctions.

Relevant Commodities and Products Covered by the Regulation

The regulation applies to specific commodities and their derived products that have the greatest impact on global deforestation. These include:

• Wood – Fuel wood, prefabricated wooden buildings, builders' joinery and carpentry, and other wood products such as furniture, cases, boxes, tools, etc.

• Cattle – Live cattle, meat and other edible cattle products, hides, skins, and leather.

• Coffee – Coffee (including roasted or decaffeinated) and coffee substitutes containing any amount of coffee.

• Cocoa – Cocoa beans, paste, butter, powder, chocolate, and other food preparations containing cocoa.

• Soy – Soya beans, soya bean flour and meal, soya bean oil, oil-cake, and other solid residues.

• Oil Palm – Food products derived from oil palm and raw materials for the chemical and cosmetic industries.

• Rubber – Tires and other rubber products (threads, rods, tubes, plates, etc.) as well as apparel and clothing accessories.

The full scope of products is defined in Annex I of the Regulation.

For relevant products, it must be ensured that they are deforestation-free (i.e., they must not originate from land deforested after December 31, 2020) and must be produced in accordance with the relevant legislation of the country of production.

Differences in Obligations Based on the Entity

The EUDR distinguishes between two primary roles that determine the scope of obligations:

→ Operator

An operator is any natural or legal person who, in the course of a commercial activity, places relevant products on the EU market or exports them from the EU. This typically refers to the primary producer within the EU or an importer from a third country acting as the first link in the EU chain.

• "Placing on the market" means the first making available of a relevant commodity or product on the EU market.

What this means in practice: An operator is obliged to exercise due diligence and submit a due diligence statement (including geolocation data). They must document their due diligence system, retain information for 5 years, and pass on reference and verification numbers to subsequent links in the chain. Large enterprises are further required to publish an annual report on their due diligence system, while micro and small primary operators submit a one-time simplified declaration.

→ Trader

A trader is any person in the supply chain, other than the operator, who, in the course of a commercial activity, makes relevant products available on the market (e.g., processors, distributors, exporters who are not the first to place the item on the market).

• "Making available on the market" means any supply of a relevant product for distribution, consumption, or use on the EU market.

What this means in practice: A trader typically builds upon the due diligence already performed by recording suppliers, customers, and reference/verification numbers. They pass these numbers to the next link in the chain and retain information for 5 years. However, the extent of a trader's obligations varies depending on the size of the enterprise.

Recommended First Steps for Companies

To manage EUDR effectively, we recommend starting with these fundamental questions:

1. Which commodities and products do we buy and sell?

2. Are we an operator or a trader?

3. Do we have "full" due diligence obligations or "downstream" reporting obligations?

Grant Thornton can assist you in answering these questions—from performing an impact and product portfolio analysis (determining how the regulation affects your firm and defining your obligations) to providing comprehensive solutions, including the implementation of a full due diligence system.

This text was translated by AI