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EU law to prevent the sale of products that cause deforestation

On 6 December 2022, EU legislators reached a deal, prohibiting companies from selling commodities linked to forest degradation and deforestation on EU markets. The EU Deforestation Regulation (EUDR) aims to prevent global deforestation and forest degradation.

The new law on deforestation-free goods will make it mandatory for companies to issue a due diligence statement that goods sold on the EU market have not caused deforestation and forest degradation worldwide after 31 December 2020. According to the agreement, although no country or products will be prohibited, companies will not be permitted to market their products in the EU without this statement. Moreover, companies will have to prove compliance with the relevant legislation of the place of production, including human rights, and that the rights of concerned indigenous peoples have been considered.

The new legislation covers cattle, cocoa, coffee, palm oil, soya, and wood, including products that contain, feed on, or are made from these commodities (such as leather, chocolate, and furniture). Several palm oil derivatives, rubber, charcoal, and printed paper products were later added by the European Parliament.

The Commission will implement a benchmarking system to assess countries based on forest degradation and deforestation risk due to agricultural expansion. The level of country risk will determine the obligations of companies. To monitor the implementation of the new regulation, satellite images of forests and DNA testing will also be used.

Two years after entry into force, the Commission will also evaluate extending the scope to other ecosystems, including those with high carbon stocks, biodiversity, and other commodities. Additionally, the Commission shall assess whether to obligate financial institutions in the EU to only provide financial services to their customers if there is a negligible risk of deforestation associated with these services.

As the next step, the Parliament and the Council must formally approve the agreement. The new law comes into force 20 days after publishing in the EU Official Journal; however, some articles will apply 18 months later.

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RBI Regulatory Advisory

Raiffeisen Bank International AG | Member of RBI Group | Am Stadtpark 9, 1030 Vienna, Austria  | Tel: +43 1 71707 - 5923