EUROPEAN UNION

DEFORESTATION REGULATION
1. DUE DILIGENCE PROCESS
Cattle, palm oil, soy, timber, cocoa, and coffee are the main commodities contributing to deforestation
and forest degradation on a global scale.

Deforestation is the conversion of forest to another land use or the long-term reduction of tree
canopy cover below the 10% threshold. Deforestation implies the long-term (>10 years) or permanent
loss of forest cover.

Deforestation and forest degradation play crucial roles in global warming and biodiversity loss.
23% of greenhouse gas emissions stem from agriculture, forestry, and land use.

• The European Union endeavors to put an end to deforestation by prohibiting the presence of
commodities and products associated with it in its market.
• Combating deforestation and forest degradation is integral of the European Green Deal, a set
of measures introduced by the EU in 2019 aiming to achieve net-zero emissions by 2050, and to
decouple economic growth from resource utilization.

The regulation sets mandatory due diligence rules for companies placing these seven commodities
in the EU market: cattle, palm oil, soybeans, timber, cocoa, rubber, coffee 2F and 2E, and their
derived products (i.e. chocolate, leather, etc.).

Operators1 and traders have to meet the following conditions:

1. The products are Deforestation-free: produced on land that was not subject to deforestation after
31 December 2020.
2. The products are legal: compliant with all relevant applicable laws in force in the country of
production.
3. A Due Diligence Statement is produced and delivered in accordance with the requirements set
out in the regulation.

OECD - FAO GUIDANCE ON DEFORESTATION AND DUE DILLIGENCE FRAMEWORK

STEP 1: Establish policy on deforestation and strong management systems.

Explore the
STEP 2: Identify, assess and prioritize deforestation risks in the supply chain. EU Forest
Observatory
STEP 3: Design and implement a strategy to respond to deforestation. Website
for more
information.
STEP 4: Verify supply chain and due diligence of deforestation.

STEP 5: Report on due diligence to report on deforestation.

REMEDIATION OF ADVERSE IMPACTS

1 An operator is a person who, in the course of a commercial activity, places relevant products on the EU market or exports them.
 “Ethiopian coffee was born in the forest, and to the surprise of many, it continues to live
there. These coffee forests are a unique and valuable resource, providing sustainable
livelihoods for thousands of families and serving as a natural genetic bank for future
generations of coffee connoisseurs. Protecting them is therefore of paramount importance,
and it is a responsibility that falls to all of us.”

Dr. Adugna Debela, Director, Ethiopian Coffee and Tea Authority

DUE DILIGENCE - A 3 STAGE PROCESS

INFORMATION REQUIREMENTS RISK ASSESSMENT RISK MITIGATION

Companies must collect information
on their products, including
a description of the product,
information on the quantity,
the country of production, the
geolocation of the farm(s) or forest
from which the product originates,
the date or period of production
and the name and contact details
of the supplier. Companies must
also obtain conclusive proof that
the production of the product is free
from deforestation and complies with
the laws of the country of origin.
Companies must assess whether
there is a risk that the products
intended to be placed on the
market are not compliant. The risk
assessment must consider the risk
level assigned to the country of
production, as well as the presence
of forests close to the production
area, the presence of indigenous
populations, cases of human
rights violations, concerns about
corruption, the complexity of the
value chain, etc.
If the risk assessment concludes that
there is no (or only negligible) risk,
no further action is required, and
the products can be placed on the
market/exported. On the other hand,
if risks are identified, the company
must take risk mitigation measures
such as collecting additional data,
carrying out audits, etc.

EU CLASSIFICATION OF COUNTRIES ACCORDING TO RISK LEVELS

High-risk countries; Standard-risk countries2; Low-risk countries.

Assessment Criteria: Rate of deforestation and forest degradation + Rate of expansion of agriculture land for relevant
commodities.

+ Production trends of relevant commodities and products.

Key Assessment Factors

• Data Transparency: information submission on emissions and removals from agriculture, forestry, and land use.
• Legal Compliance: Existence and enforcement of laws aligned with Paris Agreement standards, with penalties for
non-compliance.
• Agreements and Instruments: relevance and adherence to agreements addressing deforestation and forest
degradation.
• Rights Protection: protection of human and indigenous rights, and transparency of data.
• International Sanctions: Consideration of sanctions by UN or EU Council on relevant imports/exports.

2 All countries are currently classified as standard risk.

Non-Compliance Penalties Applying to Operators
• Fines: Can reach up to 4% of the operator’s or trader’s annual EU turnover.
• Confiscation: Revenues from relevant transactions may be confiscated.
• Exclusion: Temporary exclusion from public procurement and access to public funding for a maximum of
12 months.
• Suspension: Temporary suspension from placing or making available on the EU market or exporting relevant
commodities/products, along with a prohibition from exercising simplified due diligence.

THE EUDR & SMALL HOLDER FARMERS

• More than 90% of the coffee is produced by smallholder farmers, whose number is estimated to be around
5 million. Many of the coffee producers in Ethiopia are small holder farmers.
• The EUDR does not foresee access to legal remedies to achieve redress or compensation of people or communities
who have been harmed.
• The EUDR emphasizes fair pricing for producers, especially small holders, to address deforestation’s root cause.
• Current provision for small holders focuses on optional support for compliance through capacity building
and investment.
• First full review after five years will assess EUDR’s impact on small holders.

GUIDE TO GEOLOCALISATION COMPLIANCE

1. Navigate Regulations with Precisions: Ensure compliance by including geolocation coordinates
in due diligence statements for products destined for the EU market or export. Explore the
EUDR FAQ
2. Tailored Geolocalisation Guidelines: Follow guidelines based on plot sizes – use polygons for for more
larger plots and choose between polygons or single points for smaller ones. information

3. Ownership of Accuracy: Operators and traders shoulder the responsibility for accuracy in
geolocation and legality information, irrespective of intermediary involvement.

4. Time-Stamped Traceability: Capture the essence of traceability by documenting the production/

harvesting date or time range.

5. Tech-driven Support: Easily upload geolocation data in a user-friendly system. User feedback
via the Multi-Stakeholder Platform fuels ongoing enhancements.

6. Upcoming Framework Insights: Stay tuned for detailed rules governing the Information
System, set to be revealed through an implementing act.
ESSENTIALS OF EUDR DUE DILLIGENCE

Information Collection Risk Assessment Risk Mitigation

Product details (trade name and type), quantity (expressed in weight, volume, or number), country of production,
geolocation and production timeline, supplier’s contact information, customer’s contact information, deforestation-
free confirmation and compliance with local legislation low risk, negligible risk? Can be placed on the EU market
or exported.

STANDARD OR HIGH-RISK COUNTRY

Assessment of risk by the European Commission, presence of forests, indigenous peoples or violation of human rights
etc. No or negligible risk of non-compliance? Can be placed on the EU market or exported.

RISK OF NON-COMPLIANCE
Additional information required from roasters/buyers, support smallholders/suppliers compliance, capacity building,
independent surveys or audits carried out etc. No or negligible risk of non-compliance? Can be placed on the
EU market or exported.

RISK OF NON-COMPLIANCE
Can not be placed on the EU market or exported.