The EU proposal to reduce deforestation, what does it mean for the timber sector?

The European Commission has proposed a new regulation to reduce global deforestation and forest degradation driven by EU consumption of certain commodities. If enacted, the proposed regulation would repeal the EU Timber Regulation (EUTR), therefore, having relevant implications for this sector. In this article, BVRio outlines some of the features of this proposal.

The proposed law would prohibit regulated commodities (cattle, cocoa, coffee, palm oil, soy, and timber) and derived products from being placed on the EU market or exported from it unless proven to be free from deforestation and forest degradation and produced under applicable laws.

The list of timber products closely follows that for EUTR. It includes nearly all CN44 timber products with a few exclusions (such as charcoal, tools, tableware/kitchenware, and packing material used exclusively to carry another product); all CN47 pulp and CN48 paper products except for bamboo-based and recovered products; and categories of wooden furniture under 9403 together with wooden prefabricated buildings (940610). As in EUTR wood seating under 9401 is not included.

The proposed regulation would impose mandatory due diligence rules on operators, meaning persons or entities placing the commodities and products in question on the EU market or exporting them from it for commercial purposes. Due diligence requires (1) the collection and organisation of verifiable information, (2) risk assessment, and (3) risk mitigation measures. This process aims to ensure that the commodities and products are deforestation and forest degradation-free and produced in line with the relevant legislation of the country of production.

According to the draft regulation, the EUTR due diligence requirements would be “adapted and improved” through the introduction of several new features that include:

  • A due diligence statement (Article 4). Operators would produce a due diligence statement when satisfied that the commodities or products were compliant, thus assuming responsibility. This statement would include confirmation of the due diligence and none or only negligible risk.
  • The geographic information requirement or geolocation, linking the commodities and products to the specific plot of land where they were produced (article 9).
  • Country benchmarking (Articles 25-26). The European Commission would use a benchmarking system to assess the risk of commodity-driven deforestation and forest degradation by country. The benchmarking system would categorise each country (or sub-national region) as “low”, “standard”, and “high risk”.
  • A distinct procedure for “simplified due diligence” (Article 12) to apply when sourcing from a country or region, categorised as “low risk”. Under this procedure, operators would be still obliged to undertake the first step of the due diligence (i.e., collect information, documents and data demonstrating products are legally produced and deforestation-free). However, they would not be obliged to undertake a risk assessment and risk mitigation measures.
  • Customs gets a more prominent role (Articles 14 and 24). Customs would be empowered to verify the status of the due diligence statements covering consignments. They could also block and destroy any consignment where risk analysis by EU competent authorities has established a high risk of non-compliance.
  • Minimum inspection levels (article 14): each Member State would have to carry out checks of at least 5% of the relevant operators every year. 5% of the volume of each of the commodities and products placed, made available or exported from each territory would also have to be subject to checks each year.
  • Provision declaring timber covered by a FLEGT license would fulfil the legality requirement. It also notes that some VPA components might be integrated where feasible and agreed by the partners into specific cooperation programmes. However, the regulatory proposal does not include a provision for FLEGT licenses to meet the “deforestation-free” or “degradation-free” requirement. Therefore, the new regulation would have profound implications for those countries engaged in the FLEGT VPA process.

As this regulation is a legislative proposal, the specifics are subject to change. The introduction of the law will require reaching a consensus on a final text between the Parliament and Council. The timeline between a proposal being tabled and adopted (or not) varies widely depending on the degree of consensus and the priority attached to the legislation by the country holding the EU Council Presidency. For now, the timing is still uncertain, but it has been mentioned that it is a priority for France’s presidency between this month and June.