EU Council and Parliament strike provisional deal on deforestation-free products regulation

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On 6 December, the European Council and the European Parliament agreed on the text of a regulation to minimise the risk of deforestation and forest degradation associated with products that are imported into or exported from the European Union.

The agreement is provisional pending formal adoption in both institutions.

The EU regulation on deforestation-free products is a part of the European Green Deal and builds on the 2019 European Commission communication on stepping up EU action to protect and restore the world’s forests. In this communication, the Commission announced four action items on deforestation:

  • Reducing the footprint of EU consumption;
  • Stepping up international cooperation;
  • Improving sustainable financing; and
  • Boosting research and innovation.

The new regulation builds on the first action item by recognising that the EU is complicit in global deforestation through domestic consumption. It complements the 2030 Forest Strategy, with which the EU aims to strengthen reforestation and conservation efforts inside the region and replaces the EU Forest Law Enforcement Governance and Trade regulation (FLEGT), which includes the EU Timber Regulation (EUTR).

The provisional agreement sets mandatory due diligence rules for all operators and traders who place, make available or export the following commodities from the EU market: palm oil, beef, timber, coffee, cocoa, rubber, and soy. The rules also apply to a number of derived products which in the wood sector include furniture, charcoal, and printed papers.

The last two items were not formerly regulated under EUTR. A review will be carried out in two years to see if other products need to be covered.

The co-legislators set the cut-off date of the new rules at 31 December 2020, meaning that only products that have been produced on land that has not been subject to deforestation or forest degradation after 31 December 2020 will be allowed on the Union market or to be exported.

The Council and Parliament agreed to define “deforestation” in accordance with the definition established by the FAO for forest monitoring purposes in their Global Forest Resource Assessment (FRA): “the conversion of forest to other land use independently of whether human-induced or not”.

This definition implies that deforestation refers to a change in land use, not in tree cover.

It is also dependent on a definition of forest, which, in the FRA, combines physical criteria (minimum thresholds of 10% canopy cover, 0.5 hectare area and 5m in height) and a notion of the predominant land use, excluding treecovered areas where the predominant use is agriculture or urban.

In accepting the FAO definition of deforestation, the legislation will impose no prohibition on products from conversion of “other wooded land” with sparser tree cover (like scrublands and savannas) as the European Parliament had proposed in amendments in July.

The co-legislators define “forest degradation” as “structural changes to forest cover, taking the form of the conversion of naturally regenerating forests and primary forests into plantation forests and other wooded land and the conversion of primary forests into planted forests”.

The EU Council press release refers to this as an “innovative” definition reflecting the fact that, according to the FAO 2022 State of the World’s Forests report, a “widely applied definition of forest degradation is unavailable, and data are scarce”.

The legislation prohibits placing on the EU market of any regulated commodity derived from deforested land or forest degradation in accordance with these definitions irrespective of whether the deforestation or degradation is legal or illegal in the country of harvest.

The co-legislators agreed on stringent due diligence obligations for operators, which will be required to trace the products they are selling back to the “plot of land”, identified by geolocation coordinates, where it was produced. At the same time, the new rules are designed to avoid duplication of obligations and reduce administrative burden for operators and authorities. It also adds the possibility for small operators to rely on larger operators to prepare due diligence declarations.

The Council and Parliament agreed to set up a benchmarking system, which assigns to third and EU countries a level of risk related to deforestation and forest degradation (low, standard, or high). The risk category will determine the level of specific obligations for operators and member states’ authorities to carry out inspections and controls. This would facilitate an enhanced monitoring for high-risk countries and “simplified due diligence” for low-risk countries.

The Council and Parliament also tasked the competent authorities to carry out checks on 9% of operators and traders trading products from high, 3% for standard-risk countries and 1% from low-risk countries, in order to verify that they effectively fulfil the obligations laid down in the regulation.

In addition, competent authorities will carry out checks on 9% of the quantity of each of the relevant commodities and products placed, made available on, or exported from their market by high-risk countries.

The legal text agreed between the European Council and Parliament also takes into account human rights aspects linked to deforestation, including the right to free, prior and informed consent by indigenous peoples.

The agreement maintains the provisions regarding effective, proportionate and dissuasive penalties and enhanced cooperation with partner countries, as proposed by the Commission. It provides that fines proportionate to the environmental damage and the value of the relevant commodities or products concerned should be set at the level of at least 4% of the operators' annual turnover in the EU and includes a temporary exclusion from public procurement processes and from access to public funding.

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