Version : Oct 2023
Introduction
The European Union’s new regulation to curb the EU market’s impact on global deforestation and forest degradation, known as the EU Deforestation Regulation (EUDR), came into force on 29 June 2023. The main obligations of the EUDR will apply from 30 December 2024, impacting the ability to market relevant products. This policy brief will focus on the impact of the EUDR on exporters to European countries, particularly in terms of trade barriers, customs procedures, tariffs, and regulatory compliance.
Trade Barriers
The EUDR imposes significant trade barriers. From 30 December 2024, it will be prohibited to place relevant products on the EU market, or export them from the EU, unless they are ‘deforestation-free’, produced in accordance with the relevant legislation of the country of production, and covered by a due diligence statement indicating no more than a negligible risk of non-compliance. This means that exporters to the EU must ensure that their products do not originate from land that has been deforested or subject to forest degradation since 31 December 2020.
The EUDR is likely to reconfigure trade and supply chains across the affected commodities over the next decade. Even if source-export countries adapt, the difficulties associated with tracing complex supply chains and associated costs will increase incentives for companies placing EUDR-related products in the EU to switch to low-risk jurisdictions.
Customs Procedures
In addition to the EUDR, the EU has implemented new customs pre-arrival security and safety programme – Import Control System 2 (ICS2) Release 2. From 1 March 2023, all freight forwarders, air carriers, express couriers, and postal operators transporting goods to or through the European Union will be required to submit advance cargo information in the form of a complete entry summary declaration (ENS). This will further complicate the customs procedures for exporters to the EU.
Tariffs
While the EUDR does not directly impose tariffs, it may indirectly lead to increased costs for exporters. Suppliers based in countries that export to the EU will need to provide documents and certificates of traceability to European partners. This has prompted some of the producing countries to express concerns regarding the EUDR increasing the costs of exporting to the EU, potentially putting at risk small and medium-sized companies.
Regulatory Compliance
The EUDR imposes stringent regulatory compliance requirements on exporters. Any operator or trader who places commodities like soy, beef, palm oil, wood, cocoa, coffee, rubber commodities on the EU market, or exports from it, must be able to prove that the products do not originate from recently deforested land or have contributed to forest degradation. Relevant goods must also be covered by a due diligence statement and be produced in accordance with applicable local laws.
Conclusion
The EUDR, which will be implemented in 2024, will greatly affect exporters to European countries. It will create new trade barriers, make customs procedures more complex, possibly raise costs, and demand strict regulatory compliance. Some countries, like Indonesia and Malaysia, see the EUDR as a protectionist policy hidden behind environmental sustainability. They are worried that the EUDR might exclude smaller producers, who are a big part of commodity production in developing countries, due to the increased costs of exporting to the EU. Exporters need to get ready for these changes to maintain access to the EU market.
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