A regulatory proposal from the European Union (“EU”) will attempt to mitigate deforestation, by requiring the submission of a mandatory due diligence statement confirming that certain commodities and products available in, or exported from the EU, are deforestation-free and are in compliance with the laws of the country of production. Below are some key points to note about the proposed Deforestation Regulation.
Why this is important
The Deforestation Regulation highlights the significance of protecting forest areas, by explaining the natural resource function and sustenance of communities that forests enable, and the ecosystem services that assist with climate regulation and the prevention of desertification. Importantly, forests also house wild animals and the conservation of forest areas is crucial to prevent diseases arising from increased contact due to deforestation.
Commodities in scope
The Regulation is intended to apply to categories of products that contain, have been fed with or are made with the following commodities: wood, cattle, soya, palm oil, cocoa, coffee, rubber.
Distinguishing between deforestation and degradation
While deforestation refers to the conversion of forests for agricultural use, degradation refers to the conversion of naturally regenerative forests into plantation forests (extensive management) or planted forests, or into other wooded land. Deforestation-free means that the relevant products and commodities made available, or exported from the EU have been produced on land that was not subject to deforestation after 31 December 2020. In addition to being deforestation-free, wood products are to be made from wood harvested from the forest without causing forest degradation.
Time-frame
The proposed Regulation will become effective on the 20th day after its publication in the Official Journal of the European Union. Compliance with certain articles will be applicable 18 months from the effective date.
Obligations
Amongst the information required to be collected by the operators or traders, are the geolocation of the land where the relevant commodities were produced and the date or time range. There also needs to be adequate and verifiable information that the products are deforestation-free and in accordance with the laws of the country of production.
The risk assessment criteria for the due diligence includes amongst others: the presence of and consultation and cooperation with Indigenous peoples in the country, region and area of production of the commodity; the prevalence of deforestation or forest degradation; and concerns relating to the levels of corruption, lack of law enforcement and violations of international human rights.
The due diligence requirements are subject to the category of risk associated with the country of production, and takes into account whether the commodity originates from a low risk country and if there is a negligible risk of circumvention or mixing of products that originate from high or standard risk countries. The EU Commission will designate countries based on assessment criteria that includes the rate of deforestation and forest degradation; the rate of agricultural land expansion for relevant commodities; and production trends of the products and commodities. Information from other interested parties may also be taken into account, including Indigenous and local communities.
The Regulation does envisage providing support to countries identified as high risk, to potentially transition towards sustainable production practices, and this offers the potential to transform the treatment of natural environments and ensure the protection of the rights of Indigenous and local communities.
Any infringing items may be subject to seizure, suspension or recalling of the infringing items, donation or disposal in accordance with waste management rules.
Penalties
- Traders and operators may potentially be held liable for the costs incurred by the competent authorities in any instances of non-compliance.
- Fines for legal persons may be also be applied at a maximum amount of at least 4% of the total annual EU-wide turnover in the preceding financial year. If necessary, the fine may be increased to exceed the potential economic advantage gained.
- Confiscation of the products and revenues gained.
- Exclusion for 12 months from public procurement processes and access to public funding.
- Temporary prohibition of making relevant products available in the EU market or from exporting them.
Future reviews
The Deforestation Regulation notes that other ecosystems such as wetlands or peatlands also provide significant environmental and sustainability benefits, and should not be compromised by the measures to protect forests. An assessment should therefore be done, on the feasibility of extending the scope to cater for other ecosystems and commodities, including maize, within two years after the Regulation takes effect.
A copy of the draft Regulation can be accessed from the Legislative Observatory page of the European Parliament.
Sustainable Capabilities 