The level of due diligence that companies will need to carry out under the EUDR will depend on the risk level of deforestation and forest degradation assigned to exporting countries by the European Commission, which will in turn classify jurisdictions according to a three-tier system. Countries classified as low risk will have simplified due diligence procedures, while those classified as standard risk or high risk will require suppliers\u2019 due diligences to be supported by satellite images including geolocalization coordinates and\/or geospatial polygons. The European Commission\u2019s impact assessment has estimated that as a result, EUDR compliance-related costs for companies are likely to amount between US$170 million and US$2.5 billion per year. The impact of such costs would either need to be \u201cabsorbed by a reduction of profit by operators along the value chain and\/or eventually passed through to the final consumer\u201d in the EU member states, according to the European Commission.<\/p>\n
Non-European companies and local producers and traders from EUDR-regulated countries are likely to record increased EU-bound export-related costs<\/strong><\/p>\n Suppliers based in countries that export to the EU will need to provide documents and certificates of traceability to European partners, with a higher threshold in certain areas in the Amazon, Indonesia and Africa. 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. Countries that have raised such concerns include Colombia, Indonesia and Malaysia. The latter two have, for example, said that the EUDR contradicts the nondiscriminatory principles of the World Trade Organization and that small and medium-sized companies are likely to struggle adapting to the EUDR\u2019s certification and traceability procedures as they would require new technologies, processes and administrative costs for compliance. However, both countries have agreed to form a technical joint task force with the EU to study the effects of the EUDR.<\/p>\n The EU is likely to cooperate and provide financial assistance to countries demonstrating willingness to combat deforestation<\/strong><\/p>\n This is ingrained in the EUDR, which says member states should provide technical and financial assistance to \"least developed countries,\" but is also part of the EU\u2019s Paris accord and EU Green Deal commitments. During the 26th UN Climate Change Conference of the Parties (COP26) held in 2021, European Commission President Ursula von der Leyen pledged a \u20ac1 billion contribution to the Global Forest Finance Pledge, to be disbursed over five years.<\/p>\n MEPs have said the EU also attempts to work with and provide financial and technical assistance to some of the supplying countries, but most of the world\u2019s producing countries are unlikely to enact new legislation to combat deforestation in the one-year outlook. They are instead likely to focus on enforcing existent deforestation commitments.<\/p>\n Countries such as C\u00f4te d\u2019Ivoire are viewing the EUDR as an opportunity, opting to lobby the EU for increased financial support to bring down deforestation via such a pledge. C\u00f4te d\u2019Ivoire, in anticipation of the EUDR, introduced its own GPS tracking system to improve data on where cocoa beans originate and has been distributing electronic tracking cards to farmers \u2014 necessary to trade \u2014 since February. Other affected countries such as Ghana have also introduced a national mandatory traceability system to meet EUDR requirements. Weak enforcement capabilities, limited international funding and a negative track record in countries like Brazil, which has nonetheless pledged to eradicate deforestation by 2023, increase the probability of producing countries not being able to meet their deforestation targets and\/or the deforestation expectations of the European Commission, a situation that would increase the number of countries being labeled as high risk by the EU. Global deforestation has been steadily increasing over the past years, rising 10% in 2022 year over year to 4.1 million hectares, according to the World Resources Institute.<\/p>","protected":false},"excerpt":{"rendered":" The level of due diligence that companies will need to carry out under the EUDR will depend on the risk level of deforestation and forest degradation assigned to exporting countries by the European Commission, which will in turn classify jurisdictions … Continue reading