In a first-of-its-kind legal action, the German cocoa company Albrecht & Dill Trading has filed a lawsuit over the European Union Deforestation Regulation (EUDR) against the German Federal Office for Agriculture and Food with the Cologne Administrative Court.
The attorney representing Albrecht & Dill, Lothar Harings, told Handelsblatt that the EUDR provisions are unclear, burdensome, and suffer from implementation issues.
The EUDR entered into force on 29 June 2023, following a 4-year process to adopt the regulation. The regulation is set to apply as of 30 December 2024 (or 30 June 2025 for micro and small companies). However, despite this date being months away, the EUDR will apply retroactively to products sourced and produced today, so timely compliance is needed if these products are placed on the market after 30 December of this year.
Under the EUDR, the import or export of certain products or components that result from deforestation or forest degradation will be prohibited. The regulation specifically applies to seven commodities: cattle, cocoa, coffee, palm oil, rubber, soya, and wood, as well as products derived from any of these seven commodities. A full list of prohibited products can be found in Annex 1 to the EUDR.
Products covered by the EUDR therefore must be deforestation-free. Even if deforestation involved with the sourcing of a product is legal in the country of origin, it would still be prohibited under the EUDR. Aside from this deforestation element, a further requirement imposed by the EUDR are that products have to be produced in accordance with applicable legislation in the country of production. In order to confirm that this is indeed the case, companies are required to implement a due diligence statement, which should show “no or only a negligible risk” (See Article 3 and 4 EUDR).
One of the issues highlighted is that benchmarking information to be provided by the European Commission will likely not be available until 6 months after the EUDR comes into force. This benchmarking system should show companies which countries are most at risk for deforestation. Countries which are marked as low-risk for deforestation require a lower level of due diligence than countries with a higher risk.
In order to accurately draft the due diligence statements, companies will require detailed information about where their products and each component are sourced from. The due diligence system also requires reporting of information, including, for instance, the quantity of the sourced products, their origins, geolocation of commodities, contact details of suppliers, operators, and traders, and information showing that products were sourced in compliance with the EUDR (See Article 9 EUDR).
Harings argues that these administrative requirements are too burdensome for companies. Albrecht & Dill, for example, would have to store geodata from 40,000 sources. They also think that small farmers would be pushed out of the market since they’re often unable to provide certain required data.
Consequences of non-compliance with the EUDR include fines of up to 4% of the company’s annual turnover within the European Union, confiscation of the products that are in violation, confiscation of revenues resulting from the violation, exclusion from public funding or public procurement, or a temporary trading prohibition on one or more products (See EUDR Article 25).
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