CoffeeNetwork (New York) - On November 17, the European Commission (EC) published a legislative proposal for a new Regulation on “making available on the Union market as well as export from the Union of certain commodities and products associated with deforestation and forest degradation.” The Commission’s objective with this proposal is to curb deforestation and forest degradation that is linked to European consumption and production. To do so, the initiative aims to minimize consumption of certain products coming from supply chains associated with deforestation or forest degradation and increase European demand for ‘deforestation free’ commodities and products. The EC expects this proposal to also reduce greenhouse gas (GHG) emissions and global biodiversity loss. The proposal includes mandatory due diligence rules for companies wanting to place some commodities on the European Union (EU) market. Large enterprises face higher due diligence obligations than small and medium-sized enterprises (SMEs), which received a carve-out in the proposal.1 Importers would need to demonstrate their products are “deforestation-free.” Under this proposal, “deforestation-free” means that the relevant commodities and products, including those used for or contained in relevant products, were produced on land that has not been subject to deforestation and that the wood has been harvested from the forest without inducing forest degradation after December 31, 2020.
The proposed Regulation lays down rules for a list of commodities identified by the Commission as the main drivers of agricultural expansion leading to deforestation. Annex I of the proposal sets the list of commodities and products that have been fed with or have been made using the relevant commodities that are in the scope of the Regulation and for which importers would need to demonstrate that their products are “deforestation-free”:
· Cattle
· Cocoa
· Coffee
· Oil palm
· Soya
· Wood
One of the key features of the proposal is the introduction of a country benchmarking system. Through this benchmarking system, the European Commission will assess the risk that countries, or parts thereof, produce relevant commodities and products that are not deforestation-free. The benchmarking system will assign each country one of three possible levels of risk: low-risk, standard, and high-risk. Unless identified as presenting a low or high risk, countries will be considered as presenting a standard risk.
The due diligence and checks obligations are differentiated according to the level of risk of the country of production. The proposal foresees simplified due diligence duties for operators sourcing from low[1]risk countries and enhanced scrutiny for competent authorities operating checks on commodities and products produced in high-risk countries.
The identification of low and high-risk countries or parts thereof will be done by the Commission. The EC will consider information provided by the country concerned which will be based on the following assessment criteria, as listed in article 27 of the proposal:
o Rate of deforestation and forest degradation,
o Rate of expansion of agriculture land for relevant commodities,
o Production trends of relevant commodities and products,
o Whether the nationally determined contribution (NDC) to the United Nations Framework Convention on Climate Change covers emissions and removals from agriculture, forestry and land use which ensures that emissions from deforestation and forest degradation are accounted towards the country's commitment to reduce or limit greenhouse gas emissions as specified in the NDC;
o Agreements and other instruments concluded between the country concerned and the Union that address deforestation or forest degradation and facilitates compliance of relevant commodities and products with the requirements of this Regulation and their effective implementation;
o Whether the country concerned has national or subnational laws in place, including in accordance with Article 5 of the Paris Agreement, and takes effective enforcement measures to avoid and sanction activities leading to deforestation and forest degradation, and in particular whether sanctions of sufficient severity to deprive of the benefits accruing from deforestation or forest degradation are applied.
The proposed Regulation introduces an obligation of due diligence for operators prior to placing relevant commodities and products on the EU market. The due diligence will include different information based on the risk level of the country of production.
The proposal states that large operators in all countries, non-withstanding their risk level, will need to collect the following information, supported by evidence:
o Description, including the trade name and type of relevant commodities and products as well as, where applicable, the common name of the species and its full scientific name
o Quantity (expressed in net mass and volume, or number of units) of the relevant commodities and products; o Identification of the country of production;
o Geo-localization coordinates, latitude and longitude of all plots of land where the relevant commodities and products were produced, as well as date or time range of production;
o Name, email and address of any business or person from whom they have been supplied with the relevant commodities or products;
o Name, email and address of any business or person to whom the relevant commodities or products have been supplied;
o Adequate and verifiable information that the relevant commodities and products are deforestation-free;
o Adequate and verifiable information that the production has been conducted in accordance with relevant legislation of the country of production, including any arrangement conferring the right to use the respective area for the purposes of the production of the relevant commodity
Additionally, operators sourcing from standard or high-risk countries will need to carry out risk assessments to establish whether there is a risk for the commodities or products to be non-compliant with the requirements of the Regulation.
The proposal requires operators to make available to the EU Member State competent authorities a due diligence statement before placing on the Union market or exporting the relevant commodities and products. This should be done through a new information system that the European Commission will establish. Customs authorities, competent authorities, operators, and traders will have access to that information system in accordance with their respective obligations under the Regulation. Additionally, the Commission will provide access to the complete anonymized datasets of the information system in an open format to the wider public. The due diligence statement aims to confirm that due diligence was carried out and no or only negligible risk was found.
The proposal imposes different due diligence obligations on SMEs and larger traders. Traders which are SMEs are only required to collect a record of their suppliers and customers, keep that information for at least five years, and make such information available to competent authorities upon request. They are not required to meet the due diligence obligations listed above. This requirement is estimated by the EC to involve only negligible costs, as such information can be expected to be part of normal business operation.
Alexis Rubinstein
