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The need to comply with EUDR-related obligations is slowly coming for all entities that import or trade with commodities such as timber, rubber, cattle, cocoa, coffee, soya and oil palm (also products derived from them)

EUDR is an EU regulation, which means that it is a directly applicable regulation. In other words, the EUDR obligations apply automatically, without the need to implement them through national law. Nevertheless, this regulation contains elements that are rather typical of directives – it contains only general assumptions and a basic list of measures and sanctions that Member States may impose on economic operators and traders. Specific measures and sanctions (including their amount) are thus decided by individual states. The first category is precautionary measures, for which the Regulation provides minimum guidance. These are immediate measures when a possible violation of relevant commodities or products is detected under the Regulation. These measures include confiscation and, where appropriate, suspension of their placing on the market or making available on the market or their export. Another category is corrective measures that an economic operator or trader must take at the request of the competent authorities. Such measures include, for example, correcting formal deficiencies, preventing the placing on the market or making available or exporting the relevant product, withdrawing the product from the market or donating it to charity, or disposing of it. If the economic operator or trader fails to take such corrective action, they shall be taken by the competent authorities. It is important to remember that remedies do not serve as a substitute for penalties – they can be imposed alongside them. Penalties must be effective, proportionate and dissuasive under the Regulation. As the EUDR provides only a minimal list of sanctions and leaves the final decision on their form to individual Member States, these sanctions may vary within the European Union. The minimum range of sanctions includes, for example, fines, confiscation of products or income earned, temporary exclusion from public procurement and public financing, temporary ban on marketing, supply or export of commodities and products, and prohibition to carry out certain activities.

In December 2023, new rules for the PEM Agreement were adopted, which aim to increase trade between the European Union and neighbouring countries in the Pan-Euro-Mediterranean (PEM) region. The rules of origin will apply from 1 January 2025 and will cause changes to all preferential trade agreements between 24 countries or countries. Parties to the PEM Agreement.

This change in rules of origin concerns: the European Union, Iceland, Liechtenstein, Norway, Switzerland, Faroe Islands, Turkey, Morocco, Algeria, Tunisia, Egypt, Israel, Jordan, Lebanon, Palestine (this designation should not be construed as recognition of a Palestinian state and is without prejudice to the individual positions of Member States on this issue), Georgia, Republic of Moldova, Ukraine, Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, Serbia and Kosovo.

Trade with these countries amounted to around €700 billion in 2022, half of the EU's preferential trade.

These provisions will make it easier for products to benefit from trade preferences such as:

• simpler product-specific rules, such as the removal of cumulative requirements, thresholds for local added value, better tailored to the EU's production needs and the new twin transitions for textiles;

• Increased tolerance for non-originating materials from 10% to 15%;

• Introduction of 'full' cumulation, whereby the production operations required to establish the origin of most products can be split between several countries;

• Duty drawback (duty drawback on imported parts) for most products.

Regulation (EU) 2023/1115 of the European Parliament and of the Council, the so-called "Regulation against deforestation and soil degradation", directly or indirectly affects many companies. To meet the requirements of this legislation, it is necessary to start by performing an analysis of the product portfolio, logistics, trade flows, contractual relationships with business partners, etc. Subsequently, sophisticated IT solutions that are created specifically for EUDR can be used. It is only necessary to start working on this issue as soon as possible, as the obligation to report to authorised authorities is coming. Do not hesitate to contact us!