By GAIL Europe Regional Board

The European Union’s Deforestation Regulation (EUDR), formally Regulation (EU) 2023/1115, marks a significant step in aligning global trade practices with environmental sustainability and human rights goals. Building on the EU’s broader commitments under the European Green Deal, the Biodiversity Strategy, and the Farm to Fork Strategy, the EUDR enters the global legal landscape with transformative potential – not only for European businesses but also for global producers and their legal advisors, particularly in forest-rich regions like South America.

In this overview, we will provide you; the affected companies and their legal advisors, with significant strategic information about the EUDR, including background, scope & timings, main obligations, enforcement mechanisms, outlook as well as impact with particular focus on South America and opportunities for companies, their legal advisors & key takeaways.

Background: From Global Goals to Binding Trade Rules

The EUDR responds to global sustainability mandates such as the UN Sustainable Development Goals (SDGs) and the Paris Climate Agreement. These frameworks demand that economic activity, including international trade, be reconciled with environmental and other human rights stewardship and climate neutrality. The expansion of agricultural land for commodities such as soy, cattle, palm oil, and cocoa is a key driver of deforestation. With the EUDR, the EU is using its market power to enforce deforestation-free supply chains.

The Regulation entered into force on 29 June 2023, repealing the previous EU Timber Regulation (EUTR), and will apply from 30 December 2025 for large and medium-sized companies, and from 30 June 2026 for micro and small enterprises.

Scope of the EUDR

In-scope Commodities

The EUDR covers seven key commodities: cattle, cocoa, coffee, oil palm, rubber, soya, and wood – as well as many derived products like leather, chocolate, tyres, and furniture. Only those listed in Annex I of the Regulation are covered. Products made from fully recycled material are excluded, but not by-products of manufacturing processes. Importantly, there is no de minimis threshold: even minimal quantities of these commodities trigger obligations.

Regulated Entities: Operators and Traders

The Regulation distinguishes between:
– Operators, who first place relevant products on the EU market or export them from the EU.
– Traders, who make products available on the EU market but are not the first to do so.

Operators and large traders bear the full burden of compliance. In particular, they retain legal responsibility even if DD is delegated or based on upstream compliance. SMEs face simplified requirements under certain conditions but are still obliged to maintain traceability
and documentation.

Defining “Deforestation-Free”

A product is “deforestation-free” only if:
– The commodity was not produced on land deforested after 31 December 2020.
– The wood was harvested without forest degradation.
– Production complied with national laws, including those on land rights, environment, labor, and the rights of Indigenous peoples (such as free, prior and informed consent—FPIC).

The EUDR defines “deforestation” and “forest degradation” broadly, encompassing land-use changes following forest fires or human intervention.

Country Risk Classification

In May 2025, the European Commission published a classification list of countries as low-, standard-, or high-risk based on deforestation rates, expansion of agricultural land, and production patterns. The list assigns a low level of risk to 140 countries and high level of risk to 4 countries, leaving 50 countries in standard risk category. The countries that have made it into the high-risk category are:

Belarus Democratic

People’s Republic of Korea

Myanmar Russian Federation

Operators sourcing from low-risk countries may use simplified due diligence (DD) procedures. However, the burden remains on companies to prove the absence of circumvention and contamination with high-risk supply chains.

Main Obligations Under the EUDR

Due Diligence (DD) Requirements

Before products can be placed on or exported from the EU market, operators and non-SME traders must:

1. Collect Information: Including geolocation data of production plots, product type, commodity origin, and applicable legal compliance.
2. Conduct Risk Assessments: Based on factors such as country risk, corruption levels, Indigenous rights claims, and supply chain complexity.
3. Apply Risk Mitigation: If there is more than a negligible risk, actors must take proportionate measures – such as independent verification or obtaining further documentation – before proceeding.

Operators must establish, update, and publicly report on their due diligence systems annually.

Due Diligence Statements

Operators and non-SME traders must submit a DD statement via the EU’s new EUDR Information System. The statement must confirm compliance and assert “no or only negligible risk” of non-compliance. It should also include:
– Company identity and product data
– Production country and geolocation
– Reference numbers of DD statements from earlier in the supply chain

Operators retain legal responsibility even if DD is delegated or based on upstream compliance.

Simplifications for SMEs and Low-Risk Countries

• SMEs can rely on DD conducted earlier in the supply chain and only need to pass along reference numbers.
• Low-Risk Countries: Operators may omit the risk assessment and mitigation steps but must still provide documentation and avoid mixing with high-risk products.

Enforcement Mechanisms

Supervision and Penalties

National competent authorities must monitor compliance based on risk:
– High-risk countries: at least 9% of operators must be checked annually
– Standard-risk: 3%
– Low-risk: 1%

Sanctions include:
– Fines up to 4% of annual EU turnover
– Confiscation of products or revenues
– Temporary exclusion from public procurement and funding
– Suspension of market access for serious or repeated violations

Immediate Action

If a product poses a serious risk of non-compliance, authorities can suspend its release or export, including through customs interventions.

Public Participation

The Regulation also empowers NGOs, individuals, and civil society to file substantiated concerns, creating a quasi-public enforcement mechanism.

Outlook

While several EU sustainability regulations are under review (e.g., CSRD, the CSDDD), the EUDR remains stable and politically supported. Its core requirements are unlikely to be watered down. The next major milestone is the risk classification deadline in mid-2025.
Stakeholders across the supply chain should use this period to prepare for enforcement.

South American Impact and Legal Opportunities

South America – home to key producers of soy, coffee, cocoa, and beef – is at the heart of EUDR compliance.

For legal practitioners in the region, the EUDR presents both challenges and strategic opportunities:

What Can Lawyers Do?

1. Support Clients’ Compliance Systems:
   – Assist in establishing robust due diligence systems.
   – Advise on traceability mechanisms, contract clauses, and documentation needs.
2. Engage in Policy Advocacy:
   – Represent industry views in national dialogues about risk classification.
   – Work with local governments to align national legal frameworks with EUDR expectations.
3. Empower Supply Chains:
   – Help producer associations and cooperatives understand their role in upstream DD.
   – Facilitate independent verification or certification mechanisms.
4. Identify Business Opportunities:
   – Assist clients in positioning themselves as premium suppliers to the EU by achieving “deforestation-free” branding.
   – Offer bundled legal-environmental advisory services to attract EU investment.

Warning from the development finance community:

Despite the expected positive impact from the EUDR, many in the development finance community are concerned that the EUDR may have unintended consequences in the global south, negatively impacting forestry investment in the most disadvantaged areas:

• Many of the most impactful and economically viable projects cannot comply with the EUDR as there are not sufficient records to demonstrate that the land was deforested before the cut-off date;
• The cost of demonstrating compliance with national laws and the non-degradation requirement shifts project revenues from local stakeholders and communities to professional service providers; and
• The increased costs associated with compliance may push EU investors away from high-impact projects in the global south, towards cheaper and less impactful projects in jurisdictions with more developed forestry commodities sectors.

This is far from an insurmountable problem and the solutions are clear and attainable:
(i) Providing carve-outs to the existing EUDR, which better support the development of high-impact projects that support small-holder and community-led forest commodities projects, should be considered;
(ii) Making funds available to develop the compliance tools needed for high-impact projects in the global south, both at the level of national/regional standard setting and in support of specific projects; and
(iii) Individual lawyers and investors have a part to play also, recognizing these challenges and seeking to properly allocate compliance costs throughout supply chains.

Key Takeaways:
– The EUDR introduces binding obligations for global supply chains linked to seven key commodities.
– Legal compliance hinges on demonstrating zero-deforestation and legality of production.
– Enforcement will be strict and includes public scrutiny and severe penalties.
– South American lawyers can play a key role in compliance, risk mitigation, and unlocking new market opportunities for clients.

For more information on the EUDR including background watch e.g. this YouTube video.