Timber Suppliers' Guide to EUDR Compliance:
Timber Suppliers' Guide to EUDR Compliance:
Step 1:
Due Diligence Work Prior to Procurement
While compliance obligations under the EUDR rest with EU-based companies, capable upstream supply chain partners must play a proactive role. As those closest to the forest source and with the deepest understanding of their supply chains, they are best positioned to assess risks and ensure compliance with relevant regulations.
To initiate effective compliance, due diligence systems (DDS) should be implemented and respected by every participant in the supply chain before procurement takes place. This step lays the foundation for identifying, evaluating, and managing risks associated with timber sourcing.
It is important to recognize that compliance activities may lead to short-term cost increases, but mutual support among supply chain partners will make this effort both viable and beneficial in the long run. By working together, participants can build a robust and sustainable framework for regulatory adherence, ultimately enhancing market trust and access.
Step 2:
HS Code Check
Before proceeding with compliance efforts, importers must first determine whether their products fall under the scope of the EUDR. This can be achieved by verifying the Harmonized System (HS) codes associated with their imported timber products.
The HS code is used to classify products during import and export and serves as a key indicator of whether a product is regulated by the EUDR. If the HS code for a specific product is covered under the regulation, the importer is obligated to comply with all EUDR requirements. Conversely, if a product’s HS code is not currently regulated, the importer does not bear obligations under the EUDR.
It is important to note that bamboo-based products, products derived from post-consumer materials, and certain particle boards such as HeXiangBan (claimed to be made from agricultural debris) may be excluded from EUDR obligations, depending on their composition. Importers should confirm whether such products contain any elements of timber that are not from recycled sources, as this determines their regulatory status under EUDR.
To determine if a specific product falls under the scope of the EU Deforestation Regulation (EUDR), importers should verify the product's Harmonized System (HS) code. The EUDR applies to certain commodities and products identified by their HS codes. A comprehensive list of these codes is provided in Annex I of the regulation. For detailed information and to access the list of HS codes covered by the EUDR, please refer to the official European Commission page on the Regulation on Deforestation-free Products.
Additionally, the European Union's TARIC database offers a multilingual platform integrating all measures related to EU customs tariffs, commercial, and agricultural legislation. This resource can assist in identifying the classification of products and determining their regulatory requirements.
By consulting these resources, importers can accurately assess whether their products are subject to EUDR obligations based on their HS codes.
Step 3:
Traceability of Forest Source
To ensure full compliance with the EUDR, supply chain traceability must follow these essential principles:
Distinct Supply Chain Identification
A supply chain is defined by its unique combination of timber species, forest source, supply chain partners, and the specific product involved. Any change to these elements results in a distinct supply chain, which necessitates a separate due diligence system (DDS) statement. This distinction is critical for effective risk assessment and compliance monitoring.
Supply Chain Mapping and Documentation
The DDS statement must include a comprehensive map of the supply chain, detailing each participant’s name, post address, email, and role. Additionally, transactions within the chain should be documented, specifying the date, nature of goods, sender, receiver, volume, and mass of transacted goods. Supporting documents, such as invoices and transportation records, must be available, verifiable, and provided upon request to demonstrate traceability.
Traceability to the Forest Source
The traceability process must extend back to the forest source. This means identifying and verifying the origin of the timber, ensuring that all supply chain elements align with documented forest sources. Accurate and complete records are essential to prove that the timber complies with regulatory and sustainability requirements.
To ensure transparency and compliance with EUDR requirements, it is essential to register and maintain accurate and detailed information about the forest source. This registration should include:
Practical Approach: Once GPS coordinates are obtained, tools such as Google Earth and Global Forest Watch can be used to assess the current and historical status of the forest remotely. There are also other tools available with various strengths and focus areas, which can provide additional insights into land use changes, deforestation, and forest health. Users should select the tool that best suits their specific needs and regional context.
Note on Land Plot Requirements: In compliance with EUDR, any land plot larger than 4 hectares must be described using a polygon rather than a single point. This ensures a more accurate representation of the forested area and its boundaries.
Note: When sourcing timber from forests near sensitive areas such as key infrastructure or military bases, providing precise GPS coordinates can inadvertently reveal the location of these sensitive sites, as many countries have laws and protocols for data sharing concerning such areas. To prevent potential security risks, extra caution must be exercised, and sourcing from such locations should be carefully evaluated and, if possible, avoided.
In this step , the focus is on conducting a comprehensive regional and country risk assessment to evaluate various risk categories pertinent to EUDR compliance. For each risk category, it's essential to establish clear criteria and determine whether the risk is considerable, negligible, or absent. According to the EUDR, 'negligible risk' is defined as a full assessment of both the product-specific and general information on compliance with Articles 3(a) and 3(b) by relevant commodities or products showing no cause for concern. For risks identified as considerable or non-negligible, the assessment should provide detailed descriptions and supporting evidence, which will be addressed further in Step 6.
Risk of Deforestation or Forest Degradation
To accurately assess the risk of deforestation or forest degradation, it is important to recognize that the EUDR’s approach to forest governance can sometimes conflict with the laws and practices of forest source countries. A key area of conflict is land categorization. In China, for instance, certain wooded areas used for timber production are classified as agricultural plantations and regulated under agricultural licenses rather than conventional logging certificates. Timber from such areas may face increased scrutiny or non-compliance risk under the EUDR, particularly if local laws permit farmers to convert these plantations into other types of land use.
While such practices may be entirely legal under domestic laws, they may not align with the stricter criteria of the EUDR. Consequently, certain forms of forest degradation or conversion that are legally permitted in timber-producing countries may be deemed unacceptable under the EUDR. This discrepancy highlights the need for stronger coordination and collaboration between countries to create harmonized frameworks that respect both international standards and domestic laws while effectively protecting forests.
Landing on Common Ground for Risk Assessment:
To conduct a thorough assessment of deforestation or forest degradation risk, stakeholders should employ appropriate tools and criteria. Leveraging previously mentioned map tools such as Google Earth and Global Forest Watch can help track and verify changes in forest status over time. Additionally, trusted data sources like the Country Risk Assessments published by the Forest Stewardship Council (FSC) and Preferred by Nature offer valuable insights for evaluating risk levels in specific regions:
· FSC Risk Assessments: Provides analyses and evaluations of risks associated with sourcing materials from specific regions.
· Preferred by Nature Country Risk Profiles: Offers assessments of timber legality, risks of deforestation, and other critical factors.
By combining these resources, supply chain partners can gain a deeper understanding of deforestation dynamics and implement effective measures to mitigate potential risks.
High Conservation Value (HCV) provides a framework for identifying and managing areas with significant environmental, social, or cultural importance, which is critical for evaluating and mitigating deforestation and forest degradation risks. Supply chain participants can better understand and protect areas of high biodiversity, ecosystem services, and community needs, aligning with regulatory requirements like the EUDR and strengthening forest management practices.
While there isn't a single source for detailed High Conservation Value (HCV) maps, combining various tools can enhance your assessments:
· HCV Resource Network: Provides methodologies and guidance for HCV assessments.
· Global Forest Watch (GFW): Offers data layers on conservation areas, forest loss, and sensitive regions that may align with HCV interests.
· Integrated Biodiversity Assessment Tool (IBAT): Delivers insights on protected areas and critical landscapes, complementing HCV assessments.
· WWF-SIGHT: Provides access to data on protected areas and critical conservation landscapes.
Risk of Illegal Logging and Trade
Illegal logging threatens sustainable forest management and supply chain integrity. Assessing this risk is crucial for EUDR compliance, as it contributes to deforestation, legal breaches, and fraud. Evaluate its prevalence by reviewing local law enforcement, known illegal activities, and reports from trusted organizations.
To support this assessment, it is recommended to reference the following data sources:
IDAT Risk Tool
This tool, provided by Forest Trends, offers data and analysis to help identify risks related to illegal logging and trade in various regions. It is accessible at IDAT Risk Tool.
Preferred by Nature's Sourcing Hub
The Sourcing Hub offers detailed country profiles and risk assessments to guide responsible sourcing and mitigate risks associated with illegal logging and trade. Visit Preferred by Nature's Sourcing Hub for more information.
FSC Country Risk Assessment
The FSC provides country-specific risk assessments that highlight potential issues related to legality, sustainability, and trade compliance. FSC Risk Assessments can be used to evaluate and manage risks within supply chains.
Risk of False Declaration or Document Fraudulence
Identify the risk of fraudulent documentation related to timber origin, ownership, and transportation. This may include fake permits, falsified delivery records, or manipulated land tenure documents.
False Claims About Forest Source and Certification
There is a risk of false claims regarding the forest source, species, or third-party certification, particularly when sourcing timber from lower-cost, high-risk regions, or when certified products carry a premium price. Revisiting and verifying supply chain mapping practices and ensuring traceability back to the forest source are crucial. Legal documents such as land title certificate, logging certificate and invoices play a key role in supporting transaction claims and deterring document fraud, as falsifying them is a criminal offense in many countries.
Species Misrepresentation
For lesser-traded species, especially those from natural forests, there is a risk of misrepresentation or incorrect claims about species names. Annual fiber or DNA testing can help detect potential mistakes or fraud, enhancing the accuracy and credibility of supply chain claims.
CITES Species Handling
Special caution is required when dealing with species listed under the Convention on International Trade in Endangered Species (CITES) to ensure compliance with international trade regulations and prevent fraudulent declarations.
Liability Clauses in Procurement Contracts
Including robust liability clauses in procurement contracts can effectively deter fraudulent practices. These clauses should clearly outline the legal and financial repercussions for providing false information, document fraud, or non-compliance with agreed standards and regulations. By establishing clear accountability, all parties are incentivized to maintain accuracy and integrity throughout the supply chain, ensuring traceability and compliance with regulations such as the EUDR.
Risk of Mixing with Material from Unknown or Unqualified Sources
Assess the potential for mixing certified and non-certified or unqualified materials throughout the supply chain. This risk can arise intentionally or from inadequate supply chain controls. The assessment and control measures are consistent with previous sections.
Supply chains certified by third-party schemes are particularly vulnerable to both document fraudulence and material mixing, as certified materials often carry a premium price but do not differ physically from uncertified ones. To enhance supply chain integrity, third-party schemes that combine human auditors with digital systems, such as blockchain, can offer more robust controls. Additionally, downstream companies should verify that the certified forest source can realistically produce the volume of raw materials being traded. Companies can also get in touch with the relevant certification body or scheme owner for the certified forest source to request their support in verifying compliance and addressing any potential issues.
Risk of Armed Conflict
Assessing the risk of armed conflict in regions where forest operations take place is crucial, as such conflicts can be directly connected to or financed by deforestation and forest degradation activities. Armed conflicts often lead to illegal logging, unsustainable land conversion, and exploitation of natural resources to finance military activities or insurgencies. Identifying and mitigating these risks ensures that the supply chain is not inadvertently contributing to conflict-driven deforestation, while promoting ethical and sustainable sourcing practices.
To check the status of countries or regions regarding armed conflicts, consider referring to the following resources:
Conflict Map – Defcon Level Warning System: Provides updates on conflict status across different regions. Visit the website
Conflict Map – Crisis Group: Offers detailed monitoring and reporting on conflict zones and crisis situations. Visit the website
Risk of Corruption
Corruption risks often arise from interactions between public officials and private entities during key administrative processes, such as land tenure transitions, granting management rights, and issuing logging permits. These processes can create opportunities for bribery or favoritism, undermining supply chain integrity and leading to legal issues. Addressing such risks in cross-country supply chains requires sensitivity to cultural and governance contexts, with a focus on ensuring all critical procedures adhere to legal standards and respect legal rights.
Enhanced Due Diligence for Critical Administrative Processes
Pay special attention to any changes or transitions in land tenure, management rights, or logging permits. Conduct thorough reviews of all associated documentation and approvals, and verify their legitimacy with trusted authorities or independent third parties.
Monitoring and Verification
Implement systems to monitor and verify the integrity of critical administrative processes. Engage independent auditors or trusted local partners to conduct on-the-ground checks and verify that approvals, permits, and other administrative documents are legitimate.
Documenting and Auditing Transactions
Ensure that all transactions and administrative processes involving land rights, permits, and logging certificates are thoroughly documented and regularly audited for compliance.
Risk of Modern Slavery
While EUDR primarily focuses on environmental impacts, addressing the risk of modern slavery within supply chains is equally critical for companies striving to meet broader sustainability and human rights obligations. Modern slavery encompasses various forms of exploitation, including forced labor, human trafficking, and debt bondage, and can severely undermine ethical sourcing practices and supply chain integrity. Moreover, companies should be aware of the EU Directive on Corporate Sustainability Due Diligence, which explicitly requires businesses to identify and address human rights and environmental risks, including modern slavery, across their operations and supply chains.
To mitigate the risk of modern slavery, companies can take the following actions:
Conduct Risk Assessments
Evaluate the potential for modern slavery within the supply chain by identifying high-risk regions, sectors, and suppliers. Resources like the Global Slavery Index and the OECD Guidelines for Multinational Enterprises offer valuable insights for assessing these risks. FSC also publish country specific guidance for key procution countries.
Implement Due Diligence Processes
Adopt due diligence processes based on frameworks such as the UN Guiding Principles on Business and Human Rights and aligned with the EU Directive on Corporate Sustainability Due Diligence. These processes should include risk assessments, supplier engagement, and ongoing monitoring to identify and address potential instances of modern slavery.
Develop and Enforce Strong Policies
Establish clear anti-slavery and anti-trafficking policies within the organization and require adherence by all supply chain partners. Leverage resources such as the Responsible Business Alliance (RBA) Code of Conduct to create a consistent approach to preventing forced labor.
Addressing Price and Supply Fluctuations
By applying this guidance, companies can assess their suppliers' and supply chains' readiness for EUDR compliance. This framework offers a practical approach to evaluating readiness, identifying gaps, and implementing measures to prepare suppliers for compliance. With EUDR enforcement 13 months away, regions facing compliance challenges, such as certain forestry operations in China, may experience price and supply fluctuations. To mitigate these impacts, consider the following strategies:
Capacity Building and Support
Engage suppliers early with training on EUDR requirements and due diligence processes. Partner with NGOs and industry groups to provide technical assistance for compliance.
Market-Based Approaches
Use flexible pricing terms to accommodate compliance costs and collaborate with industry associations to stabilize supply and pricing during the transition.
Step 6:
Forest Management Plan
To comply with the EUDR, a feasible forest management plan must integrate environmental, social, legal, and traditional rights considerations. This plan should be documented, communicated, and executed transparently in collaboration with stakeholders. Building on the risk assessment in Step 5, the plan must address all criteria, with detailed evidence and actionable measures for considerable or non-negligible risks. For negligible or no risks, documentation should substantiate these conclusions to ensure transparency. This approach aligns forest management with EUDR requirements while addressing identified issues comprehensively
Forest Classification and Management History: Ensure that the designated land was classified as forest or actively managed for forestry (e.g., planting, growth, or preparation for logging) as of December 31, 2020.
Forest Resource Maintenance: Ensure that, from January 1, 2021, the forest coverage rate and the size of natural forests and timber plantations do not permanently decrease.
Biodiversity and Ecological Function: Maintain biodiversity, water and soil conservation, and other ecological functions of the forest since the end of 2020.
Managing Negative Impacts: Gauge, manage, mitigate, and repair any negative impacts on environmental values caused by forest management activities.
Recognition and Respect for Traditional Rights
Ensure that traditional rights granted to Indigenous peoples and local communities are recognized and respected in all forest management activities. This includes customary access to land and forest resources, usage rights, and practices that have been legally or customarily established.
Stakeholder Engagement
Engage with local communities and relevant stakeholders to ensure their traditional rights, interests, and customary practices are consolidated and preserved within forest management practices.
Verification of Land and Usage Rights
Verify that the traditional rights of local communities and Indigenous peoples are legally recognized and upheld under national and international agreements, ensuring compliance with all applicable laws and regulations.
Benefit-Sharing and Fair Compensation
Develop mechanisms to ensure that both Indigenous peoples and local communities benefit fairly from forest management activities, including revenue-sharing, employment opportunities, and capacity-building initiatives.
FPIC and Traditional Rights
Ensure that communities with traditional rights have given their free, prior, and informed consent (FPIC) before any forest management activities that could affect their rights, lands, or resources take place.
Grievance Mechanisms
Establish effective grievance and monitoring mechanisms to address any concerns or disputes raised by local communities and Indigenous peoples regarding their traditional rights in relation to forest management activities.
To ensure compliance with both local and international laws, the forest management plan must encompass the following elements:
Legitimate Ownership and Management
The forest owner or manager must be a legally recognized entity with established rights to the land and resources. All logging activities must be conducted under a logging license obtained through the appropriate legal channels and procedures.
Transparent Issuance of Logging Licenses
The logging license must be issued through a transparent and legally compliant process, adhering to all required legal steps and approvals. This ensures the legitimacy of the licensing process and prevents unauthorized or illegal activities.
Detailed Logging License Requirements
The logging license must include all legally mandated elements, such as precise details on the location, volume, species, and methods of logging and regeneration, as well as any conditions or restrictions imposed by the relevant authorities.
Inclusion of Forest Governance Elements
The forest management plan should incorporate elements of forest governance to ensure that all operations comply with regulatory standards, promote sustainable practices, and maintain transparency and accountability throughout the management process.
Worker Safety Training and Protection
Safety training and measures to protect forest workers must be included in the management plan to ensure a safe and compliant working environment. This involves training on best practices, safety protocols, and hazard identification.
Personal Protective Equipment (PPE)
The provision and mandatory use of appropriate PPE must be included in forest management practices to safeguard worker health and safety during all operations.
Contracts and Insurance for Workers
Formal employment contracts and insurance coverage must be provided to forest workers. This ensures compliance with labor laws, protects workers' rights, and promotes fair and ethical treatment of all personnel involved in forest operations.
Step 7
Certification or Verification
Under the EUDR, third-party certifications such as those from FSC or PEFC serve as valuable tools for demonstrating compliance with criteria like sustainable management and traceability. However, certification alone does not exempt companies from conducting due diligence. Companies must provide clear, verifiable evidence of their supply chain practices, whether using third-party certification or second-party verification. Robust verification mechanisms add credibility, particularly in high-risk regions with deforestation pressures or weak governance, thereby strengthening compliance efforts and building stakeholder trust. Certifications or verifications should only be referenced if they cover the entire supply chain, rather than isolated companies within it.
Documentation and Presentation of Third-Party Certification
Third-party certifications, such as those issued by FSC or PEFC, must be documented and presented to the administrative body in a manner that clearly demonstrates compliance. Documentation should include:
· The certificate number and validity period for all companies along the supply chain.
· Details of the certified forest area, concerning those certiera in step 6.
· The certification body's name, scope of certification, and standards for the audit.
Presentation of this information should be transparent and supported by a chain-of-custody system to ensure traceability from the forest source to the final product.
Second-Party Verification for Compliance
When third-party certification is unavailable or not feasible, second-party verification—conducted by the company or an affiliated party—can be used as an alternative to demonstrate compliance. To be considered qualified, second-party verification must:
· Be conducted by trained and impartial staff or auditors with expertise in sustainable forest management and compliance requirements.
· Adhere to recognized standards or best practices for verification.
· Be documented through comprehensive reports, including methodology, findings, and evidence supporting compliance.
· Be subject to periodic review and validation to ensure the integrity and reliability of the verification process.
For simpler supply chains, achieving compliance with the European Union Deforestation Regulation (EUDR) requires a focused, structured approach to managing and documenting every step of the process. Proper management can be achieved through the following key actions:
Dedicated Staff Assignment
Designate staff to oversee and implement the compliance process as outlined in this guidance. These individuals are responsible for ensuring that each step is executed correctly, from supply chain mapping to documentation and risk assessments.
Comprehensive Documentation
Properly document the results from each step of the compliance process. This includes maintaining accurate records related to forest source identification, risk assessments, and any relevant certification or verification measures. All documentation and evidence must be retained for a minimum of five years to comply with EUDR requirements and demonstrate a clear traceability path.
Engagement and Training Opportunities
Provide training and engagement opportunities for all staff and supply chain participants involved in the compliance process. Ensuring that everyone understands EUDR requirements and how to meet them strengthens compliance efforts and reduces the likelihood of errors or misunderstandings.
Periodic Reviews and Audits
Conduct regular internal and, when necessary, external audits of the supply chain management system to assess its effectiveness, identify any compliance gaps, and ensure continuous improvement. Periodic reviews help to maintain alignment with evolving regulations and strengthen the overall due diligence process.
Complaints Process and Whistleblower Protection
Establish a clear and accessible complaints process to address concerns or non-compliance issues raised by stakeholders. Implement mechanisms to protect whistleblowers, ensuring they can report potential violations or risks without fear of retaliation. This fosters accountability, transparency, and trust within the supply chain.
Focused Due Diligence System (DDS) Statements
Remember that each Due Diligence System (DDS) statement must correspond to a unique supply chain, characterized by the following four elements: timber species, forest source, supply chain partners, and specific product. Any change to these elements requires a new DDS statement to maintain accurate traceability and compliance.
Complex supply chains involve multiple products, long geographical spans, high procurement volumes, and multi-tiered supplier relationships, increasing the difficulty of traceability and compliance.Key Actions for Managing Complex Supply Chains include:
Advanced Traceability Systems
Implement digital tools like blockchain to track and document product flow across the supply chain. Use centralized platforms to manage and access supply chain data efficiently.
Supplier Segmentation and Engagement
Identify key supply chain partners for long-term cooperation based on ESG impact and operational importance.Engage suppliers through regular communication and training to align them with EUDR requirements.
Knowledge Management
Develop systems to compare and align risk assessments at country, region, subregion, and supplier levels.Use these insights to identify patterns, abnormalities, key players, and risk points, enabling targeted actions.
Adaptability for Complex Relationships
Maintain flexibility by keeping a broader reservoir of suppliers who meet baseline compliance, while deepening collaboration with key partners.
If compliance issues are discovered after the importation of timber products under the EUDR framework, prompt and transparent action is essential to rectify the situation and mitigate potential consequences. The following steps outline how companies can effectively respond:
Self-Reporting to Authorities
Notify the relevant regulatory or enforcement authority as soon as the issue is identified. Self-reporting demonstrates a proactive commitment to compliance and may positively influence enforcement outcomes.
Conduct an Internal Investigation
Perform a thorough internal review to determine the root cause of the issue. Assess supply chain records and due diligence processes to identify compliance gaps.
Implement Corrective Actions
Take steps to address the compliance issues, such as updating due diligence procedures, removing non-compliant suppliers, enhancing traceability measures, or adopting new verification processes.
Engage with External Auditors
Involve third-party auditors to independently verify corrective measures and provide an impartial assessment of your improved compliance efforts.
Notify Affected Stakeholders
Communicate with relevant supply chain stakeholders, including customers and partners, about the compliance issue and steps taken to resolve it, fostering transparency and maintaining trust.
Cooperate Fully with Authorities
Provide full cooperation with any regulatory investigations, supplying requested documentation, evidence, and updates on corrective measures taken.
Review and Strengthen the Due Diligence System
Use the incident as an opportunity to enhance your due diligence system through improved risk assessment, better monitoring, staff training, or advanced traceability technologies.
Implement a Remediation Plan
If non-compliance has negatively impacted local communities, Indigenous peoples, or other stakeholders, take appropriate steps to remediate any harm caused, including compensation or revised practices.
Address Legal Consequences
Be prepared to handle any legal or regulatory consequences, such as fines or penalties, and engage legal counsel to ensure proper management of your rights and responsibilities.
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Timber Suppliers' Guide to EUDR Compliance: Pave Your Way From Forest Source to EU Market © 2024 by Lichao Ma is licensed under CC BY-NC 4.0