EUDR vs. EUTR

Understanding the fundamental differences

In the complex landscape of forestry regulations, the EU Timber Regulation (EUTR) and the proposed EU Deforestation-free Regulation (EUDR) are important pillars for ensuring the environmental sustainability of timber and timber products.

The EUTR is seen as a precursor to the EUDR in several respects. In principle, the EUDR follows the same logic but extends both the obligations and the scope of the EUTR. In this blog post, we look at the important differences between these two sets of regulations and explain their different approaches, objectives, and impacts on industry and ecosystems alike.

Definitions Of Market Players

As obligations vary according to the role of market players, either “operators” or “traders”, it is important to assess the different definitions between the two Regulations.

In EUTR operators are referred to as organisations that place timber or timber products on the market and traders as organisations that sell and buy timber or timber products already placed on the EU market (by operators). In this case, “to place on the market” means to supply goods for the first time on the EU market for distribution or use.

EUDR modifies the definitions of operator and trader by introducing another layer. In this instance, operators are organisations that place relevant commodities and products on the market for the first time or export them, while traders are organisations that make available those products in the market for distribution and use, without transforming them.

This leads to two implications. First, companies that export relevant goods from the EU market also fall under the category of operators according to the EUDR, a concept completely absent in EUTR. Secondly, actors processing relevant materials on the EU market were classified as traders under EUTR, but since under the EUDR they are transforming the goods from a certain HS code to a new one, they qualify as operators.

Product Scope

Both Regulations include Annexes with a detailed list of HS codes concerned, however, we can state in general that EUTR focuses on timber and timber products, whereas the EUDR encompasses a broad range of raw materials and their derived products, collectively named “relevant commodities” and “relevant products” in the official legal text.

The former category comprises commodities identified by the EU as having the most significant impact on deforestation and forest degradation, including oil palm, soya, wood, cocoa, coffee, cattle, and natural rubber. The latter category includes goods that are fed with, produced from, or containing these commodities, such as cocoa beans and chocolate, cattle and leather, palm oil and glycerol, or furniture and paper.

Another similarity between the two Regulations is that they do not apply to goods that are made entirely from materials that otherwise would have been disposed of as waste and are therefore 100% recycled.

Conditions To Be Compliant

The objectives defined by EUTR and EUDR are similar, as both Regulations are aimed at addressing environmental concerns related to forestry, with EUDR affecting an even larger range of goods.

However, although for both EUTR and EUDR timber and timber products should be legally sourced, according to the laws stipulated in the country of production, only under the EUDR standards the materials must also be deforestation-free, meaning that even if they were legally harvested according to the country of production but still caused deforestation, they will be illegal in the EU.

The outcome of the due diligence analysis on the concerned goods results either in a negligible or a non-negligible risk. The former implies that the goods can enter the European market for distribution and use. The latter, instead, urges companies to implement the necessary changes along their supply chains to mitigate risk. This applies under both Regulations, however, under EUDR the process is directly linked to the customs process. Goods that are not covered by a negligible risk due diligence statement will not be released from customs, under EUTR this is not the case.

Due diligence

Due Diligence Obligations & Reporting

To ensure that products are compliant with either EUTR or EUDR and can therefore access the EU market, relevant commodities and products must be subject to due diligence, generally carried out by operators as defined in the respective legal texts. However, in EUDR also large-sized traders (organisations with 250+ employees) are considered operators, therefore fall under equal requirements.

Traders, instead, need to gather and store the necessary information to comply with both Regulations and ensure their capability to provide this information to competent authorities, when required.

Another difference is that although both Regulations require companies to exercise due diligence to ensure compliance, those affected by EUDR must also provide a due diligence statement to competent authorities via an online information system operated by the EU.

Due Diligence Process

A similarity between the two Regulations lies in the expectations of due diligence, which involves three key steps: collecting necessary information, conducting risk assessments, and implementing risk mitigation measures.

EUTR obligates companies to exercise due diligence that timber is legally harvested based on analysing the risk of timber species used with the associated country, sub-region or forest of origin (through a traceable supply chain). EUDR additionally requests zero or negligible risk that products are deforestation-free and forest degradation-free based on the information collected on the country of origin and the supply chain route. Operators must transmit to operators and traders downstream in the concerned supply chain the essential information to indicate that due diligence was executed and that no or only a negligible risk was found, along with the reference numbers of the due diligence statements linked to those products.

Exceptions Based On Size Of Company And Role In The Supply Chain

EUTR does not make any distinction regarding definitions and obligations of operators and traders based on their size. In fact, “SME” does not occur once in the official text. On the contrary, EUDR acknowledges the importance of small and medium-sized companies, recognising their beneficial impact on the economic and social fabric within Europe, and introduces some new rules.

First, SME operators are not required to issue a due diligence statement for relevant products or commodities for which a due diligence statement has already been submitted to authorities, they can just present the reference number of the due diligence statement.

Secondly, in case of non-SME operators further down the supply chain (i.e. ‘transformers’ of goods from one HS code to another), they can use the due diligence carried out earlier in the supply chain by other operators and submit only the relevant reference number for the part that was already subject to due diligence.

In addition, EUDR also recognises the influence on supply chains of large-sized traders (with 250+ employees) and their weight against deforestation and forest degradation, categorising them as operators and thus subjecting them to identical obligations.

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Country Benchmarking System

When EUTR entered into force, the need for agreed risk guidance on the country level emerged and the EU started to issue country risk profiles for several producer countries as technical assistance.

For EUDR the EU has committed to develop and publish a country benchmarking system that classifies all countries into low, standard or high risk. For low risk countries, simplified due diligence will apply and the enforcement quota of competent authorities must consider the country’s risk accordingly. The criteria used to differentiate between the three levels of risk shall be based on quantifiable, unbiased, and internationally recognised data, along with information about the country’s efforts in preventing deforestation and forest degradation.

  • High risk
  • Standard risk
  • Low risk
Forest from above with deforested land in front.

Monitoring Activities By Competent Authorities

The Timber and the Deforestation-free Regulations demand competent authorities to carry out periodic checks on due diligence implementations to identify infringements and prevent violations. EUDR goes a step further and specifies the minimum percentage of operators and traders to undergo verification, determined by the level of risk of the country of origin of the goods they conducted due diligence upon. The incidence rate of checks lies at 1% for low-risk countries, 3% for standard-risk countries, and 9% for high-risk countries.

Monitoring Organisations vs. Authorised Representatives

EUTR dedicates a whole Article (8) to the description and the responsibilities of monitoring organisations, companies that have the responsibility to develop due diligence systems and make them available for market participants to use.

On the other hand, EUDR eliminates the concept of monitoring organisations while introducing a new notion related to the authorised representatives (Article 6). As previously stated, companies complying with the Deforestation-free regulation must provide a due diligence statement to both the public and the competent authorities through an online EU platform. Authorised representatives are those companies designated by operators and traders to act on their behalf and upload the relevant documentation on this information system.

Penalties

Member states are also called to define the rules on how to apply a range of possible penalties. In EUTR, penalties might include one or a combination of the following:

  • Fines proportionate to the environmental damage and the value of goods concerned.
  • Confiscation of the goods concerned.
  • Instantaneous suspension of the trade permit.

Penalties outlined in the EUDR framework are more severe.

  • Like EUTR, EUDR determines fines proportionate to the environmental damage and the value of goods concerned, but it also specifies that the maximum fine defined by the member state competent authority should be at least 4% of the turnover.
  • In addition, EUDR considers confiscation of the goods concerned as an option, but it also involves the possibility of confiscating the revenues generated by the goods concerned.

EUDR comprises three further options for penalties:

  • Exclusion from public procurement processes and public funding for a maximum period of 12 months.
  • Exclusion from the European markets for the relevant commodities and products concerned in the event of serious violations.
  • Prohibition of applying simplified due diligence in the event of serious or repeated violations.

FLEGT and CITES species

Under the EUTR framework, a FLEGT certificate qualifies as sufficient evidence to ensure that the wood products in scope are legally sourced. Hence the Regulation, provided that a FLEGT certificate is available, accepts that the wood products have been legally harvested, without requiring further information.

Instead, following the parameters set by EUDR guidelines, the FLEGT certificate alone does not guarantee full compliance, because these new regulations demand products to be not only legally sourced but also deforestation-free, meaning that although the FLEGT certificate provides evidence about the legality-related requirement, EUDR will still expect explicit evidence that the wood products in scope are deforestation-free, as state in Article 3, point (b) of EUDR official text.

In the context of CITES, EUTR provides that CITES documentation is also accepted as proof of legality. However, under EUDR it will not be sufficient for the legality requirement as the EUDR expanded the relevant legislation to assess during the due diligence execution towards areas not covered in the CITES process, for example, labour rights and indigenous people’s rights.

RADIX Tree as your solution to transition from EUTR to EUDR

GTS has worked for more than 10 years alongside timber companies and supported them in accomplishing EUTR compliance through our digital platform RADIX Tree. Since EUDR came into force, our team has developed new functionalities and automations to allow compliance with EUDR. RADIX Tree is our flexible solution to effortlessly transition from EUTR to EUDR.