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The European Commission has published its draft regulation to fight against imported deforestation

24.11.2021

On Wednesday, November 17, the European Commission presented three new regulatory initiatives as part of the European Green Deal. Among these initiatives, the Commission published a draft regulation to fight against imported deforestation. Like the French National Strategy to Combat Imported Deforestation (SNDI), the draft regulation will apply to beef, cocoa, coffee, palm oil, soy and timber and timber products. The draft regulation will then be debated and voted on in the EU legislative bodies.

We offer you a decoding of this proposal.

This draft regulation has been closely followed by the ATIBT Certification Commission through the "Imported Deforestation" group. On the basis of a draft version of the document obtained before its publication, ATIBT sent the Commission a note of comments and proposals to make the text and its provisions evolve, to better take into account the specificities and the experience of the tropical timber sector in terms of sustainable forest management. Even if a certain number of our remarks have been taken into account, there are still delicate points and grey areas to clarify.

Thus, you will find here a first draft of FAQ to allow you to get acquainted with this draft regulation, and to identify the risks and opportunities it represents for the tropical forestry and timber sector, some questions remaining open. This FAQ is based on our reading and understanding of the text, as well as the discussion sessions we were able to attend organized by the European Commission (multi-stakeholder platform meeting and expert group).

For information, the European Commission has also produced a more general FAQ.

Is timber affected?

Timber products, whether from natural forests or plantations, imported into the EU market are affected by this regulation.

The regulation targets all specific commodities that are associated with deforestation and forest degradation (such as soybeans, beef, palm oil, timber, cocoa and coffee) and certain derived products, such as leather, chocolate and furniture.

What does this draft regulation provide?

Article 3 of the regulation prohibits operators (in our case, European timber importers) from placing on the EU market products:

  • from deforestation or forest degradation (for timber) after December 31, 2020,
  • and which have not been legally produced.

To this end, the draft regulation specifies in Article 8 the due diligence rules that are mandatory for operators: information gathering, analysis and risk mitigation. Unlike the EUTR, the new regulation will include deforestation criteria in addition to legality criteria.

The Commission has also foreseen a Benchmarking System to evaluate countries and their level of risk of deforestation and forest degradation and thus proportion the level of due diligence according to the country risk.

According to the draft regulation, importers will have to geo-locate the plots where these products have been harvested, by setting up a traceability system.

Alain Karsenty, in a recent analysis, notes that “The surprise comes from the inclusion of degradation in addition to deforestation" which is only taken into account for timber.

What are the main definitions?

Several definitions are proposed in the regulation in article 2, we relay here the main ones:

  • Deforestation means the conversion of forest to agricultural use, whether human-induced or not;
  • Forest (FAO definition) means land spanning more than 0,5 hectares with trees higher than 5 meters and a canopy cover of more than 10%, or trees able to reach those thresholds in situ, excluding agricultural plantations and land that is predominantly under agricultural or urban land use;

This definition is one of the challenges of this regulation. As Alain Karsenty points out, "many countries have adopted a threshold of 30% tree cover to define forests. By setting a threshold of 10% to define zero deforestation products, we will find ourselves in a situation where production deemed legal in the country of origin (conversion may have involved an ecosystem with 20% cover, for example) will be recognized as legal but unacceptable by the EU, and, in principle, will not be allowed to be imported. This will create a lot of trade tensions.”

  • Forest degradation (FAO-REDII definition) means harvesting operations that are not sustainable and cause a reduction or loss of the biological or economic productivity and complexity of forest ecosystems, resulting in the long-term reduction of the overall supply of benefits from forest, which includes wood, biodiversity and other products or services;
  • Sustainable harvesting operations (EC proposition) means harvesting that is carried out considering maintenance of soil quality and biodiversity with the aim of minimising negative impacts, in a way that avoids harvesting of stumps and roots, degradation of primary forests or their conversion into plantation forests, and harvesting on vulnerable soils; minimises large clear-cuts and ensures locally appropriate thresholds for deadwood extraction and requirements to use logging systems that minimise impacts on soil quality, including soil compaction, and on biodiversity features and habitats;

These last two definitions represent a real risk for sustainable logging in the Congo Basin. Indeed, the definition of degradation refers to sustainable logging practices that must avoid the degradation of primary forests. Even if this last term is not defined and will leave the door open to many interpretations, one can think that the import of wood from forests little or no secondarized by silvicultural operations, as is the case in many regions of the Congo Basin, will be compromised.

  • Deforestation-free means:
    • (a) 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 after December 31, 2020, and
    • (b) that the wood has been harvested from the forest without inducing forest degradation after December 31, 2020;
  • Relevant legislation of the country of production means the rules applicable in the country of production concerning the legal status of the area of production in terms of:
    • land use rights,
    • environmental protection,
    • third parties’ rights
    • and relevant trade and customs regulations

under legislation framework applicable in the country of production.

Who is concerned?

  • The operators who place on the EU market (thus those who import and clear customs) the products derived from these commodities, and who have the obligation to apply due diligence;
  • Traders: who come just after the operators in the supply chain, and who make the products available on the EU market. Those who are not SMEs are subject to the same obligations as operators (they must therefore demonstrate due diligence);
  • - Competent authorities of the EU member states: in charge of enforcing the regulation and its implementing texts in their respective countries (as in the EUTR).

What are the practical modalities for operators?

The due diligence system will be articulated in three phases:

- First phase: operators will have to guarantee access to information, particularly on the commodities, the quantity, the supplier, the country of production, etc. In this phase, it is essential to obtain the geographical coordinates of the plots where the commodities put on the market were produced, to verify that they have not contributed to deforestation.

- Phase Two: Companies will need to use information on the plots where commodities were produced to analyze and assess the risk in the supply chain.

- Phase Three: Companies will be required to take appropriate and proportionate mitigation measures.

A simplified approach is foreseen for products from countries classified as low risk according to the classification system proposed by the EC (Benchmarking system, article 27).

The use of geographical coordinates represents another challenge of this regulation. Indeed, it imposes to set up a strict traceability of the products, allowing to go back to the harvesting plot. This can be complicated for some products, or even impossible in the case of highly transformed or assembled products (plywood, panels, furniture, paper, etc.).

What is the benchmarking system proposed by the EC?

The draft regulation establishes in its article 27 a system for the evaluation of countries or sub-national regions allowing the Commission to identify the levels of risk of deforestation and forest degradation. The identification of low and high risk countries or sub-national regions is based on assessment criteria such as deforestation and degradation rates, agricultural expansion rates, NDC perimeters, existing bilateral agreements with the EU, and the regulatory framework in place under Article 5 of the Paris Agreement.

This country classification approach runs the risk of discouraging importers from sourcing from countries such as Cameroon, Cambodia or the DRC, given the effort required in terms of guarantees. Indeed, it does not allow for the nuances of risk to be highlighted at the local level, and risks discouraging good individual practices (such as the certification process). ATIBT has recommended that the EC provide for a classification system at the level of operators (as practiced in the context of banking regulations), independently of the country risk classification.

Is the fight against illegal timber maintained?

Article 3 prohibits the import of products that have not been produced in accordance with the relevant legislation of the country of production.

In this sense, the fight against illegal timber is included in this regulation. However, it is the criterion of non-deforestation that is emphasized in this regulation. Indeed, the first step of the due diligence process requires first obtaining the geographical coordinates of the production site to ensure free deforestation. Similarly, the country evaluation criteria for the benchmarking system only include criteria related to deforestation and forest degradation.

What is the role of certification?

Third party certification is clearly recognized as a complementary source of information for the analysis and risk reduction stages, as long as the certification provides the information required by the regulation (see Article 10.2.j).

In addition, an opening for its recognition is foreseen, during the first five-year review of the regulation (article 32.2.a).

The criterion of forest degradation having been added specifically for timber (according to the definition of "deforestation free" which provides a special provision for timber to be harvested without inducing forest degradation), forest certification represents more than ever an indispensable tool to ensure compliance with this criterion (which will be quite complicated to verify by a European operator for non-certified products).

On the other hand, the challenge for certifications will be to align with the requirements of the availability of geographical coordinates of the production plots throughout the supply chain and transformation, implying a strict traceability of products. As the "mass balance" system seems to be outlawed, this will probably also imply a review of the credit system, or at least the verification criteria for uncertified wood entering mixed products.

What will happen to the FLEGT process (VPA and EUTR), with FLEGT licenses?

In terms of modalities, the EUTR seems to be maintained, at least in spirit, since the draft regulation adopts the same steps as those provided for in the EUTR, but provides for an additional verification criterion concerning deforestation/degradation.

The principle of licensing, such as FLEGT licenses, has not been retained. On the other hand, these are recognized, when they exist, as proof of legality without additional control, thus meeting part of the requirements. They do not therefore constitute a "green lane" for importing products into the EU, since they do not guarantee free deforestation.

We therefore understand that existing VPAs that are operational at the time of entry into force of the regulation will be maintained.

For the others, and for countries without VPAs, "Forestry Agreements" are foreseen.

We have recommended that the EC use VPAs as a basis for defining and implementing increasingly stringent forest legislation against deforestation and committed to sustainable forest management. To this end, VPAs should be strengthened and revised to become a tool to encourage producer countries to develop sustainable forest laws.

The continuation of the EUTR remains to be clarified.

What is the timetable for this draft regulation?

  • 17 November 2021: publication of the draft regulation by the European Commission
  • 2022-2023 (estimate): Negotiations between the Council and the European Parliament
  • End of 2023 (EC target): Publication and complementary regulatory texts
  • End of 2024 (1 year after publication): Entry into force of the regulation.

ATIBT remains committed to follow the questions that remain open, the subjects to be clarified and the provisions impacting the tropical forestry-wood sector, first of all the definition of forest degradation, but also the role of certification, the maintenance of the EUTR, the question of the strict traceability necessary to provide the geographical coordinates and the use of the massbalance system, the risks of country classification, etc.)

Despite all these points that remain to be clarified and to evolve, we must welcome the opening that is given to the opportunity of a recognition of forest certification, which remains for our sector the most appropriate tool to provide guarantees in terms of legality, zero deforestation and absence of degradation of natural forests.

File followed by Caroline Duhesme