What are my obligations as an EU operator?
As a general rule, operators (and traders which are not SMEs) will have to set up and maintain a Due Diligence System, which consists of three steps.
As step one, they would need to collect the information referred to in Article 9, such as the commodity or product which they intend to place (or make available in case of non-SME traders) on the market or export, including under customs procedures ‘release for free circulation’ and ‘export’, as well as the respective quantity, supplier, country of production, evidence of legal harvest, among others. A key requirement, in this step, is to obtain the geographic coordinates of the plots of land where the relevant commodity was produced and to provide relevant information – product, CN code, quantity, country of production, geolocation coordinates – in the due diligence statement to be submitted via the Information System. If the operator (or traders which are not SMEs) cannot collect the required information, it must refrain from placing (or making available in case of non-SME traders) on the market or exporting the relevant product concerned. Failing to do so would result in a violation of the Regulation, which could lead to sanctions.
If the operator (or traders which are not SMEs) cannot collect the required information, it must refrain from placing the affected products on the Union market or exporting from it. Failing to do so would result in a violation of the Regulation, which could lead to potential sanctions.
In step two, companies will need to feed the information gathered under the first step into the risk assessment pillar of their Due Diligence Systems to verify and evaluate the risk of non-compliant products entering the supply chain, taking into account the criteria described in Article 10. Operators need to demonstrate how the information gathered was checked against the risk assessment criteria and how they determined the risk.
In step three, they will need to take adequate and proportionate mitigation measures in case they find under step two more than a negligible risk of non-compliance in order to make sure that the risk becomes negligible, taking into account the criteria described in Article 11. These measures need to be documented.
Operators sourcing commodities entirely from areas classified as low risk will be subject to simplified due diligence obligations. According to Article 13, they will need to collect information in line with Article 9, but they will not be required to assess and mitigate risks (Articles 10 and 11) unless the operator obtains or is made aware of any relevant information, including substantiated concerns submitted under Article 31, that would point to a risk that the relevant products do not comply with this Regulation (Article 13.2).
What is an 'authorised representative’?
According to Article 6, the operator and the trader may mandate authorised representatives to submit a due diligence statement on their behalf. In this case, the operator and trader will retain responsibility for the compliance of the relevant products.
If the operator is a natural person or microenterprise, it may mandate the next operator or trader in the supply chain to act as its authorised representative, provided it is not a natural person or micro-enterprise. In this case, the mandating operator retains responsibility for the compliance of the product.
Can companies conduct due diligence on behalf of subsidiaries?
The internal organisation and due diligence policy of a group of companies (a mother company and its subsidiaries) is not governed by the Regulation. The operator or trader that places or makes available on the market or exports a relevant product, is responsible for the compliance of the product and for the overall compliance with the Regulation. Hence, it is its name that shall figure in the due diligence statement and it shall retain the full responsibility under the Regulation.
What about re-importing a product?
What are my due diligence statement obligations if I am re-importing a product that was previously exported from the EU?
Where an operator (or trader that is not an SME) re-imports a product that was previously exported and places it under the customs procedure ‘release for free circulation’, the same obligations apply as if the product was placed for the first time on the market. When exported, the relevant product looses its customs status of ‘Union good’ and that relevant product is considered to be a new product when subsequently re-placed or re-made available on the market. Already existing due diligence statements can help the operator to exercise due diligence.
Which customs procedures are affected?
Relevant products placed under other customs procedures than the ‘release for free circulation’ or ‘export’ (e.g. customs warehousing, inward processing, temporary admission etc.) are not subject to the EUDR.
What is the role of certification or verification schemes?
Certification schemes can be used by supply chain members to help their risk assessment to the extent the certification covers the information needed to comply with their obligations under the Regulation. Operators and traders which are not SMEs will still be required to exercise due diligence and they will remain responsible for any breach.
How long should documentation be kept?
How long should the operator keep the documentation of the due diligence exercise? Do SME traders have to keep the relevant information about the relevant product they place or make available on the market or export? What is considered as the beginning of this duration?
Operators shall collect, organise and keep for five years from the date of the placing on the market or export of the relevant commodities and relevant products the information gathered based on Article 9, accompanied by evidence. Based on the provisions of Article 10 (4) and Article 11 (3), the operators should be able to demonstrate how due diligence was carried out and what mitigation measures were put in place in case risk was identified. Relevant documentation about these measures must be saved for at least five years after the due diligence exercise was carried out. Operators must also keep record of the due diligence statements for five years from the date when the statement is submitted in the Information System, which is prior to the date of placing the product on the market or exporting it. In that regard, non-SME traders have the same obligations as the operators.
SME traders must keep for at least five years the information listed in Article 5 (3), including the due diligence reference numbers from the date of the making available on the market or export of relevant products.
What are the criteria for ‘negligible risk products’?
‘Negligible risk’ refers to the level of risk that applies to relevant products to be placed on the market or exported, where, on the basis of a full assessment of product-specific and general information, and, where necessary, of the application of the appropriate mitigation measures, those commodities or products show no cause for concern as to not being in compliance with Article 3, point (a) or (b).
Are ‘negligible risk products’ exempt?
Can we understand negligible risk under Article 2 (26) EUDR read together with Article 10(1) EUDR as exemption criteria of EUDR?
No. Operators and traders [that are not SMEs] may only reach a conclusion on ‘negligible risk’ (which is a pre-condition for placing or making available on the market or exporting relevant products ) as a result of conducting due diligence (as per Article 4(1)). Conducting due diligence is a core obligation of operators and traders under this regulation, which is not subject to any exemption.
N.B. The ‘negligible risk’ element does not apply to commodities (there is no ‘risk status’ per commodity in the Regulation).