On 9 June 2023, the European Commission published the new Deforestation-free Regulation, known as Regulation (EU) 2023/1115. This new regulation will enter into force on 29 June 2023. It aims to minimise the Union’s contribution to deforestation and forest degradation worldwide (imported deforestation), thereby contributing to a reduction in global deforestation. Also, it aims to reduce the Union’s contribution to greenhouse gas emissions and global biodiversity loss. It is important to note that several raw materials used in cosmetic products will be also affected.

Important definitions

• Relevant commodities mean cattle, cocoa, coffee, oil palm, rubber, soya, and wood.
• Relevant products mean products listed in Annex I that contain, have been fed with or have been made using relevant commodities.
• Forest means land spanning more than 0,5 hectares with trees higher than 5 metres and a canopy cover of more than 10 %, or trees able to reach those thresholds in situ, excluding land that is predominantly under agricultural or urban land use.
• Agricultural use means the use of land for the purpose of agriculture, including for agricultural plantations and set-aside agricultural areas, and for rearing livestock.
• Deforestation means the conversion of forest to agricultural use, whether human-induced or not.
• Deforestation-free means that (a) the relevant products contain, have been fed with, or have been made using, relevant commodities that were produced on land that has not been subject to deforestation after 31 December 2020; and (b) in the case of relevant products that contain or have been made using wood, that the wood has been harvested from the forest without inducing forest degradation after 31 December 2020.
• Plot of land means land within a single real-estate property, as recognised by the law of the country of production, which enjoys sufficiently homogeneous conditions to allow an evaluation of the aggregate level of risk of deforestation and forest degradation associated with relevant commodities produced on that land.
• Operator means any natural or legal person who, in the course of commercial activity, places relevant products on the market or exports them.
• Trader means any person in the supply chain other than the operator who, in the course of commercial activity, makes relevant products available on the market.

Products covered

The Regulation covers seven commodities and certain products that contain, have been fed with, or have been made using commodities listed in Annex I: palm oil, soya, wood, cocoa, coffee, cattle, and rubber.

By 30 June 2025, the Commission will also determine whether it is appropriate to amend or extend the list of relevant products in Annex I, particularly with respect to biofuels.

Cosmetic sector

Palm oil, cocoa, soya, and wood are the commodities that more directly concern the cosmetic industry.

However, cosmetic products as a finished product are not listed in Annex I. If, for example, a company produces soap, that is not included in Annex I, it will not be subject to the requirements of the Regulation, even if the soap contains palm oil.

Note that, regarding the wood, "tools, tool bodies, tool handles, broom or brush bodies and handles, of wood" are listed in Annex I as relevant products subject to the requirements of the Regulation.

The prohibition

Relevant commodities and relevant products shall not be placed or made available on the market or exported unless all the following conditions are fulfilled:

• they are deforestation-free ((a) the relevant products contain, have been fed with, or have been made using, relevant commodities that were produced on land that has not been subject to deforestation after 31 December 2020; and (b) in the case of relevant products that contain or have been made using wood, that the wood has been harvested from the forest without inducing forest degradation after 31 December 2020.)

• they have been produced in accordance with the relevant legislation of the country of production, concerning the legal status of the area of production in terms of land use rights, environmental protection, and forest-related rules, including forest management and biodiversity conservation, where directly related to wood harvesting, third parties’ rights, labour rights, human rights protected under international law, the principle of free, prior and informed consent (FPIC), including as set out in the UN Declaration on the Rights of Indigenous Peoples, tax, anti-corruption, trade, and customs regulations; and

• they are covered by a due diligence statement, confirming that due diligence was carried out and that no risk, or only a negligible risk, was found that the relevant products do not comply with the requirements set in above points. Operators, traders, or their authorized representatives will need to submit these due diligence statements through an information system.

Operators and traders

The prohibitions and obligations set by the Deforestation-free Regulation concern operators and traders (see the definition above).

Before placing relevant products on the EU market or exporting them, operators and traders must submit a due diligence statement to their competent authority through a dedicated information system to be established by the European Commission. Through due diligence, they must ensure, that there is either no risk or only a negligible risk that the commodities and products in question have not been sourced from deforestation or produced in violation of the relevant legislation of the country of origin.

To this end, the Deforestation-free Regulation mandates operators and traders to engage in a comprehensive due diligence process for all relevant products supplied by each specific supplier. This process involves the establishment, implementation, and regular updating of a due diligence system. Operators shall review the due diligence system at least once a year and publicly report on their due diligence system, including on the steps taken to fulfill their obligations. This includes conclusions of the risk assessments, undertaken risk mitigation measures, and a description of the information and evidence obtained and used to assess the risk. When operators become aware of new developments which could influence the due diligence system, they shall update the due diligence system to take account of those developments. Operators shall keep a record of such updates in their due diligence systems for five years.

Due diligence system

Prior to placing relevant products on the market or exporting them, operators shall exercise due diligence with regard to all relevant products supplied by each particular supplier. The due diligence system should incorporate three key components: (1) the collection of information, data, and documents needed to fulfill the requirements set out in Article 9, (2) risk assessment measures as referred to in Article 10, and (3) risk mitigation measures as referred to in Article 11. Additionally, reporting obligations must be fulfilled. These obligations become effective starting from 30 December 2024.

(1) Collection of necessary information

The collected information should include the trade name and product type. It should also list the relevant commodities or products used in or contained within the relevant products. The quantity of the relevant products must be provided for products entering or leaving the market. The country of production, along with the geolocation (latitude and longitude coordinates) of all plots of land involved in the production of relevant commodities, as well as the date or time range of production must be recorded. If deforestation or forest degradation has occurred on any of the plots of land, the commodities and products from those plots are disqualified from being placed on the market or exported. Information about the suppliers and recipients of the relevant products, including their names, postal addresses, and email addresses, should be documented. Additionally, there should be adequately conclusive and verifiable evidence that the relevant products are deforestation-free and that the relevant commodities comply with the applicable legislation of the country of production. Upon request, operators must provide the competent authorities with the collected information, documents, and data.

(2) Risk assessment

Operators shall verify and analyse the information collected and any other relevant documentation. On the basis of that information and documentation, the operators shall carry out a risk assessment to establish whether there is a risk that the relevant products intended to be placed on the market or exported are non-compliant.

Operators and traders must consider 14 criteria when making their risk assessment (Article 10 (2)). These include the Commission's risk classification of the country of production, the presence of forest land in the relevant country of production, whether there has been good faith engagement with indigenous populations, any duly reasoned claims of ownership by indigenous peoples, concerns regarding corruption or human rights violations, the complexity of supply chains and the risk of mixing and circumvention.

For these purposes, the Commission will implement a three-tier system for the classification of countries as low, standard, or high risks, taking into account the latest scientific evidence and internationally recognised sources. The classification shall be based primarily on the following assessment criteria:

• Rate of deforestation and forest degradation;
• Rate of expansion of agriculture land for relevant commodities; and
• production trends of relevant commodities and of relevant products.

The operators shall document and review the risk assessments at least on an annual basis and make them available to the competent authorities upon request.

(3) Risk mitigation

In case of a non-negligible risk that the relevant commodities and products are not deforestation-free or have not been produced in accordance with the relevant legislation of the country of production, operators and traders shall adopt risk mitigation procedures and measures that are adequate to achieve no or only a negligible risk: (a) requiring additional information, data or documents; (b) carrying out independent surveys or audits; (c) taking other measures pertaining to information requirements (as described above). Operators shall have in place adequate and proportionate policies, controls, and procedures to mitigate and manage effectively the risks of non-compliance of relevant products identified.

Simplified due diligence

The Deforestation-free Regulation also envisions simplified requirements in the following circumstances:

• For relevant products from low-risk countries or parts thereof operators should be allowed to exercise simplified due diligence (involving only the first part (1) of the due diligence which is the collection of necessary information). The Commission will publish the list of the countries or parts thereof, that present a low or high risk no later than 30 December 2024, until then all countries will be assigned a standard level of risk.
• Small- and medium-sized enterprises (SMEs) that are classified as traders would have simplified requirements. They would only need to collect and retain information concerning the identity of their suppliers or clients, along with the reference numbers of the associated due diligence statements for the products. Therefore, SME traders would be exempt from submitting a due diligence statement or conducting an extensive due diligence process.

Due diligence statement

Information to be contained in the due diligence statement:

1. Operator’s name, address, and, in the event of relevant commodities and relevant products entering or leaving the market, the Economic Operators Registration and Identification (EORI) number in accordance with Article 9 of Regulation (EU) No 952/2013.
2. Harmonised System code, free-text description, including the trade name as well as, where applicable, the full scientific name, and quantity of the relevant product that the operator intends to place on the market or export. For relevant products entering or leaving the market, the quantity is to be expressed in kilograms of net mass and, where applicable, in the supplementary unit set out in Annex I to Regulation (EEC) No 2658/87 against the indicated Harmonised System code or, in all other cases, expressed in net mass specifying a percentage estimate or deviation or, where applicable, volume or number of items. A supplementary unit is applicable where it is defined consistently for all possible subheadings under the Harmonised System code referred to in the due diligence statement.
3. Country of production and the geolocation of all plots of land where the relevant commodities were produced. For relevant products that contain or have been made using cattle, and for such relevant products that have been fed with relevant products, the geolocation shall refer to all the establishments where the cattle were kept. Where the relevant product contains or has been made using commodities produced in different plots of land, the geolocation of all plots of land shall be included.
4. For operators referring to an existing due diligence statement, the reference number of such due diligence statement.
5. The text: ‘By submitting this due diligence statement the operator confirms that due diligence in accordance with Regulation (EU) 2023/1115 was carried out and that no or only a negligible risk was found that the relevant products do not comply with the Regulation.’
6. Signature in the following format: ‘Signed for and on behalf of:..., Date:..., Name and function:..., Signature:’.

Placing on the market by operators established in third countries

Where a natural or legal person established outside the Union places relevant products on the market, the first natural or legal person established in the Union who makes such relevant products available on the market shall be deemed to be an operator within the meaning of this Regulation.

While the Deforestation-free Regulation primarily imposes prohibitions and obligations on natural or legal persons in the European Union, producers of relevant commodities and products (including those outside the EU) would also be impacted as their products would have to meet the requirements of the Deforestation-free Regulation to be sold in or exported from the Union.

Checks on operators and non-SME traders

The checks on operators and non-SME traders shall include:

• examination of their due diligence system, including risk assessment and risk mitigation procedures, and of documentation and records that demonstrate the proper functioning of the due diligence system.
• examination of documentation and records that demonstrate that a specific relevant product that the operator has placed or intends to place on the market or intends to export or that the non-SME trader has made available or intends to make available on the market complies with this Regulation, including, when applicable, through risk mitigation measures, as well as the examination of the relevant due diligence statements.

The checks on operators and non-SME traders may also, among others, include, where appropriate, spot checks, including field audits, including where appropriate in third countries, provided that such third countries agree, through cooperation with the administrative authorities of those third countries.

Corrective action in the event of non-compliance

Upon identifying non-compliance, competent authorities must promptly request the operator or trader to implement appropriate and proportional corrective measures within a reasonable timeframe.

For this purpose, the corrective action to be taken by the operator or trader should include at least one of the following measures, as applicable:

• Rectifying any formal non-compliance.
• Preventing the relevant product from being placed on the market or exported.
• Immediately withdrawing or recalling the relevant product.
• Donating the relevant product to charitable or public interest purposes, or if not feasible, disposing of it in accordance with Union waste management laws.

Regardless of the corrective action taken, the operator or trader must address any deficiencies in their due diligence system to prevent future non-compliance with the Regulation. If the operator or trader fails to take the specified corrective action within the timeframe set by the competent authority, or if non-compliance persists after that period, the competent authorities of the Member State in question are obligated to enforce the required corrective measures using all available means permitted by their national law.

Timeline

The main obligations of the new Deforestation-free Regulation will enter into force on 29 June 2023 and be applicable from 30 December 2024.

For SMEs (micro-undertakings or small undertakings pursuant to Article 3(1) or (2) of Directive 2013/34/EU, respectively), this period is extended (24 months after the entry into force of the Regulation which is on 30 June 2025).

Repeal

The Regulation (EU) No 995/2010 (i.e. the EU Timber Regulation) is repealed with effect from 30 December 2024.

However, Regulation (EU) No 995/2010 shall continue to apply until 31 December 2027 to timber and timber products as defined in Article 2, point (a), of Regulation (EU) No 995/2010 that were produced before 29 June 2023 and placed on the market from 30 December 2024.

By way of derogation from Article 1(2) of this new Regulation, the timber and timber products as defined in Article 2, point (a), of Regulation (EU) No 995/2010 that were produced before 29 June 2023 and placed on the market from 31 December 2027 shall comply with Article 3 of this new Regulation.

Actions for being well-prepared

All relevant individuals and companies involved in placing, making available, or exporting products within the scope of the Regulation need to assess their internal due diligence system to ensure compliance with the Regulation's obligations by 30 December 2024.

Operators and traders should:

• Evaluate the complexity of their supply chains and the processing stage of relevant products to identify challenges in linking them to the specific land plots where relevant commodities were produced.

• Assess the risk of Regulation circumvention or mixing with products of unknown origin or from areas where deforestation or forest degradation has occurred after 31 December 2020.

• Familiarize themselves with the applicable laws in the countries where their regular suppliers produce relevant products, including land use rights, environmental protection, forest management, biodiversity conservation, third-party rights, labor rights, international human rights, free, prior and informed consent, taxation, anti-corruption measures, trade, and customs regulations.

• Monitor proposed implementing acts by the Commission and relevant legislation in member states.

• Start collecting necessary documents and information, from 29 June 2023, for relevant products that will be placed on the EU market, made available, or exported from 30 December 2024, to comply with the information-gathering aspect of due diligence.

Producers of relevant commodities and products, including those outside the EU, should take appropriate measures to ensure compliance with the Regulation's requirements and provide sufficient information to their customers in this regard.

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