EUDR compliance. Short check of the updated version of “Frequently Asked Questions Implementation of the EU Deforestation Regulation”. The subjects. Second part

We would share the main questions & answers on the subjects of obligations arising from the EUDR compliance.

What happens if a non-EU based operator places a relevant product or commodity on the EU market? Under which circumstances will non-EU based operators have access to the Information System?

If a natural or legal person established outside the EU places relevant products on the EU market, according to Art. 7 EUDR the first person established in the Union who makes such products available on the market is deemed to be an operator within the meaning of the Regulation.

This means that in this case, there will be two operators within the meaning of the Regulation

– one established outside and one inside of the EU.

The first person established in the Union that is deemed to be an operator according to Art. 7 EUDR is subject to the obligations of “upstream operators” (see FAQs 3.1 and 5.1 for more information). Art. 5 EUDR does not apply to the first person established in the Union. The purpose of Art. 7 EUDR, as set out in Recital 30, is that in every supply chain in the Union there is an operator who is established in the Union and can be held accountable in the event of non-fulfilment of the obligations under the EUDR.

Example:

Non-EU based company A imports and releases for free circulation cocoa beans, a relevant product. Company A supplies the cocoa beans to EU-based company B who manufactures and sells chocolate.

Company A is a non-EU based operator and must exercise due diligence and submit a DDS into the Information System. As a consequence of Art. 7 EUDR, EU-based company B is an operator and is equally obliged to exercise due diligence and submit a DDS.

Non-EU based operators will only have access to the Information System if they have a valid EORI number issued by an EU Member State or by the United Kingdom in respect of Northern Ireland (XI), as only in this case they will need to submit a due diligence statement or simplified declaration prior to lodging a customs declaration. They will have access to the system in the role of an operator and not as an authorised representative, as according to Art.2(22) EUDR, an authorised representative must be established in the Union.

Art. 7 EUDR equally applies in the case of a company group which consists of multiple legal entities that are established both in- and outside of the EU. Both company group members can choose to make use of an authorised representative for DDS submission pursuant to Art.6 EUDR.

No obligations under Art. 7 EUDR apply to the first company established in the Union if it does not place or make available relevant product on the market or exports them (example: Non-EU based company C imports and releases for free circulation coffee beans, a relevant product, exercising due diligence and submitting a DDS. Company C then supplies the coffee beans to the EU-based company D who roasts them and uses them for coffee pastry (a non-relevant product). As company D does not place or make available a relevant product on the EU market or exports them, it does not fall under Art. 7 EUDR and hence has no obligations under the EUDR.).

In the specific case of B2C e-commerce transactions (See FAQs 3.17-3.19), Art. 7 EUDR does not apply to EU consumers buying products for private consumption from outside the EU, as such consumers do not make relevant products available on the EU market. Art 7 EUDR does not require that there must be an operator established in the EU when a relevant product is supplied to a final consumer. Art. 7 EUDR rather requires that, if a natural or legal person established within the EU makes relevant products available on the EU market after the relevant products have been placed on the market by a person established outside the EU, then such a person shall be deemed an operator under the Regulation.

3.8. Can a person be both an operator and a downstream operator with regard to the same product in the same supply chain?

It is generally possible that one legal entity meets both the definition of operator and downstream operator in the same supply chain: when an entity places a product on the market and then transforms the product into a derived relevant product which it places on the market, it can meet both the role of (upstream) operator and first downstream operator. In this case, the legal entity does not need to communicate the reference number pursuant to Art. 4(7) EUDR in case the derived product is supplied to another downstream operator or trader.

Are organizations that are not SMEs and sell to consumers (retailers) classified as traders?

A retailer organisation can either qualify as an ‘operator’, as a ‘downstream operator’ or as ‘trader’ under the Regulation, depending on specific situations.

Who is an SME under the EUDR?

According to Art. 2(30) EUDR, ‘small and medium-sized enterprises’ or ‘SMEs’ means micro, small and medium-sized undertakings, irrespective of their legal form, within the meaning of Article 3(1), Article 3(2), first subparagraph, and Article 3(3), respectively, of Directive 2013/34/EU (“Accounting Directive”). The thresholds mentioned in Art. 3(5) and (6) of Directive 2013/34/EU for small, medium-sized and large groups have no relevance for the SME definition under the EUDR. Neither is Commission recommendation (of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (C(2003) 1422)) applicable to the EUDR.

Accounting Directive 2013/34/EU, as amended by Commission Delegated Directive (EU) 2023/2775, states that medium-sized undertakings “shall be undertakings which are not micro-undertakings or small undertakings and which on their balance sheet dates do not exceed the limits of at least two of the three following criteria: (a) balance sheet total: EUR 25 000 000; (b) net turnover: EUR 50 000 000; (c) average number of employees during the financial year: 250.”

However, it should be noted that for Art. 38(3) EUDR and the deferred entry into application of the Regulation by 30 June 2027, it is decisive whether an operator was established as a micro-undertaking or small undertaking by 31 December 2024. This is dependent on the size thresholds which were in force by that day and irrespective of the company’s legal form.

I am a company exempted from submitting DDS. Can the companies which I supply to require me to submit a DDS nevertheless?

There is no legal obligation for any downstream operator or trader to submit a DDS, nor does the Information System foresee the technical possibility to do so.

Can I submit a DDS / simplified declaration for a product that is placed on the market of a third country and that will eventually be imported into the EU?

The EUDR Information System is a repository of statements and declarations for products that are placed on the EU market or exported thereof. Only (upstream) operators, i.e., importers and primary producers placing directly on the EU market, are required to submit due diligence statements or simplified declarations. On the other hand, persons placing relevant products on another market than the EU market have no obligation to interact with the EUDR Information System. The system does not serve as a repository for products which are sold or undergoing further manufacturing outside the EU.

Who is liable if a product does not comply with Article 3 EUDR?

Operators retain responsibility for the compliance of the relevant product they place on the EU market or export (Art. 4(3) EUDR). In cases of non-compliance, operators have to refrain from placing the product on the market or exporting it and have to immediately inform Competent Authorities and downstream operators and traders to whom they supplied the relevant product (Art. 4(4)(a), (5) EUDR).

Downstream operators and traders have information and, in case of non-SMEs and substantiated concerns, verification duties according to Art. 5(5) and (6) EUDR.

Who is the operator in the case of standing trees or harvesting rights?

Standing trees as such do not fall within the scope of the Regulation. Depending on the detailed contractual agreements, the ‘operator’ at the moment of harvesting could be either the forest owner or the company that has the right to harvest relevant products, depending on who is placing the relevant product on the EU market or exporting it from the EU. In case  a person concludes a contract by which it authorises the other party to the contract to harvest wood, the contracted party carrying out the harvest is considered the operator if it directly and automatically becomes the owner of harvested logs by the mere act of harvesting the trees. This is not the case where the applicable national law or the contract provide that the natural or legal person transfers, after harvesting, the right of ownership to the other party of the contract (for reference see, by analogy, Judgment C-370/23 of 21 November 2024).

How does the Regulation apply to company groups?

The due diligence obligations apply to ‘persons’ in accordance with Art. 2(20) EUDR, regardless of whether they are members of a company group or not. Subsidiaries of a group, like any legal entity, have to refer to Directive 2013/34/EU to determine whether their entity is an SME or not (see FAQ 3.10). The balance sheet, net turnover and number of employees of the individual legal entity, not of the group as a whole, is decisive.

For this reason, each entity that meets the definition of operator, non-SME downstream operator or non-SME trader must create a separate and individual account for its economic operator in the Information System. The system does not allow for a single account with the role of operator, downstream operator or trader to represent multiple companies or to create an economic operator account for a company group with multiple user companies.  However, pursuant to Art. 6 EUDR, it is possible for operators to mandate an authorised representative to submit and manage due diligence statements (or, if applicable, simplified declarations). Consequentially, company groups have the possibility to mandate one of their members as an authorised representative to submit due diligence statements on behalf of all members of the group. An authorised representative can use a single account to submit and manage DDS or SD on behalf of all entities it represents. The authorised representative must be established in the Union in accordance with Art. 2(22) EUDR. It should be noted that legal responsibility for compliance with the Regulation remains with the individual operator.  For details of registration in the Information System, please refer to the EUDR User Guide5.

Who is the operator or trader when one company contracts another company to provide relevant products that are linked to their commercial activities?

For example, an onsite cafeteria, small shop or a stand established besides a main business. Depending on the detailed contractual agreements, the company responsible for supplying relevant products for use in the cafeteria, small shop, stand etc. (making available a relevant product on the EU market) is responsible for EUDR compliance. The obligations of the company would depend on their size and position in the supply chain.

For example:

1) Contractor C is an SME company which, under its contractual agreement with  Supermarket B, is responsible for purchasing from an EU manufacturer and supplying chocolate (HS 1806) to customers at Supermarket B shops. In this situation, Contractor C is an SME trader which is only subject to the obligations under Art. 5(1), (3)-(5) and (7) EUDR. C is not subject to due diligence requirements and does not retain responsibility for the EUDR compliance of the chocolate.

2) Contractor A runs onsite restaurants on behalf of non-SME EU Supermarket B. Contractor A is a non-SME and, under its contractual agreement with Supermarket B, is responsible for purchasing and supplying chocolate (HS 1806) at an onsite restaurant on the establishment of Supermarket B. Contractor A buys the chocolate from an EU manufacturer, so in this situation, Contractor A is a non-SME trader subject to the obligations under Art. 5 EUDR. Contractor A is not responsible for the EUDR compliance of the chocolate but must verify that due diligence has been exercised for the chocolate in case of substantiated concerns (Art. 5(7) EUDR).

3) Contractor D is a non-SME company that runs confectionary stands at Supermarket B shops. The confectionary includes chocolate (HS 1806). Under their contractual agreements, Supermarket B buys the chocolate bars from a producer in a third country and Contractor D only sells chocolate bars on behalf of Supermarket B without ever owning them. In this situation, Supermarket B is therefore an operator responsible for exercising due diligence for the chocolate bars and submitting a DDS for each batch of chocolate bars. Contractor D is not responsible for the EUDR compliance of the chocolate bars.

Fulfilling EUDR obligations is only required when the supplied products are in the scope of the Regulation (FAQ 5.13). Products that are not in scope, even if they contain components or Online marketplaces are online platforms as defined in Article 3, point (i) of Regulation (EU) 2022/2065, which allow consumers to conclude distance contracts. As long as the provider of the online marketplace only facilitates an online sales agreement to be concluded by two other parties and does not intervene in the actual supply of the product to the client, the online marketplace is a mere intermediary service provider with no obligation under the EUDR. Where a provider offers different functions (on the one hand, selling a relevant product themselves or offering services aimed at delivering products and, on the other hand, acting as an online marketplace allowing other operators, downstream operators or traders to sell their relevant products), the decision as to whether the provider is an operator, downstream operator or trader under the EUDR or an intermediary service provider must be made on a case-by-case basis, taking into account their concrete functions in the supply of the individual sale in question (e.g., fulfilment service providers are usually actually ‘supplying’ the product to the client).  Whatever the circumstances, there is always an operator, downstream operator or trader actually supplying the product to the client. As explained above, depending on the specific circumstances of the supply, the operator, downstream operator or trader may be either the person offering the product for sale (manufacturer, distributor, retailer), the online
marketplace in respect of the specific services it provides that extend beyond acting solely as
an intermediary, or a separate fulfilment service provider, if present in the supply chain. All
these actors are encouraged to determine and clarify their responsibility in view of their
respective role in the supply chain.

Can the consumer be an ‘operator’ in case of imports made in the context of B2C online sales (e-commerce) or other distance sales? 
As explained in the previous FAQ, the ‘operator’ under the EUDR is the person who in the course of a commercial activity, places relevant products on the EU market or exports them. In the context of online sales or other distance sales, who is the operator can vary depending on the business model, and the role and responsibility of actors that intervene in the supply of the relevant product in the course of a commercial activity. An operator under EUDR can be, irrespective of whether they are established in the EU or not (see FAQ 3.7): manufacturers, sellers, importers, online retailers or fulfilment service providers when they actually supply the products to EU consumers (see also previous question).   Against this background, an EU consumer, (i.e. a natural person who is acting for purposes which are outside his trade, business, craft or profession) is never an operator under EUDR when buying a relevant product from an online website supplying products in the EU, even if being declared as the “importer” on the customs declaration. The placing of the relevant product on the EU market is not done by the private consumer but by the legal or natural
person actually supplying the relevant product to that consumer.

 

Can a cooperative or association submit simplified declarations or DDS instead of its members?
Depending on the circumstances, a cooperative or association can either submit declarations in its own name or on behalf of its members.
Option 1: if the cooperative / association itself produces relevant products which it places on the EU market (for example in the case of sales of standing timber, see FAQ 3.12), it may qualify as an operator under EUDR. Therefore, the cooperative / association, rather than its members, can submit a single DDS, or, in case it meets the definition of MSPO, a single simplified declaration. See FAQ 3.22 for more information under which circumstances a cooperative / association may qualify as an MSPO.

Option 2: if the cooperative / association wishes to support its members that qualify as operators, it can act as an authorised representative for its members and submit DDS or simplified declarations on their behalf, see Art. 6 EUDR. In order to act as authorised representative, a cooperative / association must be established in the EU. No simplified declaration is needed for MSPOs whose information is made available pursuant to Art. 4a(4) EUDR.

Who qualifies as a micro or small primary operator (MSPO)?

An MSPO is a subcategory of operator with simplified reporting obligations. They are generally subject to the rovisions for operators (e.g. Art. 4(1) EUDR) unless the Regulation says otherwise.
There are four requirements that must be met in order to qualify as a micro or small primary operator:
a) natural person or micro or small undertaking (based on the thresholds of the Accounting Directive) A micro or small primary operator is either a natural person or a micro or small undertaking, assessed based on the thresholds of the Directive 2013/34/EU. For more information about the size thresholds, please refer to FAQ 3.10.
b) established in a low-risk country
In the case of a natural person, the primary place, and in case of a legal person or association of persons, the registered office, central headquarters or main permanent business establishment, whichever is applicable, must be in a low risk country.
c) directly placing on the EU market or exporting In order to qualify as an MSPO, a person must be directly placing on the EU market or exporting relevant products. This means that primary producers established outside of the EU are not covered by this definition if they supply products to intermediaries outside of the EU, which then place products on the EU market. Primary producers outside of the EU who do not place on the EU market have no legal obligations under the Regulation.

d) products that the operator has produced itself (produced in the sense that they have grown, harvested, obtained or raised themselves the product on plots of land or establishments) in the country of establishment.

Lastly, an operator only classifies as an MSPO if they place on the EU market products they have produced themselves. Produced is to be understood as growing, harvesting, obtaining from or raising products on plots of land or  establishments – that is, the operator must be a primary producer.

While the production is often done by (or on behalf of) the owner of a plot of land or establishment, there are also cases in which there is another entity actually carrying out the production that can be considered the operator. This is the case where such entity directly and automatically becomes the owner of relevant products by the mere act of producing (for example, by harvesting trees). It is not the case where the applicable national law or the contract provides that the natural or legal person transfers, after production, the right of ownership to the other party of the contract (see FAQ 3.12.). In a scenario where operator and landowner are not identical, it is the size of the operator that is decisive for the scope of obligations (so if a non-MSPO company qualifies as an operator by harvesting, DDS submission obligations apply).