Szabolcs Szalay on how to prepare for EUDR
As the EU Deforestation Regulation (EUDR) approaches its implementation date, pellet companies across Europe must prepare for new compliance, traceability, and due diligence requirements. In this interview with Szabolcs Szalay, policy officer at Bioenergy Europe, we clarify the key obligations for the pellet companies.
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What is the EU Deforestation Regulation (EUDR) and how does it affect pellet companies?
The European Deforestation Regulation (commonly abbreviated as EUDR) is a European regulation designed to ensure that certain products placed on the EU market or exported from the EU are not linked to deforestation or forest degradation. Wood is one of the commodities covered, and wood pellets are well within the scope of the Regulation.
For pellet companies, EUDR obligations depend on their role in the supply chain. Companies that first place wood or pellets on the EU market must carry out due diligence before placing their product on the market. Companies further downstream, where the relevant material has already undergone EUDR due diligence, will have, however, lighter traceability obligations.
Are there different obligations for pellet producers and traders? Or does the operator that puts the pellets on the EU market matter the most?
The decisive factor is always the role an enterprise performs in the value chain of a relevant product. An operator is the company that first places a relevant product on the EU market, before the product has been covered by upstream EUDR due diligence. The operator can be the original producer in the EU, or the one that imports a product from a third country to the EU. The operator must carry out due diligence and submit a Due Diligence Statement, or DDS. For micro- and small primary operators (MSPOs) a simplified regime applies, necessitating the submission of a simplified one-time declaration only. A downstream operator processes already-covered inputs into another relevant product, while a trader generally resells a relevant product that has already undergone due diligence. These two categories have significantly less obligations under EUDR.
This distinction is particularly important for pellet producers. An EU pellet producer buying EU wood that has already been covered upstream may be a downstream operator when placing the pellets on the market, with limited obligations. But if that same pellet producer imports goods from outside the EU and is the first EU actor placing that material on the market, it acts as the operator for that imported feedstock and is obliged to make due diligence. The same company can therefore have different EUDR obligations depending on the sourcing route.
Are the responsibilities of an EU company producing or trading pellets different to those of a non-EU company?
The key question is: who first puts the product on the EU market? That company is the operator and carries the main EUDR due-diligence obligations. If pellets or wood come from outside the EU, this will usually be the EU importer or first EU buyer placing them on the market. If the material comes from inside the EU, pellet producers are more likely to be downstream operators, foresters being the primary operators.
It is true that if a non-EU supplier wants to trade with EU companies in the future, it will still need to provide the information the EU operator requires. The legal responsibility under the EUDR, however, sits with the company that first places the product on the EU market and makes the due diligence.
What do pellet companies need to know about the EUDR Information System? How can they submit their Due Diligence Statements? Also, how often do they have to submit the DDS?
The EUDR Information System is the Commission’s online reporting platform, described as a specialised tool of the TRACES platform. Operators use it to submit DDSs before covered products are placed on the EU market or exported. The Commission also provides a separate Acceptance environment for testing and training, but statements submitted there have no legal value.
A DDS does not necessarily mean one statement per shipment. One DDS may cover several batches or shipments, provided that all products and quantities concerned are covered by the underlying due-diligence exercise and the DDS is submitted before they are placed on the market or exported. Once the quantity covered by that DDS has been used, a new DDS is required. The Commission also indicates that such a DDS should normally not cover successive batches for more than one year.
It is important to keep in mind that Micro or Small Primary Operators (MSPOs) are different: where they meet the specific conditions, they submit a one-time simplified declaration rather than DDSs, updating it only following major changes.
Downstream operators as well as traders only need to register in the Information System if they are non-SMEs.
What documentation do pellet companies have to gather?
Operators need to collect enough information to demonstrate that the relevant products comply with the EUDR, e.g. they are not linked to deforestation or forest degradation. For wood, this includes the product description and wood species, quantity, country and where relevant area of production, geolocation of all production plots and the production date or period. They also need supplier and business-customer information, together with sufficiently conclusive and verifiable evidence that the material is deforestation-free and was produced in accordance with the relevant legislation of the country of production.
Operators sourcing from countries categorized as standard or high-risk in the EUDR country benchmarking must also document their risk assessment and, if necessary, the measures taken to reduce any identified risk to a negligible level. The underlying records must be retained for at least five years.
Micro and small primary operators can, instead of geolocation data, use postal addresses, and in case they have access to EU or Member State databases, they can use the information sourced from them.
Downstream operators and traders have lighter obligations: they mainly retain supplier and customer traceability information, with the first downstream buyer also keeping the relevant DDS reference number or simplified-declaration identifier received from the upstream operator.
How much time do pellet traders and producers have? Are there any important deadlines they must keep in mind?
The main application date is 30 December 2026 for medium and large companies. Most micro and small undertakings benefit from a later date of 30 June 2027. However, there is an important exception for the pellet sector: products that were already covered by the former EU Timber Regulation do not benefit from that additional six-month postponement. Therefore, pellet producers and traders must be ready to comply by the end of the year.