If the European Union does not approve a deadline extension, starting next year, up to 116,000 companies in Poland will have to comply with the EUDR regulation. “Entrepreneurs should start preparing for the implementation of the new regulations as soon as possible,” says Dr. Marek Woch.
The EUDR, which concerns deforestation, has sparked significant controversy. It was originally scheduled to come into effect at the end of 2024, but following appeals from the business sector, the European Commission proposed a one-year delay, extending it to June 30, 2026, for small businesses.
The regulation introduces significant changes for entrepreneurs in sectors related to the production and trade of goods such as cattle, cocoa, coffee, palm oil, rubber, soy, and timber. The aim of these regulations is to reduce global deforestation and forest degradation by ensuring that products entering the EU market do not contribute to these negative phenomena, explains Dr. Marek Woch, president of KRP Kancelaria Rzecznika Przedsiębiorców.
The regulation will apply to companies that introduce these goods or their derivatives into the EU market or export them. It will be the responsibility of entrepreneurs to demonstrate that the goods “do not contribute to deforestation” and that production is conducted in accordance with the laws of the country of origin.
Dr. Woch highlights another requirement: companies must conduct “due diligence.” What does this mean? Due diligence involves collecting information, data, and documents, assessing risks, and implementing measures to mitigate deforestation-related risks. To this end, the entity must collect, organize, and store information for five years from the date of introduction or export of the relevant products, including geolocation data of all plots where the goods were produced, along with the production date or timeframe. If the relevant product includes goods produced on various plots, geolocation of each individual plot must be provided. Any deforestation or degradation on those plots automatically disqualifies all relevant goods and products from being marketed or exported. For products containing or produced using cattle, the geolocation must relate to all facilities where the cattle were held, explains the expert.
This means that companies will need to analyze and verify their current suppliers against the requirements imposed by the regulation. Dr. Woch notes that adapting to the new regulations will lead to increased operational costs.
Non-compliance with the regulations could result in significant financial penalties, confiscation of goods, seizure of profits from transactions, temporary exclusion from tenders, and bans on introducing goods to the market.
Entrepreneurs should begin preparations for implementing the new regulations as soon as possible. Consulting with experts is advisable to ensure correct interpretation of the regulations and effective implementation of the required procedures. Close cooperation with suppliers is also essential to ensure product compliance with the new requirements, as well as keeping up to date with regulatory changes. Meanwhile, government authorities should consider providing informational support to entrepreneurs through business organizations and employers, as well as exempting small and medium-sized enterprises and farmers from harsh penalties under the proposed national regulations, believes Dr. Marek Woch.
According to some analysts, the implementation of the EU regulation may lead to price increases for products such as coffee, cocoa, palm oil, and soy. Analysts from PKO BP believe these increases may only be temporary, with the impact on supply in the EU market being “moderately negative.”
The EUDR regulation could affect 116,500 companies in Poland, note PKO BP analysts.
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