Every year, agricultural trade with the European Union (EU) is linked to the loss of around 112,500 hectares of forest. This figure reflects deforestation associated with the production of imported commodities, including cocoa, soybeans, beef, and palm oil (Trase, 2026).
To address this impact, the EU has introduced a regulation that changes the requirements for certain commodities entering its market. Under Regulation (EU) 2023/1115, known as the European Union Deforestation Regulation (EUDR), companies must prove that products placed on the EU market do not come from land that has been subject to deforestation after 31 December 2020.
The regulation covers seven key commodities: cattle, wood, cocoa, coffee, oil palm, rubber, and soy. Derived products, such as chocolate, tyres, and furniture, are also included.
From Environmental Regulation to a Trade Requirement
Before the EUDR, companies seeking to sell commodities in the EU had to comply with various trade requirements. They must now also demonstrate that the raw materials used in their products do not come from land deforested after the specified cut-off date.
For example, a company selling chocolate in the EU must be able to trace the origin of the cocoa it uses. It needs to identify the location of the farms where the cocoa was grown and ensure that the land did not result from forest clearance after 31 December 2020.
If a company cannot verify the origin of its raw materials, its products cannot be placed on the EU market.
This makes information about the origin of raw materials an essential part of market access requirements. Companies must collect data from suppliers, check for potential violations, and address any identified risks before their products can be sold.
When Will the EUDR Take Effect?
The EUDR was adopted in June 2023. However, its implementation has been postponed twice to give companies and governments more time to prepare the necessary systems and documentation.
The first postponement came in December 2024, followed by a second in December 2025.
Under the revised timeline, large and medium-sized companies must comply with the regulation from 30 December 2026. Most micro and small enterprises have until 30 June 2027. However, micro and small businesses handling certain wood products must still meet the December 2026 deadline.
In May 2026, the European Commission also issued updated guidance and technical revisions to simplify implementation. Some additional products, including instant coffee and certain palm oil derivatives, will only fall under the EUDR from 30 December 2027.
Three Requirements for Entering the EU Market
To place their products on the EU market, companies must meet three requirements. First, products must be deforestation-free. Second, they must have been produced in accordance with the laws of their country of origin. Third, companies must submit a due diligence statement demonstrating compliance with these requirements.
For the first requirement, the EUDR specifies that production land must not have been subject to deforestation after 31 December 2020. The regulation follows the FAO definition of a forest: land larger than 0.5 hectares, with trees taller than five metres and a canopy cover of at least 10 percent.
Companies must also record the geographical location of the land where their commodities were produced. This information allows the origin of raw materials to be checked, from farms or plantations to the final products sold in Europe.
The due diligence statement is primarily required from companies that first place products on the EU market. Other companies that buy and resell these products must still retain information about their suppliers and buyers for five years. This ensures that products can be traced throughout the supply chain.
Supplier Countries Face Different Risk Levels
Not all countries face the same level of scrutiny. The European Commission classifies supplier countries into three categories based on their deforestation risk: low, standard, and high.
Belarus, North Korea, Myanmar, and Russia are classified as high-risk countries. Countries that are not listed as either low-risk or high-risk are automatically classified as standard-risk.
This classification determines how strictly products are checked. Products from low-risk countries face fewer checks and can follow simplified due diligence procedures. By contrast, products from high-risk countries are subject to the strictest scrutiny.
Companies that violate the regulation may face fines of at least 4 percent of their annual turnover across the EU in the previous financial year. Other penalties include the confiscation of products and exclusion from public procurement for up to 12 months.
The impact could extend across global supply chains, as many commodities traded with Europe are linked to deforestation in supplier countries.
Between 2021 and 2023, cocoa imports from Côte d'Ivoire accounted for around 38,800 hectares, or 40.1 percent, of the EU's deforestation exposure through agricultural imports. This was followed by soybean imports from Brazil, linked to 13,600 hectares; cattle products from Brazil, linked to 10,400 hectares; and palm oil from Indonesia, linked to 7,300 hectares.
Will the EUDR Reshape Global Trade Flows?
A study published in the journal Environmental Research Letters estimates that the EUDR could alter global commodity trade patterns.
In a simulation covering all supplier countries, EU imports of oilseeds could decline by 34 percent, beef by 66 percent, vegetable oils by 47 percent, and forest products by 40 percent. If restrictions were applied only to countries with high deforestation risks, the declines would be smaller.
However, a decline in exports to Europe does not necessarily mean that trade in these commodities will stop. Some products could simply be redirected to other markets.
In the same simulation, soybean exports to China increased by around US$500 million. This suggests that while the regulation could reduce deforestation-linked imports into the EU, its impact on global trade may be more limited.
Differences in trade interests are also evident in EU-US relations. In a joint statement issued on 21 August 2025, the EU acknowledged that the production of relevant commodities in the United States poses negligible global deforestation risk.
The EU also committed to addressing concerns raised by US producers and exporters to ensure that the regulation does not unduly disrupt trade.
