The EUDR was adopted in 2023 and is part of the European Green Deal. It is now slated to come into full effect on December 30, 2025, after the European Parliament amended it with a 12-month delay.

While several similar legislations have existed, such as the Lacey Act of the US, or the EU Timber Regulation, perhaps none of them covers the breadth of products and depth of due diligence that the EUDR does. This regulation requires companies trading with the EU to ensure that products like soy, oil palm, cocoa, coffee, timber and rubber, meet stringent environmental standards, prove they are deforestation-free and respect human rights.

The regulation also requires additional annual checks on produce from countries that are categorised as ‘high risk’. 

Damocles' Sword On Small & Medium Exporters

EUDR has put the spotlight on the often informal and fragmented supply chain, typical to these business sectors. On its part, the EUDR specifically targets the complexity of the supply chain and underlying risks. The regulation will affect both large and small exporters to the EU.

Larger entities must put in dedicated efforts to reliably verify its diverse and complex supply chains, while smaller players would need significant capacity building to fully adhere to the many expectations of the regulation. Exporters to the EU must significantly bolster supply chain transparency, utilising geo-location tools and third-party audits to verify compliance. In short, full compliance will be a complex and costly affair for exporters of these products to the EU.

India exports quite a few of the products covered by EUDR, as per the Ministry of Commerce and Industry’s export data to Europe (see graphic). Of these, rubber products exports are valued at greater than US$ 1 billion, while coffee and wood products together comprise another US$ 1 billion.

Compliance Cost For Exporters To Go Up

To comply, Indian exporters have to implement advanced traceability systems to track products from origin to destination, collect detailed information about product origins and suppliers, including geolocation data of production areas, and use blockchain technology to create immutable records of the entire supply chain, ensuring transparency.

The exporting companies have to identify potential risks of non-compliance within their supply chains, regularly assess and verify that their products are not linked to deforestation after December 31, 2020, and may have to use satellite monitoring as a deforestation risk management tool. All these would need more money.

Mounting compliance costs may jeopardise the profits of some exporters and some may have to shut their shops, particularly smaller players.

Additionally, many of these exporters also import several EUDR-relevant products such as oil palm and soya (see graphic). Such traders must now engage with their international supply chain to address EUDR mandates, in case they wish to expand into EU markets. Where such a supply chain resides in EU nations, any disruption therein due to non-compliance with EUDR provisions is likely to affect the Indian entity.

Exporter Countries Force Postponement...

It would be inaccurate to suggest that EUDR has not met with resistance, as companies have already raised several queries on how to implement these regulations. Actual implementation is likely to reveal more challenges that remain unforeseen at this stage.

Consequently, many companies and countries, like Brazil, India, Indonesia and the US, had earlier called for postponing the implementation start date by at least a year. To provide clarity to companies, additional guidance has been released, but only in October 2024, with the original full implementation slated for December 2024.

The EU had also argued with the protesting countries at the WTO Committee on Agriculture in September 2024 that such a delay would negatively affect companies that have already ensured readiness with the EUDR. With diplomatic pressure — citing EUDR as a non-tariff trade barrier — increasing, the EU Commission finally proposed to pursue two major changes to the regulation — postpone implementation by a year, and create a new category for ‘no risk’ countries.

But environmentalists did not take this move well, with 225 civil society organisations calling on the EU Parliament to reject the EU Commission proposals. However, the EU’s intent was clear — have a delayed but widely implemented regulation, rather than one being hurried and inconsistently applied.

The EUDR comes with significant penal clauses, but penalising companies will not save forests. With these considerations, the EU Parliament approved the proposals on November 14, 2024.

...But Indian Exporters Have To Hurry Up 

So how should Indian companies treat this delay? The most important consideration to note is that none of the other provisions of EUDR have been changed which sends a strong signal that this extension is just a means to ensure greater compliance. In all likelihood, there will be no exemption available in the EUDR. Despite affected countries' arguments about the legislation being 'WTO-incompatible', it is here to stay, like other EU non-tariff barriers including CBAM (Carbon Border Adjustment Mechanism).

The publication of additional guidance also indicates the EU Commission’s intent to support stakeholders in complying with EUDR expectations. Consequently, this one year is going to be very crucial for companies to further strengthen, if not at least begin, their EUDR preparations.

Government support is also very much needed. However, for Indian agri-exporters, it’s time to wake up.

(The writer is the Managing Director of Protiviti Member Firm for India. Views are personal)