EUTR Newsletter - 2022 review

Review of 2022 

With 2023 well underway, we’d like to briefly review the events of 2022. What happened and what have we learned from the approach taken by both the European Commission and EU Member States to ensure the proper application of the EU Timber Regulation (EUTR)?

While the EUTR has had some effect in tackling illegal logging and the associated trade of illegal timber in the EU, establishing a consistent and unified implementation of the Regulation remains a significant challenge. The last 12 months have been an important year of developments and ongoing work to improve enforcement of the EUTR and further strengthen and develop new EU forest laws. The stand-out achievement of last year was a historic new anti-deforestation regulation (EUDR), which aims to prevent products causing forest destruction from being sold on the EU market. As this new regulation will replace the EUTR in 2024, we take a closer look at what the transition could look like and share our concerns and focus points for 2023.

In this newsletter, we consider the following three topics:

1. The most important developments and publications regarding the implementation and enforcement of the EUTR and related due diligence measures in 2022
2. ClientEarth’s work on the implementation of the EUTR and development of other EU forest legislation
3. An analysis of the new EU anti-deforestation regulation (EUDR)

If you have any updates to share that we could include in the next newsletter, any queries regarding the EUTR implementation or enforcement that you would like us to address in the next release, or if you would like to receive this newsletter by email, please contact us at: 

forests-contact@clientearth.org

1. Most important developments and publications regarding the implementation and enforcement of the EUTR and related due diligence measures in 2022

Adoption of the Swiss equivalent of the EUTR

On January 1st, 2022, a new Swiss law  – the Timber Trade Ordinance (Holzhandelsverordnung – HHV), entered into force. This is the Swiss equivalent to the EUTR and aims at banning illegal timber from being placed on the Swiss market. 

Corporate Sustainability Due Diligence Directive

On February 23rd, 2022, the Commission’s proposal for the Corporate Sustainability Due Diligence Directive (CSDDD) was published. The CSDDD is a legislative proposal that aims to promote sustainable business practices among companies operating in the EU. The initiative was first announced in 2020 as part of the European Commission's Action Plan for a Sustainable Europe. Once the final text is agreed and adopted by EU lawmakers (i.e. Council and European Parliament), this directive will oblige companies to conduct due diligence on actual and potential adverse human rights impacts and adverse environmental impacts arising across their value chains.

At the end of 2022, the Council finalised its stance on the CSDDD which will serve as the foundation for the co-decision negotiations with the European Parliament on the Directive in 2023. The Council's text (see here and here) includes several modifications to the initial draft proposed by the Commission. The scope of the regime is largely the same, but companies must now meet the criteria for two consecutive financial years and there is a slight tweak to the turnover required for those operating in one of the high-risk sectors. The Council also removed the concept of "established business relationships" from the text and replaced it with "business partners" and introduced new provisions on risk mapping and prioritization as well as on parent companies. The Council also decided to leave it to individual Member States whether they wish the regime to regulate the provision of financial services by financial undertakings.  Finally the Council also undermined various provisions related to indigenous people and local communities’ rights from the Annex on human rights.  Different committees in the European Parliament are currently adopting their positions and are expected to vote in plenary in May.

Sanctions on Russian and Belarussian timber

On April 8th, 2022, the Council of the EU approved a new set of sanctions on Russian and Belarussian timber. These sanctions were approved against the Russian Federation for its invasion of Ukraine and Belarus for its contribution in Russia's invasion of Ukraine, with the practical consequence of banning the import into the EU of most of the timber and timber products covered by the EUTR. Both leading certification organisations, Programme for the Endorsement of Forest Certification (PEFC) and Forest Stewardship Council (FSC) announced in March 2022 that all timber originating from Russia and Belarus shall be categorised as ‘conflict timber’ (i.e. from a controversial source) and cannot be sold and promoted as PEFC- or FSC-certified. 

A new investigation in December 2022 led by the Belarusian Investigative Center (BIC), Siena, and a network of partners from the Organized Crime and Corruption Reporting Project (OCCRP) has revealed that recently, after implementing penalties on wood imports from Russia and Belarus, Europe experienced a surge in wood that is allegedly from Kazakhstan and Kyrgyzstan. Officials assert that individuals who are attempting to evade sanctions are increasingly falsely labelling the wood as Central Asian in order to continue importing it into the EU.

Enforcing sanctions against Myanmar teak

On April 22nd, 2022, WOB Timber, a German company, was found guilty and penalized for bypassing sanctions on timber imported from Myanmar. The German law enforcement and customs authorities conducted a raid on the personal residence of Stefan Bühric, the former head of WOB Timber. The company was discovered to have been involved in illegal timber trade, violating the EUTR and was subsequently convicted by the Regional Court in Hamburg. The authorities confiscated 111 m3 of Myanmar teak valued at over €1 million, as well as company assets worth €1.7 million, as reported by the Environmental Investigation Agency (EIA). You can find more information on the case here.

On August 4th, 2022, the Environmental Investigation Agency (EIA) won a case in the Netherlands' highest court, which upheld EU regulations for importing timber from Myanmar. The court decision confirmed that Royal Boogaerdt Timber, a company that imported Myanmar teak into the EU market, did not meet these due diligence standards as established by the EUTR, and therefore the company failed to comply with the regulations. 

Revised guidance on conflict timber

In May 2022, the Commission made a significant move towards implementing due diligence laws by releasing a revised version of guidance for identifying timber from conflict regions. The new document includes the use of the Fragile States Index (FSI) as a reference for identifying high-risk areas, specifically stating that countries with a ranking above 110 on the FSI should be considered as areas with ongoing armed conflict. If a country is considered to be an area with ongoing armed conflict, it may be difficult to ensure that the timber and wood products coming from that country are legally sourced. As a result, the EUTR may require more stringent due diligence measures and documentation from companies importing wood from such countries to ensure that they are not contributing to illegal logging and deforestation in conflict-affected areas. It could also lead to a ban of some or all of the wood products from such countries.

New EU Regulation on Deforestation

On December 6th, 2022, the EU reached a political agreement on a new EU anti-deforestation regulation (EUDR) which aims to prevent products linked to deforestation or forest degradation from being sold on or exported from the EU market. While being the legal successor to the EUTR, the new law – also based on a due diligence mechanism – goes far beyond the EUTR’s scope and legal requirements, although some unfortunate gaps still remain. If you’d like to learn more about it, please see our short overview of the EUDR at the end of this newsletter.

2. ClientEarth’s involvement in the development of EU legislation related to forests in 2022

In this section, we describe our involvement and activities related to the EUTR and EU forest laws in 2022.

ClientEarth’s request for internal review – the EU Taxonomy Regulation

In February 2022, ClientEarth submitted a request for internal review to the European Commission of the Commission’s Delegated Regulation 2021/2139 setting the technical screening criteria for activities that can be qualified as 'sustainable' under the EU Taxonomy Regulation. ClientEarth claims that the criteria set out, inter alia, for bioenergy activities are not based on conclusive scientific evidence and on the precautionary principle: the regulation does not adequately take into account the consequences of burning woody biomass for energy that have been shown to be harmful to both the climate and environment.  In July 2022, the Commission denied the request for an internal review. Based on the EU’s internal review mechanism, which was revised as part of the amendment of the Aarhus Regulation in 2021, ClientEarth consequently brought an action for annulment of the Commission's decision before the General Court of the EU. These proceedings were initiated in September 2022 and are currently pending.

ClientEarth’s publications on the new anti-deforestation regulation

On February 3rd,  2022, ClientEarth, together with over 100 civil society organisations from Europe and beyond, wrote a Civil Society Organisation (CSO) statement calling on the European Parliament and EU Member States to close the loopholes in the proposed European Commission’s regulation to tackle EU-driven global deforestation. The CSO statement, supported by environmental, climate and human rights organisations, outlined key policy asks that were required to be addressed and included in the proposed law to ensure that the EU regulation is truly fit for purpose and meets the EU’s climate and biodiversity targets.

On October 3rd , 2022, ClientEarth, together with partner organisations in producer countries, produced a briefing explaining why the benchmarking mechanism in the proposed EUDR should integrate greater participation by producer country stakeholders. It provides an analysis of the ways in which the EU could address some of these concerns by strengthening cooperation and partnership within the scope of Article 28 of EUDR. Our suggestions for benchmarking were not fully incorporated as we had hoped. The Commission may take into account input from producer country stakeholders when it comes to accounting for emissions and removals in agriculture, forestry, and land use in the Nationally Determined Contribution (NDC), but is not obliged to do so. Additionally, the Commission may, but is not obliged to, consider other factors such as existing agreements or legal frameworks in producer countries and their implementation when making decisions.

On October 18th, 2022, ClientEarth and many other civil society organisations published a shared CSO statement calling on EU Ministers, Commissioners and Members of the European Parliament to ensure the rapid adoption of a strong and ambitious EU regulation on deforestation-free products. Ten points of advice were encouraged to be adopted for the law to be effective including: 1) a comprehensive list of commodities; 2) clear, robust and credible definitions set at EU level, including for “deforestation” and “forest degradation; 3) immediate protection of “other wooded land”; 4) protections for internationally-recognised human rights; 5) robust due diligence obligations for operators and large traders that require full traceability; 6) a limited role for third-party certification as “complementary information’’ ; 7) equivalent due diligence obligations for EU-based financial institutions; 8) a strong and comprehensive enforcement framework that includes mandatory minimum compliance checks; 9) a cut off date; and 10) measures to support vulnerable stakeholders in producing countries, in particular to empower Indigenous Peoples, local communities, women, smallholders and civil society.

On June 3rd , 2022,  ClientEarth published a briefing clarifying the traceability requirement of the EUDR proposed by the European Commission. The requirement to trace commodities back to where they were produced is an essential element of the due diligence system of the new regulation that aims to ensure that only compliant products can be placed on the EU market.

ClientEarth’s in-depth analysis of the public control over Polish forests

On October 24th, ClientEarth published a report disclosing our assessment of Poland’s laws on forest governance. In this report ClientEarth states that Poland fails to exert an appropriate level of institutional control over its timber market to meet its obligations under the EUTR. Although the EUTR has been formally implemented in Poland’s legal framework, the relevant provisions are ineffective, insufficient and poorly implemented in practice, demonstrating clear obstacles to the unified and consistent application of the EUTR across all member states of the European Union.                                 

Linked to this, ClientEarth has also been involved in several cases regarding forests of the Polish Carpathians. We submitted three requests for environmental information regarding potential illegal logging activities in the Carpathians Region to the Polish state-owned logging company – State Forests, and further complaints to the Polish administrative court on the refusal to disclose the requested information. These cases represent an important building block to increase transparency in forest management at both EU and national level, particularly in Central and Eastern Europe. Read more about the cases here.

ClientEarth’s position paper on the proposed EU Framework for Forest Monitoring

On November 18th, 2022, ClientEarth wrote a position paper as a response to the Commission’s public consultation on the new EU Framework for Forest Monitoring and Strategic Plans.  The aim was to bring to the attention of the Commission three issues that will be key to unlock the potential of this new framework: 1) access to information, public participation and access to justice; 2) the accessibility of forest data, in particular remote sensing data and its effective use; and 3) the role of forest-related data in the implementation of EU legislation on nature conversion and restoration and on illegal logging and deforestation.

3. ClientEarth’s analysis: A short overview of the new regulation on deforestation-free products

In this section of our Newsletter, we provide an analysis of an EUTR-related issue in each edition. For this edition of our Newsletter, we take a closer look at the new EU regulation on deforestation-free products. 

Please note that the content of the following analysis represents the views of ClientEarth only and is its sole responsibility. It does not reflect the views of the European Commission, nor any other official entity or organisation mentioned therein.

EU lawmakers have concluded negotiations on a ground-breaking new regulation that prohibits products linked to deforestation from being placed on or exported from the EU market (EUDR). The EUDR will replace the EUTR and significantly widen the scope of the current framework against deforestation. Major improvements concern:

• strengthened obligations on operators and traders

• expanding the scope of covered products beyond wood to other products linked to deforestation that contain, are made from or fed with cattle, soy, palm oil, cocoa, coffee and rubber;
• introducing a new deforestation-free criterion in addition to the existing legal sourcing requirements, against which operators will have to check their products before placing them on (or exporting them from) the EU market to ensure they are not associated with deforestation, or forest degradation (for wood products only), after 31 December 2020;
• widening the scope to both imports to and exports from the EU market;
• applying the due diligence requirements – currently applicable to operators only – to non-SME traders;
• improving the due diligence framework by establishing, among other things: 1). a definition of negligible risk, 2). widening the scope of information that needs to be gathered, 3). including a clear traeability requirement, providing a new set of risk assessment criteria, 4). requirements to mitigate the risks of non-compliance and 5). a clearer procedural requirements to establish an internal due diligence and risk management system;
• strengthened penalties
  • establishing a set of objective criteria for penalties for non-compliance (e.g. a penalty is proportionate to the environmental damage and the value of the illegal commodities);
  • providing important alternative protective measures (i.a. confiscation of revenues from illegal trade, temporary exclusion from public procurement processes and from access to public funding, temporary prohibition from trading in relevant products or commodities);
• strengthened role of enforcing authorities
  • providing a detailed framework for enforcement actions to be followed by competent authorities (including i.a. a fixed number of checks per year and criteria for analysis of risks of non-compliance);
  • creating a structural role for customs authorities by i.a. granting them competencies to carry out checks on operators in regards to customs declarations;
  • enhancing the cooperation by mandatory exchange of information between customs and other authorities;
  • launching a new digital database open to enforcing authorities with relevant information on the commodities placed on EU market (i.a. as geographic coordinates and country of production);
• strengthened rights of the public
  • introducing clearer provisions on substantiated concerns and obliging competent authorities to thoroughly and timely assess the evidence provided by the public;
  • introducing a judicial review mechanism that allows the public to challenge the assessment of substantiated concerns conducted by competent authorities;
  • clarifying that records and checks carried out under the regulation consitute environmental information within the context of EU access to information rules.

Unfortunately, the final text of the EUDR, agreed by the Council of the EU and the European Parliament, does leave some gaps that may hamper its efficiency. The major disappointment is the lack of protection of the rights of Indigenous Peoples. Instead of expressly obliging companies to respect the internationally recognised rights of Indigenous Peoples, the EUDR relies on national laws in third countries to provide adequate protection for land tenure rights of local communities. Another gap is that the EUDR will not be applicable to important non-forest ecosystems, like savannahs and wetlands, or to the finance sector. Regarding enforcement, the final target for checks to be conducted by national authorities is much lower than that initially proposed by the Commission, and the definition of what constitutes forest degradation remains flawed: it does not cover large-scale clear-cutting of native forests unless the land is converted to another use.

Formal adoption of the EUDR among all Member States will take place in the coming weeks, after which the law will enter into force. The main substantive provisions for operators and traders will be applicable 18 months thereafter, with a slightly longer phase-in period for small enterprises (24 months).

Picture credits to Justus Menke via Unslash