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EUDR: Everything about EU's Deforestation Law that may hit Exports of India

India is discussing with EU a law that aims to tighten the rules governing the imports of wide range of consumer goods that are commonly associated with deforestation. Under European Union Deforestation Regulation (EUDR), items such as coffee, wood articles, chocolates and soy will be allowed only if exporter is able to prove that the shipments are not causing deforestation or forest degradation- a major cause of Global Warming.

What does the EU anti-deforestation regulation entail?

The regulation affects seven specific commodities (cocoa, coffee, soy, palm oil, wood, rubber, and cattle) and their derivatives, as well as products made using these commodities (e.g. leather, cosmetics, chocolate, furniture etc.). Over the course of the next two years a review will be carried out, potentially adding additional products to this list.

The new Regulation will require any company importing or exporting these commodities from the EU to prove the products are deforestation-free. This applies to any company, regardless of whether they are EU-based or not, and for legal and illegal sources of deforestation in Europe and overseas.

The Regulation defines a product as deforestation-free when the product itself, its ingredients or its derivatives were not produced on land subject to deforestation or forest degradation after the cut-off date of 31 December 2020. This cut-off date has been suggested to minimize disruption to international supply chains.

The Global Trade Research Initiative (GTRI) said that the EU-DR appears to prioritise protecting its own agricultural sector and promoting exports, making imports more difficult as it is a trade barrier disguised as a green measure.

When EUDR will be Implemented

It will come into force as early as December 2024 for Large Firms and June 2025 for smaller firms. With in 18 months, the EU will classify countries as low, standard or high risk. High Risk Countries must meet more obligations and subject themselves to more checks. For instance, EU Customs will check 9% of firms or consignments from High Risk Countries, 3% from standard-risk countries and 1% from low-risk countries.

How it will impact India in terms of Exports

"EU DR will adversely affect India's exports to the EU of the value of US 1.3 billion (2022 data). The significant products affected and their export value to the EU are Coffee (USD 435.4 million), Leather hides, skin, preparations (USD 83.5 million), Oil cake (USD 174.5 million), Paper, paperboard (USD 250.2 million) and Wood furniture (USD 334.6 million)," the report said.

India has a functioning blockchain-enabled trace and track system being implemented by the Agricultural & Processed Food Products Export Development Authority (APEDA) for grape exports to the EU and other regions. It needs to be adopted for all covered products, and make exporters aware of the compliance requirement. However, it will increase compliance cost impacting Exporters adversely especially Small Exporters.

India may also bring up the law at WTO as it violates its MFN treatment and national treatment principles.

Notes: Content has been taken from multiples sources available for purely academic purpose.

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