Milena Kazanowska-Kędzierska answers questions about the EU Deforestation Regulation (EUDR), this time focusing on the consequences for non-compliant companies and the monitoring system.
This is key information for all companies needing to prepare for the new rules on deforestation, i.e. production based on the use of cattle, cocoa, coffee, oil palm, rubber, soya and wood.
What are the penalties for violating the EUDR?
As a reminder, it will be up to each EU country to decide exactly how it will penalize companies that do not comply with the new rules.
The EU only provides a general framework and maximum penalty amounts, but the detailed rules for imposing these penalties will vary depending on the specific country and the model chosen.
In Poland, no implementing legislation has yet been adopted or even submitted, but the Regulation itself contains a list of penalties for violations, so it can be assumed that the Polish legislature will propose a similar system.
In accordance with the Regulation, penalties include:
- Fines in proportion to the environmental damage and the value of the relevant commodities or relevant products concerned[1]; in the case of a legal person, the maximum amount of such a fine shall be at least 4% of the OPERATOR’S or TRADER’S total annual Union-wide turnover in the financial year preceding the fining decision[2]
- Confiscation of the relevant products concerned
- Confiscation of revenues gained from transactions involving the relevant products
- Temporary exclusion (for a maximum period of 12 months) from public procurement processes and from access to public funding, including tendering procedures, grants and concessions
- Temporary prohibition from placing or making available on the market or exporting relevant commodities and products, in the case of serious or repeated infringements
- Prohibition from carrying out simplified due diligence in the above case[3]
Who will be responsible for checking companies’ compliance with the EUDR?
By 30 December 2023, Member States were required to notify the Commission of the names, addresses and contact details of the competent authorities responsible for checking compliance with the Regulation.
Details of these authorities can be found on the Commission’s website. However, as of 9 October 2024, Poland has not yet designated a competent authority.
What will be checked?
- The due diligence system and all its procedures
- Documentation and records of the monitoring of the functioning of the system and compliance of the specific relevant product with the Regulation
Where potential non-compliance with the EUDR is identified, the authority has the right to take interim measures, such as:
- Seizure of the relevant goods or products concerned
- Suspension of the placing or making available on the market or export of such goods or products
Important to remember.
As the implementation of the Regulation is still at a very early stage, and as there are considerable delays in the adoption of national legislation, we believe that we need to keep an eye on what is happening in this area. Both at EU level and at local level.
See also part one of our series in which we explained the basic concepts of the EUDR, discussed the differences between an ‘operator’ and a ‘trader’ and provided a list of the goods covered by the new legislation.
Eco Focus #1 also provides an update on the implementation deadlines.
Any questions? Contact us
[1] The level of such fines is calculated in such way as to ensure that they effectively deprive those responsible of the economic benefits derived from their infringements, and gradually increasing the level of such fines for repeated infringements.
[2] It will be calculated in accordance with the calculation of aggregate turnover for undertakings laid down in Article 5(1) of Council Regulation (EC) No 139/2004, and will be increased, if necessary, to exceed the potential economic benefit gained.
[3] Defined in Article 13 of Regulation 2023/1115.
