Quick Bites
- Non compliance with the EUDR will result in a fine of at least 4% of EU-wide turnover in the previous financial year
- The fine could increase with repeated infringements
- Access to EU public funds and procurement may be blocked
- Reputation could be damaged, as the majority of EU consumers oppose deforestation
We’re already more than halfway through the year delay to the EUDR. As MEPs debate the details of the regulation in Parliament, businesses must be prepared for its coming into force on December 30.
According to a recent analysis, however, only 30% of upstream actors and 12% of downstream have systems in place to trace deforestation.
Complying with the regulation is deeply important. The penalties for failing to do so are often harsh.
Who makes and enforces penalties?
The EU itself set out a framework, as part of the original EUDR regulation, which penalties must adhere to.
However, it is up to member states themselves to design such penalties, as well as to carry out their enforcement.
Liability for non-compliance ultimately lies with companies which are non-compliant. Even SMEs, while they have fewer due diligence obligations and do not need to carry out reporting, are not exempt from the consequences of non-compliance.
Financial penalties
Perhaps the most obvious consequence of not complying with the EUDR is that you will probably be fined.
How much? Well, it depends. The member states ultimately decide the exact amount. However, the EUDR itself has set clear lower limits for what these penalties can be.
The total fine will be at least 4% of your turnover within the EU in the previous financial year.
Furthermore, it will likely increase with each infringement, the amount getting greater with more instances of non-compliance
The ultimate aim of such a fine is, of course, to deprive the non-compliant business of the economic benefits of its non-compliance.
Further to this, any revenues made from the non-compliant product will be confiscated.
Also read → How much the EUDR will cost businesses – and consumers
Restrictions on trading in the EU
A significant consequence of non-compliance will be losing access to the EU, in a number of ways.
Firstly, non-compliant products will of course not be allowed to enter the bloc. On discovery of non-compliance, the product shall also be immediately confiscated.
Furthermore, repeated incidents of non-compliance could result in further restrictions, such as being temporarily excluded (for a maximum of 12 months) from EU public funding and public procurement.
Alongside this, non-compliance may result in being temporarily prohibited, in cases of repeat offence, from putting any of the relevant commodities on the EU market.
Finally, you may be prevented from using the simplified due diligence process, which is in place for those importing from countries classified as low risk.
Reputational damage
This outcome is slightly more speculative than the others, as reputation cannot be legislated for.
Nevertheless, it is entirely possible that non-compliance, especially if deliberate, could lead to reputational damage.
This is borne out by research. According to data published by the World Wildlife Fund (WWF), seven in 10 European consumers (around 73%) want deforestation-linked products off the market.
Thus, such reputational damage could impact your sales if consumers decide not to buy from a non-compliant company.
As part of the penalty for non-compliance, the European Commission will publish a list of those judged to be so on its website.
