Following the European Commission’s proposal to delay the implementation of the European Union’s Deforestation Regulation (EUDR), the European Parliament introduced various amendments aimed at reducing the Regulation’s ambition. One such amendment that has been subject to widespread criticism is the proposal to introduce a new category of “no risk” countries under the existing risk benchmarking system. This “no risk” amendment would exempt countries that fall within its scope from two key EUDR requirements, namely: that products placed on the EU market are deforestation-free; and the submission of a due diligence statement. These exemptions would make the “no risk” category much less stringent than the existing benchmarking system, that categorizes countries as high-risk, low-risk, and standard-risk, according to their perceived risk of producing non-compliant commodities. TULIP Consulting analysed the WTO consistency of the EUDR with a focus on the “no risk” exemption.
According to the authors that proposed the amendments, to fall within the “no risk” exemption countries must meet three criteria: (i) their forest area development must have remained stable or have increased compared to 1990; (ii) they must have signed the Paris Agreement and international conventions on human rights and on preventing deforestation; and (iii) they must strictly implement and enforce regulations on preventing deforestation and forest conservation at the national level.
On 3 December 2024, the EU lawmakers agreed to postpone the implementation of the EUDR by 12 months. The "no risk" exemption was not included in the final text. The Commission has agreed to provide further clarifications on the Regulation and explore additional simplifications, in full compliance with the objectives of the Regulation.
Our analysis finds that if the “no risk” amendment had been adopted, it would have likely rendered the EUDR inconsistent with various provisions of the WTO covered agreements. In particular, a Regulation with a “no risk” exemption would amount to impermissible discrimination in violation of GATT Articles I and III. Moreover, such WTO inconsistencies would not be justifiable under the general exceptions clause of GATT Article XX as the “no risk” exemption would likely constitute arbitrary or unjustifiable discrimination under the chapeau of that provision. Should a panel find the EUDR to be a technical regulation, it would likely also violate Article 2.1. of the TBT Agreement.
You can read the study here.
(Image: Forest on the shores of Kinabatangan river, Sabha Malaysia. Shashank Kumar, August 2023.)
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