The EU Deforestation Regulation (EUDR) requires firms to ensure that products exported to the EU have been grown on land which has not been deforested after December 31, 2020.
The regulation has implications for India’s coffee, cocoa, soya, wood products, rubber and its products and leather goods exports. It prescribes fines up to 4% of a firm’s annual turnover in the EU and confiscation of products and revenues gained from a transaction for non-compliance.
As part of the process, exporters are putting together traceability proofs for land and establishments associated with raising cattle, details of the entire supply chain, forest-related rules and land use information for the last five years to ensure smooth transition and continued market access. “We have been working on the traceability software on sourcing hides and it should be ready by December. We have been preparing for almost a year,” said Rafeeque Ahmed, chairman of Farida Group, one of India’s largest shoe manufacturers and exporters, adding that the estimate of the additional costs of compliance would become clear in sometime.
The EUDR, which aims to curb international deforestation by imposing strict compliance requirements on goods imported into the bloc, is expected to hit India’s agricultural exports worth $1.3 billion, according to think-tank Global Trade Research Initiative (GTRI).
As per the regulation, operators in third countries, including smallholders, could face costs to develop or implement systems to allow EU operators to comply with the new requirements, where they do not already have systems in place.
Further, additional costs in producing countries to ensure compliance with the regulation would be any costs of switching to production practices compliant with the “deforestation-free definition”. India’s total exports to the EU were $75.9 billion in FY24. “Even oilseeds will be covered under this regulation but many agricultural products are not ready for it because it is a big task. It is not easy to implement the traceability because of small land holdings,” said an official.
Exports of wooden items are already subject to Vriksh-a standard for audit and traceability created by Indian industry in 2013. There are 700 exporters audited in the Vriksh scheme. “We comply with all the norms and are conducting country-wise programmes with buyers and overseas clients and educating trade to minimise their troubles,” said O P Prahladka, chairman, Hitaishi KK Manufacturing, an exporter of wooden goods.
The Export Promotion Council for Handicrafts is hand-holding new and unorganised exporters for the upcoming regulation.
Even if exporters are certain that a product is not grown on the deforested land, they still have to follow all elaborate compliance requirements.