Passive compliance model for first downstream actors
The European Union Deforestation Regulation (EUDR) simplification review took a lighter touch than some feared on compliance requirements. The biggest shift affects downstream actors, or businesses handling EUDR-relevant commodities after they enter the EU market. These companies now only need to keep information on direct business partners. They must include their partner's due diligence reference numbers only when that partner is an upstream actor, meaning a producer or first importer.
The regulation applies a "passive" model. Downstream actors are not required to investigate whether a business partner is actually an upstream actor. If reference numbers do not arrive, they need not dig deeper.
Built-in vulnerability to fraud
This approach cuts verification work for downstream operators, but it creates an opening for upstream actors to withhold required reference numbers and dodge compliance burdens. According to Bo Li, research associate with the Forest Governance and Policy team at the World Resources Institute, the passive approach for downstream actors could create vulnerability if initial due diligence is fraudulent or reference numbers do not get passed along.
The regulation does place a reactive obligation on downstream actors: if they discover evidence of non-compliance, they must flag it. But absent explicit proof of wrongdoing, upstream actors may evade detection. Li calls for clearer guidance from the European Commission on when downstream operators should question missing reference numbers, particularly for products that obviously contain EUDR commodities. Member states must also invest in enforcement infrastructure to prevent this loophole, she adds.
Smaller businesses and company segments get lighter treatment
The simplification allows segments of larger companies to qualify as micro or small primary operators if they meet size requirements by employee count and revenue. A large food multinational might have a small cocoa-farming subsidiary, and under these rules the company can look at just that farming unit in isolation rather than the whole group.
Small or micro primary operators must only submit a one-time declaration rather than a fully-fledged due diligence statement. These operators also automatically qualify for low-risk status under the EUDR benchmarking system if they operate in low-risk countries, exempting them from additional risk checks unless a specific problem surfaces.
A spokesperson for traceability technology company Koltiva noted that larger companies specifically lobbied for clarity on exactly how to use this provision, which suggests they see it as a useful avenue.
What was excluded and added
The simplification review did not introduce a "negligible risk" category that many agricultural ministers had requested. However, some commodities such as leather were excluded from EUDR scope, while others were added, most notably instant coffee.
Effectiveness remains uncertain
The lighter compliance burden addresses one of the main sources of industry pushback against the EUDR. Smaller operators will face fewer checks and lower costs. But how these changes will affect the regulation's ability to prevent deforestation and land conversion remains unclear.