Caobisco issues plea to EU Commission president on EUDR deforestation laws

The European confectionery trade body, Caobisco, has issued an urgent plea to EU Commission president Ursula von der Leyen over significant concerns surrounding the implementation of the upcoming EUDR supply chain legislation, reports Neill Barston.

According to the Brussels-based organisation, which is set to return as a key partner for this year’s World Confectionery Conference this September, there are a number of compliance concerns surrounding the groundbreaking new European environmental laws.

The new framework is due to come into force at the end of this year, but a number of EU nations, as well as industry partner governments in South East Asian palm oil producing nations, over how the new system will be governed, and the effectiveness of satellite mapping at the heart of the scheme.

As Caobisco noted, its member companies are fully committed to the successful implementation of the new regulations, with the thousands of businesses part of the organisation already taking steps to mitigate and minimise the risk of deforestation in their supply chains while mobilising significant resources to prepare for compliance.

In its letter addressing the EU Commission president, Coabisco said:  “The date of application of the EUDR is approaching at full speed, while several key components are still further delayed or lacking clarity. This is particularly concerning as companies rely on legal clarity to further adapt their systems, processes and organisational resources to the EUDR requirements and ensure a high level of preparedness.

Given the risks that companies will bear in case of non-compliance, urgent action is required from the European Commission to provide all the necessary tools and systems, as specified in the regulation, to minimise the risk of market disruptions, food waste and unnecessary administrative burden on companies.”

As Caobisco notes, its specific concerns include-  Due diligence obligatons of operators/traders further down the supply chain, as well as noting that the EUDR places obligations on operators further down the supply chain (articles 9 to 11)

As per the FAQs of December 2023, these operators are obliged to “ascertain” that due diligence was carried out. It is understood that upstream operators can choose to disclose or not the geolocation information to downstream operators in the Information System.

According to Caobisco, ‘it is currently unclear how downstream operators will verify that due diligence has been carried out effectively if they lack access to primary data of the due diligence conducted, in particular, geolocation information. This lack of direct access to primary data may contradict article 4(7) while hindering the ability of downstream operators to fulfill their verification responsibilities effectively, posing a significant implementation challenge.

“We urge the European Commission to explicitly clarify what exactly would qualify as ascertaining that due diligence was carried out and to ensure that the EU Information System is equipped with the necessary specifications to allow an adequate level of transparency and data transfer between operators within the supply chain.

“Even in cases were geolocation details are disclosed in the Information System, downstream operators and traders would have to check thousands if not hundreds of thousands of geolocations that might have contributed to a given finished product. This is a significant challenge in itself, whereas the EUDR goes even further in mandating that companies check the entire due diligence process which is much more than just collection and provision of the geolocation details. Hence the obligation of “ascertain” should be considered fulfilled when downstream operators/non-SME traders make sure a given relevant product is covered by due diligence statement which is confirmed by a received due diligence statement reference number,” added the letter.

Furthermore, Caobisco asked the EU Commission to  clarify how placing a product on the EU market is to be defined within the context of a mother company and subsidiaries.

It did so on the basis that numerous transactions can happen within a group company, where a product is transferred from one site to the other, without being processed or sold outside the group. In this case, it should be clarified if a group could use the same due diligence statement for internal transactions, and only submit the information for a new due diligence statement when the product is either processed (and becomes another product) or sold outside the group. Re-creating a new due diligence statement for each intra-EU movement within the same group company provides no added value to the objective of the EUDR, yet would generate considerable amounts of red tape for companies.

In addition, Caobisco said there will be many instances in which  which hundreds of thousands of due diligence statements would be required to enable a large international operator to fulfil potential EUDR requirements for finished products. It believed there was a  lack of clarity around the scope, frequency and aggregation possibilities for a single due diligence statement may create higher compliance costs for companies due to an excessive burden of administration, cost, IT systems changes, as well as complexity, confusion and inconsistency for competent national authorities. By clarifying compliance requirements, the organisation added that those costs and resources could instead be invested by companies in their upstream supply chains or origin activities.

Caobisco added: “We encourage the Commission to provide guidance towards a simplified due diligence statement option for operators of composite products. In the case of chocolate, products derived from other in-scope commodities (e.g. palm oil, coffee) can be mixed to create the final product. As chocolate is listed under the “cocoa” category in Annex I, our understanding is that the due diligence statement accompanying a batch of chocolate should comprise traceability information only for the cocoa-derived products and that the obligation to include geolocation information for products derived from other commodities stops once the products are blended together.

The confectionery organisation added that it welcomed the development of an Application Programming Interface (API) to enable seamless communication of information between companies’ in-house information systems and the Information System. But it expressed concerns about the capacity of this system to handle the massive volume of data that will be generated, especially considering the high volume of due diligence statements that need to be produced. In the event of the system’s malfunction or breakdown for a certain amount of time, it added that it is seeking clarity on the ways of proceeding is needed for companies to put together a business continuity plan (with internal processes, etc.).

Significantly, Caobisco said it was also crucial that the system is accessible to non-EU legal entities to lodge their due diligence statements as there will be many instances when an operator places a commodity/product for the first time on a non-EU market. These products will ultimately be placed on the EU market within a new composite product needing to rely on due diligence already carried out upstream.

Transition period
Caobisco’s letter contained: “While we appreciate the clarity provided in the last FAQs update of December 2023 regarding the transition period, uncertainty remains in relation to relevant products produced during the transition period that are not directly shipped into the EU market and only reach the EU market after date of application.

“Given the complexity of global supply chains, involving multiple processing stages, long storage times, and the upcoming main crop seasons for commodities like coffee and cocoa starting in October 2024, products produced during the transition phase but not immediately shipped to the EU will pose significant challenges in complying with the EUDR and cause unintended cost and environmental consequences. We strongly encourage the European Commission to explore a constructive solution to this issue.

“Additionally, for composite products, it is possible that some ingredients/semi-finished products used to produce a finished product are placed on the EU market at different times before or after the end of the transition period. Currently, the EU Information System under development does not allow for this.:”

Benchmarking system
Lastly, Caobisco added that a potential delay of the benchmarking system would mean all countries would be considered “standard risk” by default. Irrespective of the country of origin, relevant products will face full-fledged due diligence, even if they may have otherwise been classified as “low risk”. Timely completion of the benchmarking system is crucial to provide clarity to supply chain actors and ensure the smooth implementation.

The group also noted that operators will need clear guidance on precisely how they should comply with the new regulations, and requested that the Commission provide examples of how evidence should be provided. It hoped that despite such challenges, the EUDR could be rolled-out as smoothly as possible in the anticipated timeframe.