Unlocking Compliance: Navigating EU Timber and Deforestation Regulations for Ukrainian Woodworking Businesses

In this publication, we shed light on the critical importance for Ukrainian woodworking enterprises to fully grasp the intricacies of EU legislation, particularly the EU Timber Regulation (EUTR) and the EU Deforestation Regulation (EUDR) when trading Ukrainian wood products within the EU market. We offer practical insights to both Ukrainian product suppliers and EU-based buyers (Operators), outlining the specific steps required to ensure that illegally harvested and purchased wood doesn't infiltrate their supply chains.

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The EU Timber Regulation (EUTR) entered into application on 3 March 2013 and will be repealed completely by the Regulation on deforestation-free products by the end of 2024. The EU Timber Regulation (EUTR) came into effect with the primary objective of combating illegal logging and the trade of associated timber and timber products within the EU market. 

EUTR

Among its obligations, the EUTR mandates that traders (referred to as Operators) placing timber and timber products on the EU market must "exercise due diligence based on a framework of procedures and measures" (Article 4).

Monitoring organizations have the option to provide EU Operators with operational due diligence systems.

The Expert Group established for the EUTR emphasizes that “operator shall put in place a set of procedures, measures, and risk criteria to identify and assess the risk of sourcing illegally harvested timber or timber products that may contain illegally harvested timber.”.

Starting from December 9, 2020, Ukraine has become a focal point for EU Timber Regulation-related Competent Authorities. This indicates that "Sourcing timber and wood-based products from Ukraine is connected with high risk of sourcing products being in breach with applicable legislation in the country."

Therefore, the primary objective of implementing a due diligence system is to ascertain the legality of the origin of wood products imported into the EU market, as well as to verify the legality of the Seller's supply chain and the origin of their logs. The goal is to ensure the products are 100% legal.

On April 29, 2022, the EUTR Commission Expert Group implemented a three-level procedure due to the ongoing military invasion. Consequently, only timber from non-occupied territories is eligible for placement on the EU market if a negligible risk has been identified for the products. This determination is based on the conclusion that “COM confirmed that the Ukraine guidance document and Annex still applies for ‘Other parts of the Ukrainian territory’ and notes the suggestion that input from NGOs/civil society on the ground in Ukraine can support risk mitigation.”

EUDR

On April 19 and May 16, 2023, the European Parliament and the Council of the European Union officially endorsed the new Regulation on Deforestation-Free Products (EUDR). The EUDR came into force on June 29, 2023, and mandates more consistent and rigorous enforcement actions across EU Member States. Operators and traders are granted an 18-month grace period to implement the new rules.

These regulations require all Operators and traders engaged in importing or exporting listed in Annex I commodities to the EU market to demonstrate that these products do not originate from recently deforested areas (after 31 December 2020) or contribute to forest degradation (as defined by FAO, e.g., the harvested site should remain forested or under forest land use category). Operators must collect and maintain information, documents, and data related to each shipment for a period of five years.

Operators must establish and maintain a Due Diligence System consisting of three key steps:

1. Information Collection: Gather and provide product details, including CN code, quantity, country of production, proof of legal harvesting, and geolocation coordinates through the Information System.

2. Risk Assessment: Evaluate and verify the risk associated with non-compliant products (e.g., illegally logged wood) entering the supply chain, considering Article 10 criteria.

3. Mitigation Measures: Implement and document appropriate measures if the risk exceeds negligible during step two, ensuring it is reduced to a negligible level, in accordance with Article 11 criteria.

The DDS information may need to be entered into a specially designated EU Information System (details will be provided by the end of 2024).

Key takeaways for operators collaborating with Ukrainian partners under the EUDR include:

• Existing EUTR requirements for Ukraine remain applicable to the DDS established by operators since they are obligated to verify the absence of illegality in their supply chains (specifics may change by the end of 2024, pending the EU authorities' publication of the list of countries' risk groups).

• Operators should start already exploring methods for accurately collecting and verifying geographic coordinates of land plots (sites) where wood was harvested for all wood used in the product. If there are wood harvesting plots (sites) exceeding 4 hectares in the product supply chain, operators must collect the geographical coordinates of the points forming the plot perimeter (polygon) rather than just the center point (polygons may be presented in shapefile format).

• Traceability requirements apply to each batch of imported/exported/traded wooden products and will need to be exercised before they are introduced to the EU market.

• Product material sourcing and manufacturing processes must comply with national laws.

• If upstream Supplier do not provide the required by established within the Regulation DDS information, Operator must refrain from placing the concerned products on the market.

Additionally, EU adopted restrictive measures in view of Russia’s invasion of Ukraine by adopting Council Regulation (EU) 2022/263 of 23 February 2022 concerning restrictive measures in response to the recognition of the non-government controlled areas of the Donetsk and Luhansk oblasts of Ukraine and the ordering of Russian armed forces into those areas. The Regulation requires not to place on EU market goods that could trace their origin to territories encompassing Russia, the Republic of Belarus, or the areas encompassing Donetsk, Luhansk, Kherson, Zaporizhzhya, and Crimea (regions currently under occupation by russia within Ukraine). 

Operator Risk Mitigation General Recommendations 

In accordance with the obligations imposed by the EU Timber Regulation (EUTR), Operators are required to establish and utilize a Due Diligence System. For this reason ForestCom recommends the establishment of an agreement or Memorandum of Understanding (MoU) between the Operator and Product Supplier (Seller), encompassing the following key points:

• Assurance of no presence of illegal wood within the production line.

• Confirmation of the absence of wood products lacking valid documentation.

• Inclusion of comprehensive documentation within each shipment or case, comprising contractual agreements with wood suppliers, Felling Tickets specifying the logging site of wood extraction, Waybills indicating the wood's origin and loading details, Consumption Notes detailing wood usage rates for product creation, Invoices for product shipments, and other relevant documents based on the specific case.

• Mandating that all presented verification documents are accessible online via government and other databases, ensuring third-party verification; exceptions may apply with alternative verifiable evidence.

• Requirement for interlinked documentation, leaving no room for ambiguity (e.g., a Waybill must reference a logging location or Logging Ticket number). This aspect can be incorporated into the due diligence process, either by the wood product seller or the Operator.

• Prohibition of sourcing wood from sanitary or other "gray scheme/illegal practices" types of felling, with exceptions considered only with substantial evidence, such as natural disaster-related damage or infections (government-approved paperwork alone is insufficient in these cases).

• Strict avoidance of wood from nature-protected categories of forests, high conservation value forests, and similar areas.

• Zero tolerance for bribes or corrupt practices in securing access to wood resources.

• Vetting of wood suppliers' reputations, with disqualification of those associated with records of corrupt and illegal practices.

• Exclusion of wood from suppliers involved in open criminal cases.

• Firm rejection of wood or other goods from territories encompassing Russia, the Republic of Belarus, or regions including Donetsk, Luhansk, Kherson, Zaporizhzhya, and Crimea (currently under Russian occupation within Ukraine).

These measures collectively contribute to aligning operations with EUTR requirements and promoting transparency and legality throughout the wood supply chain.

Such an agreement should help a product Supplier (Seller) to understand what to expect from the cooperation with the Operator, which must work within the EU legislative field. 

Hence, it is important for product suppliers to align their practices with EU regulations, particularly as we anticipate the implementation of more stringent timber regulations, as underscored in the EUDR. These new rules extend and reinforce the existing EUTR due diligence framework.

In situations where Operators cannot ascertain the thorough understanding and adherence to these criteria during business interactions, it is advisable to refrain from engaging in business with such product Sellers.

Furthermore, ForestCom recommends that Ukrainian national wood product selling companies (Sellers) establish a comprehensive information system pertaining to wood origin and production capabilities. This system should facilitate Operators in ensuring the absence of risks associated with the declared products.

Information provided by the Seller to the Operator must adhere to specific criteria, being valid, of official nature, independently verifiable, and include the following information from respective Wood Suppliers: 

1. Logging Ticket number for the logging site, which must specify the forest plot number and a clear indication of the timber harvest location (copy of a Logging Ticket with a clear indication of the logging site from where the wood was harvested).Precise geographic coordinates of land plots (sites) where wood was harvested for all wood used in the product. If there are wood harvesting plots (sites) exceeding 4 hectares the Seller should request the geographical coordinates of the points forming the plot perimeter (polygon) rather than just the center point (polygons may be presented in shapefile format).
2. Legal reason for purchased wood/round logs indicating species names (including scientific), their volume, and other quality and dimensional characteristics of purchased wood/round logs (a copy of a Contract between the Seller and its Wood Supplier). Reference numbers of the Timber Transportation Tickets (Waybills) explicitly listing the timber logs utilized in the production of the declared batch of wood products for sale. This Waybill should also include a reference to the logging site, which may be indicated either directly on the Waybill or within a separate Certificate supplied by the Wood Supplier.
3. Documented round wood volumes of logs as specified in the Waybills, which were utilized in the production of declared wood products. This documentation could be presented in a table format for clarity and ease of reference.
4. Specify the output factor of processed wood products (manufactured timber) derived from the unit of procured wood. This factor is contingent upon the type of manufactured products and the quality of round wood utilized. Supporting documentation, such as a Consumption Note from the local Chamber of Commerce and Industry, technical specifications for related equipment, or scientific publications, should be provided to substantiate this factor.
5. The volume of the sold batch of manufactured wood products that must align with the output factor corresponding to the product type, as outlined in the Invoice.
6. In the event of utilizing wood from sanitary cuts or timber harvested in protected, recreational, and protection forests (forest categories 1, 2, and 3), the Supplier is required to request and assist the Operator with official documentation. This documentation must substantiate the logging rationale and provide additional verification through means such as pre-logging images of trees displaying officially recorded diseases or damages as specified in the official documentation, or other supporting evidence.

The Seller may choose to present the information about the purchased wood logs in the following table format:

For additional information, please refer to the following links:

EUTR Commission Expert Group Procedure

Guidance Documents