India concerned that EU’s Deforestation-Free Regulation could be “disguised” trade restriction

India has raised concerns about the EU’s Deforestation-Free Products Regulation (EU-DR), which will be implemented in December 2024, possibly leading to discrimination against some countries and acting as a disguised restriction on international trade. However, the bloc has said the proposed rules were based on objective, scientific, non-discriminatory and proportionate criteria.

At a recent meeting of the WTO’s Committee on Agriculture, India sought clarification on the EU-DR regulation to restrict exports of certain identified items to the bloc produced in land deforested after 2020. The proposed regulation can potentially affect Indian exports to the EU worth $1.3 billion annually, per estimates made by the Global Trade Research Initiative.

“..the EU has stated that the rules are designed to ensure that products sold in the EU from any country, including the EU member states, comply with the same requirements in terms of preventing deforestation. However, the benchmarking system established by the regulation imposes different due diligence obligations on operators from high-risk and low-risk countries,” according to the query placed by India.

New Delhi further asked the EU to explain how the measures would satisfy the multilateral body’s requirements that these should not be applied in a manner that would constitute “a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail”, and is not a “disguised restriction on international trade”.

The EU-DR covers seven primary commodities and a variety of products derived from these. While the main commodities are cattle, cocoa, coffee, oil palm, rubber, soya, and wood, the derived commodities are several such as meat products, leather, chocolate, coffee, palm nuts, palm oil derivatives, glycerol, natural rubber products, soybeans, soy-bean flour and oil, fuel wood, wood products, pulp and paper and printed books.

In its reply to India’s queries, the EU said that no commodities or countries will be subject to discrimination, and the regulation will apply equally to commodities and products produced inside and outside the EU.

“There is no ban against products coming from any country. The benchmarking classification will be based on a set of objective criteria – detailed in the regulation - such as deforestation rates and the expansion of agricultural land associated with the commodities in scope. Criteria will apply equally to all countries. It will be developed by the Commission based on scientific data,” the EU said.

While the assessment will result in categorising countries into low, standard and high risk, with the high-risk countries subject to enhanced scrutiny, the EU noted that the due diligence obligations will be the same.

“Competent authorities in the member states will be required to inspect 9 per cent of operators sourcing from high-risk areas, 3 per cent from standard risk and 1 per cent from low risk. Due diligence obligations are the same, whether the source of a product is high or standard risk. Operators sourcing commodities entirely from areas classified as low risk will also be subject to due diligence obligations, albeit simplified, and will have to provide the geolocation, i.e. ensure full traceability,” the EU explained.

However, suppose there is a risk that the relevant products do not comply with the regulation or that the regulation is circumvented. In that case, the operator shall perform all due diligence and immediately communicate any relevant information to the competent authority.

According to officials, New Delhi is hopeful of continuing discussions with the EU on the EU-DR, both at the WTO and bilaterally, to sort out its concerns before the measure is implemented.

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