As is well known, the European Union Deforestation Regulation (EUDR) regarding wood, pulp, paper, and packaging products will officially enter into force on 30 December 2026. This became clear when the European Parliament and the Council did not exercise their right to veto the revised product list within the two-month period; the veto period concluded on Sunday, 13 September. Brussels rejected 19 out of 25 submitted proposals to change the product list. Consequently, sawmill wood residues were kept on the list, while recycled pallets were not included.
Large, medium, and even the smallest companies in the timber sector will have to comply with the new rules from 30 December of this year, while micro-enterprises and small businesses in other sectors have been given until mid-2027. The new regulation prohibits the sale of wood sourced from areas that have been subject to deforestation or forest degradation since 31 December 2020.
Key nuances and exemptions
Wood residues and sawmill by-products (HS code 4401) remain on the list and will be regulated, as they were previously included in the old EU Timber Regulation (EUTR). Wood packaging is only exempt from the regulation if it serves to support or protect another product. A new pallet sold separately is subject to the regulation, whereas pallets in a closed-loop system do not require additional checks. In the case of repaired pallets, compliance requirements apply only to the so-called newly used wood. Fully recycled paper is exempt from the regulation's requirements as waste and scrap, but if a product contains raw (virgin) pulp or production by-products, it must be checked.
Countries have been divided into three risk categories. High-risk countries are Russia, Belarus, Myanmar, and North Korea. Conversely, 140 countries, including all European Union member states, the USA, Canada, Australia, and China, have been recognised as low-risk countries. Low-risk status means a lower number of inspections – one inspection per one hundred operators – but it does not waive the obligation to submit a due diligence statement and geolocation data. Companies that violate these rules face serious sanctions; member states must set a maximum penalty of at least 4% of the company's total annual turnover in the European Union.
What can we conclude?
Unlike other sectors, where small operators have been given additional time until mid-2027, micro-enterprises in the wood, pulp, and paper industry must start fulfilling the regulation's requirements from 30 December 2026. This means that forestry and timber processing companies in Europe must be fully prepared. Although Latvia and other EU countries are included in the low-risk list, which reduces the frequency of physical inspections, companies are not exempt from data collection. The requirement for precise geolocation and species of wood origin means that digital traceability in supply chains will be of crucial importance.
The rules introduce nuanced boundaries regarding what is and is not subject to the regulation, for example, new pallets versus pallets in circulation, or clean, recycled paper versus mixed paper. This will require very precise record-keeping and legal understanding from companies in the logistics and packaging spheres to avoid massive fines.
Differences in attitude. China – security versus export interests
The attitudes and actions of China and the two “high-risk” neighbouring countries – Russia and Belarus – regarding the Deforestation Regulation differ drastically. While China is seeking compromises between national security and access to the EU market, Russia and Belarus are bypassing the regulation through illegal schemes.
Overall, China has expressed an officially dismissive or very cautious attitude towards the EUDR, primarily due to national security and sovereignty. Chinese actions are twofold. Firstly, the biggest Chinese objection is the requirement to provide precise GPS coordinates of the land area. Beijing points out that the transfer of such detailed maps and data to foreign institutions may violate Chinese national laws, such as the Cybersecurity Law and the Data Security Law. Secondly, the Chinese see a conflict of legal issues, as the State Council of China has issued Decree No. 834, which directly prohibits companies from conducting investigations into independent supply chains or collecting information if it violates local regulations. This creates a situation where Chinese companies are “trapped” – by complying with European requirements, they risk violating Chinese laws. To protect its internal information, the state has introduced special legislation that restricts the conduct of independent foreign audits within its territory. At the business level, China's large furniture, paper, and packaging exporters are actively investing in digital traceability systems. As China is classified as a low-risk country on the EUDR list, its goal is to find a legal compromise and prove product compliance so as not to lose billions of euros worth of exports to Europe.
Despite political objections, China is very well aware of its market position, as it provides nearly half of the wooden furniture and >40% of the paper packaging imported into the European Union; therefore, large Chinese exporters and industry associations are actively preparing for certification and seeking legal channels, such as official data verification channels. However, small and medium-sized enterprises lack the resources to ensure traceability.
Hiding and bypassing “conflict wood” – the Russian and Belarusian approach
Official comments from Russia and Belarus regarding European environmental initiatives have not been perceived as constructive partnership dialogues since the beginning of the war in Ukraine. Both countries are included on the EUDR “high-risk” blacklist, and their attitudes and actions are aimed at bypassing sanctions and the regulation. As both countries are already subject to strict European sanctions, they are not officially attempting to adapt to EUDR requirements at all. Instead, wood exports have been fully reoriented to “friendly” countries – China, Turkey, and CIS countries – or are being used as a political instrument.
Investigations by non-governmental organisations, such as Earthsight, show that Russia and Belarus are actively using illegal schemes to continue getting their wood – especially birch plywood – onto the European market. The supply mechanism is now well known – Russian or Belarusian wood is exported to China, Kazakhstan, Turkey, or Georgia, where it is processed into furniture, packaging, or simply relabelled and sold in the European Union as third-country products, in an attempt to bypass strict traceability of origin. In the period starting from the end of 2024, so-called “blood birch” products worth hundreds of millions of euros flowed into the European Union in this way.
General background of the Deforestation Regulation in Asia
In the rest of the Asian region, particularly in Southeast Asia, the EUDR caused huge political resistance, followed by sudden and urgent adaptation. Indonesia and Malaysia, which are the world's largest producers of palm oil and natural rubber, initially fiercely opposed the regulation, calling it “green protectionism” and a discriminatory instrument. The main argument of Asian countries is that Europe is imposing a disproportionate administrative and financial burden. The biggest victims are millions of smallholder farmers and private landowners who have neither smartphones nor the technical expertise to digitally map their small plantations and provide GPS polygons. In response to this, the governments of Asian countries have recently been rushing to create national databases and traceability platforms to centrally assist their producers. At the same time, there are serious concerns about the creation of a “two-tier market”, namely, sustainable and certified products will be sent to the expensive European market, while cheaper products linked to recent deforestation will be diverted to less-regulated local or Middle Eastern markets.
The “spectre” of the Deforestation Regulation for Africa
In Africa, the background to the EUDR is even more dramatic, as high economic risk there is combined with the rapid modernisation of legislation. The regulation most significantly affects West African countries, primarily Côte d'Ivoire and Ghana, which provide the bulk of the world's cocoa and coffee exports, as well as Central Africa, which exports timber and rubber. Many African countries openly warned Europe that the new requirements threaten to completely exclude small African farmers from global trade, increasing poverty because the costs of proving compliance are too high.
Despite sharp criticism, Africa is currently experiencing an unprecedented mobilisation of the state and private sectors. For example, in Ghana, the government is already working on extensive reforms to completely reshape the cocoa sector with new laws and force companies to register every small farm. Countries that invested early in traceability systems now see an opportunity to become market leaders. In Africa, success is directly dependent on how much financial and technical assistance the European Union will be able to provide to local communities to help digitise supply chains before the deadline. Thus, Europe will have to pay for the implementation of its requirements – and it will not be cheap.