The EU Deforestation Regulation (EUDR) is a new law designed to eliminate deforestation from supply chains linked to the European market. From 30 December 2025, large and medium-sized companies must prove that key commodities, cocoa, soy, cattle, timber, coffee, rubber, and palm oil, are both deforestation-free and legally produced. Small and micro-enterprises will need to comply by June 2026. 

The regulation is part of the European Green Deal and responds to one of the biggest environmental drivers of climate change: global deforestation. Between 1990 and 2020, over 420 million hectares of forest were lost, an area larger than the entire EU. Most of this loss has been driven by agricultural expansion tied to just a handful of commodities, including those now regulated under the EUDR.

As supply chains stretch across borders and become more complex, risks around deforestation and illegal sourcing increase. The EUDR addresses this with a single, enforceable framework that makes companies directly responsible for verifying the origin of their products.

Why this matters for your business

If you’re sourcing, manufacturing, or selling in-scope products in the EU, you’ll need to verify where your products come from and prove they meet strict environmental and legal standards. This guide will help you make that assessment and outline what compliance looks like for your sector and role.

Who is affected by the EUDR?

How your supply chain activity defines your EUDR role

The EUDR distinguishes between two core market activities. While the legal definitions may sound technical, here’s what they mean in practical terms:

• Placing on the market: You’re placing a product if you're the first to bring it into the EU, either by importing it from outside the EU or manufacturing it within the EU and offering it for sale.
• Making available on the market: You’re making a product available if it’s already been placed on the EU market and you’re selling or distributing it. This applies to wholesalers and retailers sourcing from EU-based suppliers.

Based on these activities, companies fall into one of two roles:

• Operators: Companies that place regulated products on the EU market or export them outside the EU. This includes importers, EU manufacturers, and exporters.
• Traders: Companies that buy and sell regulated products that have already been placed on the EU market. This includes distributors and retailers sourcing from within the EU.

Responsibilities vary by role. Operators carry the full due diligence burden. They must collect and verify supply chain data and submit a formal due diligence statement (DDS) before market entry. 

Traders, especially SMEs, have lighter obligations focused on traceability. They must retain and pass along relevant documentation but are not typically required to conduct full due diligence.

How company size changes your EUDR responsibilities

You’re considered an SME (small or medium-sized enterprise) if you meet two out of three of the following:

• Fewer than 250 employees
• Annual turnover below €50 million
• Annual balance sheet total below €25 million

Large companies exceed these thresholds and face full compliance obligations, whether acting as operators or traders while SMEs benefit from a simplified due diligence process.

Understanding your role for each product type and transaction is essential to determining your obligations. If you’ve already confirmed your role, explore how to comply with the EUDR step-by-step.

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How to determine your role under EUDR 

To figure out your role under EUDR, consider the following checkpoints for each of your products:

Key responsibilities by role

Your obligations under the EUDR depend on three factors: 1) your company’s role in the supply chain (operator or trader), 2) your company size (SME or non-SME), and 3) whether you’re first in line or further down the supply chain.

Non-SME operators first in the supply chain

Large companies that import, manufacture, or export in-scope products for the first time carry the most extensive responsibilities. These businesses must conduct full due diligence for each product before it enters or leaves the EU market (Article 8). This includes collecting geolocation data and verifying that the product is legally produced and deforestation-free (Article 9), assessing and mitigating any risks (Articles 10 and 11), and submitting a DDS through the EU Information System (Article 3).

In addition, they must review their due diligence system annually and publicly report on their efforts (Article 12). All documentation must be retained for at least five years (Article 12).

Example: An Italian company importing timber from Brazil to manufacture flooring in the EU qualifies as an operator. Because it places the product on the EU market for the first time, it must carry out full due diligence and submit a DDS.

Non-SME operators further down the supply chain

Even if a company is working with materials that have already been covered by a DDS upstream, it must still meet certain compliance requirements if it transforms those materials into new products and places them on the market. In these cases, the company must verify that upstream due diligence was properly conducted (FAQ 3.4), submit a new DDS that references the upstream DDS and includes its verification number (FAQ 3.4), maintain an internal due diligence system (Article 12), and retain documentation for at least five years (Article 12).

Example: A large furniture manufacturer using timber from an EU sawmill must file its own DDS when placing finished furniture on the market, even though the raw material was already covered by a DDS.

SME operators first in the supply chain

Small and medium-sized enterprises that import or produce in-scope goods must also carry out due diligence when placing a new product on the market (Article 8). Their obligations include collecting geolocation data and verifying legality (Article 9), assessing and mitigating risks (Articles 10 and 11), submitting a DDS (Article 12), and maintaining their internal due diligence system (Article 12). They must keep relevant documentation for five years but are not required to publish annual reports (Article 12).

Important note: SME status does not exempt companies from due diligence obligations when placing a product on the market.

Example: An SME importing cocoa beans from out of EU and producing cocoa powder must conduct due diligence and submit a DDS.

SME operators further down the supply chain

When SMEs use inputs that have already been assessed upstream, their role focuses on traceability rather than repeating due diligence. They are not required to submit a new DDS for the covered components. However, they must retain and pass along DDS reference numbers and verification codes (FAQ 3.5), include them in customs declarations when exporting (FAQ 3.5), and share them with customers or authorities upon request (FAQ 3.5). If they become aware of non-compliance, they are required to inform authorities immediately. Any new inputs not previously covered must go through due diligence and be documented in a new DDS (Article 8).

Example: An SME purchasing cocoa beans that were already covered by a DDS can rely on the upstream documentation when selling chocolate products, but must ensure any additional cocoa inputs meet EUDR requirements.

Non-SME traders

Large distributors and retailers that sell regulated products already placed on the market must also comply. These traders are responsible for verifying that upstream due diligence was properly conducted (FAQ 3.4), submitting a new DDS that references the existing DDS and its verification number (FAQ 3.4), maintaining a system that supports this verification (Article 12), and keeping all documentation for at least five years (Article 12).

Example: A major supermarket selling chocolate made by another company must file its own DDS referencing the manufacturer’s DDS, even though the product has already been placed on the EU market.

SME traders

SMEs distributing regulated products already placed on the market carry the lightest obligations. They are not required to perform due diligence or submit a DDS. However, they must obtain and retain DDS references from their suppliers (Article 5), pass this information to customers or authorities upon request (Article 5), and keep transaction records for at least five years (Article 5). If they suspect non-compliance, they must notify authorities immediately (Article 5).

Example: A small German wholesaler buying coffee from an EU-based importer and reselling it to local roasters qualifies as an SME trader. It isn’t required to conduct due diligence but must store and share the upstream DDS reference.

Dual-role companies

Some companies will act as both operator and trader, depending on the transaction. When importing or producing in-scope goods, they are operators and must follow full due diligence. When reselling goods already placed on the market by another EU entity, they are traders and only responsible for traceability.

Example: A Polish furniture manufacturer importing timber from Indonesia is an operator and must comply fully. If that same company also buys finished wood panels from a French supplier and resells them, it acts as a trader for that specific transaction.

Sector overview: Which industries are impacted?

The EUDR targets seven commodities widely linked to deforestation:

Cattle, cocoa, coffee, oil palm, rubber, soy, and wood.

But the regulation extends beyond raw materials. Any product listed in Annex I falls under the EUDR regardless of whether it’s raw, processed, or finished. This includes everything from chocolate and tyres to wooden furniture and leather goods.

If a commodity is transformed into a product with a different HS code, for example, turning soybeans into soy meal or timber boards into wooden chairs, it’s considered a new product under EUDR. This triggers new due diligence requirements, even if the original commodity was already assessed.

Examples of EUDR-regulated goods by industry

Below, we break down the seven commodities with real-world product examples, use cases, and sector-specific risks to help you assess what's relevant in your supply chain.

Special cases and common misunderstandings

Composite products
If a product contains multiple EUDR commodities, due diligence may only be required for the commodity linked to the product’s final HS code.

Example: Chocolate bars (HS 1806) fall under cocoa, not palm oil even if both are ingredients.

Recycled content
Products made entirely from recycled or waste material (like 100% recycled paper) are not subject to EUDR. However, any portion that contains newly sourced material, even in small amounts, must still be traced and verified.

Packaging
Wooden or paper-based packaging is in scope if sold as a product. If it's simply used to ship another item, it's not in scope.

Example:

• Wooden crate sold as a standalone item → in scope
• Same crate used only to transport coffee → not in scope

What happens if you don’t comply?

The EUDR isn’t optional. If your company fails to meet its obligations, the consequences can be immediate and costly.

First, your products won’t make it to market. Without a valid DDS, customs authorities will block your shipment. Even if a DDS has been submitted, any identified risk that hasn’t been fully mitigated makes it illegal to place that product on the EU market. In practice, that means shipments can be held at the border or pulled from shelves.

Once on the market, non-compliant goods may be seized. EU Member States have the authority to inspect, withdraw, or destroy products linked to deforestation or insufficient due diligence. They can also halt further sales or temporarily suspend business operations tied to those goods. A batch of timber linked to illegal logging, for example, could be confiscated while the remainder is locked from sale until corrective steps are taken.

Financial penalties are steep. Depending on the Member State, serious or repeated breaches can lead to fines of up to 4% of your EU revenue, with additional penalties for each non-compliant shipment. In cases of fraud, such as submitting false documents, criminal prosecution may apply.

Even without formal penalties, operational disruption is a real risk. Companies sourcing from high-risk areas face regular inspections. If documentation is incomplete or flagged, expect delays, added costs, and potential contract losses. These knock-on effects, from missed delivery deadlines to dissatisfied customers, can quickly add up.

Finally, there’s the reputational cost. EUDR compliance is fast becoming a baseline requirement in contracts and procurement. Falling short can damage relationships, attract unwanted media attention, and invite scrutiny from NGOs, consumers, and investors.

Next steps

Understanding your EUDR obligations is only the first step. The next is applying the framework to your own operations.

Start by identifying which of your products fall under the scope of the regulation. Are you placing a product on the EU market for the first time either by importing it or manufacturing it within the EU? Are you transforming a commodity into something new with a different HS code? Are you reselling goods already placed on the EU market by another EU-based supplier? And do you qualify as a SME, or exceed the thresholds that define a large company?

Answering these questions will clarify your role whether you're acting as an operator or a trader and determine your specific obligations. That could mean conducting full due diligence and submitting a DDS, or ensuring you retain and pass along traceability documentation.

Once your role is clear, you can start building the internal systems, supplier workflows, and documentation processes needed to stay compliant.

At Coolset, we help companies simplify EUDR compliance by making traceability actionable. Whether you’re just getting started or preparing for full implementation, our platform is designed to support every step of the process.

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