Time is running short. Starting on December 30, the European Union (EU) will impose new environmental requirements on imports of coffee, cocoa, palm oil, soy, beef, wood, and some derived products—many of them originating in low- and middle-income countries. The Deforestation Regulation is part of a broader EU effort to reduce global greenhouse gas emissions and biodiversity loss, and other countries are considering similar measures.

The regulation requires EU-based importers to provide detailed documentation, such as geolocation data, to show that a product did not originate from land deforested after 2020 and that it was produced in accordance with local laws. In practice, much of the burden will be passed on to farmers, manufacturers, and exporters in countries where the affected commodities are produced.

World Bank research shows that the EU Deforestation Regulation’s impact on exports of low- and middle-income countries is likely to be significant. Up to 22 percent of Latin America’s exports to the EU—or 2.3 percent of its total exports —could be affected.

Developing country governments and firms – particularly small and medium-sized ones – need technical and financial assistance to comply with the regulation. In Peru, where exports of affected commodities including coffee, cocoa, wood, and palm oil comprise about 12 percent of total shipments to the EU, a World Bank team worked with the government to craft a roadmap to ensure adherence to the EU Deforestation Regulation (EUDR), identifying key compliance gaps in Peru’s supply chains.

The experience offers four lessons for other countries:

1. Coordinate among stakeholders

Effective coordination among public and private stakeholders in both exporting and importing countries is vital. The EUDR's extensive scope necessitates collaboration across governmental ministries overseeing the environment, agriculture, and foreign trade. Partnering with local governments, who play an important role providing information and assistance to small producers, is also key. The private sector, especially in fragmented production chains with many small producers, requires swift and practical support from both international buyers and governments to geolocate areas of production, implement traceability systems, and verify that local laws were observed. Private-sector involvement is crucial in devising solutions and sharing responsibility for compliance, because exporters will have to furnish much of the required data on geolocation, traceability, and compliance with domestic laws.

International cooperation is also essential. Various international organizations like the World Bank, FAO, and the German Agency for International Cooperation (GIZ) are developing tools that aid EUDR compliance. They can also facilitate the dialogue between national and international stakeholders related to the regulation, as well as share best practices and lessons learned from other regions. Coordinating with these institutions can create synergies, amplify their impact, and enhance capacity building among all stakeholders.

2. Act with urgency and pragmatism

With the December 2024 deadline looming, it is paramount to act urgently and pragmatically, differentiating between short- and medium-term priorities. Immediate action is needed to prevent export disruptions and ensure that as many commodities as possible meet EUDR standards. That means identifying key firms with significant EU export shipments, mapping their chains, and supporting their compliance efforts. It will be necessary to leverage existing initiatives on traceability, geolocation, and deforestation-free chains, including digital platforms from international organizations or private actors. Producers unable to meet EUDR requirements in the short term may need help finding alternative markets.

Medium-term actions should aim to integrate more producers and exporters into the supply chain, help them adapt to new market conditions, and address structural issues affecting their competitiveness and sustainability, thereby converting the EUDR into a new opportunity to boost export competitiveness by upgrading the environmental standards of exported products.

3. Cultivate trust with EU importers

EU companies importing goods covered by the EUDR bear responsibility for demonstrating compliance with the regulation. Data and documentation provided by governments and exporters in producing countries will need to comply with EU importers requirements, standards, and risk tolerance levels. Such data must be robust, verifiable, and consistent to be trusted by EU importers and submitted to EU authorities to prove compliance. Engaging EU importers early to understand their data and verification needs is critical. Moreover, EU importers can also be important allies to producing countries by, for instance, conveying the concerns and difficulties the producing countries are facing in complying with the EUDR to EU authorities.

4. Establish effective communication channels

Countries must establish efficient communication channels and procedures with EU trade authorities to address EUDR-related issues. Whether a particular shipment complies with the EUDR will be determined based on data and documentation from different sources, which may differ in quality and reliability, leaving significant room for discretion in approval by EU authorities. So, it is important for ministries of trade of exporting countries to agree with their EU counterparts on procedures for resolving such problems swiftly. Periodic consultations undertaken under free trade agreements with the EU may provide opportunities to resolve these issues, but it is advisable to discuss and expedite the adoption of specific protocols to resolve issues related to EUDR compliance.

The EU Deforestation Regulation marks a critical step towards reducing global environmental impacts. As countries like Peru navigate the complexities of compliance, learning from this pilot project can better prepare other nations to ensure their exports remain competitive in the EU market.

This project was supported by the Umbrella Facility for Trade. The trust fund’s development partners are the Department of Foreign Affairs and Trade of Australia; the Foreign, Commonwealth & Development Office of the United Kingdom; the Norwegian Agency for Development Cooperation (NORAD); the Norwegian Ministry of Foreign Affairs; the Ministry of Foreign Affairs of the Netherlands; the State Secretariat for Economic Affairs of Switzerland (SECO), and the Swedish International Development Cooperation Agency (SIDA).