EU's new regulation on deforestation-linked products head-scratcher for Vietnamese producers

The EU's ban on deforestation-linked imports are causing concern among Vietnamese producers as the requirements to trace commodities back to their origin can push up costs and entail finding alternative suppliers.

The EU Deforestation-free Regulation (EUDR) will cover imports of various commodities, including cocoa, coffee, palm oil, and rubber, plus products derived from them, such as chocolate, tires, and shoes.

The extent of data collection imposed on producers will increase significantly as the regulation requires the visualisation of GPS for every single farm and 'due diligence' reports showing the origin of their products, their legality, and the conditions of their production.

Tran Thi Quynh Chi, Regional Director of the Sustainable Trade Initiative (IDH), believed that EUDR would put more pressure on Vietnamese producers as meeting its traceability requirements demands a comprehensive system to trace their products back to farms.

"Consumers are getting more serious about sustainability. Their buying patterns are shifting towards environmentally-responsible products to meet carbon-neutral targets," said Chi.

Nguyen Nam Hai, Chairman of the Vietnam Coffee Cocoa Association, said the EU is Vietnam's largest coffee importer, consuming 40% of the country's coffee export annually. In 2022, Vietnamese coffee exported to the EU topped 689,000 tonnes, up 26% year-by-year.

He believed that EUDR would raise new challenges for around 1.3 million coffee farmers in the sector, including the accessibility to technology and ranges of costs. The same goes for coffee companies, which play a major role in the supply chains.

"Vietnam should push the EU for a deferral of its effective date to give coffee companies more time to prepare for the regulation," said Hai.

It is also worth noting that the total area of coffee at high risk under EUDR was estimated at 13,000 ha.

Le Duc Huy, Director-General of Simexco Daklak, said EUDR had not taken his company by surprise because it had been preparing for the change for many years.

Simexco Daklak was the first company in 2012 to cooperate with IDH in promoting sustainable agriculture in the Central Highlands.

Its decade-long effort in building deforestation-free supply chains bore fruits as its coffees had gained a huge advantage in the international markets over those linked to deforestation.

Nguyen Phu Hung, Chairman of the Vietnam Forestry Science and Technology Association, urged the Ministry of Agriculture and Rural Development to send an appeal to the EU, calling for support to coffee farmers who cannot afford the costs associated with meeting EUDR standards.

He also called for training courses to keep the farmers well-informed about the anti-deforestation regulation.

According to a representative from the Association of Vietnam Timber and Forest Products the EU imports about 500 million USD of Vietnamese wood-derived products per year.

He said EUDR would not create as much compliance burden on timber companies as it was concerned because the practice of converting natural forests into plantations had become a thing of the past.

All timber companies have to do is ensure the traceability of their products as required by EUDR.

Tran Thanh Hai, Deputy Director of the Agency of Foreign Trade, said the EU had raised the bar considerably on wood-derived products by ratifying EUDR.

Under the regulation, products that have been made from forest degradation-inducing wood would be banned from EU markets. Even wood collected from reforested land would be no exception.

EUDR would take effect around December 2024 and January 2025. Microenterprises and small enterprises would have an additional six months to comply with the regulation's requirements.

Rui Ludovino, First Counselor in charge of climate action, environment, employment, and social policy at the Delegation of the European Union, said Vietnam would find itself among low-risk countries under EUDR thanks to its proactive approach to fighting deforestation.

For instance, Vietnam entered into the Voluntary Partnership Agreement on Forest Law Enforcement, Governance, and Trade (FLEGT) with the EU in 2018.

The deal gives Vietnamese wood-derived products a big advantage over those from non-agreement countries: FLEGT-licensed products are considered legal under EU Timber Regulation, making it easier for Vietnamese producers to enter EU markets.

He said EUDR doubles the EU's effort in promoting deforestation-free supply chains by requiring companies to produce a 'due diligence' statement and 'verifiable' information proving their exports had not been made from wood grown on deforested land.

Patrick Haverman, Deputy Resident Representative UNDP in Vietnam, suggested the next step for Vietnam in regard to EUDR: review the legal framework and make necessary revisions to align it with the anti-deforestation regulation.

He also called for assistance to fend farmers off the costs incurred by EUDR-induced changes in farming practices.

Minister of Agriculture and Rural Development Le Minh Hoan said Public-Private Partnerships hold the key to the commercial success of Vietnamese agricultural products abroad in the light of EUDR.

"The regulation is indicative of a global consumer behaviour shift towards environmentally-friendly products. It's time to kick-start a sector-wide restructuring," said the Minister./.