US Commodities to Avoid Strict Checks Under EU Deforestation Law

(Bloomberg) -- US commodity producers will likely avoid strict checks under the European Union’s rules to curb deforestation after months of lobbying, providing relief for the sector against the backdrop of a tariff war.

The country will be classified as having a low risk of deforestation under rules set to be agreed by EU member states next month, according to a person familiar with the matter. That will mean that European importers will face the minimum level of checks for products like timber coming from the US.

All member states in the EU will also be considered “low risk”, while Brazil, a major exporter of key commodities like soybeans and beef, will fall under the “standard risk” category, said the person, who asked not to be named speaking on sensitive discussions. Only countries covered by UN and EU sanctions will be labeled “high risk,” according to a guidance document published last year.

Discussions are still ongoing and final decisions could still change, the person said. A spokesperson for the European Commission didn’t immediately respond to a request for comment.

The US’s categorization should alleviate any concerns in Washington that the EU rules to combat deforestation globally would add fire to a bitter trade dispute between the two sides. The regulation faced fierce pushback from American industry and government, contributing to a one-year delay to its implementation.

US paper makers, for example, warned the EU that the law, which would require them to trace timber to its origins, risked disrupting $3.5 billion of trade, while raising prices of everyday products, like diapers. Officials under President Joe Biden’s administration, including the former secretary of agriculture, Tom Vilsack, said that there were “critical challenges.”

That all EU member states are classified as low risk — meaning just 1% of operators will face annual checks — should mean that they support the implementing regulation in a vote on May 12, according to people familiar with the matter.

Still, the decision — based on the rate of deforestation in any country — will come as a blow to Brazil, which had also lobbied the EU heavily to delay and loosen the criteria. The country is set to host the United Nations’ COP30 climate summit in November and has made protecting forests one of the key pillars, including through the creation of a $125 billion fund.

The person declined to specify the categories in which other commodity-producing countries had been placed in.

The EU aims to slash the 10% of global deforestation — and associated loss of biodiversity — linked to the bloc’s consumption of commodities such as timber, beef, coffee and cocoa. The law will require every log, cow and bean entering the region to be traced to their origins to avoid hefty penalties.

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