UK Launches Deforestation Regulation Consultation

This week, the UK Department for Environment, Food and Rural Affairs (Defra) launched a consultation on proposed supply chain due diligence regulations to address illegal deforestation. The regulations would apply to coffee, cocoa, cattle, soy, oil palm, rubber and timber, as well as derived products. The consultation, including the Government's proposal, is discussed in this post.

The UK already has somewhat of a framework for addressing illegal deforestation.

• The UK Timber Regulation, adopted in 2013, prohibits placing illegally harvested timber and timber products on the market in Great Britain.

• In 2021, the UK introduced primary legislation to address illegal deforestation by regulating the use of forest risk commodities. Schedule 17 of the Environment Act 2021 provides the framework for prohibiting the commercial use of forest risk commodities unless they were produced in compliance with relevant local laws.

  The Environment Act establishes three core requirements: (1) a prohibition on using illegally produced forest risk commodities – relevant local laws must be complied with in relation to the commodity, (2) a requirement to establish and implement a due diligence system – i.e., a system for identifying and obtaining information about the commodity and assessing and mitigating the risk of non-compliance with relevant local laws relating to the commodity, and (3) annual reporting on the due diligence system. Secondary legislation is needed to implement this framework. 

• In addition, the EU Deforestation Regulation will apply in Northern Ireland, starting at the end of this year.

As we wrote about during the summer, on June 23, the UK Government announced that it intends to introduce deforestation regulations under Schedule 17 of the Environment Act. It laid out the proposed regulations in broad strokes in a contemporaneous policy paper. Defra has indicated that implementing regulations are expected to be delivered in 2027. In addition to implementing Schedule 17 of the Environment Act, those regulations will update requirements under the current UK Timber Regulation. 

Schedule 17 Proposal

The portion of the consultation on the Schedule 17 regulations includes, among other things, proposals on (1) in-scope products and businesses, (2) due diligence system requirements and (3) identifying, assessing and mitigating the risks of illegal deforestation, as further discussed below. 

This is the second consultation held; the prior consultation is discussed in this Ropes & Gray post.

Covered Commodities

The Government intends to regulate seven commodity categories: cattle, cocoa, coffee, oil palm, rubber and soy, alongside strengthening the existing timber regime. 

Only specified products would be regulated. Harmonised System (HS) product codes would identify these products. The proposed scope is broadly comparable to Annex I of the EU Deforestation Regulation. The proposed product scope includes EU Deforestation Regulation Annex I products that have been added effective December 30, 2027. 

Subject Entities

The regulations would apply to businesses with annual global turnover of more than £1 million in their prior financial year. Volume-based exemptions are not contemplated.

The Consultation Document notes for clarity that financial services are not targeted by the regulations (guidance to this effect will be issued). However, if a financial institution directly buys and sells covered commodities and in the process holds the legal title to those commodities, it will come within the requirements. 

For in-scope businesses, the requirements will apply to online and distance sales, including both B2B and B2C e-commerce transactions.

The regulations will apply at the market level – to commercial activities carried on in the UK – rather than at the entity level.

Due Diligence System

Regulated commodities would need to be traced to their harvest location or production areas, as evidenced by geolocation data. Geolocation information would be required to be in a format compatible with the EU Deforestation Regulation using a common data standard. In the Consultation Document, Defra recognizes that appropriate geolocation data aggregation methods may vary depending on the commodity, product, characteristics of sourcing regions and supply chains and therefore welcomes views and evidence on these considerations. 

Geolocation origin data would be used alongside other information to assess and mitigate the risk that commodities were not produced in compliance with relevant deforestation laws. The Consultation Document indicates that the risk assessment may take into account factors such as commodity-specific risks, governance and enforcement, supplier practices, supply chain complexity and the risk of mixing with commodities from unknown or potentially non-compliant sources. Defra is seeking views and evidence on the requirements of an effective risk assessment.

In contrast to the European Union’s approach, the UK does not plan to publish a country-level risk benchmarking system that classifies countries according to the level of risk that commodities are produced on land subject to deforestation or illegally produced. However, the Consultation Document indicates that regulated businesses will be required to appropriately assess risk as part of their supply chain due diligence and country of origin may be part of that assessment.

If a risk of non-compliance with relevant local laws is identified through due diligence, the subject company would be required to mitigate that risk to a negligible level before using the commodity or product in its commercial activities. Defra is seeking input on whether the UK should use the same categories of relevant local laws as the EU Deforestation Regulation. The Consultation Document notes that, in considering the scope of local laws, the UK Government will take into account proportionality, the associated evidential burden on businesses and producers in demonstrating compliance and relevance to achieving the policy objective of preventing illegal deforestation. 

Defra also is seeking views on establishing a differentiated approach to due diligence based on a business’s position in the supply chain, among other things to reduce duplication. Additionally, Defra is seeking input on whether relevant due diligence information, including traceability information, should be shared with businesses further downstream to support them in their compliance and whether that can be done through businesses’ existing systems and processes. Potential approaches are further discussed in the Consultation Document. The UK Government’s preferred approach is to create a regulatory requirement to share information between regulated businesses, operated flexibly through a business-to-business model, as further discussed in the Consultation Document.

The Consultation Document indicates that the UK Government is not seeking to ban in Great Britain commodities that are not deforestation-free, noting that the UK Timber Regulation and Schedule 17 of the Environment Act establish prohibitions based only on whether a commodity was legally harvested or produced. However, the Consultation Document goes on to indicate that the UK Government’s ambition is to transition to a deforestation-free standard in the future. 

In addition, the Consultation Document indicates that due diligence statements would not be required to be submitted to the UK Government before a product is placed on the Great Britain market (reporting requirements under consideration are annual and retrospective) and there would not be new customs controls or border checks on goods entering Great Britain or additional information requirements for market entry or changes to import or export documentation. 

Annual Reporting

Defra is seeking input on the content of the annual report to be submitted to the regulator, and what information should be published to support effective public scrutiny. Among other things, it is considering requiring information concerning the following: 

• The types and quantities of commodities and products to which the report relates;

• Geographic information, such as the country or subnational region of origin; 

• Information regarding the level of traceability; 

• How compliance with relevant laws is assessed;

• Risk assessment methodology and processes, factors assessed and outcomes; 

• Where risk was identified, risk mitigation actions taken and the results;

• Grievances received and actions taken to address them;

• How producers, including small-scale producers and indigenous peoples and local communities, were meaningfully engaged (if relevant);

• How compliance information has been audited or verified;

• Use of third-party certification or other assurance schemes, or adherence to relevant standards as part of due diligence; and 

• The extent to which information from upstream actors is relied on.

Defra also is considering how annual reporting requirements should be applied proportionately to businesses at different points in the supply chain.

In addition, Defra is seeking input on the extent to which information and evidence used to meet reporting requirements under other regulatory frameworks, such as the EU Deforestation Regulation, could also support reporting under the deforestation regulations in Great Britain.

A digital system will be developed by the Government to support the submission of annual reports.

Enforcement

Defra is soliciting views on appropriate civil sanctions, in particular whether there should be maximum penalties and whether penalties should be a fixed amount or tied to turnover.

UK Timber Regulation Proposal

The UK Government is proposing to make the following core changes to the existing due diligence regulations for timber and timber products and/or is seeking input on the following related topics:

• The list of in-scope timber products would be expanded to be comparable to the EU Deforestation Regulation Annex I wood product scope. The Consultation Document indicates the additional timber products proposed for inclusion.

  Defra is considering an exclusion for wood packaging used solely to support, protect or carry another product, similar to the exclusion under the EU Deforestation Regulation.

• The new requirements would apply to businesses with annual global turnover of more than £1 million in the previous financial year. Other businesses would remain subject to existing obligations under the UK Timber Regulation.

• Timber traceability to harvest site(s) would be required, with geolocation data to be collected as evidence of origin. 

• In line with the proposal on forest risk commodities, Defra is seeking views on whether relevant due diligence information, including traceability information, should be shared with timber traders to increase the effectiveness of the regulation and how the information should be shared, including whether this can be done through businesses’ existing systems and processes.

• Whether annual reporting requirements should apply to timber businesses, taking into account the reporting approach proposed for forest risk commodities and existing requirements applying to the timber sector.

Responding to the Consultation

The Consultation Document is available here. It includes 91 questions. However, respondents do not need to answer all of them. Respondents are encouraged to use the online survey tool.

The consultation closes on January 17, 2027.

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