FAQ: EUDR Country Benchmarking System and Its Impact on the Malaysian Palm Oil Industry

THE objective of the benchmarking is to support the implementation of the EUDR by classifying countries into a low-risk, standard-risk, or high-risk classification for deforestation and forest degradation. This classification:

• Helps EU operators assess the risk of deforestation and forest degradation associated with the seven commodities affected in a source country.
• Enables more targeted and efficient due diligence procedures.
• Encourages producer countries to strengthen forest governance and sustainable practices.
• Incentivises countries to reduce deforestation to have better EU market access.

The EUDR risk classification system evaluates countries as 'low', 'standard' or 'high' risk based primarily on quantitative criteria like deforestation rates, agricultural land expansion, and production trends of relevant commodities. Countries close to the thresholds will undergo a qualitative assessment that complements the quantitative analysis to change to a lower risk category.

Being listed as 'standard-risk' means:

• Full due diligence obligations for all EU operators sourcing from Malaysia. Companies must verify that their products are: 

1. deforestation-free (i.e., not produced on deforested land after 2020),
2. legal under specific countries' law, and
3. fully traceable to their origins (via geolocation data)

• No simplification in compliance procedures compared to ‘low-risk’ countries.
• Greater scrutiny by EU competent authorities: subject to 3% annual compliance checks, compared to 1% for ‘low-risk’ countries.

If countries are upgraded to ‘low-risk’, the benefits are:

• Simplified due diligence for EU operators sourcing from Malaysia
• Increased attractiveness to EU importers due to lower compliance requirements (1% annual compliance checks)
• Boost in trade competitiveness
• Enhanced international reputation