EXPLAINER: The EU Ban on Palm Oil Continued
There is much confusion around the “EU ban on palm oil” which is supposed to take place once the policy makers in Brussels approves the EU Commission’s proposals on deforestation-free supply chains.
The EU Commission announced on December 06, 2022, that “The Commission welcomes the provisional political agreement just reached between the European Parliament and the Council on an EU Regulation on deforestation-free supply chains.”
Media coverage of the announcement set off a frenzy on how the EU Regulation on deforestation-free supply chains would ban palm oil.
The declared ban on palm oil was repeated in SE Asian media with The Jakarta Post reporting “The European Union will soon enforce its deforestation regulation which bans palm oil and its derivatives that do not meet the EU-set sustainability standards from entering the EU market.”
The Malaysian Digest published a convoluted report claiming that: “The European Union’s decision to ban palm oil has caused a stir in the global marketplace, with many questioning why it has taken such a drastic action.”
The mass confusion caused the EU Ambassador to Malaysia, Michalis Rokas, to refute the Malaysian Palm Oil Board’s statement that the EU would be banning palm oil under the new Corporate Due Diligence legislations.
According to Ambassador Rokas, there is No palm oil ban by EU in the EU Commission’s proposals for Corporate Due Diligence.
“I would like to clarify the statement made by the Malaysian Palm Oil Board (MPOB) on the European Union’s (EU) legislative proposal “on the making available on the Union market as well as export from the Union of certain commodities and products associated with deforestation and forest degradation”.
So how did the EU’s deforestation regulations end up as a ban on palm oil?
Irresponsible Media Clickbaits Created Confusion
It may have to do with misleading reports like this one from Mongabay which titled its content as “European bill passes to ban imports of deforestation-linked commodities”
The European Parliament has approved a bill blocking the import of “dirty commodities” by members of the European Union, in an effort to combat global deforestation.”
Adding to the confusion is a report by Mintec Global titled: EU agrees law to ban imports of soy and palm oil derivatives linked to deforestation
“On 6th December, the European Union (EU) agreed a new law to ban the import of soy, palm oil and derivative products, among other commodities linked to deforestation globally. The law mandates companies to prove with due diligence that their products are deforestation-free (not grown on land deforested after 2020), before being allowed into the EU.”
It didn’t help that “legal experts” Holman Fenwick Willan LLP weighed into the issue earlier with:
AN UPDATE: EUROPEAN UNION DRAFT LAW SEEKING TO BAN IMPORTS AND EXPORTS OF COMMODITIES FROM REGIONS AT RISK OF DEFORESTATION
“On 28 June 2022, the Council of the European Union adopted its negotiating position on the draft Regulation which would ban the import and export of six core agricultural commodities to and from the European Union where these products have been linked to deforestation.”
No Palm Oil Ban by the EU’s Corporate Due Diligence
Now that a deal has been reached with the Czech Presidency of the Council of the European Union, it's time to look into the Proposal for a Regulation of the European Parliament and of the Council.
The text reads like the press statement made on December 06, 2022, which was published here:
“On Tuesday morning, MEPs reached a preliminary deal with EU governments on a new law on deforestation-free products that will make it obligatory for companies to verify and issue a so-called “due diligence” statement that goods placed on the EU market have not led to deforestation and forest degradation anywhere in the world after 31 December 2020. According to the agreed text, while no country or commodity as such will be banned, companies will not be allowed to sell their products in the EU without this type of statement.”
There is a suggestion of a “ban” in Article 3 where the word “Prohibition” is used as in:
“Prohibition Relevant commodities and products shall not be placed or made available on the Union market, or exported from the Union market, unless all the following conditions are fulfilled:
(a) they are deforestation-free;
(b) they have been produced in accordance with the relevant legislation of the country of production;
and (c) they are covered by a due diligence statement.”
As far as palm oil imports are concerned, the main exporting countries in Indonesia and Malaysia, should have no problems meeting the first two conditions. Deforestation regulations notwithstanding, certification schemes like the ISCC and RSPO have for years, developed a deforestation-free supply chain for EU imports of palm oil.
However, voluntary certification standards like the ISCC or RSPO may or may not qualify to provide the quality assurance. National standards in the MSPO and ISPO appear to have the necessary governmental assurance to support the due diligence statement by Authorised Representatives.
According to Article 5 of the Proposed Regulation:
“Authorised representatives 1. Operators or traders may mandate an authorised representative to make available the due diligence statement pursuant to Article 4(2) on their behalf. The operator or trader shall in that case retain the responsibility for the compliance of the relevant product with the requirements of this Regulation”
It is therefore in the best interests of major palm oil producing countries like Indonesia and Malaysia, to ensure that the MSPO and ISPO are accepted within the influence of “Authorised Representatives.”
This is in fact, a solution to the many problems with the due diligence proposal as stated by Business Europe amid concerns of excluding palm oil smallholders.
Rating Palm Oil Producing Countries on Deforestation Risks
Making the case easier for both importers and exporters would be the rating of palm oil producing countries as Low or Standard Risk.
Malaysia has warned that designating its palm oil as coming from a High Risk country would be seen as offensive.
The concern is justifiable but the strength of the MSPO and ISPO, as state-owned schemes, as augmented by solid credentials, should see Indonesia and Malaysia, rated as “Standard Risk” at best, or “Low Risk” at worst as presented below.
“CHAPTER 5 COUNTRY BENCHMARKING SYSTEM AND COOPERATION WITH THIRD COUNTRIES
Article 27 Assessment of countries
2. The identification of low and high risk countries or parts thereof pursuant to paragraph 1 shall be based on an objective and transparent assessment by the Commission, taking into account the latest scientific evidence and internationally recognised sources. The identification shall be primarily based on the following assessment criteria:
(a) rate of deforestation and forest degradation,
(b) rate of expansion of agriculture land for relevant commodities,
(c) production trends of relevant commodities and of relevant products,”
Within the parameters for the assessment of risks, current reports show that palm oil from Indonesia and Malaysia, should qualify as “Low Risk”, if not “Standard Risk” as long as the cut-off date is maintained.
It remains to be seen, how much of the wording and content of the Proposal will make it into law. The one thing that is certain, is that companies which are unable to provide the simple requirements of the deforestation regulation, will face temporary bans or import restrictions unless they are unable to meet the “Corrective action in case of non-compliance” as stated in Article 22.
But of all the commodities targeted by the EU, palm oil stands most ready to meet the requirements of the deforestation regulations. This is apparent once the confusion on the “ban on palm oil” by the deforestation regulations, is cleared up.
Published January, 2023. CSPO Watch
The EU Commission announced on December 06, 2022, that “The Commission welcomes the provisional political agreement just reached between the European Parliament and the Council on an EU Regulation on deforestation-free supply chains.”
Media coverage of the announcement set off a frenzy on how the EU Regulation on deforestation-free supply chains would ban palm oil.
- The Guardian declared “EU ban on deforestation-linked goods sets benchmark, say US lawmakers”
- The BBC Deforestation: EU law bans goods linked to destruction of trees
- SPGLOBAL added: EU agrees on "groundbreaking" law to ban agri-food imports contributing to deforestation
- France24: The European Union reached an agreement Tuesday to ban the import of products including coffee, cocoa and soy in cases where they are deemed to contribute to deforestation.
The declared ban on palm oil was repeated in SE Asian media with The Jakarta Post reporting “The European Union will soon enforce its deforestation regulation which bans palm oil and its derivatives that do not meet the EU-set sustainability standards from entering the EU market.”
The Malaysian Digest published a convoluted report claiming that: “The European Union’s decision to ban palm oil has caused a stir in the global marketplace, with many questioning why it has taken such a drastic action.”
The mass confusion caused the EU Ambassador to Malaysia, Michalis Rokas, to refute the Malaysian Palm Oil Board’s statement that the EU would be banning palm oil under the new Corporate Due Diligence legislations.
According to Ambassador Rokas, there is No palm oil ban by EU in the EU Commission’s proposals for Corporate Due Diligence.
“I would like to clarify the statement made by the Malaysian Palm Oil Board (MPOB) on the European Union’s (EU) legislative proposal “on the making available on the Union market as well as export from the Union of certain commodities and products associated with deforestation and forest degradation”.
So how did the EU’s deforestation regulations end up as a ban on palm oil?
Irresponsible Media Clickbaits Created Confusion
It may have to do with misleading reports like this one from Mongabay which titled its content as “European bill passes to ban imports of deforestation-linked commodities”
The European Parliament has approved a bill blocking the import of “dirty commodities” by members of the European Union, in an effort to combat global deforestation.”
Adding to the confusion is a report by Mintec Global titled: EU agrees law to ban imports of soy and palm oil derivatives linked to deforestation
“On 6th December, the European Union (EU) agreed a new law to ban the import of soy, palm oil and derivative products, among other commodities linked to deforestation globally. The law mandates companies to prove with due diligence that their products are deforestation-free (not grown on land deforested after 2020), before being allowed into the EU.”
It didn’t help that “legal experts” Holman Fenwick Willan LLP weighed into the issue earlier with:
AN UPDATE: EUROPEAN UNION DRAFT LAW SEEKING TO BAN IMPORTS AND EXPORTS OF COMMODITIES FROM REGIONS AT RISK OF DEFORESTATION
“On 28 June 2022, the Council of the European Union adopted its negotiating position on the draft Regulation which would ban the import and export of six core agricultural commodities to and from the European Union where these products have been linked to deforestation.”
No Palm Oil Ban by the EU’s Corporate Due Diligence
Now that a deal has been reached with the Czech Presidency of the Council of the European Union, it's time to look into the Proposal for a Regulation of the European Parliament and of the Council.
The text reads like the press statement made on December 06, 2022, which was published here:
“On Tuesday morning, MEPs reached a preliminary deal with EU governments on a new law on deforestation-free products that will make it obligatory for companies to verify and issue a so-called “due diligence” statement that goods placed on the EU market have not led to deforestation and forest degradation anywhere in the world after 31 December 2020. According to the agreed text, while no country or commodity as such will be banned, companies will not be allowed to sell their products in the EU without this type of statement.”
There is a suggestion of a “ban” in Article 3 where the word “Prohibition” is used as in:
“Prohibition Relevant commodities and products shall not be placed or made available on the Union market, or exported from the Union market, unless all the following conditions are fulfilled:
(a) they are deforestation-free;
(b) they have been produced in accordance with the relevant legislation of the country of production;
and (c) they are covered by a due diligence statement.”
As far as palm oil imports are concerned, the main exporting countries in Indonesia and Malaysia, should have no problems meeting the first two conditions. Deforestation regulations notwithstanding, certification schemes like the ISCC and RSPO have for years, developed a deforestation-free supply chain for EU imports of palm oil.
However, voluntary certification standards like the ISCC or RSPO may or may not qualify to provide the quality assurance. National standards in the MSPO and ISPO appear to have the necessary governmental assurance to support the due diligence statement by Authorised Representatives.
According to Article 5 of the Proposed Regulation:
“Authorised representatives 1. Operators or traders may mandate an authorised representative to make available the due diligence statement pursuant to Article 4(2) on their behalf. The operator or trader shall in that case retain the responsibility for the compliance of the relevant product with the requirements of this Regulation”
It is therefore in the best interests of major palm oil producing countries like Indonesia and Malaysia, to ensure that the MSPO and ISPO are accepted within the influence of “Authorised Representatives.”
This is in fact, a solution to the many problems with the due diligence proposal as stated by Business Europe amid concerns of excluding palm oil smallholders.
Rating Palm Oil Producing Countries on Deforestation Risks
Making the case easier for both importers and exporters would be the rating of palm oil producing countries as Low or Standard Risk.
Malaysia has warned that designating its palm oil as coming from a High Risk country would be seen as offensive.
The concern is justifiable but the strength of the MSPO and ISPO, as state-owned schemes, as augmented by solid credentials, should see Indonesia and Malaysia, rated as “Standard Risk” at best, or “Low Risk” at worst as presented below.
“CHAPTER 5 COUNTRY BENCHMARKING SYSTEM AND COOPERATION WITH THIRD COUNTRIES
Article 27 Assessment of countries
2. The identification of low and high risk countries or parts thereof pursuant to paragraph 1 shall be based on an objective and transparent assessment by the Commission, taking into account the latest scientific evidence and internationally recognised sources. The identification shall be primarily based on the following assessment criteria:
(a) rate of deforestation and forest degradation,
(b) rate of expansion of agriculture land for relevant commodities,
(c) production trends of relevant commodities and of relevant products,”
Within the parameters for the assessment of risks, current reports show that palm oil from Indonesia and Malaysia, should qualify as “Low Risk”, if not “Standard Risk” as long as the cut-off date is maintained.
It remains to be seen, how much of the wording and content of the Proposal will make it into law. The one thing that is certain, is that companies which are unable to provide the simple requirements of the deforestation regulation, will face temporary bans or import restrictions unless they are unable to meet the “Corrective action in case of non-compliance” as stated in Article 22.
But of all the commodities targeted by the EU, palm oil stands most ready to meet the requirements of the deforestation regulations. This is apparent once the confusion on the “ban on palm oil” by the deforestation regulations, is cleared up.
Published January, 2023. CSPO Watch
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