"Pulp Supply Chain Tracking Difficult... Implementation Should Be Delayed"
"If US Export Stops, Entire EU Will Be Affected"
As the European Union (EU) Forest Law Enforcement, Governance and Trade Regulation (EUDR) is set to be implemented by the end of this year, concerns have been raised that it could exacerbate inflation across Europe.
On the 10th (local time), Bloomberg reported that the American Wood and Paper Association made this claim and urged the EU to postpone the enforcement of the law.
Mark Fitz, director of the American Wood and Paper Association, stated, "If this law is enforced, prices of products made from pulp extracted from wood, such as diapers and sanitary pads, will increase, which will lead to inflationary pressures in the EU." Fitz also noted that the law is already affecting supply contracts of some member companies even before its enactment.
The association argues that the pulp supply chain is too extensive to be fully traceable, and since there is a two-year lag from logging to fiber production, complying with the regulation is impossible. Therefore, they are calling for a delay in the law’s implementation scheduled for the end of this year and for the paper industry to be classified as a low-risk group for deforestation.
According to foreign media, Gina Raimondo, U.S. Secretary of Commerce, Tom Vilsack, Secretary of Agriculture, and Katherine Tai, U.S. Trade Representative (USTR), also sent a letter to the European Parliament in May requesting a postponement of the regulation’s application.
The EUDR is a law aimed at reducing global deforestation and biodiversity loss caused by the consumption of seven products, including wood, beef, coffee, and cocoa. Companies importing and selling these products must prove that they were not produced on land converted through deforestation after December 2020. Failure to comply will result in fines of at least 4% of the company’s EU revenue.
The United States is a major exporter of absorbent material known as "fluff pulp." Pulp exported from the U.S. satisfies about 60% of the total EU demand. According to Euromonitor International, Procter & Gamble and Kimberly-Clark are the largest diaper suppliers in Europe. Bloomberg predicted that if U.S. companies halt exports, it could cause ripple effects throughout Europe.
This issue is not limited to the paper industry. Palm oil exporting countries such as Malaysia and Indonesia are also requesting a delay.
Yesterday, Giuseppe Lavazza, chairman of Italy’s major coffee company Lavazza, stated that the coffee industry is facing strong headwinds due to the enforcement of the EUDR. Currently, only 20% of coffee farms comply with the EUDR. He forecasted a rise in coffee prices as a result.
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