The UK Forest Risk Commodity Regulation: Wood They or Wouldn't They?

Introduction

Deforestation is now the second leading cause of climate change globally, after burning fossil fuels, and is responsible for around 11% of all greenhouse gas emissions. In the last 60 years more than half of tropical forests worldwide have been destroyed, reducing biodiversity and endangering rare species.¹

Commodities such as cattle and palm oil (used in frying fats, chocolate and cosmetics) have been identified as some of the key drivers of deforestation. From December 2026 (June 2027 for micro and small undertakings established as such by December 2024), the EU Regulation on Deforestation-Free Products ("EUDR") prohibits the placing on the market or making available in the European Union, or exporting certain commodities and products unless they are deforestation-free and produced in compliance with legislation in the country of production. Stringent due diligence and reporting requirements are imposed on in-scope companies.

The United Kingdom is developing its own Forest Risk Commodity ("UKFRC") regime: the enabling legislation is set out in the Environment Act 2021 (the "Act"). However, the details have been "on hold" for several years. In June, the Government announced some significant changes to the originally proposed scheme, though the exact details remain unavailable.

A further Government consultation is set to take place in 2026, with legislation expected in 2027. However, it is unclear if the recent change of Prime Minister and members of the Government will create further delay or lead to another rethink.

In this Legal Update, we summarise the key design features of the originally proposed UKFRC and highlight some of the key ways it diverged from the (recently updated) EUDR. We then summarise those elements of UKFRC which are known or remain uncertain.

It should be noted that EUDR will continue to apply in Northern Ireland. The Government has announced that: "The upcoming consultation will propose that the GB regime covers the same core commodities and underlying information requirements as the regulation in Northern Ireland where EUDR applies. This aligned approach is designed to prevent administrative duplication across the United Kingdom while helping British exporters to the European Union meet consistent data and traceability standards."

As such, we can expect greater alignment with the EU legislation than was originally envisaged, but so far it remains unclear to what extent key design elements will be harmonised.

Key Design Features of the UKFRC

Key aspects of UKFRC

• The Act as currently in force sets out three core requirements on in-scope businesses:
  • A prohibition to use in-scope illegally produced forest risk commodities (including both raw and derived products);
  • A requirement to establish a due diligence system; and
  • A requirement to report annually on their due diligence exercise.

• Limiting the Act to illegally produced forest risk commodities (meaning that local laws in the country of origin must be complied with) was the first fundamental divergence from EUDR. EUDR goes further than this and requires products to be entirely deforestation-free with a cut-off date of 31 December 2020.
• The Government has indicated that whilst it will initially focus only on illegal deforestation, it may move towards EUDR's more comprehensive requirement that products be entirely deforestation-free.
• In order to do so, the Act itself would need to be amended. The Government will not be able to solely rely on existing powers under the Act to issue new regulations. Given the likely packed upcoming legislative agenda, one wonders whether new legislation in this area will be prioritised.

Wood they, wouldn't they?

• A second key area of divergence is that the Act provides that the underlying regulations made under the Act may not specify timber or timber products as a forest risk commodity. Though this at first seems counter-intuitive, the original plan was for the already-in-place UK regime under the UK Timber Regulation that applies to timber products (implementing the European Union's Timber Regulation) would remain in place. Regulations under the Act would provide that the regime applies only to non-timber forest risk commodities (see the list below).
• This original policy now seems to have been departed from and the Government has announced that the newly proposed regime will include "wood." However, again, this will require the Act itself to be amended.

In scope businesses and exemptions

• It was also originally proposed that only those businesses with a global annual turnover of £50 million or more would be required to comply. In addition, businesses using 500 tonnes or less of each in-scope commodity per annum could apply for an exemption.
• However, the availability of these exemptions seems likely to be significantly cut back, with the Government stating that businesses that trade in forest risk commodities and wood products, and that have an annual turnover of more than £1 million, will be required to comply with the due diligence requirements.
• A discussion has been underway at both the EU and UK levels as to whether the financial sector should be in-scope. So far neither scheme envisages that this is the case but in the EU there will be a review of the scope of the scheme by 30 June 2030 that should consider the issue.

Enforcement

• It seems likely that the secondary legislation made under the Act will continue to provide for a range of enforcement options. Amongst these will be an unlimited monetary (civil) penalty for significant breaches of the Regulations. There will also be criminal penalties for failure, without reasonable excuse, to comply with some of the data requirements. The details are to follow when the draft Regulations are published.

Comparison of UKFRC and EUDR

Many of the details of the UKFRC are yet to be announced. The main differences between the original UK proposal, EUDR and the recent announcement are set out below.

Recent Simplification of the EUDR

Following major industry pushback, in December 2025, the European Union introduced amendments to the EUDR that modified obligations for downstream operators and traders reducing their compliance burden and introduced a category of micro or small primary operators (mainly, EU farmers) with limited obligations, and in May 2026, the European Commission updated its EUDR Guidance and FAQs to align with December 2025 amendments.

The obligations of operators, and their compliance burden, however, remain largely intact. For operators, particularly those importing to the European Union, compliance with the EUDR requires establishment, maintenance and day-to-day use of an intricate compliance mechanism covering inter alia collection and analysis of significant volumes of data and information, implementation of supply chain traceability and segregation of in-scope products, evaluation of the products' compliance with the legislation in the country of production and engagement with the European Union's online EUDR platform.

If Great Britain follows suit, in-scope companies will need to devote significant time and resources to ensure compliance and engage with the whole supply chain to ensure traceability, segregation and availability of necessary data and documentation.

Practical considerations

The Government's announcement is likely to be a relief for many businesses that were contemplating having to prepare for two completely different regimes. However, there are a number of practical aspects of the design of the regime that will apply in Great Britain that remain uncertain. These include:

• Mandatory Geolocation Tracking and Supply Chain Traceability: The EUDR requires precise latitude and longitude coordinates and supply chain traceability to map in-scope products directly to the exact plot of land where the commodities were produced. It remains to be confirmed whether similar requirements will apply in Great Britain.
• Legality Requirement: The EUDR's legality requirement mandates in-scope commodities and products to have been produced in compliance with a wide range of laws applicable in the country of production. The operators are required to collect "adequately conclusive and verifiable information" confirming such compliance and, where applicable, to perform risk assessment and risk mitigation. While the updated Guidance has eased up to a certain degree the requirement to collect and analyse documentation by introducing the element proportionately to the level of risk involved, the legality requirement remains one of the most complex burdens imposed by the EUDR which affects primarily operators importing relevant products to the European Union. It remains to be seen what Great Britain will require to demonstrate compliance with the legality requirement and whether it will adopt a risk-based approach.
• Human and Labor Rights: It is not yet clear exactly which standards on human and labour rights will be integrated into the legislative framework that will apply in Great Britain.
• In-scope products: EUDR relies on a specific list of in-scope products and their Harmonized System and Combined Nomenclature codes to trigger compliance. While the United Kingdom intends to align its future deforestation rules with international frameworks, the exact list of UK products, their customs codes and exemptions remains undefined.
• Due diligence statements: EUDR requires operators to submit a Due Diligence Statement (DDS) containing inter alia geolocation data, quantity and product description into the European Union's Information System (an online tool). For imports of in-scope products, the DDS reference number assigned by the system must be included into the customs declaration to enable customs clearance. It is still unknown if the United Kingdom's processes and documentary requirements will mirror the European Union's systems exactly.

 

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¹ See Fifth Special Report of Session – 2023-24: The UK's contribution to tackling deforestation: Government's Response to the Committee's Fourth Report.

² Per EUDR Guidance, FAQs and Commission Delegated Regulation of 13 July 2026 (the latter is not yet in force).