EUDR 2025–2026: What Malaysian Palm‑Oil, Rubber and Wood Exporters Must Know and Do Next

Starting on 30 December 2025, the EU Deforestation Regulation (EUDR) will admit Malaysian palm-oil, rubber and timber products only if each shipment is demonstrably deforestation-free and produced in full conformity with Malaysian law – including land titles, labour standards, environmental permits, taxes and indigenous-land rights.

Exporters therefore have only little time left to map supply chains to plot level, compile a legislation–evidence matrix for every estate, mill and factory and test bulk uploads in the EU’s digital portal. Without that audit-ready dossier European buyers will not load and EU customs will not clear, any goods after the deadline.

This article first provides an overview of the EUDR and then highlights what has happened in the last few months and what is expected going forward. It then sets out specific steps Malaysian companies should take given that the clock is ticking fast.

Executive snapshot

The European Union Deforestation Regulation (EUDR) is entering its operational phase. Beginning on 30 December 2025, Malaysian companies that exports palm‑oil, natural‑rubber or timber‑based goods to the EU must file a digital Due Diligence Statement (DDS) through the EU’s online EUDR Information System. The DDS must confirm that the products are:

• deforestation‑free; and
• produced in accordance with relevant Malaysian laws (if produced in Malaysia), including land tenure, labour, tax and environmental statutes.

Failure to meet either limb will almost certainly result in refusal by European procurers given that they face confiscation of consignments, fines of up to 4% of their annual turnover and in the worst cases exclusion from market participation altogether.

Malaysia has been placed in the “standard risk” category for deforestation earlier this year, which obliges EU authorities to perform documentary and identity checks on at least 3% of consignments. By contrast, “low‑risk” countries face a minimum one‑per‑cent inspection rate. The distinction is therefore quantitative rather than qualitative: the underlying obligation applies to every shipment regardless of its risk label and a reduction in audit frequency does not create any margin for shortcuts.

1.     EUDR essentials for Malaysian exporters

The EUDR covers six core commodities and their derived products. For Malaysia, three are commercially significant: palm oil, natural rubber and wood. Under Article 3, goods may enter the EU market only when the EU importer demonstrates that they are deforestation‑free and that they were produced in accordance with “the relevant legislation of the country of production.” The phrase embraces land titles, environmental licensing, labour standards, pesticide limits, tax filings and even indigenous‑land rights. Evidencing compliance requires far more than a sustainability certificate or GPS map.

The due‑diligence obligation unfolds in three cumulative steps, which, somewhat simplified, can be described as follows:

• first, the EU importer[1] of relevant products must collect information: exact geo‑coordinates for every plantation or forest plot that supplied the shipment, plus details of quantity, species and supplier identity, as well as on the compliance with the above-mentioned legal requirements.
• second, the EU importer must conduct a risk assessment that tests whether deforestation or legal non‑compliance could be present.
• third, if any more‑than‑negligible risk remains, the EU importer must adopt mitigation measures until the risk is negligible. These duties apply shipment‑by‑shipment regardless of Malaysia’s risk rating.

Contrary to common belief – and misunderstanding – in Malaysia, the EUDR thus does not impose any duty whatsoever directly on Malaysian exporters. However, EU procurers of relevant products will place that duty on Malaysian exporters commercially: those companies, which can comply with the requirements the EU importers are facing, will be able to sell their products. Those, who are not, will not sign any deals.

Table 1 – Principal elements of the EUDR and their relevance for Malaysian exporters

2.     What happened in 2025 – Building the compliance scaffolding

In December 2024, the European Commission, the Council of the European Union and the European Parliament agreed to delay the entry into force of the EUDR by one year – to 30 December 2025. Sinc then, various events during the first half of 2025 transformed the EUDR from static legislation into a live compliance project:

• On 15 April the European Commission published a Draft Delegated Act that clarifies how mixed‑content products such as nitrile‑rubber gloves and tyres containing synthetic components will be treated.
• On 20May the Commission released its methodology for benchmarking producing countries against deforestation and governance criteria.
• The most widely reported development occurred on 22May when Malaysia was classified as a standard‑risk origin. We will explain what impact this has on Malaysian companies in this write-up.
• June then saw the publication of the fourth edition of the Guidance Document and an expanded Frequently Asked Questions set, both of which explain how companies may submit aggregate DDSs valid for twelve months and use authorised representatives to reduce administrative workload.

Table 2 – Key regulatory milestones in 2025

3.     What will happen next – The 18‑month horizon

Between mid‑2025 and the end of 2026, several further steps will tighten the compliance net. Among others:

• an Implementing Regulation locking the Country‑Risk List into EU law is scheduled for adoption still in June.
• The Delegated Act on product scope will undergo a two‑month scrutiny period by the European Parliament and Council during the Q3/2025.
• In Q4/2025, the Information System’s bulk‑upload interface will open, allowing exporters to test data pipelines.
• From 30December 2025 enforcement begins for medium‑ and large‑sized EU importers; six months later the regime widens to include small and micro‑
• End‑2026 marks the first deadline for public compliance reports.

Table 3 – Upcoming steps under the EUDR framework

4.     Risk status and the myth of easy compliance

As mentioned previously, Malaysia was identified as “standard risk” when it comes to deforestation. This was met with heavy criticism from Malaysia, including from the Malaysian Palm Oil Council (MPOC), which asserted that Malaysia has a better track record in the reduction of forest loss than some European countries.[2]

Whether correct or not, this criticism overlooks several important elements:

• the risk classification has no impact whatsoever on the core obligation to prove deforestation-free status and legal compliance for every shipment;
• the risk classification further has no impact whatsoever on the underlying duty to show that the goods to be imported to the EU were produced in accordance with the laws of the country of production;
• even in the low risk category, authorities must specifically check at least 1% of low-risk consignments (compared to 3% for the standard risk category); and
• the only real advantage is for EU importers to skip the risk-assessment and risk-mitigation steps that are mandatory under Articles 10 and 11.[3]

In summary, it can thus be said that the risk classification merely streamlines the process (skipping the risk-assessment and mitigation steps) and lowers the minimum inspection rate; however, crucially for Malaysian exporters, it cannot relax the substantive legal-compliance requirement.

5.     Risk allocation under the EUDR: the great danger for Malaysian exporters

Article 25 EUDR puts in place a very sophisticated framework of penalties, which are in place to ensure that EU importers of products covered by the EUDR adhere to the requirements under the EUDR. Crucially, the EUDR only imposes such penalties on EU importers. The EUDR does not put any penalties on Malaysian exporters.

However, it is nevertheless crucial for Malaysian exporters to understand what their business partners from the European Union are facing. This is for two main reasons:

• fully appreciating a procurer’s situation allows Malaysian companies to better understand an EU importer’s insistence on strict compliance; and
• EU importers will try to contractually pass the risk of penalties to Malaysian exporters so that the latter will have to hold the EU importer harmless for any damage suffered.

It is crucial to emphasize the second bullet point, which we will also address in greater detail further below, before highlighting specifically what penalties apply: although the EUDR does not directly impose any penalties on Malaysian companies, EU importers will attempt to design their contracts in a way that penalties can be carried over onto Malaysian exporters. This risk – coupled with the risk of a foreign law (e.g. German law) governing contracts – poses a huge threat to Malaysian exporters.

Table 4 – Penalties under the EUDR

5.1     Typical EUDR clauses

Many Malaysian exporters only focus on the price and the delivery timelines of their produce. This could prove to be extremely costly in exports to the EU. From our practice in advising foreign companies doing business in Malaysia and Malaysian companies exporting to the EU, we know that EU importers are carefully considering how to minimize their risk. This includes an obligation for Malaysian exporters to:

• guarantee that each consignment is deforestation-free and fully compliant with Malaysian law;
• keep documentary evidence for at least five years; and
• provide geo-location data and supporting licences within forty-eight hours of any request.

We have also seen a wide range of audit clauses, which give European companies significant rights, such as physical inspections “down to plantation or tapping-plot level” and rectification or improvement plans in case of breaches.

Penalty-pass-through clauses oblige the exporter to reimburse any fine the operator pays under the EUDR. Given that this can be up to 4% of the EU importer’s annual (group) turnover, potential fines in the billions are looming for Malaysian companies. These amounts could potentially increase further if an EU importer is excluded from doing business.

5.2     Traps for Malaysian exporters

Even if Malaysian exporters do some basic contractual due diligence, there are many traps which await them: For instance, the average Malaysian exporter would likely overlook that:

• the regulatory definition of “deforestation-free” is fixed by EU law – not by domestic forestry rules – and that the warranty therefore extends to land-use changes that would be legal in Malaysia;
• indemnities are often open-ended and cover consequential loss, creating liability far beyond the contract value;
• contracts may contain an “evergreen evidence” clause, under which failure to update a document – for example, a specific license or certification– is deemed a material breach even if the shipment itself meets all EUDR criteria; and
• the governing law is that of an EU country (e.g. French/German law), which Malaysian companies, which are used to the common law system in Malaysia, are completely unfamiliar with.

Going forward, exercising very thorough contractual due diligence is thus an absolute must for Malaysian exporters.

5.3     Negotiation strategies and contract review checklist

Malaysian exporters should very carefully review contract drafts and obtain legal advice which covers (i) the EUDR and (ii) the applicable law of contract. The specific negotiation strategy should be adopted on a case-by-case basis, but some elements are crucial in every contract. For instance, Malaysian exporters should:

• insist that warranties are limited to matters within their knowledge and control;
• demand that liability caps are proportionate to the contract price and that audit rights respect reasonable notice and confidentiality;
• only agree to a split-liability model under which each side bears responsibility for the part of the supply chain it manages where a shipment contains mixed inputs; and
• carefully draft their force majeure clauses to among others cover sudden regulatory changes or third-party data failures that prevent timely DDS submission.

Malaysian exporters are further advised to prepare for any negotiation based on a contract checklist, which among others ensures that:

• product descriptions match the final HS codes contained in Annex I to the EUDR;
• warranties are cross-checked against the evidence actually held;
• inspection and audit provisions are – to the extent permitted under the EUDR – aligned with existing certification audits to avoid duplication; and
• their current insurance policies cover the enlarged contractual indemnities.

In doing so, Malaysian exporters should further address any inconsistency between Malaysian and EU law through a governing-law clause that preserves the exporter’s ability to invoke domestic compliance as a defence where appropriate.

We have a tailor-made contract checklist, which we can share with Malaysian exporters free of charge upon request.

6.     Roadmap to compliance – Month‑by‑month actions

The six months before the EUDR enters into force give Malaysian exporters a very narrow implementation window. They must use July–September 2025 for supply-chain mapping, drawing precise geo-polygons for every plantation or tapping plot and building a legislation–evidence matrix that allocates document responsibility, sets validity periods and triggers renewal alerts.

During Q4/2025, Malaysian exporters should pilot bulk uploads to the EU Information System, close any evidence gaps, draft “negligible-risk” statements and secure written confirmation from EU buyers that the data package meets their contractual warranties.

The clock is ticking. By 30 December 2025 every medium- and large-sized EU importer must have a live Due Diligence Statement for each stockkeeping unit and a standing procedure for issuing new statements on future shipments.

Article 12(3) of the EUDR obliges operators to publish a report covering their first full calendar year of EUDR operations. In order to make themselves more attractive to EU importers, Malaysian exporters should therefore maintain an “audit file” throughout 2026 that records DDS reference numbers, mitigation actions, enforcement queries and supplier audits, so the public report can be compiled quickly and withstand regulator scrutiny.

7.     How Aqran Vijandran / ESG in Malaysia can help

Our support at a glance

• Two-week EUDR readiness audit: gap analysis, red-flag register and implementation timetable.
• Legislation–evidence matrix: customised database that links every estate, mill or factory to the relevant Malaysian statute and issues automatic renewal alerts.
• Contract overhaul: warranty, audit and indemnity clauses aligned with EU importer requirements; liability caps and risk-sharing mechanisms negotiated.
• Data-flow and DDS training: workshops for estate managers, glove-factory supervisors and sawmills on traceability, geo-polygons and bulk uploads to the EU portal.
• Policy advocacy – preparation of industry submissions aimed at upgrading Malaysia’s risk classification and clarifying enforcement guidance.

Prof. Dr. Harald Sippel, MBA is a European lawyer (Austria) who has spent more than fifteen years guiding Asian suppliers through EU market-entry rules. He combines deep knowledge of EU trade and environmental law with on-the-ground experience in mapping complex palm-oil, rubber and timber supply chains.

Sujatha Sekhar Naik – co-author – is a Malaysian compliance specialist who previously headed export-control and sanctions programmes for a global manufacturer. She pairs hands-on expertise in corporate compliance systems with an intimate understanding of how regulatory demands cascade down Asian supply chains.

Together they translate regulatory obligations into workable, audit-ready processes tailored to Malaysian exporters.

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[1]           For reasons of simplicity, this write-up uses the term “EU importer." The EUDR differentiates between “Operators” (Art. 2(15)); “Traders” (Art. 2(17)); “authorised representative” (Art. 2(22)); and third country operators (Art. 7). Only two business roles are regulated: operators (first placers/exporters) and traders (all downstream resellers). Every shipment must pass through at least one operator, and traders’ obligations scale with their size; the risk-management duties themselves do not change.

[2]           Oils & Fats International, Malaysia says its ‘standard’ risk classification under EUDR “unfair”, 29^th May 2025, available at: www.ofimagazine.com/news/malaysia-says-its-standard-risk-classification-under-eudr-unfair [last accessed on 2025-06-19].

[3]           However, they must still collect and keep all Article 9 information (geo-coordinates, supplier identity, quantity, etc.), and simplified status is lost if the batch is mixed with standard- or high-risk origin material or if a “substantiated concern” is filed.

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