A DD system, or due diligence system, is the operator's own written "risk management system". By maintaining this system, the operator ensures that the products it procures and places on the market comply with the requirements of the Regulation.
A DD system means a written description of a company's procedures and measures by which the operator systematically ensures the compliance of products. The key requirements of the Regulation are that products are deforestation-free and lawful in accordance with the legislation of the country of production. The scope of the manual depends, among other things, on the extent and complexity of each operator's supply chains and on the risk level of the origin and the country of production of the products.
The system consists of three elements: information gathering, risk assessment and risk mitigation. More detailed information on the content of the DD system can be found in Chapter 2, Articles 8-13 of the Regulation. The information collected must be retained for five years.
Collecting information
When maintaining appropriate due diligence, operators must collect information to verify the origin of products, including:
- Product description and quantity.
- The country of production and, where relevant, parts thereof
- The geolocation of all plots of land where the relevant commodities and products were produced (geolocation requirements).
- Plots larger than 4 hectares shall be described by a polygon using latitude and longitude coordinates with a minimum precision of six decimal places.
- Plots smaller than 4 hectares and cattle holdings shall be described by a single geolocation point using latitude and longitude coordinates with a minimum precision of six decimal places.
- Adequately conclusive and verifiable information that the relevant products are deforestation-free.
- The operator must therefore be able to demonstrate, by means of documentation and geolocation information, that the commodities used in the product have not caused deforestation. The information must be fact-based and verifiable.
- The deforestation-free status of a product can be demonstrated, for example, through information on the harvesting location, the harvesting method before the time of harvesting, and any subsequent land-use changes and plans.
- See also: FAQ v5, Question 1.20.
Risk assessment and mitigation
Risk Assessment
Based on the information collected, operators must carry out a risk assessment. The assessment determines whether there is a risk that the products do not comply with the requirements of the Regulation.
When carrying out the risk assessment, the following must be taken into account, among other things:
- The risk level of the country of production, the occurrence of deforestation and forest degradation, whether there are Indigenous Peoples in the country of production, the prevalence of corruption, and the complexity of the supply chain of the products.
- If the assessment determines that the risk is greater than negligible, the risk must be mitigated before the products are placed on the market or exported.
- If the measures taken do not reduce the risk to a sufficiently low level (no risk or a negligible risk), the products may not be placed on the market or exported.
Risk Mitigation
If the risk assessment determines that the risk of compliance is greater than negligible, risk mitigation measures must be taken.
Risk mitigation measures may include, among other things:
- requiring additional information, data or documents;
- carrying out independent assessments or inspections;
- other measures related to the information requirements laid down in Article 9.
Risk categorisation of countries of origin
The Commission has published a risk classification for countries of production. If the risk level of the origin is low, a simplified due diligence procedure may be applied under certain conditions. Under the simplified DD procedure, neither risk assessment nor risk mitigation is required. The risk classification list is a document that is subject to updates, and the Commission will separately announce any changes to risk levels.