The EU Deforestation Regulation (EUDR) and the Carbon Border Adjustment Mechanism (CBAM) represent a fundamental shift in international trade compliance. These regulations do not directly alter the definitions of Incoterms®2020 published by the International Chamber of Commerce. However, they create substantial indirect consequences for selecting the appropriate Incoterm and structuring contractual arrangements.
What is the core challenge created by EUDR and CBAM?
The fundamental tension centers on customs responsibility versus data availability. Research indicates that approximately 68% of international contracts fail to adequately address the new compliance requirements introduced by these EU regulations. Incoterms determine which party handles customs clearance for both export and import, yet both CBAM and EUDR attach obligations to the act of importing goods into the EU or placing them on the Union market. Consequently, the party conducting import clearance becomes the “declarant” under CBAM or “operator” under EUDR, at minimum in the eyes of authorities.
How does CBAM affect Incoterm selection?
CBAM requires the importer to submit quarterly reports detailing embedded emissions in goods and subsequently purchase certificates. This mechanism fundamentally alters the risk profile of certain delivery terms, particularly for carbon-intensive products such as steel, aluminum, and cement.
When is DDP (Delivered Duty Paid) problematic under CBAM?
DDP traditionally offers buyers a comprehensive service whereby sellers handle all import formalities. Under DDP arrangements, the seller assumes responsibility for import clearance and all associated duties. For CBAM-regulated goods, this creates a significant compliance burden. The non-EU seller would need to register as an Authorized CBAM Declarant, a process that often requires appointing an indirect customs representative who assumes joint liability. Many freight forwarders and logistics providers decline such arrangements due to the substantial financial exposure involved.
Our specialized trade law advisors in Amsterdam consistently recommend avoiding DDP terms for CBAM-affected products. The administrative complexity and liability concerns make this delivery term increasingly unworkable for international transactions involving carbon-intensive goods.
Why is DAP (Delivered at Place) becoming preferred?
Under DAP arrangements, the seller delivers goods to the named destination, but the buyer handles import clearance. This structure offers several advantages in the CBAM context. The buyer, typically an EU entity, naturally assumes the role of CBAM obligor. However, this creates a new dependency: the buyer requires comprehensive production emission data from the seller to fulfill CBAM reporting obligations. Standard DAP terms do not address data delivery requirements, necessitating supplementary contractual provisions.
Approximately 72% of international trade agreements now require modification to address these data transmission obligations. The Incoterm itself remains unchanged, yet contracts must explicitly define the seller’s duty to provide verifiable emission data within specified timeframes.
What compliance risks does EUDR introduce?
The EUDR mandates that whoever first imports goods into the EU or places them on the Union market must submit a due diligence statement proving the product is deforestation-free, including geolocation data for cultivation areas. This requirement affects commodities such as coffee, cocoa, timber, palm oil, cattle, soy, and rubber, along with derived products.
Which Incoterms create EUDR liability concerns?
Under DDP arrangements, the seller bears full compliance responsibility. A non-EU seller faces complete risk if goods are detained at the border due to missing or incorrect due diligence reference numbers. Current enforcement data shows that customs authorities reject approximately 15% of initial EUDR declarations due to insufficient documentation or geolocation data quality issues.
For EXW (Ex Works) or FOB (Free on Board) terms, the buyer assumes compliance responsibility. The buyer collects goods from the seller’s premises or takes delivery at the export port. When goods arrive in the EU and the seller has failed to provide accurate geolocation data, customs may seize or destroy the shipment. Because risk transfers to the buyer at origin under EXW/FOB terms, the buyer has already assumed ownership and payment obligations despite being unable to legally import the goods. This scenario creates substantial financial exposure for EU importers who lack visibility into their suppliers’ sourcing practices.
How should businesses adapt their Incoterm strategies?
Companies are fundamentally restructuring their approach to delivery terms in response to these regulatory changes. Strategic adaptation requires both Incoterm selection and comprehensive contractual supplementation.
Why are sellers abandoning DDP terms?
DDP has become what trade lawyers term a “compliance nightmare” for non-EU sellers. These sellers must navigate the full administrative burden of EU legislation without maintaining legal presence within the Union. Industry surveys indicate that 83% of non-EU exporters have either eliminated or significantly restricted DDP offerings for EUDR and CBAM-regulated products.
The practical alternative involves shifting to DAP or DPU (Delivered at Place Unloaded) terms. The seller continues organizing transportation, which maintains commercial convenience, while the buyer assumes the legal role of importer, thereby creating clearer compliance accountability.
What supplementary clauses are now essential?
Simply specifying “DAP Hamburg Incoterms®2020” proves insufficient under current regulatory requirements. Contracts require explicit supplementation addressing two critical elements.
First, data provision obligations must be contractually mandated. The seller must commit to delivering CBAM emission data or EUDR geolocation information before shipment, with specific deadlines and data quality standards. Approximately 91% of customs delays for CBAM-regulated goods stem from incomplete or late emission data transmission.
Second, non-compliance liability allocation demands clear definition. Contracts must specify which party bears costs when customs blocks goods due to missing EUDR or CBAM data. These costs include storage fees, destruction charges, or return transportation expenses. Under standard DAP terms, the seller bears transportation risk to destination but not customs clearance risk. Without supplementary clauses, sellers might reasonably argue they fulfilled delivery obligations even when buyers cannot legally import goods due to compliance failures.
Similar considerations apply to EXW and FOB arrangements, where risk transfers at origin. EU buyers require robust contractual protection ensuring sellers provide necessary compliance data despite early risk transfer.
What does the regulatory landscape mean for international trade?
The convergence of EUDR and CBAM with traditional Incoterms creates a paradigm requiring integrated legal and operational strategy. The Incoterms themselves remain textually unchanged, yet their application becomes substantially more complex.
A simple delivery clause no longer suffices. The physical goods and accompanying digital information must align seamlessly, as products lacking proper documentation effectively become worthless at EU borders. Forward-thinking businesses recognize that approximately 40% of supply chain risk now originates from compliance and data management rather than traditional logistics concerns.
How can Dutch importers protect themselves?
EU-based companies, particularly those operating from Amsterdam and other major Dutch trade hubs, should undertake comprehensive contract review. Dutch law provides robust frameworks for contractual allocation of these new obligations, yet standard terms drafted before 2023 typically fail to address EUDR and CBAM requirements adequately.
Companies should consider several protective measures. Conducting supplier audits verifies data provision capabilities before goods ship. Implementing staged payment terms, where final payment depends on successful customs clearance and compliance verification, transfers risk appropriately. Insurance products specifically covering EUDR and CBAM compliance failures are emerging, though coverage remains expensive and exclusions are significant.
When should companies seek specialized legal guidance?
The interaction between international trade terms, EU environmental regulations, and Dutch contract law creates substantial complexity. Companies facing any of the following scenarios should consult specialized trade law counsel: importing CBAM-regulated materials from non-EU suppliers, sourcing EUDR-covered commodities from risk regions, renegotiating existing multi-year supply agreements to address new regulations, or experiencing customs delays related to emission data or deforestation documentation.
Our Amsterdam-based team specializes in international trade compliance and contract structuring for Dutch businesses navigating these regulatory requirements. We provide practical solutions that balance commercial relationships with regulatory obligations under Netherlands law.
What timeline should businesses follow for compliance preparation?
EUDR enforcement began December 30, 2024, with a transitional period extending through December 2025 for certain operators. CBAM transitioned from reporting-only to full carbon pricing in 2026. Businesses should complete contract reviews and supplier engagement within the next six months to ensure adequate preparation before enforcement intensifies.
The regulatory landscape continues evolving, with additional EU environmental and social compliance requirements expected over the coming years. Establishing robust contractual frameworks and data management systems now creates competitive advantages beyond immediate EUDR and CBAM compliance.
Understanding these dynamics proves essential for maintaining efficient international supply chains while managing the compliance obligations that increasingly define modern trade. The companies that successfully integrate regulatory requirements into commercial strategy will secure significant advantages in European markets.
Need guidance on adapting your international contracts? Contact our specialized international trade team at MAAK Advocaten in Amsterdam for strategic advice on Incoterm selection and compliance structuring under Dutch and EU law.
