U.S. papermakers have warned the European Union that a new law requiring them to trace wood to its origins threatens to disrupt $3.5 billion in trade and raise prices for diapers, sanitary pads and other hygiene products.
It would be impossible to comply with the suspension. EU Deforestation Regulation Because pulp supply chains are so dispersed that not all trees can be traced, there is often a two-year delay between when they are cut and when they are turned into fiber, according to the American Forest and Paper Association.
The U.S. industry is a major exporter of “lint core,” an absorbent material used by companies like Procter & Gamble and Kimberly-Clark to make personal products. American suppliers meet about 60% of the European Union’s needs, so any disruption to supplies would have a negative impact on the 27-nation bloc.
“The EU production cut plan as it stands now will significantly raise costs for US producers and translate into inflationary pressures in the EU,” said Mark Bates, executive director of the Paper Industry Association. “Is this really necessary?”
His group wants to delay the law’s implementation, due at the end of the year, while it seeks to have the sector classified as low-risk for global deforestation. That would exempt producers from the requirement to track.
US government officials also asked for a delay, saying in a letter to the European Union that the base constitutes “Critical Challenges” For local producers.
The EU aims to cut the 10% global deforestation — and associated loss of biodiversity — linked to its consumption of commodities such as timber, beef, coffee and cocoa. The pending law would require every log, cow or bean that enters the region to be traced back to its origins, or the EU would impose steep penalties.
“The EU Commodity Settlement System requires companies to document the geographical location of all land parcels relevant to bulk-traded goods. This requirement does not relate to tracing every single wood fibre to a single parcel of land,” said European Commission spokesman Adalbert Jans.
Procter & Gamble, the maker of Pampers diapers, and Kimberly-Clark, the maker of Huggies diapers, are the largest suppliers of diapers in Europe, while P&G is the largest supplier of menstrual care products, according to data from Euromonitor International.
A P&G spokesperson said the company complies with applicable laws and regulations, and will do so through the EUDR. It also expects suppliers to do the same through sources Guidelines.
Kimberly-Clark declined to comment.
The law had some repercussions even before it went into effect, Bates said, leading to the cancellation of supply agreements for several association members.
“This is already impacting supply chain contracts in the fall,” he said, declining to identify the companies involved. “It’s putting those contracts at risk.”