EUDR and palm oil: what Indonesian and Malaysian exporters must now prove

This article is for informational purposes only and does not constitute legal advice. Consult a qualified legal professional for advice specific to your situation.

Why palm oil is the regulation’s most complex case

Palm oil is the commodity where the EU Deforestation Regulation bites hardest. Indonesia and Malaysia together account for around 85 percent of global palm oil production. Both countries have experienced significant forest loss in palm oil growing areas since the reference date the regulation uses: 31 December 2020. And palm oil supply chains, particularly those sourcing from smallholder farmers, are among the most difficult to trace to plot level.

The result is that EUDR compliance is a serious operational challenge for Indonesian and Malaysian exporters, not a documentation formality. EU importers who cannot satisfy the regulation’s requirements cannot legally place palm oil or palm-derived products on the EU market. Exporters who cannot provide the right information will lose EU market access regardless of the quality or price of their product.

This article explains what the regulation requires for palm oil specifically, where the genuine difficulties lie, and what suppliers need to start building now.

What is in scope

The EUDR covers palm oil itself and a wide range of derived products. The relevant categories under Annex I to the regulation include:

Crude palm oil and its fractions. Refined palm oil and palm kernel oil. Palm-based fats used in food manufacturing, including partially hydrogenated variants. Oleochemicals derived from palm, including fatty acids, fatty alcohols, and glycerol. Preparations containing palm oil as a significant ingredient, including certain margarines and shortenings.

The breadth of derived products means that palm oil enters the EUDR compliance perimeter not only in its refined form but as an ingredient in products that may not appear obviously connected to deforestation. A food manufacturer importing palm-based emulsifiers, a cosmetics importer sourcing palm-derived surfactants, and a cleaning products company importing palm fatty acids are all handling in-scope commodities. Their EU importers bear the compliance obligation, but they can only fulfil it if the upstream supply chain provides the right documentation.

The specific documentation requirements

For palm oil, compliance with EUDR requires an EU operator to collect and verify the following before placing the product on the EU market.

Plot-level geolocation data. The regulation requires GPS coordinates sufficient to identify the specific parcel or parcels of land where the palm fruit was harvested. For estate production from a single large plantation, this may be a manageable number of polygons or points. For supply chains aggregating fruit from independent smallholders, it means collecting individual plot coordinates from every farmer whose fruit entered the supply chain. There is no provision for regional or district-level approximation. The geolocation data must identify the actual land.

Deforestation-free verification. The operator must be able to verify, using the geolocation data, that the land was not subject to deforestation or forest degradation after 31 December 2020. In practice this means cross-referencing the plot coordinates against satellite forest cover data. Several third-party services now offer automated EUDR verification against this standard, but the underlying geolocation data must be accurate for the verification to be valid. A coordinate that locates a farmer’s plot in the wrong location, or that represents a village centre rather than the actual cultivation area, will not pass verification.

Legal compliance declaration. The operator must hold a statement confirming that production complied with the relevant legislation of the country of production. For Indonesia and Malaysia, this covers land use rights and permits, environmental protection requirements, and applicable labour law. The declaration must be substantiated, meaning it cannot be a bare assertion. Supporting documentation showing that the producer holds valid land titles or cultivation permits and is operating within authorised land use categories is required.

Supply chain traceability records. The operator must be able to trace the product from the production parcels to the point of export. For palm oil this typically means documentation covering the fresh fruit bunch from farm to mill, the crude palm oil from mill to refinery, and the refined product from refinery to exporter. Each handover point in that chain needs to be documented with sufficient detail to establish continuity of custody.

Where Indonesian supply chains face the hardest problems

Indonesia has approximately 2.7 million smallholder palm oil farmers. Many are independent growers who sell fresh fruit bunches to local collection points or directly to mills. They may not have formal land titles. Their plots may not have been formally surveyed. Their awareness of what GPS coordinates are, let alone how to obtain them, varies considerably.

Mills aggregating fruit from independent smallholders face a structural challenge: they have historically not needed to know the exact location of every plot supplying them. The fruit arrives, is weighed, and is processed. The price paid reflects the grade of the fruit, not its geographic origin. Building the traceability infrastructure to associate specific batches of processed palm oil with specific source plots is a significant operational change.

Several practical problems compound this.

Plot boundaries in smallholder areas are often defined by physical markers, trees, or informal agreements rather than surveyed boundaries. Converting these into GPS coordinates that accurately represent the plot extent requires either field surveys or satellite-assisted mapping, both of which require resources and take time.

Land tenure in some smallholder areas is informal or customary rather than based on formal title. A farmer who has cultivated the same plot for decades may not have documentation that satisfies a formal land rights verification. This is not necessarily an indicator of illegality, but it creates a gap in the documentation chain that EU importers may not know how to handle.

The concentration of processing through mills means that traceability depends on mills maintaining plot-level data about their supplier farmers. Many mills have not built systems to capture this. Upgrading those systems, training procurement staff, and engaging thousands of individual smallholder suppliers to provide location data is a multi-year programme, not a one-time exercise.

Where Malaysian supply chains face different but related challenges

Malaysia’s palm oil sector has a higher proportion of estate production than Indonesia’s, which makes plot-level traceability somewhat more tractable for the large integrated producers. The major plantation groups have the technical and financial capacity to build EUDR-compliant documentation systems and several have done so.

The challenge in Malaysia is concentrated in Sabah and Sarawak, where a combination of smallholder production, complex land tenure arrangements under native customary rights, and historical deforestation in proximity to active cultivation areas creates the same kinds of documentation difficulties as in Indonesian smallholder supply chains. The risk classification of specific regions under the EUDR benchmarking system, which the Commission is expected to finalise ahead of the application dates, will affect how intensively these supply chains are scrutinised.

Malaysia has also been more active than Indonesia in engaging with the Commission on the benchmarking methodology and on the provision of national monitoring systems that could support simplified due diligence for certified sustainable production. Whether those engagements translate into a more favourable benchmarking classification remains to be seen, but the outcome will significantly affect the compliance burden for Malaysian exporters supplying certified product.

The certification question

Both Indonesia and Malaysia have national sustainability certification schemes for palm oil: the Indonesian Sustainable Palm Oil standard and the Malaysian Sustainable Palm Oil standard. A common question from exporters is whether holding ISPO or MSPO certification satisfies EUDR requirements.

The short answer is that certification does not substitute for EUDR compliance. The EUDR is a market access regulation with specific documentary requirements. It does not recognise third-party certification schemes as a substitute for due diligence. An operator placing certified palm oil on the EU market must still collect plot-level geolocation data, verify deforestation-free status against the 31 December 2020 baseline, and submit a due diligence statement.

Certification may be relevant as supporting evidence within the broader due diligence process. A certified producer operating under an audited scheme that includes land mapping and deforestation monitoring may be better placed to provide the required documentation than an uncertified producer, because the certification process will have generated some of the underlying data. But the certification itself is not a shortcut.

The EU has engaged with producer country governments on the question of equivalence, and there is ongoing discussion about whether strengthened versions of national schemes could support some form of simplified due diligence in the future. As of the current application dates, no such equivalence has been recognised.

The SME phase-in and what it means in practice

The EUDR provides a delayed application date for SME operators and traders: 30 June 2026, compared to 30 December 2025 for large operators. This applies to the EU importer’s classification as an SME, not to the supplier’s size.

For large EU importers of Indonesian and Malaysian palm oil, the 30 December 2025 application date has already passed. They are now required to carry out full due diligence before placing palm oil and palm-derived products on the EU market. Suppliers who have not built the documentation infrastructure to support this requirement are already creating problems for their EU buyers.

For SME importers, the June 2026 deadline provides a short window. But supply chains cannot be made EUDR-compliant in weeks. The plot data collection, verification, and documentation systems that compliance requires take months to build properly. An exporter whose primary EU customers are SME importers should not interpret the SME deadline as permission to defer preparation.

What exporters need to build

The practical preparation for EUDR compliance for Indonesian and Malaysian palm oil exporters involves several distinct workstreams.

Farmer data collection. Building a database of plot-level GPS coordinates for every smallholder supplier, or at minimum for every smallholder whose fruit can be traced into specific export consignments. This requires field engagement, often through existing extension networks or buyer relationships, and a mechanism for keeping the data current as land is subdivided, sold, or brought under new cultivation.

Deforestation verification. Running the plot coordinates against satellite-based forest cover data to identify any parcels with deforestation events after 31 December 2020. This is a one-time exercise for historical data but needs to be repeated for any new suppliers or newly identified parcels. Third-party verification services can automate much of this, but the input data quality determines the output reliability.

Legal compliance documentation. Assembling the documentation that supports the legal compliance declaration: land use permits, cultivation licenses, environmental permits, and evidence of labour law compliance. For large estates this may be a document organisation exercise. For smallholder supply chains it requires working with individual farmers or their cooperatives to obtain and digitise the relevant documentation, where it exists.

Mill and refinery traceability systems. Ensuring that the processing and refining steps in the supply chain maintain the link between specific batches of processed oil and specific source parcels. This typically requires changes to mill intake procedures, weighbridge recording systems, and lot management practices at refineries.

Due diligence statement preparation. The TRACES NT submission is the EU importer’s obligation, not the exporter’s. But the importer can only make that submission if the exporter has provided the underlying data: geolocation coordinates, deforestation-free verification, and legal compliance documentation, assembled at consignment level. Exporters need to understand exactly what their EU buyers require for each shipment and build the internal systems to produce and deliver it consistently.

None of these workstreams is straightforward for supply chains that were not designed with this kind of traceability in mind. The businesses that will be best positioned when EU buyers scale up their EUDR data requirements are those that started the data collection and system-building work early, before the pressure of a specific buyer deadline made the timeline unmanageable.

A plain-English explanation of what the EUDR requires across all covered commodities is available here: EUDR explained: what the EU Deforestation Regulation requires and who it affects.

This article is part of the Verdandi EU sustainability regulation series. Verdandi is Citium’s EU sustainability compliance tracker, currently in development. If you want to be kept informed ahead of launch, get in touch.