US Diaper Makers Warn EU of Shortages Under Law to Save Forests

(Bloomberg) -- US paper makers are warning the European Union that a new law requiring them to trace timber to its origins risks disrupting $3.5 billion of trade and raising prices for diapers, sanitary pads and other hygiene products.

It will be impossible to comply with the pending EU Deforestation Regulation because pulp supply chains are too diffuse to track all trees, and there’s often a two-year lag between the time they’re cut down and when they’re turned into fiber, according to the American Forest and Paper Association.

The US industry is a major exporter of “fluff pulp,” an absorbent material used by the likes of Procter & Gamble Co. and Kimberly-Clark Corp. to make personal products. American suppliers meet about 60% of the EU’s needs, so any interruption would reverberate throughout the 27-nation bloc.

“The EUDR as is currently written will raise the costs significantly for US producers, and it will translate into inflationary pressures in the EU,” said Mark Pitts, executive director at the paper association. “Is this really necessary?”

His group wants the law’s implementation, scheduled for year’s end, delayed while it pushes for the sector to be categorized as a low risk to global deforestation. That would exempt producers from the traceability requirement.

US government officials also asked for a postponement, saying in a letter to the EU that the rule posed “critical challenges” to domestic producers.

The EU aims to slash the 10% of global deforestation — and associated loss of biodiversity — linked to its consumption of commodities such as timber, beef, coffee and cocoa. The pending law requires every log, cow and bean entering the region to be traced to their origins, or the bloc will levy hefty penalties.

“The EUDR mandates that companies document the geolocation of all relevant plots of land for commodities traded in bulk,” said Adalbert Jahnz, a spokesman for the European Commission. “This requirement is not about tracing each individual wood fiber to a single plot.”

Pampers maker Procter & Gamble and Huggies manufacturer Kimberly-Clark are the top suppliers of diapers in Europe, while P&G is the biggest supplier of menstrual care products, according to data from Euromonitor International.

A spokesperson for P&G said the company complies with applicable laws and regulations, and it will do so with the EUDR. It also expects suppliers to do the same through its sourcing guidelines.

Kimberly-Clark declined to comment.

There have been some repercussions from the law even before it takes effect, with several association members having supply agreements derailed, Pitts said.

“It’s already affecting supply-chain contracts for the fall,” he said, declining to identify the companies involved. “It puts those contracts in jeopardy.”

--With assistance from Leslie Patton and Dasha Afanasieva.

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