EU Classifies Thailand as Low-Risk for Deforestation, Boosting Export Opportunities for Rubber and Palm Oil to the European Market

On May 22, 2025, the European Union (EU) classified Thailand as a “low-risk” country in relation to deforestation under the EU Deforestation Regulation (EUDR). This regulation, which is set to come into effect later this year for medium and large businesses in the EU, aims to ensure that certain imported products are free from links to deforestation. Under the EUDR, imports of the following products into the EU market must meet strict criteria: soy and soy-based products, cocoa, palm oil and its derivatives, timber and wood products, coffee, rubber and rubber-based products, as well as cattle and beef-related products. These goods must not be associated with deforestation, must be produced legally, and must undergo a three-step due diligence process: 1) Information collection 2) Risk assessment 3) Risk mitigation

Failure to comply with the regulation can result in penalties of up to 4% of the company’s annual turnover within the EU, along with exclusion from public procurement processes and government support schemes.

Thailand’s designation as a low-risk country is a significant positive development, especially amid the country's current challenging economic environment. Importers of agricultural products from Thailand will receive special exemptions under the EUDR. Specifically, they will not be required to undertake the risk assessment (step 2) and risk mitigation (step 3) phases of the due diligence process—both of which are complex and carry high compliance costs.

As a result, Thailand’s low-risk status will reduce the cost of importing Thai goods into the EU compared to products from countries classified as standard- or high-risk, which must complete all three steps of the due diligence process. This creates a competitive advantage for Thai exports, particularly in sectors such as rubber and palm oil, by lowering barriers to entry in the European market.

Thailand’s “low-risk” status provides a cost advantage and enhances trade opportunities in the EU market, especially when compared to competitors classified as medium- or high-risk. In 2024, Thailand ranked as the 15th largest source of EUDR-regulated imports into the EU (excluding EU member states), with a total import value of USD 2.041 billion, accounting for approximately 1.5% of all EUDR-regulated imports from non-EU countries.

Rubber and rubber-based products are the primary EUDR-related exports from Thailand to the EU. Among the EU’s top 15 trading partners for EUDR-covered goods, 10 countries—including Thailand, China, and Vietnam—are classified as low-risk, while the remaining 5 countries—including Brazil, Indonesia, and Malaysia—are considered standard-risk.

This classification highlights an opportunity for Thailand to expand its market share by positioning itself as a preferred sourcing alternative. As EU importers seek to reduce compliance costs, they are likely to shift procurement away from higher-risk countries, thus benefiting low-risk exporters like Thailand.

SCB EIC assesses that countries classified as “low-risk” under the EUDR framework have the potential to expand their exports of EUDR-covered products by substituting for standard- and high-risk countries, which currently export approximately USD 39.586 billion worth of goods to the EU. As EU importers seek to lower compliance costs associated with the regulation, there is a growing tendency to shift sourcing to low-risk countries, which are exempt from the more complex and costly risk assessment and mitigation steps. An analysis of the top 15 non-EU source countries for EUDR-regulated imports that are currently classified as standard- or high-risk reveals significant trade volumes across the seven key product categories covered by the regulation. These include: 1) Soy and soy-based products – USD 10.175 billion 2) Cocoa – USD 7.580 billion 3) Palm oil and its derivatives – USD 5.995 billion 4) Timber and wood products – USD 5.912 billion 5) Coffee – USD 5.802 billion 6) Rubber and rubber-based products – USD 2.657 billion and 7) Cattle and related products – USD 1.465 billion

In addition, low-risk countries also stand to benefit indirectly by serving as upstream suppliers of raw materials to manufacturers within global supply chains that export finished products to the EU.

Rubber and palm oil are two of Thailand’s key agricultural products with strong potential to expand into the EU market under the EUDR. Thailand is the world’s largest exporter of natural rubber. In 2024, the EU imported over 680,000 tons of rubber from Côte d’Ivoire, Indonesia, and Malaysia combined—2.3 times more than its imports from Thailand. Given the stricter compliance requirements imposed on standard-risk countries, EU importers are increasingly likely to shift their sourcing to Thailand to minimize regulatory burdens. Additionally, Thailand is expected to benefit indirectly from changes in global supply chains. China, a major tire manufacturer and significant exporter to the EU, is likely to increase its rubber imports from Thailand in order to reduce its own EUDR compliance costs. In the case of palm oil, although Thailand currently exports relatively small volumes to the EU, it is the world’s third-largest exporter of crude palm oil, after Indonesia and Malaysia—both of which are classified as standard-risk countries and thus face stricter regulatory obligations under the EUDR. In 2024, the EU imported more than 2.4 million tons of crude and refined palm oil from these two countries, representing a large market that Thailand could potentially tap into. However, the growth prospects for other Thai agricultural products—such as soybeans, cocoa, coffee, and cattle—remain limited in the short term, as current production levels are insufficient to substitute for existing suppliers from standard- and high-risk countries.

However, this opportunity may only offer a “temporary advantage” if Thailand fails to maintain credibility and transparency throughout its supply chain. While Thai exporters are exempt from the risk assessment and mitigation steps under the EUDR’s due diligence process, they are still required to gather extensive information in Step 1, such as geolocation data of production sites and verified land-use documentation. As a result, Thai producers must develop robust data collection and traceability systems that can be readily shared with EU importers. Some industry players have already begun adapting, such as Sri Trang Group’s “Traceable Rubber” initiative, which enables 100% traceability of rubber origins. On the public sector side, the Thai government has made progress in preparing for EUDR compliance in several areas—such as creating agricultural and forest mapping systems that align with EU requirements and linking farmers’ geolocation data with private sector platforms. These efforts must be accelerated and completed before the regulation takes effect at the end of this year. In the long term, the government should also focus on scaling up production of EUDR-regulated crops in which Thailand currently has limited capacity, such as coffee and cocoa—high-value commodities in strong global demand. This can be achieved through innovation-driven efforts to raise productivity, lower costs, and better integrate farmers into global markets. Additionally, Thailand must closely monitor its risk classification within the EU system and continue implementing forest conservation measures to maintain its “low-risk” status over the long term. The EU is scheduled to conduct its first official review of country risk levels in 2026.

The EUDR is not merely an environmental regulation by the EU, but a turning point for the global agricultural trade system.  It represents a critical “test” of which countries can maintain their place in an increasingly demanding and sustainability-driven supply chain. Thailand must not miss this opportunity.