How Segregation Works in the EUDR Pulp Value Chain

Segregation in the EUDR pulp value chain means keeping compliant and noncompliant fiber streams physically and digitally separate to maintain chain of custody. Mills must store, process, and transport EUDR verified pulp in dedicated silos, lines, or batches, with unique identifiers and audit ready records. This ensures that only fiber proven to be deforestation-free and legally sourced is placed on the EU market. According to the European Commission’s EUDR guidelines, operators must implement systems—such as physical segregation or mass balance accounting—to demonstrate that compliant outputs never exceed verified inputs. 

Segregation is one of the most effective ways to maintain a chain of custody, allowing mills to demonstrate exactly where their inputs came from and prove that only deforestation free, legally sourced pulp enters the EU market. 

The stakes are high: without proper segregation, mills risk losing market access, facing regulatory penalties, or damaging their reputation with sustainability focused EU buyers. Discover how mills can implement segregation practices and stay fully audit ready under EUDR. 

Key Takeaways 

• EUDR requires pulp mills and exporters to prove all fiber is deforestation free and legally sourced, backed by a Due Diligence Statement (DDS) with plot level geolocation, a documented chain of custody, and audit ready records for five years.  

• To meet this, mills use segregation—physically and digitally separating compliant from noncompliant pulp at procurement, storage, processing, and export.  

• However, space limits, legacy systems, and manual protocols make segregation costly and error-prone.  

• TraceX’s Agentic AI platform solves this by assigning digital batch IDs, validating polygons, automating DDS generation, syncing with ERPs, and providing Realtime alerts—turning compliance into an efficient, scalable advantage. 

What are the EUDR Requirements That Drive Segregation in Pulp Value Chain 

The EU Deforestation Regulation (EUDR) mandates that any pulp or paper product placed on the EU market must be proven deforestation free and legally sourced. This isn’t just a declaration—it requires verifiable evidence at every stage of the value chain, driving mills and exporters to adopt segregation as a core operational practice. 

Due Diligence Statement (DDS) with Geolocation 

Mills must submit a DDS through EU TRACES that includes: 

• Plot level geolocation coordinates for every batch of fiber. 

• Supporting legality documents (permits, harvest records). 

• Supplier verification data tied to each shipment. 

For pulp, often sourced from multiple plantations or aggregators, this means building digital supplier profiles with exact polygon boundaries—something only scalable with tech platforms, not manual spreadsheets. 

Chain of Custody to Show Separation of Inputs 

The EUDR requires a clear chain of custody, proving that compliant inputs remain separate from unverified or noncompliant material throughout storage, processing, and transportation. 

• Dedicated storage silos, labelled inventory, and digital batch IDs are used to track material flow. 

• Any commingling risks must be addressed through physical segregation or auditable mass balance systems. 

Forward-thinking mills see this not as a burden but as a chance to showcase operational discipline and win trust from premium buyers demanding transparency. 

Audit Ready Records for Five Years 

All DDS data, geolocation maps, and chain of custody records must be kept for a minimum of five years, ready for inspection by EU authorities. 

• This means moving from adhoc recordkeeping to centralized digital archives with timestamped logs. 

Maintaining such records also delivers internal benefits—supporting ESG reporting, enabling performance analytics, and helping mills benchmark supplier compliance over time. 

Segregation isn’t just about following rules—it creates a competitive edge. Mills that integrate segregation workflows with traceability tech can turn compliance into a marketing advantage, positioning themselves as leaders in sustainable sourcing rather than simply reacting to regulation. 

Ready to master EUDR compliance? 

Dive into our expert blogs on  

Geolocation requirements  

Chain of Custody in EUDR 

to see exactly what regulators expect—and how you can stay ahead.

How Segregation Works in the Pulp Value Chain? 

At Procurement 

When pulp mills receive fiber from plantations, brokers, or aggregators, suppliers are first classified as EUDR compliant or noncompliant based on their submitted Due Diligence Statement (DDS) and supporting geolocation data. 

• Compliant suppliers are assigned digital batch IDs linked to verified plots and legality documents. 

• Separate receiving bays or intake lines are set up so compliant material never mingles with unverified sources. 
  Some mills are using handheld scanning devices at unloading points to instantly match incoming loads with their DDS records, cutting down on human error and speeding up acceptance checks. 

In Storage 

Compliant and noncompliant pulp are stored in dedicated silos, warehouses, or clearly marked bays, ensuring physical separation. 

• Color-coded tagging or QR coded labels are attached to bales or pallets, feeding directly into digital traceability systems. 

• Smart inventory platforms track stock levels in real time, allowing mills to show regulators that their declared compliant output never exceeds verified inputs. 
  Mills implementing segregation tech are also finding operational benefits—fewer misplacements, more accurate inventory counts, and improved stock rotation. 

During Processing

Inside the mill, segregation continues through separate processing lines or controlled scheduling: 

• Where dedicated lines aren’t feasible, mills document clean down and changeover procedures between noncompliant and compliant runs. 

• Every transfer is logged digitally, creating a timestamped chain of custody at each stage of production. 
  Some leading mills integrate IoT sensors and AI to monitor line usage, ensuring no accidental mixing occurs—turning compliance into a data driven process rather than a manual burden. 

In Transportation and Export 

Before pulp leaves the facility, segregation practices extend into shipping and export documentation: 

• Only verified compliant batches are assigned to EU bound shipments. 

• Shipping manifests, bills of lading, and customs data clearly reference compliant batch IDs. 

• Digital audit trails are maintained, often accessible through blockchain or ERP integrated traceability platforms. 
  Forwardthinking mills market these capabilities to buyers, promoting their ability to deliver proven sustainable pulp, which not only satisfies EUDR but also builds brand value and premium pricing opportunities. 

Segregation isn’t just a compliance requirement—it’s becoming a strategic advantage. Mills that invest in technology driven segregation workflows not only stay EUDR ready but also unlock better inventory control, stronger supplier partnerships, and more trust from EU buyers.

What are the Challenges Mills Face in Segregation — and How Technology Transforms Them 

Space and Infrastructure Requirements for Physical Separation 

Before: 

Mills often struggle to allocate separate silos or storage bays for compliant and noncompliant pulp. Limited floor space leads to adhoc segregation methods—labels on pallets, handwritten logs—that are prone to mixups. 

After (with Technology): 

Traceability platforms assign digital identities to each batch and integrate with warehouse management systems. Even in shared physical spaces, mills can track material movement digitally, ensuring that each compliant batch is clearly logged, monitored, and never incorrectly assigned. 

Training and Enforcing Strict Handling Protocols 

Before: 

Staff rely on paper instructions or memory to follow segregation rules. Missteps in handling—such as using the wrong storage bay—go unnoticed until audits, creating costly compliance risks. 

After (with Technology): 

With Realtime alerts and mobile apps, operators receive instant notifications if a compliant batch is moved or processed in the wrong area. Digital SOPs built into the platform guide staff through each step, reducing human error and improving accountability. 

Legacy Systems Not Designed for Batch Level Tracking 

Before: 

Traditional ERPs and inventory systems track bulk stock but lack granularity. A single entry might represent material from multiple suppliers, leaving no way to demonstrate chain of custody for each batch. 

After (with Technology): 

ERP integrations with specialized traceability platforms allow batch level tracking—every load of pulp has a unique ID tied to its supplier’s DDS, geolocation data, and compliance status. Auditors can instantly see a material’s history from forest to shipping container. 

Costs of Duplicated Processes vs. Risk of Non Compliance 

Before: 

Mills invest time and money in duplicate storage, manual audits, and constant rechecking to prevent errors, while still risking EU shipment rejections if something slips through. 

After (with Technology): 

AI validation tools automatically check supplier polygons and DDS data before material is received, eliminating costly rework. Digital systems reduce duplicate processes, optimize storage use, and provide continuous compliance visibility—cutting operational costs while safeguarding market access. 

With technology, segregation stops being a heavy operational burden and becomes a streamlined, proactive system. Mills gain: 

• Confidence that only compliant pulp enters EU bound supply chains. 

• Efficiency through reduced manual handling and automated validation. 

• Competitive advantage by proving sustainability to buyers. 

How TraceX helps Mills and Exporters 

Conduct a Compliance Gap Analysis of Current Storage and Processing 

Before  

Mills often rely on fragmented spreadsheets and physical logs, making it hard to see where segregation or documentation falls short. 

With TraceX 

Our platform provides a single dashboard to map your existing storage, processing lines, and supplier data against EUDR requirements. Built-in analytics instantly highlight compliance gaps—whether it’s missing geolocation data, unverified suppliers, or areas where commingling risks exist.

Invest in Infrastructure or Digital Tools for Segregation Tracking 

Before  

Physical segregation alone is expensive and error-prone, requiring extra silos, duplicate workflows, and manual oversight. 

With TraceX 

You gain digital batch IDs, QR codes, and automated chain of custody records. Instead of relying solely on physical separation, our Agentic AI tracks compliant material in real time across procurement, storage, processing, and export—optimizing your existing infrastructure. 

Train Staff on Handling Protocols and Digital Systems 

Before  

Teams are often overwhelmed by new regulations, leading to inconsistent practices and compliance risks. 

With TraceX 

 Intuitive, field ready interfaces and Realtime alerts guide your staff step by step. From warehouse operators to compliance managers, everyone follows clear digital workflows with AI assistance, reducing human error and ensuring segregation rules are enforced. 

Turn Compliance Into a Competitive Advantage 

By combining these steps with TraceX’s Agentic AI features—polygon validation, DDS automation, and ERP integrations—you’re not just staying compliant; you’re building a smarter, audit ready supply chain that buyers trust and reward. 

Segregation as a Competitive Advantage 

Segregation isn’t just a regulatory checkbox—it’s a way to stand out in an increasingly demanding market. Mills and exporters that can prove, with precision, that their pulp is kept separate, traceable, and verifiably deforestation free gain far more than compliance. They unlock access to premium EU buyers, strengthen their ESG credentials, and build a reputation for operational excellence. With TraceX’s Agentic AI platform, segregation becomes seamless and data driven, turning what was once a costly challenge into a powerful differentiator that drives trust, market access, and longterm growth. 

Want deeper insights into staying EUDRready? 

Explore our blogs on  

EUDR system 

How traceability drives compliance 

The impact of EUDR on the paper and pulp industry 

packed with expert tips, real examples, and actionable strategies. 

Frequently Asked Questions (FAQ’s)