CBAM is getting closer

9 March 2023

What is CBAM?

• CBAM is an import levy on carbon emissions that occur during production of certain carbon intensive products imported into the EU from countries with less stringent environmental rules compared to the EU
• CBAM will be levied in the form of selling CBAM certificates. The price of CBAM certificates will be calculated based on the EU Emissions Trading System (“ETS”) prices
• The company should be properly registered as an ‘authorized CBAM declarant’ to import the products subject to CBAM
• CBAM leads to collection and reporting of new information on imported goods as well as development of relevant internal procedures.

Scope

Currently, the following goods have been proposed to be in scope of CBAM: 

• Iron and steel, cement, fertilizers, aluminum, electricity, hydrogen, certain precursors, and several downstream products (e.g., bolts and screws)
• It is the tariff code of the goods that defines whether a product is subject to CBAM
• Chemicals and polymers might be further included into the CBAM scope, subject to assessment before the end of the transitional period. Full inclusion of all ETS products into the CBAM scope is planned by 2030 (e.g., petroleum products, acids, glass, paper, etc.) 
• CBAM will not apply to goods originating in countries and areas such as Iceland, Lichtenstein, Norway, Switzerland, etc.

Timeline

• The CBAM transitional period is expected to last from October 2023 until the end of 2025 with reporting obligations only
• The definitive period shall start from 2026. Businesses will be required to purchase CBAM certificates from 2027
• Legislative procedures on CBAM are not finalized yet, and the final technical details (including the full entry into force) are under discussion.

Specific CBAM rules applicable to import of goods

• Importers of CBAM goods should only be entitled to import these goods after being granted the status of an authorized CBAM declarant, or if they would appoint a representative authorized as CBAM declarant
• The customs authorities may carry out checks on the goods, including with respect to the identification of the authorized CBAM declarant, the eight-digit CN code, the quantity and the country of origin of the imported goods, the date of declaration, and the customs procedure. 

Enforcement

• Failure to surrender correct annual CBAM declaration or import from an entity not authorized as CBAM declarant is subject to penalties
• In case of repeated offences, the national competent authority may decide to suspend the account of the declarant

Actions

If your company is importing – into the EU – products potentially falling under CBAM, we would recommend developing CBAM roadmap already now via:

• Checking tariff codes and country of origin of the goods imported into the EU in order to identify whether and which of your products fall under CBAM 
• Formation of CBAM compliance team within your organization
• Development of internal procedures on CBAM data collection and reporting. Are there enough data within the organization to meet CBAM reporting requirements or should new types of data be requested from the producers? 
• What IT system improvements are needed to aggregate the data required for CBAM reporting? Is it possible to use the existing systems?

If you have any questions about whether CBAM is applicable to your business and how you should prepare for its introduction, please contact us.