Carbon Border Adjustment Mechanism Regulation: An Overview

Companies importing certain materials and products into the EU must comply with the Carbon Border Adjustment Mechanism (CBAM) Regulation. This includes, for example, certain materials like aluminium, iron and steel. Additionally, the regulation covers certain finished or semi-finished products made with these materials, like screws and bolts.

In this guide, we explain the regulation as it relates to the application procedures for CBAM declarants, the submission of CBAM declarations, reporting obligations, and the purchasing of CBAM certificates. Additionally, we provide a FAQ section that addresses common questions concerning the regulation.

What is the CBAM Regulation?

The regulation aims to reduce global carbon emissions and support the goals of the Paris Agreement. It establishes mechanisms to deter companies from transferring production to countries with laxer greenhouse gas emissions rules than their own. It does so by having importers pay for embedded carbon emissions generated in the production of certain goods imported into the EU.

The regulation requires certain covered goods to only be imported into the EU by an authorised CBAM declarant. The declarant must be established in the EU and can only be:

• An importer
• An indirect customs representative

Non-EU companies importing covered goods to the EU must appoint an indirect customs representative who is established in the EU. Note that we could not find in the regulation or related guidance pages an explanation of the situation in which a non-EU company could “import” goods into the EU.

However, the regulation defines “importer” as:

a. The person lodging a customs declaration for release for free circulation of goods in its own name, or

b. The person whose customs declaration is lodged by an indirect customs representative

Other requirements generally include registration, record-keeping, reporting and certificates.

Which products are covered?

The regulation covers imported goods or processed products from those goods mentioned in Annex I originating from non-EU countries. Article 2(1) contains the product scope of the regulation:

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1. This Regulation applies to goods listed in Annex I originating in a third country, where those goods, or processed products from those goods resulting from the inward processing procedure referred to in Article 256 of Regulation (EU) No 952/2013, are imported into the customs territory of the Union.

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Annex I of the Regulation lists the CN code of covered goods and covered products made of these goods. We provide a summary in the table.

Goods	Covered CN codes
Cement	2507 00 80 – Other kaolinic clays 2523 10 00 – Cement clinkers 2523 21 00 – White Portland cement 2523 29 00 – Other Portland cement 2523 30 00 – Aluminous cement 2523 90 00 – Other hydraulic cements
Electricity	2716 00 00 – Electrical energy
Fertilisers	808 00 00 – Nitric acid; sulphonitric acids 2814 – Ammonia, anhydrous or in aqueous solution 2834 21 00 – Nitrates of potassium 3102 – Mineral or chemical fertilisers, nitrogenous 3105 – Mineral or chemical fertilisers containing two or three of the fertilising elements nitrogen, phosphorus and potassium (with exceptions)
Iron and steel	72 – Iron and steel (with some exceptions) 2601 12 00 – Agglomerated iron ores and concentrates 7301 – Sheet piling of iron or steel 7302 – Railway or tramway track construction material of iron or steel 7303 00 – Tubes, pipes and hollow profiles, of cast iron 7304 – Tubes, pipes and hollow profiles, seamless, of iron or steel 7305 – Other tubes and pipes 7306 – Other tubes, pipes and hollow profiles of iron or steel 7307 – Tube or pipe fittings of iron or steel 7308 – Structures and parts of structures of iron or steel 7309 00 – Reservoirs, tanks, vats and similar containers for any material of iron or steel 7310 – Tanks, casks, drums, cans, boxes and similar containers of iron or steel 7311 00 – Containers for compressed or liquefied gas, of iron or steel 7318 – Screws, bolts, nuts, coach screws, screw hooks, rivets, cotters, cotter pins, washers and similar articles, of iron or steel 7326 – Other articles of iron or steel
Aluminium	7601 – Unwrought aluminium 7603 – Aluminium powders and flakes 7604 – Aluminium bars, rods and profiles 7605 – Aluminium wire 7606 – Aluminium plates, sheets and strip 7607 – Aluminium foil 7608 – Aluminium tubes and pipes 7609 00 00 – Aluminium tube or pipe fittings 7610 – Aluminium structures and parts of structures 7611 00 00 – Aluminium reservoirs, tanks, vats and similar containers 7612 – Aluminium casks, drums, cans, boxes and similar containers 7613 00 00 – Aluminium containers for compressed or liquefied gas 7614 – Stranded wire, cables, plaited bands and the like, of aluminium 7616 – Other articles of aluminium
Chemicals	2804 10 00 – Hydrogen

You can read Annex I to find the full description for each CN code.

Exemptions

The regulation does not apply to the following imported goods:

a. Goods originating from non-EU countries and territories mentioned in point 1 of Annex III (see section “Which origin countries are not covered by CBAM?” for the full list).

b. Goods to be moved or used for the military

c. Goods whose intrinsic value per consignment, including goods contained in personal travelling luggage from non-EU countries, is not more than a total of 150 Euro per consignment.

Which origin countries are covered by CBAM?

All non-EU countries that are not listed in Annex III are covered by the regulation. The list applies to all goods mentioned in Annex I. This includes, for example, the following countries:

• United States
• United Kingdom
• China
• Japan
• South Korea
• India
• Vietnam
• Canada

Which origin countries are not covered by CBAM?

The regulation does not apply to goods imported from the following countries and territories, which are mentioned in point 1 of Annex III of the regulation:

Countries

• Iceland
• Liechtenstein
• Norway
• Switzerland

Territories

• Büsingen
• Heligoland
• Livigno
• Ceuta
• Melilla

Additionally, the regulation does not apply to countries mentioned in point 2 of Annex III. However, this only concerns the importation of electricity. As of the writing of this guide, no country has been listed.

Which companies must comply with the CBAM Regulation?

Companies that are importing goods from non-EU countries covered by the CBAM Regulation must comply with the regulation.

We could not find any exemption based on the size of the business. A possible explanation of why no special measures were introduced for SMEs is found in the published proposal on the regulation in the section entitled “Regulatory fitness and simplification”.

In short, the EU concluded that, due to the nature of the covered goods, most SMEs would not be affected by the regulation.

What are the general requirements under the CBAM Regulation?

Under the CBAM Regulation, only an authorised CBAM declarant may import goods covered by the regulation. As mentioned previously, the CBAM declarant can be an importer established in the EU or an indirect customs representative.

The CBAM declarant is required to engage in a number of activities. As stated in Article 32, during the transition period that ends on 31 December 2025, these activities are limited to reporting. Specifically, the CBAM declarants must submit quarterly reports through the CBAM Transitional Registry.

The Transitional Registry can be found on the Carbon Border Adjustment Mechanism guidance page.

After the transition, period, the obligations include:

a. Applying for authorisation

b. Preparing and submitting the CBAM Declaration

c. Purchasing CBAM certificates (when necessary)

CBAM Reporting

During the transitional period that lasts until 31 December 2025, the EU importer or the indirect customs representative must submit reports (the CBAM Report) containing information on goods imported during a given quarter of a calendar year.

Reporting is required as the CBAM registry is not established yet. The transitional reporting is done through the CBAM Transitional Registry.

The CBAM Report should contain the following Information about the imported goods:

a. the total quantity of each type of goods

b. The actual total embedded emissions

c. The total indirect emissions

d. The carbon price due in a country of origin for the embedded emissions in the imported goods

Application for authorisation

EU importers or indirect customs representatives in the EU who operate as the CBAM declarant for a covered imported good must apply for authorisation.

The application for authorisation should be submitted through a CBAM registry. However, we found that the CBAM registry does not exist yet and that only a CBAM Transitional Registry has been developed by the EU Commission to allow CBAM declarants to fulfil their reporting requirements under the regulation (see the section on CBAM reporting below).

Access and registration to the CBAM Transitional Registry should be requested through the CBAM Portal (TAXUD).

CBAM Declaration

The authorised CBAM declarant must declare the following for imported goods covered by the regulation that comes from non-EU countries:

a. The total quantity of each type of goods imported during the preceding calendar year

b. The total embedded emissions in the goods

c. The total number of CBAM certificates to be surrendered

d. Copies of verification reports, issued by accredited verifiers

The declaration must be submitted on the 31st of May of every year and starts in 2027 for the preceding year. The declaration must be submitted through the CBAM registry.

However, the CBAM registry is not available yet. Currently, there is only the CBAM Transitional Registry.

CBAM Certification

A CBAM certificate refers to a certificate in electronic format that represents one metric tonne of CO2, or an amount of any other greenhouse gas mentioned in Annex I of embedded emissions in goods.

The authorised CBAM declarant is required to declare the number of CBAM certificates used to cover the total embedded emissions in the goods imported.

CBAM certificates are purchased from the EU member state where the CBAM declarant is established. The CBAM declarant should register with the relevant EU member state and purchase certificates corresponding to the carbon price that would have been paid had the goods been produced under the EU’s carbon pricing rules.

FAQ

Are manufacturers required to comply with the CBAM Regulation?

The CBAM Regulation concerns goods imported from non-EU countries. The regulation does not define or mention manufacturers. Thus, we have no indication that it affects companies that manufacture in the EU.

Certain product safety regulations, such as the General Product Safety Regulation, cover businesses that market their products under their trademarks, including those imported products which originate from non-EU countries, and define them as the “manufacturer”. However, this is not the case for the CBAM Regulation.

Are importers required to comply with the CBAM Regulation?

Yes, both EU and non-EU companies importing covered goods are affected by the CBAM Regulation. Note that by “importation” the regulation refers to non-EU goods which are released for free circulation as explained in Article 201 of Regulation (EU) No 952/2013.

An EU company importing products from non-EU countries must apply to be an authorised CBAM declarant. They also have the option to appoint an indirect customs representative to fulfil the role.

Non-EU companies importing products are also affected. However, unlike importers established in the EU, they can only appoint an indirect customs representative.

Are retailers required to comply with the CBAM Regulation?

The CBAM Regulation concerns imported goods from non-EU countries. The regulation does not contain definitions for retailers or distributors. As we understand it, the regulation only affects the company importing the covered goods.

Are non-EU companies required to comply with the CBAM Regulation?

Assuming that the non-EU company is importing covered goods that originate from third countries, the non-EU company would have to comply with the CBAM Regulation.

As non-EU companies would not established in the EU, they will not be able to act as an authorised CBAM declarant. Instead, they must appoint an indirect customs representative established in the EU who agrees to function as the CBAM declarant for the imported goods.

How are emissions for the purpose of reporting and declaration calculated?

For both CBAM reporting and the CBAM declaration, the total embedded emissions must be calculated using the methods set out in Annex IV of the CBAM Regulation.

The total embedded emissions stated in the CBAM declaration must be reviewed by an accredited verifier. This is not the case for CBAM reporting.

The document entitled “Carbon Border Adjustment Mechanism (CBAM) Questions and Answers” claims that the accreditation of CBAM verifiers should be tasked to National Accreditation Bodies in the EU Member States. Our understanding is that it is not possible to find an accredited verifier yet.