Guide to the initial phase of the CBAM

The carbon border adjustment mechanism (CBAM) starts with its transitional phase from October 1 2023 to December 31 2025. The new ‘carbon tax’ covers certain categories of imported goods from outside the EU that have high CO₂ emissions involved in their production.

The aim of its introduction is to prevent possible circumvention of EU legislation on combating climate change by importing goods from third countries that do not apply EU measures in reducing greenhouse gas emissions. The mechanism is intended to align the prices of imported goods with the actual carbon intensity associated with them.

The CBAM covers:

• Cement (selected products from Chapter 25 of the European Commission’s Combined Nomenclature, or CN);

• Electricity (CN code 2716 00 00);

• Fertilisers (among others, codes falling within CN headings 2808, 2814, 2834, 3102, and 3105, with the exception of CN heading 3105 60 00);

• Goods in the steel industry; for example, iron and steel, and iron and steel pipes (selected products in CN chapters 72 and 73); and

• Aluminium (selected products from CN Chapter 76).

The list of goods covered by the CBAM is based on the customs classification. Consequently, the correct identification of the scope of obligations for the new carbon tax involves the need to accurately allocate goods to the CN classification.

In addition, some non-EU jurisdictions are excluded from the application of the CBAM. Therefore, the determination of customs origin becomes additionally relevant for the implementation of the CBAM.

During the transitional period, the importer's (called ‘declarants’ for this purpose) CBAM obligations are limited to certain reporting. The reporting obligations may be fulfilled by the importer or the importer's indirect customs representative when the representative agrees to do so. Moreover, an indirect customs representative is obligatorily responsible for CBAM reporting obligations for importers not established in the EU.

Each importer that has imported CBAM goods into the EU (or, in the above cases, an indirect customs representative) shall submit a report to the European Commission for that quarter containing information on the imported goods.

The CBAM report shall be submitted for quarterly periods, no later than one month after the end of that quarter. Thus, the first CBAM report, for Q4 2023, must be submitted by the end of January 2024.

The CBAM report shall include information such as:

• Total quantity of each type of goods specified for each installation producing the goods in the country of origin;

• The actual total embedded emissions;

• The total indirect emissions;

• The carbon price due in a country of origin for the embedded emissions in the imported goods, taking into account any rebate or other form of compensation available.

With reference to the first three quarterly reports (Q4 of 2023 and Q1 and Q2 of 2024), embedded emission can be calculated based on default values provided by the European Commission.

Before submitting the first CBAM report, the declarant should register using IT systems provided by EU countries. Also part of the preparation for the CBAM is clarifying communication with suppliers and customs representatives/customs agencies to make all stakeholders confident about the status of their obligations in the CBAM process.