CBAM, a new European Union climate levy, is officially in the starting blocks. But what exactly does this CBAM mean? What is the purpose of this? And what changes will all this bring for you? DKM Customs is happy to explain it to you in concrete terms.
The customs unions may well be the most important aspect of the European Union, because the EU can decide for itself what requirements imported goods must meet. In this context, the EU decided to reduce its carbon emissions by 55% by 2030 to meet its climate target. The most important measure to achieve this objective? Yes, CBAM (Carbon Border Adjustment Mechanism).
But what does this mean? Specifically, a carbon certificate must be purchased when importing certain goods. The reason for this is simple: it is an offset to the carbon price you pay if these goods are produced in the EU. Were you already paying a carbon price abroad? Then there is the possibility of a reduction in the price paid here.
Of course, this mechanism also has a purpose, and that purpose is very clear: to ensure that the rest of the world also takes similar measures to reduce carbon emissions. An additional reason is the fact that companies have fewer reasons to move production to third countries.
CBAM happens in several stages: a transition period and effective implementation. This first phase includes the following items on which you must report:
The CBAM mechanism is not applicable for:
The intention is to expand this list even furter, so that by 2030 all goods covered by the Emission Trading System will also be covered by CBAM.
But what changes? As mentioned earlier, CBAM is being implemented in several phases. The transition period includes a reporting requirement and the effective implementation includes the rule of effectively paying for the carbon certificates based on the reporting.
The transition period of the CBAM starts on Oct. 1, 2023, and runs until Jan. 1, 2026. As of this moment, there is therefore a reporting requirement, although currently without consequences. During this transition period, an authorized declarant must report the following to the competent authority: embedded carbon emissions by relevant imports on a quarterly basis.
This reporting requirement applies to subsequent individuals without the consequence:
The first reporting is due in January 2024. As of December 31, 2024, the importer/declarant must register in the CBAM registry as an "authorized CBAM declarant".
The effective implementation of the CBAM is scheduled for June 1, 2026. As of this writing, it is mandatory to purchase CBAM certificates on a central platform. Note that this platform has yet to be provided by the European Commision, which controls CBAM.
Further updates on this effective implementation can always be found in this article.
But how can you as a company best prepare for the implementation of this mechanism. Because not only the large multinationals are affected by this measure, you as a small SME that occasionally imports raw materials should also prepare thoroughly.
DKM Customs recommends that you evaluate your supply chain for CBAM impacts. Consider correctly determining the classification and origin of your imported goods.
Under CBAM, the European Commission unveiled its draft implementing regulation for reporting requirements. DKM Customs is happy to explain all this and exactly what it means for you and your business.
Following the entry into force of the CBAM regulation on May 17, 2023, the European Commission published a draft implementing regulation. This regulation contains reporting requirements under CBAM during the transition period beginning Oct. 1, 2023.
We would like to summarize the main points of the CBAM implementing regulation. Importers must provide the following of their imported CBAM goods:
As an importer, you may choose to ask your producers to use an electronic template issued by the EU Commission. This template contains all the reporting elements.
When failing to comply with CBAM reporting requirements, you can be fined between €10 and €50 for each ton of unreported integrated emissions. The actual fine is determined based on a number of factors. The fine can also increase if the duration of non-reporting exceeds 6 months.
To calculate the integrated emissions, you can use one of the following methods:
Under certain conditions, other calculation methods are allowed until Dec. 31, 2024.
In addition to reporting standard emission values, as an importer you can also combine the use of actual emission data with the use of standard values with certain limits. If you choose to do this, you create flexibility in the case of partially unavailable emissions data.
The CBAM report must be submitted with the CBAM transition file. As an importer, you will be granted access to this registry through the CBAM trade portal. Through this portal, you can submit CBAM reports via a web interface or a system-to-system interface.
Now that the CBAM regulation has officially entered into force, it means that the requirements and timetable for the transition period are clearer. This allows you as a company to continue your preparations for CBAM.
Specifically, this means you can take the following actions: