Understanding the CBAM Rollout: A Guide for Importers and Exporters

The EU’s Carbon Border Adjustment Mechanism (CBAM) is designed to establish a fair price for the carbon emitted during the production of carbon-intensive goods entering the EU, while also promoting cleaner industrial practices globally.

With the CBAM, importers have to pay a fee based on the carbon emissions created when making certain goods.

This makes sure that imported products follow the same carbon pricing rules as those made within the EU.

It keeps things fair and stops any unfair advantages caused by different carbon pricing systems.

CBAM Rollout Timeline

The CBAM rollout has entered its initial phase, with a 27-month transition period beginning on October 1, 2023. While full implementation isn't until 2 more years, the CBAM process is already underway. From October 1, 2023, exporters are required to report the carbon content of certain goods.

• October 1, 2023: It will be a 27 month transition period which started from October 1, 2023. Exporters won't need to pay any tax but share details of the carbon content of steel and aluminum with EU importers.
  

• January 2026: Exporters will start paying carbon border tax on aluminum, steel, and other covered products.

• 2026 - 2034: СВАМ will be extended from 2026 to 2034, where new products will be gradually brought under the CBT ambit.

• 2034 onwards: Starting in 2034, all the goods and materials imported into the EU will be taxed under the СВАМ.

Industries and Goods Impacted by CBAM:

The CBAM focuses on specific industries with a high carbon footprint. These include:

• Cement

• Electricity

• Iron & Steel

• Aluminum

• Fertilizer

• Hydrogen

The CBAM Regulation applies to goods classified under

i. CN codes (Combined Nomenclature), which extend the ii. Harmonized System (HS) code used for international trade.

Annex I of the CBAM Regulation lists all goods subject to reporting of embedded emissions, known as 'CBAM goods.'

The CBAM primarily targets raw materials and intermediate goods, but it also extends its coverage to certain finished or downstream products, such as fasteners classified under CN code 7318 XX XX

Throughout the transitional period, CBAM reporting requirements do not extend to returned goods, as outlined in Article 203 of the Union Customs Code.

Consequently, the embedded emissions associated with these goods are exempt from inclusion in the CBAM report.

Here's a key point to remember: Returned goods are currently exempt from CBAM reporting.

For businesses involved in exporting to the EU, understanding the CBAM timeline and impacted sectors is crucial. The transition period provides an opportunity to prepare for future carbon border taxes and ensure compliance.

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