EU – Carbon Border Adjustment Mechanism (CBAM) Starting from 1 October 2023

REGULATION (EU) 2023/956 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 10 May 2023 establishing a carbon border adjustment mechanism (CBAM) came into force on 17 May 2023. It's part of the 'Fit for 55' legislative package. Its purpose is to ensure equivalent carbon pricing for imports and domestic products.

The goods covered by this regulation are included in Annex I, which covers:

• Cement,
• Electricity,
• Fertilizers,
• Iron and steel and certain products made of iron or steel,
• Aluminum and certain products made of aluminum,
• Chemicals (currently hydrogen only).

The Regulation applies to goods originating in a third country, as well as processed products resulting from the inward processing procedure. These are imported into the customs territory of the Union or brought to an artificial island, a fixed or floating structure, or any other structure on the continental shelf or in the exclusive economic zone of a Member State adjacent to the customs territory of the Union.

The country of origin is determined in accordance with the rules for non-preferential origin as referred to in Article 59 of the UCC.

The Regulation does not apply to goods contained in the personal luggage of travelers, low-value shipments (not exceeding 150 EUR), and goods to be moved or used in the context of military activities. The import of goods originating in countries and territories mentioned in Annex III (Iceland, Liechtenstein, Norway, Switzerland, Büsingen, Heligoland, Livigno, Ceuta, Melilla) is also excluded from the scope.

Transitional Period

Between 1 October 2023 and the end of 2025, importers will have to report emissions embedded in their goods subject to CBAM at the end of each quarter without paying a financial adjustment. A set of information is included in Article 35 of the Regulation. During this period, reports will be submitted using the CBAM Transitional Registry, and importers will not need to be authorized. Customs will inform importers of CBAM goods of their reporting obligations at the moment of import.

Definitive Period

Goods shall be imported into the customs territory of the Union only by an authorized CBAM declarant. This status may be granted to the importer or their indirect customs representative. If the importer is not established in a Member State, only an indirect representative is allowed to apply for authorization. The application for authorization will be submitted via the CBAM registry.

Each authorized declarant will have to submit a CBAM declaration by 31 May for the previous year (for the first time in 2027 for the year 2026).

The CBAM is similar to The European Union Emissions Trading System (EU ETS). It is based on the purchase of certificates by importers. The price of the certificates will be calculated depending on the weekly average auction price of EU ETS allowances expressed in €/tonne of CO2 equivalents emitted.

CBAM Awareness Test

Complete the CBAM quiz below and test your level of awareness of the upcoming CBAM. The test consists of 5 multiple-choice questions that cover the main aspects of the CBAM regulation. It will take you 5 minutes to complete.

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