The entry into force of the regulation is taking place in several stages. A transition period applies from October 1, 2023, to December 31, 2025. The full CBAM Regulation will enter into force on January 1, 2026. From that date on, goods covered by the CBAM Regulation can only be imported by an authorised CBAM declarant. In addition, the authorised CBAM declarant will be obliged to submit an annual CBAM declaration. More on this later. This publication focuses on the transition period.
Transition period
In the run-up to the full entry into force of the CBAM Regulation, the transition period entered into force on October 1, 2023. During this period, there is a reporting obligation applicable, whereby importers are obliged to periodically (every quarter) report on the CBAM goods they have imported.
To fully inform you about the reporting obligation and the transition period, we have listed the key points below.
Which goods fall under the CBAM Regulation?
Not all goods – imported into the European Union – fall under the CBAM Regulation from October 1, 2023. Annex I to the CBAM Regulation contains a list of goods to which the CBAM Regulation applies. The Annex follows the systematics of commodity codes, as included in the Combined Nomenclature (CN). The intention is to expand the list with new goods in the coming years.
The CBAM Regulation will broadly apply to the following goods: cement, electricity, fertilizers, cast iron, iron, steel, aluminium, and chemicals. However, it is important to note that the list also contains some exceptions. For example, HS heading 72 – cast iron, iron and steel is initially covered by the CBAM Regulation, but there are a number of goods from this heading that are then exempted at CN level. It is therefore important to determine in advance whether your goods fall under the CBAM Regulation.
Exemptions
A number of third countries and territories are exempt from the CBAM Regulation. These countries either adhere to the same guidelines as the European Union or have an agreement (such as the European Economic Area Agreement) with the European Union that also regulates environmental objectives. In these cases, a CO2 levy has already been paid. This means that the Regulation does not apply to CBAM goods originating from Iceland, Liechtenstein, Norway, and Switzerland. Additionally, the territories of Büsingen, Helgoland, Livigno, Ceuta, and Melilla are also excluded from the CBAM Regulation.
Another exemption concerns CBAM goods with a value lower than EUR 150 per consignment, so-called e-commerce goods, CBAM goods in passenger luggage, and CBAM goods intended for certain military purposes. The CBAM Regulation does not apply to the import of these goods.
Reporting obligations
In the CBAM Regulation, the reporting obligation – in principle – applies to the importer of the CBAM goods. However, the importer can also transfer the reporting obligation to an indirect customs representative. Please note that this is only possible if the indirect customs representative expressly agrees to this.
However, if the importer is established outside a Member State of the European Union, the reporting obligation applies directly to the indirect customs representative.
Submitting CBAM reports, verification, and sanctions
During the transitional period, each importer (or indirect customs representative) is obliged to submit a CBAM report no later than one month after the end of each quarter, containing information on the CBAM goods imported in that quarter. The CBAM report must be submitted directly to the European Commission via a so-called CBAM transitional register.
The
European Commission will assess the CBAM reports and, if necessary, instruct
the national CBAM authority to initiate a correction procedure with the
importer (or indirect customs representative). The importer (or indirect
customs representative) has the opportunity to correct errors in the CBAM
report through this correction procedure. If the CBAM obligations are not met
or if the importer (or indirect customs representative) does not respond to the
correction procedure, the national CBAM authority may impose a sanction.
Content of the CBAM Report
The CBAM report must include information on the origin and quantity of the imported CBAM goods, the direct and – where applicable – indirect emissions, and any carbon price paid for the imported goods in the country of origin.
In addition, the CBAM report must contain various data on the production location of the CBAM goods. This includes the company name, address, and geographical coordinates of the production location.
For the full content of the CBAM report, we refer to the CBAM Implementing Regulation.
Template and guidance documents
For a large part of the data in the CBAM report, the importer is dependent on information from the producer of the CBAM goods. To make the exchange of data between the producer and the importer easier, the European Commission has drawn up an electronic template. This template contains all the required data elements that are required from the producer of the goods.
In addition, the European Commission has published two guidance documents on the reporting obligation. These guidance documents provide guidance for both importers and producers of CBAM goods to comply with the reporting obligation. These guidance documents are available in several languages.
Conclusion
Do you have any questions or would you like to know more about the CBAM Regulation and the obligations that the mechanism entails? Please do not hesitate to contact one of our advisors.