CBAM – Carbon Border Adjustment Mechanism

On 1 October 2023 Carbon Border Adjustment Mechanism (the CBAM) entered into. It covers certain categories of imported goods from outside the EU whose production involves high CO2 emissions.,

The aim of its introduction is to prevent the circumvention of EU legislation on combating climate change by importing goods from third countries which 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.

CBAM starts with its transitional phase starting from 1 October 2023 to 31 December 2025.

CBAM goods

CBAM covers:

  • cement (selected products from CN Chapter 25);
  • electricity (CN 2716 00 00);
  • fertilisers (inter alia, codes falling within CN headings 2808, 2814, 2834, 3102, 3105 with the exception of CN 3105 60 00);
  • goods in the steel industry, e.g. iron and steel, iron and steel pipes (selected products in CN Chapters 72 and 73);
  • 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 Combined Nomenclature (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 Carbon Border Adjustment Mechanism.

CBAM obligations

During the transition period, which is expected to last until 31 December 2025, the importer’s CBAM obligations are limited to certain reporting. Reporting obligations may be fulfilled by 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 who has imported CBAM goods into the EU (or, in the above cases, an indirect customs representative) shall submit a report to the 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 includes, among other things:

  1. the total quantity of each type of goods specified for each installation producing goods in the country of origin and expressed in the appropriate units;
  2. the actual total level of built-in emissions calculated in accordance with the method laid down in the CBAM regulations.

How can we help?

We offer comprehensive advice on CBAM obligations combined with customs, VAT and excise advisory, including:

  • Consultation on day-to-day issues such as, for example, identification of goods and transactions/movements subject to CBAM, incl. the correct customs classification and determination of the origin of goods, together with verification of origin documentation;
  • Develop and support the implementation of an internal procedure/instruction for the fulfilment of CBAM obligations;
  • Review of concluded contracts for the purchase/sale of goods covered by CBAM, including the preparation of model clauses for contracts/orders that will include arrangements relevant to the need to fulfil CBAM obligations;
  • Facilitate CBAM reporting during the transition period, including:
    1. preparation for registration in the CBAM provisional register,
    2. analysis of data and information received from suppliers for their suitability for CBAM reporting;
    3. support in the preparation of CBAM quarterly reports;
  • Support in communication with suppliers/manufacturers, including, for example, the development of a template for communication to suppliers to obtain the data necessary for CBAM reporting (in Polish, English or other languages if needed);
  • Support in communication with customs representatives/customs agencies, taking into account the renegotiation of current agreements and the development of a communication path regarding CBAM obligations;
  • Support in dealing with customs and tax authorities;
  • Customs and tax advice relating to the movement of goods via the EU border.

Feel free to contact us

Agnieszka Kisielewska

Partner | Tax adviser | Head of the customs and excise team