CBAM: New obligation for importers

The European Union (hereinafter as ‘EU’) sets its own goals to prevent the climate changes. One of the targets is the risk of ‘carbon leakage’. In general, EU based companies move carbon-intensive production to non-EU countries with less stringent climate policies, or if EU production is replaced by more carbon-intensive production from non-EU countries. 

With the CBAM, which is in accordance with the World Trade Organisation’s rules, the EU manages to put a fair price on the goods imported from non-EU countries that are carbon emitted during their production, as a result the prices for domestic and foreign production should be set more equally. Further, the EU believes that by introducing the CBAM they will encourage the non-EU countries to cleaner industrial production. 

In principle, imports of the certain goods from non-EU countries will be covered by the CBAM. Only the countries who participate in the EU Emissions Trading System or have an emission trading system linked to the EU will be excluded from the mechanism, e.g. members of the European Economic Area, (Iceland, Norway, Liechtenstein), Switzerland, etc. 

Transitional phase

In transitional phase of introducing the CBAM, the system will focus on goods most at risk of carbon leakage such as:

• cement;
• iron and steel;
• aluminium;
• fertilisers;
• hydrogen;
• electricity, etc. 

In the future, the list of the goods that will be subjected to the CBAM will be much wider. The goods that are in scope of the CBAM are specified by the commodity codes defined in the Combined Nomenclature. 

The company in whose name the declaration into EU is filled should be on guard as the CBAM will be applied on those (hereinafter as ’Declarant’). During transitional phase Declarants should request for authorisation in order to be still able to import the goods once the CBAM comes into effect as of 1 January 2026. 

During transitional phase the Declarants will file the reports, there will not be any payments yet, however, there could be penalties for non-reporting. 

Go-live phase

Starting 1 January 2026 Declarants will start buying carbon certificates corresponding to the carbon price that would have been paid, had the goods been produced under the EU's carbon pricing rules.

The Declarants will declare annually the quantity of goods and the amount of embedded emissions in the total goods they imported into the EU in the previous year. 

On the other hand, once a non-EU producer proves that the price for the carbon has been already paid in a third country, the corresponding cost will be fully deductible. 

What to do now? 

Before 1 October 2023 we recommend following these steps: 

1. Check in whose name the goods are imported: will your company be the Declarant or is that your indirect customs representative?
2. Check the commodity codes of your products whether they falls under the CBAM.
3. Check the supply chain and countries that are involved.
4. Evaluate / analyse your entire supply chain in order to find or produce products with lower embedded carbon emissions.

In case of your interest or if you have any questions, please, do not hesitate to contact us.

Authors:

Jana Bursíková, Tax Senior
Martin Průša, Tax Senior