Lawyer Advises EU Importers to Consult Widely as CBAM Approaches

Two months away from the first reporting requirements for carbon intensity of certain imports into the EU, not only do many importers not understand how to comply, but even the customs authorities aren't ready, said Vassilis Akritidis, a partner at Crowell who offered a webinar on the Carbon Border Adjustment Mechanism last week.

"Even customs authorities in the European Commission don’t know exactly how this will be implemented" once duties are due in 2026, or how sanctions will be applied to companies that violate the law, he said. However, he said, importers should talk to lawyers, engineers and customs officers to learn what should be reported.

He said the CBAM implementing regulation contains reporting forms, annexes with tariff codes affected, "what kind of customs identification is required; which are the methodologies for calculating emissions ... ."

De minimis entries, which are less than 150 Euros, will not be covered by CBAM.

"I assume there is going to be at some point, hopefully soon, an electronic platform to file these reports," Akritidis said.

Of those watching the webinar, a third said they are working with engineers to estimate embedded carbon and working with customs agents to get ready. But 22% said, "I have no clue how to do this; neither does my customs agent."

Akritidis said for those who import goods covered by CBAM -- steel, aluminum, iron, cement, hydrogen -- they need to report estimates in January, "even if this declaration is imperfect."

If you don't meet the deadline, you could attract the attention of the authorities, he said.

"Use this period to make sure you're diligent … and that through this exercise, talking to customs, talking to advisers, to engineers, to your suppliers, to the suppliers of your suppliers, you will actually be preparing for 2026."

Even in the broad categories, some products won't be covered, so consult the implementing regulations, he said.

For instance, ferrous scrap, some ferro-alloys and certain fertilizers aren't included.

"The ultimate objective of CBAM is to have a broad product range," he said, including manufactured products, but there is strong lobbying among sectors to avoid the charge.

Just how large that charge per ton of carbon will be is not yet known. It will be an average, calculated each week, and can be no higher than the domestic cap and trade certificate cost. He said estimates are that the CBAM fee on imported steel will add 15% to the current price.

Akritidis said he believes audits will be done on large aluminum traders and steel traders, but there will also be circumvention scrutiny for those who break up shipments to qualify for de minimis, or those who make changes to a product to avoid the list of affected tariff codes.

"Penalties for each ton shall be between 10 and 50 euros. It’s relatively soft," he said.

He said small companies, such as a steel service center with 65 employees that distribute fasteners, will have a hard time complying. They will have to ask suppliers of wire rod, wire and fasteners how much embedded carbon their processes entail.

"It’s possible that all these three phases took place in different countries, by different producers," he said, and a small company won't have the leverage to demand the information or threaten not to buy the product if it's not given.

They also don't have the compliance team to do the work, he noted.

There is an out, however. "If you’re not certain of what your suppliers are doing, or you are doing, just going to default values, and you can sleep tight." Akritidis said the default values may be higher than the actual carbon content, so "financial exposure may be a bit higher. At least you’re getting rid of the hassle, the financial burden of having to calculate this; that also has a cost."