CBAM poses challenges for importing companies

Since January 1, 2023, the Carbon Border Adjustment Mechanism (CBAM) has come into effect, presenting new challenges for importing companies of certain goods. The Customs Support Group (CSG), a provider of customs clearance and trade solutions in Europe, has identified five common mistakes in its consulting practice that can lead to increased costs, compliance risks, and additional effort.

CBAM is a central element of the EU Green Deal and aims to ensure that imported products such as iron, steel, aluminum, cement, and fertilizers bear the same CO₂ costs as goods produced in the EU. After a three-year transition period during which companies could establish their reporting structures and test reporting processes, the reported emissions will be definitively assigned to imported goods starting January 1, 2026.

Companies importing more than 50 tons of CBAM goods annually should submit their application for the status of approved CBAM declarants by March 31, 2026. This approval is crucial to ensure the uninterrupted import of CBAM goods into the EU. Starting in 2027, approved CBAM declarants must acquire and surrender certificates for the goods imported in the previous year, which will have direct financial implications.

Challenges in Implementing CBAM

John Wegmann

According to John Wegman, CEO of the Customs Support Group, CBAM is evolving from a mere reporting obligation to an operational management tool that deeply impacts customs, supply chain, and financial processes. The CSG has identified five typical weaknesses that companies should address:

First, CBAM is often viewed as a technical reporting task, while in practice, it requires clear responsibilities across various areas. Lack of coordination between customs, procurement, sustainability, and finance can lead to inconsistent reporting and increased risk of errors.

Second, the correct classification of goods is crucial. Errors in assigning customs tariff numbers can lead to incorrect reporting and delays. Companies should regularly review origin, classification, and CBAM obligations.

Third, companies exceeding the threshold of 50 tons should apply for the status of approved CBAM declarants in a timely manner. Failures to do so can result in delays, penalties, or even import bans.

Fourth, many companies have not adequately quantified the financial impacts of CBAM. The acquisition of certificates will directly affect import costs. Companies should use the published CBAM benchmarks to assess their risk.

Fifth, incorrect reporting can lead to rework and fines. CBAM should be viewed as an ongoing process that requires regular reviews.

Practical Example Illustrates the Risks

An example from the industry illustrates how quickly errors can become relevant: An EU importer of steel components from a third country enters the final phase of CBAM without having assessed the financial impacts and engaged its suppliers early on. When preparing its first CBAM declaration, the importer requests emissions data from its supplier, who assumes that the products do not fall under CBAM. This results in no preparatory measures being taken and no emissions data being collected.

Only later does it become clear that the goods, due to their correct customs classification, actually fall under CBAM. The importer must rely on standard values, leading to higher costs and significant coordination efforts.

Wegman emphasizes: “CBAM is not a theoretical reporting project, but an operational stress test for customs, supply chain, and data processes. It is not the rules themselves, but their implementation that determines whether companies manage risks or incur unnecessary costs.”

www.customssupport.com