Can a tube/pipe producer avoid averaging HRC precursor emissions by defining “HRC-origin-specific” production processes?
Case: An installation converts hot rolled coil (HRC, CN 7208 37 00) into tubes/pipes (single on-site route: forming/bending). It purchases HRC from 5 distinct origin installations and has substrate-level tracking showing no blending of HRC into finished product.
Summary
Yes, but only via the “complex goods precursors” exception in Article 14(3): the installation can determine (and report) different precursor embedded-emissions values for the same HRC CN code by splitting its pipe-making into separate “production processes”, provided it can evidence to the verifier that each production process used HRC only from a single origin installation (or a defined subset).
If it cannot evidence that segregation “for a given production process,” then the default rule applies: HRC precursor emissions must be a weighted average across origin installations.
What the regulation permits (and why “5 processes” can be valid)
Defining production processes: Operators must identify production processes for goods to which the same functional unit applies, ensuring inputs/outputs/emissions can be monitored and emissions attributed to those goods.
For steel products, the general functional unit is tonnes under the same CN code.
Key point: The rule that forces a single production process applies when the same functional unit is produced using different production routes within an installation (then one process must encompass all routes). In this case, there is one on-site route, so Article 4(6) does not require consolidation across “origins”.
Avoiding weighted averages for precursors (the critical permission): Where an installation producing complex goods receives precursors under a given CN code from multiple installations, the default is a weighted average.
However, Article 14(3) allows separate determination where operators provide the verifier with sufficient evidence that, for a given production process, only precursors from a single installation (or subset) were used—then embedded emissions for that precursor portion are determined based on that origin (or weighted average of that subset).
The recitals confirm the intent: default weighted average, but separable where evidence shows a production process used only a given installation/subset.
Operational monitoring alignment: The Annex requires that precursor quantities and emission properties are determined separately for each production process from which the precursor is sourced, and that the methods are laid down in the monitoring plan.
Implication for your design: Defining “Pipe-from-HRC-Origin-A” … “Pipe-from-HRC-Origin-E” as 5 production processes is defensible if each is a real monitoring unit with attributable activity and inputs, and you can prove exclusive use of the relevant HRC origin(s) for each process (to satisfy Article 14(3)).
What the regulation restricts (where the approach fails)
If HRC origins are mixed within one production process (or segregation cannot be evidenced), then the HRC precursor emissions must default to weighted average across installations under Article 14(2).
Production-process definitions must still meet the Article 4(1) requirement that inputs/outputs/emissions can be monitored and emissions attributed (i.e., you cannot create arbitrary “processes” that break traceability or create data gaps/double counting).
The regulation is explicitly cautious about “structuring” for avoidance: splitting routes into separate installations is only allowed with valid commercial reasons and non-circumvention intent. While this is about installations (not production processes), it signals scrutiny of artificial structuring.
What to document (verifier-ready checklist)
To rely on Article 14(3), the monitoring plan and records should clearly show:
Production process list includes the “HRC-origin-specific” processes and the goods delivered per process (monitoring plan minimum elements).
Precursor consumption per process: quantity of HRC consumed per production process and how it’s determined.
Origin installation data for each HRC batch (installation ID/location etc.) where precursor obtained from another installation.
Method flagging: for each precursor (HRC) indicate whether emissions were determined via default weighted average (Art 14(2)) or via the single-installation/subset method (Art 14(3)).
Evidence of exclusivity per production process: substrate-level tracking / batch traceability demonstrating that, for process A, only HRC from origin A was used (and similarly for others), matching the Article 14(3) condition.
Conclusion
One can avoid averaging HRC embedded emissions across multiple origin installations by structuring pipe production into separate production processes aligned to substrate-level segregation, and applying Article 14(3) (separate precursor determination) where we can provide verifier-satisfactory evidence that each production process used only HRC from a single origin installation (or defined subset). If we cannot evidence this exclusivity, Article 14(2) requires weighted averaging of HRC precursor emissions across origins.