A CBAM reporting obligation is realised when an importer releases a CBAM good, originating from a third country, into free circulation in the EU post 1st October 2023.

CBAM goods are defined via their CN (Common Nomenclature) code which is a classification of goods. If the CN code of the good is identified in Appendix II of the CBAM implementing regulation, then this good is a CBAM good.

The aggregated goods categories captured under the CBAM regulation are hydrogen, electricity, aluminium, iron and steel, ferroalloys and cement.

CBAM goods are split into two categories: simple and complex goods. Simple goods are minimally processed (e.g. aluminium ingots or sintered ore) whilst complex goods are processed (e.g. aluminium sheets or steel screws).

To learn more about identifying CBAM goods via their classification including TARIC, CN and HS codes please take a look at this article.

When a good is imported into the EU a customs declaration must be lodged. Within the customs declaration the good must have a requested customs procedure (box 37) associated with its intended use within the EU.

Goods can be released for free circulation and home use of goods, subject to inward processing or put in transit through the EU.

Permitted customs requested procedures for CBAM are:

Only goods where the requested procedure is associated with the release of the good for free circulation into the EU are captured by a CBAM reporting obligation.

Goods placed under inward processing arrangements are not subject to CBAM unless they are subsequently released for free circulation into the EU and not re-exported.

There are two types of customs representation: direct and indirect. The vast majority of customs agents act as direct representatives in the EU whilst indirect customs representation is less common.

Organisations registered in the EU generally always have direct customs representation in the EU. In this way, the customs agents clears goods through customs on behalf of and in the name of their customer.

Organisations established outside the EU generally always have indirect customs representation where the indirect customs representative is registered in the country of import. With indirect representation, the agent clears goods in their own name on behalf of the customer.

A third country is defined as a country outside of the EU excluding Switzerland, Lichtenstein, Norway and Iceland.

If you do not have a CBAM reporting obligation, you do not need to take any actions or make a CBAM declaration.

If you do clear CBAM goods into the EU but not within a given CBAM reporting period, then you do not need to make a CBAM declaration for that given quarter.

You need to first register to become a CBAM declarant through your National Competent Authority (NCA). You can find guidance on the steps that you need to take in order to gain access to the EU Transitional Registry through the National Competent Authority in the member state of establishment of your organisation. There is an NCA per EU member state and each one has slightly different credential requirements in order to be able to access the Registry. Please consult the guidance provided and contact your NCA desk email address if you have any further questions.

Identifying the source of truth on your CBAM goods. You need to obtain information from your customs agent on the goods that they have cleared and released for free circulation into the EU in the current reporting period. This information will enable you to identify the specific quantities of the CBAM goods that you have imported and need to declare. Customs import data is the source of truth as this is the data the NCAs will assess when they perform their completeness check to ensure that you have declared all CBAM goods you have imported into the EU from third countries.

Identify your CBAM goods suppliers and contact them in order to explain their CBAM reporting obligation to you with regards to calculating the embedded emissions of the CBAM goods that they produce in line with the EU CBAM reporting methodologies.

National Competent Authorities (NCAs) are established in each EU member state. They are responsible for providing access to the EU Transitional Registry.

The European Commission is responsible for maintaining the EU Transitional Registry.

There are a number of internal stakeholders that will need to be involved in the CBAM reporting process due to the variety of data required for CBAM reporting.

Customs, indirect tax or finance will need to be involved as they will likely have the necessary credentials to access the EU Transitional Registry as well as have the strongest relationships and understanding on the status of goods imported into the EU where the organisation is the importer of record. Customs team will likely have the strongest relationship with the customs brokers or freight forwarders and will therefore be able to obtain information on the CBAM goods cleared into the EU each quarter. This team is most likely to carry out the CBAM declaration process itself.

Procurement or purchasing teams will likely have the strongest relationship with suppliers of CBAM goods. It is therefore critical that they are involved in order to be able to facilitate conversations with suppliers and explain their CBAM reporting obligation. They are also most likely placed to receive CBAM goods information from suppliers and they need to recognise that this must be shared with the relevant team completing the CBAM declaration so that this information can be included in the CBAM declaration.

You will require two key sets of data for CBAM reporting. Firstly, you will need to know what goods you have imported into the EU in the reporting period.

From this data you will need to be able to identify if any of these goods are CBAM goods. To do this you will need to know the TARIC/CN/HS Code of the goods, the country of origin of the goods and the customs requested procedure of the goods. This will enable you to identify if you have a CBAM reporting obligation.

If you do, then you will need to also know a number of additional parameters associated with the goods including the net weight imported (in tonnes or kilograms), the production country and the specific installation (manufacturer) where the goods were produced. The majority of this information should be able to be obtained from your customs agents.

The one set of data that a customs agent may not be able to provide is resolving back to the installation that produced the goods. This is often the missing link between customs data and CBAM reporting requirements. In many cases, the installation will be the exporter however, this will not be the cases where you interface with distributors, for example in the case of steel products.

The second dataset that is critical for CBAM reporting is the installation data that you require for your reporting needs for the October declaration based on goods imported in Q3 2024. There are a number of fields required in order to make a CBAM declaration using installation data which reflect the embedded emissions of a CBAM good based on data provided by the producer. This information must be obtained directly from the operator of the installation.

The CBAM declaration can be performed by several parties under the guidance provided by the EU Commission. Generally, there are two situations which are dictated by the type of customs representation received by the importer.

In cases of direct representation for EU-established entities, it is the importing entity that will make the CBAM declaration. This is because direct customs representatives can refuse to take on the CBAM reporting obligation resulting in the importer having to take on the declaration obligation. The importer can appoint a separate indirect customs representative to take on the CBAM reporting obligation in this case however, in most instances the importer is best placed to take on the CBAM reporting obligation.

With indirect customs representation, generally where an importer is established outside the EU, an indirect customs representative is used to customs clear goods into the EU and it is that same indirect customs representative that must take on the CBAM reporting obligation.

Once the declarant has been identified, the task of reporting to the NCA can be delegated to a service provider.

You can find detailed insight into the reporting obligations in the attached guidance.

Reporting for importers needs to be done quarterly in the transitional period, starting from the 31st January 2024 for imports that occurred in Q4 2023.

Reporting for installations must be done quarterly, starting from early January 2024 and then must be performed annually from October 2024 onwards.

In the definitive period, CBAM reporting is to be done annually for both importers and installations, although importers will need to monitor their imports and purchase CBAM certificates monthly through the CBAM registry.

Yes, there are penalties for under reporting, over reporting or misreporting. The penalty is between 10-50 EUR per tonne of CO2e misreported. Note, there will be opportunities to amend any issues that could result in penalties before these are applied.

Before a penalty is applied, the NCA will engage with the importer to amend their report in order to be compliant. Failure to comply or engage with the NCA to amend the report will result in a penalty.

The severity of the penalty will increase in line with extent of engagement with the NCA or the number of delayed or missed reporting deadlines by the importer.

The EC have provided a set of global default emissions intensity values at the CN code-level to enable importers to make declarations using these figures. This is to enable importers time to engage with their installations to obtain primary data for future reporting periods.

The default values are permitted to be used until July 2024. This means that for the October declaration on goods imported in Q3 2024, usage of default values would constitute misreporting and would result in a penalty.

The default values have been designed to be penalising (i.e. the emissions intensities are high) in order to discourage their usage post-July 2024.

Default values can also be used by installations when preparing their data communication sheet for reporting to importers. From July 2024, installations can continue to use default values for purchased precursors provided the total share of default values in the calculation of the embedded emissions of the product does not exceed 20%. This means that for minor emissions contributions associated with in-scope precursor materials (or where the majority of precursor emissions intensity data has been obtained from multiple installations), an installation can use default values and provide compliant data to their importing customers.

You are likely to have requests for CBAM data from your customers if they import your products into the EU and you are established outside of the EU and produce goods of a CN code that is captured in Anex II, Table 2 of the implementing regulation for the transitional period.

You may also be an installation for CBAM reporting purposes if you are based in the EU and export CBAM goods that are subsequently transformed into other CBAM goods and re-imported into the EU.

Critically, you should assess the CN Codes of the goods you manufacture and discuss with your customers if any of your products are subsequently imported into the EU and released for free circulation.

If your supplier produces CBAM goods that are considered in-scope precursors for your installation (e.g. you produce aluminium sheets and buy aluminium ingots, then your ingot supplier is an in-scope CBAM good precursor supplier).

For your given manufacturing process, please check what products are in-scope for your system boundary under CBAM.

Your suppliers need to provide this data to you as soon as possible in order to enable you to report to your customers. The data needs to be communicated to you in the format of the excel communication summary sheet for installations.

If your precursor suppliers need support or would like access to the Knowledge Hub then please contact CarbonChain.

In all instances, CBAM-compliant data is in the form on the communication data template provided by the European Commission. The reason for this is due to the fact that the system boundary for CBAM reporting is not the same as GHG Protocol aligned Product Carbon Footprinting, nor is it the same as scope 1,2,3 reporting that the GHG Protocol’s Corporate Carbon Footprint users are familiar with.

Compliant CBAM data is a single excel tab in the format of the Communication data template with no missing fields. The data template contains the necessary fields required for reporting of installation data, including information on carbon price paid, production process and additional product qualifying parameters.

For importers with a large number of suppliers, receiving data in any format other than this template is likely to be unacceptable.

GHG Protocol Aligned Product Carbon Footprints, as you can see here, calculate the full emissions footprint of a product, from cradle-to-customer, or grave. They consider the full carbon emissions footprint of a product all the way from raw material production and processing to the delivery to customer and end of life. The standard for measuring product carbon footprints is set by the GHG Protocol.

The CBAM specific embedded emissions figure is calculated based on a European Commission defined system boundary that is a subset of the scope of a Product Carbon Footprint as defined by the GHG Protocol. As a result, a CBAM carbon intensity figure should always be lower than under the GHG Protocol’s Product Carbon Footprint Standard.

Furthermore, CBAM data must be prepared by the installation that produced the goods whilst it is permissible, and common practice, to use estimates such as global, country or company-specific emissions factors in asset-level product carbon footprints.

For example, aluminium ingots under CBAM reporting do not need to take into account the emissions associated with bauxite mining or alumina refining, as they fall outside the CBAM system boundary, whereas you would include these in an aluminium ingot’s product carbon footprint calculation.

Furthermore, during the transitional period, both direct and indirect emissions are to be included in the calculation for both steel and aluminium products however, during the definitive period only direct emissions are to be measured and used to inform the volume of CBAM certificates to be purchased. This results in a significantly lower CBAM emissions intensity for aluminium, of around just ~2tCO2e/t (default value, direct only) versus between 3-28tCO2e/t for a product carbon footprint since a significant proportion of emissions are associated with electricity consumption. Note, the default value for aluminium ingot is ~8tCO2e/t for indirect emissions.

Scope 3 reporting is a corporate carbon footprint reporting term that is associated with indirect emissions associated with the operational activity of a business. Scope 3 reporting does capture product-level emissions and therefore, CBAM data can be used for Scope 3 reporting however, as identified above, there are a number of gaps in the system boundary when using CBAM data.

Obtaining CBAM data is a great first step to engaging your supply chain and putting pressure on them to provide full product-level emissions in order to enable your own scope 3 reporting ambitions – particularly when it comes to meeting SBTi or other net zero commitments. When asking for CBAM data from your CBAM goods suppliers, you should also look to engage them on Scope 3 reporting to see if they can do both simultaneously. CarbonChain can also support these conversations.

The penalties associated with misreporting under CBAM fall on the importer, not on the installations. As a result, the importer must take critical steps to engage their suppliers and be able to evidence these actions to the appropriate NCA.

It is highly recommended that importers of CBAM goods amend the terms and conditions of their contracts to address CBAM reporting requirements by their suppliers or ensure that payment terms incorporate the receipt of complete, valid CBAM installation data, in the form of the EU’s Data Communication Data template. It is critical that supplier data that is received meets your reporting requirements.

The alternative approach is to switch to suppliers that will comply with your CBAM reporting requirements. This may be the best option where you purchase products from suppliers that do not have a large exposure to EU markets.

Yes, feel free to book time with our team via our office hours or review our guidance FAQ material for addressing supplier questions.

There are a number of key areas where installations may face challenges with regards to reporting on the embedded emissions of their products.

Firstly, ensuring the calculation is performed in line with the EU CBAM reporting requirements and system boundary. There will be no verification process for installation data in place until the definitive period and therefore compliance with EU CBAM methodology may not be discovered until this point. In advance of the definitive period, it is recommended to work with third parties to validate and review CBAM installation data. Installations should also establish a monitoring methodology document in order to layout out their calculation methodology, ensuring alignment with the EU CBAM system boundary for reporting.

Installations with multiple precursor suppliers need to obtain the emissions intensity of these in-scope precursors. This requires educating their suppliers to ensure that they provide the correct data. This is certainly a key challenge regarding obtaining accurate data, also prepared in line with the EU CBAM methodology requirements, from suppliers in a timely manner.

The guidance is not entirely clear regarding what data is permissible for reporting by importers. The consensus is that the “latest available” 12-month data set (e.g. calendar or fiscal year) is appropriate for reporting. In the January 2024 declaration, several installations provided full year 2022 data to importers.

In theory installations should provide quarterly data during the first year of reporting. This is because, following the implementation of a monitoring methodology in advance of the 1st October 2023, an installation would have 1 quarter of actual CBAM data in early January and be able to report this to their importing customers using 3 quarters of estimated data based on this. Over the year, they would increase the amount of actual data each quarter until the 30th September 2024 where they would have obtained a full year of data calculated in line with the EU CBAM permitted reporting methodologies. From this point, installations would provide importers with one annual update on the annual average embedded emissions of the products they have sold them from a given installation.

Note, there are additional permitted methodologies for calculating the embedded emissions of CBAM goods that can be used until the 31st December 2024. After this date, only the calculation or measurement-based methodologies will be permitted for CBAM reporting and therefore, we recommend installations prepare their CBAM data in line with these methodologies as soon as possible.

Until the 31st December 2024, installations can calculated the specific embedded emissions of their CBAM goods using a number of emissions measurement methodologies, including the EU CBAM’s methodologies, Other Methods or National measurement schemes (e.g. under an ETS).

After this date, only the calculation or measurement-based methodologies will be permitted for CBAM reporting and therefore, we recommend installations prepare their CBAM data in line with these methodologies as soon as possible.