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EU CBAM reporting deadline rapidly approaching for EU importers

Deadline 31 January 2024

Ian Worth, Director, VAT and Customs Duty services
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National audit, tax, advisory and risk firm, Crowe, urges UK suppliers to disclose emissions data to their European customers as the first EU CBAM reporting deadline rapidly approaches on Wednesday 31 January.

The EU’s Cross-Border Adjustment Mechanism (CBAM) regulations, which came into force on 1 October 2023, compel EU importers to submit quarterly data on embedded emissions in their supply chains from third party countries, including the UK.

The EU Commission has indicated leniency during implementation phase; however, the scale and ambition of CBAM regulations - initially covering imports of aluminium, cement, electricity, fertilisers, hydrogen and cast iron and steel - mean affected UK businesses must not be complacent about their responsibilities, especially if this wish to remain competitive in EU. 

Well-prepared UK suppliers must already have the necessary mechanisms in place to accurately capture, report and submit complex carbon emission data to their customers.

The EU CBAM is currently in a transition period until 2026, during which EU importers of goods in scope must report details of carbon emissions embedded in the products they import. There will be no financial impact until the transition period ends when the scale of carbon charges start at just 2.5% of the carbon value and incrementally increases to 100% by 2034.

EU importers are responsible for complying with CBAM and could face fines being levied against them for unreported emissions of between €10 and €50 per tonne, which could be passed along to suppliers if unprepared businesses are unable to provide appropriate data.

Crowe’s five step guide

As the first deadline approaches at the end of January, to help all affected parties Crowe has developed a 5-step guide to help comply with these new and complex obligations:

Step 1: Understand obligations under CBAM

Determining if a company has reporting obligations means they must review what products are imported into the EU and comparing them to the list of CN codes.

Even if companies do not have direct reporting obligations under CBAM, they might sell products to customers who do have obligations to determine the embedded carbon in their products, and those customers will need details of embedded carbon emissions.

Step 2: Perform an impact assessment
If companies have obligations under CBAM, they will need to determine the volume of products covered under the regulations, the country of origin of those products and the production sites.
Step 3: Develop the right cross-functional team

Pulling together the right team is critical to establishing the appropriate oversight and management of the compliance process, with expertise which could include trade compliance, accounting, legal, environmental, social and governance (ESG), and other specialists. 

Additionally, large multinational enterprises will need input from members of their global trade team.

Step 4: Calculate embedded emissions

The EU has made reporting easier for companies to allow them to use default values if actual data is unavailable. 

Companies must work quickly to collect the direct and indirect embedded emissions within their CBAM products in order to report actual emissions once default values are no longer permitted from July 2024. For EU importers, obtaining this data can be very challenging and so they need to determine how they can efficiently work with their suppliers.

Step 5: Get ready to report

Companies must establish the right internal systems and controls to gather, verify, and report CBAM information quarterly. The reports are to be submitted through the CBAM Trader Portal under the CBAM Transitional Registry.

The EU has developed a template for businesses to help facilitate reporting.

Ian Worth, Crowe’s Director of VAT and Customs Duty services, said:

Ian Worth 

“Since launching in October 2023, UK businesses have had to scramble to understand and assess their exposure to EU CBAM. Readying preparedness has required time and investment by UK suppliers to ensure they are compliant ahead of the Wednesday 31 January deadline. 

 “The impact of CBAM is beginning to reverberate across the global supply chain, including close trading partners such as the UK and will continue to do so as the scheme expands. However, while its effectiveness and implications on businesses remains to be seen, we’re urging UK business not to ‘shy away’ from their reporting responsibilities, especially if they wish to remain competitive against other third country suppliers in the same position.

“While CBAM is additional level of regulation, there is a silver lining. EU CBAM represents an opportunity for UK businesses to develop accurate reporting processes, and importantly invest in decarbonising production to minimise carbon emissions, ahead of the introduction of the UK’s own scheme in 2027.”