EU Adopts Import Reporting Rules Ahead of Carbon Border Adjustment Tax

The European Commission this week officially adopted rules covering the transitional phase for its carbon border adjustment mechanism, which will eventually set new requirements on imports of electricity, fertilizers, hydrogen, steel, aluminum, cement and other items, including from the U.S. (see 2212130056). During the transition period, which launches Oct. 1 and runs through 2025, traders will be required to report on the emissions “embedded in their imports” that are covered by the mechanism, but they won’t have to pay any taxes.

The EU said the transition period will “give adequate time for businesses to prepare in a predictable manner, while also allowing for the definitive methodology to be fine-tuned by 2026.” While importers must begin collecting fourth quarter data on their imports Oct. 1, the EU said their first report won’t have to be submitted until Jan. 31.

The EU also published new guidance to help importers and third-country exporters comply with the mechanism, and said it plans to develop “dedicated” information technology tools to help “importers perform and report these calculations.” The bloc will hold six webinars to help traders understand their obligations. The sessions will cover “general features of the CBAM” as well as the "specifics" that apply to the iron and steel, aluminum, cement, fertilizers, electricity and hydrogen sectors.

During the transition period, importers or their “indirect customs representatives” must report on the quantity of imported goods, the “type of goods,” their country of origin, their direct and indirect embedded emissions, any carbon price “due for those emissions, including carbon prices due for emissions embedded in relevant precursor materials,” and more, the EU said in its implementing regulation. The regulations offer some flexibility for importers that struggle to “obtain all the information from third country operators” on the product’s embedded emissions, adding that those traders can “use and refer to an alternative method for determining” the emissions.

The EU said member states will be able to impose penalties on importers that fail to “respect the reporting obligations,” the bloc said, including if the importer submits “incorrect or incomplete” information. Penalty amounts should be between 10 and 50 euros “per tonne of unreported emissions,” and the “criteria to be used by competent authorities for determining the actual amount of the penalty should be based on the gravity and duration of the failure to report.” Higher penalties may be imposed for repeat offenses.