CBAM applies to carbon-intensive products such as cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. The list may expand in the future.

It is designed to level the playing field between EU companies, which must pay for greenhouse gas emissions under the EU Emissions Trading System (ETS), and non-EU companies, which are subject to CBAM regulations.

According to the recent simplifications approved by the European Commission, only importers above certain thresholds will be subject to this regulation. It is estimated that 90% of them will be exempt.

CBAM has two phases:

• The transitional period started on October 1, 2023, and runs until December 31, 2025.
• The definitive system begins on January 1, 2026. Nonetheless, importers will be obligated to purchase CBAM certificates starting from February 2027.

The responsible declarant is the entity legally accountable for CBAM compliance. This can be: the direct importer, a holder of an Entry in the Declarant Register (EIR) authorization, an appointed indirect representative, an indirect representative when the importer is based outside the EU.

In practical terms, a non-EU manufacturer can centralize these obligations into a single entity only if this entity is the same customs broker used across the entire continent. However, this is an unlikely scenario, also because customs brokers rarely take responsibility for CBAM obligations.

As a result, manufacturers must provide their importers with the necessary emissions data so that they can handle CBAM certificate payments themselves.

Manufacturers must provide detailed documentation on embedded emissions in their products to importers. Without accurate emissions data from manufacturers, importers cannot fulfill CBAM reporting requirements, which could block market access to the EU.

Failure to comply with CBAM obligations can result in significant penalties. Companies that do not report their emissions, fail to submit the required report, or provide incorrect or incomplete information without correcting it may face fines. Additional sanctions apply if the responsible declarant does not deliver the required number of CBAM certificates for the imported emissions or if goods enter the EU without meeting CBAM requirements.