Necessary actions for importers of steel and aluminium products from China

Under the new EU regulation CBAM (Carbon Border Adjustment Mechanism), importers of selected high-emission materials to Europe must quarterly report in detail on the emissions of these goods. This is particularly relevant for steel and aluminium from China, both as raw materials and as so-called complex goods. The regulation came into force in 2023 and we are still in a transition period. But this is quickly coming to an end: Reporting for Q2 this year, with a deadline July 30th, is the last period where default reference values can be used. After this more detailed data is necessary.

The EU regulators have developed a comprehensive Excel sheet called “CBAM Communications Template for Installations”, with the intention that the suppliers should fill this in. The sheet has 11 sub-sheets and about 275 items that should be added. Notably, the EU team did not make a Chinese version of the sheet, so the Chinese partners were expected to understand the instructions in English. A test done in Thailand showed that among eleven suppliers who received the sheet, only five it filled in, and only one of these was correct. Of course, the road to complex spreadsheets is paved with good intentions. However, CBAM data gathering must be approached in better ways to ensure that correct and reliable data is submitted.

Screenshot of the “CBAM Communications Template”

Importers of CBAM goods to Europe should collaborate closely with their exporting partners to get the correct data early on. Most of the production site details will not vary over time, so doing the job properly in the beginning will have great pay-offs over time. Not getting it right will likely lead to inconsistent time series and make it difficulty in tracing errors. There are also local incentives for Chinese manufacturers to set up systems to monitor and reduce emissions. Engaging a local partner who knows these will therefore ensure better communication and commitment for doing the reporting correctly.

Although the CBAM regulation mandates this reporting for customs purposes (after the transition period, the importer must compensate for lower carbon prices in the country of origin compared to the EU), the data should not be used only for this purpose. A number of other EU regulations, such as the CSRD for ESG reporting and anti-greenwashing rules, also requires carbon emissions data. Getting the CBAM reporting right will help in getting scope 3 emissions for these reporting needs. Our partners have long experience with working for international companies on this.