Chaos, a nightmare, a bureaucratic monster, and the art of complicating things are just a few ways the stainless steel community describes CBAM, which started its transitional phase on October 1, writes SMR Stainless Club in its industry newsletter.

Navigating the complex world of CBAM (Carbon Border Adjustment Mechanism) feels like a wild rollercoaster ride for EU importers. Despite countless webinars, explanatory papers, and the supposed “learning phase” of the first three years, importers have more questions than answers, just two months away from the first reports being due. “CBAM has been implemented in a rush, in less than no time. It’s by far not ready yet,” expresses a market specialist, capturing the sentiment of importers facing the unpreparedness of the system.

“A mechanism to protect the European Union from high-polluting imports is something you should definitely support, but how it’s handled so far gives us issues as a company… After attending several webinars on the procedure of CBAM from next year, there is no light at the end of the tunnel, meaning the website for reporting is still not working. We still don’t know what and how to report the information needed,” said Damstahl, a major stainless steel distributor in the EU.

Damstahl’s concerns were echoed by many other stainless steel importers who are all set to report but are held back by the absence of the registry, national authorities, default values for emissions calculations, and explanations of procedures. For example, Germany is still dragging its feet on nominating the National Competent Authority, leaving German importers unable to access the CBAM registry for report submissions. “We have no idea what takes Germany so long,” remarks a market participant.

Importers in Belgium, Netherlands, Spain, and some other countries complained they couldn’t access the CBAM registry’s test environment to look at how it works. “Even accessing the test environment of the CBAM Transitional Registry is an absolute ordeal. Was it really necessary to make access so secure? It’s supposed to be just a test site, a simple demo… And it’s made as secure as Fort Knox or a Wall Street vault…,” commented Christophe Lagrange (Executive Board Member at Euranimi). The regular Transition CBAM registry is expected to be available between mid-December and the beginning of January.

For many steel importers, the complexity of CBAM remains a big issue. Considering the format of the report, which consists of about 200 fields, requesting very detailed information is a real burden. Another challenge is collecting all the data from the suppliers, especially if the importer is dealing with many companies. Some suppliers, for example, in South Korea or Japan, and even in China, consider the information requested by the Commission too sensitive and do not want to share it. But even with cooperating suppliers, importers are concerned about the correctness of provided data as, ultimately, the responsibility for the wrong or incomplete reporting lies on the shoulders of the importer. The only exclusion is if goods are supplied on the DDP base, where all the procedures are the exporter’s responsibility.

Penalties in a “learning” period also surprised many market participants. To ensure that all parties do their best to comply with CBAM reporting, the European Commission will use fines ranging between EUR 10 and EUR 50 per tonne of unreported emissions. “The penalties apply where the reporting declarant has not taken the necessary steps to comply with the obligation to submit a CBAM report, or where the CBAM report is incorrect or incomplete, and the reporting declarant has not taken the necessary steps to correct the CBAM report after the competent authority initiated the correction procedure,” the EC updated Q&A paper reads. During the transitional period, the Commission will screen the CBAM reports and communicate a list of incomplete or suspicious reports to the competent national authority.

The good thing is that some flexibility is available for the emissions data reporting and the first reports’ correction timeframe. For the first three reposts, importers struggling to obtain all the necessary emission data from suppliers could use default values – a calculated number of embedded CO2 emissions in CBAM goods. The Commission will determine those values for each CBAM commodity CN code by the end of the year. The EU’s Joint Research Centre (JRC) report published on September 29 will serve as a base for default emissions values during the traditional phase. The values will be global in the transitional phase, without division by countries. However, while simplifying the initial reporting process, default values could be much higher than real ones as they are based on the data of the EU’s worst-performing manufacturers in the Emission Trading System. CBAM declarants will be allowed to correct the first two reports till July 31, 2024.

Overall, market participants asked by SMR are not against CBAM in absolute; they are just confused as there are still a lot of clarifications required. The participants also don’t expect significant trade flow changes in the coming months, as no additional payments are involved, and verifications are needed. Importers continue working with their suppliers to comply with new regulations and establish new procedures. Practically, nothing has started yet, and the main focus is to work on receiving the most accurate data and understanding step-by-step how to report it.

SMR Stainless Club
10 December 2023