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CBAM: questions and answers from EU Commission

Gennaio 28, 2024 /

EU Commission on 23 January 2024 updated its “ Carbon Border Adjustment Mechanism (CBAM) Questions and Answers” and checks the following points:

  1. General topics about the CBAM;
  2. Reporting aspects, responsabilities, procedures and general issues related;
  3. The transitional registry;
  4. Methodology for calculationg embedded emission in CBAM goods (cement,fertilizer, electricity, hydrogen, iron, steel, aluminum/steel)
  5. Customs and CBAM.
  6. Definitve period.

For what is concerning, the customs implications of CBAM, the “ Carbon Border Adjustment Mechanism (CBAM) Questions and Answers” provides with the following answers:

QUESTION: Can an importer use different customs representatives for the customs declaration and the CBAM reporting?

  • As regards the reporting requirements applicable during the transitional period, the CBAM Regulation (Article 5) foresees the possibility for importers of CBAM goods to appoint direct or indirect customs representatives within the meaning of Article 18 of the Union Customs Code (see to that effect Regulation No 952/2013):

o in the case of direct representation, the EU-established importer would be subject to the CBAM obligations while the direct customs representative keeps the status of customs declarant.

o if an EU-established importer appoints an indirect customs representative, and the latter so agrees, the reporting obligations shall apply to such indirect customs representative.

o where the importer is not established in a EU Member State, the reporting obligations shall apply to the indirect customs representative in any case.

  • There is no possibility during the transitional period for an importer to have several indirect customs representatives for CBAM goods covered by the same customs declaration.
  • For an importer established in an EU Member State, it would be possible to use a direct customs representative to carry out customs obligations, and to hire a service provider to enter CBAM reporting data in the CBAM Transitional Registry. For this purpose, the importer would delegate access to the Transitional Registry to this service provider, who would fill in the CBAM report in the name and on behalf of the importer. In case the service provider has an EORI number, he can be given access by the NCA directly to the CBAM Registry as Economic Operator, upon providing evidence that he has been authorised by the importer to submit CBAM reports on his behalf.

However, the importer would, in the above cases, remain the reporting declarant and therefore legally liable for CBAM obligations.

  • For an importer established outside the EU, the indirect customs representative will be responsible for both the customs declaration and the CBAM declaration.

QUESTION: What happens if an indirect customs representative does not agree to carry out CBAM reporting obligations?

  • This is only possible in cases where the importer is established within the EU. Where on the contrary the importer is not established in the EU, the indirect customs representative has to fulfil the CBAM reporting obligations.
  • Art 8.3 of the Implementing Regulation provides that in cases where indirect customs representatives do not agree to carry out CBAM reporting obligations, they shall notify the importer of the obligation to carry out the reporting
  • If no such notification is given to the importer, the indirect customs representative remains liable for the reporting obligations.

QUESTION: Can a direct customs representative be a CBAM reporting declarant for companies established in the territory of the EU?

  • EU importers can indeed appoint direct or indirect customs representatives. However, as regards CBAM reporting (under the CBAM Regulation and the Implementing Regulation), the obligations lie either on the importer or on their indirect representatives where the latter so agree (please see Art. 32 of Regulation (EU) 2023/956 for the transitional period).
  • Even in the case where the importer appoints a direct customs representative, that importer remains liable for CBAM reporting obligations. In other words, the importer remains the declarant for CBAM purposes.
  • Nothing prevents importers from appointing service providers who may assist them in preparing and submitting their CBAM reports in practice, but the responsibility for complying with the CBAM reporting obligations, even in such cases, lies on the importers or, where the case may be, on the indirect representatives.

QUESTION: Will customs representatives have the obligation to check if their client is a CBAM-registered declarant prior to making a customs declaration on their behalf for CBAM goods?

  • According to Article 15(2) on the Union Customs Code (UCC), the lodging of a customs declaration by a person to the customs authorities (importer or customs representative) shall render the person concerned responsible for (a) the accuracy and completeness of the information given in the declaration; (b) the authenticity, accuracy and validity of any document supporting the declaration; (c) where applicable, compliance with all of the obligations relating to the placing of the goods in question under the customs procedure concerned, or to the conduct of the authorised operations.
  • This also applies to the provision of any information in any other form required by, or given to, the customs authorities.
  • Based on the above, it is in the interest of the direct customs representative to check, prior to lodging a customs declaration for release for free circulation of CBAM goods, if the person on whose behalf the declaration is lodged fulfils the requirements of the CBAM Regulation.

QUESTION: My company is registered in one EU Member State but imports CBAM goods through multiple Member States. Should I compile all these imports into one single quarterly report?

  • During the transitional period, the CBAM declarant is responsible for submitting quarterly CBAM reports containing information on embedded emissions of all imported CBAM goods. CBAM goods are attributed to a CBAM declarant through the EORI number provided to the customs authorities. In the given scenario, there is only one company with one EORI number involved. The quarterly CBAM report should therefore compile the information on embedded emissions of all CBAM goods imported by this company, even if the goods were imported in different Member States.
  • Please note that importers may decide to appoint an indirect customs representative who, if they agree to carry out the reporting obligation, will have to provide their own EORI number during the importation of CBAM goods, and to undertake the CBAM obligations in the stead of the importer for those goods imported by the indirect customs representative.

QUESTIO: Are goods transiting in the EU to be reported on under CBAM?

  • No. Only goods to be released for free circulation into the EU are subject to the CBAM, while goods transiting in the EU are not.
  1. Will the CBAM reporting obligation apply to CBAM goods that have entered free circulation within the EU due to non-compliance with a customs procedure other than import (e.g., temporary admission), and for which all duties and taxes have already been paid through the said non-compliance procedure?
  • The release of the goods for free circulation requires that the CBAM requirements have been fulfilled. Therefore, the controls on whether or not those requirements have been fulfilled should precede the release of the goods for free circulation.
  • In case of non-compliance, Article 198(1)(b) UCC would apply (i.e. “the customs authorities shall take any necessary measures, including confiscation and sale, or destruction, to dispose of goods where the goods cannot be released because they are subject to prohibitions or restrictions”), because the goods are subject to CBAM requirements which have not been fulfilled.
  • In such a case, Article 198(2) UCC would apply as well (i.e. “non-Union goods which have been abandoned to the State, seized or confiscated shall be deemed to be placed under the customs warehousing procedure”).

QUESTION: Do I need to report on CBAM goods that are placed under the inward processing regime?

  • CBAM becomes due only for goods that are released for free circulation in the EU. Thus, in the case of CBAM goods that are placed under a custom suspensive regime in view of their future export or in view of their processing, there is no CBAM obligation.
  • Note, however, that if a CBAM good leaves the inward processing regime to be placed on the EU market, then there is a CBAM obligation.
  • A CBAM reporting obligation also arises in the specific case where a CBAM good that was placed under inward processing is processed into a product that itself is no longer a CBAM good, and this final good is finally released for free circulation in the EU (see Article 6 of the Implementing Regulation). In this specific case, the CBAM report would contain information on the quantities and embedded emissions of CBAM goods placed under inward processing (Article 6(f) and (g) of the CBAM Regulation), but not on the quantities and embedded emissions of the final goods released for free circulation, because in the example, these goods are not CBAM goods themselves (i.e. Article 6(a) and (b) do not apply).

QUESTION: There is a tariff suspension on the CBAM good that I have imported. Am I exempt from the CBAM?

  • EU legislation provides for some tariff suspension, such as through Council Regulation (EU) 2023/2890 of 19 December 2023 amending Regulation (EU) 2021/2278 suspending the Common Customs Tariff duties referred to in Article 56(2), point (c), of Regulation (EU) No 952/2013 on certain agricultural and industrial products.
  • Such tariff suspension has no effect on the CBAM obligations (including reporting requirements), which still apply even in the case of a tariff suspension.

QUESTIONS: What happens if indirect customs representatives agree to act as reporting declarants only for some goods but not for others? Do they need to submit two different customs declarations, one for the goods for which they act as reporting declarant and one for which they do not?

  • Yes, this is correct. Indirect customs representatives, who agree to act as reporting declarants only for some goods but not for others, would need to submit two separate customs declarations, one for the goods for which they act as reporting declarants and one for the goods for which they do not

Additional interesting questions & answers are:

QUESTIONS: Does the CBAM apply to EU outermost regions, such as Mayotte or La Reunion?

  • The CBAM Regulation applies only to CBAM goods originating in third countries and imported into the customs territory of the Union. The list of territories which comprise the EU customs territory is included in Article 4 of the Union Customs Code (Regulation EU 952/2013). La Réunion and Mayotte are part of the EU customs territory, and therefore the CBAM Regulation does not apply to goods produced in La Réunion and Mayotte.

QUESTION: Which third countries fall under the scope of the CBAM?

  • In principle, imports of goods from all non-EU countries are covered by the CBAM. However, certain third countries who participate in the EU ETS or have an emission trading system linked to it are excluded from the CBAM, so that a carbon price is not paid twice for the same product. This is the case for members of the European Economic Area (EEA) and Switzerland.
  • The CBAM applies to electricity generated in and imported from third countries including those that wish to integrate their electricity markets with the EU. If those electricity markets are fully integrated and provided that certain strict obligations and commitments are implemented, the concerned countries could be exempted from the CBAM. If that is the case, the EU will review any exemptions in 2030, at which point those partners should have put in place the decarbonisation measures they have committed to, and an emissions trading system equivalent to the EU’s.

QUESTION: Do I need to report the import of CBAM goods originating from the UK?

Embedded emissions from goods originating from the UK will need to be reported during the transitional period

It can help to know what does mean “non preferential origin” or made in or commercial origin of goods.

Firstly, the non-preferential origin can be defined as the characterization of a good with respect to a place where it is entirely obtained or where it undergoes processing capable of attributing its original character: in other words, customs origin constitutes the substantial and legal link between the finished good and the physical space in relation to which it is considered for customs, tax and commercial policy needs.

Like preferential origin, it is included in the AEO QAV (self-assessment questionnaire) in question 1.3.2 whereby: “…a) Provide an overview of the preferential or non-preferential origin of imported goods. b) What internal measures have been implemented to verify that the country of origin of imported goods has been correctly declared? c) Describe the method used to issue proof of preferences and certificates of origin for export…”.

Generally, it can be stated that the origin of a good takes on central importance in the correct application of the customs tariff and other commercial policy and trade compliance measures in general; within the AEO it represents an aspect to be managed with particular attention to the canon of qualified diligence.

Starting, in fact, from this premise, it is possible to identify how non-preferential origin[1] represents the main tool for the interpretation of the anti-dumping legislation referred to in question 1.3.5 of the QAV (self-assessment questionnaire for AEOs) “…Marketed products subject to anti-dumping or countervailing duties? Yes No. If yes, please provide information on the manufacturer(s) or country(s) outside the EU whose goods are subject to the above duties...”.

Where a good is wholly obtained in a single country or territory it must be considered as originating in that country or territory.

Instead, in the case in which there is a competition of activities and production processes, the reg. n. 952 of 2013 in its art. 60, 2nd paragraph, provides that: “Goods to the production of which two or more countries or territories contribute are considered to originate in the country or territory in which they underwent the last substantial and economically justified transformation or processing carried out in an equipped company for this purpose, which ended with the manufacture of a new product or represented an important stage in the manufacturing process”; in this way enucleates the contextual recurrence of the following elements: the last substantial and economically justified transformation or processing, the company or production structure equipped for this purpose, the activity carried out must end with the manufacture of a new product or has represented a important stage of the manufacturing process.

For completeness, the definition of “last substantial and economically justified transformation or processing” corresponds to the “substantial transformation” indicated in the Kyoto Convention of 15 May 1973 which is normally highlighted through the following rules:

  • the change of tariff heading, subheading or fractional subheading: this rule requires that the tariff classification of the final product is different from the tariff classification of the non-originating materials used in production. It can exclude a modification from another specific item or it can subordinate the modification to some additional processes [2];
  • the criterion of specific treatment;
  • the criterion relating to added value which requires that the substantial transformation coincides with the processing which determines an established percentage of the ex-factory value of the product.

 

If a primary rule did not allow the non-preferential origin of the goods to be determined, or if the transformation carried out is not economically justified (article 33 of the RD), or if the operation carried out does not go beyond the minimum operations referred to in the article 34 of the RD, the residual rules apply.

The chapter residual rule defined at the top of each chapter states that the country of origin of the goods is where the majority of the materials originate. Depending on the case, the larger part rule is based on the value or weight of the materials used

Always with reference to the provisions of the art. 60, 2nd paragraph of the reg. UCC, non-preferential origin requires the application of the criteria indicated in annex 22-01 containing “Introductory notes and list of manufacturing or transformation operations that confer a non-preferential origin” of the reg. n. 2015/2446 of the Commission of 28 July 2015 where the primary and residual rules are indicated for each tariff chapter.

Finally, according to the EU guidelines it is important that the importer/CBAM reporting declarant is able to prove non-preferential origin, although there is no specific method and if he does not have certificates from abroad it is advisable for him to be able to answer the questions indicated in the annex to the EU guidelines on non-preferential origin which are reproduced in full below:

“…Reference to the customs declaration for free circulation:

Identification of the declarant:

Information relating to the origin of the goods:

  • Description of the product:
  • Tariff classification (minimum 6 digits):
  • Ex-works price:
  • Origin:

How did you make the assessment of the declared origin of the product?

Which of the provisions in the Union Customs Code Regulation (EU) 952/2013, and Commission Delegated Regulation (EU) 2015/2446 have been applied?

Please provide the following information relating to the origin determination:

  • Detailed description of the production process:
  • Has this product been manufactured entirely from materials that were wholly obtained in the country of production?

     If not, please provide the following elements:

Where the origin determination is based on a change in tariff classification, for each of the materials or components:

– the sub-heading in which they are classified (6 digits)

– the origin

Where the origin determination is based on a value-added rule, the value of the most important components not originating in the country of manufacture, allowing for the verification that the rule has been fulfilled.

 Where origin is determined by any other method (such as a specific processing operation or a residual rule), detailed information (as appropriate: weight, value of materials, etc.) allowing for the verification that the rule has been fulfilled.

Please note that evidence relating to these elements may be required at a later stage, including  copies of import declarations, invoices etc.

Where the information above should be kept confidential, this document may be sent back directly to the customs office responsible for the verification of the declared origin at the following address…”.

Therefore, from a perspective of qualified diligence of the authorized economic operator and CBAM declarant, it is appropriate to make a systematic and preventive collection of the data reported above.