As of January 1, 2026, the EU Carbon Border Adjustment Mechanism — Regulation (EU) 2023/956 — has entered its definitive regime. The transitional phase is over. Every shipment of steel, aluminum, cement, fertilizer, hydrogen, and electricity entering the EU now requires the importer to purchase CBAM certificates covering the embedded carbon emissions of the goods.
If you import steel or aluminum products from China—whether as a US-based manufacturer, a brand sourcing components, or a distributor—your Chinese suppliers must now provide verified carbon emissions data, or you will pay the EU default values, which are often far higher than actual emissions.
Quick Reference
| Item | Detail |
|---|---|
| Full Name | Carbon Border Adjustment Mechanism — Regulation (EU) 2023/956 |
| Transitional Phase | Oct 2023 – Dec 2025 (reporting only, no payment) |
| 🔴 Definitive Regime | January 1, 2026 |
| Covered Sectors | Steel, Aluminum, Cement, Fertilizer, Electricity, Hydrogen (6 sectors) |
| Certificate Price | Linked to weekly EU ETS carbon allowance price (Q1 2026 Al ≈ €75/tonne CO₂) |
| June 2026 Expansion | Council agreed to add 180 downstream steel/aluminum products starting January 1, 2028 (fasteners, pipes, structural parts, etc.) |
| Penalties | €10-50/tonne CO₂ fine + back payment + possible import rejection |
| Carbon Credit Offset | Carbon price already paid in country of origin may be deducted. China has no comprehensive carbon pricing → no offset available |
How CBAM Works
CBAM is not a tariff. It is a certificate purchase obligation:
- The EU importer must obtain “authorized CBAM declarant” status from a Member State authority
- For each import, the number of certificates required = embedded emissions (tonnes CO₂) × weekly EU ETS allowance price
- Certificates are purchased through the CBAM registry (Q1 2026 aluminum benchmark: ~€75/tonne CO₂)
- Sufficient certificates must be held at the time of customs clearance
- Annual reconciliation by May 31 for the previous year’s certificates; quarterly CBAM reports required
The critical variable: embedded emissions. If you can provide third-party verified actual emissions data → pay the actual amount. If not → pay the EU default value (set conservatively high) → significantly higher costs.
6 Sectors Affected
| Sector | CN Codes | Impact on Non-EU Exporters |
|---|---|---|
| Steel | Chapter 72, partial 73 | 🔴 Highest-impact sector. China is the world’s largest steel exporter |
| Aluminum | Partial Chapter 76 | 🔴 High carbon intensity in smelting. Certificate cost directly impacts competitiveness |
| Cement | 2523 | 🟡 Low export volumes but extremely high carbon intensity per unit |
| Fertilizer | Partial Chapter 31 | 🟢 Limited China-to-EU fertilizer trade |
| Electricity | 2716 | 🟢 Not applicable to China-EU physical trade |
| Hydrogen | 2804 | 🟢 Minimal export volumes |
June 2026: Expansion to Downstream Products
On June 12, 2026, the EU Council agreed to extend CBAM to 180 downstream steel and aluminum products, effective January 1, 2028:
- Steel downstream: Screws, bolts, nuts, fasteners, structural components, pipes, flanges, containers
- Aluminum downstream: Profiles, structural parts, foil, tubes, containers
- Anti-circumvention: Third-country simple processing to change origin will no longer bypass CBAM
This gives hardware, construction materials, and component exporters approximately 18 months to prepare. The European Parliament is expected to vote on the expansion in September 2026.
What Importers Need to Do Now
If You Import Steel or Aluminum Raw Materials
- 🔴 Request verified emissions data from your Chinese suppliers immediately
- Without actual data, your CBAM certificate costs will be based on EU default values—likely far higher
- Consider supplier diversification: Vietnamese, Turkish, and Indian mills may have lower carbon profiles
If You Import Hardware or Components Containing Steel/Aluminum
- 🟡 These products will be covered starting 2028
- Begin building emissions accounting into your supply chain now
- Products classified under HS codes outside the CBAM CN code list may still be caught if they fall under the downstream expansion
If You Are a Freight Forwarder or Customs Broker
- You do not purchase CBAM certificates directly (the importer does)
- However, under DDP terms where you act as IOR, CBAM compliance responsibility may shift to you
- Verify whether your clients’ steel/aluminum shipments require CBAM certificates before accepting EU-bound cargo
Four-Step Action Plan
- Emissions Accounting: Calculate embedded emissions for steel/aluminum products exported to the EU, or engage a third-party verifier (SGS, TÜV, Bureau Veritas)
- Data Transfer: Provide verified emissions data to your EU importer so they purchase certificates based on actual—not default—values
- Decarbonization Assessment: Evaluate opportunities to reduce production emissions (green electricity, scrap recycling, process optimization)
- Prepare for Downstream: If you export hardware or components, complete your emissions accounting system by mid-2027
Frequently Asked Questions
Q: Is CBAM a tariff? Can it stack with anti-dumping duties?
A: CBAM is not a tariff—it is a certificate purchase obligation. It applies independently of anti-dumping duties and base customs tariffs. A product subject to both anti-dumping and CBAM will bear both costs.
Q: My supplier has ISO 14001. Is that sufficient?
A: No. ISO 14001 is a management system certification and does not replace product-level carbon accounting. CBAM requires product-level embedded emissions data calculated according to EU methodology and verified by an accredited third party.
Q: My product contains steel but is classified as machinery (HS Chapter 84). Does CBAM apply?
A: Currently, no—if your product’s HS code falls outside the CBAM CN code scope (e.g., machinery under Chapter 84), it is not covered. However, the 2028 downstream expansion may capture certain steel-containing components. Monitor the final legislative text after the September 2026 Parliament vote.
Q: Will China develop a carbon pricing system that offsets CBAM?
A: China currently operates a national emissions trading scheme covering the power sector, but carbon prices (~¥70/tonne) are far below EU ETS levels (~€75/tonne), and the scheme does not yet cover steel or aluminum. Near-term offset against CBAM is unlikely.
Importing steel or aluminum from China? Unsure about CBAM costs?
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