CBAM: submission of the first report before 31st of January 2024

French version

To enhance its climate ambitions, as reiterated notably in the "Fit for 55" package, and to counter less stringent environmental policies in certain third countries, the European Union has established the Carbon Border Adjustment Mechanism (referred to as “CBAM”).

The aim of CBAM is to fight carbon leakage, in other words, to limit the relocation of production for certain high-carbon-intensity products by European companies abroad. The new mechanism aims to subject the importation of certain products to a pricing equivalent to that applied by the European industries under the European Union Emissions Trading System (referred to as “EU ETS”).

Furthermore, Regulation (EU) 2023/956 establishing the CBAM, dated May 10, 2023, came into effect on October 1, 2023, in its transitional phase. Now, the importation of products mentioned in Annex I to the aforementioned Regulation (i.e. cement, iron, steel, aluminium, fertilizers, hydrogen, and electricity), with an embedded emissions value exceeding 150 euros, entails compliance with specific obligations. It should be noted that the CBAM Regulation does not apply to goods originating from the Member States of the European Economic Area (EEA), Switzerland, and certain territories.

Two phases are to be distinguished in the implementation of the Carbon Border Adjustment Mechanism:

• Transitional Phase from October 1, 2023, to December 31, 2025: During this period, the declarant of goods subject to the CBAM is required to submit a CBAM report at the end of each quarter, detailing the emissions of the imported goods. It is important to highlight that no payments are required during this transitional phase.

• Implementation Phase commencing from January 2026: In this phase, the declarant must adhere to the following obligations:
  • Obtain the status of an authorized CBAM declarant prior to any importation;
  • Purchase CBAM certificates;
  • Submit an annual “CBAM Declaration” summarizing the importation data for the preceding calendar year.

1.       Creation of an account and access to the CBAM platform in France

Operators already have access to the declaration platform in France, which is not the case for all European Union Member States. Indeed, there appear to be significant disparities within the European Union regarding access to the platform, thereby making it more challenging to comply with the reporting obligation by January 31, 2024, in these states.

In France, operators must, among other things, have:

• A certified account on the French Customs Website “Prodouane”, linked to an EORI number;
• Authorization to access the CBAM registry.

The operator will need to log in to the CBAM registry^[1] with the credentials of their Prodouane account to submit the quarterly report.

2.       Emission Calculations: Publication of “Default Values” by the European Commission

During the transition phase, operators can declare their imports through several emission calculation methods:

• The method recommended by the Commission (“EU method”);
• Alternative equivalent methods;
• Based on default values.

Many operators may be inclined to use the default values (published by the European Commission on December 22, 2023) for their initial CBAM report. These default values, especially beneficial for operators who haven’t had the opportunity to gather all necessary information from their suppliers, simplify the reporting process.

In this context, operators can refer to the table provided by the customs nomenclature (at the 4-digit tariff position, 6-digit sub-position, or 8-digit combined nomenclature level), indicating the default values for each subject product, including direct, indirect, or total emissions.

In principle, the use of these default values is permissible only until the submission of the declaration for the 2nd quarter of 2024 in July 2024. From the 3rd quarter of 2024 onward, operators can use default values only under certain conditions.

3.       Submission of the CBAM Quarterly Report before January 31, 2024, and subsequently every quarter

Declarants must submit the first CBAM quarterly report before January 31, 2024, covering the reporting period from October 1, 2023, to December 31, 2023.

The report should include:

• The total quantity of each imported product (in MWh for electricity or in tones for other goods);
• The total emissions (in tones of CO2 per MWh or ton);
• The carbon price already paid in the country of origin, if applicable.

It is noteworthy that the importer of products or their registered customs representative acting under a mandate for indirect representation^[2] holds the status of declarant and thus the obligation to meet the aforementioned requirements.

Furthermore, attention is drawn to the fact that the country associated with the CBAM is determined by the country of issuance of the operator’s EORI number. Therefore, an operator with a French EORI number must submit their CBAM report from their French Customs Website account linked to their EORI number for all imports within the European Union. Thus, a single report must be submitted for all imports.

Lastly, updated versions of the Commission’s guidelines and FAQs were published on December 22, 2023. Similarly, a Notice to Operators regarding the Carbon Border Adjustment Mechanism was published in the Official Journal of the French Republic on December 14, 2023.

In general, the competent authorities seem to advocate for a lenient and learning period at the beginning of this transition phase, allowing operators to establish the necessary internal processes.

Thus, it will be possible to amend the initial filings until July 31, 2024. Additionally, at this stage, it will not be necessary to engage an accredited verifier to certify the reports.

Operators are encouraged to take advantage of this period to implement all the processes necessary for the correct application of the system in the short term.

Therefore, it is crucial for operators to ensure:

• The ability of foreign suppliers to provide reliable information within a reasonable timeframe;
• The establishment of the proper internal organization enabling efficient and compliant handling of these new obligations;
• The correct classification of their imported goods, allowing appropriate verification of the scope of the scheme.

On this last point, an increase in customs audits regarding the tariff classification of goods can be anticipated, aiming to prevent any attempt by operators to circumvent CBAM obligations, especially by declaring goods as not subject to the mechanism.

Lastly, it is important to note that sanctions for non-compliance with CBAM regulations, especially failure to submit the quarterly report, could apply as of now (sanctions ranging from €0 to €50 per ton of undeclared emissions).

Sanctions should be gradual and proportionate during the early stages of the transitional phase. Competent administrations should initially encourage operators to improve, supplement, or correct upcoming quarterly reports, followed by warnings in case of non-submission.

It should be noted that in case of repeated offenses, operators could be declared ineligible for the CBAM declarant status, a mandatory status from 2026. Therefore, special attention must be paid to complying with imposed obligations, particularly the submission of the required reports.

^{[1]  https://cbam.ec.europa.eu/declarant}

^{[2] If the importer is established in the European Union, the designated Registered Customs Representative has the option to denounce the obligations in question by notifying their client.}