In Short : The European Union (EU) allowing importers to delay the first Carbon Border Adjustment Mechanism (CBAM) report by one month suggests a flexibility or adjustment in the reporting requirements related to this carbon pricing initiative. CBAM aims to address carbon leakage by requiring importers to pay for a portion of the carbon emissions associated with the production of certain goods. The extension might provide businesses with more time to comply with the reporting obligations of CBAM.
In Detail : Due to difficulties caused by a technical glitch, CBAM declarants can request a delay of up to 30 days to submit their first quarterly report. There are no payments yet in the transitional phase, but the carbon border tax system does include penalties.
The European Union started the transitional period of its Carbon Border Adjustment Mechanism or CBAM in October. Importers of electricity, aluminum, cement, fertilizers, hydrogen, iron and steel will be charged a tax from 2026 for the greenhouse gas emissions that were created during production.
Their suppliers from third countries, such as the Western Balkans and Turkey, are already obligated to measure their emissions and send data to their clients inside the EU, the importers or CBAM declarants, who report on a quarterly basis. The deadline for the submission for the fourth quarter of 2023 is expiring today. However, the European Commission has just approved a delay for EU companies that were affected by a technical malfunction in the system.
Customs systems, CBAM Registry affected by malfunction
Producers of the said commodities and electricity inside the 27-member bloc already pay a climate levy through the Emissions Trading System – EU ETS. It gives their competitors in third countries an advantage, which the EU intends to adjust through CBAM. The idea is to pass the costs on to producers who don’t pay an equivalent carbon tax in their home countries.
The European Commission said some businesses were unable to submit data and reports related to CBAM and the Import Control System 2 (ICS2). A technical glitch affected several EU customs systems, including ICS2, and the functioning of the CBAM Registry.
No penalties before conducting correction procedure
Declarants who experienced difficulties in reporting and have not yet submitted their quarterly CBAM report can “request delayed submission” from February 1 on the Transitional Registry, allowing an additional 30 days, the EU’s executive body explained.
Delayed submission of a CBAM report due to system errors would, by definition, be deemed justified as long as the submission occurs promptly once the technical errors are overcome. In any event, national competent authorities won’t impose penalties before the correction procedure.
It allows declarants to provide justifications and correct any potential inaccuracies in their first three quarterly reports by July 31.