The International Chamber of Commerce listed the difficulties faced by companies during the first reporting period

The International Chamber of Commerce (ICC) has identified a number of problems faced by companies during the first reporting period of the transitional phase of the carbon border adjustment mechanism (CBAM). This is stated in an open letter to the Director-General of the European Commission for Taxation and Customs Union (TAXUD).

ICC raises the following issues.

Access to the CBAM reporting platform. The decentralized process of gaining access through national competent authorities varies significantly across EU member states, making it difficult for businesses to navigate. In addition, there have been technical issues that have prevented many companies from accessing the platform. However, they also appeared after gaining access. For example, there were validation errors with commodity codes when using default values for direct emissions.

Navigating the reporting process. ollowing the instructions for filing, it has been a significant challenge for companies to determine how a report can be submitted by the declarant on behalf of the signatory who certifies that the information is correct. Another problem is that the platform is not available in more EU languages.

High administrative burden. Due to the low de minimis threshold of €150, a large number of transactions  is captured in the scope of the CBAM including those traded in low volumes – such as screws and bolts – resulting in disproportionately high compliance costs which are particularly challenging for smaller businesses.

«It is also difficult for businesses who do irregular low value/weight consignments or are sending samples for which a quarterly or annual threshold could be considered or a simplified reporting procedure. The climate effects of such low weight/value shipments are negligible compared to the bureaucratic burden and the resulting impacts on international transactions», the ICC notes.

Data collection and calculation of built-in emissions. There is an urgent need to assist companies in the EU and – in cooperation with partner countries – abroad with user-friendly calculation methodologies and to recognise and facilitate the complexity of data collection across elaborate global supply chains.

Even though many companies, globally, are already monitoring and calculating their embedded emissions, they are based on other methodologies, whose use is only possible until the end of 2024.

For the CBAM collection method, the installation guide and the “communication template” are too complicated for most suppliers. In addition to the complex data collection, the information required by law differs from the information that the CBAM excel sheet requires. All importers are focused on completing this excel sheet while exporters are focused on the data required by law.

Get data across the supply chain. Many suppliers outside the EU are reluctant to provide critical information and even risk violating national data protection laws. A mechanism should be envisaged that would allow DG TAXUD to obtain the necessary information directly from operators without the importers having access to it. For non-European companies that are registered in the EU only for VAT purposes, it is particularly difficult to determine the volume of imports made to Europe.

Protection of confidential business information. The type of information that is collected, particularly in the importer’s excel sheet, exposes confidential business information in relation to the product, the production process and inputs that exporters do not want to share.

Uncertainty about default values. The use of default values is not available for the entire duration of the transitional period. Given the short deadline to understand and implement CBAM compliant reporting, it should be considered to extend the use of default values throughout the entire transitional phase to facilitate reporting.

The ICC has invited DG TAXUD to engage in a dialogue to address these concerns. The organization also points to the risk that the CBAM will create an unequal playing field for international trade, which will not only affect the competitiveness of European businesses but also pose long-term risks to the integrity of the single market.

Retaliatory measures by non-EU countries could lead to increased trade barriers. In addition, other countries are beginning to develop their own CBAMs using a different methodology, which, according to the ICC, serves not only climate goals but also protectionist interests.

As a reminder, the Italian parliament approved a proposal that obliges the government to cooperate with European institutions to review certain aspects of the CBAM.