EU CBAM: Authorised CBAM Declarant (Our Law Summary)

Understanding the Authorised CBAM Declarant System: A Guide to the Draft Legislation

As the European Union strengthens its commitment to environmental sustainability, the introduction of the Carbon Border Adjustment Mechanism (CBAM) marks a significant step in regulating carbon emissions linked to imports. This mechanism will require importers of certain goods to become authorised CBAM declarants, ensuring they comply with specific climate regulations.

In this blog entry, we will explore how the authorised CBAM declarant system will function by summarising the draft legislation, which is divided into six key chapters.

Chapter 1: Application to Become an Authorised CBAM Declarant

The first chapter outlines the application process for businesses wishing to become authorised CBAM declarants. This process will take place electronically through the CBAM registry, simplifying the application for businesses across the EU and beyond. Here are the main points:

1. Electronic Applications: All applications must be submitted through the CBAM registry in an electronic format, ensuring efficiency and ease of use.

2. Required Information: Applicants must provide detailed information as specified in Article 5 of Regulation (EU) 2023/956. This includes essential data about the business and its operations.

3. Details for Non-EU Entities: For legal entities based in third countries, the application must include the address in that country and the address of establishment in the EU Member State where the application is being submitted.

4. Unique Reference Number: Each application will be assigned a unique reference number within the CBAM registry, facilitating tracking and management of applications.

   
   

Chapter II: Guarantee

Chapter II outlines the requirements and processes for the provision and adjustment of guarantees related to the CBAM (Carbon Border Adjustment Mechanism). Here are the key provisions:

1. Provision of a Guarantee (Article 14):

   • If a guarantee is required, it must be registered in the CBAM registry within 15 working days following the decision to grant the status of an authorised CBAM declarant.

   • Upon the applicant providing the guarantee, the competent authority must register it and update the status of the authorisation and the CBAM account to 'active.'

2. Monitoring the Guarantee (Article 15):

   • The competent authority is responsible for monitoring the guarantee.

   • The authorised CBAM declarant must ensure the guarantee is sufficient to cover the expected number of CBAM certificates they need to surrender for imported goods, based on prior estimations.

   • The guarantee must remain at the required level, with the competent authority able to reassess and request adjustments as necessary.

3. Acceptance of Other Forms of Guarantee (Article 16):

   • The competent authority must notify the Commission when it accepts alternative forms of guarantee as specified in the relevant regulations.

4. Adjustment of Guarantee (Article 17):

   • If the competent authority determines that an adjustment is necessary, it must require the authorised CBAM declarant to make this adjustment promptly.

   • The decision to adjust will consider the amount of imported goods declared and other pertinent information, which must be shared with the declarant.

   • The declarant has one month to provide the adjusted guarantee, with the authority required to register it promptly. An extension of up to three months can be granted upon a reasoned request.

   • Failure to provide the adjusted guarantee within the specified timeframes can result in the initiation of a revocation procedure by the competent authority.

     
     

Overall, Chapter II establishes a framework for the provision, monitoring, and adjustment of guarantees, ensuring that authorised CBAM declarants maintain adequate financial security for their obligations under the CBAM regulation.

Chapter III: Authorisation

Chapter III details the processes for granting and reassessing the status of an authorised CBAM declarant. The decision to award this status includes specific information as outlined in an annex and is recorded in the CBAM registry, with the account number reflecting the Member State that granted it. Reassessment of the declarant's status is mandated when there are changes to provided information, potential non-fulfilment of conditions, or indications of severe infringements of customs and market regulations. Competent authorities are required to inform each other and the Commission about any severe infractions. Following reassessment, if adjustments to the declarant's status are necessary, the competent authority must communicate these findings promptly. The declarant has 30 days to respond, and if they are deemed to no longer meet the required criteria, their authorisation may be revoked. This chapter establishes a structured framework for ensuring compliance and accountability among CBAM declarants.

Chapter IV: Revocation of the Status of Authorised CBAM Declarant

Chapter IV outlines the processes and conditions for revoking the status of an authorised CBAM declarant. If an individual's status is revoked, they must still submit a CBAM declaration for goods imported prior to the revocation and may reapply for authorisation at any time if they meet this obligation. An authorised declarant can request revocation by providing reasons and a desired date, with specific reporting requirements depending on when the request is made. The competent authority may initiate revocation due to serious infringements, assessing factors such as compliance readiness, past behaviour, and cooperation. Revocation becomes effective the day after the decision is made and does not invalidate previously issued CBAM certificates. Overall, this chapter establishes a framework for managing the responsibilities and compliance of CBAM declarants.

Chapter V: Data Protection

In today's digital age, protecting personal data is crucial. Chapter V addresses the handling of personal information during the application and authorisation processes, ensuring compliance with EU data protection laws. This guarantees that any personal data collected will be used solely for the purposes of authorisation and revocation processes.

Chapter VI: Final Provisions

The final chapter contains important provisions regarding the entry into force of the regulation:

1. Effective Date: The regulation will take effect on the twentieth day after its publication in the Official Journal of the European Union.

2. Application Start Date: The rules will be fully applied from 31 December 2024, allowing time for the necessary systems and processes to be established.

   
   

Conclusion

The draft legislation for the authorised CBAM declarant system outlines a comprehensive framework for importers to navigate the new carbon regulations. With a streamlined application process, clear criteria for authorisation, and robust data protection measures, the system aims to facilitate compliance while promoting sustainability in international trade. As businesses prepare for the 2026 implementation date, understanding these procedures will be crucial for successful navigation of the new regulatory landscape.

What are your thoughts on the CBAM system? Are you prepared for the changes ahead? Let us know in the comments!