Final guidance on the European Union Carbon Border Adjustment Mechanism (CBAM) compliance is here, heightening existing greenhouse gas (GHG) emissions reporting and monitoring to include actual emissions associated with the production of certain goods.
Starting in 2026, using default values rather than actual embedded emissions will trigger higher carbon taxes, which will negatively impact the cost and competitiveness of U.S.-manufactured products exported to the EU.
To remain competitive, U.S. manufacturers must understand their EU customers’ new compliance requirements and tax obligations so they can meet new expectations around data collection and controls, supply chain emissions reporting, and decarbonization.
Current CBAM emissions reporting on 2025 EU imports was due on January 31, 2026, representing the last period before CBAM carbon taxes began and default emissions have become punitive.
CBAM introduces a carbon tax on certain carbon-intensive goods that are imported into the EU to discourage production from shifting to countries with less-stringent climate policies.
The definitive CBAM system went into effect on January 1, 2026, following a transitional period that began in late 2023. CBAM requires EU importers of covered goods to report the emissions associated with the production of these goods (referred to as “embedded emissions”) and pay a carbon tax through the purchase and surrender of CBAM certificates. These obligations trickle down to non-EU manufacturers with customers in the EU, who are likely to field requests for data and verification needed for compliance.
Imported goods in the following sectors are currently in CBAM’s scope:
CBAM applies primarily to basic materials, with in-scope goods and input materials (“precursors”) determined by EU classification codes specified in the regulation. At this time, CBAM covers only a limited number of finished products — for example, screws, nuts, and bolts.
However, the EU has introduced a new proposal that would expand CBAM to include additional finished goods with high aluminum and steel content. Beginning in 2028, if finalized, the proposal would extend CBAM reporting and financial obligations to many industrial supply chain products used in heavy machinery and specialized equipment (e.g., base metal mountings, cylinders, industrial radiators), as well as some household appliances like washing machines.
U.S. manufacturers of CBAM-covered products may be asked to provide verified embedded emissions data (including energy source and precursors) to help EU customers fulfill their compliance obligations. Beyond compliance, to remain competitive, U.S. manufacturers will need to lower their products’ carbon footprints to help minimize their EU customers’ CBAM tax obligations and avoid higher costs for products sold in the EU.
When preparing for compliance, it’s helpful for U.S. manufacturers to understand CBAM from the perspective of their customers (EU importers). Some of the key requirements and considerations for EU importers under CBAM are as follows:
CBAM outlines highly prescriptive and complex reporting methodologies and verification principles, making it essential for U.S. manufacturers to establish robust processes and controls for calculating and reporting embedded emissions data to their customers.
Manufacturers should begin by developing an emissions monitoring plan that aligns with CBAM rules, including tracking emissions at the installation level and determining the emissions associated with specific production processes. Because totals must include embedded emissions from any in-scope input materials used during production, it may be necessary to conduct a supply chain assessment to determine whether actual emissions data is available for these precursors. This may present challenges, especially for businesses with global supply chains — making early engagement and data readiness critical.
If manufacturers are unable to obtain accurate, verifiable emissions data, default values may be used. Using actual emissions data rather than standardized default estimates is likely to result in lower carbon footprints and lower carbon tax obligations for EU importers. Providing actual embedded emissions data, along with taking steps to lower emissions from production, can help U.S. manufacturers both protect and grow their EU market share.
It is important to note that when actual data or carbon price paid is reported, verification must be obtained at the reasonable assurance level. U.S. manufacturers should be prepared to work with an EU-accredited verifier to help ensure that the actual embedded emissions reported are reliable. This process includes planning, sampling, data validation, and mandatory site visits during the first year.
To effectively navigate the regulatory and market pressures of CBAM, U.S. manufacturers should consider the following:
As CBAM moves into its initial years of full implementation, companies should note the deadlines in the table below. Although EU importers or “CBAM declarants” are directly responsible for taking action by the following dates, related requirements may be passed down to their U.S. suppliers.
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Date |
Action |
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January 1, 2026 |
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March 31, 2026 |
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February 1, 2027 |
|
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September 30, 2027 |
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September 30 (annually) |
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Written by Marisol Berrios-Silletti and Aurora Bardoneschi. Copyright © 2026 BDO USA, P.C. All rights reserved. www.bdo.com