Application of Default Values During the Transitional Phase of the Carbon Border Adjustment Mechanism (CBAM)

On September 12, 2024, the Directorate General for Energy and Climate (DGEC) issued an administrative circular to importers outlining the procedures for using default values during the transitional period from October 1, 2023, to December 31, 2025. This circular addresses the significant challenges faced by economic operators when submitting their quarterly reports.

After the third reporting period, the use of default values will be severely restricted. Any report using these default values after the third reporting period will be considered legally inaccurate. The DGEC acknowledges that obtaining the necessary information for the quarterly reports can be very difficult, if not impossible, and has proposed an educational approach depending on the situation:

  • When obtaining actual emissions data is impossible, the use of default values may be tolerated beyond the third reporting period. This option is viable only if the economic operator provides evidence of the impossibility of obtaining real data and demonstrates good faith cooperation in complying with the mechanism. These efforts must be documented with supporting evidence and included in the quarterly report.
  • In the case of an incomplete or incorrect quarterly report, the DGEC will initiate a rectification process without applying sanctions at first. These controls will follow two levels of requirements:
  • Verify that all imported goods, accounting for more than one ton of CO2eq, have been properly reported. In the event of discrepancies, the administration will initiate a rectification process starting October 1, 2024.
  • The economic operator will be granted an additional period during the rectification process to correct their declarations.
  • However, these allowances have limits. They are valid only if the economic operators have submitted their quarterly reports within the reporting period. The DGEC also reminds that any economic operator who has not submitted a report by July 31, 2024, is in violation of the CBAM regulation. Nevertheless, the DGEC will initially show leniency by contacting these operators and urging them to promptly file a CBAM declaration. If they fail to comply, sanctions will be imposed.

According to information provided by the European Commission, the DGEC has discretionary power to assess the compliance of importers with the CBAM. This discretion is reflected through:

  • Educational checks :
  • First, regarding controls, the DGEC will focus on those related to timing and will prioritize major importers whose inherent emissions exceed 1 tCO2eq. o It will also focus on goods whose cumulative quarterly imported emissions exceed 100 tCO2eq.
  • A progressive scale of sanctions:
  • A systematic invitation to submit or correct a report.
  • A formal reminder and invitation to complete or correct the quarterly report.
  • Financial penalties (between €10 and €50 per tCO2) for repeated and/or deliberate non-compliance, following a formal notice process.
  • Refusal to grant the “Authorized CBAM Declarant” status in cases of serious and repeated violations.

It is recommended that affected importers begin discussions now to avoid the use of default values.

Most important features for the Declarant Portal for release CBAM 1.3.0.0

 

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