BRUSSELS and BERLIN, Oct. 22, 2026 — A proposed expansion of the European Union’s Carbon Border Adjustment Mechanism (CBAM) to finished steel- and aluminium-intensive goods is raising competing priorities for metal producers and downstream manufacturers. Negotiators’ outcomes are expected to shape how far carbon-related obligations reach into automotive, machinery and component supply chains. The changes would affect import documentation, sourcing decisions and the allocation of compliance costs.
The European Commission’s proposal COM(2025)989, published on December 17, 2025, would extend CBAM coverage to selected downstream products from January 1, 2028. A Council negotiating mandate dated June 12 and a European Parliament position dated September 15 propose changes or extensions to the Commission’s product list. The Parliament’s position identifies 457 products for coverage.
The proposed classifications and obligations have not been adopted as final legislation. Manufacturers therefore cannot determine whether their products will fall within the future scope based only on their industry or general product description. This uncertainty affects planning for companies preparing for potential CBAM requirements.
CBAM downstream scope and implications for supply chains
The expansion is intended to address differences in carbon-cost exposure between European processors and foreign suppliers of finished goods. A company processing steel in Germany or Italy may incur costs linked to carbon emissions embedded in covered metal inputs. A competitor outside the EU may export certain finished products assembled using comparable steel without facing an equivalent border obligation on those goods.
European metal producers argue that such a gap could encourage companies to relocate processing, cutting and assembly abroad rather than reducing emissions. They also contend that excluding downstream products from the mechanism could weaken Europe’s domestic industrial base. Downstream firms say the calculation becomes more complex as coverage broadens.
Automotive suppliers, machinery manufacturers and component importers face additional documentation, procurement expenses and potential compliance liabilities if wider coverage applies. They also note that broader scope could provide additional protection against imported finished goods whose carbon costs are treated differently. Global automotive supply chains are cited as a key factor because castings, fasteners, brackets and housings can be sourced across multiple regions and supplier tiers.
Combined Nomenclature codes and evidence requirements
The precise Combined Nomenclature (CN) code of a product is central to determining potential exposure. Chapter 73 covers many articles of iron and steel, while machinery and electrical equipment generally fall under chapters 84 and 85. However, the proposals specify selected products or subheadings rather than extending CBAM automatically across entire chapters.
Manufacturers and importers would need to map their products against relevant eight-digit CN codes. Industry-level exposure estimates alone would not establish whether a specific component is covered under final rules. The proposals also raise questions about how pre-consumer scrap, metal precursors and potential resource shuffling are treated for embedded-emissions calculations.
Depending on final provisions, scrap generated during manufacturing may be treated differently from post-consumer recycled material when calculating embedded emissions. Suppliers would need to document material origins, production processes and emissions-allocation methods while avoiding double counting. A general declaration that a product contains recycled steel may not be sufficient evidence for a valid emissions calculation.
Two compliance periods: 2026 records and 2028 coverage
The negotiations create two planning periods for European buyers tied to different compliance horizons. For goods already covered by CBAM, EU authorised declarants must use import and emissions records for 2026 to prepare their first annual declaration by September 30, 2027. This requirement applies ahead of any downstream extension.
For products that may enter the mechanism under the proposed downstream extension, buyers can begin negotiating contractual provisions covering changes in law, emissions evidence and allocation of additional costs. Such arrangements should distinguish existing legal obligations from potential requirements beginning in 2028. Treating every product listed in a negotiating proposal as already covered would be an unreliable basis for customs declarations and compliance planning.
The commercial effect of a wider scope is also linked to industrial demand conditions. EUROFER forecasts apparent EU steel-consumption growth of just 0.1% in 2026 and reported that EU steel exports fell by 20% in the first half of the year. Even if carbon-cost differences narrow, weaker automotive production or delayed construction projects can constrain demand for European steel.
Operational priorities for Serbian suppliers and EU importers
For Serbian automotive and machinery suppliers, immediate tasks include identifying which components could fall within proposed product coverage. They also need to establish the steel or aluminium inputs used in manufacturing and determine whether reliable emissions records are available at installation level. These steps relate directly to whether emissions information can be provided for covered inputs.
German importers are described as needing to manage contractual exposure and ensure carbon-related costs are allocated clearly. Poorly drafted price-adjustment clauses could expose buyers to duplicate charges or compliance risks involving emissions data they cannot independently inspect. These issues can intensify across multi-tier manufacturing chains where each stage introduces additional emissions.
A cited example involves a steel mill supplying coil to a processor that produces a blank for a component manufacturer delivering a finished part to an EU customer. If the downstream extension is adopted, emissions accounting would need to distinguish between embedded emissions in original metal inputs and emissions generated by subsequent processing. The methodology would also need to prevent the same material from being counted or charged twice under incompatible assumptions.
Mass-balance documentation and supply-chain adjustments
Procurement teams would need physical mass-balance records to establish how input quantities are allocated to finished products concerned. These records are expected to help connect material consumption, production processes and relevant emissions calculations throughout the supply chain. Companies may respond by changing supplier locations, redesigning components or renegotiating responsibility for compliance costs.
The resulting emissions impact would depend on production efficiency, transport requirements and the origin of materials used. Preventing carbon leakage is described as the regulatory objective; changing invoicing location alone does not establish that emissions have been reduced. Evaluations of alternative supply arrangements would therefore need to consider full supply-chain emissions alongside production and commercial costs.
The final scope of the downstream extension would determine how CBAM’s carbon-cost requirements move from basic steel and aluminium production into more complex manufacturing networks. Negotiations involve competing interests across steelmaking, automotive manufacturing and regulatory obligations across the wider European industrial supply chain.