The next major policy dispute over the Carbon Border Adjustment Mechanism (CBAM) centres on downstream goods made from steel and aluminium. The European Commission has proposed extending the mechanism to 180 additional steel- and aluminium-intensive products from 2028. The Council has supported an approximately 200-item list, while Parliament has adopted a negotiating position covering a substantially wider range. The final scope will be set through negotiations between the EU institutions.
Manufacturers and importers are being advised to separate proposed changes from the rules that govern imports in 2026. The Commission proposal and the Council and Parliament positions are described as inputs for scenario planning and contract preparation. They should not be treated as binding requirements before the amending legislation takes effect. Companies are therefore expected to plan for uncertainty during the legislative process.
Scenario planning ahead of any amendments to CBAM
A two-scenario approach is presented as a way to prepare for possible outcomes. One model would be based on current law, while another would reflect potential reform. This structure is intended to support development of data systems and consideration of optional contract clauses. It is also meant to avoid compliance decisions that depend on legislation still under negotiation.
The definitive CBAM regime continues to apply to goods already covered by the existing regulation. The proposed downstream extension is aimed at carbon leakage further along industrial value chains. It seeks to reduce the risk that imported finished products gain an advantage when their steel or aluminium inputs were processed outside the EU. The scope debate therefore focuses on how far coverage moves beyond primary materials.
Institutional differences could change which products are covered
Differences between EU institutions are described as commercially significant for affected supply chains. A fastener, cable, machinery component or fabricated metal product could fall within one proposed list but not another. Because of this, broad assumptions that all downstream steel or aluminium products will be covered are considered insufficient for business planning. Product-level analysis is therefore highlighted as a key step.
Manufacturers are expected to map their Combined Nomenclature (CN) codes, bills of materials, covered metal precursors, supplier installations and available emissions data. This mapping is intended to support multiple legislative scenarios and help respond to EU customer requests before new legal obligations begin. For companies with diversified portfolios, a product-level scope assessment is described as particularly important. Exposure should be assessed against precise customs classification rather than inferred from general industrial categories.
Potential impacts on sourcing, emissions data and contracting
The final product list could affect sourcing strategies, manufacturing locations and investment decisions. EU downstream producers are seeking protection against imports containing carbon-intensive metals. Non-EU manufacturers using verified lower-emission inputs may retain a competitive advantage if the final methodology allows those emissions differences to be reflected in the CBAM calculation. The institutional scope choices could therefore influence how emissions information translates into outcomes.
If the proposed extension takes effect from 2028, reliance on default emissions values could become more costly. Manufacturers that can obtain reliable information about metal inputs and production installations may be better positioned under different scenarios. For exporters outside the EU, proposed changes may also affect commercial negotiations before direct legal obligations arise. EU buyers planning multi-year contracts or 2028 sourcing arrangements may request emissions information in advance.
Suppliers are expected to respond by providing available evidence and identifying which potential regulatory scenario it supports. They are also advised to distinguish verified information from assumptions when communicating with customers. Promising a specific CBAM treatment is discouraged while legal scope and methodology remain unresolved. This approach is intended to keep supplier statements aligned with what can be supported by evidence.
Western Balkans exporters may face broader downstream coverage
The Western Balkans include automotive, machinery, electrical and metal-processing supply chains serving EU markets. An extension to downstream goods could therefore affect a wider group of regional exporters than the mechanism’s original coverage of primary materials. Proximity to EU customers may support logistics for suppliers in the region. However, reliable carbon information is also described as part of supplier assessment.
Preparing emissions data for steel and aluminium inputs alongside consistent product and customs records is presented as a way for exporters to respond to customer requests as negotiations progress. Companies are advised to prioritise products with high revenue exposure that appear across all or most institutional positions. Early data preparation is recommended for those items, while investment decisions dependent on exact final scope may be deferred until legislation is settled.
Operational steps tied to negotiation milestones
Monitoring negotiations is described as needing outputs beyond tracking announcements. Each material change should have an owner, a decision date and an assessment of implications for procurement, customs, engineering, finance and customer communications. A three-column scope matrix covering Commission, Council and Parliament positions can help exporters track differences in proposed coverage. As talks advance, companies should update the matrix and identify which CN codes, supplier records, contracts and investment cases require reassessment.
The compliance file should connect purchasing, production, customs and finance records so assumptions can be explained consistently to both a verifier and a commercial manager. This includes documenting conditions under which an emissions calculation or regulatory assessment might change. A minimum decision file is described as documenting legal status of the relevant provision, customs treatment, responsible data owner, implementation deadline and approval of key assumptions. It should also identify an alternative approach if preferred treatment cannot be substantiated.
The final CN-code scope will shape future obligations
The central question in negotiations is how far CBAM will extend beyond basic steel and aluminium into finished and semi-finished industrial products. The outcome will determine which manufacturers remain mainly subject to customer data requests versus those facing direct obligations under an expanded framework. Until final legislation is adopted, companies are advised to keep current compliance requirements separate from future scenarios while preparing product classifications and emissions evidence useful under either outcome.
The final CN-code scope is identified as critical for determining which supply chains must translate that preparation into formal CBAM compliance once amendments take effect.