Insight

By Alexander Kolodzik, secretary general, European Fastener Distributor Association (EFDA)

The Carbon Border Adjustment Mechanism (CBAM) regulation urgently needs to be simplified so that it can be fully applied to downstream products such as fasteners, which will require considerable efforts on the part of the legislator. The European Commission has already made some proposals for simplification – some of them are good, others need to be improved. EFDA has clearly positioned itself with demands to the EU legislator. However, if these are not realised, fasteners must be excluded from the scope of CBAM. 

As expected, CBAM will continue to pose major challenges for the fastener industry in 2025. There has been a certain amount of ‘getting used to’ the reporting obligations for EU importers, and the procurement of data from their suppliers, since the start of the so-called transition phase on 1^st October 2023. But even if the idea of switching to a transitional phase before the start of the actual full implementation in January 2026 is a good one, over the last year and a half, it has become clear that the planned end of the transition phase at the end of 2025 is nowhere near enough time to get CBAM up and running. 

This is because it is not only the importers of goods subject to CBAM, such as fasteners, and their suppliers that are having problems with the application of CBAM, but apparently also the EU itself and the Member States that must implement the EU requirements. As EFDA has been warning for a long time, it is clear to everyone involved that CBAM cannot be implemented as planned. That is why the Commission has now also presented proposals to simplify CBAM, but these require the approval of the European Parliament and the Council representing the governments of the EU Member States. 

During the transition phase, it is envisaged that the scope and level of detail of the information to be reported will increase from certain points in time. In this way, importers and their suppliers should become accustomed to dealing with CBAM. As a result, countless companies, inside and outside the EU, have gone to enormous lengths to obtain the required data. Not only have they spent an enormous amount of time, but they have also spent a lot of money on software, consultants and hiring specialised staff. EFDA has supported its members by providing templates and guides, as well as regular information on innovations and experiences. We recently published an updated version of the EFDA template, which considers new legal requirements for imports from 2025. 

Despite all efforts, the Commission had to revise its requirements and continues to allow the use of default values, which was originally no longer envisaged. However, there are still many problems. In particular, the issue of intermediaries outside the EU remains unresolved. For example, it is still a major obstacle to obtain data from the manufacturers of imported fasteners if these are not purchased directly from the manufacturer – but from intermediaries. This shows once again that CBAM in its current form is not suitable for the use of downstream products such as fasteners – with sophisticated supply chains and thousands of players involved worldwide. Rather, it has been designed for the import of raw materials – a different world. 

However, our members are also concerned about the prospect of 2026. It is still planned that EU importers of CBAM goods will have to make payments for the emissions embedded in the goods from the beginning of next year. The Commission’s proposal to postpone the payment date to 2027 does nothing to change this. Contrary to what some have assumed, it is not the entire full CBAM implementation phase that is to be postponed from 2026 to 2027, but only the date for payments. EU importers are to pay the costs for the emissions of the fasteners imported in 2026 retroactively in 2027 and at the same time, as originally planned, purchase CBAM certificates for the imports expected in 2027 itself. The reason for this proposal is not the reduction of bureaucracy, but the fact that the legal and technical requirements for the purchase of certificates will not be in place by the end of the year. The legislator himself has completely underestimated CBAM. 

Since the introduction of CBAM, EU fastener distributors repeatedly had to make the bitter experience that implementing regulations, guidance documents or even the competent authorities in some Member States were only available to them after important legal deadlines for importers had already passed. The problem of ‘always too late’ now seems to be looming again in the full implementation phase, which is scheduled to begin in 2026. EFDA is therefore campaigning for this phase to be postponed to 2028 and for the CBAM regulation to ensure CBAM users always have at least one year’s lead time to be able to adapt to significant changes. Things just cannot continue as they are now.

In its current position paper ‘EFDA: Urgent need for action to simplify CBAM – the position of the European fastener importers, wholesalers and distributors,’ EFDA sets out the most important measures that need to be taken to ensure that CBAM passes the reality test and can be implemented without further disasters. 

One thing is certain, excluding some of the EU importers from the scope of application, as proposed by the Commission, will not solve the serious problems of implementing CBAM but create new ones. The proposed restriction of CBAM to companies importing up to 50 tonnes of CBAM goods per year would not only relieve the exempted companies from reporting obligations, but also from the costs associated with the embedded emissions in imported goods. Consequently, companies impacted by CBAM would incur additional expenses for emissions embedded in imports starting from 1^st January 2026, while others could import goods without these costs. This discrepancy could lead to significant distortions in fair competition. 

It is anticipated that CBAM will increase the cost of fasteners by 2% – 3% from 2026. By 2030, the additional cost is likely to be around 10%, potentially exceeding 20%. If two EU companies purchase the same fasteners from the same manufacturer outside the EU, the company subject to CBAM would have to pay 20% more for the imported fasteners than the other company. Therefore, CBAM must remain applicable to all importers without exception and must be designed in such a way that the requirements can be implemented by all participants. 

However, the Commission has taken up an important demand by EFDA which could contribute to a significant simplification of CBAM. The Commission is now proposing to limit the data needed to calculate the embedded emissions of the final CBAM goods to the embedded emissions in the precursors used for the manufacture of the imported CBAM goods. This could end the existing discrimination against EU importers of fasteners under CBAM compared to domestic manufacturers of fasteners under the Emissions Trading System (ETS) and also significantly reduce the reporting obligations by non-EU manufactures. 

EFDA also welcomes the Commission’s proposal to allow EU importers to freely choose between the application of default values and the actual emission data from 2026. However, steps must be taken to prevent protectionist reasons from leading to unrealistic and unreasonably high default values.

An issue the Commission is not addressing at all is the problem of receiving emission data if intermediaries are involved in the supply chain. As intermediaries ensure greater efficiency in complex supply chains, CBAM must be designed in such a way that proven business models can continue to exist.

EFDA is lobbying the EU legislator to ensure that its demands are considered in the upcoming legislative process. If CBAM is not applicable in practice, it will fail. In view of the major challenges facing international trade at this time, it should be in the EU’s own interest to take the demands based on our industry’s experience seriously.