Insight

By Phil Matten, policy advisor, BIAFD

It’s not been an auspicious start for the EU’s Carbon Border Adjustment Mechanism (CBAM), but that genie won’t go back into the bottle. Now, the UK has committed to introduce a similar mechanism by 2027. One way or another the impact of CBAM on UK and Irish businesses will only continue to intensify, so it’s time to take CBAM seriously.

The British & Irish Association of Fastener Distributors’ (BIAFD) position with the UK Government, and through the European Fastener Distributor Association (EFDA) with the European Commission, is that 7318 fasteners have no place in CBAM. They are not included in either UK or EU Emissions Trading Systems and their complex supply chains and processes make obtaining, collating and reporting emissions data an administrative nightmare. 

BIAFD is very serious about that request but recognises it will be an uphill battle. So, while hoping for the best, we are very definitely planning for the worst. 

CBAM has been top of BIAFD’s agenda for a year now and we are intent on ensuring our members are thoroughly informed and alert. We’ve invited experts to make detailed presentations to record attendance BIAFD meetings; BIAFD representatives sit on an EFDA Working Group – meeting regularly to unravel the complexities of EU reporting and simplify reporting from global supply chains; plus, BIAFD is evaluating software and support systems to help members developing CBAM reports. 

We have also made a detailed submission to the consultation on UK CBAM – including the request that fasteners are removed from UK plans – and worked with government officials to provide insights into the complexities of the EU mechanism.

Across the UK and Irish fastener sector there is widespread bafflement about how to comply with the EU CBAM and, more significantly, how to find the resources to cover the administrative burden and costs of doing so. At least there is recognition here that CBAM does have to be addressed. Many, however, still seem to be in denial – believing CBAM will simply go away. That is a real cause for concern, placing those businesses in both commercial and even legal jeopardy. 

It didn’t help that EU CBAM was less of a launch and more of a crash. The initial phases demonstrated a massive impact on businesses, presenting major challenges and administrative burdens both to EU importers and to their overseas supply chains. 

The EU argues that CBAM is a new concept and that it has provided a two year transitional period for importers and supply chains to adapt. Nevertheless, it is a very steep learning curve. Fewer than 20% of EU companies required to file a CBAM report have so far managed to provide detailed emissions data. Major issues with the EU reporting system, now mostly resolved, certainly didn’t help.

Core issues remain:

• Limited awareness amongst EU companies and far less amongst global supply chains.
• The complexity of the data required.
• Reticence on the part of supply chain companies to provide data.
• Concerns over commercial confidentiality.

CBAM has exposed the paucity of tracking and recording emissions in supply chains, compounded by the reticence of some manufacturers and suppliers to share their data. The more complex the supply chain, the greater the stresses and resistance – nowhere more severe than in the complex global supply chains supplying industrial fasteners to the European market.

Unless we are very fortunate and UK and EU authorities accede to the request to exclude fasteners, CBAM is here to stay and will impact every fastener company in the UK and Ireland.

For imports up to the end of June, EU importers could report using default values published by the European Commission. From July, the use of default values is severely restricted and importers must now report detailed emissions data by the October deadline.

Obtaining meaningful data from supply chains is proving a huge challenge. EU importers tried passing on the EU CBAM template – but its complexity has left many UK exporters, let alone those in Asia, bewildered. Even simplifying the data template or working with a credible system provider is limited in overcoming supply chain reticence or lack of comprehension. 

The deadline for full reporting compliance is, therefore, very challenging for other than the most straightforward supply chains, where credible data is readily available. Be clear, the European Commission is adamant that detailed emissions data will be required for Q3 of 2024 and that there will be no extension of the use of default values. 

What to do?

By all means, hope for the best but, please, prepare for the worst. Don’t wait – act on CBAM now, to ensure you will not be either legally or commercially penalised. Find out whether the products you export to the EU are in scope. If they are fasteners, as it stands, the answer is emphatically yes. Similarly, if you import fasteners, as it stands, they will come into the scope of the UK mechanism when it is introduced. 

Please don’t think, as some do, that the quick answer is to stop exporting to EU customers. Sure, you won’t have to provide data directly to those customers, but it’s almost certain you will have UK customers that do supply into the EU – so you are still likely to be required to provide CBAM data to them. 

Add your voice to BIAFD’s and EFDA’s in opposing the inclusion of fasteners in CBAM. Become one of the better informed – access all the information and support BIAFD is providing and will continue to provide its members. Join the British & Irish Association of Fastener Distributors today.