The European Union’s Carbon Border Adjustment Mechanism (CBAM) is drawing attention to a vulnerability in international industrial supply chains. The concern is that manufacturers may not be able to substantiate emissions linked to steel or aluminium incorporated into finished products exported to the EU.
The issue can arise when metal is produced in one country, processed in another, and then exported to the EU as a covered or potentially covered product. Even if customs origin changes due to processing, the need to provide emissions information for covered precursor materials can remain. Whether the finished article is within CBAM depends on its Combined Nomenclature (CN) classification and the rules applicable to that product.
How traceability works under the definitive CBAM regime
Under the definitive mechanism, which began operating in January 2026, an authorised EU declarant must calculate embedded emissions for goods within scope using the applicable methodology. Where actual emissions are used under the relevant rules, the figures must be supported by the prescribed verification.
The European Commission publishes product- and country-specific default values for situations where their use is permitted under the legislation. Data requirements vary by product and production route, so a general corporate environmental statement cannot automatically replace an emissions calculation for a specific shipment.
The potential expansion to downstream products is also expected to increase the importance of precursor traceability. For example, a Turkish metal component manufactured using Chinese steel could require a documented information chain connecting the EU importer, the component manufacturer, and the upstream steel mill, depending on final scope and accounting requirements.
Securing that information can be difficult because suppliers may treat fuel consumption, production volumes, and emissions-allocation figures as commercially sensitive. Importers and manufacturers may therefore need arrangements that allow evidence sharing with authorised verifiers while limiting wider distribution of confidential industrial data.
Documentation gaps affecting embedded emissions declarations
Several weaknesses in emissions documentation can complicate CBAM compliance. One gap involves identifying the company that fabricated a component without identifying the installation that produced the steel or aluminium used in it. This can leave importers without upstream information required under applicable rules.
A second gap concerns how emissions are calculated. Emissions may be determined at corporate-group level rather than for the relevant installation and product, which can be inadequate when more specific production data is required by the methodology.
A third gap relates to consistency of quantities. Reported material quantities may not reconcile with purchase records, production volumes, and invoices, which can undermine the credibility of emissions declarations. It can also create a risk that low-emission material is attributed to multiple products without adequate supporting records.
These weaknesses make alignment between production data, procurement documentation, and emissions calculations a key element of supply-chain control.
Relevance for Serbia and exporters across the Western Balkans
The issue affects manufacturers in Serbia, Türkiye, and the Western Balkans that rely on internationally sourced metal feedstock. A Serbian processor exporting a product already covered by CBAM remains subject to applicable requirements regardless of whether its steel or aluminium originated in China or another third country.
At the same time, distinguishing covered inputs from covered finished goods remains important. A product outside CBAM’s scope should not be treated as already subject to a direct obligation solely because its metal input is covered. Any future liability would depend on product classification and legislation applicable at the relevant time.
For businesses operating across multiple jurisdictions, this also requires separating the customs treatment of the finished article from information needed to establish emissions associated with covered materials.
Contract terms and internal controls for upstream evidence
Supply agreements are expected to clarify which party provides upstream emissions information and what verification standards apply. They should also specify how long supporting evidence must be retained and how corrected data will be transmitted to the authorised EU declarant.
Implementing these arrangements requires coordination across company functions because different teams hold different parts of the chain. Quality assurance teams, accountants, customs specialists, and production engineers each hold information needed to connect material purchases, manufacturing processes, product quantities, and emissions calculations. No single function necessarily has complete visibility of the full chain.
Manufacturers able to trace metal from procurement through final production and substantiate emissions allocations under independent review may be better positioned to meet customer requirements. Companies unable to reconstruct relevant production history could face commercial disadvantages even if their manufacturing costs remain competitive.
As CBAM requirements develop, documenting and verifying precursor emissions is becoming an increasingly important element of industrial supply-chain management. For exporters, reliable traceability may help preserve access to EU customers; for importers, gaps in upstream records can become a source of compliance and commercial risk.