The European Union is preparing a potential extension of the Carbon Border Adjustment Mechanism (CBAM) beyond selected primary materials. The European Commission’s proposal, presented in December 2025, would cover downstream products containing significant quantities of steel or aluminium. The Commission envisages bringing additional finished goods into scope from 1 January 2028, although the final date and product coverage depend on the legislative process.
CBAM currently addresses carbon leakage linked to imports of covered materials that compete with EU production subject to carbon costs. The proposed expansion aims to address a competitive imbalance further along the manufacturing chain. European manufacturers purchasing metal subject to EU carbon costs may face competition from foreign producers of finished components whose inputs face different carbon-pricing conditions.
The exposure described in the proposal extends beyond steel and aluminium producers to companies making fasteners, wire products, industrial fittings and assemblies. The change would shift part of the compliance discussion from commodity production to industrial businesses that transform those materials into finished goods.
Commission proposal and legislative timeline for product scope
The Commission proposed adding approximately 180 downstream products assessed as containing significant amounts of steel or aluminium. The Council adopted its position in June 2026, followed by the European Parliament’s vote on amendments in September 2026. Negotiations are ongoing and involve differences in product coverage, anti-circumvention safeguards and the treatment of materials such as scrap.
The positions adopted by the three EU institutions do not, on their own, establish binding coverage for individual customs codes. The final legislation and subsequent implementing measures will determine which requirements apply. For manufacturers, the decisive details are expected to be tied to product classifications rather than the general policy objective.
Whether a finished product falls within CBAM may depend on its specific Combined Nomenclature (CN) code. This would mean that a product’s commercial name or apparent metal content may not be sufficient for determining regulatory exposure. Companies with large product portfolios would therefore need structured classification processes and monitoring of legislative developments.
A manufacturer managing thousands of product lines could face limits if it relies only on short illustrative lists. For example, a firm with 5,000 product lines would not be able to assess exposure reliably using a limited set of examples. The proposal places emphasis on classification accuracy across a broad range of goods.
Input tracking, emissions evidence and procurement implications
Downstream CBAM would increase the importance of identifying metal inputs across complex manufacturing operations. Finished products may include multiple steel grades or aluminium inputs sourced from different suppliers and countries. Companies would need to connect product specifications with material quantities and emissions evidence.
Procurement decisions could increasingly reflect product weight, material composition, origin and supporting emissions documentation alongside price, delivery schedules and technical performance. The proposal highlights how carbon costs can affect competitive conditions when domestic metal supply is subject to EU carbon pricing while foreign inputs may follow different frameworks.
The competitive rationale is described as particularly relevant for products such as steel fasteners. An EU manufacturer may face carbon costs associated with domestic metal supply, while a foreign competitor may use inputs produced under another carbon-pricing framework. Including finished products could reduce this disparity by extending coverage further along the chain.
The regulatory design is also expected to address potential double counting where materials have already entered the EU under CBAM or have undergone processing in multiple jurisdictions. Final rules would need to specify how emissions information is carried through production and trading stages.
Scrap handling, data constraints and supplier information needs
The proposal identifies recycled metal as a separate implementation challenge for downstream calculations. Scrap may pass through dealers, processors and remelting facilities, while documentation about earlier history can become fragmented or unavailable. The framework would need to distinguish actual provenance from general claims about recycled content.
Practical evidence requirements are described as important for supporting circular production while limiting opportunities for primary material to be incorrectly classified or attributed as recycled. Downstream manufacturers may therefore need more detailed information from suppliers about material origin, production routes and processing history. How these inputs are treated would affect how companies substantiate emissions claims under the eventual framework.
The administrative burden could be higher for smaller manufacturers that buy metal through distributors rather than directly from production mills. A regional workshop producing high-value components may have limited influence over whether upstream suppliers provide verified emissions information. If proportionate procedures are not established for obtaining and assessing such information, vertically integrated manufacturers with established data systems could gain an administrative advantage regardless of actual carbon performance.
The proposal also points to ways companies could identify information gaps through procurement tenders without treating proposed requirements as current legal obligations. Requests could cover producing mill identity where available, material mass by batch, recycled-content shares and subsequent processing steps. Commercial contracts could include provisions allowing carbon-related prices to be reviewed after final EU measures take effect.
Cross-border production routes and anti-circumvention coordination
The downstream extension could influence decisions about where fabrication operations are established inside or outside the EU. Manufacturers assessing production locations would need to consider labour costs, energy prices, proximity to customers, trade measures and potential regulatory costs associated with embedded carbon. Processing hubs outside Europe could face additional challenges when steel or aluminium is produced in one jurisdiction, transformed in another and exported to the EU from a third.
The final framework is expected to clarify which emissions information must accompany products through these stages. It would also need to address how importers can substantiate compliance without unrestricted access to confidential records held by every upstream producer. Data governance is described as central to policy design through stable product classifications, consistent data definitions and workable rules for inherited material information.
The Commission’s proposed anti-circumvention package is intended to address avoidance practices involving product transformation and other methods of circumventing CBAM requirements. Closely related products may have different customs classifications, while design changes or additional processing steps can affect how goods are classified. A change in product design or customs code should not automatically be assumed to remove CBAM exposure or reduce eventual liability.
Engineering, customs and compliance teams would need to assess product specifications together against final legal requirements. Large buyers may begin requesting production-route disclosures, version-controlled product specifications and access to relevant supporting documents during supplier qualification processes. Suppliers able to provide reliable records could be easier to qualify even if their absolute emissions are not yet the lowest.
Implications for Serbian exporters ahead of 2028
The potential extension is also relevant for manufacturing supply chains in Central and Southeastern Europe, including Serbia. A Serbian producer supplying metal fittings to an EU construction distributor would need to determine whether its finished product is included in the final scope once legislation is adopted. It would also need to identify which emissions methodology applies under the final rules.
The producer may need to distinguish emissions attributable to its own processing activities from those associated with upstream metal inputs. The proposal states that it does not mean every product containing steel or aluminium will automatically become subject to CBAM. Determining applicability would depend on whether specific goods fall within the mechanism under final classifications.
The timing of final legislation is described as particularly important for international procurement contracts negotiated before 2028. Equipment manufacturers often agree multi-year prices and supplier qualifications that cannot be changed immediately. Transition arrangements and sufficiently predictable requirements are therefore expected to influence how companies prepare contracts, production records and procurement systems.