The European Commission’s proposed 2028 expansion would extend carbon-border requirements to additional steel- and aluminium-intensive products, bringing more manufacturers and complex supply chains into the regulatory debate.
Proposed expansion shifts attention to finished goods
The European Union is preparing a potential expansion of the Carbon Border Adjustment Mechanism (CBAM) beyond selected primary materials towards downstream products containing significant quantities of steel or aluminium. The European Commission’s proposal, presented in December 2025, envisages bringing additional finished goods within the mechanism from 1 January 2028. However, the proposed date and product coverage remain subject to the legislative process.
CBAM currently addresses carbon leakage associated with imports of covered materials competing with EU production subject to carbon costs. The proposed extension seeks to address a related competitive imbalance further along the manufacturing chain. European manufacturers purchasing metal subject to EU carbon costs may compete with foreign producers of finished components whose inputs face different carbon-pricing conditions.
This exposure can extend beyond steel and aluminium producers to manufacturers of fasteners, wire products, industrial fittings and assemblies. The proposed change would therefore move part of the compliance discussion from commodity production towards the industrial businesses transforming those materials into finished goods.
Legislative negotiations will determine product coverage
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 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, by themselves, establish binding coverage for individual customs codes. The final legislation and subsequent implementing measures will determine the applicable requirements.
For manufacturers, the decisive details will lie in the product classifications rather than the general political objective. Whether a finished product falls within the mechanism may depend on its specific Combined Nomenclature (CN) code, not simply on its commercial name or apparent metal content.
Companies managing thousands of product lines will consequently need a structured approach to classification and legislative monitoring. A manufacturer with 5,000 product lines, for example, cannot reliably assess its exposure using only a short list of illustrative products.
Bills of materials and emissions records gain commercial importance
Downstream CBAM would increase the importance of identifying metal inputs throughout complex manufacturing operations. Finished products may incorporate several steel grades or aluminium inputs sourced from different suppliers and countries, requiring companies to connect product specifications with material quantities and emissions evidence.
Procurement decisions could increasingly take account of product weight, material composition, origin and supporting emissions documentation alongside price, delivery schedules and technical performance.
The competitive rationale for extending CBAM is particularly apparent in products such as steel fasteners. An EU manufacturer may face carbon costs associated with its domestic metal supply, while a foreign competitor may use inputs produced under a different carbon-pricing framework. Including the finished product could reduce this disparity.
However, the regulatory design must also address potential double counting where materials have already entered the EU under CBAM or have undergone processing in several jurisdictions. The final rules will need to establish how emissions information is carried through these production and trading stages.
Scrap traceability complicates downstream calculations
Recycled metal presents a separate implementation challenge. Although recycling can reduce physical emissions, scrap may pass through dealers, processors and remelting facilities, with documentation about its earlier history becoming fragmented or unavailable.
The proposed framework must distinguish the actual provenance of materials from general claims about recycled content. Practical evidence requirements will be important to support circular production while limiting opportunities for primary material to be incorrectly classified or attributed.
Downstream manufacturers may therefore need more detailed information from suppliers about material origin, production routes and processing history. The treatment of these inputs will affect how businesses substantiate emissions claims under the eventual framework.
Smaller manufacturers face supplier-data constraints
The administrative burden could be particularly significant for smaller manufacturers that purchase metal through distributors rather than directly from production mills. A regional workshop producing high-value components, for example, may have limited influence over whether upstream suppliers provide verified emissions information.
If the final framework does not establish proportionate procedures for obtaining and assessing that information, vertically integrated manufacturers with established data systems could gain an administrative advantage over smaller competitors, irrespective of their actual carbon performance.
Manufacturers and buyers can begin identifying information gaps through procurement tenders without treating proposed requirements as current legal obligations. Requests could cover the identity of the producing mill where available, material mass by batch, recycled-content shares and subsequent processing steps.
Commercial contracts could also include provisions allowing carbon-related prices to be reviewed after the final EU measures take effect. Such arrangements would help counterparties address uncertainty without assuming that the provisional methodology will necessarily become binding.
International manufacturing locations and trade routes remain exposed
The proposed extension could influence decisions about where companies establish fabrication operations. Manufacturers assessing production inside or outside the EU will need to consider labour costs, energy prices, proximity to customers, trade measures and the potential regulatory costs associated with embedded carbon.
Processing hubs outside Europe may face additional challenges where steel or aluminium is produced in one jurisdiction, transformed in another and exported to the EU from a third. The final framework will need to clarify which emissions information must accompany products through these stages and how importers can substantiate compliance without unrestricted access to confidential records held by every upstream producer.
These requirements make data governance a central part of the policy design. Stable product classifications, consistent data definitions and workable rules for inherited material information would allow suppliers to adapt existing manufacturing records. Changes to coverage or calculation methods could otherwise lead to defensive sourcing decisions, inventory adjustments and contractual disputes.
Anti-circumvention measures require coordination across departments
The Commission’s proposed anti-circumvention package is intended to address avoidance practices involving product transformation and other methods of circumventing the mechanism. Closely related products may have different customs classifications, and design changes or additional processing steps can affect how goods are classified.
However, a change in product design or customs code should not automatically be assumed to remove CBAM exposure or reduce an eventual liability. Engineering, customs and compliance teams will need to assess product specifications together against the final legal requirements.
Large buyers may begin requesting production-route disclosures, version-controlled product specifications and access to relevant supporting documents in supplier qualification processes. Suppliers capable of providing reliable records could be easier to qualify, even where their absolute emissions are not yet the lowest.
Serbian exporters need to distinguish proposals from binding rules
The potential extension is also relevant to manufacturing supply chains in Central and Southeastern Europe. A Serbian producer supplying metal fittings to an EU construction distributor, for example, would need to establish whether its finished product is included in the final scope and which emissions methodology applies once the legislation is adopted.
The producer may also need to distinguish emissions attributable to its own processing activities from those associated with upstream metal inputs. Nevertheless, the proposal does not mean that every product containing steel or aluminium will automatically become subject to CBAM.
The timing of the final legislation is particularly important for international procurement contracts negotiated before 2028. Equipment manufacturers frequently agree multi-year prices and supplier qualifications that cannot be changed immediately. Transition arrangements and sufficiently predictable requirements will therefore influence how companies prepare their contracts, production records and procurement systems.
The proposed downstream expansion would broaden CBAM’s reach while increasing the number of products, companies and manufacturing relationships involved. Its final design will determine how effectively the EU balances carbon-leakage protection with the administrative costs of measuring emissions across fragmented industrial supply chains.
