The next major policy dispute over the Carbon Border Adjustment Mechanism (CBAM) concerns the downstream products manufactured from steel and aluminium. The European Commission proposed extending the mechanism to 180 additional steel- and aluminium-intensive products from 2028, while the Council supported a broader list of approximately 200 goods. Parliament adopted a negotiating position covering a substantially larger range of products. The final scope will depend on negotiations between the EU institutions.
For manufacturers and importers, the immediate priority is to distinguish proposed changes from the rules governing imports in 2026. The Commission proposal and the positions adopted by the Council and Parliament provide a basis for scenario planning and contract preparation, but they must not be treated as binding requirements before the amending legislation takes effect.
A two-scenario approach can help companies prepare: one model based on current law and another reflecting potential reform. This allows businesses to develop data systems and consider optional contract clauses without making compliance decisions that depend on legislation still under negotiation.
The Final CN-Code List Will Determine Exposure
The definitive CBAM regime continues to apply to goods already covered by the regulation. The proposed downstream extension aims to address carbon leakage further along industrial value chains, reducing the possibility that imported finished products gain a competitive advantage because their steel or aluminium inputs were processed outside the EU.
The differences between the institutional positions are commercially significant. A fastener, cable, machinery component or fabricated metal product could fall within one proposed list but outside another. Broad assumptions that all downstream steel or aluminium products will become covered are therefore insufficient for business planning.
Manufacturers should map their product Combined Nomenclature (CN) codes, bills of materials, covered metal precursors, supplier installations and available emissions data. This work can support multiple legislative scenarios and help businesses respond to EU customer requests before any new legal obligations begin.
A product-level scope assessment is particularly important for companies with diversified portfolios. Exposure should be assessed against the precise customs classification of each product rather than inferred from its general industrial category.
Implications for Sourcing and Competitiveness
The final product list could influence sourcing strategies, manufacturing locations and investment decisions. EU downstream producers seek protection against imports containing carbon-intensive metals, while non-EU manufacturers using verified lower-emission inputs may retain a competitive advantage if the final methodology allows those emissions differences to be reflected in the CBAM calculation.
Dependence on default emissions values could become more costly if the proposed extension takes effect from 2028. Manufacturers that can obtain reliable information about their metal inputs and production installations will be better positioned to assess their potential exposure under different scenarios.
For exporters outside the EU, the proposed changes may affect commercial negotiations before they create direct legal obligations. EU buyers planning multi-year contracts or 2028 sourcing arrangements may request emissions information in advance.
Suppliers can respond by providing available evidence, identifying which potential regulatory scenario it supports and distinguishing verified information from assumptions. They should avoid promising a specific CBAM treatment while the final legal scope and methodology remain unresolved.
Western Balkan Supply Chains Face a Wider Potential Impact
The Western Balkans have automotive, machinery, electrical and metal-processing supply chains serving EU markets. An extension to downstream goods could therefore affect a broader group of regional exporters than the mechanism’s original coverage of primary materials.
For these suppliers, proximity to EU customers may support competitive logistics, but reliable carbon information can also become an important part of supplier assessment. Preparing emissions data for steel and aluminium inputs, together with consistent product and customs records, can help exporters respond to customer requests as the negotiations progress.
Companies should prioritise products with high revenue exposure that appear across all or most of the institutional positions. These products warrant early data preparation, while investment decisions that depend on the exact final scope may be deferred until the legislation is settled.
Turning Policy Developments into Operational Decisions
Monitoring the negotiations should produce specific actions rather than simply a record of new announcements. Each material change should have an owner, a decision date and a clear assessment of its implications for procurement, customs, engineering, finance and customer communications.
A three-column scope matrix covering the Commission, Council and Parliament positions can help exporters track differences in proposed coverage. As negotiations advance, companies should update the matrix and identify which CN codes, supplier records, contracts and investment cases need to be reassessed.
The underlying compliance file should connect purchasing, production, customs and finance records. A company should be able to explain its assumptions to both a verifier and a commercial manager using consistent evidence, including the conditions under which an emissions calculation or regulatory assessment might change.
A minimum decision file should document the legal status of the relevant provision, customs treatment, responsible data owner, implementation deadline and approval of key assumptions. It should also identify an alternative approach if the preferred treatment cannot be substantiated. Establishing this fallback early can reduce the risk of discovering material exposure only after a customer, verifier, customs authority or authorised declarant challenges the company’s position.
Negotiations Will Define the Next Compliance Boundary
The central question is how far CBAM will extend beyond basic steel and aluminium into finished and semi-finished industrial products. The answer will determine which manufacturers remain primarily subject to customer data requests and which may face direct obligations under an expanded legal framework.
Until the final legislation is adopted, companies should keep current compliance requirements separate from future scenarios while preparing the product classifications and emissions evidence that will be useful under either outcome. The final CN-code scope will be critical to determining which supply chains must translate that preparation into formal CBAM compliance.
