The European Commission has proposed expanding the Carbon Border Adjustment Mechanism (CBAM) downstream, with anti-circumvention measures targeting misdeclaration and avoidance, but the changes remained under negotiation as of October 2026. The dispute has practical implications for metal suppliers and importers, who need to show that reported emissions reflect the actual production route rather than a late-stage recycled-content label.
The European Parliament and the Council have taken differing positions on which products the proposed changes should cover. The debate has also highlighted the difficulty of separating genuine recycling and legitimate cross-border processing from transformations made mainly on paper or to change a customs classification.
Production evidence matters
Recycling can reduce process emissions in many steel and aluminium applications, but secondary production is not emissions-free: sorting, remelting, refining and alloy adjustment consume energy and materials. Scrap is not a uniform input. Steel scrap must be sorted by residual elements, grade and contamination, while aluminium scrap varies by alloy family, coating and tolerance for impurities.
Electric-arc steel production depends on scrap availability and quality. Primary aluminium production, by contrast, uses alumina and carbon anodes in electricity-intensive smelting. Secondary aluminium can reduce exposure to primary-smelter electricity costs, but its alloy must meet demanding automotive or engineering requirements. Switching from primary to secondary metal without checking performance could increase reject rates and undermine the expected economic benefit from lower emissions.
Importers need evidence about the actual installation and production process, not just a supplier’s marketing statement. A product carbon footprint or recycled-content certificate can provide context, but is not an automatic substitute for legally required CBAM data. Different calculation frameworks may also produce different carbon figures for the same batch, making it important to reconcile records with the prescribed installation and emissions calculations where CBAM applies.
Supplier due diligence is already relevant in complex cross-border metal chains. Buyers should secure inspection and access rights before a supplier relationship becomes commercially critical, and assess whether financial and technical assurances can be enforced.
Tracing material across borders
The economics of the rules may encourage processing to move across borders. A mill, for example, could export a semifinished product for coating or machining and reimport a different article. Such processing may have legitimate commercial reasons, including quality, access to special equipment or customer requirements; treating every foreign processing step as circumvention would be misleading, while ignoring deliberate misclassification would also be wrong.
Authorities need to determine whether a claimed transformation changes the customs classification under the law and whether declared emissions match the actual production steps. Auditable production records can include material receipts, heat and batch numbers, melt-shop energy records, yield losses, scrap purchase specifications, production work orders and shipping movements. Physical production records are more persuasive than statements printed on invoices.
Mass-balance reconciliation is a useful starting point. A secondary aluminium works buying mixed scrap should be able to reconcile purchased metal units, melt losses, dross, alloy additions and finished shipments over a reporting period. A steel recycler should document how scrap inputs, residual elements and yields relate to output grades. Large unexplained discrepancies may point to weak controls even if there was no intent to avoid the rules.
Systems must account for the time between purchasing scrap, melting it and shipping finished goods, which may occur in different months. Accounting and production records should reconcile those stages without allocating the same favourable emissions characteristic to multiple batches. Contracts should specify acceptable allocation methods, audit access and correction steps. A defensible record can protect a buyer’s commercial credibility if a low-carbon claim is unsupported, even when the shipment’s customs treatment is otherwise correct.
Procurement and carbon claims
Procurement teams should check whether an imported good is currently covered by CBAM, whether the verified production route supports the claimed emissions result, and whether supplier assurances are enforceable. Buyers should consider possible future expansion separately in contract scenarios, rather than treating the proposed changes as adopted rules.
They should also avoid double-counting carbon credits and should not rely on foreign carbon payments that have not actually been made or have already been refunded. Verifiable production and emissions data are central to distinguishing competitive recycling from transactions engineered around regulatory labels, while avoiding a blanket presumption that cross-border processing is improper.
