The European Union’s Carbon Border Adjustment Mechanism (CBAM) is highlighting a vulnerability in international industrial supply chains: manufacturers may be unable to substantiate the emissions associated with steel or aluminium incorporated into finished products they export to the EU.
The challenge arises when metal is produced in one country, processed in another and subsequently exported to the EU as a covered or potentially covered product. Customs origin may change as a result of processing, but that does not automatically remove the need to provide relevant emissions information for covered precursor materials. Whether the finished article falls within CBAM depends on its Combined Nomenclature (CN) classification and the rules applicable to that product.
Traceability 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 in accordance with the applicable methodology. Where actual emissions are used under the relevant rules, the required figures must be supported by the prescribed verification.
The European Commission publishes product- and country-specific default values for circumstances in which their use is permitted under the legislation. Data requirements vary according to the product and production route, meaning a general corporate environmental statement cannot automatically substitute for an emissions calculation covering a particular shipment.
The proposed expansion to downstream products could make precursor traceability more important. For example, a Turkish metal component manufactured using Chinese steel could require a documented information chain linking the EU importer, the component manufacturer and the upstream steel mill, depending on the final scope and accounting requirements.
Obtaining that information may be difficult when suppliers consider fuel consumption, production volumes and emissions-allocation figures commercially sensitive. Importers and manufacturers may therefore need arrangements that allow relevant evidence to be shared securely with authorised verifiers without distributing confidential industrial data more widely than necessary.
Three documentation gaps can increase risk
Several weaknesses in emissions documentation can complicate CBAM compliance.
First, a supplier may identify the company that fabricated a component without identifying the installation that produced the steel or aluminium used in it. This can leave the importer without the upstream information needed under the applicable rules.
Second, emissions may be calculated at corporate-group level rather than for the relevant installation and product. Where the methodology requires more specific production data, group-wide figures may not provide an adequate basis for the calculation.
Third, reported material quantities may fail to reconcile with purchase records, production volumes and invoices. Such discrepancies can undermine the credibility of emissions declarations and create a risk that the same low-emission material is attributed to multiple products without adequate supporting records.
These weaknesses make consistency between production data, procurement documentation and emissions calculations an important part of supply-chain control.
Implications for Serbia and regional exporters
The issue is relevant to 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 the applicable requirements regardless of whether its steel or aluminium originated in China or another third country.
However, the distinction between covered inputs and covered finished goods remains important. A product that is currently outside CBAM’s scope should not be treated as already subject to a direct obligation simply because its metal input is covered. Any future liability would depend on the product’s classification and the legislation applicable at the relevant time.
For businesses operating across several jurisdictions, this makes it essential to distinguish the customs treatment of the finished article from the information needed to establish emissions associated with covered materials.
Contracts and internal controls need to work together
Supply agreements should clarify which party is responsible for providing upstream emissions information, what verification standards apply, how long supporting evidence must be retained and how corrected data will be transmitted to the authorised EU declarant.
Implementing these arrangements also requires coordination across company functions. Quality assurance teams, accountants, customs specialists and production engineers each hold part of the information needed to connect material purchases, manufacturing processes, product quantities and emissions calculations. No single function necessarily has a complete view of the chain.
Manufacturers that can trace metal from procurement through final production and substantiate emissions allocations under independent review may be better positioned to meet customer requirements. Conversely, companies unable to reconstruct the relevant production history could face commercial disadvantages even when their manufacturing costs remain competitive.
As CBAM requirements develop, the ability to document and verify 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.
