UK CBAM readiness

Approximately 70% of respondents from our recent poll during a live webinar mentioned to have either started or completed an initial assessment to establish if the UK CBAM applies to them, while approximately 66% identified obtaining carbon data from their key suppliers as their biggest challenge.

The UK Carbon Border Adjustment Mechanism (CBAM) takes effect from 1 January 2027 and applies to specified commodities in the aluminium, cement, fertiliser, hydrogen, iron and steel sectors. Businesses importing relevant goods must understand both if they fall within the regime and the potential implications for their supply chains, data, contracts and most importantly on their costs.

During our recent “Navigating the UK CBAM masterclass” online event, we asked the attendees three questions about their preparations. The results point to an encouraging level of awareness but also reveal areas where implementation challenges may lie for businesses in the UK. Our first question was about enquiring with the attendees if their organisations (especially if they have a group structure) have established if they are in scope of the UK CBAM regime? 54% of the respondents said yes, with a further 16% indicated that their assessment was a work in progress. That means 70% of respondents have either completed or started their UK CBAM scope assessment. Businesses must understand what they import and identify the relevant commodity codes for determining which goods potentially fall within CBAM. The scope assessment cannot stop at a general view of the organisation's activities, so the organisations must look at sufficient granularity in their import information to understand their exposure. Further attention must be paid to the £50,000 threshold, that relates to the value of relevant imported goods over a rolling 12-month period, rather than the amount of CBAM tax payable.

Our second poll went a level deeper to enquire if commodity-level assessment has also been completed to evaluate if the attendees’ organisations are in scope of the UK CBAM? 46% of our respondents said yes and another 27% said this was work in progress. So, approximately 73% of respondents have either started or completed their commodity-level assessment. There is an interesting finding here if we combine the first two polls, which is that 54% had completed their overall scope assessment but only 46% had completed the more detailed commodity assessment.

Businesses must build a register of imported products, identify the appropriate commodity codes and compare those codes against the CBAM goods list, for compliance preparations. This exercise may require input from other departments such as customs, procurement, finance and supply-chain and organisations also need to review relevant contractual arrangements and customs declarations, consider exemptions, carbon price reliefs and establish processes for monitoring the £50,000 threshold.

Expected revelations came from our third poll when we asked respondents to identify their organisation's biggest challenge in complying with UK CBAM, with choices including governance, internal information sharing, import data and obtaining supplier carbon data. 66% of respondents selected ‘carbon data from suppliers to enable the use of actual emissions rather than default values when calculating CBAM charges’.

CBAM compliance involves an important decision between using actual verified emissions data and using government provided default values. Obtaining actual emissions data is quite challenging, as it requires information to flow through the supply chain or business partners, supported by adequate evidence and verification, as described in the CBAM literature. So, in a way, this helps explain why supplier data could be emerging as an important concern here. Based on our wider engagements, we feel that most in-scope organisations will choose the default value route (which is essentially based on the data already available from import records) for initial periods of payment of CBAM charges or until they have confidently engaged their suppliers and business partners on the carbon data part!

The poll results also reinforce a broader point that CBAM should not be treated solely as a tax, customs or sustainability exercise, it is rather a procurement, supply-chain, data and contractual issue. Businesses should start (if not already doing) engaging with their key suppliers about emissions information, origin and traceability, and information concerning carbon pricing in the country of production. Formal contractual arrangements may also consider addressing the provision of accurate and timely information and the allocation of responsibilities between the parties. For more sophisticated arrangements and group structures, businesses must evaluate if contracts clearly address data provision, cooperation obligations, audit rights, inaccurate or late information and responsibility for CBAM-related costs. For procurement teams, there is also a strategic question. Supplier CBAM readiness and data maturity could increasingly become part of supplier selection and management, particularly where the availability of reliable emissions information affects the organisation's ability to manage its CBAM exposure.

What should businesses do now?

Based on the poll results and overall engagement, we see five practical priorities for businesses.

1. Complete the scope assessment

Map all imported goods against the relevant commodity codes and establish which imports could fall within CBAM

2. Establish who is responsible

Determine the liable importer for different import routes and make sure CBAM responsibilities are understood across customs and contractual arrangements, especially if there is a group structure with multiple legal entities importing CBAM goods

3. Start the supplier data conversation

Identify priority suppliers and establish what emissions, origin, traceability, verification and carbon-pricing information is already available.

4. Remember there are two routes to compliance

By all means do start with internal assessments to compare actual emissions and default-value approaches. But do not consider the CBAM charge alone and look at the wider cost and practicality of obtaining, managing and verifying actual emissions data when deciding which route is appropriate.

5. Put governance around CBAM

Assign clear ownership across relevant functions such as tax, finance, customs, procurement and sustainability and establish appropriate reporting, controls and sign-off procedures.

Don't panic, but don't wait!