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CBAM INWARD PROCESSING:
How to Manage CBAM If You Import Materials for Processing
If your business imports steel, aluminium, cement or other goods covered by the Carbon Border Adjustment Mechanism (CBAM) solely to process them, manufacture with them or transform them, EU legislation offers a practical tool:Inward Processing for CBAM‑covered goods.
This regime allows you to suspend the requirement to pay import duties and, in many cases, VAT at the point of entry into the EU, and conditions the application of CBAM on the moment when the final product is released for free circulation in the EU market.
In this article, we explain what Inward Processing is, in which cases applies and how it can help you organise your import and processing operations in line with EU rules.
What We’ll Cover in This Blog
1. What Does Inward Processing Do?
Inward Processing is a special customs procedure of the EU that allows:
- To import non‑Union goods.
- To process, transform them or use them as raw material in manufacturing.
- And then re‑export the resulting product or release it for free circulation in the EU, without paying import duties at the moment of entry.
While the goods remain under this regime:
- Import duties are suspended.
- In many cases, VAT is not paid at the import stage.
- CBAM reporting and payment are not triggered on import, as CBAM applies to covered goods only when they are released for free circulation in the EU market.
The CBAM calculation is therefore shifted to the moment when the final product is released for free circulation, based on the quantity and emissions of the CBAM‑covered input material used.
To learn more about how Inward Processing works in practice, visit our dedicated blog here.
2. How CBAM Inward Processing Works
Inward Processing for CBAM‑covered goods is particularly useful for:
- Industrial plants that import steel, aluminium, cement, fertilisers or other CBAM‑covered goods.
- Manufacturers of metal parts, tubes, profiles, structures, reinforced concrete elements and prefabricated components.
- Businesses that, after importing, transform the materials and then re‑export the final product outside the EU.
In these cases, the regime allows:
- A temporary reduction in the fiscal burden of importing (duties and, in many cases, VAT).
- A more streamlined CBAM management, avoiding reporting on every shipment of raw material, as the obligation is triggered only at the moment of release for free circulation.
- Better predictability of cash‑flow linked to carbon‑related obligations.
3. Practical Example: Steel Turned Into Tubes
Imagine the following scenario:
- A factory in Spain imports hot‑rolled steel coils from China (a CBAM‑covered product).
- The aim is to transform that steel into welded tubes and then sell them to a customer in Turkey, without the final product ever entering the EU market.
Steps:
- The steel is non‑Union goods (originating outside the EU).
- The company obtains authorisation for Inward Processing for its plant.
- On import, the steel is declared under the CBAM inward processing procedure, without being released for free circulation in the EU.
- During processing, the steel is stored, cut and transformed into tubes under the IP regime.
- The final product is exported to Turkey; it never enters the EU market.
Result:
- The steel is not released for free circulation in the EU → no import duties are paid, and in many cases no VAT is charged on import.
- As the finished product never enters the EU market → CBAM is not triggered under CBAM inward processing, because CBAM obligations apply only to covered goods released for free circulation in the EU.
In this case, Inward Processing for CBAM‑covered imports is used as a customs‑design tool: it organises the import and processing phase according to the real destination of the product.
4. CBAM Inward Processing When the Final Product Enters the EU
In other cases, the final product does enter the EU market. For example:
- You import steel → transform it into metal parts → sell them to a constructor in the EU.
In this scenario:
- Inward Processing does not remove the legal obligation under CBAM, but conditions when it is activated.
- The calculation is carried out on the quantity of CBAM‑covered input material used when the final product is released for free circulation in the EU, based on its embedded carbon footprint.
Benefits:
- CBAM is managed at the moment the material actually enters the EU market.
- You do not need to report CBAM for each import of raw material, but can organise it in a structured way aligned with your operations, within the inward processing framework for CBAM-covered imports.
Key takeaway: two main scenarios for inward processing for CBAM‑covered goods
- If you import CBAM‑covered materials (steel, aluminium, cement, etc.) only for processing and the final product is re‑exported outside the EU, CBAM is typically not triggered on that input material.
- If the final product is released for free circulation in the EU, CBAM applies on the CBAM‑covered input material used, not on every import shipment.
5. Operational Preparation Under CBAM Inward Processing
To ensure that inward processing for CBAM‑covered goods functions effectively in relation to CBAM, the following is key:
- Apply for and manage the authorisation for Inward Processing at the transformation plant, complying with customs requirements on controls, supervision and traceability.
- Establish clear and verifiable traceability from the import of raw material to the final product, both for customs and for CBAM‑related reporting under CBAM inward processing.
- Ensure that the customs procedure and any relevant information code (for example, the CBAM‑related code as set out by national customs rules) are applied correctly wherever applicable.
- Assess whether your business model allows re‑exporting the final product outside the EU, so that, in those cases, CBAM is not triggered within the CBAM inward processing regime.
Only when the final product is released for free circulation in the EU market does the obligation to manage CBAM on the CBAM‑covered input material used come into play, within the framework of inward processing.
6. How Customs Complete Helps With CBAM Inward Processing
Customs‑Complete offers Inward Processing (IP) services focused on:
- Assessing whether your business meets the conditions for inward processing for CBAM‑covered and can benefit from this regime.
- Designing and implementing the customs‑operational workflow so that CBAM inward processing is applied consistently with your production process and EU rules.
- Helping you integrate this structure with CBAM‑compliant reporting, so that your emissions disclosures and certificate usage align with the actual quantity of CBAM‑covered material used.
Frequently Asked Questions
1. What is CBAM inward processing?
CBAM inward processing means placing CBAM‑covered goods under the EU’s Inward Processing customs regime. During the regime, import duties are suspended and CBAM is aligned with the final release‑for‑free‑circulation moment of the processed product in the EU.
2. Does CBAM always apply when I import under Inward Processing?
No. If the processed product is re‑exported from the EU and never released for free circulation, CBAM is generally not triggered. CBAM typically applies when the final product or the CBAM‑covered materials are released for free circulation in the EU market.
3. Can businesses other than manufacturers use CBAM inward processing?
Yes. Any economic operator that imports CBAM covered goods under Inward Processing and performs an authorised processing operation (including transformation, mixing or blending) can use the regime, provided they meet the customs and traceability requirements of Inward Processing.
Do you import steel, aluminium, cement or other CBAM‑covered goods for processing?
Contact us so we can assess whether your operations are suitable for inward processing or CBAM‑covered importsand help you organise your import and processing flows in line with EU legislation.
