Volume I, No. XXV
USTR opens a record on Europe's carbon border charge as the EU moves it down the supply chain to machines and trucks
A USTR notice published October 8 asks U.S. producers how the EU's Carbon Border Adjustment Mechanism affects their exports, and whether enforcement action may be appropriate. Comments are due November 9, while EU institutions negotiate adding hundreds of downstream steel and aluminum goods.
The Office of the United States Trade Representative chose a sharp phrase for a routine notice. In describing how the European Union estimates emissions for importers that lack company-level data, the request for comments it published on October 8 says the EU “adds a punitive mark-up that increases the overall values,” with the aim of pushing importers toward company-level data1. The notice asks U.S. producers, workers and exporters to document what the EU’s Carbon Border Adjustment Mechanism, known as CBAM, is costing them, and what the EU’s plans to widen it would cost1. Its last question is the one with consequences: “Whether and what enforcement action may be appropriate to remedy any negative effects of CBAM”1. A climate measure written in Brussels is being entered into Washington’s trade-barrier file at the moment the EU is deciding how far down the manufacturing chain it reaches.
The instrument: a European carbon charge and an American record
CBAM is an EU regulation, not a tariff in the U.S. sense. Regulation (EU) 2023/956, adopted on May 10, 2023, applies to listed goods originating outside the EU when they are imported into its customs territory4. Its recitals present it as a climate measure meant to prevent carbon leakage “while ensuring compatibility with World Trade Organization law”4. An EU importer of covered products must declare the greenhouse gases emitted in making them and buy CBAM certificates priced off the EU Emissions Trading System’s allowance auctions, so that imports carry a carbon price equivalent to what EU producers pay1. The regulation lets the importer reduce the certificates owed for a carbon price “effectively paid in the country of origin,” net of any rebate4. It also adjusts the obligation to reflect the free emissions allowances that EU producers of the same goods still receive4.
The U.S. side of the instrument is thinner. The notice is signed by Amy Kreps, Acting Assistant U.S. Trade Representative for Environment and Natural Resources, and it cites no U.S. statute1. It says only that comments “will help inform continued USTR and U.S. government engagement with the EU on CBAM”1. The enforcement question nonetheless points toward the tool USTR has used most often against foreign practices. Section 301 of the Trade Act of 1974 directs the Trade Representative to take appropriate action when a foreign act, policy or practice “is unreasonable or discriminatory and burdens or restricts United States commerce”6. A Section 301 action starts with an investigation and a determination. The October notice is neither. It builds a factual record that any later step would need.
The mechanism: what CBAM asks of an exporter’s customer
Which products and dates apply now?
The covered sectors are aluminum, cement, electricity, fertilizer, hydrogen, and iron and steel1. The definitive regime began on January 1, 20261. EU importers do not have to pay until September 2027, but every covered product imported since January 1 is already accruing an obligation based on its embedded emissions, and importers must keep records of emissions per ton, any carbon price paid abroad and supplier information1.
The legal obligation sits with the EU importer. The data burden does not. The importer must gather emissions figures from the foreign producer, such as a U.S. mill shipping to Europe, or use EU default values built from country- and sector-level data, and any company-level figures must be checked by an EU-accredited third-party verifier1. USTR’s 2026 National Trade Estimate Report, released in March, recorded industry concerns that the limited number of approved accreditors could create verification bottlenecks2. It also noted that the EU issued the rules for full implementation, including the method for calculating fees, on December 17, 2025, two weeks before the regime took effect2.
Why might U.S. exports get no carbon credit?
The deduction in the regulation turns on a price that was paid4. The National Trade Estimate Report drew the consequence: U.S. exports “may not be eligible for such credits because CBAM does not offer credits for regulatory and other non-price mechanisms for reducing carbon emissions”2. A U.S. producer whose emissions are governed by regulation rather than by a carbon price would therefore pay the full EU price on its verified emissions, or on the marked-up default if it cannot supply verified data1,2.
Small shippers have some relief. After an EU simplification measure published in October 2025, importers bringing in less than 50 tons of covered goods a year are exempt, a threshold that does not apply to electricity or hydrogen2. Exceeding it without authorization carries penalties of three to five times the standard €100 per ton of embedded emissions, according to USTR2.
What would the downstream expansion add?
In December 2025 the European Commission proposed extending CBAM to more iron and steel products and to a new sector of “combined metal products,” with new anti-circumvention provisions1. The National Trade Estimate Report put the Commission’s list at 180 downstream products, mostly industrial supply chain goods2. The Council of the EU settled its position on June 12, 2026 and the European Parliament adopted amendments on September 15; USTR counts over 300 additions in the Council text and about 400 in Parliament’s1,3.
The Council’s annex reads like a catalog of finished manufactures. It includes household washing machines, combined refrigerator-freezers, industrial robots, agricultural soil-preparation machinery, diesel engines for the industrial assembly of vehicles, nails, steel wire fencing and motor vehicles for the transport of goods3. Their emissions would be calculated from the steel and aluminum inputs they contain3. For some goods made from several input materials, the Council would drop the mark-up on default values3. The extension would apply from January 1, 20283.
The anti-circumvention provisions matter as much as the list. The Council text targets “harmful resource shuffling,” in which a producer with plants of differing emissions intensity sends its cleanest output to the EU3. For combinations of goods and origins the Commission identifies as high-risk, the importer would have to show that no shuffling occurred; where the evidence falls short, the CBAM declaration would have to use default values3. The text also counts emissions from pre-consumer steel and aluminum scrap used as an input, and treats scrap as pre-consumer unless its origin is proven3.
The effect: who bears the charge
Formally the EU importer pays. In practice the charge depends on data only the foreign producer holds, so much of the work of compliance, and the risk of a marked-up default, falls on exporters selling into the EU1. USTR’s four questions ask about current costs and market access, the potential effect of each of the three EU expansion proposals, and whether CBAM advantages EU companies or companies from third countries relative to U.S. firms1. It asks for specific products, trade values, lost sales, job effects and the size and location of producers1.
The third question has a concrete basis in the record. The National Trade Estimate Report noted that the Commission proposed a fund to reimburse part of the carbon costs EU producers bear under the Emissions Trading System, and that comparable relief for CBAM charges on imports had not been proposed2. It also flagged a parallel British CBAM, planned for 2027, and UK-EU negotiations over how their emissions trading systems will interact, which could lead to reciprocal exemptions from the two border charges2.
None of the documents cited here quantify CBAM’s cost to U.S. exporters. That figure is what the docket is meant to supply.
The longer view: from a framework commitment to a docket
CBAM has been on the bilateral agenda for more than a year. The joint statement on a U.S.-EU trade framework, released August 21, 2025, recorded that, “Taking note of the U.S. concerns related to treatment of U.S. small and medium-sized businesses under the Carbon Border Adjustment Mechanism (CBAM), the European Commission, in addition to the recently agreed increase of the de minimis exception, commits to work to provide additional flexibilities in the CBAM implementation”5. That language addressed implementation for smaller firms. It did not address the scope of the regime, which is now the subject of the EU’s legislative work1,5.
The October request follows USTR’s annual call for trade-barrier comments, which this journal discussed in earlier coverage, and it narrows that general inventory to one measure. The original CBAM regulation already instructed the Commission to report before the end of the transitional period on extending the scope to other goods at risk of carbon leakage4. The Council text goes further, providing that the Commission’s report before January 1, 2028 and every two years after could come with a legislative proposal3. It would also let the Commission remove a good from the scope by delegated act if its inclusion caused severe harm to the EU internal market3.
The timetable is now set by two calendars. Comments to USTR close at 11:59 p.m. ET on November 9, 20261. The Commission, Council and Parliament still must reconcile their versions in trilogue, which USTR says “may occur later this year”1. Which of the three product lists emerges, and whether USTR treats it as a matter for engagement or for enforcement, is not yet settled.