Navigating the CBAM Seas: A Ship Supplier's Perspective
What ship suppliers think about the EU's CBAM
Mr Peter de Haas Jr., Chair of the Working Group on Customs, and member of the Dutch Ship Supply Association has expressed concerns regarding the potential unintended consequences of the Carbon Border Adjustment Mechanism (CBAM) on ship supplies. CBAM, designed to prevent carbon leakage by imposing a carbon price on imports, may inadvertently impact ship supplies. Here is how
In the vast and intricate world of international shipping, few regulations have caused as much stir recently as the Carbon Border Adjustment Mechanism (CBAM). This levy on carbon-intensive products imported into the European Union is designed to address climate change by accounting for the carbon footprint of goods. However, its implications for ship suppliers—particularly those dealing with in-transit goods and spare parts—introduce a unique set of challenges beyond typical import scenarios.
The Everyday Reality for Ship Suppliers
For most ship suppliers, the intricacies of CBAM are a distant concern. As long as their goods remain 'in transit' and are stored in a Customs Warehouse, destined to leave the EU again, CBAM does not come into play. The regulatory landscape shifts, however, when goods must be imported within the EU. This typically occurs when a ship supplies to a destination lacking customs facilities. In such cases, unless the CBAM levy has already been paid abroad, it kicks in.
The Spare Parts Conundrum
The situation grows even more complex for ship suppliers who manage the storage and distribution of spare parts, especially those listed in Annex 1 of the CBAM regulation. These parts, often disembarked in transit for storage in a customs warehouse, must sometimes be delivered to repair companies without customs facilities. This requires imports under a CBAM permit issued by the Dutch Emissions Authority in the Netherlands.
But why is this scenario so uniquely challenging?
The Unique Challenges of Historical Goods
Unlike fresh imports, spare parts can spend years onboard before reaching a warehouse. Determining their carbon footprint is fraught with difficulties:
- Aged Production Methods: Yesteryear's manufacturing processes, energy sources, and technological standards differ significantly from today's practices. Pinpointing the carbon footprint of goods produced years ago is no small feat.
- Data Deficiency: Detailed records on the carbon emissions associated with producing these historical goods are typically missing or outdated. Original documents and certificates may no longer be available, or if they are, they may not meet current regulatory standards.
- Regulatory Misfit: The CBAM regulations are tailored to contemporary goods and may not seamlessly apply to items produced under older standards. Specific guidelines or exceptions are necessary to bridge this gap.
- Administrative Overload: Collecting and analysing the needed data for these parts imposes a tremendous administrative burden. Ship owners often lack this historical data and are unlikely to cooperate fully.
- Information Gaps: Details about the duration a product has been onboard have been rarely available. Ships change owners, and records of every nut and bolt involved in past installations are not typically transferred—much like when you buy a used boat and receive an invoice for the boat but not for each component.
A Call for Practical Solutions
The complexity of applying CBAM to historical goods highlights the need for practical solutions. The European Commission must consider implementing a 'compensation mechanism' that allows for compliance with CBAM without the need for precise historical emissions calculations. This would alleviate the administrative burden and make the regulations more manageable for ship suppliers.
Conclusion
Importing goods subject to CBAM introduces significant challenges in terms of data collection, administrative workload, and regulatory compliance. To address these unique situations, the European Commission and organisations like OCEAN must collaborate on developing practical guidelines. These guidelines must acknowledge the intricacies of historical goods and provide workable solutions for ship suppliers. Only through such collaborative efforts can the maritime industry navigate the choppy waters of CBAM effectively, ensuring both regulatory compliance and the continued smooth operation of global shipping.
