Carbon Border Adjustment Mechanism (CBAM) Y R E G U L A T I O N S P G O 1
T he alphabet soup of regulations that impact global supply chain and logistics operations—from the EU’s Carbon Border Adjustment Mechanism (CBAM) to the Uyghur Forced Labor Prevention Act (UFLPA) in the United States—is daunting and becoming more so. Regulators across the globe are more closely examining the impact supply chains can have on the environment, workers, consumers, and tax revenues. In the United States, for instance, the enforcement power of Customs and Border Protection of cers has increased since the mid-1990s, due in part to the greater volume of imports as well as technology that streamlines communications among various ports, says Nithya Nagarajan, attorney and partner with Husch Blackwell, which focuses on trade and supply chain issues.
companies’ operations. The CSDDD will require relevant companies to take multiple actions, including identifying and addressing potential and actual adverse human rights and environmental impacts within their operations, their subsidiaries and, in some cases, their business partners. Member EU states have until July 26, 2026, to bring the Directive into their national laws. The Directive will start to apply to the rst group of companies one year later. In this group are EU companies with more than 5,000 employees and global revenue of more than Euro 1.5 billion, as well as non-EU companies with EU-generated revenues of more than Euro 1.5 billion. R egulation on Deforestation- Free Products (EUDR) In October 2024, the effective date of the EU’s Regulation on Deforestation- Free Products was postponed from 3 year-end 2024 to year-end 2025 for large companies. “It’s one year for companies to get their arms around this,” Miller says. This ruling focuses on commodities known to cause deforestation, such as cocoa and coffee, as well as on understanding where the products originated and if they contributed to deforestation, Miller says. The process for determining this can get thorny.
A European Union regulation, CBAM requires companies that import products considered carbon intensive, such as aluminum, to report on the embedded carbon in their goods, says Rebecca Miller, consulting senior manager with Crowe LLP. Among other changes to CBAM, as of January 1, 2025, only the EU method of reporting carbon emissions will be accepted. For complex goods, estimates— including default values—can be used only if they account for less than 20% of the total embedded emissions, according to the European Commission. Obtaining the data needed to meet these requirements becomes more arduous when products move through multiple supply chain tiers. And even companies that don’t sell directly into the EU may be swept up in the regulation if they’re links in the supply chains of companies that do sell into the EU. Corporate Sustainability Due Diligence Directive (CSDDD) Another EU initiative, the Directive on corporate sustainability due diligence 2 (CSDDD or Directive 2024/1760) has set a goal of fostering sustainable and responsible corporate behavior in
• • • Canada’s 25% surtax on steel and aluminum products from China shows how even seemingly niche regulations can have a widespread impact on supply chains. • • •
Also driving governments’ enforcement efforts is their desire to close revenue gaps and ensure compliance, says Alison Lay eld, director of product development at ePost Global, a provider of shipping solutions. For instance, Canada’s 25% surtax on steel and aluminum products from China shows how even seemingly niche regulations can have a widespread impact on supply chains. In addition, many global companies work with tens of thousands of suppliers. That can equate to hundreds of thousands of vendor locations once you get several tiers into a supply chain, says Richard Barnett, chief marketing of cer with SupplyFrame, a Siemens company and provider of design-to- source intelligence solutions for the electronics industry. Adding to the complexity is the changing nature of the regulatory environment. Here are some of the regulations that merit monitoring.
In today's regulatory landscape, U.S. Customs and Border Protection manages a growing volume of imports—a role that has expanded significantly since the mid-1990s.
150 Inbound Logistics • January 2025
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