September 15, 2023

To: CEOs / Managing Directors / Export Managers / Marketing Managers

Implementation of European Union (EU)

Carbon Border Adjustment Mechanism (CBAM) & Deforestation-Free Products (EUDR) Regulations  

The European Union (EU) has passed into law a suite of policies and regulations with the purpose of reducing greenhouse gas (GHG) emissions by 55% from 1990 levels by 2030. Among the regulations that have been passed include the Carbon Border Adjustment Mechanism (CBAM) and EU Deforestation-Free Products (EUDR) which entered into force on May 16, 2023 and June 29, 2023 respectively.

Carbon Border Adjustment Mechanism (CBAM)

The CBAM transitional phase will come into effect on October 1, 2023. It will initially apply to imports of certain goods and selected precursors whose production is carbon intensive and at most significant risk of carbon leakage: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. The reporting obligations and information sought from EU importers of CBAM goods, as well as the provisional methodology for calculating embedded emissions released during the production process of CBAM goods can be obtained from the following guidance documents:

• General information on CBAM
• Guidance document for importers of CBAM-covered goods.
• Guidance document for foreign producers of CBAM-covered goods, including instruction for calculating GHG intensity of goods.
• Communications template for foreign producers of CBAM-covered goods – the information sheet that importers will want producers to complete for them.
• Sectoral webinars on CBAM: information sessions specific to sectors like iron & steel, aluminum, fertilizers

EU Deforestation-Free Products (EUDR)

The scope of EUDR encompasses seven distinct commodities (namely cocoa, coffee, soy, palm oil, wood, rubber, and cattle) along with their byproducts, and also extends to goods manufactured using these commodities (for instance, leather, cosmetics, cocoa preparations including chocolate, etc.). The EUDR provides a transition period of 18 months to prepare before the rules become enforceable as of December 30, 2024. Starting in January 2025, business operators and traders will be mandated to conduct due diligence on products entering (or exiting) the EU market.

Further information on the regulations, due diligence obligations and implementation mechanisms can be obtained from the following documents:

• General Information on EUDR
• Objectives and FAQ on EUDR - https://environment.ec.europa.eu/topics/forests/deforestation/regulation-deforestation-free-products_en
• Legislation on EUDR

For further information, please contact FMM Secretariat, Ms Jess Chong at tel: 03-62867200 or e-mail: jess@fmm.org.my.