Serbian manufacturers of machinery, electrical equipment and fabricated metal products are moving into the next major area of exposure to the European Union’s carbon border levy, as Brussels prepares to extend CBAM beyond basic steel and aluminium into hundreds of downstream industrial products.
The European Parliament voted on the proposed expansion of the Carbon Border Adjustment Mechanism on 15 September 2026 and referred the file back for interinstitutional negotiations with the Council. The legislation is therefore not final, but the political direction is established: CBAM is set to move significantly further into manufactured goods from 2028. (Legislative Observatory)
The European Commission originally proposed extending CBAM to around 180 steel- and aluminium-intensive downstream products, including machinery and appliances. Parliament’s environment committee pushed substantially further, proposing a scope covering 457 products, while the Council has supported its own narrower list and annual reviews of possible further additions.
For Serbia, the difference is significant.
The first CBAM phase principally exposed steel, aluminium, cement, fertilisers, hydrogen and electricity. The next one could reach directly into some of Serbia’s most important export industries, where steel and aluminium are inputs rather than the final product.
That means the compliance centre of gravity is shifting from large primary producers towards thousands of companies that cut, machine, weld, coat, assemble or otherwise transform metals into higher-value goods.
Serbia’s industrial export model comes into scope
Serbia exported goods worth €33.1 billion in 2025, while EU member states accounted for 58.3% of the country’s total external trade, according to final Statistical Office data. (Statistical Office Serbia)
That high level of EU integration makes downstream CBAM more important for Serbia than for economies whose manufacturers sell primarily into domestic or non-EU markets.
The most exposed Serbian industrial groups are likely to be:
Fabricated metal products. Producers of structural components, brackets, housings, tanks, fasteners, wire products, fittings and other fabricated steel and aluminium goods sit closest to the expansion. For some companies, CBAM could move directly from the raw material they purchase to the finished product they export.
Machinery and industrial equipment. The Commission explicitly identifies machinery among the downstream sectors targeted by the expansion. Serbian producers of industrial machines, mechanical components, pumps, compressors, production equipment, heating systems and specialised engineering products could therefore become directly exposed depending on the final CN-code list.
Electrical equipment. Serbian exporters of switchgear, electrical cabinets, transformers, motors, control equipment and other products containing significant quantities of steel or aluminium should treat the final product list as a material trade issue. Exposure will depend on individual customs classifications rather than the broad sector alone.
Automotive and industrial components. Serbian component suppliers may be affected where specific metal-intensive products enter the final scope, particularly where the component is imported separately into the EU rather than incorporated into a larger Serbian export.
Construction and infrastructure products. Metal structures, specialised fittings, supporting systems and other steel- or aluminium-intensive products are another potential exposure area.
The precise impact cannot yet be quantified because negotiations will determine which CN codes survive into the final regulation.
But the direction is already sufficiently clear for exporters to begin screening.
A Serbian factory may become CBAM-relevant without being a major emitter
That is perhaps the most important change for manufacturers.
A company does not need a steel furnace or aluminium smelter to face downstream CBAM.
Consider a Serbian company that buys steel sheet, machines and welds it into an industrial component and exports that component to an EU customer.
Its own production process may consume relatively little energy.
Most of the embedded emissions may instead sit inside the steel.
Under an expanded CBAM regime, that upstream carbon becomes relevant to the finished product.
The manufacturer therefore needs information that traditionally sat outside its own compliance perimeter:
which steel producer made the material, at which installation, using which production route, with what embedded emissions and how much of that steel ended up in the exported component.
CBAM consequently turns procurement records into carbon records.
For many Serbian manufacturers, that will be the largest operational change.
Procurement becomes the first line of CBAM compliance
Industrial purchasing in Serbia has traditionally focused on price, technical specification, quality, availability and delivery.
CBAM adds another criterion:
Can the supplier provide usable emissions data?
That can fundamentally change supplier selection.
A Serbian machinery manufacturer buying steel from several domestic and foreign suppliers may eventually need installation-level emissions information for each source.
If one supplier provides verified data and another provides no usable information, the second supplier may create higher CBAM exposure even if its commodity price is lower.
The lowest-cost material at factory gate may no longer produce the lowest-cost product at the EU border.
This could also change relationships between Serbian companies.
A domestic steel processor selling only inside Serbia may still become part of CBAM if its customers use the material in products exported to Germany, Italy, Austria or another EU market.
The evidence obligation therefore travels backwards through the domestic supply chain.
Serbian suppliers that do not export themselves may increasingly receive CBAM questionnaires and contractual data requests from Serbian industrial customers.
The critical chain is precursor-to-product allocation
For downstream manufacturers, simply obtaining an emissions number for purchased steel will not be enough.
The exporter has to be able to connect that precursor to the product exported to the EU.
That requires controlled allocation.
A factory buying 1,000 tonnes of steel and producing dozens of different product families needs to demonstrate how the relevant quantity of steel and its embedded emissions were allocated across production.
The evidence chain therefore becomes:
supplier → precursor batch → receipt into factory → inventory → production order → product → export shipment → EU importer.
Depending on the final methodology, companies may need mass-balance systems, bills of materials, production records, ERP allocations and documented calculation rules capable of being tested by a verifier.
This is where many otherwise sophisticated manufacturers may face difficulty.
Companies often know how much steel they purchased during a year.
They may not be able to demonstrate precisely which emissions belong to each exported product.
CBAM turns that distinction into a compliance issue.
Default values create a commercial risk
The practical alternative to strong actual-emissions data is often the use of default values under the applicable CBAM methodology.
That reduces data complexity, but it can weaken competitiveness where the default assumption is higher than the real emissions of the Serbian supply chain.
This creates a potentially important split between Serbian exporters.
One manufacturer may sell a component produced using relatively low-carbon steel and renewable electricity, supported by robust data.
Another may make an almost identical product but lack the evidence required to demonstrate those advantages.
The physical products may be similar.
Their CBAM profiles may not be.
An EU buyer calculating total procurement cost could therefore see different effective carbon costs attached to competing Serbian suppliers.
That turns MRV — measurement, reporting and verification — into part of commercial positioning.
EU importers will push the burden back to Serbian suppliers
CBAM’s formal regulatory obligation remains with the EU authorised CBAM declarant.
That does not mean the Serbian exporter can leave compliance to its customer.
The importer cannot reconstruct production data that only exist inside a Serbian factory.
It will therefore request them from the supplier.
The likely operating structure becomes:
Serbian precursor supplier → Serbian manufacturer → Serbian exporter → EU importer/declarant → accredited verifier → CBAM Registry.
The further CBAM extends downstream, the more contractualised that relationship is likely to become.
EU customers may increasingly require supplier agreements covering:
- embedded-emissions data;
- precursor information;
- calculation methodology;
- evidence retention;
- verification cooperation;
- access to supporting records;
- correction of erroneous data;
- carbon-price-paid information;
- reporting deadlines;
- and liability where inaccurate information creates additional CBAM cost.
For Serbian exporters, CBAM clauses should therefore be treated as commercial liability provisions rather than environmental boilerplate.
A supplier accepting unlimited responsibility for inaccurate CBAM data could potentially assume exposure well beyond the value of the immediate shipment.
Machinery exporters face a particularly complex problem
Machinery may become one of the more difficult sectors because a single exported product can contain numerous metal components.
A machine could include:
structural steel, aluminium housings, stainless components, wire, castings, fasteners, hydraulic equipment, motors and externally purchased assemblies.
Not every component will necessarily be relevant under the final rules.
But if the CBAM methodology requires emissions from covered precursors to be reflected in the downstream product, companies will need a structured way to identify which inputs matter.
That means a traditional bill of materials increasingly needs a carbon layer.
ERP systems may ultimately need to associate:
supplier + material + installation + emission factor + quantity + production order + exported product.
For high-volume component manufacturers, manual spreadsheets may be insufficient.
The compliance problem becomes a data architecture problem.
Electrical equipment could become an important Serbian exposure
The same issue applies to Serbia’s electrical-equipment industry, which is deeply integrated into European industrial supply chains.
Products such as control cabinets, transformers, switchgear, motors and other equipment can contain substantial volumes of steel, copper and aluminium.
The final CBAM scope remains critical because only specified customs codes will be covered.
But electrical-equipment exporters should already perform product-level CN-code screening rather than waiting for the final legislation.
A company with 100 exported product lines may discover that only 20 are covered.
The commercial priority then becomes identifying which EU customers buy those products and which materials drive their embedded emissions.
That is much more manageable than attempting to build a CBAM system for the entire company indiscriminately.
Fabricated metal companies face the shortest transition
For fabricated-metal producers, the exposure is more immediate.
The Commission said 94% of the downstream goods covered by its original proposal were industrial supply-chain products, with average steel and aluminium content of around 79%. It cited products such as industrial radiators, cylinders, base-metal mountings and specialised machinery components.
That is close to the core activity of many Serbian metal-processing SMEs.
These businesses may have relatively simple production processes but highly fragmented material sourcing.
A small fabricator could buy different grades and batches of steel from multiple distributors, produce several hundred customised items and export them through several EU customers.
The central risk will be traceability.
Without tighter control over material provenance, supplier data and production allocation, the company may have difficulty demonstrating actual embedded emissions even where its own operations are efficient.
Scrap rules could alter metal sourcing
The proposed reform also tightens treatment of scrap and anti-circumvention.
The Commission proposed bringing pre-consumer steel and aluminium scrap more explicitly into CBAM calculations, while Parliament has also focused on concepts including resource shuffling and other potentially abusive sourcing patterns.
For Serbian metal processors, this means recycled content needs documentation rather than broad sustainability claims.
Scrap origin, treatment and allocation may become part of the verified carbon file.
Companies sourcing secondary materials because they are cheaper or lower-carbon will need evidence capable of supporting that treatment.
2027 should be treated as the Serbian preparation year
With downstream expansion proposed from 1 January 2028, Serbian manufacturers effectively have 2027 to build the compliance architecture.
They should not wait until the final months before implementation.
A practical sequence would be:
- Screen all EU export CN codes. Compare product codes against the Commission, Parliament and eventually final trilogue scope.
- Map EU customers and authorised declarants. Identify who will actually hold the CBAM obligation on the EU side.
- Identify CBAM-relevant precursors. Determine which steel, aluminium and other covered inputs enter each exported product.
- Map suppliers to installations. A distributor name alone may not be sufficient; installation-level information can become necessary.
- Build product allocation rules. Connect purchased inputs and their emissions to production orders and exported products.
- Review electricity evidence. Establish what electricity is used, how it is metered and what claims can legitimately be made under the relevant methodology.
- Prepare the CBAM evidence package. Contracts, invoices, supplier declarations, production records, meter data, calculation files and allocation methodology should resolve into one auditable chain.
- Pre-verify before formal verification. Test whether an independent verifier could reproduce the calculation and trace the evidence without relying on explanations outside the file.
Three different exposure levels are emerging
For Serbian industry, companies can broadly be divided into three operational groups.
Highest readiness priority: fabricated steel and aluminium goods that closely resemble products already identified by the Commission and Parliament for downstream coverage.
High monitoring priority: machinery, electrical equipment and industrial components with substantial covered-metal content and significant EU sales.
Supply-chain priority: Serbian companies that do not themselves export covered goods but provide steel, aluminium, fabricated components or subassemblies to other Serbian exporters.
The third category should not be underestimated.
CBAM can reach companies indirectly through customer requirements long before legislation applies directly to their own exports.
Low-carbon materials could become a purchasing advantage
The new rules could also reshape Serbia’s industrial sourcing economics.
If a Serbian manufacturer can choose between two steel suppliers — one with high embedded emissions and one with lower verified emissions — CBAM can create an economic value for the cleaner material.
That value increases as the EU ETS carbon price rises and as free allocation to EU producers is progressively phased out.
Carbon therefore begins to influence procurement alongside commodity price.
The same principle applies to electricity.
A manufacturer able to demonstrate a lower emissions profile through properly documented energy sourcing may strengthen the carbon profile of its exported goods where the relevant CBAM methodology recognises those emissions.
Generic claims that a Serbian plant operates on “green energy” will carry little value unless the underlying evidence satisfies the applicable calculation and verification rules.
Serbia could gain as well as lose
Downstream CBAM is often described primarily as a cost for non-EU manufacturers.
For Serbia, the effect is likely to be more nuanced.
Its geographic proximity to EU manufacturing centres, established supplier networks and large industrial base create exposure.
But they also create an opportunity.
Serbian factories that move quickly toward verified precursor data, lower-carbon materials, auditable renewable electricity and strong MRV systems could become attractive alternatives to suppliers whose embedded emissions are higher or harder to document.
The competitive advantage will not come from claiming to be green.
It will come from proving it.
The Commission’s original expansion already targeted 180 downstream products from 2028, while Parliament’s much wider approach would extend the perimeter to 457 products. The final compromise will determine how many Serbian manufacturers fall directly within the regulation.
But the preparation problem exists before that final list is known.
Serbia’s machinery, electrical-equipment and metal-processing companies now have enough information to identify the products, suppliers and EU buyers most likely to be affected.
By 2028, the commercial distinction may no longer be between a Serbian supplier with CBAM exposure and one without it.
It may be between a supplier whose EU customer receives a verification-ready carbon file with the shipment and one whose customer has to reconstruct the carbon story after the goods reach the border.