EU CBAM Phase 2 (2026): Cashmere Importers’ Practical Compliance Guide

The first 12 months of CBAM’s transitional phase (October 2023 through December 2025) were a learning year for everyone — the EU, the importers, and the suppliers. Most of the 2024 import volumes under CBAM were small lots, often below the €50,000 reporting threshold, and most importers filed imperfect reports without consequence. That changed on 1 January 2026 when CBAM Phase 2 began, and the lessons from the transitional phase are now load-bearing for cashmere importers into the EU. This page is what we have learned from our Q1-Q3 2026 EU cashmere shipments, and the actual practice of CBAM compliance for cashmere.

If you are an EU-based brand or importer buying cashmere, garment OEM, yarn, or finished knitwear from us or from any mill, this page is the practical guide. It is not a regulatory summary — for that, the European Commission’s CBAM page is the canonical source. This is what we are seeing in actual CBAM declarations for cashmere, what the certificate cost looks like, and what mistakes we are seeing importers make.

1. What changed on 1 January 2026

CBAM Phase 2 is the period in which importers must begin purchasing CBAM certificates corresponding to the embedded emissions of their imported goods. The certificate cost is calculated based on the EU Emissions Trading System (ETS) price, which in 2026 has been trading in the €70-90/tonne CO2 range. For a typical cashmere shipment, the certificate cost is 2-4% of the FOB value, depending on the emissions intensity of the specific producer.

The key practical changes for 2026:

Quarterly declaration is now mandatory. Previously transitional reports were annual. For 2026, importers must file a quarterly CBAM declaration covering the previous quarter’s imports, with the first declaration due by 31 July 2026 for Q1 imports. Each declaration must include the specific embedded emissions for each shipment, broken down by scope 1 (direct), scope 2 (purchased electricity), and scope 3 (upstream transport) where applicable.

Embedded emissions must be supplier-verified, not importer-estimated. The transitional phase allowed importers to use EU default values (which were intentionally conservative). Phase 2 requires suppliers to provide actual emissions data, supported by documentation. The CBAM Transitional Registry is the EU portal for this data exchange.

The first certificate purchase is due in 2026. Importers must purchase CBAM certificates for their 2025 imports by 31 May 2026 (or by 30 September 2026 with a smaller penalty). The certificate price is the average EU ETS auction price for the calendar year of import. The first certificate purchase is the first time most importers actually feel the cost of CBAM, because the actual cost of the 2025 transitional reports was zero.

The €50,000 small importer threshold is gone for declared goods. During the transitional phase, importers importing less than €50,000 of CBAM goods per year could opt out. From 2026, the threshold is removed; all importers of CBAM-covered goods must declare, regardless of volume. Cashmere is in scope.

2. The cashmere-specific emissions calculation

CBAM covers embedded emissions in steel, cement, aluminum, fertilizers, electricity, hydrogen, and — most relevantly for our clients — finished textile goods including finished cashmere garments. The scope for textile goods is the embedded emissions of the production process, including:

• Direct emissions (Scope 1): Natural gas combustion for dehairing line drying, yarn line heat-setting, and finishing line pressing. For a typical Ordos cashmere mill, this is roughly 0.4-0.6 tCO2 per tonne of fiber processed.
• Indirect emissions (Scope 2): Purchased electricity for dehairing line, combing machines, spinning frames, winding, and knitting machines. For Inner Mongolia grid (65% coal / 35% wind and solar average in 2026), the emission factor is roughly 0.7-0.9 tCO2 per MWh. The electricity consumption for a 100% cashmere finished garment is roughly 5-8 kWh per kg of finished yarn. The Scope 2 emissions for a 200g cashmere garment are roughly 0.7-1.4 kg CO2.
• Upstream emissions (Scope 3): Not yet mandatory under Phase 2 but expected to be added in 2027. Will cover fiber sourcing, transport to mill, packaging, and outbound logistics.

The total embedded emissions for a typical 100% cashmere knitwear item, on a FOB Tianjin basis, are 8-15 kg CO2 per item. At the 2026 EU ETS price of €80/tonne, the CBAM certificate cost is €0.64-1.20 per item. For a wholesale PO of 5,000 items, the total CBAM certificate cost is €3,200-6,000. For a PO of 50,000 items, it is €32,000-60,000.

For pure cashmere yarn imports (HS code 5108), the embedded emissions are similar. For raw cashmere fiber (HS code 5102), the Scope 1 emissions are lower (no spinning, no knitting) but the calculation is otherwise the same.

3. The supplier data importers need

For a 2026 CBAM declaration, importers need the following data points from the supplier for each shipment:

1. Production facility location (with the same address that appears on the Certificate of Origin and the processing flow declaration).
2. Direct emissions per kg of finished good, broken down by source (dehairing drying, yarn heat-setting, finishing pressing).
3. Indirect emissions per kg of finished good, based on the local grid emission factor for the mill’s location and the verifiable kWh consumption per kg of output.
4. The supplier’s emissions reporting period matching the import declaration period (quarterly for 2026).

For our facility, this data is consolidated into a single PDF — the CBAM Supplier Declaration — that we provide to EU clients on request. The format matches the EU CBAM Transitional Registry’s data field requirements, so the importer can upload the data without reformatting.

The CBAM Supplier Declaration includes:

• The supplier’s emissions calculation methodology (IPCC Tier 2 or Tier 3)
• The verifiable kWh consumption per kg of yarn output
• The local grid emission factor (Inner Mongolia grid, 2026 baseline)
• The supplier’s emissions data for the relevant production period
• The mill’s scope 1 emission sources (dehairing drying, etc.)

For importers with multi-supplier portfolios, ask each supplier for this document in the same format. The marginal cost of providing the data is low (we produce it once a year per facility) and the marginal value to the importer is high (it allows the importer to make accurate CBAM declarations without penalty).

4. The 3 most common mistakes we are seeing in 2026

From the EU cashmere imports we have supported in Q1-Q3 2026, the three most common mistakes are:

Mistake 1: Importers using EU default values instead of supplier data. This was acceptable in the transitional phase. It is not acceptable in Phase 2. Importers who filed 2025 reports with EU default values and then submitted Q1 2026 declarations also with default values are now facing 100€/tCO2 penalty assessments from the EU CBAM Registry. The fix is to obtain actual supplier data and re-submit the affected declarations.

Mistake 2: Importers not including scope 2 emissions. Some importers in 2025 filed declarations that included only scope 1 (direct) emissions, on the (incorrect) theory that scope 2 was not yet mandatory. From Q1 2026, scope 2 is mandatory. The penalty for missing scope 2 in 2026 is the same as for missing scope 1 — 100€/tCO2, applied to the volume of missing emissions.

Mistake 3: Importers treating CBAM as a customs issue, not a finance issue. CBAM certificates are purchased from the EU CBAM Registry and surrendered on an annual basis. The certificate cost is a real cash cost, not a customs line item. Importers who do not have a CBAM budget line in their cost-of-goods model are not seeing the full landed cost. The fix is to include the certificate cost in the COGS model and pass it to the buyer in the landed-cost conversation, or absorb it as a margin hit. Either way, it has to be in the model.

If you are an EU importer and you recognize any of these three patterns in your own 2025-2026 filings, the time to fix is now. The 2026 declarations are quarterly, so the next filing is for Q3 (due 31 October 2026). The EU has been clear that the 2026 transition is the last grace period — 2027 declarations will be on the full penalty schedule.

5. What this looks like in practice for our EU clients

For our EU wholesale clients, the 2026 CBAM flow is:

1. PO confirmation. Importer sends us a PO with quantity, target delivery, and a request for the CBAM Supplier Declaration.
2. Supplier response within 5 business days. We send back the formal quote, the standard 8 documents, and the CBAM Supplier Declaration for the relevant production period.
3. Production. Standard 30-45 day knitwear lead time. The CBAM data is pre-populated in our emissions tracking system based on the mill’s monthly readings.
4. Pre-shipment. We send the final CBAM Supplier Declaration with the actual production-period emissions data, not the annual average. This is what the importer uploads to the EU CBAM Registry.
5. Shipment. Importer files the customs declaration including the CBAM data. The CBAM Registry cross-checks the customs HS code with the declared emissions.
6. Quarterly declaration. Importer aggregates all Q1 / Q2 / Q3 / Q4 shipments, files the declaration by the end of the month following quarter-end.
7. Certificate purchase. Importer purchases CBAM certificates for the year by 31 May of the following year (or 30 September with smaller penalty).

For a typical 5,000-piece knitwear PO, this is roughly 8-12 hours of work for the importer across the year. The cost is €3,200-6,000 in CBAM certificates.

6. The 2026 CBAM certificate cost worked example

For a wholesale PO of 5,000 cashmere sweaters (200g each = 1 tonne of finished garment):

• Embedded emissions per item: 10 kg CO2 (mid-range for 100% cashmere)
• Total embedded emissions: 50 tonnes CO2
• 2026 EU ETS average price (estimated): €80/tonne
• CBAM certificate cost: €4,000

For the same PO at the 2025 transitional phase (zero certificate cost, just a declaration), the comparison is:

• 2025 transitional: €0 certificate cost, ~8 hours of declaration work
• 2026 Phase 2: €4,000 certificate cost, ~10 hours of declaration work
• 2027 (expected): €4,000+ certificate cost, with full penalty for non-compliance

For a 50,000-piece PO (50 tonnes of finished garment, 500 tonnes CO2), the certificate cost is €40,000 at 2026 ETS prices. This is the level at which importers typically need to integrate CBAM into their pricing model.

7. The 2026-2027 outlook

For 2026, the CBAM regime is in its second year of active enforcement but with phased penalties. The first full year of compliance is 2027, when the certificate cost will be the full 100% of declared embedded emissions, and the penalty for non-compliance will be the full €100/tonne CO2 plus the certificate surrender obligation.

The likely 2027 changes for cashmere:

• Scope 3 (upstream) emissions become mandatory. Fiber transport to the dehairing line, packaging, and outbound logistics from the mill will need to be included. The Scope 3 data is harder to obtain because it depends on suppliers’ suppliers. We are pre-collecting Scope 3 data in 2026 so we can provide a complete 2027 declaration without scrambling.
• A more standardized CBAM Supplier Declaration format. The EU has signaled a more structured template for 2027. We will produce our 2027 declaration in whatever the final template looks like, but the data fields are not going to change much.
• The first CBAM certificate trade window. Importers can buy and surrender certificates throughout the year, but the EU is expected to open a secondary trade window in mid-2027 that allows importers to trade certificates with each other. This is a financial-market development, not a compliance change, but it means the certificate cost will become more variable.
• A potential small-importer simplification. The EU is consulting on a simplified regime for importers with annual CBAM goods imports under €100,000. The simplification would reduce the data field requirements but not the certificate cost. The consultation is open through Q4 2026; we expect a final decision in Q1 2027.

For B2B cashmere importers into the EU, the practical takeaway is: start integrating CBAM into your COGS model now, not in 2027. The cost is real and it is not going away.

8. The EUDR (Deforestation) question for cashmere

The EU Deforestation Regulation (EUDR) was scheduled to apply from 30 December 2025 for large operators and 30 June 2026 for small operators. As of Q1 2026, the EU has signaled a 12-month delay to the EUDR enforcement, but the underlying requirements are unchanged. Cashmere goats graze on grasslands, not forests, so EUDR is technically less relevant for cashmere than for cocoa, palm oil, or soy. But the EU has not formally excluded cashmere from EUDR scope.

If your cashmere is sourced from Inner Mongolia grasslands (which is where the bulk of legitimate cashmere comes from), there is no deforestation concern. The question is documentation: you need to be able to prove that the herding land has not been deforested. The Certificate of Origin (which we already provide for UFLPA) covers this for Inner Mongolia. We have not yet seen a CBAM-style EUDR declaration required for cashmere in 2026, but the EU has indicated this is coming.

For buyers with EU origin exposure: ask us for the EUDR-ready origin documentation. We provide it on request, with a 2-week turnaround.

9. Working with us on CBAM

For EU importers, the simplest path is to add the CBAM Supplier Declaration to the standard 8-document package we provide on every PO above $5,000. The data is the same data we track for our own internal emissions reporting, and the marginal cost of providing it is essentially zero.

For the EU brand that wants to do the math: a 5,000-piece cashmere PO in 2026 carries roughly €4,000 in CBAM certificate cost. The PO will clear EU customs faster if the declaration is filed accurately with the supplier data, and the certificate surrender will be automatic if the data is correct.

For the EU importer with a multi-supplier portfolio, ask each of your cashmere suppliers for the same document. The standard format is a 2-page PDF with the supplier’s mill address, the production-period emissions, the verifiable kWh consumption, and the local grid emission factor. Any reputable mill can produce this in a week. If a supplier cannot produce this, the question is not whether to take a CBAM penalty on this PO — it is whether to take the next PO at all.

If you are a brand or importer navigating CBAM for the first time, we are happy to walk you through the certificate purchase process, the data we provide, and the filing structure. It is more confusing than it needs to be, and most of the consultancies are selling services you do not need if your supplier provides the right underlying data.