India's EU Steel Preferential Quota Proposed to Increase to 1.64 Million Tonnes, CBAM Still Applies

en.Wedoany.com Reported - On September 14, the latest legal text of the EU-India Free Trade Agreement showed that after the agreement takes effect, India's steel exports to the EU will receive an additional preferential quota of 694,853 tonnes. Combined with the existing World Trade Organization quota of 946,616 tonnes, the total annual related quota will be approximately 1.64 million tonnes. The additional preferential quota will only be activated after the India-EU Free Trade Agreement formally takes effect, which is currently expected to enter into force by the end of 2026. The final arrangement still depends on the legal text of the agreement and subsequent ratification procedures.

The EU's current steel import regime has been in effect since July 1, 2026, with an annual total volume of 18.3 million tonnes of steel imports exempt from the 50% over-quota tariff, and dedicated quotas set for free trade agreement partners. After India's additional preferential volume of 694,853 tonnes, the total quota of 1.64 million tonnes is equivalent to 68.4% of India's approximately 2.4 million tonnes of steel exports to the EU in 2025; the existing quota of 946,616 tonnes is equivalent to only 39.4% of the 2025 export volume.

According to the legal text of the agreement, the additional steel quota obtained by India is allocated by specific product category, with the majority concentrated in flat products. Hot-rolled sheet and hot-rolled strip received the largest allocation, reaching 509,605 tonnes. Indian steel entering the EU market must still meet the corresponding conditions regarding product scope, rules of origin, and quota balance. Steel products exceeding the applicable quota will face a 50% over-quota tariff.

The additional preferential quota does not change the application of the EU Carbon Border Adjustment Mechanism (CBAM) to Indian steel. The EU CBAM entered its formal implementation phase on January 1, 2026, with steel among the first batch of covered industries. Eligible EU importers are required to declare the embedded carbon emissions of imported steel and to purchase and surrender the corresponding number of CBAM certificates; if a recognized carbon price has already been paid during the production process of the steel in the country of origin, the relevant amount may be deducted in accordance with the rules.

The 2026 CBAM certificate price is calculated based on the quarterly weighted average of the EU Emissions Trading System allowance auction prices. The CBAM certificate prices for the first and second quarters of 2026 published by the European Commission are EUR 75.36 per tonne of carbon dioxide and EUR 75.28 per tonne of carbon dioxide, respectively; starting from 2027, the certificate price will be calculated on a weekly basis. The actual CBAM cost borne by steel enterprises depends on factors such as the embedded emissions of the product, the applicable benchmark, and the carbon price already paid.

The EU and India completed negotiations on the Free Trade Agreement on January 27, 2026. The agreement content published by the EU shows that, in addition to the steel quota arrangement, the two sides also formed dedicated chapters on goods tariffs, rules of origin, customs and trade facilitation, among others, with the steel tariff quota separately listed in Annex 2-B.