PEM Convention

10/01/25

As of 1 January 2025, the new set off origin rules under the system of Pan-Euro-Mediterranean (PEM) cumulation have come into effect. Due to the internal procedures of some of the contracting parties to the PEM Convention, not all are ready yet to implement the new set of rules. As such we are now in a transitional phase for the period 1 January to 31 December 2025. This facilitates a smooth transfer for those contracting parties that are not ready yet.

What does this mean for your company?

Companies need to be aware of the different options in respect of contracting parties applying either still the old 2012 origin rules, the revised 2023 origin rules and the once applying both. Depending on which origin rules are applicable the formal requirements can differ. For example, ensuring that the correct codes are mentioned in the import declarations as well as ensuring that when the revised rules are applicable this is clearly stated on the proof of origin.

Since we are in a transitional phase, it is also important to monitor any changes in relation to the different contracting parties' statuses this coming year. Since, these can change at any moment. Another aspect that should not be overlooked is making the required changes in your IT systems, applications including the revised instead of the old rules, ensuring the correct codes are included in your import declaration, correct proof of origins being issued etc.

In addition to the above and in general about the revised 2023 origin rules, if not already done companies should evaluate what the new rules will bring for their company. Maybe it will become possible to claim a lower or zero import duty rate, due to the changes/more flexibility in the origin rules.

Background

The revised 2023 origin rules are the result of years of negotiating and are in almost all cases less strict/more flexible than the old 2012 origin rules. Main changes of the revision are simplified origin rules, increased level of tolerance for non-originating content, elimination of the EUR-MED, possibility to request an average price calculation of the non-originating materials, expanded cumulative rules and the direct transport rule will be replaced with the non-manipulation rule.

At the end of 2023 the PEM Joint Committee adopted the revised rules of origin between the European Union and the other countries of the PEM region. The intention was that the revised rules of origin would be implemented as of 1 January 2025. Not all the contracting parties are ready and as such we are now in a transitional phase. Since September 2021, some of the contracting parties already had bilateral agreements amongst each other in which there was the possibility to apply the revised 2023 rules of origin as well as the old 2012 origin rules.

What are the key points to take into account regarding the transitional phase:

Continuance of the possibility to use both the old 2012 origin ruels as well as the revised 2023 origin rules;

Cross-border permeability, which allows exporters using the revised 2023 origin rules under certain circumstances to apply cumulation even if their suppliers follow the old 2012 origin rules;

When using the revised 2023 origin rules the proof of origin issued should mentioned “REVISED RULES”;

Explanation provided on how to deal with proof of origin issued before 2025 when the goods are released for free circulation in 2025.

How can PwC help

PwC has extensive experience in the field of determining the origin of products as well as determining how to benefit from the possibilities of cumulation under the PEM convention. As such we can help you understand what the changes entail and assess how your company/supply chains are affected as well as how your company can profit from the revised rules of origin.

Furthermore, we can help in setting up processes/procedures, implement/update your systems for origin management to ensure your company is compliant and that the rules of origin are applied correctly. Enabling your company to provide the correct evidence to issue origin certificates/statements or the correct evidence to claim the lower/zero rates import duties rates.