New rules of origin for Pan-Euro-Med

01/09/20

On 24 August 2020 the European Commission adopted a set of proposals including more flexible and business-friendly rules of origin with 20 of the contracting parties of the Pan-Euro-Mediterranean trade agreement.

The next step will be for the European Council to adopt the proposals. It is expected, upon agreement by the European Council that the new rules will be implemented by some countries as early as the first half of 2021 (the EU will need to agree separately with all the parties on the new rules). It is important to note that companies will have the option to make use of the new rules instead of the current ones in a transitional way, pending the adoption of the revised PEM Convention. Parties are however free to continue to apply the rules currently in place under the PEM Convention.

What does this mean for you?

It is stated that the rules of origin in the different proposals are more flexible and easier to meet, the “direct transport” rule will be replaced by a more flexible “non-manipulation” rule and the current prohibition of duty-drawback will be lifted.

This means that in case your company currently is not able to profit from the PEM Convention, that when the new rules of origin will be implemented, they might be able to profit.

Your company will then be able to profit from lower or zero-rated import duties upon import in the EU or the contracting party.

Since the proposals are already available, it is possible to already review and compare to your supply chain to see whether your company could benefit. Also ceasing the opportunity to take them into account when sourcing for new products/raw materials or when changing the supply chain.

Amendments

It concerns amendments to the rules of origin in the following EU bilateral agreements with the following contacting parties:

Iceland, Liechtenstein, Norway, Switzerland, Faroe Islands, Turkey, Egypt, Israel, Jordan, Lebanon, Palestine, Georgia, the Republic of Moldova, Ukraine, Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, Serbia and Kosovo.

The proposals adopted are the product of the negotiations as part of the review and modernization of the PEM Convention dating back to the 1990’s.

Since the timing on the completion of the PEM Convention is uncertain, the EU has taken this approach to already ensure the new rules of origin enter into force as quickly as possible.

For the specific measures, please see this link in order to determine which measures apply to which country to determine if and how this impacts your business.