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Revised rules PEM Convention still expected for September 1

28/07/21

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.

Assuming that all the proposals will be adopted in the joint committees under the agreed FTAs concluded with the contracting parties in time, simplifications and more flexibility should be introduced as of September 1st.

What does this mean for your business? 

If not done already, we do advise, especially with the date of September 1 approaching, to evaluate which opportunities these simplification and more flexible rules of origin will bring for your company. It could be that your company currently is not able to profit from the PEM Convention, however with the new rules it might. Resulting in lower or zero-rated import duties up on import in the EU or the contracting party.

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

Background

The revised rules proposed by the Commission are based on the outcome of the negotiations to review the PEM Convention. The scope of the proposed amendments was effectively finalised in November 2019, with the presentation of a final compromise package.

Following the opposition of several countries, the EU Commission proposal was rejected. As such the amendment of PEM Convention was not possible, as the requirement of unanimity was not met among all contracting parties. Instead, the Commission proceeded with a revision of the protocols on rules of origin under the different FTAs concluded with the contracting parties.

The main objective of the revised rules is to modernise and update the rules of origin, by introducing more flexibilities. These rules will not replace the PEM Convention, however, they will be applicable in parallel, as transitional rules, until the Convention is revised.

Overall, the revised rules aim to facilitate an integrated supply chain within the PEM region, adapting it to the current economic realities. The overview of the most important changes is provided below.

Type of simplification The specific aspects of the revised rules The content of the revised rule
Product specific 1. Increased tolerance levels for non-originating material

The tolerance levels for non-originating content will be increased from 10% to 15% of the value ex-works price.

2. Increased flexibility for the scope of processing/working operations

The economic operator can request an authorisation from customs authorities to apply an average calculation of the non-originating materials.

3. Full cumulation

Aside from textile (Chapters 50-63), the parties will be able to benefit from full cumulation.

4. Revised duty drawback rules
  • The prohibition on duty drawback will be removed, except for textile (Chapters 50-63), 
  • For textile, there will be some exceptions foreseen.
Type of simplification The specific aspects of the revised rules The content of the revised rule
Related to logistics and record-keeping

5. The non-alteration rule

 

  • Direct transport rule will be replaced with the non-alteration rule.
  • The economic operator would need to show that the products were not altered or transformed during transit
6. Single proof of origin
  • The double system of EUR.1 and EUR.MED certificates will be revised.
  • Only EUR.1 will be foreseen under the revised rules.
  • An option for economic operators to be a registered exporter (REX).
7. Easier rules on Accounting segregation
  • The economic operator will be able to obtain an authorisation, which will allow for operational simplifications, without additional costs.

 

How can we help?

We can help you understand what the changes entail and to assess whether your company can profit from the simplifications and more flexible rules of origin. 

Furthermore, we could help in setting up processes/procedures to ensure that the rules of origin are applied correctly (in your IT systems) and your company has the correct evidence to issue origin certificates/statements or the correct evidence to claim the lower/zero rates import duties rates.

Let’s talk!

Should you require any advice on this matter, please contact your regular Customs & International Trade contact at PwC.

Contact us

Simeon L. Probst

Simeon L. Probst

Partner Customs & International Trade, PwC Switzerland

Tel: +41 58 792 53 51

Claudia Buysing Damsté

Claudia Buysing Damsté

Partner, PwC Netherlands

Tel: +31 (0)65 103 04 63

Dr. Michael Tervooren

Dr. Michael Tervooren

Partner, PwC Germany

Tel: +49 211 981-7641

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