EU: Transitional preferential rules of origin under pan-Euro-Mediterranean (PEM) Convention

Non-binding guidance document regarding the rules of origin under the pan-Euro-Mediterranean (PEM) Convention

Non-binding guidance document regarding the rules of origin under the PEM Convention

The European Commission has published a non-binding guidance document on its August 2020 legislative package of proposals regarding the rules of origin under the pan-Euro-Mediterranean (PEM) Convention—read TradeNewsFlash.  

The new rules (transitional rules) are intended to modernize and update the rules of origin as described in the origin protocols of the trade agreements in the PEM region by making them more flexible and user-friendly.

However, the package does not contain a formal amendment to the comprehensive PEM Convention. This concerns an amendment to the original origin protocols of the following PEM countries: Albania, Bosnia and Herzegovina, Egypt, the Faroe Islands, Georgia, Iceland, Israel, Jordan, Kosovo, Lebanon, Liechtenstein, Moldova, Montenegro, North Macedonia, Norway, Palestine, Serbia, Switzerland, Turkey, and Ukraine.

The transitional rules are scheduled to enter into force on September 1, 2021. Initially, the rules will apply between the EU and Switzerland, Norway, Iceland, Albania, Jordan, and the Faroe Islands. The other partner countries will adopt the transitional rules at a later date.

The Dutch Customs authorities published guidance on August 23, 2021, on the transitional rules that includes specific information regarding the rules of origin under the revised PEM Convention and, for example, instructions for accordingly submitting a customs declaration. 

Rules of origin amendments

Highlights of the new rules include:

  • “Full cumulation” or “full diagonal cumulation” introduced for most products
  • Thresholds of tolerance for non-originating materials increased from 10% to 15%
  • Duty drawback prohibition lifted for most products
  • Flexible accounting segregation rules when using fungible materials
  • Direct transport rule replaced with non-alteration rule (also called “non-manipulation”)
  • Proof of origin limited to the €1 movement certificate or origin declaration issued by the exporter

Read an August 2021 report prepared by the KPMG member firm in the Netherlands


For more information on this topic or to learn more about KPMG’s Trade & Customs Services, contact:

Doug Zuvich | (312) 665-1022 | dzuvich@kpmg.com

 

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