Pan-Euro-Mediterranean Convention (PEM)
At a glance
The Pan-Euro-Mediterranean (PEM) convention on preferential rules of origin aims at establishing common rules of origin and cumulation among the partner countries and the EU to facilitate trade and integrate the supply chains within the zone.
The rules are under revision and a new set of rules of origin should be applicable mid-2021, including provisions on cumulation, duty drawback, tolerance and the non-alteration rule that will be relaxed.
The objective is to move towards the application of identical rules of origin for the purpose of cumulation of origin for goods traded between all the countries concerned. Ultimately, the PEM convention will replace the network of about 60 bilateral protocols on rules of origin in force in the pan-Euro-Med zone.
Detailed information about the pan-Euro-Med system is available in the User's Handbook.
Rules of Origin
Rules of origin
To qualify for the preferential rate, your product needs to comply with certain rules that prove its origin.
Where can I find the rules of origin?
Rules of origin are set out in the Regional Convention on pan-Euro-Mediterranean preferential rules of origin (PEM Convention)
Requirements for rules of origin under the PEM Convention are defined in Appendix I of the PEM Convention. Those rules are under revision and a new set of alternative rules of origin should be applicable mid-2021, including provisions on cumulation, duty drawback, tolerance and the non-alteration rule (see below) that will be relaxed.
Detailed information about the pan-Euro-Med system is available in the User's Handbook
- wholly obtained in the EU or in a Contracting Party of the PEM Convention, or
- manufactured in the EU or in a Contracting Party of the PEM Convention using non-originating materials provided that such materials have undergone sufficient working or processing by fulfilling the product specific rules set out in Annex II
See also Annex I "Introductory notes” to product specific rules of origin. Furthermore,Appendix II provides for derogations to the product specific rules for certain products.
Examples of the main types of product specific rules in EU trade agreements
- the value-added rule – the value of all of the non-originating materials in a product cannot exceed a certain percentage of its ex-works price
- the change of tariff classification – the production process results in a change of tariff classification between the non-originating materials and the final product – for example production of paper (Harmonized System Chapter 48) from non-originating pulp (Harmonized System Chapter 47)
- specific operations – a specific production process is required, for example spinning of fibers into yarn – such rules are mostly used in the textiles, clothing and chemical sectors
Tips to help you comply with the product specific rules
- the tolerance rule allows the producer to use non-originating materials that are normally prohibited by the product specific rule up to 10% of the product’s ex-works price
- this tolerance cannot be used to exceed any threshold of maximum value threshold of non-originating materials listed in the product specific rules
- specific tolerances apply to textiles and clothing classified in Harmonized System Chapters 50 to 63, which are included in Notes 5 and 6 of the Annex I "Introductory notes to the list in Annex II".
The PEM Convention provides for three ways of cumulating origin:
- bilateral cumulation - materials originating in a Contracting Party of the PEM Convention can be counted as originating in the EU (and vice versa) when used in the manufacturing of a product
- diagonal cumulation - materials originating in one Contracting Party of the PEM Convention can be counted as originating in another Contracting Party when exported to a third Contracting Party within the pan-Euro-Med zone. However, diagonal cumulation only applies if a Trade Agreement is in place between all Contracting Parties concerned and those countries apply the same rules of origin.
- Please check the 'matrix' (table containing all the agreements in force using the PEM Convention) to find out amongst which Contracting Parties diagonal cumulation can be applied.
- full cumulation operates between the EU and Algeria, Morocco and Tunisia as well as between the countries of European Economic Area (the EU, Iceland, Liechtenstein and Norway). The EEA is considered as a single territory, with a common "EEA originating status". Full cumulation allows taking into account the working or processing carried out on non-originating materials in those countries to help you comply with the product specific rule.
How does diagonal cumulation work?
Diagonal cumulation occurs among several different countries that share the same rules of origin and have trade agreements with each other. This is when a producer of goods in either country can import materials and use them as if they originated in their own country. For example, under the PEM Convention, a Moldavian trader who is making clothes for export to the EU can use fabrics originating in Moldova, Georgia and Ukraine (and/or any other party of the PEM Covention) to produce the clothes. The double transformation requirement (i.e. Manufactured from yarn) has been fulfilled and the clothes are considered as originating from Moldova when exported to the EU and will therefore benefit from free access in the EU market.
The product also need to fulfil all other applicable requirements specified in the Convention, such as insufficient working or processing, or the direct transport rule:
Transport through a third country: direct transport rule
Originating products must be transported from the EU to a Contracting Party of the PEM Convention (and vice-versa) or through the territories of the Contracting Parties with which cumulation is applicable without being further processed in a third country.
If the products remain under supervision of the customs authorities, the following operations are allowed
- any other operation designed to preserve products in good condition
Originating products may be transported by pipeline across territory other than that of the Contracting Parties acting as exporting and importing parties.
Evidence that these conditions have been fulfilled shall be supplied to the customs authorities of the importing country by the production of:
- a single transport document (for example a bill of lading) that covers passage from the exporting country through the third country via which the goods transited;
- a certificate issued by the customs authorities of the third country through which you are transporting your goods. This certificate must attest to the fact that the goods were at all times under the surveillance of the third country’s customs authorities ; or
- failing these, any substantiating documents
Under the PEM Convention it is not possible to get refund on duties previously paid on non-originating materials used to produce a product that is exported under a preferential tariff, except in purely bilateral trade between the EU and
- Gaza and the West Bank
Purely bilateral trade means if no diagonal cumulation is applied and the product is not re-exported from a country of importation to any of the other countries of the zone.
Exporters and importers have to follow the origin procedures. The procedures are set out in Title V on Proof of Origin and Title VI on Arrangements for Administrative Cooperation. They clarify e.g. how to declare the origin of a product, how to claim preferences or how the customs authorities can verify the origin of a product.
How to claim a preferential tariff
To benefit from a preferential tariff, importers must provide proof of origin.
The proof of origin can be either:
No proof of origin is required when the total value of the products does not exceed
- €500 in the case of small packages or
- €1,200 for personal luggage.
The proof of origin is valid for a period of 4 months from the date of issue.
Movement certificate EUR.1 or EUR-MED
- Movement certificates EUR.1 or EUR-MED are issued by the customs authorities of the exporting country.
- Annex III a and b includes specimen EUR.1 and EUR-MED certificates and gives instructions for the completion.
- The exporter applying for the certificate should be prepared to submit documents proving the originating status of the products concerned.
Further explanations on when to use the EUR.1 or the EUR-MED certificate are provided under page 72 of the handbook.
How to make an origin declaration
“The exporter of the products covered by this document (customs authorisation No ... ) declares that, except where otherwise clearly indicated, these products are of ... preferential origin.”
How to make a EUR-MED origin declaration
“The exporter of the products covered by this document (customs authorisation No … ) declares that, except where otherwise clearly indicated, these products are of … preferential origin.
- cumulation applied with … (name of the country/countries).
- no cumulation applied”
The origin declaration can be made in any official language of the EU or official languages in the PEM zone as mentioned in the Annex IV a and b (the statement related to cumulation should always be in English).
You must sign your origin declaration by hand. If you are an approved exporter, you are exempted from this requirement provided you give your customs authorities a written undertaking that you accept full responsibility for any declaration identifying you.
Verification of origin
The customs authorities may verify whether a product imported is indeed originating or fulfils other origin requirements. Verification is based on:
- administrative cooperation between customs authorities of the importing and exporting parties
- checks done by local customs - visits of the importing Party to the exporter are not allowed.
The authorities of the exporting party make the final determination of origin and inform the authorities of the importing party of the results.