The new Regional Convention on pan-Euro-Mediterranean (‘new PEM Convention’) preferential rules of origin will enter into force as of 1 January 2025.

However, some contracting parties of the PEM Convention are already applying most of these rules (so called ‘Transitional Rules’), alternatively to the current PEM Convention that entered into force in 2013.

At the moment we are writing, exporters to PEM countries have the choice to use both rules of origin:

• the rules of origin of the PEM Convention;
• the so called ‘Transitional Rules’.

There are really a few differences between the so called ‘Transitional rules’ and the ‘new PEM Convention’.

Today, if you apply the ‘Transitional Rules’, you can already apply the cumulation rules foreseen in the ‘new PEM Convention’. No need to wait 2025 to benefit from the advantages of cumulation.

What are these cumulation rules?

Cumulation means that products that have obtained originating status in one partner country may be used with products originating in another partner country without prejudice to the preferential status of the finished product. 

In the case of cumulation the working or processing carried out in each partner country on originating products does not have to be ’sufficient working or processing’ in order to confer on the finished product, the origin of the partner country, but it must go beyond the minimal operations.

The ‘Transitional Rules’ and the ‘new PEM Convention’ foreseen the following kind of cumulation:

• Bilateral cumulation
• Bilateral full cumulation
• Diagonal cumulation
• Full cumulation

Bilateral cumulation is operated between two partners. An originating product (country A) is exported to country B where it will be processed (processing that goes beyond the minimal operations) and it will take the preferential origin of country B. This processed product will be exported back to country A. In country A and in country B, no customs duties are paid, thanks to the preferential arrangement.

Bilateral full cumulation allows, only for bilateral trade between the parties, that the working or processing carried out in the importing party is considered to be carried out in the exporting party if the products obtained are subject to further working or processing in that exporting party.

This kind of cumulation is possible only for products of HS Chapters 50-63.

If you want to know more about full bilateral cumulation, you can read this article.

Diagonal cumulation is the same than bilateral cumulation, but it operates between more than two countries.

Full cumulation means that all operations carried out in one partner country are taken into account when assessing the final origin. It does not require that the goods be originating in one of the partner countries before being exported for further working or processing in other partners countries, but it does require that all the working or processing necessary to confer origin is carried out on the product.

Example of full cumulation: a Chinese product is imported in partner country A where it is manufactured. At import in partner country A, the importer will pay the customs duties on this product. The manufactured product does not obtain preferential origin (list rule not fulfilled) and it is exported to partner country B where it is again manufactured. In country B the importer will pay customs duties. However, the double transformation requirement has been fulfilled in partner country B and the product can be exported and benefit the preferential treatment at import in partner country C.

Full cumulation does not apply for textiles and clothing listed in Chapters 50-63 of the HS.

The cumulation of origin can provide significant financial benefits for your company by enabling it to access preferential tariffs, gain competitive advantages, expand market opportunities, optimize supply chains, and mitigate risks and this without the need to have guarantees, keep records, requesting complex authorizations, etc.

Customs planning is essential in business if you want to be competitive.

Do you want to know more about the advantages of origin for your business or do you want to benefit from cumulation rules of origin? Do not wait 2025!