The European Commission is working on the revised rules of origin of the Pan-Euro-Mediterranean (PEM) Convention. However, this revised version of the rules of origin has not been endorsed by all Parties of the Convention. For this reason, some PEM Contracting Parties have expressed an interest in starting to apply on a transitional basis the revised rules. This means that the revised rules are introduced in the bilateral origin protocols.

The revised rules of origin of the PEM Convention will enter into force from 1^st September 2021 for the EU, Jordan, Norway, Switzerland and the CEFTA countries, excluding Albania and Georgia.

It is important to underline that these origin rules will apply as alternative rules of the PEM Convention.

There are two ways a product can be considered originating:

• it can be “wholly obtained” or produced in the territory of one country, without using materials from any other country, or
• it has been substantially transformed (“sufficient working process”) considering the relevant product specific rule.

In this article we are going to focus on the “sufficient working or processing” rule and where the relevant rule is based on compliance with a maximum content of non-originating materials (e.g. Manufacture in which the value of all the materials used does not exceed 40 % of the ex-works price of the product). This means that the value of the non-originating materials must not exceed a certain percentage of the ex-works price of the finished product.

Today, exporters shall calculate the “maximum content of non-originating materials” for each product every time it is exported. The new rules provides that customs authorities can authorised the exporter to calculate the ex-work price of the products and the value of the non-originating materials on an average basis, in order to take into account the fluctuations in costs and currency rates.

The average ex-works price of the product and average value of non-originating materials used shall be calculated respectively on the basis of the sum of the ex-works prices charged for all sales of the products carried out during the preceding fiscal year and the sum of the value of all the non-originating materials used in the manufacture of the products over the preceding fiscal year as defined in the exporting Contracting Party, or, where figures for a complete fiscal year are not available, a shorter period which should not be less than three months.

This is a great simplification for most of the exporters that shall apply the “maximum content of non-originating materials” rule.

Do you want to know more about origin of goods? You can contact our Team at info@customseasy.com.