New PEM 2025 Preferential Origin Rules: What Changes for Customs and Which Countries are Involved

The Pan-Euro-Mediterranean Convention on Preferential Rules of Origin (PEM) is an agreement established in 2012 with the goal of setting common rules between contracting countries and the European Union regarding the origin of goods. This system facilitates trade, reduces customs duties, and simplifies bureaucracy for businesses.

The PEM agreement involves 15 contracting parties, including:

• European Union (EU)
• EFTA States (Switzerland, Norway, Iceland, and Liechtenstein)
• Faroe Islands
• Barcelona Process countries (Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestine*, Syria, Tunisia, and Turkey)
• EU Stabilization and Association Process countries (Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, Serbia, and Kosovo)
• Republic of Moldova, Georgia, and Ukraine

(*This designation does not imply recognition of a State of Palestine and does not affect the individual positions of EU member states on this issue.)

The revision of the PEM Convention introduces significant changes to facilitate trade and reduce customs costs. The main updates focus on digital simplification and new codes for certifications. Here's what changes in detail:

1. Greater Flexibility in Cumulation

New possibilities for diagonal cumulation with trading partners, provided that ratification and dynamic linking to bilateral agreements have been completed.

2. New TARIC Codes for Certificates of Origin

Two new TARIC codes (U078 and U079) to identify EUR.1 movement certificates and origin declarations. Both certificates must include the new "REVISED RULES" statement;

3. Electronic EUR.1 Certificates

• EUR.1 certificates can now be issued and accepted in electronic format, streamlining import and export procedures.

4. Transition Period: January 2025 – December 2025

To ensure a smooth transition to the new rules, until 31 December 2025, there will be an option to apply either the updated PEM 2025 rules (Revised Rules) or the PEM 2012 rules (old rules). During this period, it will be essential to:

• Verify the final destination of the goods.
• Correctly apply the rules of origin.
• Update EUR.1 certificates and origin declarations with the required new statement.

Being well-prepared is essential to fully embrace the opportunities presented by this change. Not adhering to the new regulations correctly can lead to shipping delays, increased costs, and loss of customs advantages. Here are the main risks:

• Thanks to the transitional measures, you can choose between the two conventions until the end of 2025. If a company does not stay updated, it may apply invalid rules, causing delays or shipment blocks.
• Loss of Diagonal Cumulation > Diagonal cumulation allows goods to qualify as "originating" if processed in multiple PEM countries. If a company fails to update its processes, it risks losing customs duty exemptions.
• Use of Incorrect Certificates > If a company continues using EUR.1 certificates lacking the "REVISED RULES" statement, the proof of origin might be rejected, resulting in unexpected duty payments.
• The electronic format of EUR.1 certificates allows for smoother processes and reduced errors. Not adopting this solution means prolonging the customs clearance process and increasing operational costs.