The EU loves abbreviations and complexity. Unless you are an EU customs law specialist (“geek”), the news of the EU proposals (only proposals!) for simplifying rules of origin (ROO) agreed under the PEM convention may have gone over your head. But the announcement matters.

Businesses need to demonstrate they meet the ROO detailed in Annex II of the PEM convention alongside other criteria to qualify for a lower or zero duty rate, which makes the imported product less expensive. So far, qualifying for preferential duties was often difficult to archive.

The new proposal injects flexibility into the rules and makes it much easier to benefit for the lower duty: The thresholds for the use of non-originating materials or components will be increased, and, for most products, the current prohibition of duty-drawback will be lifted. The restrictive “direct transport” rule will be replaced with a more flexible “non-manipulation” rule and full cumulations will be the norm.

It will be important for businesses to understand these developments if they trade with 20+ PEM trading partners and to ensure that they only pay what’s really due. Take a look at the revised PEM convention legal text proposed in 2019. If you’d like a chat about how to optimize your supply chain using the PEM convention, get in touch.

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