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System of Pan-Euro-Mediterranean cumulation

Summary:

The system of Pan-Euro-Med cumulation of origin is the extension of a previous system of Pan-European cumulation. It therefore operates between the EU and the States of the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland) and Turkey and the countries which signed the Barcelona Declaration, namely Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Syria, Tunisia and the Palestinian Authority of the West Bank and Gaza Strip. Faroe Islands have been added to the system as well.

General introduction

Legal framework

Specific provisions

Regional Convention

a) General introduction

I.

The pan-European cumulation system was created in 1997 on the basis of the EEA agreement (1994) between the EC, the EFTA countries, the CEEC countries and the Baltic States. It was then widened to Slovenia and to industrial products originating in Turkey (1999).

As result, the pan-European cumulation system is operated between the Community, the States of the European Free Trade Association ( Iceland, Liechtenstein, Norway and Switzerland) and Turkey.

The EU has customs unions with Turkey, the Principality of Andorra and the Republic of San Marino. Products covered by the customs unions with Andorra and San Marino are treated in accordance with the provisions of the Origin Protocols to the Agreements. All the relevant Agreements contain Joint Declarations stating that products of Chapters 25 to 97 originating in Andorra and all products originating in the Republic of San Marino are to be considered as originating in the EU by the partner countries.

At present the system is being enlarged to the Faroe Islands and the Mediterranean countries and hence is commonly referred to as Pan-Euro-Mediterranean cumulation.

II.

The Euro-Mediterranean Partnership was launched with a joint declaration of the Foreign Ministers from the European Union and Mediterranean Partners in Barcelona in November 1995 - hence also called the "Barcelona Process". Its overall objective is to provide a framework for strengthened dialogue and comprehensive co-operation in the Mediterranean.

The Partners have agreed upon a strategy aiming at creating an area of peace, stability and shared prosperity through the progressive establishment of free trade between the EU and its Mediterranean partners and amongst the partners themselves by 2010.

The first step towards the creation of this free trade area is the conclusion of a full set of Euro-Mediterranean association agreements between the EU and its partners in the Mediterranean, granting reciprocal trade preferences. These agreements replace the co-operation agreements concluded in the 1970s, which implied unilateral trade preferences. The only co-operation agreement still in force is with Syria. From 1998 to date, Euro-Mediterranean association agreements with Algeria, Tunisia, Morocco, Israel, Jordan, Lebanon, the Palestinian Authority and Egypt have entered into force. The association agreement with Syria was initialled on 18 October 2004.

For more detailed information on the Barcelona Process, see the websites of DG Trade and of DG External Relations.

A system of Pan-Euro-Mediterranean cumulation of origin is being created. For this purpose the Council of the European Union on 11 October 2005 approved a Commission proposal to amend protocols on rules of origin annexed to the various agreements (IP/05/1256 Choose translations of the previous link  ). The system will be applicable between the EC and Algeriapdf, Egyptpdf, Israel, Jordanpdf, Lebanonpdf, Morocco, Syria, Tunisiapdf, West Bank and Gaza Strippdf, the EEA / EFTA countries (Icelandpdf, Norwaypdf and Switzerland (including Liechtenstein)pdf), the Faroe Islandspdf and Turkey (including coal and steel and agricultural products).

b) Legal framework

This Pan-Euro-Med cumulation is based on a network of preferential agreements, the origin protocols of which have to consist of identical rules. For more details, see the list of arrangements and the 'matrix'pdf. (Commission notice concerning the date of application of the protocols on rules of origin providing for diagonal cumulation between the Community, Algeria, Egypt, Faeroe Islands, Iceland, Israel, Jordan, Lebanon, Morocco, Norway, Switzerland (including Liechtenstein), Syria, Tunisia, Turkey and West Bank and Gaza Strip).

The EU also published Explanatory Notespdf to the pan-Euro-Med origin protocols.

c) Specific provisions

NOTICE: These specific provisions only contain information on the specific, core aspects of Pan-Euro-Med protocols. As long as those protocols are not in place between some countries of the zone, other rules apply. Therefore, always check the common provisions, the 'matrix' pdfof Pan-Euro-Med protocols and list of arrangements.

Cumulation

In the context of the Pan-Euro-Med system, diagonal cumulation means that products which have obtained originating status in one of the 42 countries may be added to products originating in any other one of the 42 without losing their originating status within the Pan-Euro-Med zone.

In Pan-Euro-Med zone, a possibility to cumulate origin diagonally is based on a ''variable geometry'' rule. It means that countries of the Pan-Euro-Med zone can only cumulate originating status of the goods if the free trade agreements including a Pan-Euro-Med origin protocol are applicable between them. Consequently, a country of the zone which is not linked by free trade agreements with the others is practically outside cumulation's benefits. The 'matrix'pdf indicating the protocols which are applicable between various partner countries is published in the EU Official Journal and is regularly up-dated.

In parallel, full cumulation is currently operated by the European Economic Area (EEA comprises the Community, Iceland, Liechtenstein and Norway) and between the EU and Algeria, Morocco and Tunisia. These countries apply full cumulation between themselves and diagonal cumulation with the other pan-Euro-Med countries.

No drawback rule

In the Pan-Euro-Med zone, in principle, in diagonal trade a prohibition of drawback must be respected.

Protocols between the EU and Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, Tunisia and the Palestinian Authority of the West Bank and Gaza Strip provide in Article 15 (7) for partial drawback which is considered as being in line with the no-drawback rule. The transitional period for the application of this provision expired on 31 December 2012 but the Commission proposed to extend it until 31 December 2015 (see OJ C , soon available).

At the same time, the applicable rates of customs charges that have to be retained have been reviewed as followed: a 4% rate of customs charges for products falling within Chapters 25 to 49 and 64 to 97 and 8% of customs charge for products falling within Chapters 50 to 63.

The same protocols allow benefiting from drawback in purely bilateral trade between the EU and those countries. This implies that drawback can be granted only if diagonal cumulation has not been applied and a product has not been re-exported from a country of importation to any of the other countries of the zone.

Proof of origin

The originating status of a product is proved by either:

  • a movement certificate EUR.1 or EUR-MED issued by the customs authorities of the exporting country or
  • an invoice declaration or and invoice declaration EUR-MED. This may be made out by an approved exporter or by any exporter for a consignment consisting of one or more packages containing products whose total value does not exceed € 6 000.

d) Regional Convention

The Regional Convention on preferential Pan-Euro-Med rules of origin:

Several years ago, the Commission proposed to replace the network of about 60 bilateral protocols on rules of origin in force in the Pan-Euro-Med zone with a single legal instrument in the form of a regional convention. The main objective of such a proposal was to allow for a more effective management of the system of Pan-Euro-Med cumulation of origin by enabling the contracting parties (current participants in the cumulation zone + possible newcomers such as Western Balkans – see below) to better react to rapidly changing economic realities. A single legal instrument may indeed be amended much more conveniently than a complex network of protocols and should thus be viewed as paving the way towards the long expected adaptation of the pan-Euro-Med rules of origin to the current market conditions.

Finally, the Convention was also seen as offering the opportunity to integrate the participants in the European Union's Stabilisation and Association Process into the Pan-Euro-Med system of cumulation of origin. This step should allow developing trade by offering new opportunities within an enlarged trade area, thus promoting regional integration.

The regional Convention on pan-Euro-Mediterranean preferential rules of origin is now a reality. After different preparatory steps, it was eventually open for signature on 15 June 2011. Since then, the EU, the EFTA States, FYROM, Montenegro, Croatia, Albania and Turkey have signed it.

The EFTA States followed by Croatia, Albania and the EU have also concluded their internal steps concerning the ratification procedure of the Convention and the Convention has entered into force or is in the process of doing so in respect of these Contracting Parties, thus including the EU. The website of the Council of the European Union gives access to a table, updated in real time, showing the detailed and precise state of play of the contracting parties' procedures.

The next step will be for Contracting Parties that have ratified the Convention to render it effective by referring to it in the origin protocols of their free trade agreements with their pan-Euro-Med partners having also completed their respective ratification procedures.