Jan Vangheluwe European Commission DG Taxation and Customs Union Origin of goods Workshop on pan-Euro- Mediterranean preferential rules of origin PEM Convention: general provisions and ratification process April 2013

Regional Convention on pan-Euro- Mediterranean preferential rules of origin (PEM Convention) 1.General 2.Ratification process 3.Diagonal cumulation 4.The extended PEM matrix 5.The linkage to the Convention in FTAs 6.The Joint Committee 7.Accession of third parties 8.Roadmap 2 Presentation content

An international agreement (legal instrument) laying down a single set of rules of origin Intended to replace the origin rules in all Free Trade Agreements (FTAs) between the Contracting Parties (CPs) to the PEM Convention with a single legal instrument fixing rules of origin Creating one big zone of diagonal cumulation (merging current PEM cumulation and SAP cumulation) Published in the EU in the Official Journal L54 of What? 1. General

 Contracting Parties:  EU  EFTA States  Faroe Islands (represented by DK)  Participants in the Barcelona Process (MEDs)  Participants in the EUs Stabilisation and Association Process (SAP partners) 4 Who?

 Set identical rules for all partners ( = condition for applying diagonal cumulation)  Provide for extended diagonal cumulation (between EFTA states and SAP countries; between SAP countries and MEDs)  Can be managed/amended more easily – no need to amend more than 60 individual protocols  Make it easier to update the rules of origin in view of their simplification and adaptation to economic reality  Pave the way for long expected simplification  Can be extended to include new Partners more easily (more partners = more sourcing possibilities) 5 Why? 1. General

Albania EU Former Yugoslav Rep. of Macedonia Croatia Faeroe Bosnia and Herzegovina West Bank and Gaza Strip Israel Morocco Jordan Montenegro Lebanon Serbia Algeria Tunisia Egypt Syria Turkey Switzerland/ Lichtenstein Iceland Norway

Albania EU Former Yugoslav Rep. of Macedonia Croatia Kosovo* Faeroe Bosnia and Herzegovina West Bank and Gaza Strip Israel Morocco Jordan Montenegro Lebanon Serbia Algeria Tunisia Egypt Syria Turkey Switzerland/ Lichtenstein Iceland Norway Reference to PEM Convention replacing Protocol on rules of origin in each FTA * This designation is without prejudice to positions on status and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo Declaration of Independence.

 To support an initiative creating better trade opportunities and promoting regional integration in the framework of the European Neighbourhood Policy  To allow their companies to benefit from extended cumulation possibilities ( = enhanced sourcing opportunities)  To be able to actively participate to the revision of the Convention (only Partners having ratified the Convention have the right to vote)  To avoid disruption of trade: if Appendix I to the Convention is revised before all Partners ratified, those not having ratified will be prevented from applying diagonal cumulation 8 2. Ratification process Why should partners ratify asap?

State of play 2. Ratification process PartnerSignatureRatificationEntry into force Norway Switzerland Lichtenstein Croatia Iceland Albania EU FYROM Montenegro Faroe Islands Jordan Turkey

* This designation is without prejudice to positions on status and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo Declaration of Independence. State of play 2. Ratification process PartnerSignatureRatificationEntry into force Morocco Algeria Serbia Tunisia Bosnia and Herzegovina Egypt Israel Kosovo* Lebanon Palestine Syria

 Signature of the Convention  Ratification of the Convention  Deposit your instrument of acceptance with the depository of the Convention ( = General Secretariat of the Council of the EU)  Target: By end October 2014  Entry into force: 1 st day of 2 nd month following deposit  Target: entry into force for all CPs by Ratification process Procedure

More than 60 Free Trade Agreements (FTA) between these partners Each containing a Protocol setting identical rules of origin Modifying rules of origin requires changing all the Protocols PEM and SAP do not overlap 12 Current situation 3. Diagonal cumulation PEM cumulation - 16 partners: EU, TR, Faroe Islands, EFTA States, MEDs SAP cumulation (Stabilisation and Association Process) – 8 partners: (EU, TR, 6 Western Balkan countries)

13 Conditions 3. Diagonal cumulation  Existence of a preferential trade agreement (FTA) between Contracting Parties (CPs) involved in the acquisition of the origin status and the CP of destination  Materials and products have acquired originating status by the application of rules of origin identical to those of the Convention  Notices indicating fulfilment of the requirements to apply cumulation published in the OJEU and in Contracting Parties party to the relevant agreements  Mention dates as of which diagonal cumulation can apply

14/06/2016 Current situation – PEM (OJ C 156, , p.3) 3. Diagonal cumulation

14/06/2016 Current situation – SAP ( OJ C 154, , p.14) 3. Diagonal cumulation

 WHY?  Add SAP partners in the matrix, emphasising one of the main objectives of the PEM Convention: to include SAP countries in the system of PEM diagonal cumulation of origin ( = SAP+)  Main changes in the notice and matrix (see doc TAXUD/111007/13)  Matrix groups Parties (EU, EFTA, Faroe Islands, MEDs, TR, SAP)  2 types of dates:  Date preceded by "C": cumulation based on reference to the PEM Convention in the FTA (so far only CH(+LI)-IS-NO  ME)  Other dates: cumulation based on current protocols on rules of origin in FTAs  Note  SAP-matrix remains valid for the time being  Dates will be moved to PEM matrix as links are made to the Convention in order to avoid giving the impression that SAP+ diagonal cumulation is already possible. Such cumulation will only become possible as of the time that a reference to the PEM Convention is inserted in each relevant FTA, at which time the PEM matrix will be completed with its date of application The extended PEM matrix

Protocols on rules of origin in all FTAs between CPs will have to be replaced by Protocols referring to the Convention  Requires a Decision of the Joint Committee competent for amending the rules of origin in the relevant Agreement  Target date: by end 2014  Condition: Convention has entered into force for the CPs concerned  Following Agreement currently qualify: EFTA-ME (already done) / EFTA-AL / EFTA-MK EU-CH (+LI) / EU–IS / EU-NO / EU-AL / EU-MK / EU-ME 17 General 5. The linkage

 Draft text of the Protocol:  Contains the reference to the Convention  Provision on dispute settlement Joint Committee provided for in the relevant FTA remains competent for disputes concerning verification procedures Disputes between importer and customs of country of import: legislation of that country applies  Provision on withdrawal from the Convention Transitional provisions:  To avoid that cumulation possibilities available under the relevant FTA would not be possible during the transitional period  To avoid imposing EUR-MED certification in cumulation involving only EU, TR, SAP and EFTA (until revision of the Convention) 18 Text 5. The linkage

 PEM Working Group of May 2013: Presentation of the text and discussion  June 2013 – December 2014: insertion of the link to the Convention in ALL FTAs linking CPs to the Convention 19 Next steps 5. The linkage

 Each CP shall be represented  CPs for which Convention entered into force: have voting right  CPs for which Convention has not entered into force and third parties invited to accede: have observer status  Acts by unanimity (except for Decisions on new accessions where one CP cannot veto or amendments of Appendix II)  Meets whenever necessary but at least once a year  Shall adopt rules of procedure at first meeting (provisional dates: 23-24/10/2013)  May set up sub-committees or working groups (e.g. on the revision of the Convention) 20 General (Art. 3) 6. The joint committee

 Administer and ensure proper implementation of the Convention  Recommend to the CPs:  Explanatory notes and guidelines for the uniform application of the Convention  Other measures for its application  Adopt by decision:  Amendments to the Convention  Invitations to third parties to accede  Transitional measures in case of accession of new CPs 21 Tasks (Art. 4) 6. The joint committee

Who? 7. Accession of third parties EU Neighbourhood Policy Union for the Mediterranean Eastern Partnership MED countries are Partners to PEM Convention Possible accession to PEM Convention foreseen in DCFTAs under discussion between EU and  Ukraine  Georgia  Moldova  Armenia

 Condition: candidate has an FTA with at least one of the Contracting Parties  Steps (Art. 5): 23 Procedure 7. Accession of third parties Candidate Depositary Joint Committee (JC) decides (1 CP may not oppose) 1. Request 2. Request 3. JC decision 4. JC decision 5. Deposit instrument of accession 6. Accession becomes effective 1st day of 2 nd month after 5. CP 7. Notification

Action/EventDate/TargetSubjects PEM Working Group14-15/5/2013Discuss ratification process, PEM matrix, rules of procedure of Joint Committee, linkage, revision of the PEM Convention, etc. Publication extended PEM matrix End 4/2013 Beginning 7/2013 Matrix including SAP countries Update following accession HR to the EU Further updates as CPs insert link to the PEM Convention in their FTAs Joint Committee – 1 st meeting 23-24/10/2013 (provisional dates) Adoption of rules of procedure, planning of actions, setting up of sub-committees or working groups, revision, etc. Sign/ratify PEM Convention By 10/2014Complete process of signing/ratification by CPs so that they can deposit their instrument of acceptance by end October 2014 Entry into force of PEM Convention in all CPs By 1/1/2015Date depends on date of deposit of the last instrument of acceptance Roadmap

Action/EventDate/TargetSubjects LinkageBy 1/1/2015All protocols on rules of origin in FTAs between CPs to be replaced by link to PEM Convention Revision of the PEM Convention By end 2014Finalise discussions on the revision and vote in the Joint Committee Roadmap Different actions (signing/ratification; linkage; revision) have to be carried out in parallel!

THANK YOU ! European Commission DG Taxation and Customs Union Unit B3 duties/rules_origin/preferential/index_en.htmhttp://ec.europa.eu/taxation_customs/customs/customs_ duties/rules_origin/preferential/index_en.htm 26