With the revised Pan-Euro-Mediterranean (PEM) Convention rules coming into effect on 1 January 2025, companies operating in the EU, EFTA and the wider Mediterranean region face new trade compliance considerations. These updates aim to modernise and simplify trade within the PEM zone. However, since not all participating countries will be ready by 1 January 2025, a new transitional phase has been introduced to support this transition smoothly. On 27 November 2024, the Federal Office for Customs and Border Security (FOCBS) released detailed guidance on this transitional phase, clarifying its scope and implications for businesses.
What’s new: the transitional phase
On 7 December 2023, the PEM Joint Committee confirmed that the revised rules of origin would take effect on 1 January 2025, applying to all 24 contracting parties to the PEM Convention. However, because the PEM Convention only provides a standardised framework, each free trade agreement (FTA) within the PEM zone must adopt this update with a "dynamic reference" to the revised PEM Convention.
As of now, some FTAs within the PEM zone, including those between Switzerland/EFTA and countries such as Egypt, Israel, Jordan, Lebanon, Gaza Strip and the West Bank, Morocco, Tunisia, Ukraine and the Faroe Islands, have not yet incorporated this dynamic reference. To prevent any negative consequences for existing cumulation possibilities and supply chains, an additional transitional period has been extended until the end of 2025, giving businesses time to comply without sacrificing trade flexibility.
The key points of this transitional phase include:
- Parallel use of rules: The revised rules will go into effect as planned on 1 January 2025, while the original PEM rules can still be applied in parallel until 31 December 2025. This allows the contracting parties to adjust their free trade agreements accordingly.
- Cross-border permeability: The revised rules introduce cross-border "permeability". Exporters using the revised rules can still cumulate origin even if their suppliers follow the old rules. However, this cumulation is limited to goods of certain chapter of the Harmonized System and requires exporters to fully comply with the revised rules.
- Proof of origin labelling: During this transition, exporters applying revised rules should indicate "REVISED RULES" on proofs of origin by 31 December 2025.
- Pre-2025 proof of origin validity: Proofs of origin issued before 1 January 2025 will still be valid if goods are in transit or under customs supervision on this date.
The Joint Committee will adopt the final measures in December 2024. It is expected that the Switzerland-EU agreement will meet this deadline, though some countries may experience delays in ratification. Importantly, these decisions require unanimous agreement among the contracting parties. If, contrary to expectations, consensus is not reached, the revised rules would still take effect on 1 January 2025, but without any transitional provisions.
Key changes of the revised PEM rules
In our February post, we covered the primary updates to the PEM Convention rules, including the elimination of the EUR-MED proof of origin, expanded cumulative rules, increased tolerance for non-originating materials, average price origin calculation, replacement of the direct transport rule by the non-manipulation rule and simplified origin rules.
Moreover, from 1 January 2025 electronically validated movement certificates will generally be accepted by customs administrations. Additionally, the product-specific rules under the PEM Convention will be updated to align with HS 2022 nomenclature in the near future.
How businesses can prepare
The 2025 PEM revision marks a significant step towards a more streamlined and flexible trade environment across Europe and the Mediterranean. Businesses that are proactive in adapting to these changes will be able to reduce costs, increase sourcing flexibility and improve operational efficiency.
However, with two sets of rules in place during the transitional period, managing preferential origin could remain complex. Given that the Joint Committee’s final decisions will be made in December 2024, businesses must be prepared for potential last-minute adjustments. We recommend staying informed on these developments, assessing your goods flows and evaluating the impact of the revised PEM rules on your operations.
Additionally, companies must understand and address the details of proofs of origin and supplier declarations, ensuring compliance with labeling requirements and the permeability of origin proofs. Finally, businesses should use the transitional phase to adapt gradually, balancing immediate compliance needs with the long-term benefits of the revised rules. Taking these steps now will help businesses navigate the transition effectively and seize the opportunities offered by the new PEM framework.
How can PwC support you?
Are you ready for the upcoming changes to the PEM Convention? Our team can guide you through the transition with a tailored “PEM Readiness Check” to ensure that you are fully prepared for the new rules. We’ll help you take strategic steps to maximise the benefits of the revised PEM Convention, from compliance adjustments to optimising your supply chain. Let’s work together to turn these changes into an opportunity for growth and efficiency.
For more information join us at our 14th Swiss Customs Law Conference 2025 (in German) on 13 May 2025 in Bern, where we will delve deeper into the new PEM rules and their implications. This is a great opportunity to network with industry experts and gain valuable insights on how to navigate the changing landscape. Don’t miss out on this chance to stay ahead of the curve and make the most of the revised PEM Convention. We look forward to seeing you there!
