Alinea Customs Briefing
Following this year’s World Economic Forum at Davos, for UK industries, discussion has escalated addressing the comments made by the EU Trade Commissioner Maroš Šefčovič who signalled that Brussels is open to the UK joining the Pan-Euro-Mediterranean (PEM) Convention. At the time of writing, Chancellor Rachel Reeves has expressed that she is “absolutely happy” to consider the UK’s accession to the PEM Convention. The PEM Convention provides scope for cumulation in terms of sourcing raw materials and intermediates from trade-partner regions outside of the European Union, and incorporating these into the composition of products exported to or importing from the European Union, whilst retaining tariff free access. It is a multilateral convention, offering similar procedural advantages to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), rather than access to a customs union or single market.
What is the Pan Euro-Mediterranean (PEM) Customs Scheme?
The PEM Convention, which facilitates trade among its members by harmonising rules of origin, includes the EU and twenty-four other countries. It offers a framework for diagonal cumulation of origin and is based on a network of free trade agreements having identical origin protocols. The pre-existing origin protocols have been replaced by a reference to the Regional Convention on pan-Euro-Mediterranean preferential rules of origin (PEM Convention). This arrangement allows components sourced from any PEM country to qualify as originating in the final product’s country of manufacture.
The countries currently in the PEM Convention include the European Union, Iceland, Liechtenstein, Norway, Switzerland, Faroe Islands, Türkiye, Morocco, Algeria, Tunisia, Egypt, Israel, Jordan, Lebanon, Palestine, Georgia, the Republic of Moldova, Ukraine, Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, Serbia and Kosovo. Of these countries, the United Kingdom does not currently have a trade agreement established with Bosnia and Herzegovina, Montenegro, and Bosnia and Herzegovina.
For UK businesses, this means greater flexibility in sourcing materials and qualifying for tariff-free trade under preferential agreements. Additionally, the PEM Convention enables wider scope for non-originating materials to be used in production – enabling a tolerance level of up to 15%. Industries such as automotive, chemicals, fashion and textiles and food production, which rely on complex cross-border supply chains, stand to benefit significantly. Joining the PEM could allow them to use inputs from PEM member countries within manufacturing in facilities outside of the intermediates original country of origin without facing tariffs, thereby reducing paperwork and potentially benefiting various sectors facing challenges from rising costs, complicated rules of origin, and barriers to trade.
As Holly Piggott, Alinea Customs Director commented, “While joining PEM will not resolve all UK-EU trade frictions, the convention offers clear economic benefits, supports British industries and businesses, and strengthens supply chains. It could simplify our supply chains, reduce bureaucracy, and enhance trade efficiency. These are precisely the types of measures businesses need to navigate the current trade landscape. Our team at Alinea Customs are ready to assist and bring businesses up to speed on the PEM Convention.”
Alinea Customs assist businesses that require tailored expert solutions and can provide timely assistance to prepare for changes. The team offers professional customs clearance and consultancy services, legal advisory on supply chain agreements, and customs training to support businesses in navigating international trade, customs and regulations.
For more information about Alinea Customs and its services, visit www.alineacustoms.com.
