(S,P) Cumulation makes it much easier for business to get their goods to "originate" unlocking costs savings. For the Euro-Med region, a special matrix specifies options
What are Rules of Origin?
Rules of origin determine where goods originate, i.e. not where they have been shipped from, but where they have been produced or manufactured.
As such, the ‘origin’ is the 'economic nationality' of goods traded in commerce.
The tariff classification, value and origin of a good are determining factors based on which the customs tariff treatment is applied.
What is the PEM convention?
The Pan-Euro-Mediterranean (PEM) convention on preferential rules of origin aims at establishing common rules of origin and cumulation among the partner countries and the EU to facilitate trade and integrate the supply chains within the zone. Ultimately, the PEM convention aims replace the network of about 60 bilateral protocols on rules of origin in force in the pan-Euro-Med zone.
Who are the members of the PEM convention?
The Contracting Parties are the European Union, Albania, Algeria, Bosnia and Herzegovina, Egypt, Faroe Islands, Georgia, Iceland, Israel, Jordan, Kosovo (under Resolution 1244(1999) of the United Nations Security Council), Lebanon, North Macedonia, the Republic of Moldova, Montenegro, Morocco, Norway, Serbia, Switzerland (including Liechtenstein), Syria, Tunisia, Turkey, Ukraine and West Bank and Gaza Strip.
What is Cumulation?
Cumulation is the term used to describe a system that allows originating products of country A to be further processed or added to products originating in country B, just as if they had originated in country B.
The resulting product would have the origin of country B.
It can only be applied between countries operating with identical origin rules.
An important point to remember is that in the case of cumulation, the working or processing carried out in each partner country on originating products does not have to be 'sufficient working or processing' as set out in the list rules.
There are four types of cumulation: bilateral, diagonal, regional and full.
Bilateral cumulation
Bilateral cumulation operates between two countries where a free trade agreement or autonomous arrangement contains a provision allowing them to cumulate origin. This is the basic type of cumulation and is common to all origin arrangements. Only originating products or materials can benefit from it.
Diagonal cumulation
Diagonal cumulation operates between more than two countries provided they have Free Trade Agreements containing identical origin rules and provision for cumulation between them. As with bilateral cumulation, only originating products or materials can benefit from diagonal cumulation.
Although more than two countries can be involved in the manufacture of a product it will have the origin of the country where the last working or processing operation took place, provided that it was more than a minimal operation.
It is the Diagonal cumulation that operates between the EU and the countries of the so-called "pan-Euro-Mediterranean cumulation zone".
For the purpose of the application of diagonal cumulation of origin among the Contracting Parties (1) to the Regional Convention on pan-Euro-Mediterranean preferential rules of origin (2) (hereafter referred to as ‘the Convention’), the Parties concerned notify each other, through the European Commission, of the origin rules in force with the other Parties.
So how will a business know if countries have the same rules of origin to cumulate origin?
It is recalled that diagonal cumulation can only be applied if
a) the countries of final manufacture and of final destination have concluded free trade agreements
b) these must contain identical rules of origin, with all the countries participating in the acquisition of originating status, i.e. with all countries from which the materials used to originate.
Materials originating from a country that has not concluded an agreement with the Parties of final manufacture and/or of final destination needs to be treated as non-originating.
What is the cumulation matrix?
Based on the notifications made by the Parties to the European Commission, this matrix specifies. It is published when updated by the EU Commission in the Official Journal of the EU (which Customs Manager Ltd monitors for PREMIUM subscribers) under a notice called
"Commission notice concerning the application of the Regional Convention on pan-Euro-Mediterranean preferential rules of origin or the protocols on rules of origin providing for diagonal cumulation between the Contracting Parties to this Convention"
EXAMPLE
How to read the Cumulation Matrix
TABLE 1
In Table 1, an ‘X’ marks the existence between 2 partners of a free trade agreement containing rules of origin allowing cumulation based on pan-Euro-Mediterranean model rules of origin.
To use diagonal cumulation with a third partner, an ‘X’ should be present in all the intersections of the table between the 3 partners.
However, there are some exceptions to diagonal cumulation. For such cases, either (1) or an (*) next to the ‘X’ will point out the exceptions to consider.
TABLE 2
In Table 2, the dates mentioned refer to:
The date of application of diagonal cumulation on the basis of Article 3 of Appendix I to the Convention where the free trade agreement concerned refers to the Convention. In that case the date is preceded by ‘(C)’;
The date of application of the protocols on rules of origin providing for diagonal cumulation attached to the free trade agreement concerned, in other cases.
TABLE 3
In Table 3 the dates mentioned refer to the date of application of the protocols on rules of origin providing for diagonal cumulation attached to the free trade agreements between the EU, Turkey and the participants to the EU's Stabilisation and Association Process. Each time a reference to the Convention is made in a free trade agreement between Parties in this table, a date preceded by ‘(C)’ has been added in Table 2.
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