Rules of Origin and the Pan-Euro-Med Convention
Since 2013, the Faroe Islands have been a party to the Regional Convention on pan-Euro-Mediterranean preferential rules of origin, known as the PEM Convention. Participation in this system allows for products that have obtained originating status in any one of the Convention countries to be added to products originating in any one of the other countries, without losing their originating status when traded within the Pan-Euro-Med zone. This is referred to as diagonal cumulation of origin.
Other countries which are Parties to the PEM Convention include all the EU member states, the EFTA countries (Iceland, Liechtenstein, Norway and Switzerland), as well as a number of Mediterranean and Eastern European countries.
In the Trade Agreement between the Faroe Islands and the EU, Protocol 3 provides that Appendix I and the relevant provisions of Appendix II to the PEM Convention on preferential rules of origin shall apply to bilateral trade between the Faroe Islands and the EU.
In brief, the PEM preferential rules of origin recognise that manufactured products can often contain material from several countries. The system allows for products to change their origin between the countries that are a part of the system and which have bilateral trade agreements. For example, raw materials can be imported from any of the countries in the system, and then processed and exported as originating in the country in which the finished product had its last working or processing operation. The PEM Convention defines the level of processing required for a product to change its origin. With regard to seafood, simply freezing, packaging or sorting fish is not considered sufficient basis for a change of origin.
- Protocol 3 to the Trade Agreement concerning the definition of the concept of ‘originating products’ and methods of administrative cooperation.
- The Faroese Tax and Customs Authority, TAKS, is responsible for the implementation and application of the PEM Convention in the Faroe Islands.
- The European Union is the depository for the PEM Convention, and provides comprehensive information on the implementation and application of the system: The pan-Euro-Mediterranean cumulation and the PEM Convention