Business awaits ratification of the Transitional Provisions of the Pan-Euro-Med Convention

14/ 02/ 2025

According to information provided to the European Business Association, the Ministry of Economy of Ukraine has already developed a draft law for the Verkhovna Rada to ratify the Transitional Provisions of the Pan-Euro-Med Convention, which the EU implemented at the end of December 2024. The business community is eagerly anticipating its prompt adoption. As a reminder, on January 1, 2025, Ukraine enacted the updated version of the Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin. As a result, new origin rules have begun to apply in trade relations with the EU, Moldova, and North Macedonia. However, the updated version of the Convention does not take into account Decision No. 2/2024 of the Pan-Euro-Med Joint Committee on the transitional period, which was introduced in December 2024. Without its ratification, Ukrainian businesses face a loss of competitiveness in European and other markets covered by the Convention. The key challenges for Ukrainian companies are as follows: (1) Certificates of origin EUR.1 and origin declarations issued before January 1, 2025, cannot be used if the goods arrived in Ukraine after this date. Moreover, all materials used for processing in Ukraine that were received before January 1, 2025, are now considered non-preferential under the updated Convention and cannot be used to confirm origin. (2) The Free Trade Agreement with EFTA countries does not contain a dynamic reference to the updated Convention. As a result, the previous version of the origin rules still applies to trade with these partners. Due to the application of different sets of rules between Ukraine, the EU, Moldova, North Macedonia, and EFTA countries, diagonal cumulation cannot be used until the FTA with EFTA is amended or a transitional period is introduced. (3) Under the Ukraine-UK Free Trade Agreement, the previous version of the Convention remains in effect. This prevents the cumulation of materials originating from the EU due to different origin rules. Given the critical importance of adopting the transitional provisions—which would enable Ukrainian businesses to benefit from diagonal cumulation with EFTA and the UK, facilitate the interaction between different rule sets, and prevent customs clearance issues—the European Business Association urges the urgent ratification of Decision No. 2/2024 of the Pan-Euro-Med Joint Committee.

As a reminder, on January 1, 2025, Ukraine enacted the updated version of the Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin. As a result, new origin rules have begun to apply in trade relations with the EU, Moldova, and North Macedonia.

However, the updated version of the Convention does not take into account Decision No. 2/2024 of the Pan-Euro-Med Joint Committee on the transitional period, which was introduced in December 2024. Without its ratification, Ukrainian businesses face a loss of competitiveness in European and other markets covered by the Convention. The key challenges for Ukrainian companies are as follows:

(1) Certificates of origin EUR.1 and origin declarations issued before January 1, 2025, cannot be used if the goods arrived in Ukraine after this date. Moreover, all materials used for processing in Ukraine that were received before January 1, 2025, are now considered non-preferential under the updated Convention and cannot be used to confirm origin.

(2) The Free Trade Agreement with EFTA countries does not contain a dynamic reference to the updated Convention. As a result, the previous version of the origin rules still applies to trade with these partners. Due to the application of different sets of rules between Ukraine, the EU, Moldova, North Macedonia, and EFTA countries, diagonal cumulation cannot be used until the FTA with EFTA is amended or a transitional period is introduced.

(3) Under the Ukraine-UK Free Trade Agreement, the previous version of the Convention remains in effect. This prevents the cumulation of materials originating from the EU due to different origin rules.

Given the critical importance of adopting the transitional provisions—which would enable Ukrainian businesses to benefit from diagonal cumulation with EFTA and the UK, facilitate the interaction between different rule sets, and prevent customs clearance issues—the European Business Association urges the urgent ratification of Decision No. 2/2024 of the Pan-Euro-Med Joint Committee.