Customs and origin

Rules of Origin

Rules of origin are the criteria used to determine the country where a product is originating from, meaning the country in which it is considered to have been produced or manufactured. They establish the nationality of a product, which matters because it determines whether trade preferences apply. Correct application of rules of origin ensures that goods receive the appropriate treatment, including preferential tariffs where a free trade agreement applies.

Preferential origin

The preferential rates are applicable only to goods meeting the rules of origin set out in a free trade agreement, i.e. they must demonstrate origin as required by these agreements.

Preferential origin allows products to benefit from reduced or zero customs duties under a free trade agreement. A product must meet the origin requirements set out in the relevant agreement and be supported by an accepted proof of origin, such as a certificate of origin or an origin declaration. These requirements determine whether the product qualifies as an “originating product”.

How a product obtains originating status

A product may obtain originating status in two main ways. It can be wholly obtained, meaning that the product must be entirely produced in one country such as agricultural goods, fish or mineral products. Alternatively, it can be sufficiently worked or processed, meaning that the manufacturing carried out meets the product-specific rules in the agreement.

List rules/ product-specific Rules

The list rules specify how much processing or refinement is needed in order for the finished product to obtain originating status.

These rules are structured according to the Harmonized System (HS) customs classification. There are list rules available for all goods. It is important to note that there are also list rules for goods that are not included in the product coverage of the free trade agreements. You may therefore not use the list rules to assess whether or not the item in question in included in the scope of goods.

Some rules recur in the lists:

• Change of tariff heading rule
  This list rule means that a finished product will obtain originating product status if the third-country materials used in the production of the finished product have a different position in the Customs Tariff form the finished product.
• Value rule
  The finished product will obtain originating status if it does not contain more third-country materials than the percentage specified in the list rule. The percentage is always calculated on the basis of the ex-works price of the finished product.
• Tolerance rule
  This allows you to use up to 10% third-country materials in production regardless of the list rule for the finished product.

For goods where the list rules require that all third-country materials used must undergo a change of tariff heading, the tolerance rule means that you can still use 10% third-country materials that do not change heading.

The tolerance rule cannot be applied to goods classified within Chapters 50 to 63 of the Customs Tariff (textile goods).

Minimal operations

If your item is processed in a particular country, but the processing is not extensive enough for it to obtain originating status in that country, we refer to the processing by the term "minimal operations". An item can change heading and thereby comply with a list rule. This will result in it becoming an originating product. This only applies if the processing that has led to a change of heading is more than a minimal operation.

Cumulation

Cumulation allows the “free use of originating materials” from partner countries within a cumulation scheme. This means that originating materials from another country in the scheme can be used in production without needing to meet the product specific list rules for the final product. To apply cumulation, relevant partners must have a free trade agreement with each other and identical rules of origin in their agreements. Cumulation also allows originating products from one country in such scheme to be re-exported to another without losing their originating status.

There are several types of cumulation: (i) bilateral cumulation between two parties to a single FTA, (ii) diagonal cumulation among three or more partners applying identical rules of origin, (iii) extended cumulation among partners with different rules of origin where this is expressly allowed, and (iv) full cumulation, where all stages of processing in the free trade area can be taken into account. Cumulation provides greater flexibility for companies and is an integral feature of systems such as the pan-Euro-Mediterranean (PEM) cumulation zone.

The pan-Euro-Mediterranean preferential rules of origin (PEM Convention)

The Regional Convention on pan-Euro-Mediterranean Preferential Rules of Origin (PEM Convention) establishes common rules of origin and provisions on cumulation among its Contracting Parties. 

The revised PEM Convention and its incorporation in EFTA’s free trade agreements

The revised PEM Convention was adopted by the PEM Joint Committee on 7 December 2023 and entered into force on 1 January 2025 and automatically applied to all FTAs containing a dynamic reference to it. The revised rules modernise and simplify the origin framework, including more flexible product-specific rules and clearer cumulation provisions. 

Further guidance on the revised PEM rules of origin have been made available here: GUIDANCE ON THE REVISED PEM RULES OF ORIGIN.

The old rules of origin could be applied alternatively during a transitional period from 1 January 2025 to 31 December 2025. However, as of 1 January 2026, only the revised PEM rules of origin apply in those FTAs that contains a dynamic reference to the PEM Convention. For EFTA, this applies to the following FTAs (more details in table below):

• EFTA Convention
• EFTA – Albania
• EFTA – Bosnia and Herzegovina
• EFTA – Georgia
• EFTA – Jordan
• EFTA – Kosovo
• EFTA – Moldova
• EFTA – Montenegro
• EFTA – North Macedonia
• EFTA – Serbia
• EFTA – Tunisia
• EFTA – Türkiye
 

For FTAs that do not contain a dynamic reference, the rules of origin set out in the relevant origin protocols, based on the original PEM Convention, continue to apply. For EFTA, this applies to the following FTAs:

• EFTA – Egypt
• EFTA – Israel
• EFTA – Lebanon
• EFTA – Morocco
• EFTA – Palestine
• EFTA – Ukraine

Concerning the application of the PEM Convention or the protocols on rules of origin providing for diagonal cumulation between the Contracting Parties, the cumulation possibilities in the PEM area are reflected in the PEM Matrix.

Cumulation zones from 1 January 2026

From 1 January 2026, two distinct cumulation zones exist within the PEM area:

• one based on the rules of origin of the original PEM Convention, and
• one based on the rules of origin of the revised PEM Convention.

Diagonal cumulation is only possible within the same cumulation zone. Cumulation between the two zones is no longer possible.

EFTA’s ongoing work

EFTA is actively working with its partners to establish dynamic references to the revised PEM Convention with all remaining PEM partners. This work aims to ensure legal certainty for economic operators, preserve diagonal cumulation within the PEM zone, and facilitate continued preferential trade under EFTA FTAs.

Harmonized System Update 2022

Changes in product classification under the Harmonized System (HS) do not affect the list rules or product specific rules (PSRs). However, the PSRs must be technically redrafted to ensure that, under the 2022 version of the HS, all products continue to be subject to the same PSRs as before. Annex II to Appendix I of the revised PEM Convention is based on the 2012 version of the HS.

A “Technical transposition to HS2022 of the headings in Annex II to Appendix I to the revised PEM Convention” is available to support customs administrations and operators in the understanding of the changes to the product specific rules due to the HS update of 2022.

More information on the PEM Convention

For more detailed information related to the PEM Convention, please visit the following official websites:

Norwegian Customs: The Regional Convention on Pan Euro-Mediterranean preferential rules of Origin - Tolletaten

Swiss Customs: https://www.bazg.admin.ch/bazg/en/home/topics/ursprungsregeln-revidiertes-pem-uebereinkommen.html

EU Commission (PEM Secretariat): The Pan-Euro-Mediterranean cumulation and the PEM Convention - Taxation and Customs Union

Status on the incorporation of a dynamic reference in EFTA FTAs

The table below lays out a detailed status of the processes to incorporate a dynamic reference with EFTA’s PEM partners. Trade in industrial products including fish and processed agricultural products is covered by the main agreements, which applies to all EFTA States while trade in basic agricultural products is covered by bilateral agricultural agreements between each EFTA State and the partner country. 

EIF = entry into force

PEM Manual 

Making Rules of Origin Work for Lebanese Businesses

The Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin (PEM Convention): What It Is and How It Works for Products of Lebanese Priority Sectors

A Real-Life Manual

Hannes Schloemann, WTI Advisors

This manual has been commissioned and funded by the EFTA States as part of EFTA technical assistance to the Republic of Lebanon. It is one of the results of a project which also included a series of sectoral workshops, other events and some advisory contributions.

This manual remains the product of advisors and none of its content can be directly or indirectly attributed to EFTA, the EFTA States or the Republic of Lebanon or their institutions. While the manual is meant to help producers, exporters and importers, they can and should seek additional advice from the relevant customs authorities whenever any doubts remain. It is the customs authorities that will be able to make decisions in individual cases.

In English HERE / In Arabic HERE. 

Value limits for origin purposes

The following value limits expressed in the national currencies of the EFTA States are applicable from 1 January 2026 to 31 December 2026:

Links to EFTA States' websites for customs