The Pan-Euro-Mediterranean (PEM) Convention is a discreet yet essential pillar of preferential trade across an area encompassing the European Union, EFTA, the Balkans, North Africa and parts of the Middle East. Its objective is straightforward: to allow companies to structure regional supply chains around a common set of rules of origin and an extended system of cumulation.
Legally, this architecture is based on a two-tier normative framework:
(i) the PEM Convention itself; and
(ii) the rules-of-origin protocols incorporated into each bilateral agreement binding the contracting parties.
This explains why the availability of cumulation depends on the formal alignment of all these instruments.
This dependence is structural. The revised Convention does not automatically replace the existing protocols: ratification alone is not sufficient. Effective application requires an explicit update of each bilateral agreement. In the absence of such updates, access to cumulation mechanisms and the application of the revised rules remain legally excluded, regardless of the intentions or practices of economic operators.
This integration logic came to an end on 31 December 2025, marking a profound shift in the functioning of the PEM rules. Decision No. 2/2024 of the PEM Joint Committee, adopted in December 2024, definitively ends the period of coexistence between the “historical” rules of origin and the revised PEM rules. During that period, exceptional “permeability” between the old and new regimes was allowed in order to temporarily preserve diagonal cumulation and the continuity of trade flows.
That permeability was, however, strictly transitional and derogatory in nature. It was designed solely to facilitate the transition to the new regime, without anticipating or substituting for the effective legal alignment of the contracting parties.
The revised PEM rules aim to increase flexibility in the origin regime, notably by easing product-specific rules, extending tolerance thresholds and facilitating self-certification. They entered into force on 1 January 2025 only for parties that have both ratified the revised Convention and updated their bilateral agreements by incorporating a dynamic reference to the revised rules. These two conditions are cumulative.
The European Commission has confirmed that, as from 1 January 2026, these transitional provisions will cease to have any effect. This will mechanically result in the interruption of diagonal cumulation for trade flows involving partners subject to different legal frameworks. The Commission has also confirmed that there will be extension of the transitional period. At the same time, not all partners have ratified the revised Convention or adapted their free trade agreements accordingly.
As of 1 January 2026, Egypt, Tunisia, Morocco, Algeria, Türkiye, Palestine and Lebanon do not fall under a uniform legal framework in their trade with the European Union. Some apply the revised rules (in certain cases on a transitional basis), while others remain subject to the old rules due to the absence of full ratification or adaptation of their bilateral agreements.
1. A fragmented PEM area
As from 1 January 2026, the PEM framework will no longer operate as a coherent whole. Instead, it will be structured around two distinct regimes:
(i) partners applying the revised PEM rules; and
(ii) partners remaining subject to the 2012 rules or former bilateral protocols
In practice, this duality translates into three legal bases identified in the “PEM matrix” published by the European Commission: “R” for the revised rules; “C” for the old rules; “R/T” for the transitional rules applicable exclusively to relations between the EU, Morocco, Tunisia, Egypt and Palestine.
This coding has become a central compliance tool. It determines not only whether cumulation is possible, but also which proofs of origin are admissible and which mandatory statements must appear on certificates or declarations.
The benefits of the revised PEM rules will apply only to trade flows between partners that are fully aligned with the revised regime. Trade involving countries that remain under the former framework will continue to be subject to stricter—and generally less favourable—rules of origin.
The immediate consequence is that advantages arising from the revised rules cannot be extended to trade flows involving a partner that remains subject to the old regime, even where the manufacturing process is identical.
The PEM Convention thus enters a “two-speed” system, significantly increasing compliance requirements in relation to preferential origin.
This is far from a theoretical issue. The change directly undermines long-established industrial equilibria, particularly those based on diagonal cumulation, under which a product may acquire origin in the country where it is worked or processed, even if it incorporates raw materials originating in other PEM countries.
2. Cumulation as the main breaking point
Diagonal cumulation is possible only where all countries concerned apply exactly the same legal framework for origin. In the absence of full alignment, cumulation mechanisms automatically fall away, including in configurations that have historically been well established.
A recent notice from the French Directorate General of Customs and Indirect Taxes (DGDDI) expressly states that diagonal cumulation may be applied only where the relevant cell in the PEM matrix is marked with the same letter for all countries involved—a condition that becomes decisive from 2026 onwards.
This requirement applies irrespective of any economic or industrial continuity of the trade flows. The criterion is exclusively legal and formal.
As from 1 January 2026, the end of the transitional provisions will result in diagonal cumulation operating on a variable-geometry basis within the PEM area, with three possible scenarios:
- diagonal cumulation is maintained under the revised PEM rules between parties that have ratified the Convention and updated their bilateral protocols (“R parties”);
- diagonal cumulation continues under the old rules between parties that have not ratified the revised Convention or have not adapted their bilateral protocols (“C parties”);
- diagonal cumulation is interrupted for trade involving parties subject to different legal frameworks, in particular between “R” parties and “C” parties.
3. Concrete consequences for operators
For companies, this evolution leads to a significant increase in complexity. One product, manufactured according to a single process, may need to be assessed under several origin regimes depending on its commercial destination. Also, supplier declarations must specify the applicable legal framework, a distinction that is still insufficiently understood in practice. IT systems used to manage origin will need to be adapted to the parallel application of multiple sets of rules.
As a result, he risk of non-compliance and challenges to preferential tariff treatment will increase substantially.
As from 1 January 2026, proofs of origin must be issued with heightened vigilance. Depending on the partner concerned, operators will either include no specific indication (trade between R parties), or expressly indicate “REVISED RULES” or “TRANSITIONAL RULES” on the EUR.1 certificate or the declaration of origin (trade between the EU and Tunisia, Egypt, Palestine or Morocco).
Any incorrect or missing indication may result in the refusal of preferential tariff treatment at customs clearance.
The revised PEM Convention also provides for the progressive abandonment of EUR-MED certificates in favour of a system based on the EUR.1 certificate and the declaration of origin, together with a significant extension of the validity period of proofs (10 months instead of 4), subject to the applicable regime.
On a transitional basis, certain proofs of origin issued under the old rules may continue to be accepted after the entry into force of the modernised rules, within the limits of their validity period and for a maximum duration of three years.
In practical terms, proofs issued in 2025 under the old rules may still be accepted in 2026, provided that they remain valid and that the relevant bilateral relationship is authorised under the PEM matrix. This requires operators to rigorously verify both the date of issue and the legal framework applicable to each transaction.
Furthermore, goods placed under transit or a customs warehousing procedure before 1 January 2026 may retain the benefit of preferential treatment when released after that date, provided they are accompanied by a proof of origin duly issued in accordance with the rules applicable at the time of dispatch and still within its validity period (four months). This only partially mitigates the disruptive effects for flows already in progress.
Companies concerned therefore have a strong interest in taking anticipatory action without delay: mapping of supply chains, identifying the applicable regime by country, adapting internal processes and long-term declaration campaigns, and raising awareness among partners. These steps are essential to avoid supply chain disruptions and preventable customs disputes.