This Decision is addressed to the Commission.

The position to be taken on the Union’s behalf in the Stabilisation and Association Council shall be based on the draft act of the Stabilisation and Association Council attached to this Decision.

(8)In the cumulation zone constituted by the EFTA States, the Faroe Islands, the European Union, Turkey, the participants in the Stabilisation and Association Process, the Republic of Moldova, Georgia and Ukraine, the possibility of using EUR.1 movement certificates or origin declaration instead of movement certificates EUR-MED or origin declaration EUR-MED, as a derogation from the provisions of the Convention in case of diagonal cumulation among these partners, should be maintained,

(7)The discussions on amending the Convention have resulted in a new set of modernised and more flexible rules of origin to be incorporated into the Convention. The Union and Montenegro have signalled their will to apply the new rules as soon as possible bilaterally, on an alternative basis alongside the current rules while awaiting the final outcome of the amending process.

(6)Article 6 of the Convention provides that each Contracting Party is to take appropriate measures to ensure that the Convention is effectively applied. To that effect, the Stabilisation and Association Council should adopt a decision introducing in Protocol 3 to the Agreement a reference to the Convention.

(5)The Regional Convention on pan-Euro-Mediterranean preferential rules of origin (‘the Convention’) was concluded by the Union by Council Decision 2013/93/EU and entered into force in relation to the Union on 1 May 2012. It lays down provisions on the origin of goods traded under relevant agreements concluded between the Contracting Parties, which apply without prejudice to the principles laid down in those agreements.

(4)It is appropriate to establish the position to be taken on the Union’s behalf in the Stabilisation and Association Council as the Stabilisation and Association Council Decision will be binding on the Union.

(3)The Stabilisation and Association Council is to adopt a Decision on an amendment of Protocol 3 during its next meeting.

(2)The Agreement includes Protocol 3 concerning the definition of the concept of ‘originating products’ and methods of administrative cooperation. Pursuant to Article 3 of that Protocol, the Stabilisation and Association Council established by Article 119 of the Agreement (“Stabilisation and Association Council”) may decide to amend its provisions.

(1)The Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part (‘the Agreement’) was concluded by the Union by Council and Commission Decision 2010/224/EU, Euratom and entered into force on 1 May 2010.

Having regard to the proposal from the European Commission,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 207(4), in conjunction with Article 218(9) thereof,

on the position to be taken on behalf of the European Union within the Stabilisation and Association Council established by the Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part, as regards the amendment of Protocol 3 to that Agreement concerning the definition of the concept of 'originating products' and methods of administrative cooperation

As the act of the Stabilisation and Association Council will amend the Stabilisation and Association Agreement, it is appropriate to publish it in the Official Journal of the European Union after its adoption.

The amendments to the list rules in the sector of agricultural and processed agricultural goods mainly consist of adapted methodology without affecting the substance of the rules. The existing thresholds expressed currently in value will be expressed in weight. This criterion is more objective and more easy to be controlled by customs authorities. The simplification of the product-specific rules for industrial products should have a limited impact on custom duty revenues, as in many instances they may result more in sourcing changes than in increases of preferential imports from PEM countries replacing imports that were previously subject to import duties. The impact on import duty revenue of those changes is therefore not quantifiable.In terms of trade and its impact on the use of preferences, the relaxations provided in the new rules put emphasis on economic integration in the entire zone, for example in the textile sector where the use of preferences is already very high. The improved rules on textiles and cumulation are mainly intended to enhance already existing regional integration and availability of materials within the zone, rather than to allow more non-originating materials to be imported from outside the zone.

Although the provisions on duty drawback are amended, the prohibition of duty drawback is maintained in the sector of textiles and clothing, which remains one of the main sectors of trade in the PEM zone. The amended rules codify the status quo by maintaining the prohibition currently applied with some Contracting Parties. The proposed generalisation of full cumulation in the PEM zone aims at strengthening the existing trade patterns within the zone and their complementarity, but should not affect in a meaningful way the EU customs duties collected since products subject to cumulation will have to comply with their own requirement of value added in the zone in order to benefit from preferences, as it is currently the case.

These amendments to the PEM Convention have no measurable impact on the EU budget since their scope mainly concerns trade facilitation and consolidation of modern practices by customs authorities. They provide for optional facilitation in the areas which remain under competence of the authorities without impacting the substance of the rules (accounting segregation, proofs of origin, averaging). Some aspects of simplification (such as reduction of the vessels criteria) provide for greater predictability by removing conditions which are currently difficult to control by customs authorities whereas others (non-alteration) refer to logistics without affecting the substance of the rules.

Validity of a proof of origin: provides for more leniencies for the movement of originating products, by increasing the validity from 4 to 10 months).

Proof of origin: it is subject to simplification since only one type certificate of origin will be used – EUR1,

Sufficient working or processing – Average basis: by calculating the ex-works price and the value of non-originating materials on an average basis taking into account the fluctuations of the market, provides exporters with more predictability,

The proposed amendments relating to the introduction of the alternative set of rules of origin are based on a principle of modernization of the rules of origin to align them to the new trends set by the recent Free Trade Agreements. The amended rules in the PEM Convention contain mostly elements of simplification of customs procedures and elements of modernisation, such as:

The legal basis of the proposed decision should be the first subparagraph of Article 207(4), in conjunction with Article 218(9) TFEU.

Therefore, the substantive legal basis of the proposed decision is the first subparagraph of Article 207(4) TFEU.

The main objective and content of the envisaged act relate to the common commercial policy.

The substantive legal basis for a decision under Article 218(9) TFEU depends primarily on the objective and content of the envisaged act in respect of which a position is taken on the Union’s behalf.

Therefore, the procedural legal basis for the proposed decision is Article 218(9) TFEU.

The envisaged act does not supplement or amend the institutional framework of the Agreement.

The act which the Stabilisation and Association Council is called upon to adopt constitutes an act having legal effects. The envisaged act will be binding under international law in accordance with Article 121, of the Stabilisation and Association Agreement.

The Stabilisation and Association Council is a body set up by an agreement, namely the Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part.

The concept of ‘acts having legal effects’ includes acts that have legal effects by virtue of the rules of international law governing the body in question. It also includes instruments that do not have a binding effect under international law, but that are ‘capable of decisively influencing the content of the legislation adopted by the EU legislature’.

Article 218(9) of the Treaty on the Functioning of the European Union (TFEU) provides for decisions establishing ‘the positions to be adopted on the Union’s behalf in a body set up by an agreement, when that body is called upon to adopt acts having legal effects, with the exception of acts supplementing or amending the institutional framework of the agreement.’

In relation to textiles and garments, new options have been introduced regarding outward processing and tolerances. New origin conferring processes have also been introduced for these products, especially for fabric which would become more easily available. Finally, full bilateral cumulation will apply also to these products. Such cumulation will allow processing carried out on textile materials (i.e. weaving, spinning etc.) to be taken into account in the production process in the cumulation zone.

All these changes result in updated and modernised list rules which in general make it easier to meet the criterion for obtaining the originating status of a product. In addition, the above-mentioned possibility of using an average basis over a period of time to calculate the ex-works price and the value of non-originating will provide for further simplification for exporters.

- the inclusion in the current Chapter rule of an alternative rule thereby offering to the exporter more choice in meeting the origin criterion (Chapters 27, 40, 42, 44, 70 and 83, 84 and 85).

- a large number of specific rules that are derogating from the Chapter rule have been deleted (HS Chapters 28, 35, 37, 38 and 83). This more horizontal approach implies a simpler panorama for operators and customs;

- regarding a number of products the current Chapter rule contains a double cumulative condition. This is brought to a single condition (HS Chapters 74, 75, 76, 78 and 79);

The proposed compromise contains considerable changes compared to the current rules:

Other agricultural products (i.e. vegetable oils, nuts, tobacco) contain more flexible rules adapted to the economic reality notably for HS chapters 14, 15, 20 (including heading 2008), 23, 24. The alternative set of rules strike the balance between regional and global sourcing like for chapters 9 and 12. Rules have also been simplified (reduction of exceptions) in chapters 4, 5, 6, 8, 11, ex-13.

The alternative set of rules raised the threshold of weight (from 20% to 40%) and the possibility for some headings to use an alternative choice value or weight. The HS chapters and headings concerned by the change are notably: ex-1302, 1704 (alternative rule weight or value), 18 (1806: alternative rule weight or value), 1901.

The limit of non-originating materials was expressed only in value. The new thresholds are expressed in weight in order to avoid price fluctuation and currency fluctuation (e.g. ex-chapters 19, 20, 2105, 2106) together with a deletion of certain limit for sugar (e.g. chapter 8 or HS 2202).

It is proposed to prolong the period of validity of a proof of origin from 4 to 10 months. It should again provide for more leniencies for the movement for originating products between the Parties.

In order to be able to distinguish products originating under the alternative set of rules from products originating under the Convention, origin certificates or invoice declarations based on the alternative set of rules will have to include a statement pointing to the rules applied.

Further, the amended rules foresee the option to agree on the use of proof of origin that is issued and/or submitted electronically.

The amended rules (art. 17) also include the option to agree on the application of a system of registered exporters (REX). These exporters registered in a common database will be responsible for making out themselves statements on origin without going through the approved exporter procedure. The statement on origin will have the same legal value as the origin declaration or the movement certificate EUR.1.

The text introduces a single type of proof of origin (EUR.1 or origin declaration), instead of the double approach EUR.1 and EUR.MED, which substantially simplifies the system. This should improve compliance by economic operators by avoiding mistakes due to complex rules as well as facilitate the management by the customs authorities. Moreover, it should not affect the capacity of verification of proofs of origin, which remains the same.

Under the current rules (art. 15) the general principle of the prohibition of drawback applies to materials used in the manufacture of any product. Under the proposed rules (art. 16) the prohibition is eliminated for all products, with the exception of materials used in the manufacture of products falling within the scope of HS Chapters 50 to 63. Nevertheless, the text also provides for some exceptions to the prohibition of duty drawback to these products.

(h)Prohibition of drawback of, or exemption from, customs duties

The proposed non-alteration rule (art. 14) provides for more leniencies for the movement for originating products between Contracting Parties. It should avoid situations whereby products, for which there is no doubt about their originating status, are excluded from the benefit of the preferential rate at importation because the formal requirements of the direct transport provision are not met.

The current rules (art. 12) allow for certain working or processing to be done outside the territory under certain conditions, with the exception of products of HS Chapters 50 to 63, such as textiles. The proposed rules (art. 12) no longer contain the exclusion for textiles.

In the case of sugar, being a material or a final product, originating and non-originating stocks will no longer have to be kept physically separated.

An exporter will no longer have to justify when requesting an authorisation for accounting segregation that keeping separate stocks has a considerable cost or gives rise to material difficulties; it will be sufficient to indicate that fungible materials are used.

Under the current rules (art. 20 of ‘the Convention’), customs authorities may authorise accounting segregation where ‘considerable cost or material difficulties arise in keeping separate stocks’. The amended rule (art. 12) stipulates that customs authorities may authorise accounting segregation ‘if originating and non-originating fungible materials are used’.

Moreover, for products of HS Chapters 50-63, it provides for bilateral full cumulation. Finally, the Union and Montenegro will have the option to agree to extend the generalised full cumulation also to products of HS Chapters 50-63.

The proposed text (art. 7) maintains diagonal cumulation for all products under the condition that the same set of alternative rules of origin is accepted by the partners involved in the cumulation. In addition, it provides for a generalised full cumulation for all products except textiles and clothing listed in Chapters 50-63 of the Harmonised System (HS).

The tolerance in weight introduces a more objective criterion and a 15% threshold should provide a sufficient level of leniency. It ensures also that the international price fluctuation of the commodities does not have an impact on the origin of the agricultural products.

The proposed text (art. 5) provides for agricultural products a tolerance of 15% of the net weight of the product and for industrial products a tolerance of 15% in value of the ex-works price of the product.

The current tolerance (art. 6) is set at 10% in value of the ex-works price of the product.

The proposed alternative set of rules (art. 4) offers the exporter the flexibility to ask the customs authorities an authorisation to calculate the ex-works price and the value of non-originating materials on an average basis in order to take account of fluctuations in costs and currency rates. This should provide exporters with more predictability.

The so-called vessel conditions contained in the alternative set of rules are simpler and provide for more flexibility. Compared to the current text (art. 5) certain conditions have been deleted (i.e. specific crew requirements); others have been amended in order to provide for more relaxation (ownership).

The proposed amendments relating to the introduction of the alternative set of rules of origin provide for additional flexibilities and elements of modernisation, which have already been agreed by the Union in other bilateral agreements (Comprehensive Economic and Trade Agreement between the EU and Canada, EU-Vietnam Free Trade Agreement, EU-Japan Economic Partnership Agreement, EU-South African Development Community Economic Partnership Agreement) or preferential schemes (Generalised System of Preferences). The main ones are the following:

The proposed amendments insofar they relate to the current Convention are technical in nature and do not affect the substance of the protocol on rules of origin currently in effect. Therefore, they do not require an impact assessment.

The position to be taken by the EU within the Stabilisation and Association Council should be established by the Council.

These alternative rules of origin are intended for provisional application, on an optional and bilateral basis, by the EU and Montenegro pending the conclusion and entry into force of the amendment of the Convention. They are intended to apply alternatively to the rules of the Convention, as the latter are laid down without prejudice to the principles laid down in the relevant agreements and other related bilateral agreements among Contracting Parties. Accordingly, these rules will not be mandatory but of optional application by economic operators that wish to use preferences based on them, instead of Convention-based preferences. They are not intended to modify the Convention, which will remain in application among the Contracting Parties, and will not alter the rights and obligations of the Contracting Parties under the Convention.

Against this background, Montenegro has requested to start applying the amended set of rules as soon as possible, alternatively to the current rules of the Convention, while awaiting the outcome of the amendment process. Such request is explained below.

At the same time, the ongoing process of amending the Convention resulted in a new set of modernised and more flexible rules of origin. The formal amendment of the Convention requires a vote by unanimity by the Contracting Parties. The fact that there are still some Contracting Parties which have objections to the amendment risks delaying its adoption. Additionally, given the number of Contracting Parties and their respective internal procedures required to be in a position to vote on the formal adoption and to prepare the entry into force of the amended rules, no clear timeframe for the application of the amended Convention can be established.

Article 6 of the Convention provides that each Contracting Party shall take appropriate measures to ensure that the Convention is effectively applied. To that effect, the Stabilisation and Association Council established by the Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part, should adopt a Decision introducing the rules of the Convention under Protocol 3 concerning the definition of the concept of ‘originating products’ and methods of administrative cooperation. This is done by introducing in the amended Protocol a reference to the Convention that will render it applicable.

The EU and Montenegro deposited their instrument of acceptance with the depositary of the Convention on 26 March 2012 and 2 July 2012 respectively. As a consequence, in application of its Article 10(2), the Convention entered into force in relation to the EU and Montenegro on 1 May 2012 and on 1 September 2012 respectively.

The Regional Convention on pan-Euro-Mediterranean preferential rules of origin (‘the Convention’) lays down provisions on the origin of goods traded under relevant Agreements concluded between the Contracting Parties. The EU and Montenegro signed the Convention on 15 June 2011.

3.Position to be taken on the Union’s behalf

The envisaged act will become binding on the parties in accordance with Article 121 of the Stabilisation and Association Agreement.

The purpose of the envisaged act is the amendment of the provisions of Protocol 3 concerning the definition of the concept of ‘originating products’ and methods of administrative cooperation.

On its next meeting or by exchange of letters, the Stabilisation and Association Council is to adopt a Decision regarding the amendment of the provisions of Protocol 3 concerning the definition of the concept of ‘originating products’ and methods of administrative cooperation (‘the envisaged act’).

The Stabilisation and Association Council established according to the provisions of article 119 of the Agreement, may decide to amend the provisions of Protocol 3 concerning the definition of the concept of ‘originating products’ and methods of administrative cooperation (Article 3 of Protocol 3). The Stabilisation and Association Council draws up its decisions and recommendations by agreement between the two Parties.

The Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part (‘the Agreement’) aims to promote harmonious economic relations and gradually develop a free trade area between the parties. The Agreement entered into force on 1 May 2010.

2.1.The Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part

This proposal concerns the decision establishing the position to be taken on the Union's behalf in the Stabilisation and Association Council of the EU-Montenegro Stabilisation and Association Agreement in connection with the envisaged adoption of a Decision amending Protocol 3 of the EU-Montenegro Stabilisation and Association Agreement.

on the position to be taken on behalf of the European Union within the Stabilisation and Association Council established by the Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part, as regards the amendment of Protocol 3 to that Agreement concerning the definition of the concept of 'originating products' and methods of administrative cooperation

EUROPEAN COMMISSION Brussels, 24.8.2020 COM(2020) 413 final ANNEX to the Proposal for a Council Decision on the position to be taken on behalf of the European Union within the Stabilisation and Association Council established by the Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part, as regards the amendment of Protocol 3 to that Agreement concerning the definition of the concept of 'originating products' and methods of administrative cooperation



Draft



DECISION No … OF THE EU-MONTENEGRO STABILISATION AND ASSOCIATION COUNCIL on amending Protocol 3 to the Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part, concerning the definition of the concept of 'originating products' and methods of administrative cooperation The EU-MONTENEGRO Stabilisation and Association Council, Having regard to the Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part, and in particular Article 3 of its Protocol 3 concerning the definition of the concept of 'originating products' and methods of administrative cooperation, Whereas: (1)Article 44 of the Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part ('the Agreement'), refers to Protocol 3 to the Agreement ('Protocol 3') which lays down the rules of origin. (2)Article 3 of Protocol 3 provides that the Stabilisation and Association Council established by Article 119 of the Agreement may decide to amend the provisions of that protocol. (3)The Regional Convention on pan-Euro-Mediterranean preferential rules of origin ('the Convention') aims to transpose the existing bilateral systems of rules of origin into a multilateral framework, without prejudice to the principles laid down in the relevant agreements concluded among the Contracting Parties. (4)The European Union and Montenegro signed the Convention on 15 June 2011. (5)The European Union and Montenegro deposited their instruments of acceptance with the depositary of the Convention on 26 March 2012 and 2 July 2012, respectively. Consequently, in application of Article 10(3) of the Convention, the Convention entered into force in relation to the European Union and Montenegro on 1 May 2012 and on 1 September 2012, respectively. (6)The European Union and Montenegro agreed to introduce an amended set of rules which could be used bilaterally as alternative rules of origin to those laid down by the Convention, pending the finalisation and entry into force of the amendment of the Convention currently ongoing, on which the Transitional rules are based. (7)Protocol 3 should therefore be amended in order to make a dynamic reference to the Convention as it may be subsequently amended and to provide for an alternative set of rules. HAS ADOPTED THIS DECISION: Article 1 Protocol 3 to the Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Montenegro, of the other part, concerning the definition of the concept of 'originating products' and methods of administrative cooperation shall be replaced by the text set out in the Annex to this Decision. Article 2 This Decision shall enter into force on the date of its adoption.

It shall apply from … Done at For the Stabilisation and Association Council The President Annex “Protocol 3 concerning the definition of the concept of 'originating products' and methods of administrative cooperation Article 1 Applicable rules of origin 1. For the purpose of implementing this Agreement, Appendix I and the relevant provisions of Appendix II to the Regional Convention on pan-Euro-Mediterranean preferential rules of origin ('the Convention'), as it may be subsequently amended and published in the Official Journal of the European Union, shall apply. 2. All references to the 'relevant agreement' in Appendix I and in the relevant provisions of Appendix II to the Regional Convention on pan-Euro-Mediterranean preferential rules of origin shall be construed so as to mean this Agreement. 3. Notwithstanding Articles 16(5) and 21(3) of Appendix I of the Convention, where cumulation involves only EFTA States, the Faroe Islands, the European Union, Turkey, the participants in the Stabilisation and Association Process, the Republic of Moldova, Georgia and Ukraine, the proof of origin may be a movement certificate EUR.1 or an origin declaration. Article 2 Alternative applicable rules of origin 1. Notwithstanding Article 1, for the purpose of implementing this Agreement, products which acquire preferential origin in accordance with the provisions set out in Appendix A to this Protocol shall also be considered as originating in the European Union or in Montenegro. 2. The alternative rules shall apply until the amendment of the Convention on which the alternative rules are based, enters into force. Article 3 Dispute settlement 1. Where disputes arise in relation to the verification procedures of Article 32 of Appendix I to the Convention or of Article 34 of Appendix A to this Protocol that cannot be settled between the customs authorities requesting the verification and the customs authorities responsible for carrying out that verification, they shall be submitted to the Stabilisation and Association Council.

2. In all cases the settlement of disputes between the importer and the customs authorities of the importing country shall take place under the legislation of that country. Article 4 Amendments to the Protocol The Stabilisation and Association Council may decide to amend the provisions of this Protocol. Article 5 Withdrawal from the Convention 1. Should either the European Union or Montenegro give notice in writing to the depositary of the Convention of their intention to withdraw from the Convention according to Article 9 thereof, the European Union and Montenegro shall immediately enter into negotiations on rules of origin for the purpose of implementing this Agreement. 2. Until the entry into force of such newly negotiated rules of origin, the rules of origin contained in Appendix I and, where appropriate, the relevant provisions of Appendix II to the Convention, applicable at the moment of withdrawal, shall continue to apply to this Agreement. However, as of the moment of withdrawal, the rules of origin contained in Appendix I and, where appropriate, the relevant provisions of Appendix II to the Convention shall be construed so as to allow bilateral cumulation only between the European Union and Montenegro.



APPENDIX A ALTERNATIVE APPLICABLE RULES OF ORIGIN Rules for optional application among Contracting Parties of the Regional Convention on pan-Euro-Mediterranean preferential rules of origin, pending the conclusion and entry into force of the amendment of the Convention (thereafter called "the Rules"or “Transitional Rules”) definition of the concept of ‘originating products’ and methods of administrative cooperation

TABLE OF CONTENTS OBJECTIVES TITLE I GENERAL PROVISIONS Article 1 Definitions TITLE II DEFINITION OF THE CONCEPT OF ‘ORIGINATING PRODUCTS’ Article 2 General requirements Article 3 Wholly obtained products Article 4 Sufficient working or processing Article 5 Tolerance rule Article 6 Insufficient working or processing Article 7 Cumulation of origin Article 8 Conditions for the application of cumulation of origin Article 9 Unit of qualification Article 10 Sets Article 11 Neutral elements Article 12 Accounting segregation TITLE III TERRITORIAL REQUIREMENTS Article 13 Principle of territoriality

Article 14 Non-alteration Article 15 Exhibitions TITLE IV DRAWBACK OR EXEMPTION Article 16 Drawback of or exemption from customs duties TITLE V PROOF OF ORIGIN Article 17 General requirements Article 18 Conditions for making out an origin declaration Article 19 Approved exporter Article 20 Procedure for issue of a movement certificate EUR.1 Article 21 Movement certificates EUR.1 issued retrospectively Article 22 Issue of a duplicate movement certificate EUR.1 Article 23 Validity of proof of origin Article 24 Free zones Article 25 Importation requirements Article 26 Importation by instalments Article 27 Exemption from proof of origin Article 28 Discrepancies and formal errors Article 29 Supplier’s declarations Article 30 Amounts expressed in euro TITLE VI PRINCIPLES OF COOPERATION AND DOCUMENTARY EVIDENCE

Article 31 Documentary evidence, preservation of proofs of origin and supporting documents Article 32 Dispute settlement TITLE VII ADMINISTRATIVE COOPERATION Article 33 Notification and cooperation Article 34 Verification of proofs of origin Article 35 Verification of supplier’s declarations Article 36 Penalties TITLE VIII APPLICATION OF APPENDIX A Article 37 European Economic Area Article 38 Liechtenstein Article 39 Republic of San Marino Article 40 Principality of Andorra Article 41 Ceuta and Melilla

List of Annexes ANNEX I Introductory notes to the list in Annex II ANNEX II: List of working or processing required to be carried out on non-originating materials in order for the product manufactured to obtain originating status ANNEX III Text of the origin declaration ANNEX IV: Specimens of movement certificate EUR.1 and application for a movement certificate EUR.1 ANNEX V Special conditions concerning products originating in Ceuta and Melilla

ANNEX VI Supplier’s declaration ANNEX VII Long-term supplier’s declaration



OBJECTIVES These rules are intended for provisional application, on an optional and bilateral basis, by Contracting Parties of the Regional Convention on pan-Euro-Mediterranean preferential rules of origin (‘PEM Convention’ or ‘Convention’), pending the conclusion and entry into force of the amendment of the Convention. They will become applicable to trade between those Contracting Parties that decide so and refer to them or include them in their bilateral preferential trade agreements. They are intended to apply alternatively to the rules of the Convention, that in accordance with the Convention are without prejudice to the principles laid down in the relevant agreements and other related bilateral agreements among Contracting Parties. Accordingly, they will not be mandatory but of optional application by economic operators that desire to claim preferences based on them instead of on the basis of the rules of the Convention. They are not intended to modify the Convention, that will remain in full application among the Contracting Parties to the Convention, and will not alter the rights and obligations of the Contracting Parties under the Convention. TITLE I

GENERAL PROVISIONS Article 1

Definitions For the purposes of these Rules: (a)’applying Contracting Party’ means a Contracting Party to the PEM Convention that incorporates these Rules in its bilateral preferential trade agreements with another Contracting Party to the PEM Convention. ’Applying Contracting Party’, includes also the Parties to this Agreement. (b)‘chapters’, ‘headings’ and ‘subheadings’ mean the chapters, the headings and the subheadings (four- or six-digit codes) used in the nomenclature which makes up the Harmonized Commodity Description and Coding System (‘Harmonised System’) with the changes pursuant to the Recommendation of 26 June 2004 of the Customs Cooperation Council; (c)‘classified’ means the classification of a good under a particular heading or subheading of the Harmonised System; (d)’consignment’ means products which are either: - (i) sent simultaneously from one exporter to one consignee; or - (ii) covered by a single transport document covering their shipment from the exporter to the consignee or, in the absence of such a document, by a single invoice; (e)‘customs authorities of the Party or applying Contracting Party’ for the European Union means any of the customs authorities of the Member States of the European Union; (f)‘customs value’ means the value as determined in accordance with the Agreement on implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (WTO Agreement on Customs Valuation); (g)‘ex-works price’ means the price paid for the product ex works to the manufacturer in the Party in whose undertaking the last working or processing is carried out, provided that the price includes the value of all the materials used and all other costs related to its production, minus any internal taxes which are, or may be, repaid when the product obtained is exported. Where the last working or processing has been subcontracted to a manufacturer, the term 'manufacturer' refers to the enterprise that has employed the subcontractor.

Where the actual price paid does not reflect all costs related to the manufacturing of the product which are actually incurred in the Party, the ex-works price means the sum of all those costs, minus any internal taxes which are, or may be, repaid when the product obtained is exported; (h)‘fungible material’ or ‘fungible product’ means material or product that is of the same kind and commercial quality, with the same technical and physical characteristics, and which cannot be distinguished from one another; (i)‘goods’ means both material and product; (j)‘manufacture’ means any kind of working or processing, including assembly; (k)‘material’ means any ingredient, raw material, component or part, etc., used in the manufacture of the product; (l)'maximum content of non-originating materials’ means the maximum content of non‑originating materials which is permitted in order to consider a manufacture to be working or processing sufficient to confer originating status on the product. It may be expressed as a percentage of the ex-works price of the product or as a percentage of the net weight of these materials used falling under a specified group of chapters, chapter, heading or subheading; (m)‘product’ means the product being manufactured, even if it is intended for later use in another manufacturing operation; (n)‘territory’ includes the land territory, internal waters and the territorial sea of a Party; (o)‘value added’ shall be taken to be the ex-works price of the product minus the customs value of each of the materials incorporated which originate in the other applying Contracting Parties with which cumulation is applicable or, where the customs value is not known or cannot be ascertained, the first ascertainable price paid for the materials in the exporting Party; (p)‘value of materials’ means the customs value at the time of importation of the non-originating materials used, or, if this is not known and cannot be ascertained, the first ascertainable price paid for the materials in the exporting Party. Where the value of the originating materials used needs to be established, this point shall be applied mutatis mutandis. TITLE II

DEFINITION OF THE CONCEPT OF ‘ORIGINATING PRODUCTS’ Article 2

General requirements For the purpose of implementing this Agreement, the following products shall be considered as originating in a Party when exported to the other Party: (a)products wholly obtained in a Party, within the meaning of Article 3; (b)products obtained in a Party incorporating materials which have not been wholly obtained there, provided that such materials have undergone sufficient working or processing in that Party within the meaning of Article 4; Article 3 Wholly obtained products 1.The following shall be considered as wholly obtained in a Party when exported to the other Party: (a)mineral products and natural water extracted from its soil or from its seabed;

(b)plants, including aquatic plants, and vegetable products grown or harvested there; (c)live animals born and raised there; (d)products from live animals raised there; (e)products from slaughtered animals born and raised there; (f)products obtained by hunting or fishing conducted there; (g)products of aquaculture where the fish, crustaceans, molluscs and other aquatic invertebrates are born or raised there from eggs, larvae, fry or fingerlings; (h)products of sea fishing and other products taken from the sea outside any territorial sea by its vessels; (i)products made on board its factory ships exclusively from products referred to in point (h); (j)used articles collected there fit only for the recovery of raw materials; (k)waste and scrap resulting from manufacturing operations conducted there; (l)products extracted from the seabed or below the seabed which is situated outside its territorial sea but where it has exclusive exploitation rights; (m)goods produced there exclusively from the products specified in points (a) to (l). 2.The terms ‘its vessels’ and ‘its factory ships’ in points (h) and (i) of paragraph 1 respectively shall apply only to vessels and factory ships which meet each of the following requirements: (a)they are registered in the exporting or the importing Party; (b)they sail under the flag of the exporting or the importing Party; (c)they meet one of the following conditions: (i)they are at least 50 % owned by nationals of the exporting or the importing Party; or (ii)they are owned by companies which: –have their head office and their main place of business in the exporting or the importing Party; and –are at least 50 % owned by the exporting or the importing Party or public entities or nationals of these Parties.

3.For the purpose of paragraph 2, when the exporting or the importing Party is the European Union, it means the Member States of the European Union. 4.For the purpose of paragraph 2, the EFTA States are to be considered as one applying Contracting Party. Article 4

Sufficient working or processing 1.Without prejudice to paragraph 3 of this Article and to Article 6, products which are not wholly obtained in a Party shall be considered to be sufficiently worked or processed when the conditions laid down in the list in Annex II for the goods concerned are fulfilled. 2.If a product which has obtained originating status in a Party in accordance with paragraph 1 of this Article is used as a material in the manufacture of another product, no account shall be taken of the non-originating materials which may have been used in its manufacture. 3.The determination of whether the requirements of paragraph 1 of this Article are met, shall be carried out for each product. ‑‑However, where the relevant rule is based on compliance with a maximum content of nonoriginating materials, the customs authorities of the Parties may authorise exporters to calculate the ex-works price of the product and the value of the nonoriginating materials on an average basis as set out in paragraph 4 of this Article, in order to take into account the fluctuations in costs and currency rates. 4.Where the second subparagraph of paragraph 3 of this Article applies, an average ex‑works price of the product and average value of non-originating materials used shall be calculated respectively on the basis of the sum of the ex-works prices charged for all sales of the same products carried out during the preceding fiscal year and the sum of the value of all the non-originating materials used in the manufacture of the same products over the preceding fiscal year as defined in the exporting Party, or, where figures for a complete fiscal year are not available, a shorter period which should not be less than three months. 5.Exporters having opted for calculation on an average basis shall consistently apply such a method during the year following the fiscal year of reference, or, where appropriate, during the year following the shorter period used as a reference. They may cease to apply such a method where during a given fiscal year, or a shorter representative period of no less than three months, they record that the fluctuations in costs or currency rates which justified the use of such a method have ceased. 6.The averages referred to in paragraph 4 of this Article shall be used as the ex-works price and the value of non-originating materials, respectively, for the purpose of establishing compliance with the maximum content of non-originating materials. Article 5

Tolerance rule 1.By way of derogation from Article 4 and subject to paragraphs 2 and 3 of this Article, non‑originating materials which, according to the conditions set out in the list in Annex II, are not to be used in the manufacture of a given product may nevertheless be used, provided that their total net weight or value assessed for the product does not exceed: (a)15 % of the net weight of the product falling within Chapters 2 and 4 to 24, other than processed fishery products of Chapter 16; (b)15 % of the ex-works price of the product for products other than those covered by point (a). This paragraph shall not apply to products falling within Chapters 50 to 63 of the Harmonised System, for which the tolerances mentioned in Notes 6 and 7 of Annex I shall apply. 2.Paragraph 1 of this Article shall not allow to exceed any of the percentages for the maximum content of non-originating materials as specified in the rules laid down in the list in Annex II. 3.Paragraphs 1 and 2 of this Article shall not apply to products wholly obtained in a Party within the meaning of Article 3. However, without prejudice to Article 6 and Article 9(1), the tolerance provided for in those provisions shall nevertheless apply to product for which the rule laid down in the list in Annex II requires that the materials which are used in the manufacture of that product are wholly obtained. Article 6

Insufficient working or processing 1.Without prejudice to paragraph 2 of this Article, the following operations shall be considered to be insufficient working or processing to confer the status of an originating product, whether or not the requirements of Article 4 are satisfied: (a)preserving operations to ensure that the products remain in good condition during transport and storage;

(b)breaking-up and assembly of packages; (c)washing, cleaning; removal of dust, oxide, oil, paint or other coverings; (d)ironing or pressing of textiles; (e)simple painting and polishing operations; (f)husking and partial or total milling of rice; polishing, and glazing of cereals and rice; (g)operations to colour or flavour sugar or form sugar lumps; partial or total milling of crystal sugar; (h)peeling, stoning and shelling, of fruits, nuts and vegetables; (i)sharpening, simple grinding or simple cutting; (j)sifting, screening, sorting, classifying, grading, matching; (including the making-up of sets of articles); (k)simple placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards or boards and all other simple packaging operations; (l)affixing or printing marks, labels, logos and other like distinguishing signs on products or their packaging; (m)simple mixing of products, whether or not of different kinds; (n)mixing of sugar with any material; (o)simple addition of water or dilution or dehydratation or denaturation of products; (p)simple assembly of parts of articles to constitute a complete article or disassembly of products into parts; (q)slaughter of animals. (r)a combination of two or more operations specified in points (a) to (q). 2.All the operations carried out in the exporting Party on a given product shall be taken into account when determining whether the working or processing undergone by that product is to be regarded as insufficient within the meaning of paragraph 1 of this Article. Article 7

Cumulation of origin 1.Without prejudice to Article 2, products shall be considered as originating in the exporting Party when exported to the other Party if they are obtained there, incorporating materials originating in any applying Contracting Party other than the exporting Party provided that the working or processing carried out in the exporting Party goes beyond the operations referred to in Article 6. It shall not be necessary for such materials to have undergone sufficient working or processing.

2.Where the working or processing carried out in the exporting Party does not go beyond the operations referred to in Article 6, the product obtained by incorporating materials originating in any other applying Contracting Party, shall be considered as originating in the exporting Party only where the value added there is greater than the value of the materials used originating in any of the other applying Contracting Parties. If this is not so, the product obtained shall be considered as originating in the applying Contracting Party which accounts for the highest value of originating materials used in the manufacture in the exporting Party. 3.Without prejudice to Article 2, and with the exclusion of products falling within Chapters 50 to 63, working or processing carried out in an applying Contracting Party other than the exporting Party shall be considered as having been carried out in the exporting Party when the products obtained undergo subsequent working or processing in this exporting Party. 4.Without prejudice to Article 2, for products falling within Chapters 50 to 63 and only for the purpose of bilateral trade between the Parties, working or processing carried out in the importing Party shall be considered as having been carried out in the exporting Party when the products undergo subsequent working or processing in this exporting Party. For the purpose of this paragraph, the participants in the European Union’s Stabilisation and Association process and the Republic of Moldova are to be considered as one applying Contracting Party 5.The Parties may opt to extend the application of paragraph 3 of this Article on importation of products falling within Chapters 50 to 63 unilaterally. A Party that opts for such extension shall notify the other Party and inform the European Commission according to article 8(2). 6.For the purpose of cumulation within the meaning of paragraphs 3 to 5 of this Article, the originating products shall be considered as originating in the exporting Party only if the working or processing undergone there goes beyond the operations referred to in Article 6. 7.Products originating in the applying Contracting Parties referred to in paragraphs 1 and 4 of this Article which do not undergo any working or processing in the exporting Party shall retain their origin if exported into one of the other applying Contracting Parties. Article 8Conditions for the application of cumulation of origin 1.The cumulation provided for in Article 7 may be applied only provided that: (a)a preferential trade agreement in accordance with Article XXIV of the General Agreement on Tariffs and Trade 1994 (GATT) is applicable between the applying Contracting Parties involved in the acquisition of the originating status and the applying Contracting Party of destination; and (b)goods have obtained originating status by the application of rules of origin identical to those given in these Rules. 2.Notices indicating the fulfilment of the necessary requirements to apply cumulation shall be published in the Official Journal of the European Union (C series) and in an official publication in Montenegro, according to their own procedures. The cumulation provided for in Article 7 shall apply from the date indicated in those notices. The Parties shall provide the European Commission with details of the agreements with other applying Contracting Parties including the dates of entry into force of these Rules. 3. The proof of origin should include the statement in English ‘CUMULATION APPLIED WITH (name of the relevant applying Contracting Party/Parties in English)’ when products obtained the originating status by application of cumulation of origin in accordance with Article 7. In cases where a movement certificate EUR.1 is used as a proof of origin, that statement shall be made in Box 7 of the movement certificate EUR.1. 4. The Parties may decide, for the products exported to them that obtained the originating status in the exporting Party by application of cumulation of origin in accordance with Article 7, to waive the obligation of including on the proof of origin the statement referred to in paragraph 3 of this Article. The Parties shall provide the European Commission with a notification of this waiver according to Article 8(2). Article 9

Unit of qualification 1.The unit of qualification for the application of the provisions of these Rules shall be the particular product which is considered to be the basic unit when determining classification using the nomenclature of the Harmonised System.

It follows that: (a) when a product composed of a group or assembly of articles is classified under the terms of the Harmonised System in a single heading, the whole constitutes the unit of qualification; (b) when a consignment consists of a number of identical products classified under the same heading of the Harmonised System, each individual item shall be taken into account when applying the provisions of these Rules. 2.Where under General Rule 5 of the Harmonised System packaging is included with the product for classification purposes, it shall be included for the purposes of determining origin. 3.Accessories, spare parts and tools dispatched with a piece of equipment, machine, apparatus or vehicle which are part of the normal equipment and included in the ex‑works price thereof shall be regarded as one with the piece of equipment, machine, apparatus or vehicle in question. Article 10

Sets Sets, as defined in General Rule 3 of the Harmonised System, shall be regarded as originating when all the component products are originating. When a set is composed of originating and non-originating products, the set as a whole shall however be regarded as originating, provided that the value of the non-originating products does not exceed 15 % of the ex-works price of the set. Article 11

Neutral elements In order to determine whether a product is an originating product, no account shall be taken of the origin of the following which might be used in its manufacture: (a)energy and fuel; (b)plant and equipment; (c)machines and tools; (d)any other goods which do not enter, and which are not intended to enter, into the final composition of the product. Article 12

Accounting segregation 1.If originating and non-originating fungible materials are used in the working or processing of a product, economic operators may ensure the management of materials using the accounting segregation method, without keeping the materials on separate stocks. 2.Economic operators may ensure the management of originating and non-originating fungible products of heading 1701 using the accounting segregation method, without keeping the products on separate stocks. 3. The Parties may require that the application of accounting segregation is subject to prior authorisation by the Customs authorities. The Customs authorities may grant the authorisation subject to any conditions they deem appropriate and shall monitor the use made of the authorisation. The Customs authorities may withdraw the authorisation whenever the beneficiary makes improper use of the authorisation in any manner whatsoever or fails to fulfil any of the other conditions laid down in these Rules. Through the use of accounting segregation it must be ensured that, at any time, no more products can be considered as ‘originating in the exporting Party’ than would have been the case if a method of physical segregation of the stocks had been used. The method shall be applied and the application thereof shall be recorded on the basis of the general accounting principles applicable in the exporting Party. 4.The beneficiary of the method referred to in paragraphs 1 and 2 of this Article shall make out or apply for proofs of origin for the quantity of products which may be considered as originating in the exporting Party. At the request of the customs authorities, the beneficiary shall provide a statement of how the quantities have been managed.

TITLE IIITERRITORIAL REQUIREMENTS Article 13

Principle of territoriality 1.The conditions set out in Title II shall be fulfilled without any interruption in the Party concerned. 2.If originating products exported from a Party to another country are returned, they shall be considered to be non-originating, unless it can be demonstrated to the satisfaction of the customs authorities that: (a)the products returned are the same as those which were exported; and (b)they have not undergone any operations beyond that necessary to preserve them in good condition while in that country or while being exported. 3.The obtention of originating status in accordance with the conditions set out in Title II shall not be affected by working or processing done outside the exporting Party on materials exported from this Party and subsequently re-imported there, provided: (a)those materials are wholly obtained in the exporting Party or have undergone working or processing beyond the operations referred to in Article 6 prior to being exported; and (b)it can be demonstrated to the satisfaction of the customs authorities that: (i)the re-imported products have been obtained by working or processing the exported materials; and (ii)the total added value acquired outside the exporting Party by applying this Article does not exceed 10 % of the ex-works price of the end product for which originating status is claimed. 4.For the purposes of paragraph 3 of this Article, the conditions for obtaining originating status set out in Title II shall not apply to working or processing done outside the exporting Party. However, where, in the list in Annex II, a rule setting a maximum value for all the non-originating materials incorporated is applied in determining the originating status of the end product, the total value of the non-originating materials incorporated in the territory of the exporting Party, taken together with the total added value acquired outside this Party by applying this Article, shall not exceed the stated percentage. 5.For the purposes of applying paragraphs 3 and 4 of this Article, ‘total added value’ shall be taken to mean all costs arising outside the exporting Party, including the value of the materials incorporated there. 6.Paragraphs 3 and 4 of this Article shall not apply to products which do not fulfil the conditions set out in the list in Annex II or which can be considered sufficiently worked or processed only if the general tolerance fixed in Article 4 is applied. 7.Any working or processing of the kind covered by this Article and done outside the exporting Party shall be done under the outward processing arrangements, or similar arrangements. Article 14

Non-alteration 1.The preferential treatment provided for under this Agreement shall apply only to products satisfying the requirements of these Rules and declared for importation in a Party provided that those products are the same as those exported from the exporting Party. They shall not have been altered, transformed in any way or subjected to operations other than to preserve them in good condition or than adding or affixing marks, labels, seals or any documentation to ensure compliance with specific domestic requirements of the importing Party carried out under customs supervision in the third country(ies) of transit or splitting prior to being declared for home use. 2.Storage of products or consignments may take place provided they remain under customs supervision in the third country(ies) of transit. 3.Without prejudice to Title V of Appendix A, the splitting of consignments may take place, provided they remain under customs supervision in the third country(ies) of splitting. 4.In the case of doubt, the importing Party may request the importer or its representative to submit at any time all appropriate documents to provide evidence of compliance with this Article, which may be given by any documentary evidence, and notably by:

(a)contractual transport documents such as bills of lading; (b)factual or concrete evidence based on marking or numbering of packages; (c)a certificate of non-manipulation provided by the customs authorities of the country(ies) of transit or splitting or any other documents demonstrating that the goods remained under customs supervision in the country(ies) of transit or splitting; or (d)any evidence related to the goods themselves. Article 15

Exhibitions 1.Originating products, sent for exhibition in a country other than with which cumulation is applicable in accordance with Articles 7 and 8 and sold after the exhibition for importation in a Party, shall benefit on importation from the relevant Agreement provided it is shown to the satisfaction of the customs authorities that: (a)an exporter has consigned these products from a Party to the country in which the exhibition is held and has exhibited them there; (b)the products have been sold or otherwise disposed of by that exporter to a person in another Party; (c)the products have been consigned during the exhibition or immediately thereafter in the state in which they were sent for exhibition; and (d)the products have not, since they were consigned for exhibition, been used for any purpose other than demonstration at the exhibition. 2.A proof of origin shall be issued or made out in accordance with Title V of Appendix A and submitted to the customs authorities of the importing Party in the normal manner. The name and address of the exhibition shall be indicated thereon. Where necessary, additional documentary evidence of the conditions under which they have been exhibited may be required. 3.Paragraph 1 of this Article shall apply to any trade, industrial, agricultural or crafts exhibition, fair or similar public show or display which is not organised for private purposes in shops or business premises with a view to the sale of foreign products, and during which the products remain under customs control. TITLE IVDRAWBACK OR EXEMPTION Article 16

Drawback of or exemption from customs duties 1.Non-originating materials used in the manufacture of products falling within Chapters 50 to 63 of the Harmonised System originating in a Party for which a proof of origin is issued or made out in accordance with Title V of Appendix A shall not be subject in the exporting Party to drawback of or exemption from customs duties of whatever kind. 2.The prohibition in paragraph 1 of this Article shall apply to any arrangement for refund, remission or non-payment, partial or complete, of customs duties or charges having an equivalent effect, applicable in the exporting Party to materials used in the manufacture, where such refund, remission or non-payment applies, expressly or in effect, when products obtained from the said materials are exported and not when they are retained for home use there. 3.The exporter of products covered by a proof of origin shall be prepared to submit at any time, upon request from the customs authorities, all appropriate documents proving that no drawback has been obtained in respect of the non-originating materials used in the manufacture of the products concerned and that all customs duties or charges having equivalent effect applicable to such materials have actually been paid. 4.The prohibition in paragraph 1 of this Article shall not apply to trade between the Parties for products that obtained originating status by application of cumulation of origin covered by Article 7 (4) or (5).

TITLE VPROOF OF ORIGIN Article 17

General requirements 1.Products originating in one of the Parties shall, on importation into the other Party, benefit from the provisions of this Agreement upon submission of one of the following proofs of origin: (a)a movement certificate EUR.1, a specimen of which appears in Annex IV to Appendix A; (b)in the cases specified in Article 18(1), a declaration, subsequently referred to as the ‘origin declaration’ given by the exporter on an invoice, a delivery note or any other commercial document which describes the products concerned in sufficient detail to enable them to be identified; the text of the origin declaration appears in Annex III to this Appendix. 2.Notwithstanding paragraph 1 of this Article, originating products within the meaning of these Rules shall, in the cases specified in Article 27, benefit from the provisions of this Agreement without it being necessary to submit any of the proofs of origin referred to in paragraph 1 of this Article. 3.Without prejudice to paragraph 1 of this Article, the Parties may agree that, for the preferential trade between them, proofs of origin listed in points (a) and (b) of paragraph 1 of this Article are replaced by statements on origin made out by exporters registered in an electronic database in accordance with the internal legislation of the Parties. The use of a statement on origin made out by the exporters registered in an electronic database agreed by two or more applying Contracting Parties shall not impede the use of diagonal cumulation with other applying Contracting Parties 4.For the purposes of paragraph 1, the Parties may agree to establish a system that allows proofs of origin listed in points (a) and (b) of paragraph 1 of this Article to be issued electronically and/or submitted electronically. 5. For the purpose of application of Article 7, in the case of application of art 8(4), the exporter in an applying Contracting Party who issues or applies for a proof of origin on the basis of another proof of origin that has been waived from the obligation to include the statement of art 8(3) shall take all necessary steps to ensure that the conditions to apply cumulation are fulfilled and be prepared to submit to the customs authorities all relevant documents. Article 18

Conditions for making out an origin declaration 1.An origin declaration as referred to in point (b) of Article 17(1) may be made out: (a)by an approved exporter within the meaning of Article 19; or (b)by any exporter for any consignment consisting of one or more packages containing originating products the total value of which does not exceed EUR 6 000. 2.An origin declaration may be made out if the products can be considered as originating in an applying Contracting Party and fulfil the other requirements of these Rules. 3.The exporter making out an origin declaration shall be prepared to submit at any time, at the request of the customs authorities of the exporting Party, all appropriate documents proving the originating status of the products concerned as well as the fulfilment of the other requirements of these Rules. 4.An origin declaration shall be made out by the exporter by typing, stamping or printing on the invoice, the delivery note or another commercial document, the declaration, the text of which appears in Annex III to this Appendix, using one of the linguistic versions set out in that Annex and in accordance with the provisions of the national law of the exporting country. If the declaration is handwritten, it shall be written in ink in printed characters. 5.Origin declarations shall bear the original signature of the exporter in manuscript. However, an approved exporter within the meaning of Article 19 shall not be required to sign such declarations provided that he gives the customs authorities of the exporting Party a written undertaking that he accepts full responsibility for any origin declaration which identifies him as if it had been signed in manuscript by him. 6.An origin declaration may be made out by the exporter when the products to which it relates are exported, or after exportation (the ‘retrospective origin declaration’) on condition that it is presented in the importing country within two years after the importation of the products to which it relates. Where the splitting of a consignment takes place in accordance with Article 14(3) and provided that the same two-year deadline is respected, the retrospective origin declaration shall be made out by the approved exporter of the exporting Party of the products.

Article 19

Approved exporter 1.The customs authorities of the exporting Party may, subject to national requirements, authorise any exporter established in that Party (the ‘approved exporter’), to make out origin declarations irrespective of the value of the products concerned. 2.An exporter who requests such authorisation must offer, to the satisfaction of the customs authorities, all guarantees necessary to verify the originating status of the products as well as the fulfilment of the other requirements of these Rules. 3.The customs authorities shall grant to the approved exporter a customs authorisation number which shall appear on the origin declaration. 4.The customs authorities shall verify the proper use of an authorisation. They may withdraw the authorisation if the approved exporter makes improper use of it and shall do so if the approved exporter no longer offers the guarantees referred to in paragraph 2 of this Article. Article 20Procedure for issuing of a movement certificate EUR.1 1.A movement certificate EUR.1 shall be issued by the customs authorities of the exporting Party on application having been made in writing by the exporter or, under the exporter’s responsibility, by his authorised representative. 2.For that purpose, the exporter or his authorised representative shall fill in both the movement certificate EUR.1 and the application form, specimens of which appear in Annex IV to Appendix A. Those forms shall be completed in one of the languages in which the Agreement is drawn up and in accordance with the provisions of the national law of the exporting country. If the completion of the forms is done in handwriting, they shall be completed in ink in printed characters. The description of the products shall be given in the box reserved for this purpose without leaving any blank lines. Where the box is not completely filled, a horizontal line shall be drawn below the last line of the description, the empty space being crossed through. 3. The movement certificate EUR.1 should include the statement in English ‘TRANSITIONAL RULES’ in box 7. 4. The exporter applying for the issue of a movement certificate EUR.1 shall be prepared to submit at any time, at the request of the customs authorities of the exporting Party where the movement certificate EUR.1 is issued, all appropriate documents proving the originating status of the products concerned as well as the fulfilment of the other requirements of these Rules. 5. A certificate of origin shall be issued by the competent authorities of the exporting Party if the products concerned can be considered as products originating and fulfil the other requirements of these Rules. 6. The customs authorities issuing movement certificates EUR.1 shall take any steps necessary to verify the originating status of the products and the fulfilment of the other requirements of these Rules. For that purpose, they shall have the right to call for any evidence and to carry out any inspection of the exporter’s accounts or any other check considered appropriate. They shall also ensure that the forms referred to in paragraph 2 of this Article are duly completed. In particular, they shall check whether the space reserved for the description of the products has been completed in such a manner as to exclude all possibility of fraudulent additions. 7. The date of issue of the movement certificate EUR.1 shall be indicated in Box 11 of the movement certificate EUR.1. 8. A movement certificate EUR.1 shall be issued by the customs authorities and made available to the exporter as soon as actual exportation has been effected or ensured. Article 21Movement certificates EUR.1 issued retrospectively 1.Notwithstanding Article 20(8), a movement certificate EUR.1 may be issued after exportation of the products to which it relates if: (a)it was not issued at the time of exportation because of errors or involuntary omissions or special circumstances; (b)it is demonstrated to the satisfaction of the customs authorities that a movement certificate EUR.1 was issued but was not accepted at importation for technical reasons; (c)the final destination of the products concerned was not known at the time of exportation and was determined during their transportation or storage and after possible splitting of consignments in accordance with Article 14(3); (d)a movement certificate EUR.1 or EUR.MED was issued in accordance with the rules of the PEM Convention for products that are also originating according to these Rules. The exporter shall take all necessary steps to ensure that the conditions to apply cumulation are fulfilled and be prepared to submit to the customs authorities all relevant documents proving that the product is originating according to these Rules or

(e)a movement certificate EUR.1 was issued on the basis of application of art 8(4) and the application of article 8(3) is required at importation in another applying Contracting Party. 2.For the implementation of paragraph 1 of this Article, the exporter shall indicate in his application the place and date of exportation of the products to which the movement certificate EUR.1 relates, and state the reasons for his request. 3.The customs authorities may issue a movement certificate EUR.1 retrospectively within two years from the date of exportation and only after verifying that the information supplied in the exporter’s application complies with that in the corresponding file. 4. Notwithstanding the article 20 (3), movement certificates EUR.1 issued retrospectively shall be endorsed with the following phrase in English: ‘ISSUED RETROSPECTIVELY 5.The endorsement referred to in paragraph 4 shall be inserted in Box 7 of the movement certificate EUR.1. Article 22

Issue of a duplicate movement certificate EUR.1 1.In the event of theft, loss or destruction of a movement certificate EUR.1, the exporter may apply to the customs authorities which issued it for a duplicate made out on the basis of the export documents in their possession. 2. Notwithstanding the article 20 (3), the duplicate issued in accordance with paragraph 1 of this Article shall be endorsed with the following word in English: ‘DUPLICATE 3.The endorsement referred to in paragraph 2 shall be inserted in Box 7 of the duplicate movement certificate EUR.1. 4.The duplicate, which shall bear the date of issue of the original movement certificate EUR.1, shall take effect as from that date. Article 23Validity of proof of origin 1.A proof of origin shall be valid for ten months from the date of issue or making out in the exporting Party, and shall be submitted within that period to the customs authorities of the importing Party. 2.Proofs of origin which are submitted to the customs authorities of the importing Party after the period of validity referred to in paragraph 1 may be accepted for the purpose of applying the tariff preferences, where failure to submit those documents by the final date set is due to exceptional circumstances. 3.In other cases of belated presentation, the customs authorities of the importing Party may accept the proofs of origin where the products have been presented to customs before the said final date. Article 24

Free zones 1.The Parties shall take all necessary steps to ensure that products traded under cover of a proof of origin which in the course of transport use a free zone situated in their territory are not substituted by other goods and do not undergo handling other than normal operations designed to prevent their deterioration. 2.By way of derogation from paragraph 1, when products originating in an applying Contracting Party are imported into a free zone under cover of a proof of origin and undergo treatment or processing, a new proof or origin may be issued or made out, if the treatment or processing undergone complies with the provisions of these Rules.

Article 25

Importation requirements Proofs of origin shall be submitted to the customs authorities of the importing Party in accordance with the procedures applicable in that Party. Article 26

Importation by instalments Where, at the request of the importer and subject to the conditions laid down by the customs authorities of the importing Party, dismantled or non-assembled products within the meaning of General Rule 2(a) for the interpretation of the Harmonised System falling within Sections XVI and XVII or headings 7308 and 9406 are imported by instalments, a single proof of origin for such products shall be submitted to the customs authorities on importation of the first instalment. Article 27

Exemptions from proof of origin 1.Products sent as small packages from private persons to private persons or forming part of travellers’ personal luggage shall be admitted as originating products without requiring the submission of a proof of origin, provided that such products are not imported by way of trade and have been declared as meeting the requirements of these Rules and where there is no doubt as to the veracity of such a declaration. 2.Imports shall not be considered as imports by way of trade if all the following conditions are met: (a)the imports are occasional; (b)the imports consist solely of products for the personal use of the recipients or travellers or their families; (c)it is evident from the nature and quantity of the products that no commercial purpose is in view. 3.The total value of those products shall not exceed EUR 500 in the case of small packages or EUR 1 200 in the case of products forming part of travellers’ personal luggage. Article 28Discrepancies and formal errors 1.The discovery of slight discrepancies between the statements made in the proof of origin and those made in the documents submitted to the customs office for the purpose of carrying out the formalities for importing the products shall not ipso facto render the proof of origin null and void if it is duly established that that document does correspond to the products submitted. 2.Obvious formal errors such as typing errors on a proof of origin shall not cause the documents referred to in paragraph 1 of this Article to be rejected if those errors are not such as to create doubts concerning the correctness of the statements made in those documents. Article 29

Supplier’s declarations 1.When a movement certificate EUR.1 is issued or an origin declaration is made out in a Party for originating products, in the manufacture of which goods coming from another applying Contracting Party which have undergone working or processing there without having obtained preferential originating status have been used in accordance with Article 7(3) or Article 7(4) account shall be taken of the supplier’s declaration given for those goods in accordance with this Article. 2.The supplier’s declaration referred to in paragraph 1 shall serve as evidence of the working or processing undergone in an applying Contracting Party by the goods concerned for the purpose of determining whether the products in the manufacture of which those goods are used, may be considered as products originating in the exporting Party and fulfil the other requirements of these Rules. 3.A separate supplier’s declaration shall, except in the cases referred to in paragraph 4, be made out by the supplier for each consignment of goods in the form prescribed in Annex VI on a sheet of paper annexed to the invoice, the delivery note or any other commercial document describing the goods concerned in sufficient detail to enable them to be identified. 4.Where a supplier regularly supplies a particular customer with goods for which the working or processing undergone in an applying Contracting Party is expected to remain constant for a period of time, he may provide a single supplier’s declaration to cover subsequent consignments of those goods (the ‘long-term supplier’s declaration’). A long-term supplier’s declaration may normally be valid for a period of up to two years from the date of making out the declaration. The customs authorities of the applying Contracting Party where the declaration is made out lay down the conditions under which longer periods may be used. The long-term supplier’s declaration shall be made out by the supplier in the form prescribed in Annex VII and shall describe the goods concerned in sufficient detail to enable them to be identified. It shall be provided to the customer concerned before he is supplied with the first consignment of goods covered by that declaration or together with his first consignment. The supplier shall inform his customer immediately if the long-term supplier’s declaration is no longer applicable to the goods supplied.

5.The supplier’s declarations referred to in paragraphs 3 and 4 of this Article shall be typed or printed using one of the languages of the Agreement, in accordance with the national law of the applying Contracting Party where the declaration is made out, and shall bear the original signature of the supplier in manuscript. The declaration may also be handwritten; in such a case, it shall be written in ink in printed characters. 6.The supplier making out a declaration shall be prepared to submit at any time, at the request of the customs authorities of the applying Contracting Party where the declaration is made out, all appropriate documents proving that the information given on that declaration is correct. Article 30

Amounts expressed in euro 1.For the purposes of application of the point (b) of Article 18(1) and Article 27(3) in cases where products are invoiced in a currency other than euro, amounts in the national currencies of the Parties equivalent to the amounts expressed in euro shall be fixed annually by each of the countries concerned. 2.A consignment shall benefit from the point (b) of Article 18(1) or Article 27(3) by reference to the currency in which the invoice is drawn up, according to the amount fixed by the country concerned. 3.The amounts to be used in any given national currency shall be the equivalent in that currency of the amounts expressed in euro as at the first working day of October. The amounts shall be communicated to the European Commission by 15 October and shall apply from 1 January the following year. The European Commission shall notify all countries concerned of the relevant amounts. 4.A Party may round up or down the amount resulting from the conversion into its national currency of an amount expressed in euro. The rounded-off amount may not differ from the amount resulting from the conversion by more than 5 %. A Party may retain unchanged its national currency equivalent of an amount expressed in euro if, at the time of the annual adjustment provided for in paragraph 3, the conversion of that amount, prior to any rounding-off, results in an increase of less than 15 % in the national currency equivalent. The national currency equivalent may be retained unchanged if the conversion were to result in a decrease in that equivalent value. 5.The amounts expressed in euro shall be reviewed by the Stabilisation and Association Council at the request of a Party. When carrying out this review, the Stabilisation and Association Council shall consider the desirability of preserving the effects of the limits concerned in real terms. For that purpose, it may decide to modify the amounts expressed in euro. TITLE VIPRINCIPLES OF COOPERATION AND DOCUMENTARY EVIDENCE Article 31

Documentary evidence, preservation of proofs of origin and supporting documents 1.An exporter who has made out an origin declaration or has applied for a movement certificate EUR.1 shall keep a hard copy or an electronic version of those proofs of origin and all documents supporting the originating status of the product, for at least three years from the date of issuance or making out of the origin declaration. 2.The supplier making out a supplier’s declaration shall keep copies of the declaration and of all the invoices, delivery notes or other commercial documents to which that declaration is annexed as well as the documents referred to in Article 29(6) for at least three years. The supplier making out a long-term supplier’s declaration shall keep copies of the declaration and of all the invoices, delivery notes or other commercial documents concerning goods covered by that declaration sent to the customer concerned, as well as the documents referred to in Article 29(6) for at least three years. That period shall begin from the date of expiry of validity of the long-term supplier’s declaration. 3.For the purposes of paragraph 1 of this Article the documents supporting the originating status, inter alia, are the following: (a)direct evidence of the processes carried out by the exporter or supplier to obtain the product, contained, for example, in his accounts or internal bookkeeping; (b)documents proving the originating status of materials used, issued or made out in the relevant applying Contracting Party in accordance with its national legislation; (c)documents proving the working or processing of materials in the relevant Party, made out or issued in that Party in accordance with its national legislation; (d)origin declarations or movement certificates EUR.1 proving the originating status of materials used, made out or issued in the Parties in accordance with these Rules; (e)appropriate evidence concerning working or processing undergone outside the Parties by application of Articles 13 and 14, proving the fulfilment of the requirements of those Articles.

4.The customs authorities of the exporting Party issuing movement certificates EUR.1 shall keep the application form referred to in Article 20(2) for at least three years. 5.The customs authorities of the importing Party shall keep the origin declarations and the movement certificates EUR.1 submitted to them for at least three years. 6.Supplier's declarations proving the working or processing undergone in an applying Contracting Party by materials used, made out in that applying Contracting Party, shall be treated as a document referred to in Articles 18(3), 20(3) and 29(6) used for the purpose of proving that products covered by a movement certificate EUR.1 or an origin declaration may be considered as products originating in that applying Contracting Party and fulfil the other requirements of these Rules. Article 32

Dispute settlement Where disputes arise in relation to the verification procedures under Articles 34 and 35, or in relation to the interpretation of this Appendix, which cannot be settled between the customs authorities requesting a verification and the customs authorities responsible for carrying out verification, they shall be submitted to the Stabilisation and Association Council. In all cases the settlement of disputes between the importer and the customs authorities of the importing Party shall take place in accordance with the legislation of that country. TITLE VII

ADMINISTRATIVE COOPERATION Article 33

Notification and cooperation 1.The customs authorities of the Parties shall provide each other with specimen impressions of stamps used in their customs offices for the issue of movement certificates EUR.1, with the models of the authorisation numbers granted to approved exporters and with the addresses of the customs authorities responsible for verifying those certificates and origin declarations. 2.In order to ensure the proper application of these Rules, the Parties shall assist each other, through the competent customs authorities, in checking the authenticity of the movement certificates EUR.1, the origin declarations, the supplier’s declarations and the correctness of the information given in those documents. Article 34

Verification of proofs of origin 1.Subsequent verifications of proofs of origin shall be carried out at random or whenever the customs authorities of the importing Party have reasonable doubts as to the authenticity of such documents, the originating status of the products concerned or the fulfilment of the other requirements of these Rules. 2.When they make a request for subsequent verification, the customs authorities of the importing Party shall return the movement certificate EUR.1 and the invoice, if it has been submitted, the origin declaration, or a copy of those documents, to the customs authorities of the exporting Party giving, where appropriate, the reasons for the request for verification. Any documents and information obtained suggesting that the information given on the proof of origin is incorrect shall be forwarded in support of the request for verification. 3.The verification shall be carried out by the customs authorities of the exporting Party. For that purpose, they shall have the right to call for any evidence and to carry out any inspection of the exporter’s accounts or any other check considered appropriate. 4.If the customs authorities of the importing Party decide to suspend the granting of preferential treatment to the products concerned while awaiting the results of the verification, release of the products shall be offered to the importer subject to any precautionary measures judged necessary. 5.The customs authorities requesting the verification shall be informed of the results thereof as soon as possible. Those results shall indicate clearly whether the documents are authentic and whether the products concerned may be considered as products originating in one of the Parties and fulfil the other requirements of these Rules. 6.If in cases of reasonable doubt there is no reply within ten months of the date of the verification request or if the reply does not contain sufficient information to determine the authenticity of the document in question or the real origin of the products, the requesting customs authorities shall, except in exceptional circumstances, refuse entitlement to the preferences. Article 35

Verification of supplier’s declarations 1.Subsequent verifications of supplier’s declarations or long-term supplier’s declarations may be carried out at random or whenever the customs authorities of a Party where such declarations have been taken into account to issue a movement certificate EUR.1 or to make out an origin declaration, have reasonable doubts as to the authenticity of the document or the correctness of the information given in that document.

2.For the purposes of implementing the provisions of paragraph 1 of this Article, the customs authorities of the Party referred to in paragraph 1 of this Article shall return the supplier’s declaration or the long-term supplier’s declaration and invoice(s), delivery note(s) or other commercial document(s) concerning goods covered by such declaration, to the customs authorities of the applying Contracting Party where the declaration was made out, giving, where appropriate, the reasons of substance or form of the request for verification. They shall forward, in support of the request for subsequent verification, any documents and information that have been obtained suggesting that the information given in the supplier’s declaration or the long-term supplier’s declaration is incorrect. 3.The verification shall be carried out by the customs authorities of the applying Contracting Party where the supplier’s declaration or the long-term supplier’s declaration was made out. For that purpose, they shall have the right to call for any evidence and carry out any inspection of the supplier’s accounts or any other check which they consider appropriate. 4.The customs authorities requesting the verification shall be informed of the results thereof as soon as possible. Those results shall indicate clearly whether the information given in the supplier’s declaration or the long-term supplier’s declaration is correct and make it possible for them to determine whether and to what extent such declaration could be taken into account for issuing a movement certificate EUR.1 or for making out an origin declaration. Article 36

Penalties Each Party shall provide for the imposition of criminal, civil or administrative penalties for violations of its national legislation related to these Rules. TITLE VIII

APPLICATION OF APPENDIX A Article 37

European Economic Area Goods originating in the European Economic Area (EEA) within the meaning of Protocol 4 to the Agreement on the European Economic Area shall be considered as originating in the European Union, Iceland, Liechtenstein or Norway (the ‘EEA Parties’) when exported respectively from the European Union, Iceland, Liechtenstein or Norway to Montenegro, provided that free trade agreements using these Rules are applicable between Montenegro and the EEA Parties. Article 38

Liechtenstein Without prejudice to Article 2, a product originating in Liechtenstein shall, due to the customs union between Switzerland and Liechtenstein, be considered as originating in Switzerland. Article 39

Republic of San Marino Without prejudice to Article 2, a product originating in the Republic of San Marino shall, due to the customs union between the European Union and the Republic of San Marino, be considered as originating in the European Union. Article 40

Principality of Andorra Without prejudice to Article 2, a product originating in the Principality of Andorra classified under Chapters 25 to 97 of the Harmonised System shall, due to the customs union between the European Union and the Principality of Andorra, be considered as originating in the European Union. Article 41

Ceuta and Melilla 1.For the purposes of implementing these Rules, the term ‘European Union’ shall not cover Ceuta and Melilla. 2.Products originating in Montenegro, when imported into Ceuta or Melilla, shall enjoy in all respects the same customs regime as that which is applied to products originating in the customs territory of the European Union under Protocol 2 of the Act of accession of the Kingdom of Spain and the Portuguese Republic and the adjustments to the Treaties. Montenegro shall grant to imports of products covered by the relevant Agreement and originating in Ceuta and Melilla the same customs regime as that which is granted to products imported from and originating in the European Union.

3. For the purposes of paragraph 2 of this Article concerning products originating in Ceuta and Melilla, these Rules shall apply mutatis mutandis subject to the special conditions set out in Annex V.



ANNEX I INTRODUCTORY NOTES TO THE LIST IN ANNEX II Note 1 – General introduction The list sets out the conditions required for all products to be considered as sufficiently worked or processed within the meaning of Article 4 of Title II of Appendix A . There are four different types of rules, which vary according to the product: (a)through working or processing a maximum content of non-originating materials is not exceeded; (b)through working or processing the 4-digit Harmonised System heading or 6-digit Harmonised System subheading of the manufactured products becomes different from the 4-digit Harmonised System heading or 6-digit subheading respectively of the materials used; (c)a specific working or processing operation is carried out; (d)working or processing is carried out on certain wholly obtained materials. Note 2 – The structure of the list 2.1.The first two columns in the list describe the product obtained. The column (1) gives the heading number or chapter number used in the Harmonised System and the column (2) gives the description of goods used in that system for that heading or chapter. For each entry in the first two columns, a rule is specified in column (3). Where, in some cases, the entry in the column (1) is preceded by an ‘ex’, this signifies that the rules in column (3) apply only to the part of that heading as described in column (2). 2.2.Where several heading numbers are grouped together in column (1) or a chapter number is given and the description of products in column (2) is therefore given in general terms, the adjacent rules in column (3) apply to all products which, under the Harmonised System, are classified in headings of the chapter or in any of the headings grouped together in column (1). 2.3.Where there are different rules in the list applying to different products within a heading, each indent contains the description of that part of the heading covered by the adjacent rules in column (3). 2.4.Where two alternative rules are set out in column (3), separated by ‘or’, it is at the choice of the exporter which one to use. Note 3 – Examples of how to apply the rules 3.1.Article 4 of Title II of Appendix A , concerning products having obtained originating status which are used in the manufacture of other products, shall apply, regardless of whether that status has been obtained inside the factory where those products are used or in another factory in a Party. 3.2.Pursuant to Article 6 of Title II of this Appendix , the working or processing carried out must go beyond the list of operations mentioned in that Article. If it does not, the goods shall not qualify for the granting of the benefit of preferential tariff treatment, even if the conditions set out in the list below are met. Subject to Article 6 of Title II of Appendix A , the rules in the list represent the minimum amount of working or processing required, and the carrying-out of more working or processing also confers originating status; conversely, the carrying-out of less working or processing cannot confer originating status. Thus, if a rule provides that non-originating material, at a certain level of manufacture, may be used, the use of such material at an earlier stage of manufacture is allowed, and the use of such material at a later stage is not. If a rule provides that non-originating material, at a certain level of manufacture, may not be used, the use of materials at an earlier stage of manufacture is allowed, and the use of materials at a later stage is not.

Example: when the list-rule for Chapter 19 requires that ‘non-originating materials of headings 1101 to 1108 cannot exceed 20 % weight’, the use (i.e. importation) of cereals of Chapter 10 (materials at an earlier stage of manufacture) is not limited. 3.3.Without prejudice to Note 3.2, where a rule uses the expression ‘Manufacture from materials of any heading’, then materials of any heading(s) (even materials of the same description and heading as the product) may be used, subject, however, to any specific limitations which may also be contained in the rule. However, the expression ‘Manufacture from materials of any heading, including other materials of heading …’ or ‘Manufacture from materials of any heading, including other materials of the same heading as the product’ means that materials of any heading(s) may be used, except those of the same description as the product as given in column (2) of the list. 3.4.When a rule in the list specifies that a product may be manufactured from more than one material, this means that one or more materials may be used. It does not require that all be used. 3.5.Where a rule in the list specifies that a product must be manufactured from a particular material, the condition does not prevent the use of other materials which, because of their inherent nature, cannot satisfy this. 3.6.Where, in a rule in the list, two percentages are given for the maximum value of non‑originating materials that can be used, then those percentages may not be added together. In other words, the maximum value of all the non-originating materials used may never exceed the higher of the percentages given. Furthermore, the individual percentages shall not be exceeded, in relation to the particular materials to which they apply. Note 4 – General provisions concerning certain agricultural goods 4.1.Agricultural goods falling within Chapters 6, 7, 8, 9, 10, 12 and heading 2401 which are grown or harvested in the territory of a Party shall be treated as originating in the territory of that Party, even if grown from imported seeds, bulbs, rootstock, cuttings, grafts, shoots, buds, or other live parts of plants. 4.2.In cases where the content of non-originating sugar in a given product is subject to limitations, the weight of sugars of headings 1701 (sucrose