Customs update 2012

Paul Ellis reports on Customs-related issues in this regularly updated feature article.

December 2012

Union Customs Code

The Customs Code was introduced in 1992 and has been the basis of European Community Customs Law, together with its Implementing Provisions, for the last 20 years. Several years ago, development began on its replacement, the so-called “Modernised Customs Code”, which itself has now been re-named the Union Customs Code (UCC). It was originally scheduled to come into force in June 2013 but, due to various problems, not the least in making sure that it complied with the Lisbon Treaty, this has been delayed and, at present, no definite date has been agreed, although it is not expected to come into force before 2015. In addition, since all 27 Member States operate their own systems and at their own speed, there will be a transitional period following introduction for compliance, which could take uniform introduction into 2020.

There are still several areas where the UK is trying to get amendments implicated, particularly on the issue of mandatory guarantees for duty suspension procedures, and other Member States have disagreements with the proposals regarding trader record simplifications and self assessment. The UK has argued strongly about the need for clear and appropriate separation between delegated and implementing empowerment, while others would prefer more delegated provisions to be incorporated into the UCC. While the Commission has so far put up a hard line regarding amendments it does appear to be showing a little more willingness to make some changes.

The European Parliament recently produced a draft report on the UCC text and has suggested some amendments. This is due to be voted on in December. It is expected that early next year the Council, Commission and Parliament will get around the table and finally discuss these amendments.

New GSP Regulation

The EU Council has finally approved the new GSP Regulation, which will enter force 21 days after publication in the Official Journal (expected to be before the end of 2102). The new regulation will apply from January 2014 and will last for 10 years.

The list of eligible and beneficiary countries has not yet been finalised and the new regulation requires that the list be reviewed before 1 January each year. The list of beneficiaries for January 2014 will be published early in 2013. The number of beneficiaries has been reduced and will not include the following.

  • Countries that are classified by the World Bank as high or upper-middle income economies, which includes, at the moment: Argentina, Azerbaijan, Bahrain, Brazil, Brunei-Darussalem, China, Colombia, Costa Rica, Ecuador, Kazakhstan, Kuwait, Libya, Macao, Malaysia, Maldives, Oman, Panama, Peru, Qatar, Russian Federation, Saudi Arabia, Thailand, United Arab Emirates, Uruguay, and Venezuela. However, before a country can be excluded it must have been in the high or upper-middle income economy for three consecutive years immediately before finalising the updated list.

  • Countries that have a free trade agreement with the EU that has preferential rates better or equal to the GSP.

  • Countries that are part of the Overseas Countries and Territories.

The preferential rates of duty will remain the same. Those products deemed sensitive will receive a 3.5% reduction in duty while those deemed non-sensitive will be free of duty. Textiles will receive a 20% reduction. The Least Developed Developing Countries will receive nil preferential duty rates for all goods except arms.

Pakistan trade preference

The EU Council has finally agreed to grant Pakistan additional duty relief (zero rates) above the GSP following the recent devastating floods. The goods covered are mainly in the textile and clothing sectors. The associated regulation will come into force shortly after it is published in the Official Journal, expected to be in November, and will continue until 31 December 2013. The measure will not be retrospective and will thus not apply to any goods that are exported from Pakistan before the date of entry into force.

November 2012

Duty suspensive arrangements

The two main duty suspensive procedures — Inward Processing Relief (IPR), where non-community goods are imported for processing/manufacture and subsequently exported outside the EU, and Customs Warehousing, where non-community goods are imported and held in storage until they are subsequently released to free circulation or entered to another customs procedure — have been the subject of two European Court of Justice (ECJ) rulings regarding the condition of approvals.

Approval for both procedures is granted subject to certain conditions including, with regard to IPR, the submission of bills of discharge from the procedure, and for Customs Warehousing, the appropriate entry into and removal from the stock records, in particular the timing of those entries. Failure to apply these conditions may result in a customs debt arising and a subsequent demand for duty from the customs authorities.

In the case of the German company Dohler, which operates IPR, it did not submit the necessary bill of discharge within the 30-day time limit following its throughput period (the limit by which the goods must be exported or otherwise accounted for) and German Customs deemed a customs debt to have arisen. Dohler did not dispute the late submission but claimed that since some of the goods had been exported within the time limit allowed, this had no significant effect on the correct operation of the procedure and thus duty should only be liable on those goods remaining in the EU.

In the case of Eurogate, another German company that operates its own private customs warehouse, there was another timekeeping error. The company exported goods outside the EU direct from the warehouse and completed the necessary customs export documentation (which would not normally give rise to payment of duty), but failed to enter the removal of the goods from the customs procedure in its warehouse records for periods between 11 and 126 days after removal. One of the conditions of Article 530(3) of the Implementing Regulation of the Customs Code, governing the approval of customs warehousing procedures, is that entry in the records relating to the discharge of the arrangements shall take place at the latest when the goods leave the customs warehouse. Since the goods had been exported, Eurogate also claimed that this error had no significant effect on the procedure but, again, the customs authorities deemed a customs debt had arisen and issued a duty demand.

Article 89(1) of the Customs Code Regulation states that a suspensive arrangement with economic impact shall be discharged when a new customs-approved treatment or use (which includes exportation) is assigned to the goods. In both these cases the goods were removed for export outside the EU and entered into that procedure correctly, which in normal circumstances would not give rise to a customs debt.

Article 859 of the Implementing Provisions gives a validly constituted and exhaustive set of rules outlining the circumstances of failures (errors) that would result in no significant effect on the correct operation of a customs procedure, and therefore not give rise to a customs debt. These include exceeding time limits for assigning another customs procedure to the goods where the limit would have been extended had an extension been applied for in time. In the case of Dohler, customs said that no extension would have been given even if it had applied since there were no special circumstances to allow that. The Article also carries the overriding provision that any error must not imply obvious negligence on behalf of the person concerned.

The ECJ ruled in these somewhat related cases that both companies were negligent (as experienced operators of the customs procedures) and failed to fulfil the conditions of their approvals. Both failures were not covered by Article 530(3) and, as such, a customs debt had arisen even though the goods in question had been exported from the EU. The court continued by saying that approval of both customs procedures implies a grant of a conditional benefit that cannot be granted if the relating conditions are not respected.

This must serve as a warning to all those companies that operate suspensive regimes to ensure that they fully understand the conditions of their approval and, perhaps more importantly, the consequences should these not be fulfilled, regardless of whether the goods are subsequently exported under correct procedures where no duty would normally be liable.

September 2012

WTO welcomes Russia

Following 18 years of protracted negotiations, Russia has become the 156th member of the World Trade Organization (WTO).

This is particularly important for both the EU and Russia as Russia is the EU’s third-largest trading partner and the EU is Russia’s biggest trading partner. Both countries will be bound by multilateral rules and obligations for their mutual trade. EU Trade Commissioner Karel de Gucht said that the move will facilitate investment and trade, help to accelerate the modernisation of the Russian economy and offer plenty of business opportunities for both Russian and European companies. He also added the proviso that he trusted Russia would meet the international trading rules and standards to which it had committed.

The accession will have a positive impact on the condition of trade and investment between Russia and the EU, the geographical position of Russia and the importance of its market in terms of volume and growth making it an important trading partner to the EU. The biggest improvement in trade will be for EU exporters, with new regulations on customs procedures and reduced import duties into Russia, but EU importers will also benefit from better limits on Russian export duties. EU imports from Russia in 2011 totalled €199.2 billion, which represented mainly raw materials but also included crude and refined oil products (€130 billion) and gas (€24 billion).

EU–Japan

At the EU–Japan summit in May 2011, the two countries agreed to start preparations for a Free Trade Agreement. The EU Commission has now decided to open negotiations for that agreement. Negotiation directives will be sent to the Council, which will give the mandate to the Commission to start talks. Japan is the EU’s second-largest trading partner in Asia after China and together the EU and Japan account for more than a third of world GDP. The trade deal could boost the EU GDP by 1% and exports to Japan by a third.

Karel de Gucht, the EU Trade Commissioner, stated that if growth in the next 25 years is to come from Asia, overlooking Japan will be a big mistake. Priority for the talks is the non-tariff barriers in the Japanese market, eg in the car sector, and if these problems are not resolved within the next year the EU will withdraw.

It is predicted that Japanese exports to the EU will increase by 23.5%, creating 420,000 jobs in the Union. EU imports from Japan amounted to €65.7 billion in 2011, while EU exports to Japan reached €40 billion, mainly in the sectors of machinery, transport equipment, and chemical and agricultural products.

Customs seize fake goods

In 2011, EU Customs’ authorities seized 115 million products suspected of infringing Intellectual Property Rights (IPR), an increase of 15% on 2010. The value of these goods was €1.3 billion. The top categories were medicines (24%), packaging material (21%) and cigarette products (18%). Products for daily use and potentially dangerous products to health and safety amounted to 28.6% (compared with 14.5% in 2010) and the number of postal packages seized increased, with 36% involving medicines.

In terms of where the fake goods originated, China came top of the list with 73%. Other countries were the main source for certain categories: Turkey for foodstuffs, Panama for alcoholic drink, Thailand for soft drink and Hong Kong for mobile phones. The great majority of all goods seized, 90%, were destroyed.

Tariff preference from Israel

In 2009, the EU drew up a list of settlements which were regarded as beyond the Israeli borders and thus not entitled to preference. This list was not for public use but details could be obtained from Customs. A new list has now been announced and it has been decided that this is for public access. It can be found on the European Commission website.

August 2012

EU–Turkey

The Commissioner for Enlargement and European Neighbourhood Policy, Stefan Fule, has held further talks with Turkish Foreign Minister Davutoglu regarding EU–Turkish relations and putting accession talks back on track. The Commissioner expressed the view that there have been some positive moves forward in Turkey’s efforts to increase respect for human rights and visa liberalisation and delivering a visa-free regime. However, there are still concerns about the detention of lawmakers, academics and students regarding freedom of the press and journalists.

The two parties discussed the importance the EU attaches to the freedom of expression and those areas of criminal legislation that need to be amended, and court practices that need to be reviewed. The Commissioner concluded that the meeting ended with a sprit of optimism and pragmatism.

EU–USA air cargo recognition

Following the mutual agreement signed between the EU and the USA regarding each others' “trusted traders”, the two countries agreed to recognise each other’s air cargo security schemes from 1 June. The move is expected to substantially cut operators’ costs and time.

Close co-operation between the EU and the US Transport Security Administration allowed the two security regimes to be compared and it was found that both ensure a high level of security. Air carriers transporting cargo from the EU to the USA no longer need apply differing regimes, but only need to implement the full EU legal requirements, which lay down the obligations on the security of consignments and on a regulated supply chain. Similarly, there are no additional requirements for air carriers shipping goods from the USA to the EU.

Air cargo between the EU and the USA amounts to over a million tonnes per year each way, mainly carrying goods that are needed urgently. Goods transferred to the USA from the EU by air are worth more than €107 billion and amount to 27% of all goods supplied by air from the EU.

UK taken to court

The EU is taking the UK to the European Court of Justice over its refusal to compensate for duties that HMRC failed to collect. The amount involved is £15 million.

The case dates from 2005/2006 when HMRC allowed imports of fresh garlic to be imported from China under the heading of frozen garlic at a much lower rate of duty. The Commission considers that HMRC did not act with all due care. HMRC maintains that it took all the necessary actions justified.

Extension of Common Transit

Common Transit (CT) procedures are used for the movement of goods between the 27 EU Member States and EFTA countries, ie Iceland, Norway, Liechtenstein and Switzerland. These have now been expanded to cover Croatia from 1 July 2012.

The system involves the use of guarantees to cover any customs duty or other taxes, eg VAT, while the goods are in transit. Those CT principals who currently hold a CT guarantee or guarantee waiver and who wish to use them for operations involving Croatia will need to apply to the National Simplification Team to agree an increase in the reference amount and an extension of their coverage. They will also need to arrange for the nominated guarantor to sign a revised guarantee undertaking. These new arrangements will also apply to airlines using level 1 and 2 simplified procedures that need to extend their nominated airports of destination and departure to those in Croatia.

It was hoped that Turkey would also become part of the Common Transit Convention at the same time but this has been delayed for technical reasons and is hoped to become a reality later in the year.

July 2012

Anti-dumping duty

Anti-Dumping Duty (ADD) is an import duty charged in addition to normal customs duty and is applied across the whole European Community. Anti-Dumping Duty (ADD) investigations are initiated by the European Commission when it receives a complaint from EU importers that goods are being exported to the EU at an unfair export price, such that import of the goods causes commercial injury to EU producers. The export price is deemed unfair if it is below the price that the goods are sold on the home market of the exporting country and the goods are thus being “dumped” in the EU.

When investigating a complaint, the European Commission approaches all the parties concerned for their comments and has to ascertain a “normal price” for the goods on the basis of the price paid or payable in the ordinary course of trade by independent customers in the exporting country. This value is compared to the export value and ADD imposed at the time of import, as necessary.

However, when the goods are imported from a country with a non-market economy the normal value is determined on the basis of the price paid in a market economy of a third country or, where that is not possible (eg similar goods are not produced), on any reasonable basis including the price actually paid in the Community for the like product, duly adjusted if necessary to include a reasonable profit margin. The appropriate market economy should be selected in a not unreasonable manner, due account being taken of reliable information. For imports from China, Vietnam, Kazakhstan and any non-market economy that is a member of the World Trade Organization, normal value may be determined using six criteria, that is, the Market Economy Treatment (MET). These criteria include that: business decisions regarding prices and costs must be made in response to market conditions and without State interference; accounts of the supplier are independently audited in line with international standards; and it can be shown that there are no significant distortions carried over from former non-market economies which affect the price.

The choice of how to arrive at the normal value should be agreeable to all the parties concerned but, in a recent case before the European Court of Justice (ECJ), it was ruled that the Commission had not acted in a reasonable manner. The case concerned the ADD imposed on the import of mandarin oranges from China, following the usual investigations. The Commission had rejected the MET application from one Chinese exporter on the grounds that they did not satisfy all the criteria and they had rejected the use of exporters in two appropriate market economy countries (one did not reply to the request for information and although one did reply it did not return the appropriate questionnaire). The Commission then used the fallback method of “other reasonable method” and used the price paid for similar goods in the EU. The parties concerned had drawn the attention of the Commission to an exporter in another appropriate economy, which it did not for some reason investigate. The case went to the ECJ, which found that the Commission did not act in a reasonable manner and ruled that the regulation imposing a definitive ADD was invalid. This ruling of error by the Commission, due to the length of time it has taken to come to a decision (the original regulation was dated 2008), will be of little use to an importer who has not already put in a claim for repayment of duty where imports are over three years old. One wonders why it took so long.

EU–USA trusted traders

On 4 May 2012, the EU and the USA signed a mutual recognition agreement that will mean that each country will recognise the other’s “trusted traders”. These traders will benefit from faster controls and reduced administration for customs clearance, therefore, supposedly, reducing their costs. In addition, this will improve overall security of imports and exports by freeing the customs authorities to concentrate on risk areas.

Under the agreement, countries will recognise each others’ security-certified operators and so UK Authorised Economic Operators (AEOs) will receive benefits when exporting to the USA and the EU will reciprocate to operators of the US Customs-Trade Partnership against Terrorism (C-TPAT).

Switzerland, Norway and Japan also mutually recognise the EU’s certification and it is expected that China will eventually do so.

June 2012

IPR

A new Public Notice 221a has been issued detailing the changes made to the Inward Processing Relief (IPR) simplification authorisation. Most of the changes relate to those goods that are excluded from the procedure. These are Goods under Chapter 93 — Arms and Ammunition, as they require a licence, and Goods under Chapter 97 — Works of Art, Collectors’ Pieces and Accessories, as they may require a licence.

In addition, the post-clearance control system charges VAT at the standard rate, but most goods under this chapter are zero rated. Customs says that to monitor this would prove uneconomic.

Goods in excess of £500,000

Simplified authorisations have a standard throughput period of six months and, where this is expected to be longer, HM Revenue & Customs (HMRC) says that the importer should consider a full authorisation. If storage is involved, the use of customs warehousing should be considered. This latter suggestion is a recent common trend by HMRC when traders apply for full IPR when using only simplified processing such as repacking. This is thought to be not necessarily in the best interests of the importer as the costs and resources involved are high, which makes it uneconomic for the importer. It seems acceptable for HMRC to use this excuse, but not the trader. The legality of virtually forcing traders to use customs warehousing to obtain relief is being questioned.

If importers do find they need to extend the throughput period they can apply to the HMRC National Import Reliefs Unit (NIRU), but will need to demonstrate exceptional circumstances.

Iran: restrictive measures

On 24 March, the EU announced a number of prohibitions on goods imported from Iran, namely:

  • dual use goods and technology

  • crude oil and petroleum products

  • petrochemical products

  • gold, precious metals and diamonds.

The prohibitions apply to the purchase, import, transport and direct or indirect finance of the above goods. For crude oil, petroleum and petrochemical products, a derogation applies for products supplied under a contract concluded before 23 January 2012.

Colombia and Peru

The EU Council has reached agreement on a provisional application of a multipartite free trade agreement with Columbia and Peru. The agreement covers the elimination of high tariffs, technical barriers to trade, service markets, EU geographical indication and public procurement markets. It also includes commitments to the labour and environmental standards, as well as an effective and rapid dispute settlement.

Under regional integration, the agreement remains open to signing by the other two Andean Community countries — Ecuador and Bolivia.

China: rare earths

Together with the USA and Japan, the EU has formally requested a dispute settlement consultation with China and the World Trade Organization (WTO) regarding the export controls imposed by China on rare earths. This follows a successful challenge by the EU on similar restrictions on other raw materials earlier this year.

EU Trade Commissioner Karel De Gucht stated that the China restrictions are hurting producers and consumers in the EU and the rest of the world, particularly the manufacturers of hi-tech and green products. He added that despite earlier clear rulings by the WTO, China had made no effort to remove export restrictions; indeed, it seemed to have tightened them.

China imposes export restrictions, eg export licences, export duties and additional requirements, that limit the access of rare earths to companies outside China.

Rare earths are a set of 17 elements that feature unique magnetic, heat-resistant and phosphorescence properties and are used in the production of such things as wind power turbines, engines for electric vehicles, LED and LCD screens, hard drives, car parts, camera lenses and batteries. China produces about 97% of the world’s production of rare earths and although they constitute a small share of the finished product, they are generally non-substitutable or it is expensive to do so.

Additional duties on goods from the USA

Additional customs duties have been applied to various goods originating in the USA since 2005 in retaliation to what is known as the “Byrd Amendment”, which provided subsidies to US companies which the WTO ruled as illegal. Although these subsidies have been reduced, the following US goods still attract additional duty as from May 2012:

  • 07104000 — Sweetcorn, uncooked or cooked by steaming, boiling in water, frozen

  • 87051000 — Crane lorries (excluding breakdown lorries)

  • 9003190010 — Frames and mountings for spectacles, goggles or the like, of base metal.

May 2012

Low Value Consignment Relief (LVCR)

The Channel Islands are part of the European Customs Union but are not a Member State of the EU and, as such, they do not use a system of VAT. Goods imported from there may be customs duty paid and thus free of customs duty on entry to the UK but will be liable to UK VAT.

Under EU legislation, any goods imported into the EU are subject to a minimum value for VAT and customs duty, below which the cost of collecting the amount due is uneconomic. As a consequence, goods imported into the EU with a value not exceeding £15 are not liable to VAT. Goods with a value under £135 are not liable to customs duty.

As a result of this measure, a lucrative trade has grown up on the import of VAT-free goods into the UK from the Channel Islands by mail order, eg CDs, DVDs, video games, stationery, health supplements and ink cartridges. The goods are imported into the Channel Islands where customs duty is paid then forwarded to individual customers in the UK. The value of this trade was estimated to be in the region of £500 million.

Towards the end of last year, the UK Government announced that the LCVR relating to VAT would be withdrawn on all imports from the Channel Islands, thus effectively increasing the cost of such goods by 20%. A second measure, which allowed the bulking of low value goods (liable to customs duty) in one consignment free of duty, providing each separate package was individually addressed and valued below £135, was unaffected by the ruling. The new measures were announced in the March 2012 budget and came into force on 1 April 2012.

While these measures were welcomed by the Retailers Against VAT Avoidance Schemes (RAVAS), who had made submissions to HMRC that the LVCR was having a considerable effect on UK retailers, the States of Jersey and Guernsey (the “States”) applied to the Administrative Court of the EU to challenge the lawfulness of HMRC’s action, stating that they should not be allowed to single out the “States” from other non-EU countries.

The Court rejected this application for judicial review, stating that Article 23 of Directive 2009/132 gave Member States the discretion to exclude mail order goods from LVCR. However, the Court granted the “States” the right to appeal to a higher court on the grounds that the issue raised some important points. This may not therefore be the end of the matter.

Anti-dumping duty on footwear

In July 2005, the EU Commission initiated a review, for anti dumping duty (ADD) purposes, of certain footwear of leather uppers originating in China and Vietnam. A provisional ADD was imposed in April 2006, which became definitive in October 2006 (Regulation 1472/06) and remained in force until March 2011.

In February 2012, the European Court of Justice (ECJ) made a Judgment that formally annulled Regulation 1472/06, but only as it refers to products from four Chinese manufacturers: Brosman Footwear (HK) Ltd; Seasonable Footwear (Zhongshan) Ltd; Lung Pao Footwear (Guangzhou) Ltd; and Risen Footwear (HK) Co Ltd. Any shipper who has imported eligible footwear from any of the above manufacturers should submit a reclaim of the ADD to HMRC on form C285. The three-year limit on claims will apply unless the trader has previously submitted a claim. Following this ruling, the Commission is currently considering whether the terms of the Judgment can apply to exports for other Chinese and Vietnamese manufacturers.

April 2012

Modernised Customs Code — no longer

Following recent reports regarding the Modernised Customs Code (MCC), the Regulation has now been recast, primarily to take account of the Lisbon Treaty, and the name changed to Union Customs Code (UCC). This recast version was presented to Member States in February. HM Revenue and Customs, along with the other respective authorities, is now checking the finer details and meeting with trade bodies to see if there are any significant changes, and whether they can influence any amendments following the problems that have arisen since the setting up of the MCC Implementing Regulations. Early indications are that there are no real changes and the Commission will be unwilling to accept further amendments.

The recast has recognised the problem created by the reliance on electronic processes and the ability of Member States to have in place the necessary systems to deal with these. This, and the fact that the new UCC Implementing Provisions will also have to be recast, has affected the date of introduction of the UCC. It is recognised that the deadline of 24 June 2013 will not be met and a new date will be set whereby the Commission will work with all stakeholders to ensure that the necessary systems will be in operation by 31 December 2020.

The Tariff

Much to the delight of many, the paper edition of the UK Tariff, which was due to be phased out following the introduction of the Integrated Tariff Environment (ITE), will continue to be available for at least another year. The ITE has reached the end of its design stage and is ready for the build and test stages although, because of the delays to the upgrade of CHIEF, due primarily to the lack of funding, it has been put on hold.

Valuation

As previously reported, under the MCC there had been a move to restrict the current practice of using a prior sale (ie not necessarily the last sale for export) as the value of a consignment for customs purposes and the stricter use of including royalty and licence payments, both of which would potentially increase the value for duty. The Commission had been pressing for this, particularly restricting the use of prior sale, for some time not in the least because the EU is one of the few remaining trading bodies to operate the principle. The USA recently amended its rules regarding the Commission’s sentiment, but subsequently reverted to the old system due to importer pressure. The UK has been in the forefront of trying to keep the status quo.

However, we have a new ally in the form of the European Parliament, which in December voiced its feeling in a resolution that “called for the maintenance of the existing provisions concerning sale for export and the inclusion of certain royalties and licence fees in the customs value as unwarranted changes which will result in higher customs value and thus a higher tax burden”. The resolution was adopted without amendment.

With the recast of the MCC (now the UCC) it was hoped that this would push the Commission to retain the current procedure, and Member States are currently studying this. The UK has passed on to the delegates of the High Level Steering Group the concerns of UK traders, but at this stage it is unclear what influence the European Parliament’s vote will have on the final outcome.

Pan-Euro–Mediterranean Preference Agreement Cummulation

Under the Pan-Euro–Mediterranean (PEM) agreement, there is provision for diagonal cummulation whereby goods sent for processing in one member country are deemed to originate in that country when re-exported to another member country, thus allowing preferential treatment in the final member country. However, it has emerged that goods sent to an EFTA country (EFTA is a signatory to the PEM), in particular agricultural goods sent to Switzerland, are being refused a preference certificate when re-exported to another PEM member country.

This is all to do with the fact that EFTA has different rules of origin in its own preference agreements with some PEM member countries. The European Commission is currently looking at the legality of whether EFTA countries, as a signatory to the PEM, should be applying their own rules or those of the PEM. The worst scenario is that certain goods will be excluded from the diagonal cummulation procedure, but it has also revealed a can of worms as it appears this may also be a problem between other PEM member countries having differing rules of origin in agreements with each other. One would have thought these problems could have been foreseen when the PEM was drawn up.