From 1 January 2024, Switzerland will unilaterally abolish import duties on almost all industrial goods. This, together with a simplification of the Swiss customs tariff codes, should reduce costs for both consumers and companies, but will also force companies to adapt their processes.
It is well known that the average cost of goods and services is considerably higher in Switzerland than in neighboring countries. One of the factors contributing to the country’s high-cost status is the presence of various tariff and non-tariff trade barriers that isolate the Swiss market, allowing companies to charge higher prices domestically. With the aim of reducing these trade barriers, the Swiss Federal Council adopted a package of import facilitation measures back in December 2017. One of these measures was the elimination of tariffs on industrial goods, which has now been adopted and will enter into force on 1 January 2024.
The Swiss authorities estimate that eliminating the industrial tariffs will lead to welfare gains for the Swiss economy of around CHF 860 million annually (of which CHF 490 million is directly associated with the tariff elimination), compared to the loss of 0.7% in federal revenue. With customs duties eliminated and the associated administrative procedures simplified, companies in Switzerland benefit from cheaper inputs and thereby also from lower production costs, which ultimately should boost the competitive advantage of Swiss companies on the global stage and bring an annual saving of around CHF 350 million for Swiss consumers.
What are the key changes?
The key changes consist of two main elements, i.e. the elimination of industrial tariffs and the simplification of the Swiss tariff structure.
Firstly, Swiss industrial duty rates will be set to zero for most industrial products (covered in HS-chapters 25 – 97) such as mineral products, chemicals, plastics etc, but also consumer goods such as bicycles, cars, household appliances, clothing and footwear. Starting from 1 January 2024, these products will no longer be subject to customs duties when imported into Switzerland, regardless of their origin.
With industrial tariffs eliminated, there will generally be no need for special procedures such as temporary importation or inward processing relief for industrial products, reducing customs compliance.
It should be noted that a few agricultural goods (including animal feed) under HS-chapters 35 and 38 are excluded from the changes. Furthermore, no changes are foreseen for any products falling under other HS-chapters (e.g. vegetable products, foodstuffs and animal products).
Secondly, the current Swiss tariff structure will be simplified, by combining and reducing the number of tariff lines. The total amount of different tariff numbers will be reduced from 9,114 to 7,511. In most cases, this simplification involves replacing the last two digits of the Swiss eight-digit tariff numbers with "00". As such, tariff classification in Switzerland should be easier for companies going forward.
What remains unchanged?
Generally, customs procedures in Switzerland will currently remain unchanged (although it should be noted that further simplifications are in the pipeline). Importers will continue to be obliged to declare their imports and ensure the correct categorization of goods using the appropriate (simplified) tariff codes and the weight-based duty remains the same for products not covered by the change.
Moreover, the customs tariff nomenclature remains essential for various aspects of foreign trade statistics, rules of origin, the levying of additional duties (e.g., Mineral Oil Tax, Motor Vehicle Tax, VAT, VOC etc) and the enforcement of numerous non-customs regulations (e.g. license requirements, plant health etc).
Does this mean the end of preferential proof of origin in Switzerland? No!
The abolition of industrial customs duties does not mean that companies no longer need to worry about preferential proofs of origin when importing industrial products into Switzerland. For now, such preferential proofs of origin are often needed to benefit from a lowered or zero customs duty when importing goods into Switzerland, on the basis of a free trade agreements (FTAs) or the Generalised System of Preferences (GSP) in favor of developing countries.
As of 1 January 2024, such proof is no longer required if it is clear at the time of importation that the goods will remain or be consumed in Switzerland and are already subject to a zero duty rate.
However, where products are to be re-exported after processing (e.g with the use of origin cumulation) or are re-exportedunchanged, preferential proofs of origin may still be required to benefit from any preferential origin rules upon importation of the goods in further countries. To make this possible, the goods would still need to be duly declared with preferential original application upon importation into Switzerland, even though this would not result in any duty savings in Switzerland itself (as the customs duties would anyway be zero). This is why it is important for companies to understand whether further in the supply chain, preferential origin is used (either by the company itself or by its customer), as such may prompt the need to maintain the current processes upon importation in Switzerland.
Where the lifting of industrial tariffs does not generally affect the requirements for (archiving) preferential proofs of origin, the Swiss authorities will allow preferential proofs of origin to be stored electronically after the importation of the goods into Switzerland from 1 January 2024. Please be aware however, that such only applies to the time period after importation and that at the point of importation the original proof is still required, as is the case today.