Switzerland: Proposal to eliminate import duties on industrial products, to simplify Swiss customs tariffs

A pending proposal would eliminate (repeal) customs duties on most industrial goods and simplify the structure of the Swiss customs tariff.

Parliament in October 2021 approved a proposal to reform the customs rules, and the measures are subject to an optional referendum by the Swiss voters that can be launched by a political party until 20 January 2022. If no referendum is launched by that date, the Federal Council will determine the effective date of the revised customs tariff law. According to unofficial information provided by Parliament officers, the proposed repeal of customs duties would not be effective before 2023 in an effort to provide both businesses and the customs authorities with sufficient time for the necessary technical and organizational adjustments.

The repeal of industrial customs duties would cost approximately CHF 500 million. However, in light of the Swiss government estimates, the customs duty deficit would be offset by a boost to the Swiss economy calculated at approximately CHF 800 million (i.e., a decrease of customs duties exposure for Swiss companies of approximately CHF 500 million, a reduction of customs related administrative burden of approximately CHF 100 million, and indirect effects to the local economy of approximately CHF 200 million). 

Switzerland is not the first country to unilaterally propose to stop the collection of industrial customs duties. Hong Kong and Singapore have stopped levying duties on industrial products. Iceland, Canada, New Zealand, and Norway have also already unilaterally (fully or partially) repealed industrial customs duties. 

Industrial products for these purposes would mean all goods, except agricultural products (including animal feed) and fishery products. The agricultural duties would remain unchanged to safeguard Swiss agricultural and food sectors.

In detail, industrial products would include both inputs (such as raw materials and semi-finished products) and consumer goods (such as bicycles, cars, household appliances, domestic utensils, clothes, and shoes).

Therefore, the repeal of the industrial duties would affect almost all products in chapters 25-97 of the Swiss Customs Tariff schedule, except for a few products classified in chapter 35 and 38. 

Chapters 25-97 of the Swiss Customs Tariff schedule, concerning industrial products, encompass a total of 6,172 eight-digit tariff headings. The first six digits correspond to the Harmonized System (HS) of the World Trade Organization (WTO), whereas the remaining two digits are defined by Switzerland and allow the tariff to be adapted to national requirements.

With the elimination of industrial customs duties, the variety of eight-digit codes would no longer be justified and most of the eight-digit tariff items would be eliminated, resulting in a reduction from 6,172 to 4,592 tariff codes.

The tariff simplification would only concern industrial products, with the tariff structure concerning products of the agricultural sector remaining unchanged.

As a result of such customs reform, the import procedures for these products would be simplified and less burdensome, as the tariff classification is streamlined, and proof of preferential origin would no longer be required to benefit from duty exemption.

Nevertheless, tariff classification of products and preferential proofs of origin would not become completely outdated. Swiss companies active in the international trade arena (e.g., companies that manufacture with foreign raw-materials or semi-finished products and/or re-export products) would still have to comply with tariff and preferential origin regulations for international trade (e.g., proof of origin for products re-exported within the scope of preferential cumulation of origin).  

Due to the Swiss customs landscape reform, Swiss companies need to consider and assess the potential effects of the reform into their supply chain and customs operations, as well as implement the required actions to minimize risks and maximize opportunities.

Some items to consider include how to or when to:

• Quantify the impact of duty savings
• Review the tariff classification of the impacted products
• Update the master data in ERP landscape
• Assess the impact on origin management and, if required, update origin compliance procedure
• Evaluate supply chain optimization (e.g., new sourcing jurisdictions, increase in Swiss manufacturing activities) to maximize the benefits of tariff elimination

Read a November 2021 report prepared by the KPMG member firm in Switzerland
 

For more information, contact a Trade & Customs professional from the KPMG member firm in Switzerland:

Fernanda Montani | +41 58 249 75 59 | fernandamontani@kpmg.com

Maeva Rancoeur | +41 58 249 57 33 | mrancoeur@kpmg.com