The Parliament approved a reform to eliminate the customs duties on industrial products and simplify the Swiss customs tariff. This intervention is part of the efforts of the Swiss government to tackle the high prices in Switzerland and to increase the competitiveness of Swiss companies.

In order to increase the competitiveness of the Swiss industry and enhance attractiveness of the Swiss market, on October 2021, the Swiss Parliament has approved draft legislation to abolish customs duties on most industrial goods and to simplify the structure of the customs tariff. 

The Parliament’s decision is subject to an optional referendum 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 date of entry into force of the revised Customs Tariff Act. According to unofficial information provided by Parliament officers, the abolition of customs duties will not enter into force before 2023, so as to provide both the businesses and the customs authorities with sufficient time for the necessary technical and organizational adjustments.

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

Switzerland is not the first country to unilaterally propose the abolishment of industrial 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) abolished industrial duties.

Industrial products

For the purposes of interest here, industrial products mean all goods, except agricultural products (including animal feed) and fishery products. The agricultural duties remain unchanged in order to safeguard Swiss agricultural and food sectors.

In detail, industrial products 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 abolition of the industrial duties affects almost all products in chapters 25-97 of the Swiss Customs Tariff, except for a few products classified in chapter 35 and 38.

Simplified tariff classification

Chapters 25-97 of the Swiss Customs Tariff, concerning the industrial products, encompass a total of 6172 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 abolition of industrial duties, the variety of eight-digit codes is no longer justified and most of the eight-digit tariff items will be eliminated, resulting in a reduction from 6172 to 4592 tariff codes. 

As mentioned above, the tariff simplification only concerns industrial products, with the tariff structure concerning products of the agricultural sector remaining unchanged.

Reduced customs clearance burden but customs compliance still required

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

Nevertheless, tariff classification of products and preferential proofs of origin would not become completely outdated. In fact, 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 – will still have to be compliant 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).

Getting ready for the Swiss customs landscape reform

In view of the entry into force of the Swiss customs landscape reform, Swiss companies should assess the impact of the reform into their supply chain and customs operations, as well as implement the required actions to minimize risks and maximize opportunities.

Among others, the following aspects should be considered:

  • 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 procedures;
  • evaluate supply chain optimization (e.g. new sourcing jurisdictions, increase in Swiss manufacturing activities) to maximize the benefits of tariff elimination.

How KPMG can help

Our experts can help you assess the impact of the Swiss customs reform into your supply chain and customs operations, as well as advice on opportunities to maximize the benefits of the reform while ensuring compliance with international trade requirements.

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