Industrial duties about to be abolished in Switzerland?

13/10/21

The Swiss parliament voted on the abolishment of customs duties on industrial goods on 1 October 2021. The decision is still subject to an optional referendum, but the reduction of import duties in Switzerland might enter into force in the upcoming years.

What is the decision about?

As part of an "Import Facilitation" package and combatting Switzerland as a high-price island, the Federal Council adopted different measures to reduce trade barriers and costs for Swiss businesses and consumers. The abolition of industrial tariffs is part of this package of measures. In November 2019, the Federal Council adopted the dispatch on the abolition of industrial tariffs for the attention of the Swiss parliament. The dispatch envisaged setting the tariffs for all industrial products in the general tariff to zero and at the same time simplifying the tariff structure (to a 6-digit HS level).

Although tariffs on industrial products are already generally quite low in Switzerland (averaging 1.8 per cent of the product value) the annual relief from customs duties of around CHF 560 million could be achieved. In addition to the savings resulting from the elimination of duties, the administrative burden associated with imports can be partially reduced for importers. This is due to less detailed tariff classification, the partial elimination of proofs of origin (i.e. for imports) and special customs procedures (e.g. IPR).

In the final parliamentary votes on 1 October 2021, both chambers reconfirmed their approval of the dismantling of industrial tariffs in Switzerland. The Council of States voted in favour of the bill by 29 votes to 13 with 2 abstentions. The National Council also approved the Federal Council's proposal by 109 votes to 82 with 5 abstentions.

This means that all industrial goods from tariff chapters 25 to 97 (with a few exceptions) can be imported without customs duties in Switzerland once the measure will enter into force.

When does this come into force?

The decision is subject to an optional referendum and the normal referendum period is 100 days from the decision date (the expiration is in January 2022). Although the entry into force was initially planned to be on 1 January 2022 based on the publication in November 2019, due to the delays in the parliamentary consultations (due to initial disagreements between the two chambers and partly because of the Covid situation), the entry into force after expiry of the referendum period is not to be expected before the end of 2023 or the beginning of 2024. The Federal Council has still to decide on the exact date.

What does this mean for your business and how can we help?

The abolition of industrial tariffs will have a positive impact on import costs in Switzerland, especially for consumer goods (e.g. cars, bicycles, personal care products, clothes etc.) and raw materials as well as components and semi-finished products imported for the manufacturing businesses.

On the other hand, the main obligations of customs clearance, filing of declarations and the payment of VAT, other taxes and excise duties (e.g. automotive tax, alcohol tax, mineral oil tax etc.) will still remain. Furthermore, it might become more difficult for manufacturing and exporting companies to get the appropriate preferential origin documentation from their suppliers as those documents will not be needed for the import process anymore (but might be important for the later re-exportation).

Therefore, the challenges of cross-border supply chains and interactions with multiple external parties, such as suppliers, clients, freight forwarders and customs brokers remain complex and appropriate customs and trade processes are required.

PwC supports businesses in those areas. Furthermore, PwC has developed a tool “Trade Activator” that can visualize the cross-border business of your company based upon customs (or broker) data in multiple jurisdictions, including Switzerland. We help you visualize and subsequently analyze your cross-border trade in order to detect future savings possibilities and to mitigate risks.