Blogs | 3 November 2021

Switzerland: a country without customs duties?

Switzerland is about to make history by abolishing all of the customs duties currently levied on industrial goods coming into the country. This was not a conclusion they arrived at lightly. It took many discussions between parliament and working groups, however, in the end, they determined that doing away with these customs duties will not negatively impact the Swiss economy—in fact, the opposite seems likely.

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The decision was confirmed by majority vote in the Swiss parliament on 1 October: for all goods in HS code chapters 25 and 97, the duty rate will be changed to zero. This change could enter into force as early as January 2022. Customs duties will still be levied on all other chapters of goods, the biggest category for Swiss imports being agricultural. This protects domestic producers by charging tariffs on agricultural goods from outside of Switzerland, thus giving Swiss concerns a competitive advantage.

Ending customs duties on industrial imports benefits the domestic consumer because it translates to lower prices on imported goods, however the producers, logistics providers, and Swiss importers will also benefit. Since there is a general zero duty rate regardless of the origin of the imported goods, Rules of Origin agreed upon in Free Trade Agreements (FTAs) would become obsolete according to the Swiss government, thereby alleviating a lot of bureaucracy.

However, a problem remains, namely how to deal with cumulation of goods. If raw materials or semi-produced goods are imported from outside of Switzerland and go through further production processes in Switzerland before being re-exported as a final product, how do we prove the preferential origin of this final product? FTAs only allow cumulation for goods originating in specifically mentioned partner countries in order for the final product to have Swiss origin. How does the producer in Switzerland prove the origin of his final product if he cannot prove the origin of the imported items used in the production?

For now, we are waiting for the official legislation from the Swiss administration about this. One thing remains certain: the change will be revolutionary and will shift the focus of customs from collecting duties to combatting counterfeit and illegal goods, as is envisioned in the revamping of the Swiss customs administration.

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