The Swiss Federal Parliament has acted to unilaterally abolish import duties on almost all industrial goods and simplify the Swiss customs tariff to reduce costs for consumers and companies alike. If no major changes occur in the final vote of the Parliament, the policy could enter into force as early as 1 January 2022 or during the first quarter of 2022.

In late 2017, the Swiss Federal Council announced its plan to abolish import duties for industrial products (Harmonized Schedule (HS) chapters 25 – 97) among other policies to tackle the high prices of such goods in Switzerland. Based on government calculations, the expected annual duty deficit of CHF500 million could be compensated through increased tax revenues from companies as the zero tariffs reduce not only costs for pre-materials but also administrative costs for customs clearance procedures. Furthermore, consumers would be able to save approximately CHF350 million annually from reduced tariffs.

On 15 September 2021, after extensive debates in Parliament on whether to accept the policy, both chambers eventually agreed to abolish customs duties on industrial goods. The policy is still subject to a final vote by both chambers of Parliament. Unless there are any major changes of votes, the policy is likely to be passed. As a result, and along with the scheduled HS revision 2022, the Swiss tariff code would be downsized from its currently 6172 tariff lines to 4592 tariff lines to simplify the classification of products. To create further synergies, the customs duty elimination as well as the tariff code changes would both enter into force on the same date.

Simplified import procedures and tariff classifications

Except for a few industrially produced agricultural products (such as albumin, dextrin or acid oils from refining as covered in HS chapters 35 and 38), the tariffs on industrial goods would be zero, meaning that all other industrial goods could be imported without paying any customs duties. Once in effect, the compliance and import procedures for such products would therefore be less complicated and time-consuming, as special procedures (e.g., temporary importation, inward processing relief) may be redundant. Furthermore, the downsizing of the Swiss customs tariff lines would come along with the HS revision which would simplify the whole tariff classification of products and ease the change of lines in master data.

Compliance requirements

In general, it can be said that the import clearance for companies would be less burdensome as tariff classification would be simplified and companies would no longer need proofs of origin to benefit from duty reductions in Switzerland. However, companies that manufacture with pre-materials, re-sell or process products sourced from other countries still have to be compliant with preferential origin related rules of Free Trade Agreements (FTAs) in case their customers request certain proofs of origin. Thus, preferential proofs of origin are still needed and have to be declared for imported goods to ensure origin compliance accordingly. In addition, import Value Added Tax, import licenses, excise taxes (e.g., vehicle tax, Volatile Organic Compounds) and the corresponding compliance would remain applicable even if there are no customs tariffs.

In addition, the intended change following the vast reduction of Swiss tariff codes and the upcoming HS revision would require early preparation. Even though tariff classification would be simplified, the tariff codes are still the core item in connection with customs clearance, especially in regard to possible permit requirements, origin calculations and export restrictions. It is therefore essential that the internal master data is updated in due time to prevent any unforeseen events and risks.

Implications

The elimination of almost all customs duties for industrial goods and the adaption of the Swiss tariff codes would be rather comprehensive and require prompt action as they may enter into force as of 1 January 2022. Consequently, Swiss-based companies should prepare to be compliant and to be able to benefit from these customs changes. In order to be ready, companies should:

• Quantify the impact in terms of potential duty savings and compliance
• Fully update existing master data (e.g., tariff codes, origin calculation) and prepare for new structure
• Update origin compliance procedures
• Prepare assessments of third-party providers to ensure accurate declaration of imports
• Explore new sourcing options and partner countries without existing FTAs to enhance supply chain (e.g., for pre-materials)
• Assess possible domestic processing for (intermediate) manufacturing due to duty reduction
• Evaluate current customs procedures for optimization

Even though the reduction of customs duties should decrease bureaucracy and costs, companies should also be aware of possible new developments. As the European Union is currently planning to implement so-called “green taxes” (e.g., levied on plastics or carbon emissions), Switzerland may follow suit and could tax imports based on sustainability and environmental aspects in the near future.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young AG, Indirect Tax Services

• Ashish Sinha, Geneva | ashish.sinha@ch.ey.com
• Jonathan Baumeler, Zurich | jonathan.baumeler@ch.ey.com
• Marcel Blöchlinger, Zurich | marcel.bloechlinger@ch.ey.com
• Katharina Königstädt, Zurich | katharina.koenigstaedt@ch.ey.com