Switzerland Eliminates Import Tariff on Industrial Products: Prospects and Obstacles for Vietnamese Goods

Switzerland’s elimination of import tariffs on industrial goods will place Vietnamese products on an equal footing with those from other countries.

Eliminating import tariffs on industrial goods

On the evening of January 3, the Vietnam Trade Office in Switzerland announced that starting from January 1, 2024, industrial products will be exempt from import tariffs into Switzerland, regardless of their origin. This trade policy is a significant development resulting from years of research and preparation.

Specifically, in Switzerland, industrial products include intermediate input materials for the production process such as raw materials, semi-finished goods, machinery, and equipment, as well as consumer goods such as vehicles, household appliances, clothing, and footwear. These products will be exempt from import tariffs.

However, agricultural products, including live animals and plants, food, processed agricultural products, seeds, animal feed, and aquatic products, are not considered industrial products. Therefore, import tariffs still apply to these products.

In addition to eliminating import tariffs on industrial goods, Switzerland has also made several changes to simplify customs tariffs and rules regarding proof of origin, according to the Trade Office.

For example, children’s leather shoes, previously classified under HS code 6403.5910 and subject to a standard import tariff of CHF 173 (US$203) per 100 kg, will now be grouped together with other types under HS code 6403.5900, with a tariff rate of 0.

“The elimination of import tariffs on industrial goods does not affect the customs clearance process. Importers are still required to declare their imports and pay other associated fees and charges, including VAT,” noted the Trade Office.

Assessing the impact of this policy on Vietnamese goods, the Vietnam Trade Office cited data from Swiss Customs, stating that industrial goods account for approximately 90-93% of Vietnam’s total annual import turnover to Switzerland on average. Many of these products enjoy Swiss GSP (Generalized System of Preferences) tax incentives.

“Switzerland’s elimination of import tariffs on industrial goods will place Vietnamese products on an equal footing with products from all other countries. Vietnamese goods will no longer have any advantages (compared to countries not eligible for GSP benefits) or face any tax disadvantages,” commented the Trade Office. It further stated that Vietnamese goods, such as textiles, garments, leather goods, and footwear, will benefit more than competitors from many other markets.

Photo: MOIT

Measures to regulate import tariffs

The decision to eliminate import tariffs on industrial goods was made by the Swiss Parliament in October 2021 through the amendment of the Customs Tax Law. In February 2022, the Swiss Government announced that this measure would take effect from January 1, 2024.

The Vietnam Trade Office in Switzerland believes that this measure demonstrates Switzerland’s support for and promotion of open trade in a protectionist global trade environment, given its highly open economy.

The Swiss government plans to monitor the impact of this measure on domestic prices of relevant products through a monitoring program.

During the preparation process, the Swiss Government conducted studies on the impact of eliminating import tariffs on industrial goods.

The estimated economic benefits amount to CHF 860 million (approximately US$1 billion) based on trade figures from 2016. This figure includes direct tax savings for businesses of around CHF 490 million (US$575.25 million) and savings in administrative costs of approximately CHF 100 million (US$117.39 million). Indirect impacts, such as increased productivity for businesses, are estimated to be worth around CHF 270 million (US$316.97 million).

Based on updated 2022 figures for Swiss imports, direct tax savings for businesses could reach around CHF 600 million (US$680 million).

The Swiss government has not introduced any direct measures to compensate for the loss of customs duties resulting from the elimination of import tariffs on industrial goods.

Preliminary studies suggest that the elimination of import tariffs on industrial goods will lead to increased economic output, indirectly boosting other tax revenues and offsetting about 30% of the loss in customs tax revenue in the coming years.

In the overall context of the Swiss economy, the positive effects of this measure will outweigh the expected loss in tax revenue.

Experts believe that this new policy will reduce the financial and administrative burdens for Swiss businesses and consumers, thereby enhancing Switzerland’s position as an economic, commercial, and industrial hub.

This policy will also provide Swiss industries with easier access to raw materials and input products, fostering increased competitiveness and diversification. This will contribute to improving the productivity and competitiveness of Swiss companies both domestically and internationally.