VI. TRADE REGULATIONS AND STANDARDS - Tariffs and Import Taxes The Swiss customs tariff uses the Harmonized System (HS) for the numerical classification of goods. All countries are afforded GATT most- favored-nation treatment. Customs duties on imports are, with few exceptions, based on weight rather than on value. In many instances, especially with high-value, low-weight products, customs duties are almost negligible. With tariff rates averaging about 3.2 percent in the industrial goods sectors, Switzerland's tariff policy favors the development of trade. In agriculture, the myriad non-tariff barriers currently in place will be "tariffied" or changed into tariff-only protection in 1995 -- an outcome of the Uruguay Round negotiations on agriculture. The Uruguay Round agreement on agriculture will improve market access for U.S. agricultural exports into Switzerland, despite the very high tariff equivalents which will replace current non-tariff barriers. The most important U.S. exports to Switzerland are currently fruits and nuts (mainly almonds and walnuts for processing), vegetables, cotton, tobacco, and meat. Market outlooks for these and other products will improve significantly. In addition, the U.S.-Swiss bilateral agreement under the Uruguay Round has produced lower tariffs on several items of particular interest to U.S. exporters, including sweet corn, fresh berries, dried fruits, peanuts, oilseeds, parboiled rice, and grapefruit juice concentrate. These concessions could result in significant market growth, particularly if the highly concentrated Swiss retail sector would provide more opportunities for branded and generic promotions of U.S. products. - Customs Valuation Customs duties are specific duties calculated on the basis of gross weight, unless some other method of calculation is specified in the tariff (e.g., per unit, per meter, per liter), usually designated as some number of Swiss francs per 100 kilograms of gross weight. The gross dutiable weight includes the actual weight of the goods and their packaging, including the weight of any fixing material and supports on which the goods are placed. The net weight includes the actual weight of the goods, including the weight of the supports and the immediate packing material, but excluding the packing material for protection of the goods during international transport. The tare is the difference between the gross weight and net weights. Goods whose packaging ensures sufficient protection against damage resulting from transport are liable to duty on the basis of their gross weight. Goods that are not packed, as well as those whose packaging does not provide sufficient protection against transport damage, are liable to an additional tare calculated by customs authorities on the basis of the net weight. The decision as to whether packaging is adequate is determined by the packaging requirements which the goods must fulfill for international transport by rail. In addition to customs duties, the Swiss customs administration levies a three percent statistical tax on the total customs duty payable. This fee is designed to cover the cost of preparation of the relevant foreign trade statistics. Additional duties are charged on certain goods such as beer, grain used in the preparation of brewing malt, some alcoholic beverages (including wine), raw materials for distilling, and motor fuels. Certain products used as fuel are subject to countervailing duties. Turnover Tax: Switzerland currently levies a turnover tax (Warenumsatzsteuer or WUST), which applies to both domestic transactions and on the importation of goods. It is a single-step tax, applied only once during the passage from the producer or importer to the ultimate consumer, on the last transaction from a wholesaler to a nonwholesaler. Certain products considered to be essential consumer goods (fuels, foodstuffs, non-alcoholic beverages, pharmaceuticals, books and newspapers) are exempted from the turnover tax. Export sales are also tax exempt. In end effect, the WUST is a consumption tax, since it is ultimately shifted to, and borne by the consumer. With regard to imports, the 9.3 percent rate is calculated on the duty- paid, CIF value of the goods at the point of entry into Swiss customs territory. A reduced rate of 6.2 percent can be applied for at the time of clearance with the following documents: a copy of the foreign supplier's invoice and a certificate stating that the goods are for the importer's own use. Companies registered as tax-paying wholesalers with the federal tax authorities may import free of turnover tax goods that are intended for resale or are used as raw materials; they are, however, required to pay the 6.2 percent turnover tax rate when the goods are placed on sale for final consumption. Value Added Tax: In November 1993, the Swiss population decided that as of January 1, 1995, the turnover tax system described above will be replaced by a value added tax system, similar to the VAT in the EU countries. The introduction of the VAT is not a modification of the old turnover tax system, but a complete change of tax systems. In principle, the VAT will be levied on all deliveries of goods, as well as on all services, in Switzerland, including deliveries of investment and consumer goods, deliveries of animals and plants, consulting and entertaining services, license fees and the sale of rights. VAT rules for the importation of goods are the same as the old rules of the turnover tax, but the VAT is also levied on the importation of all services. The standard rate of VAT is 6.5 percent, although there is a reduced rate of 2 percent for certain goods and services, such as water transported by pipes; foodstuff and drinks (excluding alcoholic beverages and prepared meals); meats of all kinds; cereals; plants, seed and flowers; some basic farming supplies; medicine and drugs; newspapers, magazines, books and other printed materials; and services of radio and TV companies other than those for commercial use. The full implications and applications of the VAT are still being worked out. The final version of the VAT Ordinance is expected during the summer of 1994. For further information on most recent developments, contact the Commercial Section, American Embassy Bern (address in Appendix C). - Import Licenses Import licenses are required only for a limited number of products, and generally fall into two categories -- measures for the protection of the country's agriculture, and measures of state control. Under protection of the country's agriculture, Switzerland imposes quantitative restrictions in order to ensure the country's food supply in the event that supplies from abroad are cut off. Products affected by these restrictions include cattle, meat, milk and dairy products, indigenous fresh fruit and vegetables, seasonal cut flowers, cereals and forage products, wine and grape juice. These products subject to quota may not be imported without an import license, and licenses are granted only to importers established in Switzerland. Most quotas vary from year to year according to the size of harvests, volume of stocks and market requirements. In some cases, importers may be required to take a certain quantity of domestic products of equal quality. The system of import licensing for agricultural products will be significantly modified in 1995, following implementation of the GATT Uruguay Round reforms for agriculture. Switzerland will continue to block trade through high tariffs, however, as described in the section on tariffs and import taxes. Import licenses are also required for certain products which are not subject to quotas, but which are covered by special regulations concerned with public health, plant health, quarantine (plants), veterinary regulations and regulations concerning the protection of species, safety measures, prices control measures (for certain textile products), and measures for protection of the Swiss economy and public morality. Such import licenses are also issued only to persons and firms domiciled in Switzerland. - Export Controls The Swiss government has recently endeavored to join the evolving international consensus on nonproliferation-related export controls. Switzerland participates actively in multilateral nonproliferation export control regimes, including the Nuclear Suppliers Group (NSG) and Missile Technology Control Regime (MTCR). The Swiss government basically shares the U.S. view of which nations pose serious proliferation risks. It now scrutinizes sales of sensitive dual-use equipment to questionable end-users. The U.S. and Swiss governments frequently exchange views on such sales, and the Swiss take our positions into account before issuing licenses. The Swiss government has taken steps to tighten its export controls in recent years. The February 1992 Nonproliferation Ordinance placed controls on exports of material and technology related to weapons of mass destruction. An additional ordinance, effective March 1, 1993, amended the February 1992 ordinance to include the complete Nuclear Suppliers Group dual-use list, as well as annexes for the MTCR list and chemical and biological equipment. The government is now at work on further tightening its export control laws. Three new laws in preparation, on international export trade, war materials, and nuclear energy, should result in tougher standards by January 1996. As a last resort, the federal government currently has the right to halt any export shipment -- whether or not it violates Swiss law or an international export control regime -- if it is deemed to create a serious foreign policy question. While some Swiss firms may serve as intermediaries for illicit or questionable trading with entities in proliferation-risk countries, the federal government does not encourage this and tries to prevent it. Some Swiss officials and businessmen fear that multilateral export controls will discriminate--intentionally or not--against Swiss firms. The U.S. Government continues to encourage the Swiss government to remain vigilant and bring Swiss law to bear on firms that may attempt to circumvent export controls. - Import/Export Documentation All imported or exported goods must be presented to the appropriate customs office and declared for clearance. Goods imported into Switzerland must be declared to customs within the following time limits from arrival in the country: by road, 24 hours; by river, 48 hours; by rail, 7 days; and by air, 7 days. The importer may examine the goods before they clear customs. For Swiss customs purposes, an ordinary commercial invoice in duplicate or triplicate is considered sufficient documentation. The invoice should contain the following details: description of the products and packaging, gross and net weight of each package, quantity (in metric terms), country of origin, and value CIF (cost, insurance and freight) to the Swiss border. As Swiss duties are specific, indication of value is required only for statistical purposes. No consular or other stamp is required. A certificate of origin is not normally required. An exception is if preferential duty rates are requested. Additionally, a certificate of origin may be required for health reasons (meats and plants), or for reasons of quality control (controlled appellation wines). Special health certificates, stamped by the competent government authorities of the country of origin, are required for the import of horses, bovine animals, farm animals, certain domestic animals, bees and eggs for hatching, as well as for meat, game, seafood, beeswax and comb honey. Shipments of certain vegetables, fresh fruits and wild plants must be accompanied by official plant health certificates of the country of origin. Swiss importers are normally cooperative in informing the exporter of Swiss requirements, and in assisting in meeting those requirements from the Swiss side. - Temporary Entry Goods imported from abroad which are to be reexported or transported to another customs office or a customs warehouse may be cleared on the basis of a "Begleitschein" or free-pass certificate. The importer must apply for the certificate from the Customs Administration and provide security for the customs charges applicable to the imported goods. The certificate must be presented to customs within the stipulated time, together with the goods in unchanged condition for reexport. Goods transiting Switzerland must be declared for clearance at the point-of-entry customs office, covered by a national or international transit document (bond note, TIR carnet, T1/T2 dispatch declaration, or international waybill). These goods must be reexported intact within the designated time limit. No transit duties or fees are levied. A transit permit is required only for narcotic drugs, armaments, and nuclear fuels and their residues. In the case of direct transit by rail, duties and taxes are guaranteed by the railway authorities. The issuing authority is the guarantor of road transit covered by a TIR carnet. A surety or financial deposit is required for transit covered by a bond note or transit through the EU covered by a T1/T2 dispatch declaration. Goods temporarily imported or exported for processing or repair may be eligible for customs favored treatment. Reduction in duty or duty-free treatment can be granted when justified by economic interests of Swiss industry. Authorization is granted only to residents of Switzerland who do the processing or repair themselves, or commission a third party to do it. Authorization is for particular goods that are to undergo specified processing. Special conditions may be imposed for customs handling and supervision of the transaction. Goods for display at public exhibitions are eligible for free passage (Freipass) through Swiss customs. Certification by the fair authorities that the goods are entering Switzerland for the exhibition is usually required. Exhibition goods must be reexported within one month of the end of the exhibition. If the goods are sold to a Swiss resident off the exhibition floor, the buyer incurs a liability for the customs charges. - Labeling, Market Requirements Swiss labeling requirements apply mostly to food products. False descriptions are strictly prohibited. As a rule, the label or packaging for sale to consumers must indicate the specific name of the product (in French, German or Italian), the weight (in metric terms), the sale price and the unit price, the weight of each component in the case of mixed products, and a listing of the ingredients and additives in decreasing order of weight. All particulars of weight and measurements must comply with the regulations of the Federal Metrological Office (Eidg. Amt fuer Messwesen). (See Appendix C for address.) The Foodstuffs Ordinance specifies additional information that must be provided in the case of certain products, such as the name of the manufacturer or distributor, country of origin of the product, and "use by" date. A growing number of distributors prefer to provide additional information on their labels, such as the "EAN code" for computerized data retrieval, and/or the nutritional or energy value of the product. Switzerland recently issued draft implementing regulations for the revisions to its food law passed by the Swiss parliament in 1992. The changes bring Swiss law into general conformity with European Union food law, and the resulting elimination of non-tariff barriers could significantly increase U.S. exports to Switzerland. According to Swiss regulators, all of the new standards will be equal to or less strict than EU standards, except for aflatoxins, microtoxins, and certain pesticides such as the level of pesticides in water for drinking and food processing. The proposed regulations cover all food products as well as tobacco and packaging and labeling standards. The new food law is scheduled for implementation in January 1995 to keep Switzerland on the same general timetable as other EFTA countries in adopting EU directives for food. Although Switzerland voted in December 1992 against joining the European Economic Area, it still has observer status in EFTA working groups on standards, and is keen to keep on schedule with the general shift of EFTA participants to European standards. Two U.S. export commodities, horsemeat and winecoolers, will gain significantly increased access following implementation of the reforms. First, the new law will lift restrictions limiting retail sale of horsemeat to only horsemeat butcher shops. This could significantly impact market access opportunities for U.S. exporters who currently hold 60 percent of the horsemeat import market (2,500 mt per year worth $18 million in 1992). Additional market access opportunities will be created for U.S. wine exporters as the revised Swiss food law will permit wine coolers to be sold domestically. The regulations will also lift the current prohibition on sorbate additives in wine. This restriction effectively blocked several types of California wines from the Swiss market which have enjoyed significant sales in the EU. - Prohibited Imports Strictly speaking, there are no prohibited imports in licit, commercial trade with Switzerland. The Swiss method of controlling unwanted imports is through the imposition of restrictions, quotas and other rules and regulations such as detailed in other parts of this section. - Standards (e.g., ISO 9000 usage) The umbrella organization for Swiss standards is the Schweizerische Normen-Vereinigung (SNV, or Swiss Standards Association), a private, nonprofit association under Swiss law which groups Swiss governmental and private agencies and firms for the purpose of developing industrial standards and technical regulations. Certification rests with a variety of governmental and private agencies such as the Swiss Association of Machinery Manufacturers (VSM), Swiss Association of Electrical Apparatus Manufacturers (SEV), Federal Health Office, and the PTT. (See Appendix C for addresses.) The SNV is in turn a member of the International Standards Organization (ISO) in Geneva, in which some 2,000 industry associations worldwide participate in the establishment of a system of quality management and recommendations. In its Series 9000, ISO has issued recommendations aiming at introducing some 20 issues in basic processes dealing with quality testing and management for manufactured products. Swiss industry is increasingly adopting ISO 9000 standards. More and more Swiss producers are seeking certification, even though Swiss certification according to the ISO standards is not yet recognized by the European Union. To overcome this barrier, Swiss exporters are turning to agents or their own subsidiaries in EU countries to obtain equivalent certification under the EN 29000 series of European Quality Management Standards, or double certification through an international network of private quality management associations. Swiss industries incorporating U.S. components in their end products, especially in machinery and instrumentation (key Swiss export commodities), increasingly specify ISO 9000 standards for imported products. Under the EN 29000 directives issued by the EU, the equivalent ISO 9000 series of norms are becoming a sales factor in the European Union, and in Switzerland, even when they are not explicitly specified. In the service sector, the Swiss banking industry and financial institutions are gradually looking at ISO's Series 9001 recommendations, which deal with product or service development and design, as well as with training. The ISO Series 9001 to 9003 recommend specific approaches and processes in systematic quality control. 9003 concentrates on end testing. Among the 1,000 Swiss organizations which have been certified so far, the two big Swiss banks, Union Bank of Switzerland and Swiss Bank Corporation, were the first to seek certification under the 9001 ISO series of norms. Swiss industry, trade and quality management associations, as well as official agencies such as the Swiss Federal Testing Agency EMPA recommend or conduct audits. Switzerland is also represented within the private EOTC Group, the European Organization for Testing and Certification. A system of joint audits offering reciprocity treatment has been introduced between participating quality control associations in different European countries under the so-called E-Q-NET (European Network for Quality System, Assessment and Certification). In addition, reciprocity treatment for quality management certification is on the agenda of coming negotiations between the government of Switzerland and the EU. - Free Trade Zones/Warehouses There are no free trade zones per se in Switzerland, but there are four ways of maintaining goods not cleared through customs -- free ports, federal bonded warehouses, private bonded warehouses, and in transit in the Rhine River port of Basel. Free ports are considered extraterritorial, and goods may be stored indefinitely without customs inspection. Goods may be unpacked and repacked, as well as undergo certain processing such as analysis, sorting, mixing and sampling. Major processing resulting in changes of tariff classification may be undertaken only with customs authorization. One or more free ports exist in or near virtually every major city around the country. Federal bonded warehouses, considered to be on Swiss customs territory, are subject to stricter regulations. Goods stored are under customs control, involving registration of arrivals and departures. Storage may not exceed five years, and only processing essential for the preservation of the goods may be undertaken. Around a dozen federal bonded warehouses dot the country. Private bonded warehouses are operated by companies to store goods not cleared for free circulation through customs. Only wholesale traded goods are generally accepted. An import license or customs clearance note must be shown when goods covered by import restrictions or quotas are imported and cleared through customs for storage in a private bonded warehouse. Clearance for private storage is on the basis of a bond note, testifying to a cash deposit or bond to cover customs charges liable on the goods. The Rhine River port of Basel has transit warehouses for grain and similar goods for mass consumption; storage time is unlimited. Similar goods imported by ship in quantities of at least 12 tons may be stored for up to two years. Liquid fuels in transit are also stored. - Special Import Provisions Other than those import regulations already discussed in other portions of this Section, there are no special provisions governing the import of goods and services into Switzerland. - Membership in Free Trade Associations Switzerland is a member of the European Free Trade Area. EFTA members (currently Austria, Finland, Iceland, Liechtenstein, Norway, Sweden) maintain their own external tariffs, while tariff duties on trade in industrial products among member countries have been eliminated. EFTA countries have free trade agreements with the European Union (Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, United Kingdom), whereby trade in industrial goods is duty free. Preferential Swiss duty rates apply to goods imported from the EU-EFTA free trade area when an importer makes a request on the import declaration and produces a valid certificate of origin. EFTA membership is shrinking; the fate of the organization will be decided in December 1994. In December 1992, the Swiss population voted not to join the European Economic Area (EEA), whose aim is to achieve more complete economic integration between EU and EFTA members. The reasons for the rejection are many and varied, but basically involve instinctive fears of external controls (from Brussels) and an unwanted insurge of foreigners. The Swiss government nonetheless has maintained its application for eventual membership in the EU, is making a concerted effort to bring Swiss laws and regulations into line with those of the EU, and is negotiating bilateral agreements with the EU to gain as many of the economic advantages of EEA/EU membership as possible without sacrificing perceived traditional Swiss values and political and economic freedoms.