How are you utilising the free trade agreement? Information for Swiss exporters and importers.

The rules of origin which determine the processing to be carried out in the country of origin, take modern production methods into account. Thereby Swiss producers can actually utilise preferential market access – where goods are either tariff-exempt or subject to lower tariffs. In contrast to other free trade agreements of Switzerland the rules of origin in the FTA with China are not set forth in a separate annex but in the main body of the Agreement itself, in chapter 3. The specific rules governing individual products and product categories are listed in Annex II, "Product-Specific Rules".

The usual FTA provisions on bilateral cumulation of originating products are in place. Additionally, the direct shipping rule allows for splitting up of consignments in third countries un-der customs control, without the products losing the country of origin status. Particularly in the initial phase Swiss exporters and importers faced certain difficulties regarding application of the direct transport provisions in accordance with Article 3.13 of the main Agreement (see "Direct Transport Challenges" below).

With the Agreement entering into force, China's developing country status under the Generalised Scheme of Preferences (GSP) was removed. Thus the GSP certificate of origin Form A is no longer applicable since 1 July 2014. In order to apply for preferential clearance for goods imported to Switzerland from China, as of 1 July 2014 the "Certificate of Origin" (Appendix 1 to Annex III Certificate) represents valid proof of origin for accepting customs declarations. The Chinese authorities have issued this proof of origin since 1 July 2014.

For provisional customs clearance applied for prior to 31 December 2014, the customs administration granted a six-month period for submitting missing documents. Since 1 January 2015 the regular two-month period applies to provisional clearance under the Agreement. Swiss importers are responsible for obtaining the retrospective Certificate of Origin from their Chinese suppliers. In addition, Swiss importers have to issue the corresponding clearance instructions to the customs service provider.

Challenges: Direct transport importing into Switzerland via the EU customs warehouse

Compliance problems with the direct transport rule initially arose for Chinese products being imported into Switzerland which were temporarily stored in an EU-based logistics warehouse and split up into separate shipments. Because China lost GSP preference status as a developing country when the Agreement entered into force, Swiss importers were faced with the problem that no replacement certificates of origin were issued for shipments split up in the EU. The Federal Customs Administration (FCA) thus developed a new procedure in consultation with the State Secretariat of Economic Affairs (SECO) and business-sector representatives. This enables the importing Swiss company to partially write-off proof of origin for shipments from logistics warehouses.. The basis for this is an agreement between the FCA and the respective company, for which the FCA charges a fee. The company has to meet the requirements for e-dec users. The new procedure applies to all FTAs including the FTA between Switzerland and China, with few exceptions. The warehouses where the goods are stored must furthermore be in regions or countries with which Switzerland has a mutual administrative assistance agreement. Another key requirement is comprehensive accounting by the company. The company must comply with regulations for open customs warehouses in Switzerland regarding inventory recording and handling of goods. The customs administration has several options available for checking record-keeping, being able to audit the supplier (FHA), the company (bookkeeping) or the foreign warehouse (via mutual administrative assistance). It should be noted that a negative result for a review is relevant finding for all items. . Interested companies can file an application with the Swiss Federal Customs Administration, Department of Organisation and Enforcement. The new procedure entered into force on December 1st.

The following regulations have been applicable to exports from Switzerland to China since 1 July 2014:

Non-approved exporters: Swiss exporters without approved exporter status use the "EUR.1 CN" movement certificate with English-language form. In contrast to other agreements, the six-digit HS number and the origin criterion applied must be stated for each product on the "EUR.1 CN".

Approved exporters (AEs): Approved exporters can use the origin declaration on the commercial invoice. Declarations of origin must be consecutively numbered. The 23-digit serial number is comprised of the approval number, date and invoice number. The Agreement also provides for electronic interchange of declarations of origin (AE data interchange). Approved exporters must electronically file the issued declaration of origin using a web application of the Federal Customs Administration (FCA). Note that the declaration of origin still has to be presented in paper form for imports to China. Approved exporters received an information bulletin from the FCA in May 2014 specifying details. Additional information on AE data interchange is available at www.ezv.admin.ch.

Challenges: Direct transport documentation in China

Hurdles remained for exporters even after the Agreement had entered into force. Chinese customs required additional documentation for direct shipping imports moved through third countries. Most shipments to China today are transported by sea, necessitating reloading in a third country (such as at Rotterdam port). Swiss exporters had to demand so-called 'non-manipulation certificates' from transit countries, which could be very work-intensive in some cases. Chinese and Swiss customs authorities held several expert meetings. The new rules they agreed for sea freight shipments have significantly improved the situation for Swiss exporters (see FCA circular dated 14/4/2016). For Swiss enterprises it is important to reduce bureaucracy concerning documents to be presented in China to a minimum and be freed of additional information requirements establishing that their shipments through third countries were under constant customs control.