(S,P) How useful is the Swiss-UK FTA when you source goods from the EU that travel via Switzerland to the UK?
Please forgive me, but although I like the UK's "all-In" website gov.uk quite a lot, I find when it comes to Free Trade Agreements, a look to their partner's website can provide a more insightful reading of what it all means. Given that I speak German and French, I can peek onto the relevant parts of the Swiss website, even if the English one is not bad at all, too.
What about the FTA between the UK and Switzerland?
Following the Brexit transition period, the bilateral agreements between Switzerland and the EU ceased to apply to the UK on 1 January 2021. Until then, Swiss-UK relations in key areas, such as trade and migration, were based on the bilateral agreements between Switzerland and the European Union. As of 1 January 2021, Switzerland's relations with the United Kingdom (UK) are governed by seven new bilateral agreements in the areas of trade, service providers, road and air transport, migration, insurance and police cooperation.
Not all is what it was before
Based on this new EU–UK agreement, however, complete continuity is not possible in certain areas of market access which are based on legal harmonisation in the Swiss–EU relationship. This is because, as the new EU–UK relationship is not based on legal harmonisation, the corresponding Swiss–EU agreements or parts thereof which are based on common rules cannot be directly transferred to the Swiss–UK relationship.
This is the case, for example, with the Agreement on Customs Facilitation and Security, sectors of the Agreement on Agriculture (e.g. the annex on animal health) and the MRA
(with the exception of motor vehicles, good laboratory practice and good manufacturing practice for medicinal products).
What about diagonal cumulation?
Diagonal cumulation of origin is also not guaranteed, as the EU and the UK have agreed on purely bilateral rules of origin. This will have a negative impact on established value chains involving Switzerland.
OMG....you are talking in riddles. What is diagonal cumulation?
Diagonal cumulation is a type of cumulation. It applies under trade agreements between more than two countries, that allows members of this agreement to use products originating in the others without the final good losing its originating status.
For example, goods produced from originating materials in the EU and further processed in Tunisia can then be exported to Switzerland under preferential treatment. Without diagonal cumulation, only the inputs originating in the exporting country (Tunisia) could be counted towards the originating status in Switzerland.
Diagonal cumulation operates between more than two countries provided they have Free Trade Agreements containing identical origin rules and provision for cumulation between them. Only originating products or materials can benefit from diagonal cumulation.
In practice, this means that although more than two countries (e.g. EU, Switzerland and Tunisia) can be involved in the manufacture of a product it will have the origin of the country where the last working or processing operation took place (In our example Tunisia), provided that it was more than a minimal operation. Diagonal cumulation operates between the EU and the countries of the so-called "pan-Euro-Mediterranean cumulation zone", that is why I chose the example of Tunisia.
Next Training 26 February 2021
So, why is the UK excluded from that? That's not very nice, is it?
True, it's not. But then the UK may have suggested agreeing to sign up to exactly the same Rules of Origin than the EU has with all other partner countries that can diagonally cumulate. UK (and EU) wanted their own, bespoke rule. Consequence: No diagonal cumulation possible.
So, what was possible? The EU - UK TCA talks about cumulation though...
Yes, available is:
operates between two countries only that have a free trade agreement
This is the basic type of cumulation and is common to all origin arrangements.
Only originating products or materials can benefit from it.
Only the Rules of Origin of both partners matter
allows EU (or the UK) businesses to carry out working or processing on non-originating products in the EU (or the UK). Full cumulation means that
(2) operations (so, not goods, but processes)
carried out in the EU (or the UK) are taken into account.
While other forms of cumulation require that the goods be originating before being exported from one party to another for further working or processing, this is not the case with full cumulation.
Full cumulation simply demands that all the working or processing in the list rules must be carried out on non-originating materials in order for the final product to obtain origin.
This, unfortunately, has nothing to do with diagonal cumulation.
But, does the UK-Swiss agreement not state that EU content can be considered as originating in Switzerland automatically?
Well, yes and no. Let's look at APPENDIX TO ANNEX 1 “Protocol 3 concerning the definition of the concept of “originating products” and methods of administrative cooperation".
Article 4 reads promising:
Cumulation in Switzerland
1. [...] products shall be considered as originating in Switzerland, if they are obtained there, incorporating materials originating in the United Kingdom, Iceland, Norway, Turkey or the European Union, provided that the working or processing carried out in Switzerland goes beyond the operations referred to in Article 7. It shall not be necessary for such materials to have undergone sufficient working or processing.
This is perfect!
EU materials = Swiss materials
Just need to meet the sufficient processing rule
List rules can be ignored.
Now think: Isn't that too good to be true?
So we are slightly suspicious, so we read on to find 5.
5. The cumulation provided for in this Article may be applied only provided that:
(a) a preferential trade agreement in accordance with Article XXIV of the General
Agreement on Tariffs and Trade 1994 is applicable between the countries
involved in the acquisition of the originating status and the country of
No problem you say that is done: EU signed a deal with the UK, so did Turkey, Norway and, of course, Switzerland. And it's true, Protocol No 3 of the trade agreement provides for bilateral Switzerland-UK cumulation. But under certain circumstances, diagonal cumulation can also be possible, but only with input materials from the EU and other parties to the Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin (PEM Convention). Under the Swiss UK agreement, in principle, the rules of origin correspond to those of Annex I of the PEM Convention. In particular, the list rules correspond to those of Appendix II of Appendix I of the PEM Agreement, which is incorporated into this trade agreement. This does, however, not mean that the UK is part of the PEM convention or has acceded to it.
Hier buchen: www.customsmanager.org
What does this mean for materials originating in the EU when being exported to or imported from the UK into Switzerland?
The future possibilities of cumulation depend on :
which contracting parties to the PEM Convention has agreed an FTA with the UK
if they have agreed identical rules of origin to those of the Switzerland-UK trade agreement.
In order for raw materials originating in the EU to be cumulated in bilateral traffic between Switzerland and the UK, all parties must either have an FTA with identical
Rules of origin to those of the trade agreement Switzerland-UK. A UK and EU administrative cooperation agreement must also be signed. Since the rules of origin of the EU-UK FTA are not identical to those of the Switzerland-UK trade agreement, cumulation with raw materials originating from the EU is not possible.
What to do?
Businesses that depend on the cumulation with the EU for their originating status under the old rules now need a rethink. There may be a range of customs procedures or suspensive regimes that can be thought of. Please contact us to discuss.
EU-Swiss Free Trade Agreement in force
Information on the EU-Swiss Agreement
FAQ in English
Circular (In German)
About Customs Manager Ltd.
We are on a mission to empower people with import, export and transport responsibilities with helpful advice, insightful training and relevant trade intelligence services. We devote all our passion and energy to helping businesses grow faster cross-border. Working with us means to have your own multilingual Customs Manager on standby to help you trade effectively, efficiently and, of course, compliantly, wherever you want to go in the world. Includes Brexit support and the ability to lodge customs declarations + Rules of Origin
Stay in Touch
· Website: www.customsmanager.com
· E-Mail: email@example.com
· Twitter: https://twitter.com/mielkenarne?lang=en
· Linked In: https://www.linkedin.com/company/69768402/admin/
· LEAVE us a POSITIVE REVIEW: https://g.page/customsmanager/review?rc
Customs Manager Ltd. owns the copyright in this document, except for external documents and links we refer to or make available.
You are not allowed to use this information in any way that infringes the intellectual property rights in it. You may have to hold a valid licence to use this information. A licence can be obtained by becoming a Premium subscriber to the Customs Managers’ Trade Intelligence service, Professional Legislative Monitoring (PLM). As a Premium subscriber, you may download and print this information which you may then use, copy or reproduce for your own internal non-profit-making purposes.
However, under no circumstances are you permitted to use, copy or reproduce this information with a view to profit or gain.
In addition, you must not sell or distribute this information to third parties who are not members of your organization, whether for monetary payment or otherwise.
This information is intended to serve as general guidance only and does not constitute legal advice. The application and impact of laws can vary widely based on the specific facts involved. This information should not be used as a substitute for consultation with professional legal or other competent advisers. Before making any decision or taking any action, you should consult a Customs Manager Ltd. professional.
In no circumstances will Customs Manager Ltd, be liable for any decision made or action was taken in reliance on the information contained within this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.