Preferential bilateral tariffs are agreed contractually under free trade agreements (FTA). They apply to products that are manufactured entirely in the territory of the state party, or sufficiently worked or processed there to fall within the scope of the agreement. In addition, under the Generalized System of Preferences (GSP) Switzerland unilaterally applies lower duties to products from states it recognises as developing countries.
The origin criteria that these products must fulfil to qualify for preferential tariffs are set out in the origin protocol to the FTA in question (available at this link) or in the Ordinance on Rules of Origin for Preferential Tariffs for Developing Countries (SR 946.39).
Cumulation practice in relation to origin
Cumulation means adding together all of the value creation – such as the production of primary materials or processing at individual stages of manufacture – that is generated in different free trade partner countries. It is used to establish whether a good fulfils the criteria for 'originating product' status. Product origin can be cumulated in a number of ways: (i) bilateral cumulation between two parties to a single FTA; (ii) diagonal cumulation between three or more parties to FTAs that apply the same rules of origin; (iii) extended cumulation between three or more partners to FTAs with different rules of origin; and (iv) full cumulation, in which the different stages of manufacture in different parts of a free trade zone are added together.
Regional Convention on Pan-Euro-Mediterranean Preferential Rules of Origin (PEM Convention)
The «Regional Convention of 15 June 2011 on Pan-Euro-Mediterranean Preferential Rules of Origin» (the «PEM Convention»; SR 0.946.31) came into force in Switzerland on 1 January 2012. The object of the Convention is to determine standard rules of origin between PEM partner countries (in German) to ease trade and to integrate supply chains within the zone without changing the substance of the FTAs that already exist in the zone. The Convention creates a diagonal cumulation zone.
Revised PEM Convention
By adopting the PEM Convention in 2011, the parties undertook to revise the old rules from the 1970s that no longer correspond to today's manufacturing chains. On 7 December 2023 the contracting parties adopted the Revised PEM convention. It came into force on 1 January 2025. The revision simplifies the legal framework and certification of origin, permits more flexible supply chains, and thus ensures a better fit between the rules of origin and actual production chains in the PEM zone.
In order to facilitate the transition to the Revised PEM Convention, on 12 December 2024 the parties adopted transitional provisions. In particular, they provide that from 1 January 2025 to 31 December 2025, the rules of origin of the old PEM Convention can continue to be applied in parallel with the rules of origin of the Revised PEM Convention. Further information is available in the information note below.
