Update to the Swissness Regulation: „Wo Schweiz drauf steht, muss auch Schweiz drin sein“

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The Swissness regulations, including the execution ordinances adopted in September 2015, will come into force on 1 January 2017. Now, one year prior to that date, we want to take the opportunity to summarize the most important Swissness rules again. As mentioned in the title, the Swissness regulation requires that a product, which is promoted as made in Switzerland, must include a lot of Swissness, i.e. must be manufactured to a substantial degree in Switzerland. The Swissness regulation is not only important for Swiss companies, but also – one could say mainly – for foreign companies. The main purpose of the regulation is to prevent freeriding on the Swissness-label even though the respective products are far away from being substantially manufactured in Switzerland. Studies revealed that “Swiss made” is still seen as very valuable in the global business world.

The main Swissness rules in a Nutshell

  • Natural products, i.e. products that are not processed, such as vegetable, mineral water, fish etc., have sufficient Swissness if they are reaped or caught in Switzerland (see art. 48a of the revised Federal Act on Trademarks and Geographic Origins).
  • Foodstuff, including processed natural products, acquire sufficient Swissness if at least 80% of the weight of ingredients that are available in Switzerland are of Swiss origin (see art. 48b of revised the Federal Act on Trademarks and Geographic Origins). Yet, and the lobbyism is obvious, with regard to milk or milk products 100% of the milk must be from Switzerland. Important is that only raw material or ingredients, which are available in Switzerland, must be considered in the weight calculation. Relevant is the level of self-sufficiency. Worth mentioning is that foodstuff will be subject to the Swissness regulation as well as to the Swiss Federal Foodstuff Act. The Foodstuff Act requires that the country of origin for certain ingredients is declared. The country of origin of a specific ingredient may be Switzerland even if the entire product does not comply with the Swissness regulation. As a consequence, the country of origin must be declared on the packaging etc., but the product may not be promoted as Swiss made.
  • The parliament adopted a rather strict requirement for the Swissness of industrial products (see art. 48c of the revised Federal Act on Trademarks and Geographic Origins). At least 60% of the manufacturing costs must occur in Switzerland. These requirements were highly debated. Many companies and industry organizations argued – rightly – that in industries with globalized manufacturing chains too strict requirements may result in disastrous outcomes. Companies established and still having their headquarters in Switzerland may be banned from the Swissness-label if they outsource manufacturing activities to other countries. The supporters of strict rules were fully aware of that risk, but are of the opinion that these rules may urge companies to re-source certain activities to Switzerland. Whether this kind of industry politics is intelligent and successful is rightly contested.
  • If a foodstuff or an industrial product does not comply with the Swissness regulation in its entirety, it is still permitted to promote specific production steps as Swiss-made, such as “sausage smoked in Switzerland” or “furniture designed in Switzerland”. The claims must, however, not be deceptive or misleading. It must be clear for the consumer that the product in its entirety is not made in Switzerland. Furthermore, it is not permitted to use the Swiss flag for the promotion or on the packaging of such products.
  • Services are Swiss made if the service provider has its registered seat and an effective administrative office in Switzerland. With regard to holding companies art. 49 para. 1 of the revised Federal Statute on Trademarks and Geographic Origins sets out the following: a foreign subsidiary or branch of a Swiss parent company may only use “Swiss” for its services if i) the parent company has its registered seat in Switzerland, ii) the parent company or a subsidiary / branch that is effectively controlled by the parent company has an effective administrative office in Switzerland, and iii) the foreign subsidiary or branch provides similar services.

Transitional Provisions

Art. 60a of the revised Ordinance on Trademarks contains important transitional provisions:

  • Products that were manufactured prior to the enactment of the Swissness regulation and that complied with the then applicable requirements for the use of the Swiss geographic origin may be marketed until 1 January 2019.
  • Foodstuff may be sold until the minimum durability date, but no longer than until 1 January 2019.

Execution Ordinances

In order to determine the Swissness requirements in more detail, the following execution ordinances were adopted by the Swiss government in September 2015 (and will also enter into force on 1 January 2017):

  • Revised Ordinance on Trademark, mainly dealing with the Swissness requirements for industrial products;
  • The new Ordinance on the Use of the Swiss Geographic Origin for Foodstuff that includes the requirements for the Swissness of Foodstuffs. The Ordinance is rather complex and contains many details and exceptions. The enforcement of this ordinance will most likely end with a substantial bureaucracy.

The revised Ordinance on the Use of the Swiss Geographic Origin for Watches, setting out rather strict requirements for the Swissness of watches, has not yet been adopted. Consultations are ongoing. The revised Ordinance should, however, also enter into force on 1 January 2017.

Art. 50 para. 2 of the Federal Act on Trademarks and Geographic Origins sets out that industries may come up with industry-specific Swissness requirements as it was done by the watch industry. It shall, however, be avoided that part of an industry tries to enforce particular interests, in particular protectionist interests. In order to be accepted by the government, industry-specific Swissness requirements must be supported by a representative part of that industry.

Revised Ordinance on Trademarks

The following are the most important provisions:

  • 52e dealing with the calculation of the manufacturing costs for industrial products. The government decided to use existing accounting principles for the calculation of the manufacturing costs. The companies are therefore more or less free on the accounting standards to be used.
  • Explicitly not included in the manufacturing costs are packaging and transport costs, administrative and distribution costs as well as marketing and after-sales services costs (Art. 52e para. 2). Excluded are also finance costs, for example, interest rates for loan capital even if it is used to finance research and development.
  • The manufacturing costs may be separated in three components (art. 52e para. 2): Research and development costs, material costs and fabrication costs (incl. costs related to quality management and certifications).
  • 52f and 52g contain more details regarding research and development costs (incl. design costs). The research costs must be divided into product-specific and general research costs. Whereas product-specific costs must be included in the calculation in its entirety, the general costs must be attributed to the different products that benefit from the research with an appropriate allocation formula.
  • 52h and 52i contain a similar regulation for the material costs. The costs for material may be product-specific or general (direct or indirect material costs). Indirect material costs may, for example, be the costs for the interim storage of products or semi-finished products during the manufacturing process or transport costs, as long as all these costs are necessary for the manufacturing and occur in Switzerland.
  • 52k deals with material that is not sufficiently available in Switzerland. This provision may become rather important as Switzerland is not rich in commodities. The government did not define material that are not sufficiently available in Switzerland. The ordinance rather sets out that industry associations should publish positive or negative lists. It is so far unclear how the different industries will comply with that obligation. It is, however, clear that positive and negative lists only qualify as factual assumption. A judge may rebut that assumption.
  • 52l deals with direct and indirect fabrication costs. An appropriate allocation formula must be used regarding indirect fabrication costs. Fabrication costs are, for example, salaries and employee on-costs, machine costs, and costs relating to quality management and certifications.

Revised Ordinance on the Use of Swiss Geographic Origins for Watches

The following will be the most important new provisions:

  • The watch in its entirety is relevant for the cost calculation. Previously, only the clockwork was relevant. It is explicitly mentioned that smartwatches have to be qualified as watches in the sense of the ordinance.
  • At least 60% of the manufacturing costs of the watch must occur in Switzerland.
  • At least 50% of the value of the clockwork must stem from components that are fabricated in Switzerland.
  • 60% of the manufacturing costs of the clockwork must occur in Switzerland.
  • The technical development of the watch and clockwork must be executed in Switzerland. In addition, the composition and final control of the watch must also take place in Switzerland.

Enforcement of the Swissness Requirements

The use of “made in Switzerland” claims will not be subject to an approval or permission. The geographic origin “Switzerland” and any related claims may be used, as long as the Swissness requirements are complied with.

Compliance with the Swissness requirements will not be enforced by governmental bodies. It is rather expected that industry organizations will have an interest in proper compliance and therefore assist in enforcing the Swissness provisions. Industry and consumer protection organisations may initiate civil litigations against companies that infringe the Swissness regulation. Furthermore, anybody may file a criminal complaint if a company should illegally use the Swissness-label.

Additional Information (only in German):

Contact: Michael Reinle & Lukas Bühlmann

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