Optimising customs costs can be crucial to the success of fashion retailers
The sales volumes in Switzerland are roughly equivalent to those that fashion suppliers sell across borders in France. So far, so good. But how can fashion retailers benefit from Swiss customs allowance optimisation, and what do you have to consider when exporting to Switzerland?
Further advantages for cross-border e-commerce to Switzerland include the margins, which are high thanks to bulging shopping baskets and higher prices, as well as the fact the Swiss tend to return fewer products.
But like everywhere else, there is also a catch when importing into Switzerland: the customs duties. Switzerland is a customs island in the heart of Europe.
If you want to know how to optimise your processes and reduce import duties into Switzerland, start our Optimizer:
In Switzerland, customs duties on clothing are extremely high. We are talking about 2 to 5 CHF per kilogram. That's right, per kilogram! Switzerland is the only country where customs duties are calculated by weight, but this is not only a nuisance, but also an opportunity, and we will show you how you can optimise your import costs.
Pay the right price and save a lot
With the conventional customs clearance method you pay 100% of these duties. However, there’s a way to massively reduce the effective customs burden: individual customs clearance.
Before we explain the customs clearance methods in more detail, here is a brief overview:
Commercial collective customs clearance
Collective customs clearance works like this: you deliver your individual shipments consolidated by freight to Switzerland. When customs clearance is carried out by a customs agent, all individual shipments are cleared as one. Here’s an example:
You send nine shipments of the same product, each weighing 2kg, at a customs rate of 2CHF/kg. Accordingly, 18kg are calculated at 2CHF, so you pay 36CHF.
Commercial individual customs clearance
Individual customs clearance works like this: you also deliver your individual shipments consolidated by freight to Switzerland. The customs agent, however, clears all shipments separately. Let’s recalculate the above example:
You send nine shipments of the same product, each weighing 2kg, at the customs rate of 2CHF/kg. In the case of individual customs clearance, the individual shipments are considered and calculated separately - in our case 2kg. 2 x 2 = 4CHF. This amount is less than the exemption limit (5CHF), meaning you pay 0CHF in customs duty!
Conditions for individual customs clearance
Two basic conditions must be met in order for you to benefit from individual customs clearance on import into Switzerland:
- The duty per parcel must be less than or equal to 5CHF. For example, the duty rate for your product is 2CHF/kg. If a shipment weighs 2kg, the customs value is therefore 4CHF. This is less than 5CHF and is below the exemption limit, so your costs are 0CHF. But if your shipment now weighs 3 kg, the customs value is 6CHF and you are exceeding the exemption limit. This means 6CHF are due despite individual customs clearance.
- The savings from individual customs clearance must compensate for the additional costs involved.
The savings potential for the customs clearance of clothing into Switzerland therefore depends on various factors:
- the average duty rates of your goods
- the critical weight (see calculation example above)
- the percentage of consignments weighing less than the critical weight
- the average weight of all consignments below the critical weight
- the average weight of all shipments
What influence do these factors have on your effective savings potential?
Hier zwei Beispiele mit fiktiven Kennzahlen:
For a better understanding, let’s look at three options for a collective customs clearance and three options for an individual customs clearance. You can see how different they are, even though we only change a single parameter.
Example 1: We vary the percentage of shipments that weigh less than the critical weight
The critical weight is 1.1 kg. All you have to do is calculate how much your shipment may weigh so that it does not exceed the 5CHF limit. In our case, the average customs rate is 4.70CHF, which, by the way, is a realistic value for fashion retailers. So, a weight of 1.1 kg is already enough to break the 5CHF limit.
In our example, we have assumed that the proportion of shipments weighing less than 1.1 kg is 20%, 40% and 60%. And we assume that all shipments that are lighter than 1.1 kg weigh 0.8 kg on average, and all those that are above that have a gross weight of 1.2 kg.
In the second box you can now see how the percentage of shipments below the critical weight affects the costs. With a share of only 20%, individual customs clearance is 4% more expensive than collective customs clearance. This is because the savings are smaller than the additional costs for this more expensive customs clearance method. At 40%, individual customs clearance is already cheaper, and at 60% it is significantly cheaper.
Example 2: We vary the average weight of all shipments that weigh less than the critical weight
The weight variations in this example are 0.5kg, 0.6kg and0.7 kg. In the results section you can see that too many "light" shipments with individual customs clearance do not bring enough customs savings to compensate for the additional costs. However, as soon as the average gross weight of your shipments that are below the critical weight approaches the critical weight, individual customs clearance becomes increasingly worthwhile.
A closer look is worthwhile
There are situations that lead to significant savings in customs duties for fashion retailers, so the optimal scenario for your individual customs clearance would be:
100% of your shipments weigh exactly enough for the theoretical customs value to be 4.90CHF. This means you do not pay customs for any consignment and save the difference between the individual customs clearance costs and 4.90CHF. With the assumed costs for individual customs clearance (2.50CHF), you save 2.40CHF per shipment compared to collective customs clearance on the one hand and the proportionate costs of collective customs clearance on the other. As a reminder: in collective customs clearance, the weight of the individual shipments is added up and you always pay all customs duties.
Do you need help with calculations? Click here for a no obligation consultation!
How high are the customs duties in the fashion sector? Look at this chart:
If you do not know the customs tariffs for your goods, the Swiss customs database will help you. In the Tares you will find all customs tariffs that exist for Switzerland.
Three steps to the Tares:
- Click on this link: Tares.
- Follow the link with the turquoise arrow
- Take a look at the short instructions for the Tares (yellow arrow).
For the sake of simplicity we have always talked about customs tariffs of CHF/kg instead of CHF/100 kg. However, in the Tares you will always find the 100kg version. This is because cross-border e-commerce is a relatively young business. When the customs system was developed, there was no international e-commerce. Goods were traded by pallet or truck, and for these large batches the tariff per 100kg made sense.
Important: The customs tariff always refers to the gross weight. Here is a brief explanation:
- Net weight = weight of the article without packaging
- Net weight = article plus first wrapping (usually sales packaging)
- Gross weight = net weight plus transport packaging (the product is packed for transport, i.e. the outer container in which the goods are packed during fulfillment)
- One-way pallets are considered part of the packaging and are therefore included in the gross weight. EUR pallets, on the other hand, are regarded as load carriers and are not part of the packaging.
- Professional tip:
Remember that per order, several items are charged per kg, each with different customs tariffs. Therefore you have to indicate the gross weight per item and not just the total weight per order.
No confusion about the weight
Experience shows that customers often do not record the gross weight in the product master data. This is understandable, since usually at the time of storage it’s not yet known which packaging the item will be shipped in. However, the trader is obliged to declare the net and gross weight at customs clearance.
Swiss Post has an IT solution especially for Swiss customs, which calculates the gross weight per item based on the transmission of the net weight (which the retailer usually has in his PIM) and the total weight of the pre-packed order (this is usually determined during fulfillment).
Designate and code goods
The correct harmonised standard (HS) code ensures that the correct customs tariff and any special rules (e.g. quantity limitations) are applied to the respective product. The 11-digit number is based on the HS, which is administered by the World Customs Organisation (WCO) and defines the first six digits of the code.
The HS is therefore used to describe and code goods with the aim of making them the same all over the world. 98% of goods in international trade are classified by HS.
The type of clothing is decisive
The amount of duty varies according to the different materials and types of garments. Here you can see a summary of the clothing customs tariffs:
- Professional tip:
As a rule of thumb, customs duties for clothing based on natural fibres (e.g. cotton) are lower (approx. 2 to 3CHF) than those based on synthetic fibres (approx. 3 to 5CHF). The average duty rate for all the clothing tariffs shown in the table is 4.21CHF/kg.
Further possibilities for customs optimisation
You would like to export to Switzerland, but the costs are a thorn in your side? In our white paper, we show you in 6 steps how you can save costs efficiently - simply and easily!
Packaging
Less is more! This applies not only to you, but also to your customers. As you know, in Switzerland the gross weight of the consignment is directly linked to customs. This means that if you save 50g of packaging material, you can save 0.24CHF per shipment at a customs rate of 4.70CHF. This number is deceptively small. Imagine what that means for 100,000 shipments (24,000CHF!).
Logistics and shipping
There is another parameter in logistics optimisation that allows you to reduce the customs clearance costs per shipment in the case of collective customs clearance: the delivery frequency. Since the cost of customs clearance is fixed in the case of collective clearance, you can reduce the cost per item by shipping less frequently. Here’s an example:
- You send 2000 shipments per month to Switzerland.
- Scenario 1: You ship every day, 20 times a month.
- Scenario 2: You only ship 10 times a month.
- Your average cost for collective customs clearance is 100CHF.
- This is the result:
- Scenario 1: Customs clearance costs 20 x 100 CHF = 2000 CHF : 2000 = 1 CHF per shipment Scenario 2: Customs clearance costs 10 x 100 CHF = 1000 CHF : 2000 = 0.50 CHF per shipment
Calculate customs clearance costs with the optimiser:
Reduce customs clearance costs per shipment
This simplified example shows how you can easily reduce the customs clearance costs per shipment. However, keep in mind that this increases the delivery time for a large part of the order.
So, with logistics optimisation you can save cash. Check out more of our advice on this subject here: Optimised logistics: For e-commerce retailers and shoppers
With the help of this Excel calculator you can calculate your savings potential for individual customs clearance by inserting a sample shipment with gross weight and HS code.
Summary
We’ve shown you what you need to consider when exporting to Switzerland and how you can save money by choosing the right customs clearance method.
If you want to conquer the Swiss market, other factors are important. An optimal logistics chain saves money, time and also improves the customer experience. Read our tips on logistics set-up, as well as the handling of returns management.
Is your head spinning with all of this new information? We'll help you. Click here for a no obligation consultation.
