Swiss Watch Federation Votes to Strengthen ‘Swiss Made’ Criteria

The Federation of the Swiss Watch Industry (FH) has voted overwhelmingly to ask the Swiss government to strengthen legal criteria for use of the term, “Swiss made,” on watches. At least 80 percent of mechanical watches and 60 percent of quartz ones would have to be done in Switzerland to qualify for the label, says the FH proposal.

According to the FH, 87 percent of its members voted for the tougher proposal and its submission at its June 28 general meeting in Biel, Switzerland. FH members include more than 90 percent of Swiss watchmakers.

The action is a response to wide use of foreign-made components (primarily Asian) in Swiss watches; the effects on public confidence in the “Swiss made” label, and the widespread counterfeiting of upscale Swiss timepieces (40 million worldwide annually, vs. 25 million authentic Swiss watches).

The “Swiss made” issue has become a controversial one in the Swiss watch industry.

How and when “Swiss Made” is used on watches is covered by a 1971 ordinance (revised in 1992) of the Swiss Federal Council. However, it’s been criticized for years by many in the Swiss watch industry as being too lax—in part, because it only applied to mechanical movements and didn’t include components, like parts, bracelets, dials or cases—and because many watches now stamped “Swiss Made” use foreign-made components, though they’re assembled in Switzerland.

To safeguard the value of the “Swiss Made” label in world markets and protect consumer confidence in it, FH officials concluded “stricter criteria of origin” was necessary.

The FH’s proposal says at least 80 percent of production costs of a mechanical watch and 80 percent of its movement’s components must be done in Switzerland to qualify as “Swiss made.” (Currently, it’s 50 percent.) For quartz (“electronic”) watches, the rate in both cases would be 60 percent. Raw materials, precious stones and watch batteries would be excluded from production costs. In addition, technical construction and prototype development would have to be done in Switzerland. It also defines Swiss constituent parts and assembly in Switzerland.

The 60 percent rate, says the FH, is the same as one in the free-trade agreement between Switzerland and the European Union (EU). The 80 percent rate responds to renewed strength of, and strong competition in, the upscale watch business, requiring “particular emphasis on the mechanical watch,” says the FH.

The tougher criteria has critics, including several Swiss watchmakers, some of them well-known mid-and upscale brands. One is Mondaine, whose president Ronald Bernheim has claimed the proposal benefits some of Switzerland’s biggest luxury watch companies. (An article this year in the Swiss newspaper, Neue Zuricher Zeitung, claimed the Richemont Group, Swatch Group, and Rolex were major supporters of it.) Mondaine and some others contend that if adopted, the proposal would significantly increase costs of smaller watch companies, which buy components outside Switzerland. That could force them to raise prices of their watches or even shut down. Only the large watchmaking firms can easily absorb the higher costs of Swiss-made components, they claim.

Jean-Daniel Pasche, FH president, recently told the national Swiss newspaper SonntagsZeitung that “many large brands fear the [Swiss-made] label is being devalued in the eyes of consumers,” but strongly denies the proposal favors a small group of luxury watchmakers. “This law has been criticized by many watchmakers for many years,” he told JCK earlier. “Many feel it must be strengthened and adapted to the current situation.”

The FH post-vote statement acknowledged, “This is a delicate matter, due in particular to problems concerning the supply of watch components,” but said there’s “no other solution than tightening existing provisions to uphold the value of ‘Swiss-made’ in a watchmaking context.”

The FH proposal was also criticized earlier this year by the EU, which reportedly called it “protectionist,” according to the SonntagsZeitung, and said changes must be negotiated with it. The Permanent Committee of the European Watchmaking Industry (CPHE), an independent body of which Switzerland is a member, also said something similar. Pasche has said such criticism is premature and that the FH would discuss the proposed changes with other European watch associations and the EU, following review and approval, if any, by the Swiss Federal Council.

The FH anticipates a transition period, if and after the tougher criteria are approved by all agencies. “It will be up to players in the industry to use it [the transition] wisely to ensure compliance with the label once it has been revised,” says the FH statement.