Swiss Parliament Tightens Watch Requirements in Swiss-Made Rules

The Swiss parliament voted to tighten requirements on products labeled “Swiss-made,” responding to calls by the country’s largest watchmakers such as Swatch Group AG (UHR) to clamp down on foreign components.

Under the new rules, watches and industrial products can be advertised as “Made in Switzerland” only if 60 percent of the raw materials come from the Alpine country.

That caps a six-year dispute between Switzerland’s largest watchmakers such as Swatch, which makes Omega watches priced at more than $30,000 in addition to its plastic namesake brand, against smaller rivals such as Mondaine, which makes $200 timepieces styled after Swiss railway clocks. The measure replaces rules that date from 1971, which in effect could allow a watch that has 80 percent foreign components to be called Swiss-made, according to Rene Weber, an analyst at Bank Vontobel.

“It will be positive news for the Swiss brand,” as it will increase consumer trust in the products, Weber said. “It’s important to get the Swiss-made rules done more properly.”

The old rules focus only on the watch’s movement, or the mechanism that makes it tick, rather than the entire timepiece. They allow watchmakers to use non-Swiss components for less than 50 percent of the value of the watch’s movement. The new rules apply to the entire watch, creating a tougher hurdle as many Swiss watchmakers use foreign cases, hands and dials.

Watch Exports

Watches were Switzerland’s fastest-growing major export last year, increasing 11 percent. The industry has rebuilt itself since teetering on the brink of collapse in the 1970s. To keep its lead as other manufacturers shift to countries such as China in search of cheaper labor, the industry is trying to erect higher barriers to entry, which would make Swiss watches a scarcer luxury.

The Federation of the Swiss Watch Industry, which includes Swatch and competitor Cie. Financiere Richemont SA, asked the government in 2007 to strengthen the rules.

Not all watchmakers agree. The new rules could destroy jobs, according to IG Swiss Made, a trade group that includes Mondaine and has argued for a 50 percent limit for timepieces.

To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net

To contact the editor responsible for this story: David Risser at drisser@bloomberg.net

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