Lugano as a Commodity Trading Hub — a part of the book Lugano as an International Financial Centre by Dr Alexander Ressos.
Part F is the counterpart to the Geneva volume's part on commodity trading. Lugano is a smaller but distinct trading hub, strong in steel, metals and agricultural commodities, organized in the Lugano Commodity Trading Association and anchored in Italian and Eastern European trade.
This part belongs to Lugano as an International Financial Centre by Dr Alexander Ressos, published here in full, section by section.
From Transit Trade to Trading Houses: The Rise of Commodity Trading in Lugano — overview and summary
In 2024 the commodity trading companies of Switzerland produced a gross value added of CHF 19.2 billion, about 2.3 per cent of the value added of the whole Swiss economy. Read more Lugano · Lugano as a Commodity Trading HubWhat a trading house does and how Switzerland counts it
A physical commodity trader buys a raw material or a semi-finished product in one place and sells it in another, at another time or in another form, and earns the difference between purchase and sale… Read more Lugano · Lugano as a Commodity Trading HubThe long series
The SNB merchanting series is the only long time series on the Swiss trading industry. Its trajectory forms the background against which the rise of Lugano must be read. Read more Lugano · Lugano as a Commodity Trading HubFrom the Gotthard road to the forwarding houses of Chiasso
For most of its history the territory of today's Ticino lived from transit in the physical sense: from the carriage, storage, taxation and sale of goods that crossed the Alps between Lombardy and the… Read more Lugano · Lugano as a Commodity Trading HubWhy the forwarders did not become traders
The step from forwarding to trading is short in theory and long in practice. A forwarder acts for the account of others and earns a fee. Read more Lugano · Lugano as a Commodity Trading HubThe national rise of merchanting and the making of the Lugano cluster
The modern Swiss trading industry was formed in the three decades after the Second World War, and Lugano entered it late. Read more Lugano · Lugano as a Commodity Trading HubWhat Lugano offered: banks, fiduciaries and gold
Lugano's specific attractions for trading firms grew out of the financial centre described in Parts D and E. Read more Lugano · Lugano as a Commodity Trading HubAfter 1991: the eastern opening
The collapse of the Soviet Union in 1991 opened the steel and raw materials industries of Russia and Ukraine to Western traders, and Lugano's steel specialists were among the first to use the… Read more Lugano · Lugano as a Commodity Trading HubSteel and metals: the core of the Lugano cluster
Every source on the Lugano cluster agrees that metals, and steel in particular, form its centre. Read more Lugano · Lugano as a Commodity Trading HubThe trading arms of Russian and Ukrainian producers
The second group of steel traders in Lugano consists of the marketing companies of producers from the former Soviet Union. Read more Lugano · Lugano as a Commodity Trading HubHow a Lugano steel trade works
A typical transaction illustrates what a Lugano steel trader does. The trader agrees with a mill in Turkey, India or Vietnam to buy 20,000 tonnes of hot-rolled coil on CFR terms (cost and freight to… Read more Lugano · Lugano as a Commodity Trading HubEnergy, coal, agricultural products and gold
The second largest segment of the Ticino cluster after metals is energy. In 2021 the Federal Statistical Office counted 27 Ticino firms trading fuels, with 243 employees. Read more Lugano · Lugano as a Commodity Trading HubAgricultural commodities: a small segment
Agricultural commodities form only a small part of the Ticino cluster. The national statistics count 83 agricultural trading firms with 1,074 employees in 2021, most of them in the Lake Geneva… Read more Lugano · Lugano as a Commodity Trading HubThe Lugano Commodity Trading Association
The Lugano Commodity Trading Association (LCTA) was founded in 2010 as a nonprofit association with its seat in Lugano. Read more Lugano · Lugano as a Commodity Trading HubThe Global Commodities Conference and the roundtables
The association's main public event is the Global Commodities Conference (GCC). Its editions are listed for 2019, 2022, 2024, 2025 and 2026. Read more Lugano · Lugano as a Commodity Trading HubCounting the Lugano cluster: firms, jobs, value added and taxes
Before the Federal Statistical Office published cantonal data, the size of the Lugano trading cluster was known only from estimates that the association, the city and the canton gave to the press. Read more Lugano · Lugano as a Commodity Trading HubValue added and the share of cantonal GDP
The value added estimate for 2024 allows a first official answer to the question of the cluster's economic weight. Read more Lugano · Lugano as a Commodity Trading HubThe ecosystem: banks, inspectors, shippers, insurers and advisers
A trading house cannot exist without a bank that finances its cargoes. The typical Lugano trader works with transactional finance: the bank opens documentary credits for purchases, finances the goods… Read more Lugano · Lugano as a Commodity Trading HubShipping, shipbroking and logistics
Since ocean freight is part of almost every trade, many traders charter vessels themselves. Read more Lugano · Lugano as a Commodity Trading HubThe shock of 2022: war, sanctions and record profits
No Swiss trading hub was as exposed to Russia and Ukraine as Lugano. Its steel traders bought semi-finished and flat products from mills in both countries, several of the largest firms were the… Read more Lugano · Lugano as a Commodity Trading HubSanctions as a permanent condition
After 2022 sanctions compliance became a permanent condition of commodity trading in Lugano. Read more Lugano · Lugano as a Commodity Trading HubGeneva, Zug and Lugano compared
The official figures place the three Swiss hubs in a clear order. In 2024 Geneva produced 58.4 per cent of the value added of Swiss commodity trading, Zug 27.0 per cent and Ticino 3.6 per cent,… Read more Lugano · Lugano as a Commodity Trading HubCompetition beyond Switzerland
The three Swiss hubs compete with London, Singapore, Dubai and, for some products, Rotterdam and Hamburg. Read more Lugano · Lugano as a Commodity Trading HubFederal policy from the commodity report of 2013 to the statistics mandate of 2023
Until the early 2010s the Swiss commodity sector was hardly the subject of federal policy. Read more Lugano · Lugano as a Commodity Trading HubTransparency and due diligence in company law
The policy debate led to two sets of rules in the Code of Obligations. Since 1 January 2021 companies subject to an ordinary audit that are active in the extraction of minerals, oil, natural gas or… Read more Lugano · Lugano as a Commodity Trading HubThe line to today's practice
For the practitioner advising a trading company in Lugano, federal policy since 2013 has three practical consequences. First, the company will be counted. Read more Lugano · Lugano as a Commodity Trading HubThe Law of the Trading House: Contracts, Taxation and Substance — overview and summary
Consider a steel trader in Lugano who buys hot-rolled coil from a mill in Turkey, sells it to a service centre in Lombardy and hedges the price on a futures exchange. Read more Lugano · Lugano as a Commodity Trading HubLegal forms and group structures
Most trading houses in Ticino are organized as companies limited by shares ( società anonima, SA; Aktiengesellschaft, AG) under Articles 620 ff. of the Code of Obligations (CO). Read more Lugano · Lugano as a Commodity Trading HubHolding structures and the group
A trading group with Ticinese roots typically consists of a Swiss operating company, which employs the traders and concludes the contracts, and a holding company that owns it and often other… Read more Lugano · Lugano as a Commodity Trading HubGovernance and the duties of the board
The board of directors of a Swiss company limited by shares may delegate the management of the business to managers or to individual members. Read more Lugano · Lugano as a Commodity Trading HubThe company law reform of 2023
The revision of company law adopted by Parliament on 19 June 2020 and in force since 1 January 2023 changed several rules that matter for trading houses. Read more Lugano · Lugano as a Commodity Trading HubThe Swiss tax framework after TRAF
Until the end of 2019 Swiss corporate tax law offered trading groups a set of cantonal and federal practices that made Switzerland one of the most attractive locations for commodity trading in the… Read more Lugano · Lugano as a Commodity Trading HubTransitional rules: the step-up and the special rate
The abolition of the privileged regimes raised the question of how to treat hidden reserves that had accumulated under them. Two transitional mechanisms were available. Read more Lugano · Lugano as a Commodity Trading HubTicino's cantonal taxation and the rates in Lugano
Ticino began to prepare for the end of the privileged regimes before the federal reform was complete. Read more Lugano · Lugano as a Commodity Trading HubThe communal multiplier and the rate in Lugano
The effective rate in a Ticinese commune depends on the communal multiplier ( moltiplicatore d'imposta comunale ), which each commune fixes annually as a percentage of the basic cantonal tax. Read more Lugano · Lugano as a Commodity Trading HubThe OECD minimum tax in Switzerland
The second pillar of the OECD/G20 project on the taxation of the digital economy was agreed in October 2021. Read more Lugano · Lugano as a Commodity Trading HubWhat the minimum tax means for trading houses in Lugano
For the large majority of trading companies in Ticino the minimum tax is irrelevant, because their groups do not reach the threshold of EUR 750 million in consolidated revenue. Read more Lugano · Lugano as a Commodity Trading HubTransfer pricing for trading functions
Swiss tax law contains no general transfer pricing statute comparable to the detailed rules of Germany, Italy or the United States. Read more Lugano · Lugano as a Commodity Trading HubFunctions, risks and the margin of the trader
The CUP method determines the price of the commodity, but it does not by itself answer the question of how much profit the Swiss trading company may keep. Read more Lugano · Lugano as a Commodity Trading HubItalian rules: controlled foreign companies, residence and withholding tax
A trading company in Lugano owned by an Italian resident, whether an individual or a company, falls within the scope of the Italian rules on controlled foreign companies (CFC) in Article 167 TUIR. Read more Lugano · Lugano as a Commodity Trading HubThe exemption for genuine economic activity
Even where both conditions of paragraph 4 are met, the controlling person may escape the CFC rules. Read more Lugano · Lugano as a Commodity Trading HubPermanent establishment and the treaty tie-breaker
Where the Swiss company is not resident in Italy, Italian tax may still apply through a permanent establishment. Read more Lugano · Lugano as a Commodity Trading HubThe trading contract: sales law, standard forms, documents and hedging
When a Lugano trader contracts under Swiss law, two bodies of rules may apply. One is the domestic law of sale in Articles 184 ff. Read more Lugano · Lugano as a Commodity Trading HubIncoterms 2020
The International Chamber of Commerce (ICC) published Incoterms 2020, which apply to contracts that incorporate them from 1 January 2020. Read more Lugano · Lugano as a Commodity Trading HubBills of lading, letters of indemnity and demurrage
The bill of lading is the central document of seaborne commodity trading. It is a receipt for the goods, evidence of the contract of carriage and a document of title that allows the holder to claim… Read more Lugano · Lugano as a Commodity Trading HubHedging and the ISDA framework
Most trading houses hedge their price risk on futures exchanges such as the London Metal Exchange, ICE and CME, through over-the-counter swaps with banks or through options. Read more Lugano · Lugano as a Commodity Trading HubDispute resolution: Swiss arbitration, London and enforcement
International arbitration with its seat in Switzerland is governed by Chapter 12 of the Federal Act on Private International Law of 18 December 1987 (PILA). Read more Lugano · Lugano as a Commodity Trading HubThe choice of seat: Lugano, Zurich or Geneva
The seat of arbitration determines the state court competent to support the arbitration and the law on setting aside. Read more Lugano · Lugano as a Commodity Trading HubEnforcement under the New York Convention
Switzerland is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 (New York Convention). Read more Lugano · Lugano as a Commodity Trading HubSubstance, due diligence and transparency
The Federal Council first examined the commodity sector as a whole in its background report of 27 March 2013, prepared by the departments of foreign affairs, finance and economic affairs. Read more Lugano · Lugano as a Commodity Trading HubDue diligence on conflict minerals and child labour
The popular initiative "For responsible businesses – protecting human rights and the environment" (Responsible Business Initiative) was put to the vote on 29 November 2020. Read more Lugano · Lugano as a Commodity Trading HubWhat the due diligence rules mean for Lugano traders
For most commodity traders in Lugano the Swiss due diligence rules have limited direct application. Read more Lugano · Lugano as a Commodity Trading HubA practitioner's checklist for a trading company in Lugano
The establishment of a trading company in Lugano combines company law, tax, Italian law and banking requirements, and the order in which the questions are answered matters. Read more Lugano · Lugano as a Commodity Trading HubOperations, contracts and compliance
The operational set-up determines whether the company has the substance that the tax analysis presupposes. The checklist below, which follows the order of this chapter, summarizes the minimum. Read more Lugano · Lugano as a Commodity Trading HubLogistics, Shipping and the Fashion Valley: Ticino's Distribution Economy — overview and summary
Between the motorway exit at Mendrisio and the customs post at Chiasso-Brogeda lies a strip of land of a few square kilometres. Read more Lugano · Lugano as a Commodity Trading HubMeasuring the distribution economy
The word distribution covers several business models that share a location and a workforce but differ in law. The first is the principal or entrepreneur company. Read more Lugano · Lugano as a Commodity Trading HubThe press and research estimates
For the cluster as a whole the most frequently cited figures come from industry and press sources. Read more Lugano · Lugano as a Commodity Trading HubThe rise of the Fashion Valley
The clothing industry of the Mendrisiotto is older than the Fashion Valley. At the beginning of the twentieth century the southern district of Ticino counted, according to the figures collected by… Read more Lugano · Lugano as a Commodity Trading HubVF Corporation in Stabio
The most durable member of the cluster has proved to be the American VF Corporation, owner of The North Face, Vans, Timberland, Napapijri, Dickies and other outdoor and sportswear brands. Read more Lugano · Lugano as a Commodity Trading HubWhy Ticino: tax, production, workforce and logistics
The companies that settled in the Fashion Valley never concealed that taxation was one of their reasons. Read more Lugano · Lugano as a Commodity Trading HubThe frontalieri
The third factor was the workforce. In the fourth quarter of 2012 Ticino counted 55,554 frontalieri, of whom 16,406 worked in industry, 9,416 in commerce and 8,229 in construction. Read more Lugano · Lugano as a Commodity Trading HubThe Kering case: Gucci, LGI and the Italian tax authorities
The structure that the Italian authorities examined can be reconstructed from the public reports of the investigation and from Kering's own statements. Guccio Gucci S.p.A. Read more Lugano · Lugano as a Commodity Trading HubThe legal instruments
The procedure of accertamento con adesione is governed by Legislative Decree no. 218 of 19 June 1997. It allows the taxpayer and the tax office to agree on the amount of an assessment. Read more Lugano · Lugano as a Commodity Trading HubOther fashion groups before the Italian courts
The Kering case was the largest of a series of Italian proceedings against fashion groups whose foreign companies were alleged to be managed from Italy. Read more Lugano · Lugano as a Commodity Trading HubDepartures, low wages and the political debate
The withdrawal of Kering from Ticino took eight years and proceeded in four stages. Read more Lugano · Lugano as a Commodity Trading HubThe question of wages
The departures fed a debate that had accompanied the Fashion Valley from the beginning. Read more Lugano · Lugano as a Commodity Trading HubThe Chiasso-Stabio-Mendrisio logistics belt and the Gotthard corridor
The logistics belt of the Mendrisiotto owes its existence to the Gotthard railway, whose history Chapter C.III describes. Read more Lugano · Lugano as a Commodity Trading HubStabio and Mendrisio
The logistics sites of the fashion groups lay mostly in the municipalities around Chiasso, in Stabio, Coldrerio, Mendrisio, Novazzano and Balerna. Read more Lugano · Lugano as a Commodity Trading HubCustoms warehouses, free zones and the reforms after 2014
Swiss customs law allows foreign goods to remain in Switzerland without paying import duties and import VAT as long as they are placed under a suspensive procedure. Read more Lugano · Lugano as a Commodity Trading HubFree zones and the comparison with Geneva
Free zones differ from open customs warehouses in that they are enclosed areas in which goods of many depositors are stored under the general supervision of the customs office. Read more Lugano · Lugano as a Commodity Trading HubOther legal regimes that reach stored goods
Several other statutes apply to goods stored under customs suspension. The Cultural Property Transfer Act treats the storage of cultural property in a customs warehouse as an import, so that the… Read more Lugano · Lugano as a Commodity Trading HubShipping, ship management and marine insurance
Switzerland is a landlocked country whose companies control a significant share of the world's merchant fleet. Read more Lugano · Lugano as a Commodity Trading HubThe Swiss flag: the Federal Act of 1953
Ships owned by Swiss companies may fly the Swiss flag under the Federal Act on Navigation under the Swiss Flag of 23 September 1953 (Maritime Navigation Act), SR 747.30. Read more Lugano · Lugano as a Commodity Trading HubMarine insurance and the maritime services cluster
Marine insurance in Lugano is mainly a matter of cargo insurance for traders and of brokerage. Read more Lugano · Lugano as a Commodity Trading HubTax, substance and reputational risk of distribution structures
A Swiss distribution or trading company that buys goods from an Italian group company and resells them abroad faces three distinct lines of attack from the Italian tax authorities. Read more Lugano · Lugano as a Commodity Trading HubThe permanent establishment in Italy
Article 162 TUIR was amended in 2017 to follow the BEPS recommendations. A nonresident enterprise has a permanent establishment in Italy if it carries on its business there through a fixed place of… Read more Lugano · Lugano as a Commodity Trading HubDAC6 and mandatory disclosure
Since 2020 cross-border tax arrangements involving Italy may also have to be reported to the Italian Revenue Agency under the EU directive on mandatory disclosure (DAC6). Read more Lugano · Lugano as a Commodity Trading HubA practitioner's checklist for distribution structures in Ticino
The experience of the Fashion Valley yields a set of questions that advisers should ask before a group places trading, distribution or logistics functions in Ticino. The first question is functional. Read more Lugano · Lugano as a Commodity Trading HubWhen the structure is challenged
When the Italian authorities open an audit or a criminal investigation, the response must coordinate tax, criminal and Swiss law. Read more