Doing Business in Mexico, English

International Trade in Mexico

24 Aug , 2020  

Our third chapter of Doing Business in Mexico, International Trade, will provide a general overview of ton Mexican International Trade Policy considering international context, as well as customs aspects.

This chapter includes the following sections:

  1. Mexican International Trade Policy and Customs
  2. Tariff Policy
    1. MFN Tariffs or Duties
    2. Preferential Tariffs in Free Trade Agreements
      1. CPTPP
      2. USMCA
      3. New EU-Mexico Agreement
    3. Duty Deferral, Drawback and Preferential Tariffs in Trade Instruments
      1. IMMEX
      2. Trade Promotion Instruments
      3. PROSEC
        1. Eight Rule
        2. Free Trade Zones in Mexico
    4. Other Taxes affecting imports
      1. Customs Processing Fee
      2. Value-added Tax
      3. The Special Tax on Production and Services
      4. The Tax on New Motor Vehicles
  3. Non-Tariff Barriers
    1. Import Prohibitions
    2. Licensing System
    3. Other Non-Tariff Barriers on Imports
    4. Import Quotas
    5. Exports Tariff & Non-Tariff Export Barriers
  4. Recent Changes to Mexican Trade Policy
  5. Customs
    1. Customs Brokers and Customs Agencies
    2. Single Customs Window
    3. Requirements to Import and Export in Mexico
    4. Special International Trade Registries
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1. Mexican International Trade Policy and Customs Law

As a member of international organizations and Free Trade Agreements, Mexico has, to a certain extent, a predictable trade and customs policy. Mexican laws on customs and trade are normally compatible with international rules. The President and his ministers are not only in charge to apply these laws, but they also have powers to regulate international trade and customs, including emergency actions.

Since the inception of the World Trade Organization and the North American Free Trade Agreement, Mexico’s trade and customs legal framework has not been subject to a substantial overhaul; seldom reforms particularly to the customs law have occurred from time to time.

However, Mexico is currently embracing modern free trade agreements, such as the Comprehensive and Progressive Transpacific Partnership (CPTPP) or USMCA, that have and will bring certain legal changes in intellectual property, de minimis, e-commerce, etc.  

Needless to say, trade and customs programs or regulations are subject to frequent changes that seek to adapt to new trends, risks, or policy objectives. Mexico has in place, for instance, duty deferral and tariff reduction programs that allow manufacturing or export-oriented industries to be more competitive. However, such programs are subject to strict government controls.

2. Tariff Policy

Mexico is a party to the World Customs Organization and to the International Convention on the Harmonized Commodity Description and Coding System (HS Convention).

As a result of the sixth amendment to the HS, Mexican congress discussed a new law that replaced its General Import and Export Tariff Act (LIGIE, acronym in Spanish), i.e. Mexico’s Harmonized Tariff Schedule. The Ministry of Economy conducted an exhaustive review and proposed to compact or unfold tariff items for statistical purposes into 10 digits that will be called Commercial Identification Number, instead of an 8 digit tariff item (known as fracción arancelaria). The new General Import and Export Tariff Act was published on July 1, 2020.

2.1 MFN Tariffs or Import Duties

Mexico’s average WTO bound tariff is 35%, and duties rates vary from 0% to 100%. According to Mexico’s most recent Trade Policy Review (2017), the average MFN tariff on agricultural and non-agricultural products was 14.3% and 4.6%, respectively. The General Import and Export Tariff Act establishes the import tariff or “General Import Tax” (Impuesto General de Importación, or IGI) as well as the export tariff “General Export Tax” (Impuesto General de Exportación, or IGE).

….

2.2 Preferential Tariffs in Free Trade Agreements

Mexico has an extensive network of Free Trade Agreements (FTAs) with 50 countries and is also a party to regional agreements within the framework of the Latin American Integration Association (ALADI).

Mexico Free Trade Agreement, USMCA, NAFTA, TLCAN, TMEC, Alianza del Pacífico, Pacific Alliance, European Union, CPTPP, International Trade, FTAs, Mexico, Mexican Law Firm, Mexican Lawyers, WTO, Top Mexican Lawyers

The main FTAs and trade agreements to which Mexico is currently a party are as follows:

  • United States–Mexico–Canada Agreement (USMCA).
  • European Union-Mexico Free Trade Agreement, which is in the process of being modernized.
  • Comprehensive and Progressive Transpacific Partnership (CPTPP) in force between Australia, Canada, Japan, Mexico, New Zealand, Singapore, and Vietnam; Brunei, Chile, Malaysia, and Peru have not yet ratified the FTA.
  • Pacific Alliance with Colombia, Chile, and Peru.
  • FTA with Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.
  • FTA with the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland).
  • FTA with Israel.
  • FTA with Uruguay.
  • FTA with Japan.

….. Read more

3. Duty Deferral, Drawback and Preferential Tariffs in International Trade Instruments

Long before NAFTA came into existence, Mexico had into effect duty deferral policies that allowed manufacturing companies, known as maquiladoras, to import goods, such as raw materials, parts, containers, etc., without paying import duties. The maquiladoras had to use said imported goods in the production of exported manufactured goods and, in turn, they could temporally import said goods and defer customs duties.

Eventually, NAFTA introduced drawback provisions to promote the use of regional goods and “to reduce the incentive for third countries to use a NAFTA country as an ‘export platform.” Article 303 NAFTA, replicated in article 2.5 USMCA, introduced a general prohibition on refunding or exempting customs duties owed on non-originating goods imported into the territory of a party.

In essence, these provisions have as a purpose to avoid double ‘taxation’ on non-originating materials that are used as an input in the production of a finished good subsequently exported to another NAFTA or USMCA party.

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English, News

Mexico in WEF 2019 and Mexican Food Security: Trading Room

25 Jan , 2019  

Trading Room, Mexico in WEF, Seguridad Alimentaria Mexicana, Ministry of Economy

Trading Room

Mexico in WEF

From 22 to 25th of January the World Economic Forum (WEF) was held, and this year’s topic was “Globalization 4.0: Shaping a Global Architecture in the age of the Fourth Industrial Revolution”.

Underminister of International Trade, Luz María de la Mora, attended WEF to inform the economic policies of the new government.

The Underminister mentioned that the policy is based on three pillars: innovation, inclusion, and diversificación. These “pillars” are yet to be explained clearly, which will most likely be addressed in the National Development Plan.

In an interview, the Underminister mentioned that the update of the Free Trade Agreement between Mexico and the European Union is still subject to a legal review of the text and it could be signed on April.

Regarding USMCA, she said that the government is expecting that it should be ratified this year notwithstanding the internal politics in the US and the measures against steel and aluminum products.

Sources:  

https://www.jornada.com.mx/ultimas/2019/01/21/subsecretaria-de-se-acudira-a-foro-economico-mundial-de-davos-suiza-4384.html

https://www.elfinanciero.com.mx/economia/mexico-busca-inversion-en-davos-para-crear-empleo-de-calidad-de-la-mora

 

SAM: Saving Agri-food producers?

Last Friday a decentralized governmental body was created “Mexican Food Security” (SAM, acronym in Spanish), which has as a purpose to support the federal government with its agricultural policy.

The new president, AMLO, promised to “rescue” this sector, in particular, the small and medium producers of “basic” agricultural producers and milk. SAM’s numerous purposes are, among others, “coordinate the purchase” of said products at “support prices”, “promote the commercialization of excess production to foreign markets”, “sale and distribute fertilizers, improved seeds…”.

Some of SAM’s activities will likely classify as a “subsidy” pursuant WTO Law and, if international trade is distorted, countries can submit claims or initiate trade remedies measures like countervailing duties, as happened with the Mexican sugar in the USA.  

Sources:

http://www.diariooficial.gob.mx/nota_detalle.php?codigo=5548402&fecha=18/01/2019 

Download our Newsletter: Mexico in WEF and SAM – Trading Room

 

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English, News

Mexico’s NAFTA Objectives

2 Aug , 2017  

Today, August 2, 2017, the Senate released a document entitled “Notice regarding the Initiation of the Negotiations regarding NAFTA’s modernization” that was provided by the Ministry of Economy. In said document, the Ministry of Economy explained the reasons why it should participate in the renegotiation. We highlight the following statements:

  • Mexico will not accept an increase of tariffs;
  • Mexico is willing to modernize NAFTA with new disciplines of the XXI century;
  • NAFTA should continue being a trilateral agreement;

Furthermore, the Ministry of Economy also published Mexico’s priorities in NAFTA’s negotiation. In harmony with recent statements from the Mexican Minister of Economy, the document does not specify specific objectives. However, it is mentioned that Mexico has the following priorities: 1. Strengthening the competitiveness of the region,  2. An Inclusive and Responsible Regional Trade, 3. Reap the Benefits of the XXI century economy, and 4. Foster Security and Predictability in North American Trade & Investment.

In that sense, if NAFTA is modernized it should create the following benefits:

  • Maintain market access for goods and services without barriers, in particular for agricultural products;
  • Rules of Origins that benefit the region;
  • Trade Facilitation and better customs procedures;
  • Regulatory harmony in Sanitary & Phytosanitary measures;
  • Improve labor integration in the North American Market by increasing the categories of temporal movements of business persons as well as improving time frames, transparency, and procedures for their entry. Also, promote regional cooperation  regarding the development of labor capacities;
  • Strengthening the enforcement of labor laws;
  • Assistance to SMEs and including provisions regarding Gender Equality;
  • Improving NAFTA’s dispute settlements mechanisms, including Chapter 19 (Antidumping), Chapter 11 (Investor-State), and Chapter 20 (State-State);
  • Transparency and Anticorruption disciplines;
  • E-Commerce;
  • Improving market access to financial services for Mexican Investors;
  • Enhancing the North American Development Bank; and,
  • Energy disciplines.
  • Disciplines regarding SOE;
  • Promote competition, improving cooperation between the NAFTA Parties.

In conclusion, the Ministry of Economy stated that the objective is to have an expedite negotiation process and maintain Mexico’s benefits.

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