English, News

December and January Developments on International Trade – The Trading Room

15 Jan , 2021  

Mexican Economic Newsletter, International Trade News in Mexico

Developments Mid-December 2020

A series of decisions and regulations trade-related were published in December 2021. The most relevant in our opinion are the following:

  • Mexico and CPTPP: Ministry of Economy made some changes to the procedure regarding the public tenders to access the import quotas per Mexico’s Tariff Rate Quotas established in Appendix A-1, which deals with dairy products. 
  • UK-Mexico Trade Continuity Agreement: Mexico and the UK reached an agreement whereby the preferential tariffs are maintained. In essence, the European-Mexico Free Trade Agreement will continue to apply between Mexico and the UK as modified per the agreement. Now, we highlight that materials originating from the European Union will be considered as materials originating from the UK. The text of the agreement is available here.   
  • The New General Tariffs on Imports and Exports Act in Mexico: The new tariff system entered into force on december 28th, 2020, whereby Mexico now has a 10 digit tariff item code, called NICO for its acronym in Spanish. With the entry into force, the federal government published the implementing regulations, and updated its non-tariff barrier regulations: 
  1. Import and Export Quotas;
  2. Trade regulations on Pesticides, Fertilizers, and Toxic Substances;  
  3. Goods subject to trade regulations to the Ministry of Culture;
  4. Goods subject to trade regulations on behalf of the Ministry of Agriculture
  5. Goods subject to trade regulations on behalf of the Ministry of Health;
  6. Goods subject to trade regulations on behalf of the Ministry of Environment;
  7. Goods subject to trade regulations on behalf of the Ministry of Energy;
  8. Sugar export permit and maximum quota;
  9. Dual-Use, Software, and Technologies subject to trade regulations on behalf of the Ministry of Economy;
  10. Trade Sanctions per the United Nations Security Council resolutions;
  11. Goods subject to trade regulations on behalf of the Ministry of Defense.
  • Tax Benefits in the Northern and Southern Border: As reported in our last edition, the federal government renewed the Northern Borders Tax Program and replicated said Program in the Southern Border of Mexico. For more information, Jorge Montes, VTZ Tax partner,  prepared a Tax newsletter about this matter (available in Spanish).
  • The Free Trade Zone of Chetumal: Mexico created this Free Trade Zone located in the capital of the State of Quintana Roo (about 3-4 driving from Cancun). The Decree lists the goods that will not be subject to import duties and the customs processing fee. “Companies of the Region” can only access these benefits provided that they register before the Ministry of Economy. The Decree aims to “promote” trade of goods at lower costs in this region. It is uncertain (and unlikely) that this free trade zone is designed to be a foreign investment attraction policy.

Should you need more information, do not hesitate to ask us.

USMCA Labor Complaint

Do you remember that when the union AFL-CIO announced, in September, that it was going to submit a Labor Complaint against Mexico within 30 days?

Well, this week Trumpka, AFLI-CIO leader, claims that they will submit said labor complaint to trigger the facility-specific rapid response mechanism as soon as Biden takes office. Apparently, it is being reported that the AFL-CIO perceived resistance on behalf of Trump’s USTR regarding the labor complaint. If submitted, this will probably be the first USMCA task that the new Mexican Minister of Economy will have to oversee.

Mexico to Eliminate Independent Bodies?

The Mexican president has submitted the idea that independent and autonomous bodies must cease to exist per “austerity” policies. These bodies are the Anti-trust Commission, Telecommunications Institute (IFT),  Transparency Institute, and the Human Rights Commission.

As a result of this idea, which is being discussed in the cabinet, experts have expressed, that eliminating the IFT, in particular, puts Mexico at risk of not complying with relevant USMCA obligations.

The Under-minister of International Trade, Luz de la Mora, expressed in an interview that the Federal Government will seek to bring any proposed public policy into compliance with Mexico’s international obligations, including anti-trust.

In VTZ, we consider that this sudden public policy proposal and its reach, which requires constitutional amendments, will affect democratic institutions and rule of law.

USMCA Implementation E-Book

The Mexican Ministry of Economy and Senate published an e-book titled “Implementing the USMCA : A test for North America ”, which contains chapters in Spanish and English.

If your interested, you can access the e-book: here.

In December, we organized a webinar in a round table format (in Spanish) that discussed trade and tax-related matters. You can access the video at the following link: Webinar.

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Doing Business in Mexico, English

Labor and Migration in Mexico

24 Aug , 2020  

Labor, Employment, Assembly, Migration, Mexican Lawyers, USMCA, Manufacturing

Our seventh chapter of Doing Business in Mexico, Labor and Migration in Mexico, will provide a general overview of the relevant labor law provisions on employment, from worker rights, dismissals to unions and collective bargaining, including a brief summary regarding the USMCA, the rapid response mechanism, as well as information on migration.

This Chapter includes the following sections:

  1. Labor and Migration Environment
  2. Individual Employment Agreements
  3. Foreign Employees
  4. Outsourcing
  5. Salary and Wages
    1. Over-working hours
    2. Rest Day
    3. Labor Rights and Premiums
  6. Termination of Employment
  7. USMCA Labor Chapter
    1. Publications
    2. Labor Chapter and its Enforcement Mechanism
  8. Labor Mexican Amendment: Unions and Collective Bargaining
  9. Migration Matters
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Labor and Migration Environment

Mexico’s labor framework is set forth in the Constitution and the Federal Labor Law (hereon “Labor Law”). Accordingly, a “job” or “working relation” is defined as rendering of a subordinated personal service to another person in exchange for a wage.[1] The job definition is quite broad because any person that renders a subordinated service to another, who in turn pays compensation, is deemed as an employee, regardless of the nature of the service performed, and he or she is entitled to labor rights.

Pursuant to the Labor Law, workers are entitled to numerous rights. Employees are entitled, for instance, to profit sharing, which can only be dismissed in a limited number of cases. If a worker is terminated without a justified cause, he or she is entitled to seek job reinstatement or severance pay. Indeed, foreign investors perceive Mexican Labor Law as “overprotective” and costly, as noted in WEF’s Global Competitiveness Index 2019

In addition to the Labor Law, Mexico has the following labor-related laws or regulations that complete its regulatory framework:

  • Social Security Law,
  • Retirement Savings System Law,
  • Institute of the National Housing Fund for Workers Law (INFONAVIT Law),
  • Federal Regulation on the Safety, Hygiene, and Environment at the Workplace,
  • The Mandatory Standard NOM-035-STPS-2018 on Psychosocial Risk Factors at Work – Identification, Analysis, and Prevention,[2] establishing the elements to identify, analyze and prevent psychosocial risk factors, as well as to promote an environment organizational support in the workplace.

The employers are required to register all of their employees before Mexican public institutions, namely the Mexican Social Security Institution (IMSS, acronym in Spanish), the National Housing Fund for Workers (INFONAVIT, acronym in Spanish) and the National Fund Institute for Workers’ Expenditures (FONACOT, acronym in Spanish). As a result, an employer has to pay “social-taxes” to these agencies. Failing to register or make timely payments regarding these social-taxes, the employer is subject to penalties and surcharges.

Also, the employer will have to register before the tax or treasury authority of the State (i.e. local authority).  States collect a Payroll tax that is paid by the employer based on wages and other expenditures. 

Individual Employment Agreements

As a general rule, the Labor Law establishes that an individual employment agreement duration is indefinite (i.e. permanent). Temporary contracts are permitted, however, only when there is a justified cause, such as probationary periods, initial training, among other situations. The employer has the legal duty to have a copy of the agreement.

Foreign Employees

Mexican employers may hire foreign employees. However, the Labor Law provides that employers must comply… Continue reading.

Outsourcing

Outsourcing labor legal schemes are carefully regulated to prevent their abusive use against employees and their labor rights. The 2012 labor reform[3] introduced the “outsourcing or subcontracting regime”, including two very relevant provisions. In essence, a labor-intensive service agreement, for instance, may have far-reaching legal consequences to the extent of deeming service provider’s workers as employees of the contracting company.

In essence, the Labor Law considers that outsourcing entails a “contractor” (i.e. outsourcing company) that performs work or provides services to a “beneficiary”, an individual or enterprise. The beneficiary sets the tasks and supervises the development and execution of the contracted work. In turn, the outsourcing company will carry the services or work with his own employees.

An outsourcing company is responsible for all labor obligations, including social security and tax regarding, his employees. Needless to say, the beneficiary of the outsourcing services is jointly liable in the event that the outsourcing company fails to fulfill its labor obligations (including tax and social security).

The Labor Law considers, for instance, “human resources” companies (e.g. head-hunters) as….Continue reading.

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[1] Article 20 of the Labor Law.

[2] Published on October 23, 2018, in the Official Gazette.

[3] Amendments to Labor Law published on November 30, 2012 and being effective as of December 1, 2012.

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English, News

Overhaul to Food Product Labeling & USMCA for November or 2020? – TRADING ROOM

11 Oct , 2019  

Food and Beverage Labeling in mexico, reform, USMCA, Tumka, labor reform in Mexico, enforcement

The Trading Room

(Download our newsletter in PDF: Trading Room)

Overhaul to Food Product Labeling

As we reported in our Alert, on October 1 the Chamber of Deputies approved the reform to the General Health Law to regulate the frontal warning labeling on food and non-alcoholic beverages. The Senate has yet to approve such reform.

In line with this reform, today was published in the Official Gazette the project of the amendment to “NOM-051”, a legal document that regulates labeling for food and non-alcoholic beverages. This amendment project introduces the new rules that will transform the food labeling system in Mexico, introducing “warning” designs and the “nutritional” limits to determine if a given warning applies, among other issues.

Companies and chambers of the food and beverage industry will have the opportunity to submit comments to the project that modifies the “NOM-051” within 60 days.

VTZ prepared a detailed alert in Spanish that summarizes the project of the amendment to “NOM-051”. The English version will be available as soon as possible.

Should you wish more information regarding the General Health Law reform,  the project of the amendment to NOM-051 or the process to submit comments, do not hesitate to contact a VTZ member.

Sources:

https://www.dof.gob.mx/nota_detalle.php?codigo=5575205&fecha=11/10/2019

USMCA for November or 2020?

This week a group of US congressmen met with the President of Mexico, AMLO, to discuss progress in the implementation of the labor reform.

Congressman Richard Neal expressed interest in seeing Mexico meet the labor standards required by TMEC. However, the congressman also expressed to Mexican officials their concern about the “amparos” (a constitutional remedy) promoted by unions against the labor reform. In response to this concern, they were informed that the Mexican government is “winning” these cases.

We highlight that the congressmen met with the Secretary of the Treasury to review the budget allocated regarding the implementation of the labor reform. It must be noted that Mexican experts have expressed concerns regarding the budget allocation, particularly regarding the implementation of the labor reform at a State level (El Financiero).

Richard Trumka, leader of one of the most important unions in North America AFL-CIO, threatened in an interview with The Washington Post that TMEC would not be approved if it is submitted for a vote before “Thanksgiving.”

AFL-CIO’s support is considered crucial to persuade Democrats to support the USMCA. Trumka emphasizes that a budgetary commitment by Mexico is required to ensure the correct implementation of the labor reform since there is a fear of Mexico’s ability to make the reform effective, he concludes saying that “If [Mexico] can’t apply their own laws, we have a real problem.”

Will the TMEC negotiations open again to give more “teeth” to the labor chapter and the dispute resolution mechanism

Sources:

https://www.washingtonpost.com/us-policy/2019/10/09/trumka-says-fast-action-trade-pact-with-canada-mexico-would-be-colossal-mistake/

https://www.elfinanciero.com.mx/economia/democratas-piden-garantias-para-aprobar-el-t-mec

https://www.eleconomista.com.mx/politica/Congresistas-de-Estados-Unidos-externan-a-AMLO-su-preocupacion-por-amparos-contra-reforma-laboral-20191008-0084.html

 

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English, News

National Development Plan & International Trade, US representatives visit Mexico to discuss USMCA-THE TRADING ROOM

19 Jul , 2019  

National Development Plan, International Trade, US representatives visit Mexico to discuss USMCA’s approvals

The Trading Room

(Download the PDF version of our newsletter: Trading Room)

National Development Plan & International Trade

Last Friday 12th of July, the Mexican National Development Plan (NDP) for 2019-2024 was published in the official gazette. The NDP is a document, prepared every six years by the new President and approved by the legislative branch, that aims to guide policymakers of the Federal Government in their decisions. Unlike the previous NDP 2013-2018, the new NDP is a short document that lacks data and strategies, lists the government programs and projects, and focuses on criticizing the recent history. We highlight the following from the NDP:

Trade: Trade was only mentioned in the “Foreign Affairs” section when addressing the US-Mexico relationship. It is unfortunate that the NDP does not include an explanation of the so-called three trade policy pillars: diversification, inclusion, and innovation.

WTO: The NDP mentions that Mexico will accept the decisions made by International Organizations, such as the WTO.

Customs: The NDP did not mention a customs policy.

Investment: The NDP states that the federal government will promote private investment, domestic and foreign, and that a “framework for legal certainty, honesty, transparency, and clear rules will be established[.]”; it is unclear what is the government’s strategy to establish said “framework”.

Taxes: The NDP mentions that taxes on fuels will not increase, but lacks to mention if other taxes will not be increased.

Regional Projects: The NDP lists the Mayan Train, Development Program for the Tehuantepec Isthmus (DPTI), and the Northern Border Free Trade Zone. As noted in our previous editions, the DPTI aims to modernize the Inter-oceanic Corridor between the states of Veracruz and Oaxaca, creating “free zones” to attract private investment, and lowering the income tax and VAT rates.

Agriculture: The PND announces several programs, but we highlight the support for sugarcane producers, the support price mechanism for corn, beans, wheat, rice and milk, and the creation of SEGALMEX.

 

Sources:

http://www.dof.gob.mx/nota_detalle.php?codigo=5565599&fecha=12/07/2019

US representatives visit Mexico to discuss USMCA

On Wednesday, the president of Mexico, AMLO, announced during his morning conference that he would meet this Friday with a delegation of US Congress representatives to discuss USMCA approval process.

As several news portals have reported, the House of Representatives will first receive and discuss USMCA and then the Senate, however, President Donald Trump has not yet submitted the agreement to Congress. Needless to say, Democratic representatives are showing concerns regarding the following matters: dispute resolution, provisions related to the pharmaceutical, environmental sector and the effective implementation of the labor reform. Therefore, the US delegation will meet officials from the Mexican Ministries of Economy, Foreign Affairs, Labor, and Environment.

It is interesting that the delegation of representatives has the concern that Mexico may block the establishment of panels from dispute resolution mechanisms like the US did in the past with NAFTA. Unlike CPTPP, USMCA does not clearly solve the possibility that a Party may block the establishment of a panel. Hence, we hope that the US representatives return convinced that Mexico is fully committed to complying with all of USMCA’s provisions.

Sources:

https://www.milenio.com/politica/amlo-hablara-legisladores-eu-viernes-t-mec

https://www.reuters.com/article/us-usa-trade-mexico-canada/trump-presses-for-usmca-passage-as-lighthizer-lawmakers-prepare-to-meet-idUSKCN1UA1YZ

https://www.dineroenimagen.com/economia/mexico-no-aceptara-cambios-al-t-mec-ya-esta-negociado/112186

https://www.wsj.com/articles/lighthizer-charms-congress-but-struggles-to-sell-usmca-11563355920

https://www.elfinanciero.com.mx/economia/amlo-se-reunira-esta-semana-con-representantes-democratas-y-republicanos

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English, News

Goodbye SEZ and Road to USMCA: Trading Room

26 Apr , 2019  

Zonas Económicas Especiales, Itsmo, Zona Libre, Abogados, Comercio Exterior, TMEC, Senado, Ratificación

The Trading Room

(download our newsletter in PDF here: Trading Room -20190426)

Goodbye SEZs

This Thursday in his morning press conference, Mexican President, AMLO, declared that the Special Economic Zone policy will disappear.

According to his statements:

“[SEZ] were supposedly going to help, but they never did anything to help. The business was made, the land was bought and the budget was used, which did not benefit anything.”

Though SEZs were officially created,  “investment authorizations” (for private parties) were not been granted by the relevant Mexican Authority. It is evident that the results of the SEZ are not tangible since they are still at an “early” stage of their implementation.

The federal government now bets in creating “Development Projects”, which we believe refers to creating a sort of “Free Trade Zone” with industrial parks throughout the Isthmus corridor. The Master Plan of this project will be concluded in October.

Sources: 

https://www.jornada.com.mx/ultimas/2019/04/24/se-creara-zona-libre-a-lo-largo-del-transistmico-1092.html

https://elfinanciero.com.mx/nacional/lopez-obrador-anuncia-la-desaparicion-de-las-zonas-economicas-especiales

Road to USMCA

The 24th of April the relevant Senate commissions approved the Mexican labor reform. As we have reported, this reform includes the creation of specialized tribunals, union transparency and guaranteeing collective bargaining so that just and competitive conditions prevail in the labor market, changes that seek to fulfill the Mexican obligations under USMCA. Now, it is the turn of the Senate to discuss and approve the reform.

Mexican news outlets, however, reported that the American Federation of Labor and Congress of Industrial Organizations, a major US union, expressed its rejection towards USMCA’s ratification as it considers that Mexico does not have the sufficient instruments to implement the labor reform successfully.

Another step towards USMCA’s ratification was taken on April 18th when the US International Trade Commission of the US issued its report. The report predicts USMCA’s economic impact in industrial and economic sectors; in fact, it predicts that the USMCA will allow the USA to grow less than 1% of its GDP.

Sources:

https://www.usitc.gov/press_room/news_release/2019/er0418ll1087.htm

https://www.milenio.com/negocios/t-mec-impulsaria-economia-de-estados-unidos

https://www.eleconomista.com.mx/empresas/EU-el-T-MEC-dara-musculo-a-sindicatos-y-elevara-salarios-en-Mexico-20190421-0087.html

https://www.elfinanciero.com.mx/nacional/comisiones-del-senado-aprueban-en-fast-track-la-reforma-laboral-y-pasa-al-pleno

https://www.eleconomista.com.mx/empresas/Principal-sindicato-de-EU-se-opone-al-T-MEC-por-temas-laborales-de-Mexico-20190423-0044.html

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