INTERNATIONAL TRADE

Import and export requirements and procedures

Imports

The Mexican Government is continuing with a policy of gradually eliminating restrictions on imports. Previous to any import operation it is necessary to register in the general registrer of imports before the Secretaria de Hacienda y Credito Publico, (Internal Revenue Service). All fiscal obligations must be accomplished and proper documents must be presented before custom authorities. This includes a Federal Tax ID Number, RFC, and complying with all the customs laws of Mexico, some of the requirements are:
a) To fufill all requirements established by the income tax laws of
Mexico.
b) To maintain an inventory control system.
c) To obtain the information and documentation required to prove the products origin.
d) To provide product documentation for customs officials concerning manufacturer, price, and other pertinent information.

Special authorization is required for those products related to health care, ecology, quality, and consumer protection. The authorization requirements may vary depending on the type of product to be imported. Product description and other corresponding classification information will be found in the Commodities Classification and Coding System.

Import and export tax

a) Classification - Mexico uses The Commodities Classification and Coding System for imports and exports which is compatible with other countries.
b) Appraisal - The taxable base of the general import tax is assessed according to the value of the product. Other elements may be considered including other fees paid by the importer. The importer is obligated to adjust the price of the merchandise to normal
market levels. These price levels will be considered as the taxable base of the general import tax. The taxable base of the general import tax is the commercial value of the merchandise, excluding freight charges and insurance.
c) Rates - The range of rates of the general import tax is between 0% and 35%. Most of the rates are within the range of 1% to 25%, with the highest rates between 35% and 200%, which only apply to certain countries and imports.
d) Protected Industries - According to the GATT, (General Agreement on Tariffs and Trade), industry protectionism has gradually been eliminated. Only some industries such as automotive and pharmaceutical industries are protected. It is expected that in the near future these industries will no longer be protected.
e) Preferential Rates - Preferential rates apply when imports come from countries that may have signed commercial agreements with Mexico, such as the Integrated Latin American Association, (LAIA), North American Free Trade A g r e e m e n t , (NAFTA), and other free trade agreements with Colombia, Venezuela, Costa Rica, Bolivia, and Chile. The preferential rates should be applied if the importer demonstrates through a certificate of origin that the merchandise originated from a country that is participating in trade agreements.

Documentation

Importers and exporters are obligated to present a customs declaration before customs officials, through customs brokers. If the merchandise falls under duty free restrictions the petition document must include the electronic tracking numbers. The petition must be accompanied by the documentation of an invoice, bill of lading, and documents that prove the origin of the merchandise.

Review procedures

Customs authorities, (General Customs Administration, Legal Local Income Administrations, Federal Fiscal Audit and Collections Agency), have the authority to request a review of the petition and the accompanying documents, as well as the merchandise at any location.

Fines and sanctions

Fines and sanctions may be assessed in Mexico for the nonfulfillment of custom laws and foreign trade agreements. These penalties may include the confiscation of merchandise without the possibility of recovery.

Merchandise abandonment

In the case of importing goods, if the requirements are not fulfilled within a two month term, (except in the case of explosives, flammable materials, radioactive materials, corrosive products, and live animals, the term is 15 days), the authorities will grant a 15 working day term to recover the merchandise, if it is not recovered the federal authorities will seize the merchandise.

Ports of enrty
The greater ports of entry into the country are:
Gulf of Mexico....................................................Veracruz and Tampico - Altamira
Pacific Ocean............................................................... Manzanillo and Acapulco
Northern Border.................................................... Tijuana and Nuevo Laredo
Airports...................................................... México, Guadalajara, and Monterrey

National transportation

The principal railroad lines of the country are; the north border, including Nuevo Laredo, Matamoros, Piedras Negras, Ojinaga, Ciudad Juárez, Nogales, Mexicali, and Tijuana; the Gulf coast, Tampico - Altamira, Veracruz, and Poza Rica; the Pacific coast, Mazatlán, Topolobampo, and Salina Cruz. Additionally, there are several important cities in the interior of the country when
considering logistics for the movement of merchandise.

General deposit stores

Goods imported into the country by private companies may be held in storage. The importer may decide when to remove the goods from storage, but will have to pay general import taxes with consideration of the effects of the exchange
rate, infllation, and IVA.

Temporary imports

Temporary merchandise imports will be subjected to the following:
a) Taxes will not be paid for foreign trade or compensatory rates.
b) Regulations and restrictions concerning duty free matters and formalities for the dispatch of the merchandise. Temporary imports may choose the following methods:
a) The temporary imports that are exported in the same state or condition that were imported have a determined period of time to comply with the necessary regulations.
b) Temporary imports for transformation, processing, or repair by assembly companies, (maquiladora companies), Pitex, (temporary import program to produce articles intended for export), customs accounts, Ecex, (foreign trade companies).

Border region

Customs law indicates the geographical limits of the border region. The law divides the region in two large parts, the border line and the border region. The border line includes the areas within 20 parallel kilometers of the international border, while the border region is determined to be the geographical space that is determined by the federal executive branch. The ME, with the prior ruling of the SHCP, will determine through general dispositions that merchandise foreign trade taxes will be partially or totally exempted in the border line areas as well as the border regions. The ME, supported by the foreigntrade law, will determine what imported merchandise in those border areas will be subjected to regulations and duty free restrictions. NAFTA and the federal government have several measures for the specific treatment of foreign trade that is destined to, or originating from the border regions.

The most important measures are:
Decrees published in the DOF, (official federal journal), on December 24th , 1994, established customs transition plans for the general commerce of the border regions of the country. These plans have as a fundamental objective the elimination of free zones which have existed for several years. These zones will be incorporated into the commerce system that is applied to the rest of the country. These customs decrees consider the following areas as border regions: Baja California, parts of Sonora, Baja California Sur, Quinta Roo, Salina Cruz in Oaxaca, and the southern border with Guatemala. All persons and companies with activities mentioned in the decrees will import under the protection of the customs decree. They should be registered with the ME, as this registry expires on December 31st, 2000.

Information sources

a) In Mexico

For general information on possible potential commercial relationships abroad, different national or international trade chambers, or more details concerning different products, contact the following agencies:
- Ministry of the Economy (ME)
- National Bank of Foreign Trade (Bancomext)
- Information and Documentation Fund for Industry (INFOTEC)
- National Importing and Exporting Association of the Mexican Republic (ANIERM)

b) In the rest of the world

For the companies interested in exporting their products to Mexico, a consultation is recommended with the embassies or consulates involved. The National Bank of Foreign Trade, (Bancomext), have consulting offices which can provide any information related to imports.

North American Free Trade Agreement, (NAFTA)

The North American Free Trade Agreement, (NAFTA), came into effect January 1st. 1994. The approval of the agreement created one of the largest commercial exchange zones in the world, with more than 360 million consumers. The principal purpose of NAFTA is to reduce or gradually eliminate import duties between member countries and to support such duties for products originating from other nonparticipating countries. NAFTA was also created to reduce import and technical barriers, as well as to develop faster
procedures for solving controversies and disputes. NAFTA´s objective is to increase commercial competition at the international level. The three participating countries, (Mexico, U.S.A., and Canada), are working together for the protection of the environment, workers rights, and better working conditions. The rights and obligations of NAFTA are based on the principles of GATT, as well as other international agreements.

The principal goals of NAFTA are:

o To gradually eliminate quantitative and qualitative barriers
o To avoid the practice of dumping
o To increase investment opportunities
o To protect intellectual rights
o To promote trilateral cooperation

Mechanisms for the promotion of exports

The Mexican government due to the commercial programs developed between participating countries, is promoting the export sector. Mexico has implemented several mechanisms that permit exporters to have free access to components and machinery.

The principal mechanisms are:

o Temporary Import Program to Produce Export Items (PITEX)
o Maquiladora program
o Income tax refund, (Drawback)
o ALTEX certificate
o Customs accounts
o Foreign Trade Companies (Ecex)

Temporary import pogram to produce export items, (Pitex) With this program Mexican companies may temporarily import without paying taxes or compensatory rates for raw materials, machinery, and equipment that is used in the manufacture or production of goods that are directly or indirectly exported.

This program allows for the temporary importation of:
a) Raw materials, parts, and components
b) Trailers and containers
c) Flammables, lubricants, auxiliary materials, and perishables
d) Machine tools used to produce export items
e) Machinery, equipment, instruments, and molds
f ) Appliances, equipment, and accessories for investigations, industrial safety, quality control, and communications

Corporations that pay under Title II of the Income Tax Law, (LISR), may participate in this program as long as they do not produce products derived from petroleum and are established in Mexico. There are no restrictions on geographical areas or capital structure.

Import items referred to in section a through d, are authorized to exporters that:
· Have annual foreign sales more than $500,000 USD, or invoice export products that are at least 10% of total sales.
· Regarding sections a) and f), exporters must have annual foreign sales that exceed 30% of total sales. The equipment imported through this program may also be used to produce articles for the national market. Promotion and operation of the maquiladora export industry The maquila operation is an industrial process or service intended for the transformation, manufacturing, or repair of foreign originated goods temporarily imported for their subsequent export.

Mexican individuals or corporations may opt for participation in this program, regardless of capital structure. Individuals or corporations may establish their facilities anywhere in Mexico for the purpose of export production, and they may sell a certain percentage of their total production to the national market. Established companies may adopt this type of operation if they compete with their products in the national market and wish to take advantage of the productive capacity to export.

Import tax refunds, (Drawback)

Taxes generated will be refunded when import manufacturers incorporate raw materials, replacement parts, and accessories, trailers and containers, flammables, lubricants, and other foreign materials that are intended for export All the materials that were incorporated within the previous year of the submission of the application, will be subject to this refund.
Companies may obtain this refund when they directly invoice the importers, or when they sell the product to the final exporter, either using a letter of credit or when goods are provided to a maquiladora for export of the product to a foreign trade company, (ECEX), registered in the Ministry of the Economy (ME).

High volume exporting company certificate, (ALTEX)
The principal purpose of this certification is to obtain preferential treatment, and to simplify the procedures and paper work through different programs that the Ministry of the Economy has established with other departments and offices of the federal government, such as:
· Specific financial incentives, mainly through BANCOMEXT
· Preferential grants for import and export permits
· Refund of the IVA tax
Direct exporters that manufacture nonpetroleum products may request this program, if they prove annual foreign sales of at least 2 million dollars, or 40% of total sales. If they are indirect exporters, they must prove indirect export
sales of at least 50% of total sales.

Customs acounts

Importers who also export may opt for paying import taxes for their operations. They must deposit the money into customs accounts in authorized banks or authorized exchange houses for the following situations:
· When a person or company imports goods that are intended for a transformation or manufacturing process, machinery and equipment for reparation, adjustment or transformation for subsequent return within the following 18 months of the import date. These persons may request a refund of the deposited amount plus interest.
· When a person or company imports any kind of components, (different from the ones mentioned in the previous paragraph), that are returned abroad within 3 years following its import, may request the refund of the amount deposited during the time, plus the interest. This refund will be calculated by the percentage that is represented by number of days in which the components stayed in Mexico in relation of the number of days permitted for the depreciation of the components according to the income tax laws, (LISR).
· In both cases the following requirements must be fulfilled:
· The implementation of a cost system that allows for the identification of the percentage of the imported goods.
· The notification of customs authorities for the decision of paying the respective taxes through customs accounts.

Foreign trade companies, (ECEX)

These are companies whose principal purpose is to promote and to export Mexican products, (nonpetroleum), in order to:
· Integrate and consolidate proposals of export, according to international market requirements
· Identify and satisfy demands for Mexican products abroad
· Develop international distribution networks
· Promote exports of small and medium sized compagines
· Integrate replacement parts for export.
These companies will develop market surveys, marketing programs, strategies, and analyze operations of merchandise traffic and logistics problems, including shipping, insurance, customs procedures, and documentation.

ECEX benefits

· Obtaining high volume export company certificates, (ALTEX)
Specific projects must be approved by the Temporary Import Program to Produce Export Items, (PITEX), for those components that are used in production, in spite of not fulfilling the minimum required percentages to participate in this program. Only the importation of raw materials, replacement parts, components, trailers, containers, flammables, lubricants, and some other
materials are permitted.
· Free commercial information service
· Access to financial incentive programs established by BANCOMEXT