Mexico: International Trade Comparative Guide

1 Trade agreements

1.1 Which bilateral, regional and multilateral trade agreements have effect in your jurisdiction?

Mexico remains a staunch defender of the multilateral trading system. However, pursuant to the strategies set forth in the National Development Plan, Mexico has signed several regional agreements with a view to creating new commercial opportunities and diversifying trade. It currently has 12 free trade agreements (FTAs) with 46 countries and seven partial scope agreements within the framework of the Latin American Integration Association (LAIA).

1.2 Which authorities are responsible for the negotiation of trade agreements? What does this process typically involve and how long does it take?

The Ministry of Economy heads the technical negotiation teams, acting through the minister for foreign trade. However, the Ministry of Foreign Affairs is responsible for conducting Mexican foreign policy and therefore sits along the Ministry of Economy during the negotiation process.

Depending on the issues involved, different government entities may take part in the negotiations.

The faculties of the executive power of the United Mexican States include:

• directing foreign policy; and
• concluding, denouncing, suspending and amending international treaties and issuing interpretative statements thereon, subject to Senate approval.

Congress also has certain powers, depending on the issue.

Under the Constitution, international treaties signed by the president and ratified by the Senate form part of the country's domestic laws and thus do not require any additional legislative action for them to be enforced or invoked before the Mexican courts. The Constitution is the highest-ranking instrument in the legal hierarchy, followed by international treaties – which, as ruled by the Supreme Court, are ranked above federal and local laws.

It is difficult to estimate how long it takes to negotiate trade agreements. This usually depends on economic and political factors, as well as on the number of participating countries. Each country's position will influence the negotiations. Ideally, a trade agreement should take a year to negotiate, although this usually takes two or three years (or more).

1.3 Do interim provisions apply while new trade agreements are under negotiation?

No.

2 Customs and imports

2.1 What laws and regulations govern customs in your jurisdiction?

Hierarchically, the laws and regulations that govern customs are as follows:

• the Political Constitution of the United Mexican States;
• international treaties;
• the Foreign Trade Law;
• the Customs Law;
• the Law on General Import and Export Taxes;
• the Federal Tax Code;
• the Value Added Tax Law;
• the Special Tax on Production and Services Law;
• the Regulation of the Foreign Trade Law;
• the Regulation of the Customs Law;
• the Regulation of Federal Tax Code;
• the Regulation of Value Added Tax Law;
• the Regulation of Special Tax on Production and Services Law; and
• the General Rules of Foreign Trade.

2.2 Which authority is responsible for enforcing the customs regulations? What powers does it have?

Several authorities converge to ensure compliance with customs regulations:

• The Ministry of Economy has the power, among other things, to formulate and conduct the country's general foreign trade policy.
• The Ministry of Finance and Public Credit, through the Tax Administration Service and the National Customs Agency of Mexico, has the power to organise and direct customs and inspection services:
• • The National Customs Agency of Mexico is a decentralised body that oversees the management, organisation and operation of customs and inspection services; and
  • The Tax Administration Service is a decentralised body that is generally responsible for verifying that foreign trade operations comply with customs and tax regulations.

2.3 What is the authority's general approach to enforcing the customs regulations? How vigorously are the rules enforced?

The customs authorities are generally very rigorous in examining compliance with the customs regulations and have extensive experience of audits and the collection of tax credits due under the customs regulations.

In fact, the fines imposed for non-compliance with customs regulations are often some of the highest, in comparison with other tax fines.

2.4 What customs import tariffs and duties apply in your jurisdiction? How are they levied?

The import tariffs applied in Mexico can be:

• ad valorem, when expressed as a percentage of the merchandise's customs value;
• specific, when expressed in monetary terms per unit of measure; or
• mixed, when expressed as a combination of the two.

Currently, the Law on General Import and Export Taxes contemplates approximately 11,300 tariff codes that apply to imports and exports. Each tariff code sets out the quota that will apply to the value of the goods (generally ranging from 0% to 35%).

2.5 What types of preferential tariffs are available in your jurisdiction? What are the criteria for eligibility?

In accordance with the Foreign Trade Law, it is possible to establish different preferential tariffs from the general tariffs provided for in the Law on General Import and Export Taxes, provided that this is provided for under an applicable international treaty.

The eligibility criteria correspond mainly to the existence of valid international treaties or agreements that are signed by the Mexican government and that are ratified before the Senate.

2.6 Are tariffs applied to safeguard national security?

Yes, the Foreign Trade Law contemplates measures to safeguard national security, which primarily consist of the regulation or temporary restriction of imports of identical, similar or directly competitive goods to those of national production to protect and prevent any damage to the national industry.

Safeguard measures may consist, among other things, of:

• specific or ad valorem tariffs;
• prior permits or quotas; or
• some combination of the above.

2.7 What import controls and restrictions apply in your jurisdiction? What exemptions are available?

There are two types of measures to control imports:

• tariff regulations (taxes on foreign trade); and
• non-tariff regulations and restrictions, such as:
• • advance permits;
  • compliance with official Mexican standards;
  • certifications; and
  • compensatory quotas.

Certain exemptions from compliance with the non-tariff regulations and restrictions apply. For example, under several programmes established by the customs authorities, compliance with official Mexican standards can be avoided.

2.8 How are customs and import decisions challenged in your jurisdiction? What does this process typically involve and how long does it take?

There are several procedures to challenge customs decisions:

• A revocation appeal is filed before the same authority that issued the customs decision and usually takes between three and eight months.
• A nullity trial before the Federal Court of Administrative Justice – an impartial administrative court – generally takes between one and two years.
• An amparo trial before the Federal Judicial Power – an impartial judicial court – generally takes between one and two years.
• Alternative means of dispute resolution may be available in certain specific cases and generally take between three and six months.

2.9 What penalties are imposed for breach of the customs rules?

The Customs Law establishes each of the assumptions that are considered by the authorities as violations of customs regulations, ranging from declaring inaccurate data in customs forms to illegally importing goods.

It also establishes the fines that must be paid based on the alleged infraction that has been committed.

3 Exports

3.1 What export controls and restrictions apply in your jurisdiction? What exemptions are available?

Generally, no export tariffs and duties apply to the export of goods and only in some cases do non-tariff regulations and restrictions apply to control exports.

For example, some non-tariff regulations and restrictions may be applied:

• to ensure:
• • the supply of products destined for the basic consumption of the Mexican population; and
  • the supply of raw materials for national producers; or
• to regulate or control the country's non-renewable natural resources.

3.2 Which authority is responsible for enforcing the export controls? What powers does it have?

See question 2.2.

3.3 What is the authority's general approach to enforcing the export controls? How vigorously are the rules enforced?

The general approach to export control is not so vigorous as that which applies to imports, as the Mexican authorities encourage the export of goods to generate economic income in the national territory.

However, many violations relating to exports are set out in the customs regulations and the fines are very similar to those applicable to violations concerning imports.

3.4 How are export decisions challenged in your jurisdiction? What does this process typically involve and how long does it take?

See question 2.8.

3.5 What penalties are imposed for breach of export controls?

See question 2.9

4 Trade remedies

4.1 What laws and regulations govern trade remedies in your jurisdiction?

These include:

• the Foreign Trade Law;
• the Customs Law;
• the General Rules and Standards Applicable to Mexican Foreign Trade Matters; and
• the General Import and Export Tax Law.

4.2 Which authority is responsible for enforcing the trade remedy regulations? What powers does it have?

The Ministry of Economy, through the International Trade Practices Unit (UPCI), is responsible for all stages of trade remedy investigations (anti-dumping, subsidies and safeguards). In other words, the UPCI issues both dumping and injury determinations.

Before issuing a final determination, the Ministry of Economy must submit its determination to the Foreign Trade Commission, an inter-ministerial and advisory body responsible for issuing non-binding opinions. The minister of economy signs all final determinations and orders, which are subsequently published in the Official Gazette of the Federation. The Customs Administration is responsible for collecting anti-dumping duties and enforcing countervailing measures.

4.3 What is the authority's general approach to enforcing the trade remedy regulations? How vigorously are the rules enforced?

The Ministry of Economy, through the UPCI, issues both dumping and injury determinations and submits them to the Foreign Trade Commission. The Customs Administration is responsible for collecting anti-dumping duties and enforcing countervailing measures. Both bodies are very vigorous in enforcing trade remedy matters.

4.4 How is a trade remedy action initiated in your jurisdiction and on what grounds? Can the authority initiate an action ex officio?

Investigation procedures regarding unfair international trade practices and safeguard measures will be initiated:

• ex officio in special circumstances where the Ministry of Economy has sufficient evidence of:
• • price or subsidy discrimination; or
  • damage; or
• at the request of a party. The request of a party may be submitted by legally constituted organisations, individuals or legal entities that produce:
• • identical or similar goods to those that are being imported or intended to be imported under conditions of unfair international trade practices; or
  • in the case of safeguard measures, merchandise that is identical, similar or directly competitive to that which is being imported in such quantities and under such conditions that it is causing serious injury or threat of serious injury to the domestic industry.
• Applicants must represent at least 25% of the total production of the identical, similar or directly competitive merchandise produced by the domestic industry.
• In the corresponding request, arguments that support the need to apply compensatory quotas or safeguard measures must be submitted in writing to the Ministry of Economy and stated under oath.

4.5 What does the action typically involve and how long does it take?

It is difficult to estimate how long it takes to negotiate trade remedies. This usually depends on economic and political factors, as well as on the number of participating countries.

4.6 How can interested parties defend against a trade remedy action in your jurisdiction?

See question 4.4.

4.7 How are trade remedy decisions challenged in your jurisdiction? What does this process typically involve and how long does it take?

Determinations that impose or deny the imposition of anti-dumping and countervailing duties can be challenged in court. However, the complainant must first challenge the final determination before the Ministry of Economy before seeking redress before the Federal Court of Administrative Justice (FCAJ).

The first administrative appeal must be filed within 30 business days of publication of the final determination. Only the claimant(s) and the Ministry of Economy intervene in the administrative appeal process. The Ministry of Economy has three months to resolve the administrative appeal. If the ministry fails to do so, the final determination is presumed to be confirmed.

After the ministry issues a decision (or if it fails to do so within three months), the claimant can file a judicial appeal before the FCAJ. The Specialised International Trade Court of the FCAJ will conduct all court proceedings, such as:

• admitting the claim; and
• summoning parties and third parties (ie, parties with opposite interests to those of the claimant).

Once all procedural steps have been completed, the Specialised International Trade Court will remit the case to one of the two Superior Chambers of the FCAJ, which will issue the decision.

The judgment of the Superior Chamber can be appealed through an amparo action before a Collegiate Circuit Court of the Judicial Branch. As a result of a recent Supreme Court precedent, the specialised Circuit Court of Antitrust and Telecommunications has jurisdiction to hear trade remedy amparos.

4.8 What strategies should be considered to ensure compliance with a trade remedy decision? What penalties are imposed for non-compliance?

Businesses must comply with trade restrictions, including export and import control measures, as these are published in the Official Gazette of the Federation and are therefore subject to mandatory compliance. In case of doubt, a business should submit an information request to the competent authority. Businesses are advised to maintain a department or person in charge of regulatory compliance.

In addition, businesses should consider implementing an ‘integrity policy', as defined in the General Law of Administrative Liabilities. An integrity policy is an organisational, best practices, human resources and whistle-blower manual. When a company with an integrity policy engaged in corruption matters relating to import-export regulations, the Anti-corruption Authority must take into account the integrity policy when imposing sanctions, which may reduce the level of the fine or sanction.

Anyone that enters Mexico with prohibited goods or removes prohibited goods from Mexico commits an offence and is liable to:

• a fine of between 70% and 100% of the commercial value of the goods; and
• where applicable, forfeiture of the goods in favour of the Federal Treasury (Customs Law).

Additionally, criminal smuggling can be prosecuted under Article 102, Section III of the Tax Code and is subject to three to nine years' imprisonment, regardless of the imposition of monetary sanctions. Legal persons can also be subject to criminal penalties, including:

• suspension of activities;
• closure of branches; or
• a prohibition against conducting activities.

Exporters that fail to comply with export regulations cannot obtain customs clearance for the export of their products.

Administrative penalties may be imposed on exporters that:

• forge or alter documents; or
• fail to provide information on matters relating to origin, licences and quotas.

These penalties may amount to twice the value of the goods.

An exporter that fails to comply with export regulations may also be subject to criminal sanctions, including for failure to comply with environment-related measures. For example, a party that exports protected wildlife animals or their parts without complying with the relevant export regulations may be sentenced to between one and nine years' imprisonment.

5 Trade barriers

5.1 What laws and regulations govern trade barriers in your jurisdiction?

The Foreign Trade Law, the Regulations Under the Foreign Trade Law and all bilateral, regional and multilateral trade agreements include provisions that govern trade barriers between Mexico and a foreign country.

Imported goods are generally subject to Mexican mandatory technical standards (NOMs), which include labelling rules. Certain products are subject to import quotas, such as certain agricultural products. For certain types of trademarked products, the importer must also prove that it is the trademark owner or licensee.

Therefore, before importing a product into Mexico, it is important to check the current tariff as well as whether the goods are subject to specific regulations under the relevant tariff items.

5.2 Which authority is responsible for enforcing the trade barrier regulations? What powers does it have?

The ministry responsible for enforcing the trade barrier regulations will depend on the matter at hand. For example, sanitary, phytosanitary, environmental, labelling, safety and emergency requirements might involve:

• the Ministry of Health;
• the Ministry of Environment;
• the Ministry of Agriculture, Livestock, Rural Development, Fishing and Food;
• the Ministry of National Defence;
• the Ministry of Energy; and/or
• the Ministry of Public Education.

Likewise, the Tax Administration Service – a decentralised part of the Ministry of Finance and Public Credit – has the power to enforce the trade barrier regulations by verifying the compliance of foreign trade operations with customs and tax regulations.

5.3 What is the authority's general approach to enforcing the trade barrier regulations? How vigorously are the rules enforced?

Because the trade barrier regulations are public matters, the ministries are very vigorous in enforcing them

5.4 How is a trade barrier action initiated in your jurisdiction and on what grounds?

The trade barrier regulations are considered public order regulations so actions are initiated ex officio.

5.5 What does the action typically involve and how long does it take?

Trade barrier actions typically involve the obligation to attain advance permits or certifications, as well as the imposition of tariff quotas and/or compensatory fees. Regarding time, it all depends on what action is being involved, usually all trade action barriers end up being resolved at the World Trade Organisation (WTO). In fact, Mexico is in the Top 10 countries with the most trade barrier actions upon the WTO.

5.6 What measures can the authority take against a foreign trade barrier?

Measures may consist of:

• advance permits;
• quotas;
• NOMs;
• compensatory fees;
• certifications;
• marking of the country of origin; and
• other instruments that are considered appropriate for ensuring compliance with the trade policy.

The measures mentioned above are provided for in different regulations published in various legal instruments.

5.7 What non-tariff trade barriers are imposed in your jurisdiction?

Non-tariff barriers and regulations apply to certain tariff items and must be publicised. Under the Foreign Trade Law, non-tariff regulations that are not published in the Official Gazette of the Federation based on their tariff items are not mandatory. Regulations includes:

• sanitary, phytosanitary, environmental, labelling, safety and emergency requirements; and
• countervailing and anti-dumping measures.

Imported goods are generally subject to NOMs, which include labelling rules. Certain products are subject to import quotas, such as certain agricultural products. For certain types of trademarked products, the importer must also prove that it is the trademark owner or licensee.

Therefore, before importing a product into Mexico, it is important to check the current tariff and whether the goods are subject to specific regulations under the relevant tariff items.

6 Sanctions

6.1 What laws and regulations govern sanctions in your jurisdiction?

International treaties and the Foreign Trade Law.

6.2 Which authority is responsible for enforcing the sanctions regulations? What powers does it have?

The Ministry of Economy, through the International Trade Practices Unit, is the principal authority responsible for enforcing the sanctions regulations.

This authority has the power, among other things:

• to process and resolve investigations into unfair international trade practices, dumping and subsidies, and safeguards; and
• to determine the countervailing duties and safeguard measures resulting from such investigations.

6.3 What is the authority's general approach to enforcing the sanctions regulations? How vigorously are the rules enforced?

The Ministry of Economy is very serious about the enforcement of sanctions regulations.

Sanctions currently apply in relation to the following, among other things.

Military and technological dual-use restrictions: Mexico is a member of the Wassenaar Arrangement on export controls for conventional arms and dual-use goods and technologies. The Wassenaar Arrangement was established to:

• improve international security and stability;
• encourage transparency and obligations in the transfer of arms and dual-use goods and technologies; and
• avoid accumulations in certain regions.

In this regard, the Ministry of Economy established several measures to restrict the export or import of specific military and technological dual-use goods to the countries, entities and persons indicated therein, including Iran, North Korea and Afghanistan.

In addition, to avoid any possible terrorist activity:

• all military, armament and explosive goods are controlled by the Ministry of Defence; and
• no civil person is allowed to buy or carry weapons allowed only for military use.

General prohibition: The authorities can ban the import or export of certain products within the national territory. These sanctions are usually based on risks to health, the environment or the security of the national territory. For example, Mexico currently imposes bans on electronic cigarettes, drugs (eg, cocaine, opium) and certain weapons, among other things.

The Ministry of Economy also prohibits any imports or exports from specific countries that could be considered as a menace. For example, the Ministry of Economy prohibits the import and export of goods to and from the Democratic People's Republic of Korea, arguing that such measure is part of international commitments to maintain global security and economic relations.

6.4 What countries are currently subject to sanctions in your jurisdiction?

Any country that has entered into a free trade agreement or an international treaty with Mexico is subject to the sanctions established in that agreement or treaty.

6.5 Are individuals or companies subject to sanctions in your jurisdiction?

Yes, any foreign exporter that imports goods into the national territory will be subject to customs regulations and sanctions.

6.6 How are sanction decisions challenged in your jurisdiction? What does this process typically involve and how long does it take?

Apart from the internal means of challenging decisions in Mexico outlined in question 2.8, as part of the World Trade Organization (WTO), other countries can dispute sanctions through the dispute settlement mechanism of the WTO.

A dispute arises when one member country believes that another member country is violating an agreement or a commitment that it has made in the WTO – in this particular case, sanctions. The WTO has one of the most active international dispute settlement mechanisms in the world.

On average, it takes around one year without the appeal process and 1 year, 3 months with the appeal process.

6.7 What strategies should be considered to ensure compliance with a sanction decision? What penalties are imposed for non-compliance?

In order to comply with sanctions imposed by the customs authorities, it should be ensured that everything is recorded in writing and that everything imposed by the authority is met. Once the sanction has been fulfilled, the authority should be formally notified by an official letter.

7 Trends and predictions

7.1 How would you describe the current legal landscape and prevailing trends affecting international trade in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms or the negotiation of new trade agreements?

Mexico has one of the most extensive networks of trade agreements in the world and is constantly strengthening its trade alliances to become more competitive in the international arena.

Over the next 12 months, it is important to monitor the ongoing negotiations with the United Kingdom and South Korea, which could lead to new trade agreements that would undoubtedly further boost international trade.

8 Tips and traps

8.1 What are your top tips for ensuring compliance with the regulatory framework for international trade and what potential sticking points would you highlight?

In order to ensure compliance with customs regulations, the most important thing is to keep proper control of all records for foreign trade operations. As Mexico has a very formal judicial system, the authorities rely exclusively on the documents that can be presented as evidence, so it is very important to ensure that proper due diligence can be conducted on all foreign trade operations.

Of course, consulting with experts in the area is the best way to ensure compliance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.