Today, Mexico's Minister of Economy, Marcelo Ebrard announced the start of a process to cancel the registration of more than 1,000 steel mills due to "irregularities" or "simulations." In this article, we share the most relevant information on this topic and the potential risks for Mexican steel importers.
What is a steel mill in Mexico?
According to the latest amendment to the Mexican General Rules and Criteria on International Trade, a steel mill is essentially a company that smelts and manufactures "primary" steel products, such as slab or hot-rolled steel. The rules define mills as companies that manufacture steel products listed in Chapter 72 of the Mexican HTS that:
- Transforms iron or scrap, through melting in a blast furnace or electric arc furnace, into semi-finished/intermediate steel products (slabs, billets, ingots) that are unalloyed, alloyed, or stainless, and/or
- Through the conversion or reheating of semi-finished/intermediate steel products in reheating furnaces and/or hot rolling mills, manufactures flat steel products (hot, cold, silicon) or long steel products (wire rod, bars, profiles).
How many steel mills are registered and how many registrations are planned to be canceled?
On the one hand, Mexico has an active catalogue of 2,233 steel mills as of today. On the other hand, the Minister of Economy stated that the Ministry will "carry out a process of cancellation and removal [...] of 1,062 mill registrations. That means half of the mills that have been presented by companies."
What does the steel importer need: mill certificates or quality certificate?
The Mexican rules define a mill certificate as "a document issued by the mill certifying the company that produced the steel processed in the mill itself." On the other hand, they define a quality certificate as "a document certifying the manufacturer that transformed the steel for the production of the goods to be imported, prepared by the manufacturer itself."
To clarify the difference, only companies that are responsible for steel melting to produce primary steel products can issue "mill certificates." Meanwhile, companies that transform these primary products into flat or long products (cold-rolled or coated sheets, wire rods, bars, and profiles) are the ones that should issue "quality certificates."
At VTZ, we identified some time ago that the list of mills was inconsistent with the definitions of the Ministry of Economy. In our opinion, the Ministry has contributed, in part, to the "confusion" about what is or is not a mill by mandating importers to submit a mill certificate for certain flat or long products, produced by non-mills, instead of quality certificates.
What is the procedure for canceling the registration of steel mills?
According to the latest amendment to the Mexican General Rules and Criteria on International Trade, the cancellation procedure begins when the Ministry notifies the company (importer) that registered the mill of its intention to cancel the registration and grants the company 10 working days to provide evidence and arguments to prove that the mill complies with the requirements established by the regulations. In other words, the Ministry will neither notify other importers, the "mill" nor the exporter.
During the cancellation procedure, the Ministry suspends the mill's registration and any automatic import license for steel products authorized under that mill. In other words, all importers of products from that mill will also be affected.
If the company that registered the mill manages to rebut the cancellation procedure, the Ministry should issue a determination revoking the suspension within 15 working days after the deadline for submitting evidence. If the company fails to provide evidence or refute the grounds for the cancellation procedure, the Ministry shall issue a definitive cancellation of the registration.
What to do and expect regarding the cancellation of steel mill registrations?
Due to recent statements that China is allegedly using other Asian countries to "triangulate" its exports to Mexico and circumvent tariffs, the steel mills most likely to be affected are those in countries that enjoy preferential tariffs, such as Vietnam and Malaysia, among others.
At this time, we have identified two scenarios and the actions to be taken:
- Importers that registered steel mills
Importers that registered steel mills will be able to anticipate whether the registered mill complies with the regulatory definitions. In this case, we recommend maintaining close communication with the mill so that you can respond quickly and accurately to the cancellation procedure, if necessary.
- All other importers
We recommend that steel importers identify whether the imported steel comes from a mill that complies with the regulatory definitions and, if necessary, take steps to mitigate the delay in issuing automatic notices.
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.
