Mexico: Keys to International Trade and Import Processes

One of the most relevant commercial issues today is the international trade of goods. This can be defined as the purchase, sale and transfer of all types of goods by individuals or companies from one country to another.

These goods may include raw materials, parts, components, finished and semi-finished products, machinery, production equipment and goods for final consumption, among others,

International trade allows countries to expand their markets, as well as access to goods and services that cannot be obtained domestically or in the domestic market, creating greater competitiveness and access to quality products at better prices in different jurisdictions.

Mexico was, for many years, a protectionist economy and closed to international trade of goods, a situation that changed drastically a little more than 25 years ago with the signing of the North American Free Trade Agreement (NAFTA). Since its signing, Mexico became an economy focused on the free market, limiting restrictions and costs in the import and export of products from or to national territory.

This paradigm shift created a better environment for international business, expanding the customer base for a multitude of products and services for both the domestic and export markets.

In this sense, there was a significant decrease in the number of restrictions and limitations to carry out both import and export operations to Mexico, facilitating international trade.

However, despite the liberalization of requirements for the import and export of merchandise, there are still several general and specific requirements that must be complied with in order to carry out operations, particularly for imports into Mexican territory. In essence, these are the following:

• Have a Mexican Federal Taxpayers Registry.
• Have a registration in the general importers registry.
• Be registered in the specific sectors importers' registry depending on the type and tariff classification of the goods to be imported, which is applicable to products such as textiles, steel and chemical products, among others.
• Appoint a customs broker to carry out the clearance process of the goods to be imported.

It is important to mention that the processes of importing goods into Mexican territory give rise to various taxes, which, in most cases, are levied at the time of the clearance or import process of the goods into Mexican territory. There are several cases of exception that will depend on the customs regime to which the importation of such products is subject as well as the tariff classification of such products. In general terms, the taxes and duties that may be levied on the entry of merchandise into Mexican territory are as follows:

• General import and export tax.
• Value added tax.
• Special tax on production and services.
• Customs processing fee.
• Dumping and countervailing duties.

It is important to mention that the applicable rates and amounts are determined based on the tariff classification of the goods, being this concept of utmost importance when importing/exporting to Mexico.

Likewise, the country of origin of the imported goods must be taken into consideration, since this may result in the imposition of dumping and countervailing duties or benefits and preferential tariff treatment in the importation of the products.

These taxes and duties are determined based of the customs value of the products to be imported, which must be determined on the basis and requirements of the applicable regulations and include not only the price paid for such goods but also additional items such as freight, insurance, packaging, storage and pre-customs clearance operations, among others.

In this regard, it should be considered that one of the fundamental factors to determine such customs value is the Incoterm or other concepts included in the sale contracts of the goods, or, if there is a purchase and sale, the nature and characteristics of the goods and the existence of related parties, among others.

Import taxes may be determined in different ways. However, taxes in general are determined based on the following rates:

• Ad Valorem or specific percentage.
• Fixed amount.
• Mixed.

Additionally, such taxes may be established based on:

• Import quotas.
• Seasonal or temporary quotas.
• Specific period.

The importation of goods is not only subject to general import and export taxes, but also triggers payment of value added tax at the rate of 16% on the customs value of the products, plus the amount of other taxes that may be applicable to the importation of such goods.

In some cases, the imported goods, depending on their nature, use and tariff classification, may be subject to the 0% rate or exempt from such tax.

Another relevant tax on the importation of certain merchandise is the Special Tax on Production and Services (IEPS), which is applicable to merchandise such as tobacco products, alcoholic beverages, products with high caloric content and fuels, among others.

It is important to mention that the rates and tariffs applicable to the importation of merchandise are also subject to the origin or country of origin of the merchandise when there are free trade agreements entered into by Mexico with various countries. In these cases, a preferential tariff rate may be applicable that is lower than the rate applicable to such products in general based on their tariff classification.

Mexico has entered into free trade agreements with more than 50 countries; therefore, if the products originating from such countries comply with the corresponding requirements, they may be subject to such benefits.

In addition to the above, the importation of goods into Mexico also causes the customs processing fee, which is 0.8% of the customs value of the goods. This duty may be inapplicable when the merchandise originate from countries with which Mexico has entered into free trade agreements.

Finally, it is also possible to apply preferential rates on the importation of merchandise when the importer has an export promotion program, such as the Specific Sectors Import Program (PROSEC), which allows the importation of certain merchandise with a general import tax lower than that generally applicable to such type of merchandise.

Another element that must be considered for purposes of importing goods into Mexican territory is the customs regime to which the goods will be subject. The customs regimes under which goods may be imported into Mexico are essentially: definitive importation and temporary importation with some variants and particular processes.

It is important to note that the import and sometimes the export of goods to Mexican territory may also be subject to the so-called non-tariff regulations and restrictions.

In addition, it must be taken into consideration that the non-tariff regulations and restrictions (RRNAs) take as a basis for their application the tariff classification of the goods to be imported or exported, so that this concept is essential, not only for the determination of taxes and duties, but also for the determination of the application of this type of restrictions.

Among the most common RRNAs we can mention, among others:

• Import permits and licenses.
• Product registrations and authorizations.
• Import quotas.
• Mexican Official Standards (NOMs).

Likewise, it must be taken into consideration that import and export operations in Mexico are extremely dynamic due to the significant number of provisions and standards that regulate this matter, being, from our point of view, the most important ones:

• Foreign Trade Law.
• Federal Tax Code.
• Customs Law.
• General Import and Export Taxes Law.
• Value Added Tax Law.
• Law of the Special Tax on Production and Services.
• Quality Infrastructure Law.
• Regulations of the above laws.
• General rules on foreign trade matters.
• International trade agreements.
• Agreements and decrees.

Subsequent articles will provide a more detailed analysis of some of the most relevant concepts that must be taken into consideration in these operations, such as:

• Tariff classification.
• Customs valuation.
• Export Promotion Programs.
• Free Trade Agreements.
• Non-tariff regulations and restrictions.

Mexico is a large market that, although it promotes the international exchange of goods, also has several requirements in this type of operations that if not taken into consideration prior to the import and export processes can result in high costs and possible fines and penalties by the corresponding authorities, being convenient to plan in advance the foreign trade operations in order to avoid these problems.