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The In’s & Out’s of Importing into Mexico under Retaliatory Duties on U.S. Products

The In’s & Out’s of Importing into Mexico under Retaliatory Duties on U.S. Products. By: Miriam Name. Estadio Azteca, Mexico City. Capacity 87,523. The Unintended Consequences of U.S. Steel Import Tariffs: A Quantification of the Impact During 2002.

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The In’s & Out’s of Importing into Mexico under Retaliatory Duties on U.S. Products

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  1. The In’s & Out’s of Importing into Mexico underRetaliatory Duties on U.S. Products By: Miriam Name

  2. Estadio Azteca, Mexico City Capacity 87,523

  3. The Unintended Consequences of U.S. Steel Import Tariffs: A Quantification of the Impact During 2002 • 200,000 Americans lost their jobs to higher steel prices during 2002. These lost jobs represent approximately $4 billion in lost wages from February to November 2002. (More than 2.2 times the capacity of the Estadio Azteca) • One out of four (50,000) of these job losses occurred in the metal manufacturing, machinery and equipment and transportation equipment and parts sectors. • More American workers lost their jobs in 2002 to higher steel prices than the total number employed by the U.S. steel industry itself (187,500 Americans were employed by U.S. steel producers in December 2002)

  4. The Unintended Consequences of U.S. Steel Import Tariffs: A Quantification of the Impact During 2002 • Steel tariffs caused shortages of imported product and put U.S. manufacturers of steel-containing products at a disadvantage relative to their foreign competitors. • The analysis shows that American steel consumers have borne heavy costs from higher steel prices caused by shortages, tariffs and trade remedy duties, among other factors. Some customers of steel consumers have moved sourcing offshore as U.S. producers of steel-containing products became less reliable and more expensive. Other customers refused to accept higher prices from their suppliers and forced them to absorb the higher steel costs, which put many in a precarious (or worse) financial condition. The impact on steel-consuming industries has been significant. http://www.tradepartnership.com/pdf_files/2002jobstudy.pdf

  5. Background • March 8 and 23, 2018. Presidential Proclamations 9704 and 9705. The Trump Administration increased import duties applicable to products of steel and aluminum, exported from all the world, up to 25% and 10%. • April 30, 2018 entering into force on June 1, 2018. Presidential Proclamations 9739 y 9740. The Trump Administration established a temporary exemption to the increase of import duties of products of steel and aluminum originating from Canada, Mexico and the European Union. • Mexico and countries of the World Trade Organization (“WTO”), such as China, Japan, India, European Union, Turkey and Russia, considered that the measures imposed by the U.S. are in reality safeguards measures in accordance with the rules of the North American Free Trade Agreement (“NAFTA”) and the WTO.

  6. Background • Prior to the imposition of the measures, the U.S. should have notified to the Parties and the Free Trade Commission (NAFTA), of its intention to impose increased duties, which could then lead to an emergency action. • According to Mexico, under article 802, section 6 of NAFTA, the U.S. failed to comply with the obligations previously mentioned. Thus, Mexico considers that it has the right to impose measures that have substantially equivalent commercial effects to those implemented by the U.S.

  7. Mexico Decree What are the Decree’s main objectives? The Decree aims to impose equivalent measures to those measures established by the U.S., pursuant to Chapter VIII of NAFTA and the Mexican Foreign Trade Law, consisting of the suspension of preferential duty treatment, and an increase of import duties on various goods originating from the U.S., which will be valid for as long as Mexico’s President considers such necessary.

  8. Article 1 of the Decree 1. Suspension of NAFTA preferential duty treatment set forth in the “Decree whereby the duty rate applicable during 2003 of the General Import Duty is established for goods originating from North America”.

  9. Article 2 of the Decree 2. Import duties (15, 20, 25%) are levied on products originating from the U.S., regardless of their country of exportation. Modify Tariffs from the US only for permanent importations (even under PROSEC). NAFTA Maquila temporary importations OK.

  10. Article 3 of the Decree 3. The law is amended to increase the general duty rates (15%) on the temporary and permanent importations of certain goods from the steel sector. • NAFTA or other FTA. OK • May request approval for PROSEC (RULE 8) for Non-NAFTA.

  11. Others • Tariff item 1601.00.02 is created, the description of which is "of the porcine species", with an import duty of 15% per kilogram (Article 4 of the Decree). • The description of tariff items 7304.11.03, 7304.19.03, 7304.39.07 and 7304.59.08 us modified (Article 5 of the Decree). • Tariff items 7210.49.01, 7210.49.02 and 7210.49.04 are deleted (Article 6 of the Decree). • An explanatory note is added to chapter 73 of the TIGIE, to define hollow bars made of steel (Article 7 of the Decree). • Some tariff items of the steel sector are included in the list of goods that may be imported under the PROSEC Decree (Article 8 of the Decree):

  12. NAFTA? • NO NAFTA BENEFITS: Suspends NAFTA benefits. • NAFTA MAQUILA TEMPORARY IMPORTATION OK. Modify Tariffs from the US only for permanent importations (even through PROSEC (RULE 8)). • NAFTA OK. Modify General Tariffs for temporary or permanent importations. May use NAFTA or other free trade agreement certificates of origin. May request approval for PROSEC (RULE 8) for Non-NAFTA.

  13. Options?

  14. Options • Review Tariff Classification • Sourcing • Moving manufacturing operations or subcontracting • Absorbing costs • Change price • Rebates, discounts for volume purchases

  15. Review Tariff Classification

  16. 700×351 - brsata.com

  17. Sourcing Source directly in Mexico, or Mexico has Free Trade Agreements with more than 42 countries.

  18. Moving manufacturing operations or subcontracting

  19. Absorbing costs • Careful with additions to the transaction value as per Mexico Customs Law : - transportation - insurance - commissions - royalties, etc.

  20. Additions to the transaction value Mx Customs Law 65.Integration of the value of transaction The value of transaction of imported goods will comprise, besides the price paid for the goods, the following charges: I. Following items, as long as they are to be paid by the importer and are not included in the price paid for the goods: a) Commissions and brokerage expenses, except for the purchasing commissions. b) Cost of containers or packaging that, to the effects of customs, are considered as forming a whole with the goods. c) Packaging expenses, including both labor and materials. d) Transportation expenses, insurance and related expenses such as handling, loading and unloading incurred in for the transportation until the dates when events described in Article 56 (I) of this Law take place. II. The correctly distributed value of the following goods and services, provided that the importer, directly or indirectly, has supplied them free of charge or at reduced prices, for their utilization in the production and sale for the exportation of the imported goods, to the extent that such value is not included in the paid price: a) The materials, pieces and components, parts and analogous articles incorporated in the imported goods. b) Tools, matrices, molds and analogous items used for the production of the imported goods. c) Materials consumed in the production of the imported goods. d) Engineering, creation and enhancement work, art work, designs, drawings and sketches made abroad that are required for the production of the imported goods. III. Royalties and license fees related to the goods being valued, to be paid directly or indirectly by the importer as a condition for the sale of such goods, to the extent that such royalties and fees are not included in the paid price. IV. The value of any revenue that results from a further transfer, assignment or utilization of the imported goods that is directly or indirectly channeled to the seller…

  21. Change Pricing Mexico allows the vendor to freely determine the price of products; only in those sectors where there is an absence of effective competition in a relevant market may the Federal Competition Commission (FCC) regulate the price. In addition, there is no restriction to provide different prices to different clients within Mexico, as many other factors may be involved such as amounts to be purchased, payment terms, obligations, etc.

  22. Mexico Customs Compliance Iattlmexico.com info@iattlmexico.com

  23. Questions/Comments Miriam Name, Partner Cacheaux, Cavazos & Newton, L.L.P. Convent Plaza 333 Convent Street  San Antonio, Texas 78205 Tel: (210) 222-1642 Fax: (210) 222-2453 mname@ccn-law.com www.ccn-law.com

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