By: Brenda Cordova, Mexico Counsel, Braumiller Law Group
On April 6, 2017, Mexico published in the Mexican Official Gazette an enactment decree to amend the Marrakech Agreement that created the World Trade Organization (WTO). This amendment consisted of the incorporation of the Agreement on Trade Facilitation (ATF) set out in Annex 1A to the WTO Agreement. The ATF is an instrument of international trade with 24 Articles, divided into 3 Sections. Generally, it is aimed to simplify customs procedures, reduce required paperwork, modernize procedures and harmonize customs requirements and reduce the time and costs to export and import goods. It contains provisions for expediting the movement, release, and clearance of goods, including goods in transit, and sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues, among others.
The ATF is a binding legal instrument in Mexico because it was duly signed by the President of Mexico and complied with the other corresponding legal formalities. Roman Numeral I and X of Article 89 of the Mexican Constitution states that the President can sign laws and international treaties. Meanwhile, Article 133 states that the Mexican Constitution, laws approved by Congress and all treaties signed by the President of Mexico, are deemed to be the law of the land.
Additionally, Mexico affirmed its rights and obligations under the ATF by executing, approving, and passing the United States, Mexico and Canada Agreement (USMCE/TMEC(CUSMA). Chapter 7 of this Agreement sets out that three country members shall administer its customs procedures in a manner that facilitates the importation, exportation, or transit of a good, and supports compliance with their laws and that they shall discuss additional measures with a view further facilitating trade. Some of the main USMCA provisions in this regard are that governments of the member countries shall: a) make information available and free to interested parties, b) publish in advance regulations and provide the interested persons the opportunity to comment before the government adopts such regulations, c) establish or maintain inquiry points to respond to inquiries by interested persons for free and within a reasonable period of time, d) provide procedures for advance rulings, e) adopt or maintain simplified customs procedures for the efficient release of goods, f) apply transparent, predictable and consistent customs procedures, g) maintain risk management systems, among other relevant provisions.
In order for Mexico to comply with its international commitments, Mexico is not just limited to accede, sign, vote, approve, publish etc. any international legal instrument, but must also amend its domestic legislations.
There are various laws, regulations, decrees, and rules which include specific provisions aimed to facilitate trade, exports, imports, exchange of goods, etc. In fact, the Mexican Minister of Economy (federal entity responsible for conducting general politics on industry, foreign trade, foreign investment, consumer protection, etc.) created a department called General Directorate of Trade Facilitation and Foreign Trade. Some of the responsibilities of this department are: a) propose instruments, programs and policies on foreign trade, trade facilitation, etc. and the necessary measures to comply with international trade agreements, b) establish and control the information inquiry system on foreign trade and the website on trade facilitation called SNICE and the Mexican Single Window system, c) apply and monitor compliance with laws and international trade agreements, d) propose which goods are subject to comply with regulations and trade barriers.
In regard to the aforementioned mandates, traders importing and exporting into Mexico have recently complained about the vast amount of “red tape” that they have encountered in moving goods across the border, which burden various sized enterprises. For example, the General Customs Rules for 2020 were recently amended on July 24, 2020 where the majority of the tax, customs and administrative benefits were abolished for some bonded warehouses (i.e. IMMEX, fiscal deposits). Another relevant change that caused a lot of concern is the one related to the NOMs compliance. NOMs are aimed to protect and inform Mexican consumers and refers to the acronym for Mexican Official Norms which are similar to the International Standards.
On October 1, 2020, the Minister of Economy published an amendment to Annex 2.4.1 of General Rules and Criteria of Foreign Trade regarding the identification of specific harmonized tariff codes subject to comply with NOMs at the time entry or departure from the country. There are up to 15 different NOMs governing health, quality, safety, hygiene, the environment, packing, manuals, instructions and commercial and labeling information for specific products such as textiles, leather, vanilla, health, foods and nonalcoholic beverages, alcoholic beverages, cosmetics, toys, alcoholic electrical, household, among others. According to this Annex, depending on the tariff code of a product, importers must show compliance by attaching to the Mexican entry summary form (pedimento) a certificate or documents of NOM compliance issued by entities authorized to do so. Under certain circumstances, importers may instead use documents or certificates of compliance from the United States or Canada. Prior to this amendment, some goods were exempt from complying with the NOM requirement (personal luggage, goods used by service providers that will not be sold to consumer, goods imported to the border, etc.). Nonetheless, starting October 1, 2020, this exemption was abolished and therefore all goods listed under Annex 2.4.1 and imported into Mexico must comply with the NOMs. Additionally, Mexican customs reinforced its inspection and surveilling procedures of warehouses and retail stores as well as during customs clearance.
Provided some requirements are met, goods subject to compliance have the following alternatives:
Comply with the applicable NOMs prior to importation. Importers present goods for customs clearance so that customs may verify and confirm the information on labels is consistent with the information on the corresponding certification and customs records.
Comply with the applicable NOM after importation but prior to displaying goods for sale to final consumers. Importers send goods to authorized bonded warehouses so that entities authorized to certify compliance may inspect and confirm compliance.
Comply with the applicable NOM after importation but prior to displaying goods for sale to final consumers. Importers send goods to a private facility where the entities authorized to certify compliance can perform their inspection and verification duties there.
Mexico has shown its willingness to comply with the ATF and other international instruments of trade. However, the recent changes to the law, including the above NOM level a burdensome task for companies and represent additional work that they have not previously considered including logistics, increased costs, etc. Also, some trade operators have complained that they have attempted to contact the Authority through the emails provided for those purposes, but with no success.
This means that, contrary to the objectives of the ATF, companies may encounter procedures that do not improve facilitation of their trading operations, expedited procedures, or prompt response from the official inquiry points.
The Mexican government stated that they found a high number of private companies in violation of the law and that therefore they considered it necessary for all importers to comply with the NOMs so that end users can receive the necessary information regarding quantity, characteristics, composition, quality, price, nature, content, including any related risks, all in the Spanish language. The government also stated that they found acts of corruption and that these changes are intended to end those acts. In addition, the Covid-19 pandemic has hindered and obstructed trade, not just in Mexico but worldwide.
The hope is that this is a transition period and that the result will be that companies are better off with their business in Mexico, and that consumers can make informed decisions when using or buying products in compliance with NOMs. Also, the hope is that companies in Mexico can persist during the transition period and the pandemic.
It is imperative that companies and trade operators are informed and receive the most updated information so that they can prevent and avoid violations to the law.
This article was prepared on October 6, 2020. It is presented to you for information purposes only and is not intended to provide legal guidance or advise. Please consult with your attorney if you need specific information regarding the above or give us a call, we are happy to assist you.