International Trade 2022

Last Updated December 10, 2021

Mexico

Law and Practice

Authors



White & Case, S.C. has an international trade team that is widely recognised for its cutting-edge work for major Mexico-based industry associations and national producers on their most significant transactions, both globally and in Mexico. The team works with the global White & Case trade practice whenever necessary to provide a unique level of service, which allows Mexican companies to gain the insights of Europe-based lawyers on trade issues arising between Mexico and Europe, the insights of US-based lawyers on issues arising in North American trade, and the insights of Asia-based trade lawyers on issues relating to Asia-Mexico trade. The team comprises experienced lawyers with long-standing expertise in advising on global-scale mandates. It has unparalleled expertise in advising on the US-Mexico-Canada Agreement (USMCA). Recent highlights include advising Aneberries on multiple ongoing investigations into berry exports to the United States before the US International Trade Commission (ITC), and acting for Mexican steel manufacturers Tenaris (through Tenaris TAMSA) and Ternium on various international trade mandates.

Mexico has been a member of the World Trade Organization since its founding on 1 January 1995, and ratified the WTO Trade Facilitation Agreement on 26 July 2016. However, it is not a party to the WTO’s plurilateral Agreement on Government Procurement or Agreement on Trade in Civil Aircraft. Mexico joined the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT), in 1986.

Mexico has signed free trade agreements (FTAs) with 50 countries, including Bolivia (ACE 66), Chile (ACE 41), Colombia, Israel, Japan, Peru (ACE 67), Uruguay (ACE 60) and the United Kingdom (signed but not in force), and with Central America (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) and the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland). It is a party to the US-Mexico-Canada Agreement (USMCA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP – with Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam, pending Chile, Brunei, Peru and Malaysia), the Pacific Alliance (with Colombia, Chile and Peru) and a bilateral FTA with the EU. It has also signed agreements for the promotion and reciprocal protection of investment with several countries, and is part of regional agreements under the Latin American Integration Association (ALADI).

Mexico has also signed the following framework or preferential trade agreements:

  • Argentina–Mexico (ACE 6);
  • Brazil–Mexico (AAP.CE No 53);
  • Ecuador–Mexico (ACE 9);
  • the Mercosur framework agreement (ACE 54);
  • the Mercosur auto sector agreement (ACE 55);
  • the Global System of Trade Preferences among Developing Countries (GSTP); and
  • the Protocol on Trade Negotiations (PTN).

Aside from the FTAs noted in 1.2 Free Trade Agreements, Mexico does not participate in other preferential arrangements such as the Generalised System of Preferences.

In April 2020, Mexico and the European Union concluded negotiations for an updated FTA to replace the existing bilateral agreement from 2000. The new agreement must now undergo translation into all EU languages, after which it will be submitted to the European Council and the European Parliament for approval. The Mexican Senate must also ratify the agreement. Once the EU has ratified the agreement, Mexico is expected to commence its ratification process quickly.

The UK and Mexico have agreed to launch negotiations on a new bilateral FTA, and are seeking to conclude negotiations within the next three years. In the meantime, bilateral trade relations will be governed by the UK–Mexico Continuity Agreement, which the parties signed in December 2020 to minimise trade disruption following the UK’s departure from the EU.

Mexico is participating in plurilateral negotiations on digital trade with 85 other WTO members under the auspices of the Joint Statement Initiative on Electronic Commerce. These negotiations are unlikely to conclude in the near future, given divergent views on data flow and localisation issues, but some participants hope they can be concluded by the time of the WTO’s 13th Ministerial Conference. Additionally, Mexico is participating in multilateral negotiations at the WTO for a new agreement to discipline fisheries subsidies.

In 2021, the government of Korea reiterated its interest in negotiating a bilateral FTA with Mexico. The government of Mexico has not expressed interest in pursuing a bilateral trade agreement with Korea, although Korea has expressed interest in joining the CPTPP, along with China and the UK.

Issues related to the implementation of the USMCA have played a prominent role in Mexico’s trade agenda over the past year, with the most notable developments being as follows.

  • The USMCA includes a novel dispute settlement mechanism, known as the “Rapid Response Labour Mechanism” (RRLM), for resolving disputes pertaining to labour rights. The RRLM allows a party to impose trade restrictions targeting a specific facility in another party’s territory if an independent panel finds that the facility has denied its workers the right of free association and collective bargaining. In an important first test of this new system, the United States invoked the RRLM twice in 2021 to challenge alleged labour violations at manufacturing facilities in Mexico. In both of the proceedings initiated by the United States, the parties were able to agree on courses of action to resolve the labour concerns at issue without resorting to panel proceedings or trade penalties.
  • In August, Mexico invoked the USMCA’s state-to-state dispute settlement provisions to challenge the United States’ interpretation of the Agreement’s rules of origin for automotive goods. This request was Mexico’s first formal invocation of the USMCA’s dispute settlement provisions, and followed months of informal consultations between the two governments that failed to resolve the issue. The outcome of this dispute will have important implications for Mexico’s automotive sector.
  • In the USMCA, Mexico agreed to adopt an ambitious package of labour reforms to ensure that workers in Mexico are able to exercise the right of collective bargaining. Mexico enacted the labour reform package into law on 1 May 2019. Among other issues, the reform addresses the rules and procedures for union elections, the disclosure and approval of collective bargaining agreements, and the creation of new institutions and courts responsible for labour law enforcement. Over the past 12 months, Mexico has continued to implement key components of the labour reform, and the US government has closely monitored its progress – including through a new “Independent Mexico Labour Expert Board”, which issued its first full report on Mexico’s progress in July 2021.
  • In May 2020, Mexico enacted a new law on regulatory improvement that establishes a framework for the creation and publication of mandatory technical standards on a wide range of products, compliance with which must be demonstrated at the time of customs entry. Additionally, a new labelling system for pre-packaged foods and non-alcoholic beverages entered into force in October 2020; elements of this new system have caused concern among US and European exporters.
  • In July 2020, Mexico enacted a new General Law on Import and Export Tariffs, whereby it added two digits to the tariff numbers (the new ten-digit number is referred to as the commercial identification number or NICO) and temporarily increased its most-favoured nation (MFN) tariffs on certain steel, footwear and textile products.
  • In December 2021, the government enacted a Decree to create a Free Trade Zone in Chetumal, Quintana Roo for certain goods to eliminate import tariffs and provide tax credits on Importation Duties. The industries that benefit from this measure include food, textiles, pharmaceuticals, construction, restaurants, education, cultural and sport-related services and lodging businesses. Each year, the Tax Administrative Service (SAT) will determine which economic activities will benefit from the measure.

In the coming months, Mexico will participate in consultations and negotiations with several countries that are seeking to accede to the CPTPP, of which Mexico is an original signatory. Most notably, China submitted its formal request to join the CPTPP on 16 September 2021, and the CPTPP parties must now decide by consensus whether to commence negotiations with China over the terms and conditions of its accession. This issue is certain to be the subject of intense deliberations among stakeholders in Mexico, as well as between Mexico and other CPTPP parties. The CPTPP parties also recently launched formal negotiations with the UK on the terms and conditions of its accession to the CPTPP, and this process will entail negotiations on both a plurilateral basis and a bilateral basis between the UK and Mexico.

Trade relations with the United States, including the implementation of the USMCA, will remain at the top of Mexico’s trade agenda over the coming year. The dispute settlement case brought by Mexico concerning the USMCA’s automotive rules of origin will be watched closely by Mexico’s automotive industry and other stakeholders throughout the region, given its implications for North America’s highly integrated automotive sector. Recent legislative proposals in the US Congress that would provide enhanced tax credits for electric vehicles produced in the United States (but not elsewhere) will also be a topic of discussion. In addition, Mexico’s implementation of the labour reforms required by the USMCA will continue to be a focal point of its discussions with US trade officials, who have identified Mexico’s labour commitments as a top enforcement priority.

The expected entry into force of the updated Mexico–EU trade agreement will alter competitive dynamics in several Mexican industries, particularly in the agricultural sector. For example, the updated agreement will open the Mexican market to imports of European pork and poultry, while eliminating the EU’s tariffs on Mexico’s exports of tuna, fruits and vegetables, among other goods. In addition, the updated agreement will grant European companies new access to Mexico’s government procurement market, increasing competition in sectors supplying goods and services to Mexican public entities.

As one of the world’s most globally integrated economies, Mexico has been a strong proponent of the multilateral trading system and has participated actively in negotiations at the WTO. The WTO’s 12th Ministerial Conference is expected to occur in 2022, and will provide an important opportunity for Mexico and other WTO Members to discuss potential new trade rules and opportunities to reform the WTO. Among the issues likely to be discussed at MC12, restoring the functionality of the WTO dispute settlement system is likely to be of greatest interest to Mexico, which has been an active user of the system and is participating in the multi-party interim appeal arrangement (MPIA) while the Appellate Body remains inoperable.

The main legal and administrative authorities governing customs matters in Mexico are the Customs Law and the Customs Law Regulations.

Currently, the SAT within the Ministry of Finance and Public Credit administers and enforces Mexico’s customs laws and regulations. However, in July 2021, Mexico’s President issued a decree to create a National Customs Agency, which will be a separate entity from the SAT and will begin operations once Congress amends the current Law that governs the SAT.

The Ministry of Economy also participates in creating and enforcing certain trade rules, limited to certain programmes, such as Sector Promotion, IMMEX, etc. Finally, the Tax Prosecutor is responsible for enforcing and pursuing customs-related criminal offences.

The primary legal instruments through which Mexico responds to unfair foreign trade practices are the anti-dumping and countervailing duty provisions of the Foreign Trade Act and the Agreement on the Application of Article VI of the General Agreement on Tariffs and Trade. These provisions allow the government of Mexico to impose tariffs on imported goods that are sold in Mexico at less than fair value or that benefit from countervailable subsidies and cause injury to a domestic industry. The WTO Agreement on Anti-Dumping (AD Agreement) and the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement) permit WTO members to take such measures.

Mexico does not have a statute analogous to Section 301 of the US Trade Act of 1974, which allows the US government to respond unilaterally to foreign trade practices that it finds to be “unreasonable or discriminatory” in the course of a formal investigation by the US Trade Representative. However, on rare occasions, Mexico has relied on provisions of the Foreign Trade Act to respond unilaterally to foreign trade practices that it considers to be unjustified. For example, in June 2018, then-President Enrique Peña Nieto issued a Decree increasing tariffs on certain products of the United States in response to the United States’ tariffs on steel and aluminium products from Mexico, citing his authority under Article 131 of the Mexican Constitution and Articles 2, 4, 12 and 14 of the Foreign Trade Act. These retaliatory tariffs are no longer in effect.

Over the past year, the Mexican government has announced several organisational changes that are intended to improve the administration and efficiency of customs procedures:

  • In January 2021, the Ministry of Economy established the National Trade Facilitation Committee to oversee the implementation of Mexico’s commitments under the WTO Trade Facilitation Agreement (TFA) and to formulate policies, programmes and specific measures to facilitate the harmonisation and automation of customs procedures. This will include efforts to streamline the clearance and release of goods and to facilitate electronic commerce.
  • On 14 July 2021, President López Obrador issued a Decree providing for the creation of a new National Customs Agency. Once operational, the new agency will assume responsibility for the administration and enforcement of Mexico’s customs laws and regulations, and will function as a decentralised administrative body of the Ministry of Finance and Public Credit. The Decree creating the new agency emphasises Mexico’s commitment to strengthening its customs system “towards a vision of expeditious service”, and to harmonising its customs and inspection services with its international obligations to eliminate trade barriers and promote free trade.
  • As mentioned in 1.5 Key Developments Regarding Trade Agreements, Mexico enacted a new General Law on Import and Export Tariffs and temporarily increased its MFN tariffs on certain steel, footwear and textile products in July 2020.
  • In October 2021, the federal government issued a decree to allow the importation of foreign used cars, which was previously prohibited, causing controversy among auto producers. It also issued a new decree to ban imports and exports of electronic cigarettes, which has been challenged by tobacco companies and is currently under review by the Federal Judiciary due to alleged health concerns. In October 2021, Mexico’s Supreme Court of Justice ruled that the ban on the marketing of electronic cigarettes violated fundamental rights provided in the Constitution, and this ruling could have an impact on the import and export prohibitions.

As noted in 2.2 Enforcement Agencies Enforcing Customs Regulations, President López Obrador has issued a Decree providing for the creation of a new National Customs Agency. This Decree will take effect when legal reforms transferring the SAT’s customs authorities to the new National Customs Agency become effective. Within 180 days after the Decree becomes effective, the Ministry of Finance and Public Credit must propose draft internal regulations for the new National Customs Agency. The transition of Customs authorities to an entirely new agency with new internal regulations will be an important development for importers and exporters in the Mexican market.

Mexico’s President may impose trade controls and prohibitions in exceptional cases (eg, the ban on electronic cigarettes as mentioned in 2.4 Key Developments in Customs Measures), and non-compliance with such regulations can result in fines, the forfeiture of goods or even criminal liability.

The sanctions regime is governed by Article 133 of the Mexican Constitution and by the Foreign Trade Law and its regulatory provisions.

Through the Ministry of Economy, the President has the authority to regulate, restrict or prohibit the trade and circulation of foreign goods in Mexico, to impose anti-dumping or countervailing duties, and to set import and export quotas and controls. Other ministries may be involved in the creation and enforcement of non-tariff controls (eg, COFEPRIS regarding human health-related goods, or SENASICA regarding animal or vegetable-related goods).

The SAT is the government agency in charge of enforcing trade regulations during the importation and exportation process. It will review compliance with the necessary tariff and non-tariff requirements for any specific product.

Any person that imports or exports, or intends to do so, is subject to trade laws and regulations and, if necessary, to the sanctions provided for therein.

Mexico does not have a list of sanctioned persons for customs violations per se but enforces UN sanctions (eg, against members of the Islamic State, Iran, Iraq, North Korea, etc).

In addition, all persons that import or export goods must register with the Federal Tax Registry and the National Registry of Importers or Exporters, and for certain goods (eg, hydrocarbons) they must also register with specific national registries prior to performing trade operations. The SAT maintains a list of the persons that have a valid registration and a list of the persons that have lost their registration for any reason.

Mexico maintains embargoes against the countries sanctioned by the UN (see Federal Gazette Publication of 27 December 2020).

Mexico has no other types of sanctions.

Mexico does not apply or threaten sanctions in connection with transactions that have no nexus to the specific jurisdictions subject to an embargo.

Fines for non-compliance with trade requirements range between 70% and 100% of the commercial value of the goods. In certain cases, such goods will be forfeited to the Federal Treasury.

Criminal offences for smuggling goods are subject to imprisonment of between three months and nine years, and can also be subject to economic sanctions (Article 104 of the Federal Tax Code). Legal persons can be subject to criminal penalties, such as the suspension of their import and export-related activities, the closing of their subsidiaries or branches, or a prohibition on conducting business (Articles 11 Bis of the Federal Criminal Code and 422 of the National Code on Criminal Proceedings).

Importers and exporters must provide the documents demonstrating their compliance with trade regulations to the SAT, or the SAT will not issue the customs clearance for their products.

Certain goods are subject to trade controls that require the possession of an automatic or non-automatic licence before being traded (eg, hydrocarbons, pharmaceutical products, live animals, steel, etc).

For example, the importation or exportation of hydrocarbons and related goods (ie, fuel) requires a licence from the Ministry of Energy and the registration of the interested party in the Trade Registry of Hydrocarbons. Failure to comply with these requirements will result in the denial by the SAT of import/export clearance for the good. The SAT could also sanction the conduct if the importation was completed without satisfying the appropriate requirements for any reason.

The sanctions laws and regulations are strictly enforced. The SAT does not need to demonstrate an intention of wrongdoing, but only non-compliance with any of the requirements. Compliance with customs requirements has been reinforced during President López Obrador’s administration.

To obtain clearance to import or export any product, the interested party has to present documents that demonstrate compliance with the licence requirements and tariffs.

Persons must maintain their tax and customs-related records for a period of five years, at any time during which the SAT can review and request information on trade operations.

At the time of writing, Mexico has no blocking statutes nor any anti-boycott laws. However, President López Obrador has publicly criticised the embargoes by the US against Cuba and Venezuela.

In recent years, President López Obrador has issued several rulings to increase the requirements to obtain licences to trade hydrocarbons and related products. The modifications range from stricter rules for obtaining importation permits (licences) to increasing the imprisonment penalty for hydrocarbons smuggling. These amendments are perceived as part of a government policy to eliminate the smuggling of fuels and benefit the state-owned enterprise Pemex. However, they have been characterised by some companies in the energy sector as barriers to free trade.

Besides the changes and hot topics previously mentioned, there are no significant pending changes to Mexico’s sanctions regulations.

Generally, exports are open and subject to the same controls as imports, meaning that exporters must obtain clearance from the SAT to export their products, and that certain goods are subject to non-tariff controls, such as automatic or non-automatic licences.

For example, as a Member of the United Nations, Mexico restricts the exportation of arms and other items to certain countries in accordance with the decisions of the UN Security Council. As a Member of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, Mexico requires exporters to obtain permits prior to the exportation of certain dual-use goods, conventional arms and dual-use software and technologies.

The Foreign Trade Act and Article 131 of the Mexican Constitution authorise the Federal Executive to regulate, restrict or prohibit the exportation of merchandise. The export prohibitions that Mexico has imposed in accordance with UN Security Council decisions are set forth in the Agreement prohibiting the export or import of various goods to the countries, entities and persons indicated, issued by the Ministry of Foreign Affairs and the Ministry of Economy on 29 November 2012, as amended. Mexico’s export permitting requirements for goods covered by the Wassenaar Arrangement are set forth in the Agreement subjecting to the requirement of prior permission by the Ministry of Economy the export of conventional arms, their parts and components, dual-use goods, software and technologies susceptible to diversion for the manufacture and proliferation of conventional weapons and mass destruction, issued on 16 June 2011, as amended.

The Ministry of Economy is responsible for co-ordinating the system of export controls for goods that are subject to licensing requirements. The Directorate-General for Foreign Trade (DGCE) within the Ministry of Economy is responsible for issuing export permits for goods that are subject to export controls. Depending on the product at issue, the DGCE may also seek the opinions of other agencies.

The SAT is the government agency in charge of enforcing and reviewing export controls and sanctions.

See 3.4 Persons Subject to Sanctions Laws and Regulations and 3.9 Penalties for Violations.

See 3.5 List of Sanctioned Persons.

At the time of writing, the exportation of fresh tomatoes, slot machines, textiles, footwear and certain steel products requires an automatic export licence.

Mexico also requires a non-automatic licence for or forbids the exportation of certain goods, pursuant to international agreements, such as:

  • arms, ammunition, gunpowder, explosives, fireworks and chemical substances related to explosives as per the Wassenaar Arrangement (see 4.1 Export Controls);
  • essential chemicals, products for human consumption, finished products and raw materials for medicaments and pharma-chemicals; narcotics and psychotropic substances; products for the diagnosis, treatment or rehabilitation of illnesses in humans; cigarettes and tobacco; and products per the Stockholm Convention on Persistent Organic Pollutants;
  • live animals listed in the Convention on International Trade in Endangered Species of Wild Fauna and Flora;
  • agricultural products and aquatic species; and
  • hydrocarbons and oil products, nuclear materials and fuels, radioactive materials and equipment for ionising radiation.

The requirements for obtaining such licences are published in the Federal Gazette, and are based on a range of policy justifications and international commitments. For instance, the controls on certain steel products are part of a monitoring mechanism agreed to in the Joint Statement between Mexico and the US to eliminate Section 232 tariffs on steel and aluminium.

All export controls are in the form of list-based regulations.

See 3.9 Penalties for Violations.

The Ministry of Economy or the corresponding Ministry (eg, Health, Energy, etc) have the authority to issue export permits for goods that are subject to export controls. In general terms, requests for export permits are processed within 15 working days and are valid for one year, if granted. The government agency may deny a request for an export permit if it becomes aware that the applicants participated in the diversion of regulated objects to unauthorised end uses or end users or in illegal activities, made false statements, or did not meet the requirements necessary to ensure proper control over such exports.

See 3.11 Compliance.

See 3.12 Sanction Reporting Requirements.

Apart from the changes and hot topics previously mentioned, there are no significant pending changes regarding export controls.

At the time of writing, there are no significant pending changes or hot topics on the horizon regarding export controls.

Mexico’s Foreign Trade Act, its regulatory provisions and the Agreement on the Application of Article VI of the General Agreement on Tariffs and Trade govern the imposition of anti-dumping and countervailing duties and safeguard measures.

The International Business Practices Unit (UPCI) within the Ministry of Economy administers Mexico’s trade remedy laws. The Ministry of Finance and Public Credit, through the SAT, is responsible for collecting any applicable duties on imports.

The investigating authority may initiate an investigation on its own initiative, or in response to petitions from domestic producers of the merchandise at issue that represent at least 25% of domestic production of the product subject to investigation, a similar one, or one that directly competes with it.

Domestic companies can file anti-dumping, countervailing duty and safeguard petitions on an ad hoc basis for new investigations, and may request to open a review of existing duties every year or when such duties are about to expire (every five years).

Foreign entities that have a direct interest in the investigation in question are considered to be “interested parties” and may participate in trade remedy investigations in Mexico.

In anti-dumping, countervailing duty and safeguard proceedings, the Ministry has 25 days after receiving the petition to accept the request and announce the initiation of an investigation. Alternatively, the Ministry may decline to initiate the investigation or request additional information from the petitioner. If the Ministry chooses to initiate an investigation, it must notify interested parties within one day after publishing the notice of initiation in the Official Gazette. Interested parties are given 23 days to present arguments, information and evidence, starting five days after the date on which the Ministry sends the notice of initiation to interested parties.

In anti-dumping and countervailing duty investigations, the Ministry must issue a preliminary resolution within 90 days of initiating the investigation. The preliminary resolution may terminate the investigation, impose provisional duties or announce that the investigation will continue without the imposition of provisional duties. In safeguard investigations, the Federal Executive may establish provisional safeguard measures within 20 days after initiation if “critical circumstances” exist, and such provisional measures may remain in place for up to six months.

The Ministry must issue a final resolution within 210 days of initiating an anti-dumping, countervailing duty or safeguard proceeding. The final resolution may impose definitive measures, revoke the provisional measures or declare the investigation concluded without imposing measures.

In anti-dumping and countervailing duty proceedings, the Ministry’s provisional and final resolutions must be published in the Federal Gazette and contain, among other things, the methodologies used to calculate dumping margins and subsidy rates, a description of the injury to the domestic industry, and an explanation of the Ministry’s injury analysis. In safeguard proceedings, the Ministry’s final resolution must include, among other things, a description of the Ministry’s findings regarding the volume of imports and the conditions in which they were made, and a description of the “serious injury” or threat thereof to the domestic industry.

In the USMCA, the parties have agreed to exclude imports from another party from a safeguard action, unless such imports “account for a substantial share of total imports” and “contribute importantly to the serious injury, or threat thereof, caused by imports.”

Definitive anti-dumping and countervailing duty measures can be reviewed annually at the request of a party, or at any time on the Ministry’s own initiative. Definitive anti-dumping and countervailing duty measures expire automatically five years after their entry into force, unless the Ministry initiates one of the following before the end of the five-year period:

  • an annual review procedure at the request of an interested party or on its own initiative; or
  • an examination of the validity of the measure, to determine whether its revocation would lead to the continuation or recurrence of the unfair trade practice at issue.

Safeguard measures can be imposed for up to four years, and may be extended for up to six additional years if warranted.

An annual review can be requested by an interested party who participated in the original anti-dumping or countervailing duty investigation, or any other party that demonstrates a legal interest. Annual reviews generally follow the same procedures as the original investigations.

Duties or the decision to not impose such duties may be challenged by a review before the Ministry of Economy, and the final decision of the Ministry of Economy may then be challenged by an annulment trial before the Federal Tribunal of Administrative Justice. In exceptional circumstances, the decision of the Ministry of Economy may be challenged through an amparo indirecto (ie, when the decision breaches a fundamental right set forth in the Constitution) without having to proceed with the review and/or the annulment trial.

Interested parties may file the review within 30 business days of the final determination being published in the Federal Gazette, and only the parties to the process have legal standing to participate in the review. The Ministry of Economy has three months to issue a decision on the review; if it fails to do so, the determination on anti-dumping, safeguards or countervailing duties is presumed to be confirmed.

The annulment trial may be filed within 30 business days of the decision on the review being issued by the Ministry of Economy or after the three-month period elapses with no decision from the Ministry of Economy. The process before the Federal Tribunal of Administrative Justice is governed by the Federal Law on Contentious Administrative Proceedings. The ruling by this Federal Tribunal can be challenged before a Federal Court by means of an amparo directo.

The full process to challenge the determination may last three to four years, so in practice it is uncommon for parties to file an appeal after the review process by the Ministry of Economy.

Due to COVID-19, all proceedings before the Ministry of Economy are conducted through electronic means, and onsite visits have been de facto suspended.

The UPCI has recently decided that business chambers lack legal standing as interested parties to investigations.

At the time of writing, there are no significant pending changes or hot topics on the horizon regarding anti-dumping and countervailing duty measures.

Foreign direct investment in Mexico is governed primarily by the Foreign Investment Law and its implementing regulations. The Foreign Investment Law authorises Mexico’s National Foreign Investment Commission to prevent acquisitions by foreign investment for reasons of national security.

The Mexican Constitution and the Foreign Investment Law provide three types of restrictions to specific sectors:

  • activities reserved exclusively for the State through state-owned enterprises;
  • activities reserved exclusively for Mexican nationals; and
  • activities subject to a maximum percentage of foreign investment.

The main entities responsible for regulating and managing foreign investment in Mexico are the National Foreign Investment Commission, the Directorate-General of Foreign Investment and the National Foreign Investment Register.

As mentioned in 6.1 Investment Security Mechanisms, Mexican laws and regulations provide three types of restrictions:

  • Activities reserved for the State:
    1. radiotelegraphy;
    2. postal services;
    3. control and exploitation of radioactive minerals;
    4. control, supervision and surveillance of ports and airports;
    5. money and currency printing; and
    6. ownership and control of electricity transmission and distribution lines (Article 5 of the Foreign Investment Law).
  • Activities reserved for Mexican nationals:
    1. domestic land transportation of passengers;
    2. tourism;
    3. freight, excluding messenger and parcel services;
    4. development banks; and
    5. certain professional and technical services (Article 6 of the Foreign Investment Law).
  • Activities subject to a maximum percentage of foreign investment – eg, up to 49% direct foreign investment on:
    1. weapons and explosive materials manufacturing and marketing;
    2. newspapers;
    3. integrated port services; and
    4. fuel supply for aircraft, ships and train freight, etc (Article 7 of the Foreign Investment Law).

Foreign persons or entities that intend to do business in Mexico in any of the regulated sectors mentioned in 6.3 Transactions Subject to Investment Security Measures must obtain a licence from the National Foreign Investment Commission before their incorporation and, for all activities that involve foreign investments, must register with the National Registry of Foreign Investment and present periodic updates in the circumstances set forth in the Law (eg, amendments to their corporate name, economic activity, tax address and if their income or expenses exceed the threshold determined by the National Foreign Investment Commission).

All activities that are not listed in Articles 5, 6 and 7 are exempt from the licensing requirements but shall at all times comply with the requirements of the Foreign Investment Registry.

Any licence granted by the National Foreign Investment Commission may be revoked if the interested party breaches the Foreign Investment Law (eg, fails to report a change in foreign investment participation to the Federal Registry).

Depending on the obligation that is breached, any breach of the Foreign Investment Law could result in a fine of between 30 and 5,000 units of measure (ie, the index to calculate fines published in the Federal Gazette) or a sanction up to the value of the illegal operation.

The licence from the National Foreign Investment Commission and the registration with the National Registry of Foreign Investment are subject to a processing duty, which is updated yearly.

At the time of writing, there are no significant developments regarding investment security.

In September 2021, President López Obrador sent to Congress a Presidential Initiative to Modify Articles 25, 27 and 28 of the Constitution to nationalise the electricity sector. Under this initiative, all the activities related to the electricity sector that were open to private parties (ie, power generation, marketing, supply) will be reserved exclusively for the state-owned enterprise, CFE. Therefore, if the initiative is enacted, foreign investment in the electricity sector will be banned and limited to certain procurement agreements with CFE.

Like many WTO members, Mexico has programmes in place to support its domestic producers in the agricultural sector. Currently, many of these policies are guided by the Sectoral Programme for Agriculture and Rural Development 2019–2024. A significant portion of Mexico’s support for agricultural producers comes in the form of market price support, beneficiaries of which include producers of sugar, poultry, coffee, wheat and tomatoes. Other support measures include direct payments to producers based on area and subsidies based on electricity consumption.

In the industrial sector, Mexico has several programmes in place to encourage domestic production. For example, Mexico’s Programme for Industry, Manufacturing, Maquila and Export Services (IMMEX) allows the temporary importation of goods needed to produce, transform or repair goods from abroad for subsequent export and to provide export services, free of import tariffs and VAT. Mexico’s Sectoral Promotion Programmes (PROSECS) allow firms producing specific goods to import the necessary inputs and machinery at preferential tariff rates, regardless of whether the goods are for export or domestic consumption.

Mexico maintains a variety of technical regulations and labelling requirements known as Official Mexican Standards (Normas Oficiales Mexicanas – NOMs), which are issued by government agencies and secretariats. Imported products must comply with the applicable NOMs. Mexico’s Ministry of Economy maintains a list of products that are subject to compliance with NOMs at the point of entry into Mexico, set forth in Annex 2.4.1 of the Resolution by which the Secretariat of Economy issues General Rules and Criteria regarding Foreign Trade (the NOM Annex). Certain of these NOMs have generated trade concerns, such as the 2019 draft NOM establishing a conformity assessment procedure for cheese products, the 2020 final NOM establishing front-of-package nutritional labelling standards for food products, and proposed revisions to the NOM setting forth safety requirements for data processing equipment.

As mentioned in 1.5 Key Developments Regarding Trade Agreement, importers must demonstrate compliance with the applicable NOMs at the point of entry, so NOMs are a continuous cause of concern for foreign trade.

Mexico’s policies with respect to agricultural biotechnology have become a source of friction with its trading partners of late, especially the United States. Mexico’s Law on Biosafety of Genetically Modified Organisms prohibits the importation of genetically modified organisms without the authorisation of the relevant Mexican health authorities. The US government and industry stakeholders have expressed concern that Mexico’s Federal Commission for Protection Against Sanitary Risks (COFEPRIS) has not approved any agricultural biotechnology products for use in food and feed since 2018, even though multiple applications are pending and have exceeded the statutory timeline for a decision. In addition, US stakeholders have expressed concern about a Decree issued by President López Obrador on 31 December 2020 that calls for the phase-out of the herbicide glyphosate and genetically modified corn for human consumption in Mexico. There is concern that these policies will limit export opportunities in Mexico for US firms.

Under exceptional circumstances, the Mexican Constitution allows the President to impose price controls on goods that are necessary for the national economy and popular consumption. Historically, the government has set price controls on agri-food products such as corn, and it is currently enforcing price controls on the marketing of LP gas (August 2021).

In addition, to avoid monopolistic practices in certain industries, the Antitrust Regulators (COFECE, ARTF, CRE or IFT) have set price controls on certain services provided by the incumbent agent or the agent that holds monopolistic power, such as the sale of first-hand oil and gas, train freight tariffs for certain products, wholesale access to telecommunications networks, etc.

While aimed at protecting the public interest, such measures could reduce competition and imports.

US and EU stakeholders have recently expressed concern about the following changes in Mexico’s energy policy that are perceived to discriminate against foreign firms in favour of state-owned enterprises:

  • proposed constitutional reforms submitted by President López Obrador to the Chamber of Deputies on 30 September 2021, which aim to terminate the energy reform of 2013 and return full control of the national electricity sector to the Mexican State (entitled the "Initiative with a draft of decree amending Articles 25, 27 and 28 of the Political Constitution of the United Mexican States in the field of energy"). This initiative also seeks to nationalise lithium exploitation and reserve it for state-owned enterprises;
  • recent amendments to Mexico’s Hydrocarbons Law that authorise the government to suspend or revoke permits held by private parties and allow state-owned enterprises to take over their operations; and
  • new Hydrocarbon and Fuel Import and Export Rules issued by the Secretary of Energy (SENER) that shorten the term of hydrocarbon import-export permits from 20 years to five years (and in some cases one year) and restrict the possibility to use storage facilities out of customs facilities.

Under Article 28 of Mexico’s Law on Public Sector Procurement, Leases and Services, certain procurements are open to public bidding only by Mexican nationals, and the goods offered must meet local content requirements. Other procurement proceedings are open only to Mexican or foreign suppliers from countries whose FTAs with Mexico contain government procurement obligations. Some procurement proceedings are open to suppliers from any country, but goods of Mexican origin benefit from a 15% price preference in such proceedings.

Pursuant to the Industrial Property Law that Mexico recently enacted (see Federal Gazette of 1 July 2020), to comply with several obligations under international treaties (eg, USMCA), Mexico included the protection of domestic production through geographical indications, along with denominations of origin which were recognised by the previous law.

At the time of writing, Mexico has 16 goods protected under denominations of origin and 14 geographical indications. These protections have been used for foods (Cacao Grijalva, Chile Habanero de la Península de Yucatán, Mango Ataulfo, Chile Poblano, etc), alcoholic beverages (Tequila, Mezcal, Sotol, etc) and artisan products (eg, Talavera, Olinalá, Ambar de Chiapas and Alebrijes).

Like other countries, Mexico is facing serious trade challenges due to the COVID-19 pandemic and the disruptions to the supply chain of raw materials. The Mexican economy contracted in 2020 and the recovery for 2021 has not achieved the predicted results.

Mexico’s geographic location and competitive manufacturing costs present unique opportunities for economic development, although the current administration has not prioritised the promotion of international trade and policies to reshape the Mexican economy. Examples include cancelling Mexico City’s new international airport, criticising “neo-liberal” commitments and policies pursued by other countries and previous administrations (eg, an initiative to create a parallel organisation to the Organization of American States), and a strong push to nationalise certain sectors and centralise presidential power.

One key issue that will affect Mexico’s attractiveness as a trade and investment destination is the current presidential initiative to nationalise the energy industry. If enacted, this initiative could reduce foreign investors’ confidence in Mexico and cause an avalanche of foreign investment arbitrations against the country. In addition, the results of the COP26 in Glasgow could involve new commitments from the signatory countries to the Paris Agreement, which could impose restrictions for Mexican exports.

Mexico’s customs enforcement policy has also considerably delayed the processing times for imported and exported goods, which along with supply chain disruptions has created economic difficulties for many industries.

White & Case, S.C.

Torre del Bosque – PH
Blvd. Manuel Ávila Camacho #24
Col. Lomas de Chapultepec
11000 Ciudad de México
Mexico


+52 55 55 40 96 00

+52 55 55 40 96 99

whitecasemexico@whitecase.com www.whitecase.com
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White & Case, S.C. has an international trade team that is widely recognised for its cutting-edge work for major Mexico-based industry associations and national producers on their most significant transactions, both globally and in Mexico. The team works with the global White & Case trade practice whenever necessary to provide a unique level of service, which allows Mexican companies to gain the insights of Europe-based lawyers on trade issues arising between Mexico and Europe, the insights of US-based lawyers on issues arising in North American trade, and the insights of Asia-based trade lawyers on issues relating to Asia-Mexico trade. The team comprises experienced lawyers with long-standing expertise in advising on global-scale mandates. It has unparalleled expertise in advising on the US-Mexico-Canada Agreement (USMCA). Recent highlights include advising Aneberries on multiple ongoing investigations into berry exports to the United States before the US International Trade Commission (ITC), and acting for Mexican steel manufacturers Tenaris (through Tenaris TAMSA) and Ternium on various international trade mandates.

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