PANEL ON MONEY, PEOPLE, AND GOODS: GETTING WHAT YOU NEED IN AND OUT OF THE HOST COUNTRY GOODS
| Jurisdiction | United States |
(Sep 2015)
PANEL ON MONEY, PEOPLE, AND GOODS: GETTING WHAT YOU NEED IN AND OUT OF THE HOST COUNTRY GOODS
Partner
Baker & McKenzie S.C.
Mexico City
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RAYMUNDO ENRIQUEZ is a partner with Baker & McKenzie Abogados, S.C. in Mexico City. Mr. Enriquez is recognized as a leading lawyer for competition / antitrust and for business by Chambers Latin America 2013. He has served as a board member for several Mexican companies. In addition, he was a visiting lecturer at the Mexican Bar Association and a part-time tax and foreign trade law professor at Universidad Iberoamericana, where he obtained his JD from the university's School of Law. He was admitted to practice law in the Mexican Republic in 1980. Mr. Enriquez attended the International Tax Program and obtained his LLM at Harvard University in 1982.
Importing into Mexico: A Brief Summary
As much of Mexico's customs and trade legislation is based upon international agreements, many of the basic principles and concepts contained in the Mexican legislation will be familiar to those trading in other parts of the world, particularly in areas such as tariff classification, customs valuation and rules of origin. Nevertheless, Mexico's laws, regulations and administrative policies and practices are its own and therefore significant differences will also be found in Mexico.
Below is a brief summary of the most relevant issues related to the importation and exportation of goods into and from Mexico:
Tariff classification
In Mexico, the tariff classification of a good will not only determine the applicable duty rate, but also whether any non-tariff requirements are applicable at the time of importation, and the applicable rule of origin under Free Trade Agreements ("FTAs") in order to qualify for preferential duty treatment.
The Mexican import tariff schedule is contained in the Mexican General Import and Export Duties Law ("TIGIE"), which is based on the Harmonized Commodity Description and Coding System (the "Harmonized System" or "H.S.").
Under the TIGIE, goods imported into Mexico are identified by an eight-digit tariff item number. The first six digits of the classification number, or the subheading, is the international portion of the TIGIE. The seventh and eighth digits which make up the tariff item are unique to Mexico. The rate of duty applicable to imported merchandise will be determined by reference to the tariff item, that is, the full eight digits.
The import duty set forth in the TIGIE is generally ad valorem, that is, based on a percentage of the value of the merchandise. If merchandise qualifies as originating under one of the preferential trading arrangements to which Mexico is a party, as discussed below, it will be entitled to a preferential or lower duty rate.
If an exporter is exporting the same merchandise to Mexico as it is to other countries, which have adopted the Harmonized System, determining the proper tariff classification for the merchandise when imported into Mexico should be relatively straight-forward, since the first six digits of the tariff item should be the same for all countries using the Harmonized System. While classification in different jurisdictions is usually consistent, it should be noted, however, that the customs authorities sometimes disagree on the classification of a particular product. Therefore, it is essential to verify the tariff classification in the specific country of importation, in this case Mexico.
Customs valuation
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As noted above, import duties in Mexico are generally ad valorem. Therefore, in order to calculate the import duties payable on imported merchandise, it is essential to properly determine the value of the merchandise for customs purposes.
The methods for determining the customs value of imported merchandise under the Mexican Customs Law are based on the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade (the "GATT Customs Valuation Code"). Mexico became a signatory to the GATT Customs Valuation Code in 1988, but postponed implementation of the entire Code for five years until 1993 and the provisions with respect to the reconstructed (computed) value method of valuation for an additional three years until April 1, 1996.
The methods of customs valuation under Mexican law are similar to the methods used by other countries that have implemented the Customs Valuation Code, including the United States and Canada. The implementing legislation and regulations are not the same in all countries that have adopted the Customs Valuation Code. However, and each country, including Mexico, has its own policies and administrative practices with respect to the interpretation and application of the valuation provisions of its respective customs legislation and regulations. Moreover, since Mexico did not implement the Customs Valuation Code until 1993, it does not have as well-developed administrative policies or practices with respect to the application of the various valuation methods provided for under the Customs Valuation Code, as for example the United States and Canada, particularly the alternative methods of valuation to the transaction value method.
Transaction Value Method
The transaction value method is the primary method of valuation used to determine the value of merchandise for customs purposes and most imports into Mexico are valued (correctly or incorrectly) under this method.
The "transaction value" is essentially the price paid or payable for merchandise which is sold for export to Mexico for purchase by the importer, subject to certain adjustments. The price paid or payable is understood to be the total payment made or to be made for the imported merchandise, directly or indirectly, by the buyer to or for the benefit of the seller.
The transaction value method may only be used, however, provided certain conditions are met. One of the conditions is that the importer and the seller not be related parties, or if they are related, that the relationship has not influenced the transaction value.
In order to arrive at the transaction value, certain adjustments must also be made to the price paid or payable, which are prescribed in the Customs Law.
Alternative Methods of Valuation
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If for any reason the transaction value method cannot be used, for example, if there exists a relationship between the seller and the buyer which has influenced the price, then one of the alternative methods of valuation provided for under the Customs Law must be applied in the following order: transaction value of identical merchandise; transaction value of similar merchandise; unit sale price (deductive value) method and the reconstructed (computed) value method. At the importer's...
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