MEXICO: An Introduction to International Trade/WTO

Mexico has not been oblivious to the economic impact of the biggest forced pause/lockdown of the industrial and manufacturing sectors derived from the COVID-19 pandemic. The lockdown on the production of several inputs and finished goods of all industries (medical, automotive, foods) caused the closing of small locals to big manufacturing companies not only in Mexico but worldwide.

By 2023, positive annual growth is expected for the Mexican economy, supported mainly by the impact of public policies aimed at strengthening the labour market and promoting investment by increasing trade relations and transactions with more countries.

Mexico is considered one of the countries with the greatest competitive and comparative advantages for foreign investment.

The above is because of (i) its strategic location (proximity to the United States and Canada) and its network of more than 14 free trade agreements with 50 countries, and (ii) the industrial development, such as the transportation equipment sector, with a highly skilled workforce. The Mexican automotive industry is converting some of its plants to manufacture light vehicles and electric trucks to meet domestic and international demand.

Mexico will be able to consolidate its position as a leading exporter, strengthening employment in the country's manufacturing and logistics sectors and increasing the demand for industrial space.

For 2023 and ongoing years, it is expected that the global economy, including Mexico's economy, will continue growing and increasing its commercial relationships and transactions with more countries.

New Legislation Affecting Clients 

National Customs Agency of Mexico: 

In July 2021, the National Customs Agency of Mexico (Agencia Nacional de Aduanas de México or “ANAM”) was created. The ANAM substitutes the General Customs Administration (Administración General de Aduanas) of the Tax Administration Service (“SAT”) in the operation of the Mexican Customs Houses, entering operations on 1 January 2022.

The ANAM is a decentralised administrative agency of the Secretary of Finance and Public Credit, which has technical, operational, and administrative autonomy. Its operations are coordinated with the Mexican armed forces, working as tax and customs authorities.

The purpose of the ANAM is to specialise and operate the customs administration and control independently from the SAT, so the ANAM will have powers to organise and manage the customs services and inspection of goods, enforce compliance with the legal provisions that regulate the importation and exportation of goods and it will be responsible for the collection of duties and taxes on foreign trade transactions in Mexico. 

It is our opinion that the ANAM will face operational challenges, such as the following:

• Training, professionalism, integrity, and legality (all its operations must be performed as established in the applicable law).

• Coordination of military personnel operations in the customs houses, which must be adapted to the applicable legal framework in customs matters regarding their exercise and functions in customs procedures.

• To direct fight against the corruption in the Mexicans' customs houses.

New documentation requirements on import transactions in Mexico:

Recently, the SAT modified the applicable tax legislation regarding the documentation that must be issued and carried along with the transportation of goods in Mexico, to evidence their legal possession and/or importation into Mexico.

The most relevant modification was the incorporation of a complementary consignment note (complemento “Carta Porte”) that must be attached to the digital tax receipt issued by the internet (Comprobante Fiscal Digital por Internet).

The entry into force of the complementary consignment note will imply certain administrative and operational challenges to importers and companies dedicated to the transportation of goods in Mexico since the complementary consignment note requires completing several aspects of information, meaning spending more time on its issuance, making it almost impossible to perform last minute modifications of the information of the goods that will be transported.

Also, it implies intensive training to employees for employees to be able to complete the complementary consignment note correctly and timely.

Failing to comply with the issuance of said complementary consignment note would lead to the following sanctions:

• Monetary sanctions.

• Title to the goods passes to the Mexican Federal Treasury.

• Criminal liabilities (contraband).

Criminal liabilities regarding tax and customs matters 

In recent years, several laws and amendments to the Mexican legal system have been published. These laws and amendments obligate companies to operate with a higher level of diligence, legal and ethical compliance, and best practices regarding the relations with suppliers of goods, services, and clients in the supply chain and contractual relations through the ordinary course of their transactions.

Some of the provisions that have already begun to be applied, and others that have been published in recent years, are the following:

• The commission of contraband will be considered as organised crime when three or more persons commit it. Organised crime offence is sanctioned up to 16 years of prison and does not allow the possibility of posting a bond, meaning that the criminal procedure will be held incarcerated.

• The commission of organised crime opens the door for the authority to apply the Loss of Ownership Law (Ley Nacional de Extinción de Dominio) and, therefore, initiate the corresponding procedure that will be derived on the loss of title to the goods of the company.

Therefore, non-compliance with certain tax and customs obligations will imply the imposition of administrative and criminal liabilities, leading to a possible operational stoppage of operations in Mexico.

Potential Hurdles or Difficulties Faced by Clients and How These can be Overcome

Since Mexico’s Federal Government took office in December 2018 several difficulties have been raised for companies in connection with legal compliance due to a non-official policy adopted by the government regarding non-communication and reception by government officials, contrary to previous administrations.

The lack of communication and dialogue between tax and customs authorities with taxpayers represents several difficulties regarding legal and operational matters since they cannot verify with the authorities how to comply with the applicable legal provisions.

Also, the government implemented an aggressive tax and duties collection policy, increasing the number of customs and tax verification audits, including electronic audits with the seizure of goods without prior notification, auditing/reviewing mainly:

• Tariff classification of goods.

• Customs valuation of goods.

• Non-tariff regulations and restrictions.

• Declaration and payment of additions (eg, commissions and brokerage expenses, packaging, and transport fees of the imported goods into Mexico).

Based on the above, it is imperative and essential for companies to implement mechanisms to identify, prevent, and, where appropriate, mitigate risks related to their import and export transactions, their supply chain, and contractual relations. Below please find some of such mechanisms:

1. Documenting all the transactions and suppliers’ relationships.

2. Training of the company’s personnel.

3. Implementation of internal customs compliance procedures and mitigation of risks, among others.

4. Perform internal compliance reviews annually and validate them with external legal advisers.

Companies will have to operate with a higher level of diligence, legal and ethical compliance standards, and best practices, constantly ask the following questions:

• Does the company have contracts with all its customs brokers and suppliers?

• Does the company have compliance programmes to prevent crimes (Anti-Money laundering Law /Anti-bribery Law/Loss of Ownership Law)?

• Does the company have up-to-date customs and trade registrations?

• Has the company performed a recent internal compliance audit?

• Does the company review the correct backflush of its customs transactions?

If taxpayers fully comply with their customs and trade obligations and have validated them with external advisers, despite the aggressive tax and duties collection policy and the constant tax verification audits, there should be no concern regarding their customs and trade operations in Mexico.