Exporting to Mexico

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Exporting to Mexico
Hispanic Metropolitan Chamber of
Commerce Portland, Oregon March 15, 2007

• The NAFTA Group, LLC.
• International Trade Advisors
• Mexico, USA, Canada China

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General Background - Mexico

• Economic activity in Mexico decreased in 2006
  with a GDP growth rate at 4 compared to a 4.4
  in 2004.
• This situation is due to high oil prices and a
  relaxing monetary policy.
• One of the weakest points of the Mexican economy
  is its strong dependence to the American economy
  80 of Mexican exports and imports are carried
  out with the US.
• Mexico's three largest export destinations are
  the United States, Canada and Germany. Its three
  largest import countries are the United States,
  Canada and China.

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How to export to Mexico

• To compete effectively in todays business world
  it is imperative that local companies have means
  to address the global challenge and turn to
  international trade to diversify products,
  mitigate risk, and reap the benefits of
  globalization.
• Comparative advantage can be attained by finding
  the right product to satisfy clients needs.
• International trade agreements can increase the
  benefits of sourcing and selling
• products in foreign markets.

4
Import regulations and duties

• Since Mexico joined the GATT in 1986, few goods
  have been subject to import license. For the
  products which are still subject to import
  licenses, the administration in charge of import
  license is the Ministry of the Economy.
• All import products have to handle a certificate
  of origin, and particularly strict requirements
  are demanded for textiles, toys, hydrocarbons,
  and other sensitive industries.

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Import Process / Customs

• To be able to import or export merchandise it is
  required to present official approved document
  called "pedimento (or petition to import) and it
  has to be completed by a licensed Customs
  broker.
• The petition is filed at the port of
  import/export (air, land or sea port) and has a
  three day window for validation purposes.
• In the case in which the merchandise is subject
  to regulations and non-duty restrictions, the
  pedimento has to include the electronic
  signature that proves fulfillment of the same
  requirements.

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Role of the Customs Broker

• Foreign trade projects, public or private,
  require constant bringing up to date in different
  aspects such as codes regulations, custom
  formalities, duties and legal aspects and
  precepts.Therefore, custom brokers more than
  just take the necessary steps to put the
  merchandise through customs, they became advisors
  in foreign trade and international
  logistics.Result clients not only obtain the
  best applicable tariffs, but through consulting
  and deliberating, work together with other areas
  of the enterprise in developing better products,
  system and strategies by devising leaner and more
  efficient international supply chains.

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Import Requirements Check List

• Before initiating operations
• Have a Mexican importer of record must be in
  the import registry and a Customs Broker assigned
  for import operations.
• Provide the documentation to the Mexican Customs
  Broker to begin the clearance process
• Check that the merchandise complies with all the
  non-duty requirements (registration in specific
  sectors, permits, labeling, packaging, etc.) in
  both the exporting and importing countries.

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Import Requirements Check List

• Document Requirements
• Commercial Invoice (English, Spanish or French)
• Airway bill, Bill of Lading or Cargo Manifest
• Packing Lists
• Certificates of Origin
• The document that proves the fulfillment of
  regulations and non-duty restrictions that
  proceed
• Estimated price guarantee in case Mexican
  authority estimates a higher than declared value
  on the merchandise being imported
• In case of it being merchandise that is
  identifiable by serial number, make, model, and
  technical specifications.

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Import taxes

• VAT (IVA) applied on imports- standard rate
  15- reduced rate there are two reduced rates
  10 when the company's activities occur in a
  border region, and 0 in the case of some goods
  (bare necessities, food, books, medications, and
  agricultural products).
• Customs royalty (DTA) 0.8 on the declared
  value.

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Customs duties

• As a WTO member, Mexico applies the Harmonized
  Tariff System. Customs duties are calculated Ad
  valorem on the value for customs of the goods and
  the terms of sale (Inco terms).
• There are customs duty discounts (and even
  exemptions) for products helping in the
  development of the local industry (Maquiladora
  program).
• Mexico signed a number of trade agreements
  resulting in the creation of free trade areas
  (NAFTA) and preferential tariffs for a broad
  array of products.

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Maquiladora System Overview

• Manufacturing Companies that receive duty and tax
  exemptions on imported materials that are used
  for transformation and subsequently exported.
• Provides opportunity to North American companies
  for sourcing products that may have foreign
  components. After transformation through this
  program, these final or intermediate goods are
  classified as Mexican Origin (Annex 401 NAFTA).
• Products that meet the criteria may enter the
  U.S. and Canadian markets duty free.

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Sample process for a Maquiladora
Lumber From Indonesia
Import duty tax free
Import duty tax free
Maquila Mexico
Manufacturing of Furniture Product is Mexican
Origin (See Annex 401)
Canada
Hardware From China
Barnish and Enamel from Mexico
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Transportation of goods

• By road
• The road network counts 310,000 km of roads.
  50,000 km are federal roads, 60,000 km are State
  roads and the rest are countryside roads.
• The State network is in bad shape because of the
  obsolescence of infrastructure and poor
  maintenance, despite the efforts made by the
  Ministry of Communication and Transport in recent
  years.

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Transportation of goods

• By rail
• The rail network extends over 26,000 km and it
  mainly consists of three North-South routes
• 1. Along the Pacific Coast
• 2. Central region
• 3. Northeast region.
• A fourth axis connects Mexico City with Yucatán.
  
• The network connects the 10 sea ports and allows
  10 access points with the United States.
• Freight represents 95 of the railway activity.

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Transportation of goods

• By sea
• Mexico has 22 commercial ports. Since 1995, the
  government decentralized the harbor
  administration and privatized the exploitation of
  terminal operations in certain ports.
• The 4 main ports, which handle 60 of the
  traffic, are Altamira and Veracruz in the Gulf of
  Mexico and Manzanillo and Lazaro Cardenas on the
  Pacific Coast.
• In 2006 29 of the goods imported to Mexico were
  transported by ocean.

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Transportation of goods

• By air
• Mexico has the most developed airport
  infrastructure in Latin America, with airports in
  every cities of more than 500,000 inhabitants.
• Among the 83 airports of the country, 53 handle
  international flights and cargo.

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Advantages to trade with Mexico

• Cheap labor force, skilled and non-skilled
• High levels of quality and production
• Rule of Law International Property Rights
• Abundant resources and infrastructure
• International Trade Agreements
• Geographical location proximity and faster
  reaction times to problems or market changes

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5 Most Common Mistakes

• Jump the gun and not have a registered importer
  with the necessary permits and registrations.
• Forget to file for a licensed customs broker.
• Expedite cargo without the proper documentation.
• Cargo does not match or is not easily
  identifiable with importing documents.
• Document errors
• - Incorrect information (invoice, certificate of
  origin)
• - Incomplete forms (fields, stamps, signatures)
• - Illegible documents or copies
• - Unofficial formats and print outs

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International Trade Solutions

• Conduct your export activities with due diligence
  to avoid costly delays and potential loss of
  profits.
• Choose your partners adequately. Create
  synergies between your customers, suppliers, and
  service providers.
• Maintain an updated database of requirements for
  the products that you export or wish to export.
• Communicate effectively and share information
  with all involved parties for a smooth customs
  clearance.

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Important Contacts/Resources

• Mexican Export Bank Bancomext
• www.bancomext.com
• North American Free Trade Agreement - TLC
• www.nafta-sec-alena.org
• Ministry of Economy Secretaria de Economia
• www.economia.gob.mx
• Treasury Department S.A.T.
• www.sat.gob.mx
• Mexican Customs Aduanas Mexico
• www.aduanas.sat.gob.mx
• MX Customs Brokers Association CAAAREM
• www.caaarem.org.mx

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• Questions ?
• Thank you
• www.naftagroup.com