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International Trade in Mexico
Mexican International Trade Policy
As a member of international organizations and Free Trade Agreements, Mexico has, to a certain extent, a predictable international trade and customs policy. Mexican laws on customs and trade are normally compatible with international rules. The President and his ministers are not only in charge to apply these laws, but they also have powers to regulate international trade and customs, including emergency actions.
Since the inception of the World Trade Organization and the North American Free Trade Agreement, Mexico’s trade and customs legal framework has not been subject to a substantial overhaul; seldom reforms, particularly to the customs law, have occurred from time to time. However, Mexico is currently embracing modern free trade agreements, such as the Comprehensive and Progressive Transpacific Partnership (CPTPP) or USMCA, that have and will bring certain legal changes in intellectual property, de minimis, e-commerce, etc.
Needless to say, trade and customs programs or regulations are subject to frequent changes that seek to adapt to new trends, risks, or policy objectives. Mexico has in place, for instance, duty deferral and tariff reduction programs that allow manufacturing or export-oriented industries to be more competitive. However, such programs are subject to strict government controls.
International Trade 2019 Statistics: Origin of Mexican Imports
Mexico's Top Five Trading Partners
Mexican Tariff Policy
Mexico is a party to the World Customs Organization and to the International Convention on the Harmonized Commodity Description and Coding System (HS Convention).
As a result of the sixth amendment to the HS, Mexican congress discussed a new law that replaced its General Import and Export Tariff Act (LIGIE, acronym in Spanish), i.e. Mexico’s Harmonized Tariff Schedule. The Ministry of Economy conducted an exhaustive review and proposed to compact or unfold tariff items for statistical purposes into 10 digits that will be called Commercial Identification Number, instead of an 8 digit tariff item (known as fracción arancelaria). The new General Import and Export Tariff Act was published on July 1, 2020, in the Official Gazette.
Would you like to know what is Mexico’s HS Tariff Item for a given product?
The Mexican Ministry of Economy has developed an online platform to assist economic agents to find the applicable tariff item (MxHS) in an unofficial manner: Mi Fracción Arancelaria (available only in Spanish). In addition to the MxHS, you may find out the relevant non-tariff barriers.
Do you need import or export statistics?
MFN Tariffs or Import Duties
Mexico’s average bound tariff in the World Trade Organization is 35%, and duties rates vary from 0% to 100%. According to Mexico’s most recent Trade Policy Review (2017), the average MFN tariff on agricultural and non-agricultural products was 14.3% and 4.6%, respectively.
The General Import and Export Tariff Act establishes the import tariff or “General Import Tax” (Impuesto General de Importación, or IGI) as well as the export tariff “General Export Tax” (Impuesto General de Exportación, or IGE).
If the goods are categorized, Mexico’s MFN tariff (or IGI) profile may look as follows:
Preferential Tariffs in Free Trade Agreements
Mexico has an extensive network of Free Trade Agreements (FTAs) with 50 countries and is also a party to regional agreements within the framework of the Latin American Integration Association (ALADI).
The main FTAs and trade agreements to which Mexico is currently a party are as follows:
- North American Free Trade Agreement (NAFTA), soon to be replaced by the USMCA.
- European Union-Mexico Free Trade Agreement, which is in the process of being modernized.
- Comprehensive and Progressive Transpacific Partnership (CPTPP) in force between Australia, Canada, Japan, Mexico, New Zealand, Singapore, and Vietnam; Brunei, Chile, Malaysia, and Peru have not yet ratified the FTA.
- Pacific Alliance with Colombia, Chile, and Peru.
- FTA with Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.
- FTA with the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland).
- FTA with Israel.
- FTA with Uruguay.
- FTA with Japan.
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which represents 15% of global trade, entered into force on 30 December 2018 between six of the 11 signing parties, namely Australia, Canada, Japan, Mexico, New Zealand, and Singapore. The agreement entered into force with Vietnam on 14 January 2019. Brunei, Chile, Peru, and Malaysia have not yet concluded their domestic ratification procedures.
Mexico eliminated import duties on 77% of its tariff items on entry into force. The tariff reduction schedule started to apply in 2018 between Mexico and the original five CPTPP parties and started in 2019 as regards Vietnam.
What will happen with the FTAs with other CPTPP parties?
As perhaps you may have noticed, Mexico also has “parallel” FTAs with other CPTPP parties, for instance, Japan-Mexico FTA, Canada in the USMCA, Peru, and Chile in the Pacific Alliance, and one perhaps may wonder the following:
Whether these FTAs may co-exist in the “spaghetti bowl” of international trade?
The answer is yes. According to article 1.2 (1)(b) CPTPP, the rights and obligations resulting from other existing international agreements, say USMCA, between Canada and Mexico, coexist with CPTPP with respect to such parties. In this sense, economic agents may either choose to apply the CPTPP or, for instance, the Japan-Mexico FTA, which by the way turned 15 years on April 1st, 2020.
United States-Mexico-Canada Agreement (USMCA)
The United States-Mexico-Canada Agreement (USMCA) entered into force on July 1st, 2020, replacing NAFTA. USMCA introduces new rules that will affect trade in areas, such as the auto industry, remanufacturing, rules of origin, intellectual property, de minimis importations, e-commerce, among others.
Needless to say, the original agreement was modified by a protocol, signed on 10 December 2019. The protocol modified the rules of origin in the automotive sector, eliminated intellectual property provisions, introduced enforcement mechanisms in labor and environmental matters, and improved the establishment of panels for the dispute settlement mechanism.
Notably, the labor enforcement mechanism includes a unique and innovative facility-specific rapid-response labor mechanism (RRLM) that is applicable either between the US and Mexico or Canada and Mexico. The RRLM’s purpose is to address and remediate the denial of labor rights (i.e. freedom of association and collective bargaining rights) in a specific facility that falls in an economic “priority” sectors. If the denial of rights is not remedied, remediation measures can be imposed against the goods or services of a facility.
New EU-Mexico Agreement
After two years of having reached an agreement in principle, Mexico and the European Union have concluded the negotiation process regarding the modernization of their Free Trade Agreement in April 2020.
Access the text of the agreement clicking here.
The Public Procurement Chapter was preventing the conclusion of the negotiations of this FTA’s modernization. The European Union had the interest to access tenders at the sub-federal (or state) level in Mexico. In the end, 17 Mexican states are included in Mexico’s commitment to international best practices in procurement matters. This is Mexico’s first time to negotiated public procurement at the sub-federal level in its history.
With this new modernization or agreement, Mexico and the EU will fully liberalize trade since agri-food products were originally excluded from the trade agreement that is currently in force.
Recent Changes to Mexican Trade Policy
In the last years, a handful of policies affecting trade, directly or indirectly, have been implemented, and others are yet to be developed and enter into force. For example:
- Mexico temporally raised its most favoured nation (MFN) tariffs on steel, textile and footwear products that will (presumably) expire by the end of 2024. More information, here.
- Mexico changed its policy on product compliance, with mandatory standards at customs affecting imports.
- Mexico overhauled its food labeling regulations to introduce Front Warning Labels, which will enter in to force as of October 1, 2020, through three phases. This will have an impact on domestic and imported products and was a source of concern for the US, the EU, and Switzerland. More information on Mexico’s food labeling mandatory standard (known as NOM-051), visit the following alert.
- Mexico modified its conformity assessment procedure for medicines to facilitate imports.
- A Free Trade Zone Programme will be implemented in the Isthmus Corridor, which will be a public body. More information about this project is yet to be announced.
Additionally, the current administration has set up the Northern Border Free Trade Zone Programme, which grants tax rebates to companies that are established on Mexico’s northern border. This programme targets the manufacturing (maquila) industry, which relies heavily on international trade and is well established in this region.
Click for More Information on International Trade Guide
Duty Deferral and Trade Promotion Instruments
Everything you need to know about Mexico's International Trade Programs
Non-Tariff Barriers
Automatic and Non-Automatic Import Licences Applicable in Mexico
Taxes Affecting Imports
A Summary regarding all charges affecting imports in Mexico
Customs
Everything you need to know to import or export in Mexico.
How to do business in Mexico?
The Mexican Legal Guide
How to create a company in Mexico?
Under this section, Doing Business Mexico explains the 12 steps to create a company in Mexico, including the basic legal features of the two most relevant types of companies as well as other possible business structures.
Visit our guide: How to create a company in Mexico?
Do Foreign Investment Restrictions Apply in Mexico?
As a general rule, all sectors of the economy are open to foreign investors unless otherwise provided in Mexico’s Foreign Investment Law. Although through the years sectors have been liberalized, Mexico has still foreign investment restrictions in place that are applicable to specific activities as well as restrictions on land ownership.
Visit our guide: Foreign Investment in Mexico.
International Trade in Mexico
Being a WTO member and having 13 Free Trade Agreements, Mexico is a country that is open to international trade. In this guide, topics such as tariffs, preferential tariffs, import restrictions, customs procedures, Free Trade Agreements like USMCA, among other matters, are reviewed.
Visit our guide: International Trade in Mexico.
The IMMEX Program and the Mexican Manufacturing Industry
The export-oriented manufacturing industry, also known as the maquiladora industry, represents one of the most important pillars of the Mexican economy. The IMMEX program is, to a great extent, used by companies within the manufacturing industry. In this guide, Doing Business in Mexico provides a general overview on the IMMEX program.
Visit our Guide: The IMMEX Program.
Taxation in Mexico
What are Mexico’s main taxes? What is the corporate income tax rate or Mexico’s VAT? When a foreigner creates a permanent establishment in Mexico, or is considered a resident for Mexican tax purposes? In this guide, Doing Business in Mexico explores the common questions that a foreigner has about Mexican Taxes.
Visit our Guide: Taxation in Mexico.
Labor in Mexico
What is Mexico’s labor environment? What is the minimum wage? What about the effects of the United States-Mexico-Canada Agreements (USMCA) on unions and collective bargaining? In this guide, Doing Business in Mexico explores the common employment topics that a foreigner has about Labor in Mexico .
Visit our Guide: Labor in Mexico.
Get In Touch With Us!
Phone
+ 52 55 1683 2289
info@doingbusiness-mexico.com
Address
Rio Churubusco 601, Col. Xoco, Benito Juarez, Mexico City.