Issue 242, January 25, 2000
A major consumer electronics company with manufacturing operations in Mexico is estimating that new rules, which become effective on November 1, 2000 (less than ten months away), will cost the company approximately $16 to $20 million per year in additional duties to the Mexican Government.

For over thirty years, the Mexican Maquiladora industry has enjoyed the benefits of duty deferral status for all materials, components, supplies, equipment and machinery, irrespective of their origin. However, NAFTA?s Article 303, which becomes effective on January 1, 2001, specifically prohibits such duty deferral programs. As a result, only NAFTA originating materials, components, supplies, equipment and machinery will be eligible for this special duty free treatment. All non-NAFTA originating items (when finished goods are exported to the United States or Canada) will be fully dutiable in Mexico at either the Most Favored Nation (MFN) rate (which can range for 0% to 50%) or the Preferential Duty Rate (which can range from 0% to 5%). At this time, the Preferential Duty Rate is limited to those items covered by either the Electronics or Electric Industry Sectoral Promotion Programs. In the near future, Mexico is promising additional Sectoral Promotion Programs in the areas of automotive, textiles and toys.

Most materials and components from China may be especially hard hit because of the applicable dumping duty rate, which can be as high as 129% for some items. Article 303 may force Maquiladoras to pay dumping duties on all Chinese-made materials and components when finished goods are exported to the United States and Canada.

To avoid, or at least reduce, these increased duty assessments, many Mexican Maquiladoras are aggressively lobbying the Mexican government to include their products in one of the promised Sectoral Promotion Programs. Moreover, to avoid these increased duties altogether, all Maquiladora are scrambling to locate suppliers who can provide NAFTA originating components and materials.

Our contributing writer, Steven B. Zisser, is an attorney in the San Diego border community of Otay Mesa, where he specializes in the practice of U.S. Customs and International Trade Law. He can be reached at (619) 671-0376

Please note that due to the complex nature of the subject matter, AEI cannot be responsible for actions taken by the reader in reliance on the information contained herein without prior consultation with AEI.