Issue 270, September 6, 2000
The Mexican Maquiladora industry has enjoyed the benefits of duty deferral status for all materials, components, supplies, equipment and machinery, irrespective of their origin, for over 30 years. However, on November 1, 2000, the industry is preparing itself for the loss of that status. All non-NAFTA originating materials and components (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 13% to 30%, or the Preferential Duty Rate, which can range from 0% to 5%.

To limit the potentially devastating impact of these new rules, the Mexican government has introduced the Sectoral Promotion Program. Presently, this program covers 10 different industrial sectors, including Electric, Electronic, Furniture, Toys and Recreation, Foot Wear, Mining and Metallurgic, Capital Assets, Photographic, Agriculture Machinery and Varied Industries. The Mexican government is still working on sectoral programs covering the automotive, apparel and plastic industries.

Over the past few months, those Mexican Maquiladoras covered by one of the ten industrial sectors have petitioned the Mexican Government to include their materials, components and machinery in the program. The corresponding Harmonized Tariff Schedule (HTS) number is used to identify each item. Only those HTS numbers listed in each program are eligible for the preferential duty rate, which in most cases is 0%. HTS numbers not listed are not eligible. We recommend that all Maquiladoras carefully review their Bill of Materials (BOMs) with each item classified by its HTS number, to ensure that all non-NAFTA originating materials and components are listed in their respective sectoral program. Items not listed will be subject to full duty, if the finished goods are exported to the United States or Canada. Mexico will continue to accept petitions to list additional HTS numbers, which will be particularly helpful when new BOMs are added or existing BOMs are changed.

To participate in one of the Sectoral Promotion programs, each Maquiladora must file an application with the Mexican Government. Applications for participation should be filed as soon as possible, and certainly well before November 1, 2000. The application is designed to establish a Maquiladora's eligibility for one of the ten sectoral programs.

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 if you have questions on the content of this article.

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