Issue 298, April 5, 2001
As planned, NAFTA's Article 303 took effect on January 1, 2001. Duty deferral programs in the United States, including Foreign Trade Zones, bonded warehouses for manufacturing and TIB's under Subheading 9813.00.05 have lost most of their duty exempt benefits when finished goods are exported to Mexico. Because Article 303 has been applicable on exports to Canada since 1994, the impact in the U.S. was well-planned and the rules were clear and concise.

On the other hand, duty deferral programs in Mexico, including the Mexican Maquiladora Program, are fraught with uncertainty, confusion and misinformation. Even though Mexico has had over six years to prepare, the rules and guidelines for implementing Article 303 are far from complete. In response to this lack of certainty, the Mexican Maquiladora Industry, which represents one of the largest sources of foreign investment in Mexico, have joined forces to call on both President Bush and Mexican President Fox to delay the implementation of Article 303 until Mexico's new government can establish clear and concise rules.

One illustration of the uncertainty surrounding Article 303 is the piece meal implementation of the PROSEC program. This program covers 20 different industrial sectors and was designed to reduce duties for certain HTS numbers at rates ranging from 0% to 5%. Mexican Maquiladoras are still scrambling to cover all their components and raw materials under the program. However, just last month, confidence in the program was severely damaged when the Mexican Government unilaterally decided to remove hundreds of HTS numbers previously covered under the PROSEC program. Unlike the United States, Mexican Decrees are subject to immediate modifications and revocations without any opportunity for a challenge or comment. Another example of the rampant uncertainty concerns the fact that even though duties are owed on some non-NAFTA components, there is still no system in place for paying and collecting those duties.

The outlook for Article 303 is still uncertain. Most observers in Mexico are hoping for a one to two-year delay in Article 303. However, be prepared for immediate changes in the rules and requirements.

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 or steve@zissergroup.com.

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.