Horacio López-Portillo February 24 2012 New certification scheme to boost foreign trade capabilities Vazquez Tercero & Zepeda | International Trade - Mexico Horacio López-Portillo International Trade IntroductionScope and benefits of New Certified Companies Scheme Security standardsRegistration procedureExpected benefitsCommentIntroductionThe current administration's policies on security, employment and the economy may divide opinion, but it has made welcome efforts to strengthen Mexico's competitiveness and foreign trade capabilities. A key part of this drive involves bringing the country into full compliance with its obligations to the World Trade Organisation, World Customs Organisation (WCO) and the Organisation for Economic Cooperation and Development.For instance, Mexico has created and updated regulations applicable to new customs options or procedures: the Foreign Trade Sole Portal(1) and the electronic proof of value. These are intended to provide quicker and more secure methods for Mexico's customs authorities to receive importer and exporter information, with the added benefit that they support the development of a paperless system. The Foreign Trade Sole Portal and the electronic proof of value - whether generated through the portal or by third-party vendors - will give Customs access to all documentation necessary for the verification and release of shipments, submitted electronically.Mexico recently became a member of the Wassenaar Agreement, thereby committing itself to higher standards of customs security with a view to attracting greater investment in the high technology and aerospace sectors. In order to support the move to higher customs standards, in 2011 the government began taking steps to implement a new scheme of certified companies in accordance with its WCO commitments, and particularly the SAFE Framework of Standards to Secure and Facilitate Global Trade. This implementation process was completed in January 2012.Scope and benefits of New Certified Companies Scheme The New Certified Companies Scheme (known by its Spanish acronym NEEC) is a programme overseen by Customs which aims to provide security and quality assurance in Mexican logistics chain procedures in order to mitigate the contamination risk for shipments of goods involved in international trade. The programme seeks to implement globally acknowledged minimum security standards in cooperation with businesses, thereby affording participating companies certain benefits.At present, the programme's benefits are available only to manufacturing and commercialisation companies that have conducted foreign trade operations for the past five years (or longer). These benefits relate to customs dispatch procedures, including: priority customs dispatch and verification; the provision of special services, such as the use of exclusive customs dispatch lanes and V-5 import and export summaries,(2) which were formerly available to all certified Promotion of Manufacturing, Maquiladora and Export (IMMEX) Programme companies,(3) and are now available only to NEEC IMMEX companies; customs inspections conducted by non-intrusive technologies; exclusive lanes; priority cargo services in the event of renewed activities as a result of any incident; and personalised handling by qualified professionals. The NEEC scheme takes account of the criteria indicated by the SAFE Framework and reflects consolidated programmes such as the Customs-Trade Partnership against Terrorism (C-TPAT) in the United States and the Partners in Protection scheme in Canada. The aim of achieving harmonisation across the North American Free Trade Agreement (NAFTA) is to facilitate compliance in Mexico for companies that are already familiar with the programmes in place in other NAFTA territories.Security standardsThe NEEC scheme provides for 11 security standards, which cover: a general plan for the implementation of security in the supply chain; the physical security of shipments; specific controls on physical access to shipments and storage facilities; a clear identification and selection of trading partners; process security; standardised customs processes; specific security measures for freight vehicles, trailers and other containers; specific measures for personnel security; specific measures for information and documentation security; ongoing training in security and awareness programmes; and specific processes for the management and investigation of incidents. Registration procedureRegistration as an NEEC company consists of two stages - ruling and authorisation - which the authorities must complete within nine months. However, Mexican companies that already have certifications based on similar foreign programmes, such as C-TPAT or Partners in Protection, may see this nine-month period reduced.(4)Ruling Customs will issue a favourable ruling to companies that comply with the documentary and material requirements. The stages and required information(5) in the ruling process - which takes around 100 days - are as follows: submission of an application, along with a company profile (to be provided electronically); analysis to establish full compliance of tax and customs obligations;(6) documentary and electronic analysis of the company profile;(7) onsite verification; and ruling. AuthorisationOnce the company has obtained a favourable ruling from the Central Administration for International Affairs, it may submit the ruling to the Central Administration for Customs Regulation, which conducts the authorisation process and issues the relevant determination. Obtaining NEEC status is subject to a fee (set at $2,000). Authorisation is expected to take 40 days.The authorisation process may be conducted personally or through the Foreign Trade Sole Portal system.Expected benefitsThe NEEC scheme offers a number of benefits. In particular, it is intended to: encourage mutual recognition with countries that have a similar programme, leading to reduced costs in foreign trade verification processes;(8) improve Mexico's competitiveness rating as a result of the country being perceived abroad as a promoter of responsible foreign trade; reinforce the security of international logistics chains through the implementation of minimum security standards, thereby benefiting participating companies; and strengthen ties and mutual responsibilities between business and the federal government. CommentCustoms expects the implementation of the NEEC programme to facilitate many aspects of customs dispatch, as well as strengthening its enforcement powers. The scheme should also allow stronger day-to-day relationships to develop between government and business. In providing clearer guidelines on the maintenance of benefits through continuous process improvement for participating companies, and granting incentives to reflect compliance, it is expected to make processes quicker and reduce operating costs, thus contributing to the government's goal of greater competitiveness.Whether these expectations will be fulfilled remains to be seen, although government bodies and industry associations involved in international trade have made concerted efforts. The basic operating framework was enacted through rules published in the Official Gazette on December 15 2011. Many companies with a high volume of foreign trade have expressed an interest in achieving NEEC status - their day-to-day experience and the international acknowledgment of countries with tested customs facilitation programmes will determine the success of Mexico's new initiative.However, many experts consider that the real challenge for Mexico is to facilitate foreign trade, reduce logistics costs and boost competitiveness, while providing its principal trade partners with the necessary certainty that its foreign trade procedures are truly safe. This balance will be difficult to achieve. Accordingly, there is a strong argument that the incentives of NEEC status should be greater, the process should be more open and the discretionary authority of Customs should be reduced.For further information on this topic please contact Horacio A López-Portillo at Vázquez Tercero y Asociados by telephone (+52 55 5534 36 36), fax (+52 55 5534 91 95) or email ([email protected]).Endnotes(1) Similar to the US Automated Export System.(2) Using V-5 import and export summaries - also termed pedimentos - means that the foreign resident company may sell its products that were manufactured by a NEEC IMMEX company to a domestic company that does not have a foreign trade programme without the need for the products to be returned to the foreign resident and for the domestic buyer to conduct a new import process. The benefit essentially consists of the virtual transfers of goods that benefit logistics and expedited trade.(3) In general terms, an IMMEX company is a company that is entitled to import certain goods or inputs - on a temporary basis - that will be transformed, manufactured or repaired without the payment of general import tax or value-added tax, provided that such goods are subsequently returned to a foreign country.(4) The reduction in the approval period for becoming an NEEC company is the result of Customs' informal application of C-TPAT standards to Mexican companies. These standards are not part of the relevant rules and regulations governing NEEC companies, and there is a strong argument that they should not be mandatory.(5) To be submitted to Customs' Central Administration for International Affairs.(6) Two of the specific requirements for a NEEC company are the capacity to issue electronic tax vouchers and evidence of full compliance with its tax obligations.(7) For instance, the relevant company must be able to prove that it has conducted foreign trade operations in an orderly and legal fashion for at least five years.(8) For instance, Argentina, Canada, China, Costa Rica, the European Union, Guatemala, Japan, Jordan, Korea, Malaysia, Norway, New Zealand, Singapore, Switzerland and the United States.