Effective March 19, 2009, Mexico has imposed significant tariffs on 89 U.S. agricultural and industrial products in retaliation against the U.S. cancellation of the U.S.-Mexico Cross-Border Trucking Demonstration Project, a pilot program that allowed Mexican-registered trucks to transport cargo on U.S. roads.1
Mexico’s Economy Secretariat (Secretaria de Economia) announced the tariffs in a decree published in Mexico’s Diario Oficial (the equivalent of the Federal Register) on March 18, 2009. The decree lists the covered products by their 8-digit Mexican Harmonized Tariff classification number, along with the new duty rates. Only products of U.S.-origin are subject to Mexico’s tariff retaliation. The targeted products are being assessed tariffs of 20 percent and 15 percent, except for fresh grapes, which are being subject to a tariff of 45 percent. The retaliatory tariffs became effective for entries into Mexico on or after March 19, 2009.
Affected U.S.-Origin Products
From the list of 89 products listed in the March 18 decree, 36 are agricultural products and 53 are industrial products. Some of the products affected include certain fruits (e.g., pears, apricots, cherries, and strawberries in Ch. 8), vegetables (e.g., potatoes and peas in Ch. 20), juices (Ch. 20), soups and broths (Ch. 21), wines (Ch. 22), pet food (Ch. 23), shampoo, hair lacquers, dentifrices, deodorants, and antiperspirants (Ch. 33), toilet paper (Ch. 48), yarn (Ch. 55), glassware (Ch. 70), jewelry (Ch. 71), office/desk equipment (Ch. 83), coffeemakers (Ch. 84), washing machines (Ch. 84), line phone sets (Ch. 85), sunglasses (Ch. 90), furniture (Ch. 94), and pens, markers, and pencils (Ch. 96). Attached is a listing of the products, identified by MEXHTS number, subject to the retaliatory tariffs and their corresponding new rates.
Potential Impact on U.S. Producers and Exporters
Mexico’s retaliatory tariffs are geared toward selected commodities originating in about 40 U.S. states and whose value in the Mexican market is approximately $2.4 billion a year (2007 est.). These higher Mexican tariffs will affect not only U.S. producers and exporters, but also Mexican importers, who are ultimately responsible for the payment of import duties. The retaliatory tariffs will result in more costly imports, and, thus, there is a possibility that Mexican importers may look for alternative suppliers of the targeted products outside the United States.
Mexico has not specified how long the retaliatory tariffs will remain in place; it is likely that they will remain until the current impasse over the NAFTA trucking program is resolved. If they stay in effect for some time, they can potentially slow trade flows between Mexico and the United States in the particular commodity, disrupt long-established business relationships and hurt U.S. producers, exporters and workers alike.
U.S. Trade Groups Response
Various trade groups, including the American Association of Exporters and Importers (AAEI), the National Foreign Trade Council (NFTC), the U.S. Chamber of Commerce and the American Farm Bureau Federation, are urging the Obama administration to negotiate an acceptable compromise with Mexico to suspend the higher tariffs on U.S.-origin products, and comply with U.S. obligations under NAFTA. In response to these calls, White House sources have indicated that the new administration will work with members of Congress to devise a new cross-border trucking program that addresses congressional concerns and U.S. commitments under NAFTA.
How We Can Assist
We recommend that companies in the agricultural and industrial sectors that are exporting such U.S.-origin products from the United States into Mexico, or importing these U.S.-origin products into Mexico, or have operations using such products in Mexico, carefully review the coverage of Mexico’s retaliatory tariff decree. We also encourage companies whose products are listed in the decree to conduct a comprehensive classification review of their products to: (1) ascertain their products’ correct tariff classification under the Mexican tariff nomenclature (MEXHTS)2 and (2) confirm if in fact their products are covered by the new retaliatory tariffs.