Recent Developments

On September 8, 2013, the head of the Ministry of Finance and Public Credit, Luis Videgaray Caso, submitted to the House of Representatives of the Mexican Congress the 2014 Economic Package and a substantial tax and social security reform, proposed by President Enrique Peña Nieto.

As part of the tax reform, the initiative will seek to amend, among others, the Customs Law, Value Added Tax Law (VAT Law), and the Special Tax on Production and Services Law (IEPS Law), which will have implications for those performing foreign trade and customs transactions.

Below is a summary of the key points proposed to modify the Customs Law, the VAT Law and the IEPS Law that are related to foreign trade and customs issues.

  1. Changes in Custom Law included in the initiative:

Objectives:

  1. Facilitate and simplify customs procedures.
  2. Provide legal certainty in foreign trade matters.
  3. Use technological advancements and promote competition between various service providers.
  4. Provide tools and mechanisms that seek efficiency in customs control.
     

Proposed changes:

Clearance of goods

  • Possibility to carry out custom clearance of goods in other than the authorized places, prior approval from the custom authority by reasons of efficiency and facilitation of the custom clearance.
  • Optional use of Custom Broker.
  • Elimination of the "In-House Broker" by creating the "Custom Representative".
  • Clear rules regarding the rights and duties of the Custom Brokers, as well as the requirements for obtaining a Custom Broker License.
  • Elimination of the substitute Custom Broker.

Railway transportation

  • Railway transportation is incorporated as an alternative to transport goods for import and export purposes.
  • Allows the temporary importation of locomotives and specialized equipment to remain in Mexico for 10 years.

Strategic bonded warehouse

  • Authorization of strategic bonded warehouses throughout the country without taking into consideration their proximity to a Customs House.
  • Introduce into the strategic bonded warehouse regime goods under customs deposit without processing a pedimento.

Electronic validation data

  • Opens up the possibility for individuals or corporations to secure authorization to provide electronic validation data services, in addition to the already authorized Custom Brokers Confederation and Business Associations.

Custom Electronic System

  • Establishes the implementation of the Customs Electronic System.
  • The importation and exportation of goods would be processed through the electronic filing of pedimentos.
  • The importers or exporters must file an electronic document regarding the value of the goods, different from the invoice. This electronic document must include information related to the product's commercialization.

Customs inspection, risk analysis and non-intrusive inspection

  • Unique customs inspection (The inspection activities of the SAT and the persons authorized by the SAT to conduct inspections is merged into a single figure).
  • Custom inspection will be carried out through the use of non-intrusive technology.

Taxpayers  rights

  • Rectification of pedimento, before and after the activation of the automated inspection mechanism, with respect to all pedimento fields, except for those requiring authorization in terms of the foreign trade rules.
  • Change of customs regime of goods without the need of authorization from the custom authority.
  • Spontaneous regularization of temporarily imported goods without paying fines.
  • 50% discount in payment of formal fines, if paid before the resolution is notified.

Conditions to remain in Mexico

  • Unification of definitions set forth in Customs Law and Immigration Law regarding the different grades of foreigners or Mexicans abroad.

Cooperation with custom authorities of other countries

  • It establishes the authority for custom authorities to electronically coordinate and request information to custom authorities in other countries to prevent actions damaging the national production and the Federal Treasury.
  1. Changes to the VAT Law for customs issues:

Objectives:

  1. Facilitate tax collection.
  2. Eliminate preferential treatment.
  3. Provide greater benefits to the most vulnerable social groups.

Proposed changes:

Elimination of border region treatment

  • Pay 16% VAT rates on imports into the border zone, as taxed within the rest of the country.

Elimination of exemptions

  • Payment of VAT upon importation of goods under the temporary importation regime: IMMEX, OEMS, fiscal deposit and strategic bonded warehouse.
  • Payment of VAT on the sale of goods between foreign companies, and on the sale between a foreign company and an IMMEX company or OEM, for temporary importation goods or for goods introduced into fiscal deposit.

Elimination of withholding of maquiladoras to national suppliers

  • Elimination of the obligation of IMMEX companies to withhold the VAT from national suppliers on the purchase of national goods.
  1. Changes to the IEPS Law related to custom issues:

Objectives:

  1. Facilitate tax collection.
  2. Eliminate preferential treatment.
  3. Provide greater benefits to the most vulnerable social groups.

Proposed changes:

  • Payment of IEPS upon importation of goods, including temporary imports.
  • Payment of IEPS for goods imported duty free by foreign governments with which the Mexican Government has diplomatic relations, authorized foreign ambassadors in the country, and foreign members of the diplomatic and consular staff, except those made by passengers and diplomatic missions authorized in Mexico, are exempted from payment of IEPS.

Conclusion

This initiative will be analyzed and discussed in the coming days, representatives are expected to discuss and vote the proposed reforms before November 15 of this year.