Amendments regarding import and export permits for hydrocarbons and petroleum products

Following our client alert published on November 17, 2020,¹ it is informed that the Resolution that establishes the products whose import and exports is subject to regulation by the Ministry of Energy (the "Resolution") was published on December 26, 2020 and entered into effect on the 28th of the same month and year.

As reported by White & Case, on December 1, 2020, the Ministry of Economy ("SE") and the Ministry of Energy ("SENER") published before the National Commission of Regulatory Improvement the preliminary draft of the Resolution, in order to consolidate, update and modify the current regulations regarding import and export permits for hydrocarbons, petroleum products and certain materials, equipment and nuclear fuels, which are the responsibility of SENER and the National Nuclear Safety and Safeguards Commission.

The preliminary draft of the Resolution was the subject of a significant number of comments from private individuals and entities, and an opinion by the Federal Economic Competition Commission ("COFECE") was issued in the sense that "it would seriously affect the conditions of competition in the market for the commercialization of petroleum products", in the event that the preliminary draft of the Resolution is published in its terms.²

In this regard, on December 26, 2020, the SE and SENER published the Resolution in the Federal Official Gazette ("DOF").³ It is important to note that the Resolution published in the DOF has certain changes with respect to the preliminary draft particularly in the requirements to obtain the import and export permits.

From the Resolution, we highlight the following points regarding import and export permits for petroleum products and hydrocarbons:

1. It contains the tariff classification of the hydrocarbons that will be subject to obtaining an import and export previous permits, among which are:
   1. for import: heavy, medium and light crude oil, gasoline, diesel oil, fuel oil (combustóleo), jet fuel, kerosene, propane, ethylene, among others.
   2. for export: heavy, medium and light crude oil, gasoline, diesel oil, fuel oil (combustóleo), jet fuel, kerosene, propane, ethylene and natural gas, among others.
2. It establishes the procedure to request import and/or export permits for petroleum products and hydrocarbons before the Mexican Digital Foreign Trade Window, a procedure that must be solved within a period of 12 business days. It is worth mentioning that if the aforementioned term has elapsed and there is no notification of the resolution by SENER, it will be understood that the permit has been denied. Note that the procedure in force prior to the Resolution coming into effect considered the requested permit as granted.
3. It should be noted that the Resolution only contemplates permits with one and five-year terms; that is to say, permits with longer terms are no longer contemplated. The regulations in force prior to the Resolution established the possibility of requesting and obtaining permits up to 20 years.
4. Among the requirements for the granting of permits with a term of one year are highlighted as follows:
   1. for import permits: (i) a marketing and/or transport permit for the products to be imported, either from the petitioner or a third party, in which case the commercial relationship with that third party must be evidenced; (ii) a freely drafted written communication that states under oath the compliance with the administrative, tax and customs obligations of petitioner; (iii) a monthly projection of the cost of admission and the volume of the products that are intended to be imported during the term of the corresponding permit; and (iv) in the event that the importer is the permit holder of the marketing and/or distribution permits to sell fuels to service stations or end users in Mexico, evidence of the compliance with the current Public Policy for Minimum Storage of Petroleum Products.
   2. for export permits: (i) a transport and/or distribution permit for the products to be exported; (ii) a freely drafted written communication that states under oath the compliance with the administrative, tax and customs obligations of petitioner; (iii) a monthly projection of the cost of admission and the volume of the commodities that is intended to be exported during the term of the corresponding permit and it shall be demonstrated that the intended export will not impact the supply in national territory; and (iv) in the event of natural gas exports, description of the logistics of the pipelines that will be used to transport the product.
5. For the obtainment of permits with a five-year term, in addition to the requirements to obtain one-year term permits mentioned above, the following is required: (a) contractual commitments with a term of at least five years and (b) demonstrate, either, that (i) it has storage and/or transportation infrastructure or (ii) it is developing new infrastructure or (iii) it is expanding its existing infrastructure, by submitting proof of that, and the permit for the corresponding activity.
6. The permits with a one-year term may be extended up to two times for the original term, and the permits with a five-year term may be extended once for the same term.
7. The permits with a term of one year will expire if the permitted activities are not carried out for more than 30 consecutive days, and permits with a term of five years will expire if their holders do not exercise the rights foreseen in said permits or they do not fulfill their purpose during 365 consecutive days, without justified cause, which must be made known to SENER.⁴
8. SENER could adjust the authorized volumes of import or export of hydrocarbons and petroleum products in the event that the applicant does not justify such volume.
9. The Resolution expressly provides as causes for revocation of the Permits, among others: (i) undue performance of the activity granted in the permit; for example, the breach of administrative, tax or customs obligations by the permit holder; (ii) the modifications in the original conditions of the Permit if the permit holder does not inform such modifications to SENER, including, but not limited to, modifications to the bylaws and shareholder composition of the permit holder; and (iii) any breach without justified cause to the applicable energy laws, which threatens energy security and sovereignty (the Resolution does not expressly refer to what should be understood by these concepts).
10. Finally, the Resolution establishes that permit holders must present a monthly report on the permitted activity in accordance with the formats that will be published on SENER's website.

The transitory articles of the Resolution establish that: (i) the export and/or import permits issued by SENER prior to the effective date of the Resolution will remain in force in the terms that were issued, provided that the description of the products indicated in the permit coincided with the products presented to customs authority; and (ii) the request to obtain import or export permits initiated prior to the Resolution coming into effect will be substantiated with the provisions in force at the time of its application.

Those importers or exporters that are affected by the issuance of the Resolution could obtain legal advice for taking the appropriate legal actions.

_{1 To consult the client alert, please refer to the following link: https://www.whitecase.com/sites/default/files/2020-12/preliminary-draft-of-the-resolution-that-amends-the-requirements-and-procedure-to-obtain-permits-spanish.pdf
2 The opinion of COFECE is available at: https://resoluciones.cofece.mx/CFCResoluciones/docs/Opiniones/V170/3/5344481.pdf
3 Available at: http://www.dof.gob.mx/nota_detalle.php?codigo=5608832&fecha=26/12/2020
4 Please note that Article 57 of the Resolution also refers to permits granted with a twenty-years term.}

Click here to download 'Amendments regarding import and export permits for hydrocarbons and petroleum products' PDF in Spanish.

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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