On April 22, 2024, the ‘DECREE amending the Tariff of the Law on General Import and Export Taxes’ was published in the Official Gazette of the Federation.1 This decree will be valid for two years starting from its effective date on April 23, 2024.
Purpose of the Decree
The aim outlined in the Decree is to provide fair market conditions for sectors of the domestic industry facing vulnerability due to practices that disrupt and affect international trade. This is aimed at fostering the development of the domestic industry and supporting the domestic market. Among other reasons, the decree references new global trade models, such as nearshoring, to “avoid economic distortions that may affect the relocation of productive sectors considered strategic for the country, as well as the attraction of new high-value-added companies and industries.”
Furthermore, the Decree reaffirms the tariff benefit of the Sector Promotion Program (PROSEC) granted in the Decree of August 15, 2023, to certain tariff subheadings of the electrical, electronic, automotive, and auto parts industries, to promote these sectors.
Key Points of the Decree
The decree encompasses a tariff increase on 544 inputs and finished products including steel, aluminum, textiles, apparel, footwear, wood, plastic and its manufacturers, chemicals, paper and cardboard, ceramics, glass and its manufacturers, electrical materials, transportation equipment, musical instruments, and furniture, among others.
Most of these products were already subject to tariff increases ranging from 5% to 25% since August 15, 2023 (see W&C alert on the matter), thus this Decree replaces the previous one, increasing the percentage of tariffs imposed in some cases, and adding new tariff headings.
This tariff increase will be applied temporarily for two years, until April 23, 2026. It is important to note that this Decree does not affect imports under special foreign trade promotion programs, such as the IMMEX Program (Manufacturing, Maquiladora, and Export Services Industry), Sector Promotion Programs (PROSEC), and Fiscal Incentive Decrees for Border Regions, which benefit from special tariff treatments.
Continuation of PROSEC Benefits for Certain Tariff Subheadings
The Decree continues to grant benefits under the PROSEC Program as outlined in the repealed decree of August 15, 2023. Therefore, goods from the 1) electrical industry (tariff subheadings 7208.39.01, 7208.51.04, and 7211.29.99), 2) electronic industry (tariff subheading 7225.19.99), and 3) automotive and auto parts industry (tariff subheadings 7208.26.01, 7208.27.01, 7209.16.01, 7209.17.01, 7211.29.99, 7225.30.91, and 7225.40.91) may be imported under this program, enjoying its benefits, such as preferential tariff treatment, during the validity of the aforementioned Decree.
Final Comments
It is worth noting that while the Decree increases tariffs for various goods, it’s important to emphasize that these do not exceed the tariff rates bounded by Mexico2 before the World Trade Organization. Therefore, this tariff increase does not violate Mexico’s international commitments in this regard.
These tariff increases will primarily affect imports from countries with which Mexico does not have free trade agreements and which are significant exporters of these products, such as South Korea, India, and China.
The timing of this decree’s publication, preceding the expiration of the 2023 decree expected to conclude in July 2025, occurs in the context before the June 2024 Mexican electoral process. It appears to suggest that the tariff margins imposed last year were not sufficient to “protect” the domestic industry, particularly products from the steel industry such as certain types of steel wire rod, whose tariff increase rose from 25% to 50%.
Finally, it’s essential to note that some of the goods subject to the tariff increase are under investigation for antidumping, which undoubtedly could impact the conditions for analyzing potential dumping margins. These include goods from the People’s Republic of China: (i) pneumatic tires; and (ii) polyester resin (PET resin), whose tariff increases rose from 25% to 35%.
1 Available in Spanish here: https://www.dof.gob.mx/nota_detalle.php?codigo=5724207&fecha=22/04/2024#gsc.tab=0
2 Tariff binding: Commitment not to increase a rate of duty beyond an agreed level. Once a rate of duty is bound, it may not be raised without compensating the affected parties. https://www.wto.org/english/thewto_e/glossary_e/tariff_binding_e.htm
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