Mexico WT/TPR/S/29
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III. TRADE POLICIES BYMEASURE
(1) Overview
1. Overthelastfouryears, Mexico 'straderegime hasbeensubject todivergent influences. The
main thrust ofliberalization oftheeconomy hascome within theframework ofNAFTA andother
freetrade agreements; however, unilateral action ledtothem.f.n. liberalization ofover1,000 items
toduty-free levels. Insome areas, theNAFTA hasspearheaded important improvements thathave
alsobenefited thirdcountries, forexample, through thestreamlining ofMexico 'scustoms operations
andthemodernization andstricter enforcement ofintellectual property laws. Ontheother hand,
variations intreatment between NAFTA andother partners haveemerged inareas suchascustoms
valuation. Since thelastTrade Policy Review, therehasbeenincreased useofcontingency measures,
mostly anti-dumping, andhighm.f.n. tariffs havealsobeenapplied insome important sectors, using
theflexibility available under ceiling bindings.
2. Asaresult oftheUruguay Round, Mexico reduced itsceiling bindings rateformanufactures
from ageneral rateof50percentto35percent. Mexico 'sUruguay Round commitments hadlittle
effect ontheapplied simple average MFN tariff of13.6percentin1997, although tariffication in
agriculture created several tariffpeaks, andincreased tariffdispersion andthenumber ofapplied rates.
Unilateral action ledtoMFN dutyincreases oncertain goods (e.g.beef, clothing andfootwear) and
MFN dutyreductions onmachinery andinputs notproduced inMexico. ViathenewLawonMetrology
andStandardization, enacted in1992, there hasalsobeenasignificant increase inthenumber of
mandatory standards inMexico, anddiscussions havebeenheldwithin theNAFTA about thepossible
protectionist effects ofmarking andlabelling.
3. Certain aspects ofWTO Agreements havenotyetbeenincorporated inMexican legislation.
Although theauthorities haveemphasized that,fromalegalpointofview, thiscreates noinconsistencies
because international treaties havetheforce ofdomestic law,incorporation ofallWTO rules inthe
domestic statutes would increase thetransparency ofMexico 'slegislation andprovide agreater degree
oflegalsecurity foreconomic operators. Thiswould beparticularly important withrespect tolegislation
oncontingency measures, asMexico operates oneoftheworld 'smostactive trade defence systems.
Thegrowing useofsuchmeasures haspartly offset theliberalization undertaken since themid-1980s;
theymight alsoundermine thecompetitiveness ofMexican exports, ascontingency measures haveoften
affected primary andintermediate goods. Mexico hasnotsigned theWTO Agreement onGovernment
Procurement, andrestricts participation innational public tenders tonational suppliers anddomestic
goods. Mexico alsomaintains aprogramme infavour oftheautomotive industry thathasbeennotified
undertheprovisionsoftheWTOAgreementonTrade-RelatedInvestmentMeasures(TRIMs).Mexico's
NAFTApartnerswillbenefitfromtheliberalizationofbothpublicprocurementandinvestmentmeasures;
however, suchbenefits arenotextended toother trading partners.
4. Inparttooffset theanti-export biasresulting from trade measures affecting imports andan
overvalued exchange ratepriortothe1994financial crisis, Mexico hasadopted anumber ofmeasures
tosupport exports. These include various official credit programmes andtariffconcession programmes,
whose budgetary andeconomic impacts donotappear tohavebeenfullyquantified, despite theimportant
roletheyseem tohaveplayed intheexpansion ofMexico 'sexports during recent years. Under the
NAFTA, Mexico willmodify several ofthese programmes, including themaquiladora regime, but
assistance under theprogrammes maycontinue tobegranted toexports tonon-NAFTA countries.WT/TPR/S/29 Trade Policy Review
Page 38
5. Theentry intoforce ofanew competition lawin1993 andthesubsequent establishment of
theFederal Competition Commission were important steps complementing Mexico 'sprivatization
programmes; theirfurther development could helptoensure thatthehighmarket concentration observed
incertain activities doesnotimpair thethrust toachieve greater economic efficiency.
(2) Measures Directly Affecting Imports
(i) Registration anddocumentation
6. Thestreamlining ofcustoms operations hascontinued since 1993, andincluded thefurther
computerization ofoperations, greater useoftherandom merchandise verification system and
precautionary seizures when irregularities appear toexist. Increased transparency inthecustoms system,
greater clarity onimporters 'responsibilities andgreater flexibility fordutypayments wasexpected
toresult fromthenewCustoms Lawthatcame intoforce in1996(Chapter II(2)). Significant changes
werealsomade totheregimes permitting theproduction, transformation orrepair ofproducts infiscal
areas. Exports through maritime customs offices maybeverified within suchareas. Thefunctions
ofcustoms agents andbrokers havebecome more precisely defined, andformal recognition hasbeen
given tothesimilar roles theyplay.
7. TheCustoms Lawrequires importers toberegistered intheRegister ofImporters, created
forstatistical andenforcement purposes. Thespecific registration requirements aresetoutinthe
regulationstotheCustomsLaw.Theregulationsalsorequireimporterstoberegisteredinsector-specific
registers toimport products suchaspork, poultry, eggs, fatsandoils,beer, rubber, pencils, footwear,
winesandliquors,tobaccoproducts,textiles,diapers,ironandsteelproductsfortheautomotiveindustry,
bicycles andtoys. Theauthorities pointed outthattheestablishment ofsuchsectoral registers was
requested bythechambers ofindustry andcommerce.
8. Importers mustpresent: (i)animport declaration accompanied byadeclaration ofshipment;
(ii)forimports exceeding US$1,000, acommercial invoice inSpanish, English orFrench, oran
accompanying Spanish translation; and(iii),ifapplicable, priorimport permits ordocuments showing
theorigin ofthemerchandise. Allimports mustbehandled bycustoms brokers. Customs feesand
other charges aredescribed insection (vi)below.
9. Mexico'scustomssystemmakesuseof"customsadvisors"(specialistsauthorizedbytheMinister
ofFinance)toassistwiththeverificationofmerchandiseselectedthroughtherandomverificationsystem,
orforwhich particular problems havebeenidentified. Thisprogramme wasstarted inlate1993 and
nowoperates atanational level. Representatives ofindustries andchambers ofcommerce playan
indirect roleintheverification ofgoods forcustoms purposes byparticipating inthetraining ofcustoms
agents. TheMinistry ofFinance mayauthorize private firms toprovide handling, warehousing and
custody services forimported andexported merchandise, aswellasdataprocessing andother services.
10. Asacomplement tothestreamlining ofcustoms procedures, various federal ministries and
levels ofgovernment areundertaking jointefforts toimprove thephysical infrastructure atinternational
crossing points. Theproblem ofoldinfrastructure isparticularly marked inthesouthern border and
theFederal Government isgiving itspecial attention; inthatregion, therandom selection process
usedelsewhereforcustomsrevisionshasbeenrecentlyadopted,resultinginwhattheauthoritiesconsider
tobesignificant efficiency gains, several bridges havebeenbuilttofacilitate thetransit ofgoods at
thenorthern andsouthern borders. TheGovernment isalsocontinuing itsefforts tostamp out
contraband; acommittee wasestablished inMarch 1995 within theNational Programme toFightMexico WT/TPR/S/29
Page 39
Contraband, which seeks tostrengthen cooperation among Mexican agencies engaged infighting
contraband.
11. IsolatedproblemshavebeenclaimedtoaffectcertainaspectsofMexico'scustomsadministration,
butsignificant improvements havealsobeennoted concerning customs transparency andefficiency,
withtraders andMexican customs brokers reportedly agreeing thatcustoms procedures haveimproved
dramatically inrecent years.1Moreover, many problems would appear tohavebeenaddressed by
Mexico 'snewcustoms legislation.
(ii) Customs valuation andinspection
12. AspartoftheSingle Undertaking oftheUruguay Round, Mexico became automatically bound
bytheAgreementonImplementationofArticleVIIoftheGATT1994(CustomsValuationAgreement).2
Although,Mexicoinvokedvariousprovisionsavailabletodevelopingcountriesforthedelayedapplication
of,andreservations under theAgreement, theauthorities noted thattheMexican legislation isalready
inlinewiththeAgreement.3Thereplies supplied byMexico tothechecklist oncustoms valuation
were circulated toWTO members inFebruary 1995.4
13. Mexican legislation doesnotinclude certain interpretative notes totheCustoms Valuation
Agreement (notes toArticle 8.1(b)(ii)). Inthisregard, theMexican authorities havepointed outthat,
although some oftheprovisions oftheAgreement havenotbeenincorporated intotheCustoms Law,
under theMexican legalsystem anyinternational treaty signed inaccordance withtheprovisions of
theMexican Constitution hasthesame legalforce asafederal law(Chapter II(2)).
14. Mexican legislation defines thetransaction value asthepricepaidforthegoods, provided that,
interalia,thegoods aresoldtotheimporter (rather thanbuyer asindicated intheCustoms Valuation
Agreement); forpurposes ofthedetermination ofthetransaction value, theimporter isconsidered to
bethebuyer oftheimported goods, thusexcluding brokers, agents orthecarriers. When thecustoms
value cannot bedetermined onthebasis ofthetransaction value, thefollowing methods areapplied,
inpriority order: transaction value ofidentical goods, transaction value ofsimilar goods, unitprice,
constructed value, ortheprevious methods withadded flexibility; theorder ofthethirdandfourth
methods maybereversed attherequest oftheimporter. Duties fortheimportation ofusedgoods
arebased onthetransaction value.
1USTR (1995) and(1996).
2Mexico wasalsoasignatory totheTokyo Round Agreement onCustoms Valuation.
3ProvisionsoftheCustomsValuationAgreemen tinvokedbyMexicorelatedtoArticle20.2(delayedapplication
ofthecomputed value method); Annex III,paragraph 3(reservation concerning reversal ofsequential order
ofArticles 5and6);Annex III,paragraph 4(reservation concerning application ofArticle 5.2whether ornot
theimporter sorequests). Pursuant totheprovisions oftheProtocol totheCustoms Valuation Agreement, the
Mexican Government reserved therighttodelay implementation ofArticles 4and6oftheAgreement foraperiod
ofthree years from 1January 1995.
4WTO document VAL/1/Add.25/Suppl.3, 20May 1994.WT/TPR/S/29 Trade Policy Review
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15. In1994, Mexico introduced anewsystem tocombat customs under-invoicing; thisrequires
thedeposit ofguarantees, andinvolves theuseofestimated prices when there isnoevidence thatthe
declared price isavalid arm's-length commercial transaction. Estimated prices havebeenpublished
intheOfficial Journal forproducts suchaselectronics, textiles, apparel andshoes. TheMinistry of
Finance canreview anddetermine customs values using thevaluation methods setoutintheCustoms
Lawwhen theimporter doesnotcomply withestablished regulations. Such revisions havetypically
involved under-valued goods; theMinistry conducts these revisions aftergoods havegonethrough
customs clearance toavoid creating bottlenecks. Theconditions under which appeals arepossible are
governed bytheFiscal Code oftheFederation.
16. On1January 1994, thevaluation basis waschanged from anf.o.b. toac.i.f. method, with
theexception ofimports considered as"originating" under theNAFTA rules oforigin (section (iii)
below). Thischange wasthesubject ofdiscussions atanumber ofmeetings oftheWTO Committee
onCustoms Valuation andformal consultations under theWTO dispute settlement mechanism were
heldin1996 (Table AII.2); during discussions, itwasargued that,interalia,theapplication ofthe
c.i.f. method increased thedutylevied onproducts sourced outside theNAFTA region compared to
thesame products sourced within theregion.
17. Theconcept of"prior inspection" hasbeenincluded intheCustoms Lawtogrant theparty
completing theimport documentation theright torequest theinspection ofthemerchandise before
customsclearanceincaseswhenthecharacteristicsofsuchmerchandisehavenotbeenclearlydetermined.
Theauthorities noted thatthisdidnotconstitute acompulsory preshipment inspection requirement.
(iii) Rules oforigin
18. Forimports benefiting frompreferential entryfromLatin American countries, including Chile,
therules oforigin applied byMexico arethose established byLAIA orthose specified inMexico 's
free-trade agreements withCosta RicaandBolivia, aswellastheGroup ofThree agreements with
Colombia andVenezuela. NAFTA rulesoforigin apply toimports fromCanada ortheUnited States.
Preferential imports mustbeaccompanied byacertificate oforigin issued bytheexporting country,
according totheLAIA orother agreed regional formats. Theorigin ofgoods maybecertified through
different methods. TheNAFTA, andMexico 'sfree-trade agreement withCosta Ricaprovide forself-
certification,wherebytheexporterofthegoodcompletesthecertificateoforiginwithouttheinvolvement
oftheauthorities. Bolivia requires theexporter tocomplete thecertificate oforigin, andthenrequest
thecompetent authorities tocertify it.Other agreements, mainly those intheLAIA framework, require
theexporter orproducer ofthegood tocomplete aquestionnaire which serves asthebasis forthe
authorities tocomplete acertificate oforigin.
19. Rules oforigin under NAFTA classify goods as"originating" iftheyarewholly obtained or
produced intheNAFTA countries, produced entirely intheterritory ofNAFTA countries exclusively
from originating materials, orproduced from non-originating materials which undergo achange of
tariffclassification intheNAFTA region andcomply withotherrequirements. Aregional value content
(RVC) testisusedtodetermine origin inthecaseofgoods produced entirely intheterritory ofthe
NAFTA countries fromnon-originating parts, orifthepartsusedintheproduction ofthefinalgood
areclassified under thesame tariff heading orsub-heading asthefinished good; insome cases, a
combination ofatariff change andanRVC testmaybeused. TheNAFTA alsoprovides forspecific
rules oforigin fortextiles andclothing, tobereviewed in1998, andforautomotive vehicles
(Chapter IV(4)). NAFTA rulesoforigin contain provisions relating to"accumulation", giving various
producers thechoice ofpooling theirproduction withthatoftheirNAFTA suppliers fororigin purposes.Mexico WT/TPR/S/29
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20. Mexico doesnotgenerally apply specific rules oforigin toimports from m.f.n. sources.
However, special origin certification requirements were introduced inSeptember 1994 forproducts
identical orsimilar tothose subject tocountervailing oranti-dumping duties. These rulesweredesigned
toguard against theevasion ofsuchduties (mostly byproducts fromthePeoples 'sRepublic ofChina),
including bytranshipment viathirdcountries. Therulesapply toproducts fromcountries notsubject
tothedumping orcountervailing orders. Thesamerequirements apply toallproducts imported under
MFN treatment, including from countries withwhich Mexico hasfree-trade agreements, butnotto
preferential imports complying withtherelevant preferential rulesoforigin. Thespecial certificates
oforigin mustbecompleted according tothelegislation ofthecountry exporting theproduct. Ifthe
certificate oforigin doesnotcomply withsuchrequirements, theanti-dumping orcountervailing duties
inforce areapplied. Fortextiles, clothing andfootwear, thecertificate oforigin mustcomply with
thelegislation ofthecountry where thelastmajor production process tookplace, andfollow specific
instructions. Forcountries notmembers oftheWTO, anadditional requirement isthatcertificates
oforigin mustbeverified byanapproved private inspection company; Bureau Veritas ,theSociété
Générale deSurveillance (SGS) andtheInspectorate havebeenauthorized bySECOFI forthispurpose.
21. SomeWTOMembershaveexpressedconcernthatthesespecificorigincertificationrequirements
impose excessive informational demands ontraders, andcould impede thenormal flowofexports from
thirdcountries. TheMexican authorities noted thattherules wereapplicable onlytoitems identical
orsimilar tothosesubject toanti-dumping orcountervailing duties andaffected bymassive dutyevasion;
togivemore timetoitstrading partners toadapt tothenewrules, Mexico allowed importers afour-
month grace period tocomply withtherules.
(iv) Tariffs
22. Revenues fromimport taxes peaked in1992when theyreached theequivalent of1.1percent
ofGDP; thatproportion hassince fallen, to1.0and0.9percentin1993 and1994, andtoonly
0.6percentin1995and1996. In1993, import taxrevenues attained anabsolute value ofalmost 12.7
billion pesos, or6.5percentoftotalfederal budget revenue; thatproportion fellto4.0percentin
1995 and1996. Thisdecline reflects thephasing inoftariff preferences under theNAFTA andthe
other fourfree-trade agreements inforce, aswellas,thereduction ineconomic activity andimport
values in1995.
23. Theauthority tomodify tariffs, considered tobeimport taxes, isdelegated byCongress to
thePresident oftheRepublic under theForeign Trade Actof1993. TheActalsoestablishes theForeign
Trade Commission, which isresponsible forsubmitting recommendations ontariffratestothePresident
throughSECOFI;tariffchangesareissuedthroughPresidentialdecreespublishedintheOfficialJournal.
24. Mexico grants atleastMFN treatment toallcountries, whether WTO Members ornot.
(a) Tariff structure
25. Thestructure oftheMexican tariff schedule hasundergone several modifications since 1993.
Thishasresulted from unilateral tariff changes, thetariffication scheme agreed aspartofMexico 's
Uruguay Round engagements, andtheexistence ofdifferent preferential tariffschedules under Mexico 's
free-trade agreements. Overtime, theprocess ofliberalization envisaged under those agreements will
simplify thetariffsystem applied tomostimports, butnottoMFN trade, asduty-free treatment expands;
thisprocess hasalready reduced significantly theaverage MFN tariff onatrade-weighted basis, but
notthesimple average (seebelow).WT/TPR/S/29 Trade Policy Review
Page 42
26. Mexico'simporttariffstructureisbasedontheHarmonizedCommodityDescriptionandCoding
System (HS). There were 11,177 linesincluded intheMFN tariff schedule inforce inMexico in
January 1997;5there were 11,828 linesin1992. Tariffs areadvalorem ,withtheexception often
items subject tospecific ratesand45items subject tocompound rates. Specific ratesapply tosugars,
cocoa withsugar, andsyrups; estimated advalorem equivalent ratesrange from 10percenttojust
over120percent.6Compound ratesapply mostly tofoodproducts andbeverages. Theadvalorem
component ofsuchratesvaries between zeroand20percent,buttheadvalorem equivalent estimated
forthespecific component wasconsiderably higher inseveral cases. Considering bothcomponents
together, thehighest advalorem equivalent rateswereestimated forrefined sugars andmolasses (up
toalmost 300percent), andwaters andethyl alcohol (around 100percent).
27. Thesimple average applied MFN tariff, including theadvalorem equivalents ofspecific and
compound rates, was13.6percentin1997; excluding specific linesandthespecific ratecomponent
ofcompound rates, theaverage tariff was13.2percent. Those averages weresimilar totheaverage
MFN tariff in1992. Tariff dispersion, asmeasured bythestandard deviation, wasestimated at14.6
percentage points including advalorem equivalents; excluding specific lines andspecific rate
components, thestandard deviation was12.7percentage points. Thisrepresents asubstantial widening
oftariff dispersion relative tothesituation in1992, when thestandard deviation was4.5percentage
points. Thisbroad distribution isillustrated inChart III.I. In1992, applied tariffs ranged fromzero
to20percent, withfiveratesapplicable; in1997, tariffs onindustrial goods ranged upto35per
cent, witheight separate rates. Theinclusion ofagricultural tariffication made amaximum of260
percentwith23different ratesapplied.
28. Themostcommon tariffratewas10percent,applied to38percentoftarifflines(49percent
in1992), followed bythe15percentrateapplied tosome 26percentofalllines. Duty-free entry
wasgranted to13.9percentofalltariff linesin1997, asubstantial increase onthe1992 figure of
2.4percent. Thenumber oftariff peaks inearly 1997 wassubstantially larger thanin1992, largely
theresult ofthetariffication process foragricultural products. Product groups withrelatively high
average tariffs in1997 were (HScodes inparentheses): meat (02), dairy products (04), tobacco
products (24), clothing (61-62), andfootwear (64); those withrelatively lowaverage tariff include
oilseeds (12), organic chemicals (29), fertilizers (31), andpulpofwood (47).
29. Change since1993tothetariffstructure haveblurred Mexico 'spreviously cleartariffescalation
pattern: in1997, theaverage advalorem dutyapplied toprimary products washigher thanfor
semi-processed products (Table III.1). Thisispartly because oftheelimination ofdutyoncertain
machinery andequipment notproduced inMexico aswellastheintroduction ofin-quotas duty-free
treatment onsome tariffied products. Tariff escalation isnowparticularly marked inbasic metal
industries andintextiles, clothing andleather, withtheaverage tariff onfinished products inthese
industries being atleast2.5times higher thanthetariffonrawmaterials (Chart III.2). Tariff escalation
mayalsobeobserved inwood products andinpaper products. Ontheother hand, infood, beverages
andtobacco, theaverage dutyonsemi-manufactured products washigher thanonfinished products.
5Thisexcludes items marked asprohibited (17tariff lines), anditems inHSChapter 98,which identifies
goodsimportedunderspecialoperations(66lines).EstimatesinthissectionwerecomputedbytheWTOSecretariat
based ontariff dataprovided bytheauthorities.
6These estimates areonlyindicative because advalorem equivalent rates varyovertimeasthec.i.f. value
ofimports changes, which inturnreflects fluctuations incosts andworld prices.Mexico WT/TPR/S/29
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Mexico WT/TPR/S/29
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31. Theauthorities indicated thatincreases inapplied tariffs areusedtocounteract difficulties faced
bydomestic producers (e.g.oflivebovine animals, bovine meat, footwear andtextiles). Theauthorities
stressed thatsuchincreases havetaken place within themargins permitted byMexico 'sWTO bindings,
andstatedthatsafeguardmeasurespersewouldbetakenonlywhentherequiredtariffincreasesexceeded
suchbindings (seealsosection (xvi)below).
32. Mexico applies preferential tariff ratesonproducts imported from Bolivia, Costa Rica, and
Colombia andVenezuela under theterms ofitsfree-trade agreements withthose countries andunder
theEconomic Complementation Agreement withChile. More significant inpractice isthesimilar
process affecting imports from Canada andtheUnited States under theNAFTA (section (f)below);
by1January 1996theaverage Mexican tariff onproducts imported fromtheUnited States hadfallen
to4.2percent,from13percentpriortotheNAFTA,whiletheaverageU.S.tariffonMexicanproducts
hadfallen to0.65percentfrom 2.07percent.7
(b) Tariff bindings
33. Aspartofitsaccession toGATT in1986, Mexico bound itsentire tariffschedule atamaximum
50percentadvalorem .Mexico preserved theoption, never used, toapply asurcharge untiltheend
of1994, andincertain cases import quotas andlicences weresetforimports under bound rates. In
theUruguay Round, Mexico agreed toreduce bound ratesfromthegeneral baserateof50to35percent
advalorem fornon-agricultural products, withcertain exceptions. Asshown inTable III.2, those
exceptions affect arelatively widerange ofmanufactured products, with50percentthehighest bound
rate. Because oftariffication, anumber ofagricultural products aresubject tomuch higher bound
rates. Inseveral cases suchbindings taketheformofmixed ratesexpressed interms ofbothadvalorem
andspecific rates; inthose cases, theratesshown inTable III.2areonlyindicative oflikely minimum
bound rates.
34. Bound ratesarebeing reduced inequal annual stages between 1995and2004. Additional duties
above thebound tariff level maybeimposed under theSpecial Safeguard Provisions oftheWTO
AgreementonAgriculture(section(xvi)below).SinceDecember1995,Mexico'sbindingcommitments
havebeensuccessively waived toallow the1996changes totheHarmonized System tobeintroduced
intoitsWTO Schedule; inMay1997, thewaiver wasextended until31October 1997.8
35. Themajority oftariff linesarebound atceiling rates, i.e.bound ratesarehigher thanapplied
MFN rates. After 1986thegapbetween applied andbound ratesincreased asaresult oftheunilateral
liberalization undertaken byMexico. More recently, thereductions negotiated aspartoftheUruguay
Round should lessen thepossible variance ofapplied rates, giving greater certainty fortraders and
investors, although thecurrent levelofbound ratesisstillwellabove applied MFN rates. Further
reductions would beconsistent withMexico 'sintention toestablish adefacto maximum import tax
of20percentforreasons ofcompetitiveness andefficiency.9
7Figures supplied bytheMexican authorities.
8WTO documents WT/L/124, 16January 1996, WT/L/173, 25July1996, andWT/L/216, 20May 1997.
9Blanco (1994), p.96.WT/TPR/S/29 Trade Policy Review
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Table III.2
MFN tariff andbindings, byHSchapter
(Percent)
HS
Description1996 imports
(%oftotal)
(3firstquarters)MFN rate
(January 1997)Bindings (atendof
implementation
period)
Simple
averageRangeSimple
averageRange
Total 100.0
01 Liveanimals. 0.1 11.2 0-45 29.5 9-45
02 Meat andedible meat offal. 0.7 72.5 0-260 71.0 22.5-254
03 Fish/crustacean, mollusc &other aquatic invertebrate 0.0 19.1 0-20 34.7 30-35
04 Dairy prod; birds eggs; natural honey; edible prod. 0.7 40.3 0-128 57.8 18-125.1
05 Products ofanimal origin, nesorincluded. 0.1 9.3 0-20 29.1 0-36
06 Livetree&other plant; bulb, root; cutflowers etc. 0.0 9.0 0-20 28.5 25-36
07 Edible vegetables andcertain roots andtubers. 0.2 16.3 0-251 40.1 9-245
08 Edible fruitandnuts; peelofcitrus fruitormelons. 0.2 20.7 0-74 37.6 22-45
09 Coffee, tea,matû andspices. 0.0 23.3 0-72 36.0 25-72
10 Cereals. 2.5 36.7 0-198 54.7 9-194
11 Prod millindust; malt; starches; inulin; wheat gluten. 0.1 20.9 10-161 46.2 36-158
12 Oilseed, oleagi fruits; miscell grain, seed, fruitetc. 1.5 4.7 0-45 24.3 0-45
13 Lac;gums, resins &other vegetable saps&extracts. 0.0 10.5 0-15 25.5 10-36
14 Vegetable plaiting materials; vegetable products nes. 0.0 10.0 10-10 32.3 20-45
15 Animal/veg fats&oils&theircleavage products 0.6 21.1 0-260 45.4 18-254
16 Prepofmeat, fishorcrustaceans, molluscs etc. 0.1 19.7 15-20 39.3 35-45
17 Sugars andsugar confectionery. 0.2 89.8 10-296 126.5 45-210.4
18 Cocoa andcocoa preparations. 0.1 23.7 8-39 71.7 37-156
19 Prepofcereal, flour, starch/milk; pastrycook prods. 0.1 17.3 10-46 39.4 22.5-109
20 Prepofvegetable, fruit, nutsorother parts ofplants. 0.1 21.8 20-52 39.0 25-45
21 Miscellaneous edible preparations. 0.2 27.1 0-141 57.5 18-156
22 Beverages, spirits andvinegar. 0.1 25.5 10-109 41.7 36-47
23 Residues/waste from foodindust; prepanimal fodder 0.3 11.1 0-20 37.4 22.5-45
24 Tobacco andmanufactured tobacco substitutes. 0.0 51.1 20-67 51.8 45-67.5
25 Salt;sulphur; earth &ston; plastering mat;limecem 0.4 9.1 0-20 33.9 0-50
26 Ores, slagandash. 0.2 8.9 0-10 33.6 0-35
27 Mineral fuels, oils&product oftheirdistillation;etc. 2.0 8.4 0-15 34.0 0-50
28 Inorgn chem; compds ofprecmet,radioact elements 0.7 9.1 0-10 34.8 0-50
29 Organic chemicals. 2.7 7.4 0-35 35.3 10-50
30 Pharmaceutical products. 0.5 13.3 0-20 35.4 25-50
31 Fertilisers. 0.3 0.3 0-10 30.2 10-50
32 Tanning/dyeing extract; tannins &derivs; pigm etc. 0.6 11.1 0-20 35.3 10-50
33 Essential oils&resinoids; perf, cosmetic/toilet prep. 0.3 13.8 10-20 32.1 18-50
34 Soap, organic surface-active agents, washing prep. 0.2 15.0 0-20 35.6 35-50
35 Albuminoidal subs; modfd. starches; glues; enzymes. 0.2 12.4 0-20 32.8 9-50
36 Explosives; pyrotechnic prod; matches; pyrop alloy 0.0 15.0 10-20 35.0 35-35
37 Photographic orcinematographic goods. 0.4 13.8 5-20 34.8 20-35
38 Miscellaneous chemical products. 1.1 11.3 0-20 34.9 20-50
39 Plastics andarticles thereof. 6.6 12.9 0-20 34.7 10-50
40 Rubber andarticles thereof. 1.7 12.9 0-20 35.0 20-50
41 Rawhides andskins (notfurskins) andleather. 0.5 7.9 0-10 27.6 9-37
42 Articles ofleather; saddlery/harness; travel goods 0.2 29.1 10-35 35.0 35-35
43 Furskins andartificial fur;manufactures thereof. 0.0 13.8 10-35 27.2 20-35
44 Wood andarticles ofwood; wood charcoal. 0.4 15.8 10-20 34.7 10-35
45 Cork andarticles ofcork. 0.0 14.0 10-20 35.0 35-35
46 Manufactures ofstraw, esparto/other plaiting mat; 0.0 20.0 20-20 35.0 35-35
47 Pulpofwood/of other fibrous cellulosic mat;waste 0.5 3.3 0-10 27.2 10-35
48 Paper &paperboard; articles thereof 2.6 10.1 0-20 34.2 0-50
49 Printed books, newspapers, pictures &other product 0.5 10.5 0-20 33.8 0-50
50 Silk 0.0 13.0 10-15 31.3 20-35
51 Wool, fine/coarse animal hair,horsehair yarn/fabric 0.1 10.7 0-15 32.2 9-50
52 Cotton. 0.7 14.6 0-15 35.4 35-45
53 Oth.veg.textile fibres; paper yarn&woven fabric 0.0 10.0 0-15 34.2 9-45
Table II.2(cont'd)Mexico WT/TPR/S/29
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HS
Description1996 imports
(%oftotal)
(3firstquarters)MFN rate
(January 1997)Bindings (atendof
implementation
period)
Simple
averageRangeSimple
averageRange
54 Man-made filaments. 0.7 13.7 0-15 35.0 35-35
55 Man-made staple fibres. 0.4 13.8 0-15 35.0 35-35
56 Wadding, felt&nonwoven; yarns; twine, cordage 0.2 14.0 5-20 34.9 30-35
57 Carpets andother textile floor coverings. 0.1 20.0 20-20 35.0 35-35
58 Special woven fab;tufted texfab;lace; tapestries 0.4 17.3 10-20 35.0 35-35
59 Impregnated, coated, cover/laminated textile fabric 0.3 14.8 10-20 34.7 20-50
60 Knitted orcrocheted fabrics. 0.1 20.0 20-20 35.0 35-35
61 Artofapparel &clothing accs, knitted orcrocheted. 0.9 35.0 35-35 35.0 35-35
62 Artofapparel &clothing accs, notknitted/crocheted 1.7 35.0 35-35 35.2 35-50
63 Other made uptextile articles; sets;worn clothing 0.1 30.0 20-35 35.0 35-35
64 Footwear, gaiters andthelike;parts ofsucharticles. 0.1 33.5 10-35 35.0 35-35
65 Headgear andparts thereof. 0.0 18.5 15-20 35.0 35-35
66 Umbrellas, walking-sticks, seat-sticks, whips, etc. 0.0 18.8 10-20 35.0 35-35
67 Prepr feather/down; artiflower; articles human hair. 0.0 20.0 20-20 35.0 35-35
68 Artofstone, plaster, cem., asbestos, mica/sim mat. 0.2 15.3 10-20 35.0 35-35
69 Ceramic products. 0.2 15.6 0-20 35.2 35-50
70 Glass andglassware. 0.6 14.9 0-20 35.0 10-50
71 Natural/cultured pearls, precstones &metals, coin 0.2 8.7 0-20 35.0 35-35
72 Ironandsteel. 2.5 9.4 0-15 34.6 20-50
73 Articles ofironorsteel. 3.3 13.7 0-20 34.9 20-50
74 Copper andarticles thereof. 0.9 12.4 0-20 35.0 35-35
75 Nickel andarticles thereof. 0.0 7.7 0-10 26.1 0-35
76 Aluminium andarticles thereof. 1.2 13.1 0-20 34.5 10-35
78 Lead andarticles thereof. 0.1 10.5 10-15 35.0 35-35
79 Zincandarticles thereof. 0.0 10.5 10-15 35.0 35-35
80 Tinandarticles thereof. 0.0 11.3 10-20 35.0 35-35
81 Other basemetals; cermets; articles thereof. 0.2 10.1 10-15 35.0 35-35
82 Tool, implement, cutlery, spoon &fork, ofbasemet 0.5 15.6 0-20 35.1 35-50
83 Miscellaneous articles ofbasemetal. 0.8 17.5 10-20 35.2 35-50
84 Nuclear reactors, boilers, mch&mech appl., parts 14.9 10.1 0-20 35.0 20-50
85 Electrical mchy equip parts thereof; sound recorder 23.3 12.9 0-20 34.1 10-50
86 Railw/tramw locom, rolling-stock &parts thereof 0.0 10.3 0-20 34.4 10-50
87 Vehicles o/trailw/tramw roll-stock, parts/accessories 8.0 14.9 0-20 36.6 10-50
88 Aircraft, spacecraft, andparts thereof. 0.1 10.3 0-20 33.6 10-35
89 Ships, boats andfloating structures. 0.0 13.2 0-20 34.6 20-35
90 Optical, photo, cine, meas, checking, precision, etc. 2.8 10.7 0-20 34.3 10-50
91 Clocks andwatches andparts thereof. 0.1 14.7 10-20 34.4 20-35
92 Musical instruments; parts andaccessories 0.0 10.9 0-20 35.0 35-35
93 Arms andammunition; parts andaccessories thereof. 0.0 16.0 0-20 35.0 35-35
94 Furniture; bedding, mattress, mattsupport, cushion 0.7 17.0 0-20 35.0 35-35
95 Toys, games &sports requisites; parts &access 0.3 16.9 10-20 34.9 25-35
96 Miscellaneous manufactured articles. 0.3 18.2 10-20 35.0 35-35
97 Works ofart,collectors pieces andantiques. 0.0 0.0 0-0 35.0 35-35
Source: WTO Secretariat based ondataprovided bytheMexican Government.
(c) Seasonal tariffs
36. Since 1993, Mexico hasmaintained seasonal tariffs forsorghum, soybeans andsafflower seeds.
Importation isdutyfreeduring thefollowing periods: sorghum, 16December-15 May; soybeans,
1February-31 July; andsafflower seeds, 1January-30 September. During other periods atariff of
15percentapplies tothefirsttwoproducts, anda10percenttariff tosafflower seeds.WT/TPR/S/29 Trade Policy Review
Page 48
(d) Tariff quotas
37. In1993, Mexico applied notariff quotas toimports fromMFN sources. Under theUruguay
Round Agreement onAgriculture, tariffquotas wereintroduced toensure theentryofspecific quantities
ofagricultural products. Suchproducts include poultry meat, cheese, beans, wheat, barley andmaize,
forwhich initial andfinalin-quota bound rates were setat50percentandquota levels remain
unchanged.10Similar tariffbindings weremade forproducts suchascocoa, coffee, concentrated milk
andproducts containing sugar; forcoffee, quota levels aretobeincreased bysome 70percentbetween
1995to2004, similar totheincrease intheglobal quota fortheother products mentioned. Powdered
milkissubject toaconstant in-quota duty-free bound rateandafixed quota level. Formostproducts,
byfarthelargest quota share wasassigned totheUnited States and,lessfrequently, Canada, byvirtue
ofhistorical shares. Tariff quotas alsoapply tothetariff bindings fornewsprint paper.11
38. Theauthorities indicated that,inpractice, Mexico hasemployed tariff quotas onlyinthecase
ofpowdered milk, forwhich azeroin-quota dutyhasbeensetforbothpreferential andMFN imports.
39. TheForeign Trade Actof1993 anditsRegulations require thatimport (andexport) quotas
beassigned through public bids, although other mechanisms areallowed ifitissostipulated in
international treaties signed byMexico oratthediscretion ofSECOFI, which hasoftenexercised such
prerogative. Certificates granted through public bidsarenominative andtransferable. Information
ontheoperationofMFNtariff-quotasforagriculturalproducts,includingtheiradministration,isprovided
inChapter IV(2).
40. In1993, some imports benefiting fromtariffpreferences within theLAIA weresubject totariff
quotas administered bySECOFI andallocated among importers according topastimport levels. Under
theagricultural agreements negotiated aspartoftheNAFTA, Mexico converted itsquantitative
restrictions toasystem oftariff quotas; inMexico, suchtariff quotas aregenerally allocated through
auctionsanddirectassignments.UndertheNAFTA,eachpartymaycounttheNAFTAin-quotaquantity
under atariff quota towards thesatisfaction ofWTO in-quota volumes oftariff quotas orminimum
levels ofaccess. However, duties applicable toWTO members andNAFTA parties maydiffer. The
Mexico-Canada agricultural agreement provides fortheelimination ofalltariffs andtariffquotas with
theexception oftariffs andtariff-rate quotas ondairy, poultry andeggproducts andtariffs onsugar
andsugar-syrup products. Mexico andtheUnited States haveagreed toeliminate alltariffandtariff-rate
quotas without exception, under Annexes 302.2A and703.2A oftheNAFTA.
(e) Concessional entry
41. Rule8ofMexico 'sGeneral Import Tariff Lawallows forconcessional entry ofparts and
components. According tothisrule,partsandcomponents canbeclassified under asingle tariffitem,
andaresubject toazeroor10percenttariff. In1993, 39items could beimported under thisregulation.
Atthattime,duty-free entrywasgranted forauthorized ironandsteelproducts foruseinthemanufacture
ofautomotive partsandcomponents. In1997, Rule8applied to54items; newtariff lineshavebeen
created topromote thenational production ofarmoured vehicles, trailers, compact discs, andtoys.12
10PartI,Section I-B,WTO Schedule LXXVII -Mexico.
11PartI,Section II,WTO Schedule LXXVII -Mexico.
12Poder Ejecutivo Federal (1996b), p.169.Mexico WT/TPR/S/29
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A"special steel" programme wasintroduced inDecember 1991 toallow autoparts manufacturers to
import dutyfreecertain specialty steels.
42. Temporary imports areexempt fromimport taxes aswellasanti-dumping andcountervailing
duties. Suchimports aredefined bytheCustoms Lawasthose allowed toenterthecountry foralimited
period andaspecific use,andthenreturned abroad without changes; thetimelimits varybetween
onemonth (e.g. trailers) totwenty years (e.g. airplanes, helicopters, vessels, railway carriages).
Maquiladoras andfirms withexport programmes authorized bySECOFI mayalsoimport temporarily
goods usedinprocessing orrepair activities. Goods tobeusedbypublic health institutions, except
vehicles, maybealsoimported dutyfree.
43. Details onexport-oriented concessional programmes (e.g.PITEX, ECEX, themaquiladora
regime) areprovided insection (3)below.
44. Under theNAFTA, Mexico 'sdrawback anddutydeferral programmes mayremain unchanged
until1January 2001, except foraprohibition ofdutyconcession oncolour television andvideo monitor
tubes from thirdcountries forexport toNorth America.13TheNAFTA alsoprohibits theadoption
orexpansion ofanyconcessional programmes linked tothefulfilment ofperformance requirements.
(f) Tariff preferences
45. Since theprevious Trade Policy Review ofMexico, there hasbeenasharp increase inthe
importance oftariff preferences inMexico 'strade. In1993 Mexican tariffs were generally applied
onaMFN basis, while in1996almost 90percentofMexico 'sexports and80percentofitsimports
took place under freetrade agreements, with NAFTA accounting byfarforthelargest share
(Chapter II(3)). Duetothereductions inpreferential rates, thegapbetween applied MFN and
preferential ratesisgrowing; significant differences alsoexistacross free-trade agreements forsome
industries (Chart III.3). However, these differences should disappear overtimeaspreferential duties
falltozero.
46. Mexico isengaged intheprogressive elimination ofduties vis-à-vis other NAFTA members
onindustrialgoods,which,dependingontheproduct,tookplaceon1January1994,orwillbecompleted
inequal annual stages on1January 1998, 2003 or2008. Rules fortheelimination oftariffs on
agricultural products arecontained inbilateral arrangements. About one-half ofU.S.-Mexico bilateral
agricultural tradebecame dutyfreeattheentryintoforceoftheNAFTA; othertariffs willbeeliminated
nolaterthan2002, except forhighly sensitive products (e.g.Mexican imports ofcornanddrybeans)
forwhich tariff phase-outs should becompleted by2007.
47. ImportsfromLAIAmembercountriesbenefitfrompreferentialtariffsundervariousmechanisms,
including partial-scope agreements, which Mexico hassigned withallLAIA countries, thefree-trade
agreements signed byMexico with Bolivia, andColombia andVenezuela, andtheEconomic
Complementation Agreement withChile. Preferential duties arealsopartofthefree-trade agreement
between Mexico andCosta Rica. Tariff preferences aregranted byMexico under theGSTP andthe
CPC(Chapter II(3)). Nosignificant modifications appear tohaveaffected anyofthese mechanisms
overthelastfouryears; imports under these arrangements arenegligible.
13Under Annex 303.8 oftheNAFTA, major Mexican importers were exempted from thisprohibition, but
thisexemption willbegradually phased outandterminated in2000.WT/TPR/S/29 Trade Policy Review
Page 50
(v) Variable import levies
48. Variable levies wereapplied untilSeptember 1994, when theywerereplaced byspecific duties
either usedalone oraspartofcompound tariffs. Theproducts affected bysuchduties aredescribed
insection (iv)above.
(vi) Other levies andcharges
49. Theauthorities indicated thatnochanges havebeenmade since1993toother charges collected
exclusively onimports. Acustoms processing feeof0.8percentofthedeclared customs value is
levied tocover processing costs; importation orexportation ofnatural gasbyPEMEX isnotsubject
tothefee.Temporary imports destined forthemaquiladora industries payafeeof0.176 percent.
TheNAFTA requires Mexico toeliminate customs userfeesonNAFTA-originating goods nolater
than30June1999; suchfeesmaynotbeincreased inthemeantime. User feesforimports from
Colombia, Costa RicaandVenezuela willbeeliminated inJuly1999, andfromBolivia in2003. Other
taxes levied attheborder aredescribed below.
50. ThemaininternaltaxappliedinMexicoisthevalue-addedtax(VAT),leviedequallyondomestic
andimported products. TheVAT onimports islevied onthecustoms value ofimports (seesection (ii)
above) plusimport duties andanyother additional import charges. During theperiod under review,
VAT wasapplied at15percentexcept during theperiod January 1994 toApril 1995, when itwas
10percent. Currently twoother VAT ratesareapplied: a10percentrateforactivities undertaken
intheborder areas, except property transfers; andazerorateonthesaleofnon-industrialized animalMexico WT/TPR/S/29
Page 51
andvegetable products, pharmaceuticals, ice,water, agricultural machinery, ixtle(ajute-like fibre),
fishing boats, fertilizers, greenhouses, foodproducts (except beverages other thanmilk, juices and
syrups), certain domestic services, andexports ofgoods andservices.
51. Other internal taxesarealsolevied onanumber ofproducts, whether imported ordomestically
produced. These taxes include theSpecial TaxonProducts andServices (IEPS), levied atvariable
ratesandtaxable bases according totheproduct. Forexample, alcoholic beverages aretaxed onthe
salespriceateachstageofprocessing atratesthatvarybetween 21.5and60percent; tobacco products
aretaxed onthefinalretail price atratesof20.9or85percent; andgasoline anddiesel aretaxed
ondependingontheirvaluesusesandcomposition.Exportsarezero-rated,withexemptionsalsogranted
topersons engaged insmall business activities.14Thetaxonnewautomobiles (ISAN) waseliminated
inlate1995 butpartially reintroduced in1997. However, vehicles withamaximum price of65,000
pesos areexempt; areduction of60percentgranted in1997 forother vehicles, should fallto
30percentin1998.
52. No"other duties andcharges" wererecorded inMexico 'sWTO listofbindings withrespect
toanyitem.15
(vii) Minimum import prices
53. Mexico doesnotapply reference orminimum import prices.
(viii) Licensing andauthorization
54. Currently, according totheauthorities, prior import permits arerequired for184tariff lines,
including crude oilandbasicpetrochemicals, some pharmaceuticals, armsandexplosives, automobiles
drugs, andseveral usedgoods (clothing, machinery, computer equipment, andtransport equipment).
55. Under theNAFTA, Mexico maystillrequire permits fortheimportation ofcertain new
automotive goods during fiveyears (10items) ortenyears (20items), fortheimportation ofusedgoods
fortenyears (90tariff lines) andofusedautomotive goods (30tariff lines) for25years.
(ix) Import prohibitions
56. Mexico 's1997 tariff schedule identifies 17tariff items asprohibited; suchitems correspond
tothegoods identified asprohibited intheSecretariat report fortheprevious Trade Policy Review
ofMexico forreasons ofpublic safety, health, morality orchild protection.16Imports ofusedcars
remain prohibited. Mexico alsoapplies trade(import andexport) prohibitions toanumber ofcountries
asprovided forinUnited Nations Security Council resolutions.
14Activities generating anannual income orwith assets ofupto15or77times theminimum salary,
respectively.
15WTO Schedule LXXVII -Mexico.
16TheHSitems involved are03019901, 12119002, 13021102, 13021902, 28332903, 29035903, 29035905,
29109001,29251901,29310005,29391002,30034001,30034002,30044001,30044002,49089005,and49119105.WT/TPR/S/29 Trade Policy Review
Page 52
(x) Import quotas
57. Mexico currently applies noimport quotas. In1993import quotas wereapplied topowdered
milk, evaporated milk, andprocessed cheese; allagricultural products weretariffied under theUruguay
Round Agreement.
(xi) Import surveillance
58. Mexico didnotmaintain import surveillance mechanisms atthetimeofitsprevious Trade Policy
Review, butsince 1994 ithasmade useofcommercial inspection companies toexamine thecountry
oforigin ofimported goods identical orsimilar tothose subject totradedefence measures (section (iii)
above).
(xii) Import monopolies, cartels orsoledistributors
59. Noimport monopolies, cartels orsoledistributors appear toexistinMexico other thancertain
activities ofthestatecompany PEMEX (section (4)(ii)).
(xiii) Countertrade
60. Asageneral principle, theMexican Government discourages countertrade; official agencies
arebarred from engaging insucharrangements, orusing special offset requirements aspartoftheir
procurement activities. Theauthorities indicated that,totheirknowledge, theprivate sector hadnot
beeninvolve incountertrade orsimilar arrangements during theperiod under review.
(xiv) Technical requirements
61. Compulsory technical regulations inMexico cover health, andsafety, aswellasenvironment
andconsumer protection. Mexico wasamember oftheGATT Committee onTechnical Barriers to
Trade. AspartoftheSingle Undertaking oftheUruguay Round, Mexico automatically became bound
bytheAgreement ontheApplication ofSanitary andPhytosanitary Measures (SPS) andtheAgreement
onTechnical Barriers toTrade (TBT). Thenational enquiry point foreseen inArticles 10.1and10.3
oftheTBTAgreement istheGeneral Directorate forStandards (Dirección General deNormas -DGN).
Since 1995, Mexico hasmade some 65notifications under theTBT Agreement, andabout
110notifications under theSPSAgreement.17Toensure compliance withtheCode ofGood Practice
provided forintheTBTAgreement, theadoption ofthisCode hasbeenmade anaccreditation or
registration requirement forMexican standardization bodies.
(a) Standards, testing andcertification
62. Mexican standards canbeeither voluntary ormandatory. Mandatory standards, orOfficial
Mexican Norms (NOMs), aimtoestablish specifications forgoods, services orprocesses toensure
safety, theprotection ofhuman life,animals, plants ortheenvironment, orprevent deceptive practices.
Voluntary standards, designated asMexican Norms (NMXs), areusedasguidelines forconsumers
andproducers, andasinstruments ofquality promotion. Mexico 'sstandards system iscomprised of
sixprivatenationalstandardizationbodiesandnineministries(SECOFIandtheMinistriesofAgriculture,
Communications andTransport, Energy, Environment, Health, Labour, Tourism, andSocial
17WTO document series G/TBT/N andG/SPS/N/MEX.Mexico WT/TPR/S/29
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Development).TheNationalStandardizationCommissionformulatesstandardizationpolicies,coordinates
theagencies related tostandards, andapproves theannual national standardization programme. The
Commission isanational bodywithrepresentation fromallregulatory government agencies involved
instandards andtechnical regulations, private national standardization bodies andrepresentatives of
academic, industrial, commercial andconsumer groups.
63. Thelegal basis forMexico 'sconformity assessment andstandardization system istheLaw
onMetrology andStandardization (LFMN) of1July1992. TheLawwasamended byadecree of
20May 1997; thereforms entered intoforce on1August 1997. They cover areas such as
standardization, metrology, conformity assessment, accreditation, vigilance andsanctions. ForNOMs
thereformsestablishedtheobligationtoconsiderotherNOMs,NMXsandinternationalstandardsduring
theelaboration process, andtopresent a"Regulatory Impact Declaration". NMX provisions established
amore detailed elaboration process andanobligation tosubmit theNMXs topublic consultation, and
broadened theregulatory system. BothNOMs andNMXs must bereviewed every fiveyears. The
concept of"conformity assessment" wasintroduced, tobecarried outbyprivate bodies including
certification bodies, verification unitsandlaboratories. "Accreditation entities" arenowresponsible
foraccrediting conformity assessment bodies, withthesupport oftechnical organizations. Regulatory
agencies mustpublish theirconformity assessment procedures andavailable mechanisms toundertake
mutual recognition agreements withforeign entities. Onsanctions, fines havebeen linked tothe
infraction severity; accreditation, approvals andauthorizations arecancelled incasesofnon-compliance
withtheprovisions ofthelaw.
64. TheIndustrial Policy andForeign Trade Programme (PPICE -Chapter II(2)) considers the
collaboration between theprivate andpublic sectors ontheelaboration ofNOMs andNMXs forproducts
acquired bythepublic sector astheidealtooltosupport thedevelopment ofnational suppliers.18The
current programme foreconomic deregulation envisages issuing regulations under theLFMN to
encourage theelaboration ofNOMs asbothregulatory instruments andtoolstopromote thenational
industry.19
65. Theauthorities indicated thattherehavebeennocases when international standards havebeen
found inadequate; suchstandards aretypically taken asreference fortheelaboration orupdating of
Mexican standards. However, Mexico doesnotfollow international standards when itconsiders that
protection levels forthecountry mustbehigher thanthose established internationally. Theauthorities
noted thatthepercentage ofMexican standards identical toISOorother international standards varies
according totheactivity: inelectronics itreaches about 80percent,while inother areas itmayonly
be10or20percent(e.g.pollutionemissionlimits,country-of-origindeterminationsandtouristservices).
StandardsfromothercountriesarenotadoptedasMexicanstandards,althoughcertainMexicanstandards
arebased onforeign norms, especially those oftheUnited States. Theproportion ofNOMs inpartial
ortotalconcordance withinternational standards isabout 65percent.
18SECOFI (1996), p.82.
19SECOFI (1996), p129.Mexico WT/TPR/S/29
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66. Procedures fortheestablishment ofnewstandards ortherevision ofexisting onesinvolve the
regulatory agency, through aninternal technical body, presenting apreliminary project totheNational
Advisory Committee andelaborating aRegulatory Impact Declaration. Thelatter ispresented tothe
Deregulation Unitforanalysis; iftheproposed standard hasahigheconomic impact theDeclaration
mustinclude acost-benefit analysis. Once thepreliminary project isapproved itispublished inthe
Official Journal fora60-day public consultation period. Comments areanalyzed, responded toand
published. Thestandard isthenissued inadefinitive form. Similar public consultation procedures
arefollowed forNOMs andNMXs. NMXs aredrawn upandissued bynational standardization bodies.
When nosuch standardization body exists forasector, NMXs areissued bytheDGN. The
standardization body responsible forthestandard mustdemonstrate conformity withtheWTO Code
ofGood Practice.
67. Under theLFMN, regulatory agencies areauthorized toissue emergency NOMs when they
conclude thatthere isimminent riskofdamage; suchdecisions arenotified totheForeign Trade
Committee forconsideration oftheirtrade effects. Emergency NOMs maybeapplied foruptosix
months; asecond six-month period isallowed buttheregulatory agency mustsubmit toSECOFI a
regulatory impact report. Longer application periods require normal adoption procedures. SuchNOMs
arenotified totheWTO contact points. InJune1997, there weretenemergency NOMs inforce (on
areas suchasnatural gas,LPG, vehicle identification numbers, vehicle pollution controls, flycontrol
infruitandseaturtle protection).
68. There hasbeenasignificant increase inthenumber ofmandatory standards inMexico; in
1997thereweresome 823NOMs inforce, compared with303in1992. In1997, mostNOMs related
toenvironmental andworker protection, followed farbehind byservices andfood(Chart III.4). The
number ofvoluntary standards hasincreased onlyslightly, fromclose to5,300 in1992 tojustunder
5,400 in1997. NMXs cover awiderange ofitems, thelargest number relating tochemical andfood
products. Theauthorities noted thatstandardization activity increased withtheentry intoforce ofthe
LFMN in1992, asallregulatory agencies hadtoreview theirtechnical regulations. AsatJune1997,
521NOMs hadbeenmodified. NMXs increased onlyslightly because theLFMN retained allthe
voluntary standards elaborated before 1992.
69. Under theForeign Trade Act,SECOFI isresponsible forpublicizing intheOfficial Journal,
theNOMs forwhich compliance mustbeverified bythecustoms authorities atthepoint ofentry into
Mexico; onlyimports identified bytheirHScodes maybesubject tosuchverification. Notwithstanding
anyverification thatmaybemade atthepoint ofentry, compliance withNOMs mayalsobeverified
onceproducts arewithin theMexican territory. Thecurrent listsofNOMs tobeverified bycustoms
werepublished on2June1997. Certain imports, notably those covered bytemporary import regimes
(section (iv)above), areexempt from compliance withNOMs. Inthecaseofdomestic products,
compliance withNOMs isverified attheproduction ordistribution points.
70. Inareas where noNOMs exist, products must comply with, inpriority order, international
standards, specifications established bythecountry oforigin, ortheproducer 'sstandards. Nodistinction
ismade between imported anddomestically produced goods asregards compliance withtechnical
regulations andstandards. Certification ofcompliance withNOMs iscarried outbytheaccredited
certification bodies andbytheregulatory agencies. Certificates issued byMexico apply totheproduct
model andareavailable toeachimporter; itisnotnecessary totesteachshipment. Imports onlyrequire
thepresentation ofacopyofthecertificate; periodical orrandom samplings arecarried outoncertified
products. Mexico maintains mutual recognition agreements withU.S.laboratories inareas suchas
tyres andtelecommunications equipment. Mexico alsoparticipates inprogrammes ofinternational
bodies such asQuality Assessment Recognition System (QSAR), theInternational LaboratoryWT/TPR/S/29 Trade Policy Review
Page 56
AccreditationConference(ILAC),theInterAmericanAccreditationCooperation(IAAC)andtheNational
Council ofLaboratory Accreditation (NACLA).
71. Mexico 'snetwork of65calibration laboratories isoverseen bytheDGN. TheNational Centre
forMetrology (CENAM) wascreated in1994 tohelpoversee laboratories; offer technical support
inareassuchascalibration, evaluation anddevelopment ofmodels; study methods toelaborate National
Measurement Standards; andsupport harmonization withinternational practices. Thelaboratories
inthisnetwork areresponsible forensuring theprovision oftheequipment usedbyprivate testing
laboratories. TheNational System ofTesting Laboratories (SINALP) isincharge ofproviding the
testdatausedbygovernment agencies andaccredited certification bodies. TheLFMN opened the
possibility ofcreating private certification bodies, andeightsuchbodies wereinoperation inmid-1997.
InJanuary 1997, aproposal toestablish policies andprocedures forcertification waspublished for
public consultation intheOfficial Journal; comments from 35bodies andenterprises werereceived
andanalyzed byatechnical working group. Taking account ofsuchcomments, afinaldocument was
tobepublished in1997.
72. Nochanges were made tometrology regulations inMexico asaresult oftheentry-in-force
oftheNAFTA, which doesnotprovide formutual recognition among domestic andforeign certification
authorities. However, theNAFTA callsformutual recognition oftheequivalence ofstandards-related
measures andforefforts towork towards establishing compatible measures. Italsoprovides forthe
accreditationofconformityassessmentbodiesoftheothermembers.ACommitteeonStandards-Related
Measures isresponsible formonitoring theimplementation andadministration ofthese provisions;
itoversees four sectoral subcommittees responsible forharmonizing, totheextent possible,
standard-related measures intheareasoftelecommunications equipment, automobiles, textile labelling,
andlandtransport. Within thisframework, Mexico istaking steps torecognize technical testresults
performed inotherNAFTA countries, andtoharmonize typeapproval process fortelecommunications
equipment. TheSub-Committee onLabelling ofTextile andApparel Goods isworking onthe
harmonization ofcaresymbols. Mexico isamember oftheNACLA, abodycreated intheUnited States
toestablish common accreditation policies. Mexico isalsoamember ofanewTrilateral Committee
onFood Labelling, which seeks topromote theharmonization oflabelling rulesinthethree NAFTA
countries.
73. Mexico maintains acooperation programme withtheEuropean Union topromote quality and
tosupport thecreation ofMexican standardization andcertification bodies. Thesecond stage ofthe
programme foresees thestrengthening ofprivate accreditation entities, which isexpected tosupport
theestablishment ofmutual recognition agreements. Mexico participates inILAC andQSAR seeking
toestablish multilateral agreements; ithasalsoparticipated asanobserver inIAAC meetings, with
theaimofbecoming afullmember inthenearfuture.
74. Despite theprogress achieved inrecent years, theauthorities believe thatthenational system
ofnormalization andquality control doesnotyetmeettheneeds imposed byinternational competition.20
Therelevant infrastructure isconcentrated inthecountry 'scentral region andsomeindustries orregions
arestillinadequately served bythelaboratory system. Thenumber ofprivate normalization and
certification agencies issmall andthereisaneedtoincrease thenumber ofverification unitstostrengthen
compliance withofficial norms.
20SECOFI (1996), pp.109-111.Mexico WT/TPR/S/29
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75. CertaincomplaintshavebeenmadeaboutthepossibleprotectionisteffectsofMexico'sstandards
regime, although theabsence ofcomplaints totheWTO suggests thatanysucheffects maybesmall.
Some importers havequestioned theneedforNOMs incertain cases, arguing forNMXs instead.
Complaints havealsobeenraised totheeffect thatcertain NOMs areexcessively strict; products
mentioned include electrical goods, tyres andwool clothing.21
(b) Marking, labelling andpackaging
76. Commercial information requirements (including labelling andmarking) mustbeincluded in
NOMs inaccordance withlawssuchastheFederal LawonMetrology andStandardization, theFederal
Consumer Protection LawandtheGeneral Health Law. Thesamemarking andlabelling requirements
apply todomestic andimported products.
77. InJanuary 1996, SECOFI published twoNOMs relating tolabelling requirements: NOM-050-
SCFI-1994 establishing general packaging andlabelling requirements; andNOM-051-SCFI-1994
establishing specific labelling requirements forfoodandnon-alcoholic beverages. ThetwoNOMs were
toenter inforce on1November 1996, butapplication ofmost oftheirprovisions wasdelayed until
March, JulyorNovember 1997 toallow additional timefortheirdissemination andgiveproducers
timetoselloutexisting stocks. Theauthorities emphasized thatbothNOMs werebased oninternational
standards, andelaborated inaccordance withtheTBTAgreement.
78. Under NOM-050-SCFI-1994 labels mustshow (inSpanish) atleastthefollowing information:
theproduct name; quantity orweight, asestablished inNOM-030-SCFI; country oforigin; appropriate
warnings fordangerous products; expiry dateifapplicable; fordomestic products (andimports, in
certain cases), name andfiscal domicile oftheproducer; forimported products, name, andfiscal
domicile oftheimporter, anddatathatmaybeaffixed totheproduct aftercustoms clearance butprior
toretail sale. NOM-051-SCFI-1994 requires labels toinclude thefollowing information: theproduct
name; listofingredients; quantity, asestablished inNOM-030-SCFI; country oforigin; identification;
expiry date; nutritional characteristics andanyrelevant warnings.
79. Certain aspects ofMexico 'spractices withrespect tomarking andlabelling havebeenthesubject
ofcriticism. These haverelated topastrequirements foraffixing labels before theproduct concerned
arrived inMexico, thedegree ofdetailed information required inlabels, verification procedures that
takeplace atcustoms andnotatthepointofsale;thenational Chambers ofCommerce havealsoargued
thatpackaging andlabelling requirements should bepromulgated inNMXs, andnotNOMs. Questions
havealsobeenraised about theprocess followed in1994forchanging labelling rules, reportedly done
withlittleprevious notice.22
(c) Sanitary andphytosanitary regulations
80. Mexico 'ssanitary legalframework isbased ontheLawonMetrology andStandardization of
1992, theFederal Animal Sanitary Lawof1993 andtheFederal Plant Sanitary Lawof1994. The
authoritiesareoftheviewthatcurrentlegislationonsanitaryandphytosanitarymeasuresisinaccordance
21OECD (1996), p.42. Problems reportedly encountered byU.S.exporters toMexico aredescribed inUSTR
(1995) and(1996).
22European Commission (1997) andUSTR (1995).WT/TPR/S/29 Trade Policy Review
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withWTO rulesontechnical barriers. Nevertheless, changes tothestatutes aretobemade inrelation
totheaccreditation ofcertification entities, testandcalibration laboratories, andverification units,
activities previously controlled bytheGovernment butwhich willbeundertaken byprivate firms in
thefuture. Thegovernment agencies incharge ofadministering sanitary, phytosanitary andhealth
regulations aretheMinistry ofAgriculture andtheMinistry ofHealth. TheMexican authorities have
amaximum period ofthree daystodecide onapplications forsanitary orphytosanitary certificates.
81. Measures toprevent theintroduction ofdiseases taketheformofNOMs applied toimported
plants andanimals. In1995, there were inplace some 75suchnorms affecting plant products and
46foranimals; there were97phytosanitary inspection sitesatentry points. Theauthorities verify
andcertify thesanitary conditions offederal-inspection type(tipoinspección federal ,TIF)plants and
support similar action byforeign sanitary authorities. In1995, there were close to150TIFplants,
ofwhich 28wereaccredited toexport totheUnited States, 20toJapan andtwototheEuropean Union.
Mexico hasconcluded agreements with16countries concerning animal health andwithtenregarding
plant health.
82. Inorder toprotect itsdomestic livestock industry, Mexico maintains import bansonbeefand
certain dairy products fromcountries which Mexico doesnotrecognize asfreefrom foot-and-mouth
disease. Prohibitions arealsoinplace onimports ofcattle andbeeffromcountries affected by"mad
cowdisease" (bovine spongiform encephalopathy).
83. Isolated complaints have been raised about Mexico 'spractices concerning phytosanitary
measures.23However, noneofthose issues hasbeenraised inWTO fora.
(xv) Anti-dumping andcountervailing measures
84. TheIndustrial Policy andForeign Trade Programme (PPICE -Chapter II(2)) notes thatMexico
operates oneoftheworld 'smostactive trade defence system.24Intermediate andcapital goods were
involved in86percentofthecases investigated between 1987 and1995, accounting forclose to
70percentofthevalue ofimports affected bytradedefence measures. About 70percentofallcases
related toonlythree industries: metals andbasic metal products, chemicals, andtextiles andclothing
(Chart III.5). ThePPICE links those patterns tothree factors: (i)thetendency inhighfixed-cost
industries todispose ofsurpluses atlowprices during periods ofslowactivity; (ii)thegrowing presence
ofcentrally-planned economies inworld markets; and(iii)thecontinuous appreciation ofMexico 's
realexchange ratebetween 1988 andtheend1993 (seealsoChapter I).According tothePPICE,
theappreciation oftherealexchange ratecontributed tomore intensive useoftheanti-dumping system
byreducing thecompetitiveness ofnational production andincreasing theincentive toimport.25
23These haveincluded thelarge number andextensive product coverage ofsanitary andphytosanitary import
regulations published in1994, initially onanemergency basis; some suchregulations, forexample onfresh
milk, allegedly departed significantly from accepted practices; phytosanitary standards arealsoclaimed tohave
created barriers toproducts suchasgrains, citrus, christmas trees, cherries, andcling peaches (USTR, 1995).
24SECOFI (1996), p.174.
25SECOFI (1996), p.176.Mexico WT/TPR/S/29
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WT/TPR/S/29 Trade Policy Review
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85. Thenumber ofanti-dumping investigations rosesharply between 1990and1993, thenumber
ofproduct-country decisions onanti-dumping andcountervailing increasing from27to156;thisnumber
fellto107in1994.26Thetotalofproduct-country decisions reached 135in1995, anddropped to
92in1996. Thelarge number ofcases upto1994 maybeexplained bythestrength ofthepesoand
theresulting strong import growth, which might haveleddomestic producers toseektheprotection
oftrade defence measures.27
86. BetweenJanuary1993andDecember1996,thecountriesmostaffectedbyMexicananti-dumping
investigations wereBrazil, China andtheUnited States. Investigations mainly affected steel, chemical
andtextile products, andmachinery andequipment; other affected products included meat, toysand
footwear. Since itsimplementation, theMexican tradedefence system hasmostly affected basicmetal
products (particularly steel), petrochemicals, plastics, textiles andfootwear. Though thenumber of
investigations hasfallen since 1993, thenumber ofmeasures inforce remains high. Overall, there
hasbeenaclear increase inthenumber ofanti-dumping measures inforce since 1993. While in
January 1993 there were 20definitive anti-dumping duties inforce, byDecember 1996 Mexico had
some 85anti-dumping measures inforce (Table III.3). In1996, themain sources affected by
anti-dumping duties were, indescending frequency, China, theUnited States andBrazil.
87. Mexico hasusedcountervailing dutymeasures sparingly, although thenumber ofcountervailing
investigations increased since 1993 relative toprevious years. Between January 1993 and
December 1996, thecountries mostaffected bythose investigations wereBrazil andtheUnited States;
suchinvestigations mainly affected steelandagricultural products. ByDecember 1996, there were
eightcountervailing measures inforce, affecting steelproducts andmeat(Table III.4). Countervailing
investigations haveledtoundertakings from Canadian andU.S.wheat exporters, andaVenezuelan
steelproducer.
Table III.3
Anti-dumping measures inforce, December 1996
Country Product Date imposed/effective Product Date imposed/effective
Armenia Plate incoils12.06.95
Azerbaijan Plate incoils 12.06.95
Belarus Plate incoils 12.06.95
Brazil Special steel 18.11.94 Cold-rolled sheet 27.12.95
Corrugated rods 11.08.95 Malleable ironconnections 04.10.96
Cold-rolled sheet 27.12.95 Steel hoop andstrip 30.03.92
Corrugated rods 11.08.95 Ceramic walltiles 04.08.95
Plate incoils 28.12.95 Electric power transformers 07.09.92
Plate insheets 29.12.95 Synthetic rubber 27.05.96
Hot-rolled sheet30.12.95
Canada Plate incoils 28.12.95 Hot-rolled sheet 30.12.95
Table III.3 (cont'd)
26Data include bothpreliminary andfinal decisions (Poder Ejecutivo Federal ,1996c, p.100).
27Ithasbeen pointed outthatalthough thetrade coverage ofthese measures appears tobemodest, themere
threat oftrade defence action canresult inreduction ordiversion oftrade flows, andafford highmargins of
protection tothedomestic industry (OECD, 1996, p.109)Mexico WT/TPR/S/29
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Country Product Date imposed/effective Product Date imposed/effective
China Dishware 25.05.92 Made-up articles (knitted/crocheted clothing) 18.10.94
Maleable ironconnections 15.04.93 Made-up articles (notkntd/crochtd clothing) 18.10.94
Candles 19.08.93 Made-up articles (other textile articles) 18.10.94
Footwear 30.12.93 Fluorite 18.10.94
Tyres 22.09.94 Organic chemicals 18.10.94
Cameras 22.09.94 Pencils 18.10.94
Bicycles 22.09.94 Pencil sharpeners 18.10.94
Padlocks 22.09.94 Valves 18.10.94
Textiles (cotton) 18.10.94 Tools 11.11.94
Textiles (other vegetable textile
fibres) 18.10.94Machines, appliances andelectrical
equipment 18.11.94
Textiles (artificial orsynthetic
filaments) 18.10.94Recording, sound production andtelevision
sound andimage reproduction equipment 18.11.94
Textiles (synthetic/artificial
staple filaments) 18.10.94Toys 25.11.94
Textiles (gauze) 18.10.94 Games andarticles forrecreation orsport 25.11.94
Locks14.08.95
EC Bovine meat 03.06.94
Estonia Plate incoils 12.06.95
France Sorbitol 27.09.90
Germany Cold-rolled sheet 27.12.95
Georgia Plate incoils 12.06.95
Hong Kong Jean/denim 9.09.91
India Bicycle tyres 07.12.95
Japan Sulphuric acid 07.06.95
Kazakstan Plate incoils 12.06.95
Korea Short-fibre polyester 19.08.93
Kyrgyzstan Plate incoils 12.06.95
Latvia Plate incoils 12.06.95
Lithuania Plate incoils 12.06.95
Moldova Plate incoils 12.06.95
Netherlands Cationic starch 25.05.92 Hot-rolled sheet 30.12.95
Russian Fed. Plate incoils 12.06.95
Spain Sodium tripolyphosphate 08.12.92 Regenerated cellulose tubes 25.05.92
C.Taipei Latten ware 11.10.90 Ballbearings10.09.96
Tajikistan Plate incoils 12.06.95
Turkmenistan Plate incoils 12.06.95
Ukraine Plate incoils 12.06.95 Urea 05.07.95
United States Acrylic fibres 05.06.91 Hydrogen peroxide 23.12.93
Polyvinyl chloride (PVC) 05.06.91 Galvanized sheet 02.08.94
Vinylflooring inrolls 15.11.91 Caustic soda 12.07.95
Corrugated rods 23.12.91 Seamless tubes 11.10.95
Polystyrene (crystal andimpact) 11.11.94 Plastic syringes 25.05.92
Plate insheet 02.08.95 Regenerated cellulose tubes 25.05.92
Plate incoils 28.04.93 Telephone connectors 27.11.92
Hot-rolled sheet 28.04.93 Ammonium sulphate 04.09.96
Cold-rolled sheet 28.04.93
Uzbekistan Plate incoils 12.06.95
Venezuela Corrugated rods 23.12.91 Plate incoils 27.12.95
Cold-rolled sheet 27.12.95 Hot-rolled sheet 27.12.95
Source: WTO documents G/ADP/N/22/MEX, 21March 1997 andG/ADP/N/22/MEX/Corr.1, 5May1997.WT/TPR/S/29 Trade Policy Review
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Table III.4
Countervailing measures andundertakings inforce, December 1996
Country Product Effective date
Countervailing duties inforce
Brazil Hot-rolled sheet 30.12.1995
Brazil Cold-rolled sheet 27.12.1995
Brazil Plate insheets 29.12.1995
Brazil Plate incoils 28.12.1995
European Union Bovine meat 03.06.1994
Venezuela Hot-rolled sheet 30.12.1995
Venezuela Cold-rolled sheet 27.12.1995
Venezuela Plate incoils 28.12.1995
Undertakings inforce
Venezuela
C.Siderúrgica delOrinocoHot-rolled sheet 30.12.1995
Venezuela
C.Siderúrgica delOrinocoCold-rolled sheet 27.12.1995
Venezuela
C.Siderúrgica delOrinocoPlate incoils 28.12.1995
Source: WTO documents G/SCM/N/23/MEX, 21March 1997, andG/SCM/N/23/MEX/Corr.1, 16May1997.
88. ThePPICE acknowledges thattheformulation oftradedefence policies musttakeintoaccount
thattheapplication ofanti-dumping orcountervailing duties canhave serious effects onthe
competitiveness oftheMexican productive sector. Particularly inthecontext ofNAFTA, theapplication
ofsuchduties tocapital andintermediate goods could increase costsandthusundermine thecompetitive
position intheMexican market ofdomestic producers vis-à-vis producers inother NAFTA countries.
ThePPICE alsonotes thatasthemaquiladora andPITEX regimes arephased out(section (3)below),
subjecting capital andintermediate goods tocontingency measures mayreduce thecompetitiveness
ofMexican exports inforeign markets. Theauthorities noted thattheForeign Trade Actcontains
provisions toprevent anysuchadverse effects fromoccurring, including alesser dutyrule,which they
indicated isoften used, andapublic interest clause.
89. Thelegislation ontrade defence measures inforce atthetimeoftheprevious Trade Policy
Review ofMexico wassuperseded bytheForeign Trade Act(LCE) of1993 anditsRegulations
(Chapter II(2)). Thenewstatutes werenotified totheWTO Committee onAnti-Dumping Practices
inMay1995.28Mexico 'strade defence legislation isnowmade upofvarious provisions oftheLCE
anditsRegulations, together withtheWTO Agreement onImplementation ofArticle VIofthe
GATT 1994 (theADAgreement) andtheAgreement onSubsidies andCountervailing Measures (the
SCM Agreement).
90. Among thechanges stemming from thenewLCE, theauthorities highlighted those related
tobetter-defined criteria forrequiring confidential information; clearer time-limits forprocedures to
becompleted; amore specific methodology toestablish dumping margins, injury andcausal links;
theimpossibility ofimposing adutyattheinitiation ofaninvestigation; andformal provisions for
public hearings. Withrespect toexofficio andcontested administrative proceedings, theLCEextends
therightofappeal forreversal ofdecisions tocover allinterested parties andallresolutions having
28WTO documents G/ADP/N/1/MEX/1, G/ADP/N/1/MEX/1/Corr.1 andG/ADP/N/1/MEX/1/Corr.2,
G/SCM/N/1/MEX/1 andG/SCM/N/1/MEX/1/Corr.1.Mexico WT/TPR/S/29
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afinalcharacter. TheLCE alsopermits interaction between theanti-dumping authorities andthe
competition policy authorities through theForeign Trade Commission (COCEX-Chapter II).Instances
where SECOFI considers thatcompetition lawshavebeenbreached maybereported totheFederal
CompetitionCommission(section(4)(i)below).Inturn,theCommissionmayissueopinionsconcerning
decisions taken bySECOFI involving anti-dumping orcountervailing measures.
91. Theauthorities noted thatMexico 'sengagements under theNAFTA required making various
changes totheLCE, withrespect tofinaldeterminations (Article 60),review offinalcountervailing
duties(Article68),accesstoinformation(Article80),alternativedisputesettlementmechanisms(Article
97),andappeals against resolutions (Article 98). Theentry intoforce oftheNAFTA alsomade
necessary modifications totheFiscal Code oftheFederation affecting therevision ofresolutions and
theorgans involved inalternative dispute settlement mechanisms.
92. Although theLCEwasalsoenacted priortotheWTO ADAgreement andtheSCM Agreement,
theentry intoforce ofthese Agreements hasnotledtochanges intheLCE. Inthisrespect, the
authorities haveemphasized thatboththeADandSCM Agreements apply withtheforce oflawin
Mexico andhavethesame status astheLCE. Intheevent ofanyinconsistency between them and
theLCE, orofanyomission inthelatter, theprovisions oftheAgreements would prevail.29
Nevertheless, tomake clearer theconsistency ofdomestic andinternational trade defence rules, the
authorities began preparing therequisite amendments tothepresent lawandplanned topropose them
tothePresident oftheRepublic in1997.30
93. TheLCE defines SECOFI 'sresponsibilities intheareaoftrade defence; theyinclude
investigating theexistence ofprice discrimination orsubsidies, injury orthethreat ofinjury, andthe
causal linkbetween themforanti-dumping, countervailing andsafeguards. SECOFI isalsoresponsible
forproposing remedial actions andadvising Mexican exporters involved insimilar investigation abroad.
Anti-dumping, countervailing andsafeguard investigations areconducted bySECOFI 'sInternational
Trade Practices Unit(Chart II.1). Among other activities, theUnitischarged withalladministrative
procedures ofaninvestigation, requesting information fromtheparties involved, facilitating conciliation
meetings, conducting verification visits, approving priceundertakings, andsetting up,incollaboration
withcustoms authorities, verification mechanisms toensure compliance. Before issuing finalresolutions
ontrade defence measures, theLCE requires SECOFI toseektheopinion oftheForeign Trade
Commission (COCEX -Chapter II(2)). COCEX maysuggest changes oncountervailing duties for
thepublic interest, buthasnotsofardoneso(thetermcountervailing dutyisapplied bytheLCEto
duties imposed ineither anti-dumping orsubsidies investigations). TheMinistry ofFinance collects
countervailing duties andcarries outtheactstoapply them.
94. Theprovisions oftheADandSCM Agreements maybeinvoked administratively bythe
investigating authority during investigations; whether theinvestigating authority applied theproper
provisions would bedetermined through judicial reviews. Only Mexican courts areempowered to
trycases relating topossible inconsistencies between Mexican legislation andinternational treaties.
TheFiscal Court constitutes thereview authority onanti-dumping andcountervailing investigations.
29Article 2oftheLCE states that"theprovisions ofthisActareamatter ofpublic policy andapplicable
throughout theRepublic, without prejudice totheprovisions oftheinternational treaties oragreements towhich
Mexico isaparty". SeealsoChapter II(2)).
30WTO document G/ADP/W/66, 25October 1995.WT/TPR/S/29 Trade Policy Review
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95. Theadoption oftheLCEin1993 wasanimportant development, given thecentral rolethat
anti-dumping plays inMexico 'stradepolicy andpractices. However, thefactthattheLCEwasadopted
prior totheentry intoforce oftheADandSCM Agreements means thatinseveral areas Mexico 's
trade defence statutes areatvariance withtheWTO Agreement. Asaresult, WTO Members have
raised questions onwhether theLCE canbeinterpreted asaproper implementation oftheWTO
Agreements.31OneofMexico 'strading partners hasalsoquestioned inWTO foracertain Mexican
anti-dumping practices (Table II.2). TheSecretariat report fortheprevious Trade Policy Review of
Mexico noted thattheperiod actually taken tocomplete thevarious phases ofananti-dumping
investigation wasgenerally considerably longer thanthestatutory maximum. Forthisreview, the
authorities indicated thatsuchproblems hadbeenovercome, inpartbymodifying theperiods specified
inthelegislation.
96. Under theNAFTA, eachparty explicitly reserves itsright toretain itsanti-dumping and
countervailing lawsandpractices withrespect togoods imported fromtheterritory ofanyother party.
However, under amandate fromtheNAFTA Commission, aworking group wastoseekmechanisms
tominimize tradedefence related disputes. NAFTA establishes amechanism forindependent binational
panels toreview finalanti-dumping andcountervailing determinations when suchreview isrequested
byaperson entitled tojudicial review ofthedetermination under thedomestic lawoftheimporting
country.UptoMarch1997,Mexicohasbeeninvolvedin12casesinvolvingbinationalpanels,requested
bothbyMexico oritsNAFTA partners; several cases haveinvolved steelproducts.
(xvi) Safeguard actions
97. Until 1993, Mexico didnothavespecific domestic regulations toimplement safeguard actions
under Article XIXoftheGATT; inthatyearsafeguards wereintroduced aspartofthenewForeign
Trade Law(LCE). TheLCE appears nottoreflect certain provisions oftheWTO Agreement on
Safeguards, forexample, those concerning theextension ofsafeguard measures, theinterval tobe
observed between twomeasures, andmethods forfixing quantitative quotas. However, theauthorities
have noted thattheWTO Agreement onSafeguards hasthestatus ofadomestic law,ineffect
complementing thesafeguard provisions intheLCEoramending those provisions intheevent ofany
apparent divergence.
98. Safeguard provisions mayalsobefound intheNAFTA andthefree-trade agreements signed
between Mexico andCosta Rica, Bolivia, Colombia andVenezuela, aswellasinResolution 70of
theLatin American Integration Association (LAIA). TheNAFTA recognizes twotypes ofsafeguards:
multilateral orglobal (forimports originating inNAFTA andother parties), andbilateral (when the
imported product causing injury originates within NAFTA). TheNAFTA requires itsmembers to
exempt eachother fromanyglobal safeguard action unless theirexports account forasubstantial share
oftotalimports andcause orthreaten serious injury. Thebilateral safeguard permits atemporary
"snap-back" toapplied MFN tariff ratesintheevent ofimport surges resulting fromtariff reductions
orelimination.TheprovisionunderwhichNAFTAimportsmaybeexcludedfrommultilateralsafeguard
measures hasbeenquestioned inWTO fora,asitraises thepossibility thatnon-NAFTA countries "may
beburdened withadisproportionate amount oftrade restriction".32
99. Under theSpecial Safeguard Provisions oftheWTO Agreement onAgriculture, allowing for
theimposition ofanadditional dutyabove thebound tariff levelatapre-determined trigger volume
31WTO document G/ADP/W/13, 11July1995.
32WTO documents WT/REG4/1, 23June 1995, andWT/REG4/1/Add.1, 22July1996.Mexico WT/TPR/S/29
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orpricelevel, Mexico hasdesignated 294eight-digit tariffitems onwhich suchaction maybetaken33;
however, untilnowMexico hasnotmade useofthesafeguard provision. Mexico alsoretained its
righttousethetransitionalsafeguardmechanismundertheprovisionsoftheWTOAgreementonTextiles
andClothing, buthasnotmade useofthisprovision. Mexico hasalsosubmitted thelistofproducts
included inthefirstandsecond phases ofintegration intoGATT 1994 (Chapter IV(4) -textiles
andclothing).
100. Mexico hasnever applied anysafeguard measures under Article XIX oftheGATT.
(Section (iv)(a) above contains adescription oftheuseoftariffincreases asameans ofprotection against
increased imports.)
(xvii) Measures implemented inexporting countries
101. There arenoexport restraint agreements limiting exports fromforeign countries totheMexican
market.
102. According toMexican notifications totheWTO, overthelastfouryears countervailing
investigations haveresulted inprice undertakings byaVenezuelan steelproducer, andengagements
byCanadian andU.S.wheat producers toeliminate subsidies.
(xviii) Balance-of-payments andother measures
103. Mexico hasnoimport restrictions inplace todealwithbalance-of-payments problems andhas
never invoked Article XVIII:B ofGATT. Inresponse tothefinancial crisis of1995, therewasrecourse
tomacroeconomic rather thantotrade policy instruments, incontrast tothe1982 crisis when import
licensing wasextended tocover allimports (Chapter I).
(3) Measures Directly Affecting Exports
(i) Registration, documentation andorigin certification
104. Allexporters must present tothecustoms office anexport declaration accompanied bya
commercial invoice and,ifapplicable, other documents certifying compliance withspecific export
regulations. Exports must behandled byMexican customs brokers.
(ii) Export charges andrelated measures
105. Export taxes areimposed onthef.o.b. value ofgoods. In1992, export taxes werelevied on
24six-digit HSitems; in1997, 33HSitems weresubject tosuchtaxes, including certain wildanimals,
cornflour, sugars, human blood, petroleum products andhistorical heritage goods. Rates ranged from
anadvalorem rateof25percent, to200percent(cornflour); aspecific rateofUS$0.260 perkg.
applied tosugars (Table AIII.1). Atariff ratequota forsugar allows exporters holding certificates
issuedbySECOFItoexportwithoutpayingthespecificexporttariff.UndertheNAFTA,discriminatory
export charges areprohibited except forenergy export taxes under specific conditions; Mexico is,
however, permitted toimpose export taxes onselected basic foodstuffs under certain conditions.
33PartI,Section I,WTO Schedule LXXVII -Mexico.WT/TPR/S/29 Trade Policy Review
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106. Government revenue fromexport taxesisalmost negligible. From 31.1million pesos in1993,
orlessthan0.02percentoftotalfederal budget revenue, itincreased slightly withbooming export
volumes upto1996, when itreached 49.1million pesos, andwasexpected toamount to
81.1million pesos in1997.34Theauthorities indicated thatexport taxes aremaintained toensure the
domestic supply ofbasic goods.
(iii) Minimum prices
107. Nominimum export prices arecurrently usedbyMexico.
(iv) Export licensing
108. Thirty-thee products aresubject topriorexport licensing; theycomprise petroleum products;
animal products, including hides andleather ofwildanimals; andcertain types ofgoldandcoins
(Table AIII.1). Under theNAFTA, Mexico maycontrol logexports andrequire export permits on
products subject toquantitative restrictions, tariffquotas andtariffpreferences adopted ormaintained
byanother party.
(v) Export prohibitions
109. Currently, 46items areprohibited forexport, against 38in1993; these include wildanimals
andrelated products, certain plants, narcotics, tropical timber, andarchaeological goods (Table AIII.1).
Reasons include requirements ofinternational agreements signed byMexico (e.g.theCITES), control
ofdangerous substances (e.g.narcotics), sanitary, phytosanitary orhealth reasons, ortopreserve the
cultural heritage. Mexico alsorestricts exports tocomply withUnited Nations resolutions.
(vi) Export quotas
110. Mexico hasmade nouseofexport quotas since 1993.
(vii) Export cartels, etc.
111. Although monopolies aregenerally prohibited under Mexican competition laws(section (4)),
export associations thatselltheirproducts directly abroad arenotconsidered monopolies, provided
that: (i)suchproducts aretheprincipal source ofwealth produced inaregion, orarenotabasic
commodity; (ii)theproducts areneither soldnordistributed inMexico; (iii)membership isvoluntary;
(iv)permits issued byagencies oftheFederal Government areneither granted nordistributed bysuch
associations; and(v)their incorporation hasbeen authorized. Competition lawsdonotrequire
notification ofsuchassociations (section (4)(i) below). Theauthorities werenotaware oftheexistence
ofanyexport cartels. PEMEX isMexico 'ssoleexporter ofcrude petroleum.
(viii) Voluntary export restraints
112. In1993, Mexico 'sonlyexport restraint agreement wasmaintained withtheUnited States under
theMultifibre Arrangement (MFA). Since theentry intoforce ofNAFTA in1994, suchrestrictions
havebeengoverned bytheprovisions ofthatAgreement, which subject non-originating Mexican goods
toquantitative restrictions; these aretobephased outinstages ending in2004.
34Poder Ejecutivo Federal (1996c), p.60.Mexico WT/TPR/S/29
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(ix) Actions byother countries affecting Mexican exports
113. Theauthorities notethatunder NAFTA, theUnited States maintains quotas oncertain Mexican
exports, suchasorange juice, peanuts, dairy products, brooms, sugars andsyrups, andsome non-
originating textile products subject totransformation inMexico. Thelatter arealsosubject toquota
under Mexico free-trade agreements withBolivia, Costa RicaandColombia.
114. In1995, theMexican authorities provided assistance tomore than250exporting firms subject
toinvestigations inforeign countries forunfair trade practices.35TheGovernment hasparticipated
since1995inthedefence of,andgiven advice to,Mexican exporting firms involved intheagricultural,
steel, chemical andcapital goods industries incasesinvolving anti-dumping, countervailing orsafeguard
measures byforeign governments.36Reflecting itsroleasthemaindestination forMexico 'sexports,
theUnited States accounts formostmeasures affecting Mexican exports, although trademeasures have
alsobeentaken byother trading partners.37
115. InOctober 1996, Mexican tomato growers signed anagreement withtheU.S.Government,
undertaking nottoselltomatoes totheUnited States below apre-determined reference price. The
agreement sought tosettle aU.S.anti-dumping investigation intoimports ofMexican tomatoes which
would haveimposed anti-dumping duties of17.6percent. Mexico andtheUnited States hadheld
consultations onthematter within theWTO framework during 1996 (Chapter II(3)(iii)).
(x) Export subsidies
116. Mexico 'sWTO notification onsubsidies refers toasingle non-agricultural export scheme:
theProgramme ofTemporary Imports toProduce Export Goods (PITEX).38Schemes applied to
agricultural products aredescribed inChapter IV(2). Ingeneral, Mexico promotes exports without
relying ondirect budgetary outlays. Instead, exports aresupported byimport dutyexemptions on
machinery, themaquiladora regime, orbycredits from BANCOMEXT (seebelow).
117. TheunderstandingbetweenMexicoandtheUnitedStatesonsubsidiesandcountervailingduties,
firstsigned in1985 waslastrenewed untilApril 1994; itisnolonger inforce.
(xi) Duty andother taxconcessions
118. Duty concessions oninputs andmachinery aregranted, asexport incentives, under several
programmes administered bySECOFI, including thePITEX andthemaquiladora regime (thelatter
isdescribedinsection(4)(xii)).TheHigh-volumeExportingCompaniesProgramme(ALTEX),benefits
direct andcertain indirect export firms; suchfirms musthaveforeign salesofatleastUS$2 million,
orthesesalesmustaccount formore than40percentoftotalsales. Benefits granted include simplified
fiscal andadministrative procedures suchasimmediate VAT refunds.
35Poder Ejecutivo Federal (1995b), Section 4.1.
36Poder Ejecutivo Federal (1996b), p.168.
37See, forexample, theTrade Policy Reviews ofBrazil, theEuropean Union andtheUnited States.
38WTOdocumentG/SCM/N/3/MEX,21November1996.MexicowasnotasignatorytotheGATTSubsidies
Code.WT/TPR/S/29 Trade Policy Review
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119. TheForeign Trading Companies Programme (ECEX) targets firms specialized inthemarketing
ofMexicanproductsoverseas.TheECEXwasmodifiedinMay1995totrytoimprovetheprogramme's
results (the128firms registered intheprogramme in1996 accounted foronly2percentofnon-oil
exports). Themodifications included azero-rated VAT andstreamlined customs procedures. Further
revisions weremade inApril 1997. ThenewDecree targets twotypes offirms: export promoting
firms, which musthaveaminimum capital equivalent to200,000 Mexican pesos andannual exports
ofmorethanUS$250,000;andexportconsolidatingfirmswhichmusthaveaminimumcapitalequivalent
to2million Mexican pesos andannual exports ofmore thanUS$3 million. Bothtypes offirms may
subscribetoALTEXandPITEX;"consolidating"firmsbenefitfromfinancialassistanceand"promoting"
firms from promotion assistance byBANCOMEXT. Currently, 28firms havebeenregistered, and
firms registered intheformer programme weregiven fourmonths toregister inthenewscheme. Firms
under ECEX programmes alsobenefit fromfaster procedures forVAT refunds andautomatic ALTEX
certificates; theymayalsosubscribe tothePITEX, asdiscussed below.
120. TheProgramme ofTemporary Imports toProduce Export Goods (PITEX) covers thetemporary
importation ofrawmaterials, inputs, machinery andcomponents foruseinthemanufacture ofexports
thisprogramme wasoriginally established foraperiod offiveyears; itwasamended inMay1995
tobring itsduration intolinewithMexico 'sinternational commitments under WTO andNAFTA (see
below). Theamendment alsosought toencourage thesubstitution ofnational inputs forinputs imported
under theprogramme orthemaquiladora scheme andtostreamline administrative procedures forsmall
andmedium-size suppliers offirms benefiting fromthePITEX. Asaresult, firms involved inindirect
exports nowreceive assistance equivalent tothose responsible fordirect exports. Benefits granted
under thePITEX include temporary duty-free imports (ex-ante) andVAT exemption. Requirements
tobenefit fromthePITEX include exporting atleast10percentoftotalsalesandannual foreign sales
exceeding US$500,000. Indirect exporters (firms thatsupply direct exporters) mayalsobeeligible
fortemporary import programmes.
121. Theexpansion ofMexico 'sexports during recent years waslargely based onadvantages gained
through theprogrammes forthetemporary import ofinputs andmachinery usedforexport production.39
According tosome observers, Mexico 'stemporary import regimes havebeenrequired tooffset the
anti-export biasofthecountry 'strade regime andtheyarealsolinked toWTO rules allowing the
reimbursement orelimination ofimport taxes butrestricting theuseofdirect export subsidies.40
Estimates bytheMinistry ofFinance indicate thatsuchsupport reached avalue of3,442 million pesos
in1992(some US$1.1 billion atthe1992average exchange rate).41Datafor1993, thelatest available
totheWTO Secretariat, show thattotalimports under thePITEX reached US$4,864 million thatyear,
ofwhich 17percentinvolved machinery, 2percentequipment, andtherestrelated toother inputs.
Theauthorities indicated thatitwasnotpossible todetermine thevalue ofsubsidies granted through
thePITEX.
122. Theauthorities haveobserved thatfirms under thePITEX andthemaquiladora regime enjoy
ahighly favourable environment, astheirimports arenotsubject tovalue added tax,anti-dumping
orcountervailing duties, while theirexports tootherNAFTA members, ortoothercountries withwhich
39SECOFI (1996), p.24.
40Clavijo andValdivieso (1994), pp.51-53.
41Ministry ofFinance, Apoyos yestímulos fiscales alaindustria .1983-1993, Dirección General dePolítica
deIngresos ,August; presented inClavijo andCasar (1994), Appendix 5.Mexico WT/TPR/S/29
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Mexico hasfree-trade agreements, receive preferential treatment.42However, theNAFTA requires
Mexico toeliminate minimum export requirements anddomestic sales restrictions associated with
temporary import programmes. Asaresult, Mexico willimplement anewscheme toreimburse import
taxes oninputs incorporated intoexports toNAFTA commencing on1January 2001. Taxrefunds
orexemptions under thatscheme willamount tothelesser of:(i)thetariffs thatwould bepaidon
non-regional inputs iftheyweretoremain inMexico, or(ii)thetotalamount ofduties paidtoother
NAFTA members ontheexported good. Exporters willhavetoprovide evidence totheMinistry of
Finance oftheduties paidtoCanada ortheUnited States. Firms apparently willstillbeabletoimport
duty-free inputs andkeepthem inMexico uptotwoyears. Intheviewoftheauthorities, thenew
scheme should avoid distortions within theNorth American market bypreventing thebenefits ofintra-
regional freetrade tobetransferred tonon-NAFTA countries.
123. Although Mexico willnotbeabletogrant dutywaivers subject toperformance requirements,
itcancontinue togrant waivers without demanding thefulfilment ofsuchrequirements. Mexico 's
newtariff-refund system willapply onlytotrade between NAFTA members; thus, exports directed
tonon-NAFTA countries maycontinue tobenefit from theexisting drawback andduty-deferral
programmes.
(xii) Export finance
124. ExportfinanceismainlyprovidedbyBANCOMEXT,theFederalGovernmentbankresponsible
forsupporting theexport sector (Chapter IV(5)). BANCOMEXT provides short, medium andlong-term
financing fortheexport from(andimport into)Mexico ofnon-petroleum products, through loans and
guarantees. BANCOMEXT periodically develops special programmes topromote exports ofselected
industries.
Thefollowing arethemain programmes operated bythebank:
- discounted anddirect loans tofinance working capital andrawmaterial purchases byMexican
manufacturers andexporters; loanmaturity forworking capital doesnotexceed 12months;
- assistance tofinance export sales byproviding Mexican companies withpayment terms
comparable tothose offered internationally; loanmaturity forexport salesaverages 180days;
- financingtoimportgoodsrequiredtomodernizeindustrialplantsandtheirproductionprocesses;
thematurity ofimport credits varies from180daystofiveyears, according totheterms offered
byexport-import banks;
- long-term credits topromote fixed investment toexpand export-oriented production capacity
anddevelop newproduct lines; loanmaturity forfixed investment projects doesnotexceed
20years;
- financial restructuring programmes toassist Mexican export companies whose participation
ininternational markets isrestricted because oftheirinadequate financial structures; this
programme involves refinancing existing short- andmedium-term loans denominated inpesos
orU.S.dollars, withU.S.dollar debthaving amaturity ofupto20years; and
- guarantees (or"bonds"), provided tocommercial banks tosupport Mexican exporters in
international tenders.
42SECOFI (1996), p151.WT/TPR/S/29 Trade Policy Review
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125. Theamount ofcredit provided byBANCOMEXT peaked in1993 atsome US$14.6 billion,
decreasing onlyslightly in1994; however, support fellsharply in1995 and1996(Table III.5). The
earlyhighlevels probably reflected theadoption ofrelatively liberal credit policies, while thesubsequent
fallwaslinked toaconsiderable slow-down ineconomic activity andsteep increase ininterest rates.
During theearlier years, alarge share ofallcredit wasshort term. BANCOMEXT 'scredits appear
tobenefit abroad range ofactivities, although thelargest beneficiaries haveconsistently beenagriculture
andfoodprocessing, mining andmineral processing, andtourism.
Table III.5
BANCOMEXT 'ssupport totheexport sector, 1992-96
(US$ million andpercent)
1992 1993 1994 1995 1996a
Total credit (US$ million) 9,912 14,604 14,183 7,975 6,316
Total credit bytype(percent) 100.0 100.0 100.0 100.0 100.0
Short-term 71.6 72.5 69.9 69.1 55.6
Production 50.0 44.9 40.8 54.0 43.0
Sales 21.6 27.6 29.1 15.1 12.5
Long-term 18.9 20.6 21.9 23.5 40.1
Investment projects 13.7 12.4 13.5 13.5 8.9
Financial consolidation 5.3 8.2 8.4 9.9 31.2
Guarantees 9.5 6.9 8.2 7.4 4.4
Total credit bysector (percent) ... 100.0 100.0 100.0 100.0
Agriculture andfoodprocessing ... 17.7 14.8 18.4 16.5
Fishing ... 0.9 1.2 1.3 1.6
Mining andmineral processing ... 13.3 14.6 17.1 13.9
Tourism ... 4.8 5.8 6.7 12.7
Other manufacturing andservices ... 63.3 63.6 56.5 55.4
... Notavailable.
a Preliminary datatoJune, except fortotalcredit inUS$andbysector.
Source: SECOFI (1996c), p.100; andMexican authorities.
126. Theauthorities stated thatBANCOMEXT offers itsclients "competitive" interest ratestoallow
them toparticipate successfully ininternational markets. Thesetting ofinterest ratestakes account
ofthecostofmoney toBANCOMEXT anditsoperating expenses, including aprofit margin. The
interest ratescharged havevaried considerably since1993, reflecting thevolatility offinancial markets
since late1994. Tobeeligible forexport financing, exporters mustsatisfy a30percentminimum
national-content requirement.
(xiii) Export insurance andguarantees
127. BANCOMEXT provides Mexican exporters andbanks withbothpre-export andpost-export
guarantees. Pre-export guarantee programmes cover loans granted byMexican commercial banks to
Mexican private entities against non-repayment risks. Coverage ranges from50to70percent. Post-
export guarantee programmes cover various categories ofpost-export risk,suchaspolitical riskon
loans extended byMexican banks ortoMexican exporters; coverage ofupto90percentofthetotal
value ofsuchfinancing isgranted. Insurance against commercial risksassociated withloans isprovided
bytheMexican firmCompañía Mexicana deSeguros yCrédito, S.A.
128. Export guarantee facilities arelinked toaminimum national-content requirement of30percent.
129. In1996, export guarantees covered exports withatotalvalue ofUS$143 million; in1995
thetotalhadbeenUS$554 million. Thelargest beneficiaries ofsuchguarantees were (amount inMexico WT/TPR/S/29
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parentheses): manufacturing andservices (US$121 million), mining andmineral processing
(US$18 million), andagro-industries (US$4 million); in1995, therespective amounts hadbeen
US$457 million, US$65 million andUS$32 million.
(xiv) Export promotion andmarketing assistance
130. Exportpromotionactivitiesarecarriedoutbyprivateorganizationsandthepublicsectorthrough
SECOFI andBANCOMEXT. Thelatter provides information, advisory andtraining services; market
development; export promotion andcoordination; andfinancial support. Information, advisory and
capacitation services areprovided through theForeign Trade Service Centre andtheMexican System
ofExternal Promotion (SIMPEX). Thissystem hasconsolidated theexport andinvestment promotion
efforts ofofficial agencies (e.g.SECOFI, BANCOMEXT, NAFIN andtheMexican Investment Board)
toensure theireffective coordination. Export promotion activities implemented during the1980s and
early 1990s inthecontext ofthePROFIEX andPRONAMICE programmes, were replaced bythe
single programme established under the1996 Industrial Policy andForeign Trade Programme.
131. TheJointCommission forExport Promotion (COMPEX), created inJuly1989, coordinates
andundertakes export promotion activities. TheCommission, headed bySECOFI, iscomposed of
representatives from other ministries (Foreign Affairs; Finance; Energy; Agriculture; Transport
andCommunications; andLabour), BANCOMEXT, andfromtheprivate sector. In1995, COMPEX
adopted anewstrategy focusing onmicro, small andmedium-size enterprises, strengthening its
international programmes, andencouraging an"export culture". More recently, theCommission has
increased itsprogrammes todisseminate information onforeign tradeissues andstrengthen theschemes
maintained incollaboration withfederal states through anewdatabase; anewscheme foragriculture,
setupincollaboration withtheMinistry ofAgriculture, became operational inApril 1997. COMPEX
alsoconsolidates public andprivate export promotion projects through theNational Export Guidance
System (SNOE), providing information tobusinesses through 40export guidance bureaus throughout
thecountry.
(xv) Export-performance requirements
132. Export-performance requirements arecontained inthePITEX; theALTEX andECEX
programmes setminimum export salesrequirements (section (xi)above). These programmes areused
byMexico togrant preferential treatment (duty drawback andwaiver ofimport duties) ortopromote
exports. The1993 Foreign Investment Law(Chapter II(3)) eliminated most other performance
requirements: asstated bytheMexican Investment Board, thiswasinlinewithinternational trends,
including theWTO Agreements, toeliminate distortions ininternational trade.43Other export-
performance requirements willbeeliminated onalimited basis under theprovisions oftheNAFTA
(section (xi)above).
(4) Measures Affecting Production andTrade
(i) Competition policy
132. TheentryintoforceoftheEconomicCompetitionLaw(LFCE)andthesubsequentestablishment
oftheFederal Competition Commission (CFC) havemade asignificant contribution toconsolidating
Mexico 'sprivatization programme andthegeneral liberalization oftheeconomy undertaken since the
mid-1980s. Aneffective competition policy hasbecome crucial toensure thattheapparently highmarket
43Mexican Investment Board (1994), p.12.WT/TPR/S/29 Trade Policy Review
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concentration prevailing inanumber ofsectors oftheMexican economy doesnotimpair economic
efficiency.44
133. TheLFCE regulates Article 28oftheConstitution oneconomic competition, monopolies and
freemarket participation. Thelawwaspublished on24December 1992 andcame intoeffect in
June1993 replacing theobsolete Organic LawonMonopolies of1934. TheLFCE 'sobjective isto
protect theprocess ofcompetition andfreemarket participation through theprevention ofmonopolies,
monopolistic practices andother restrictions thatdeter theefficient operation ofthemarket forgoods
andservices. Alleconomic agents aresubject totheLFCE, including agencies ofthefederal, state
ormunicipal administrations andprofessional associations. Article 8oftheLFCE establishes that
monopolies andtaxcorners areprohibited, asarepractices thatdiminish, impair orprevent the
competition andfreeparticipation intheproduction, processing, distribution andmarketing ofgoods
orservices. Forthepurpose ofthelaw,thepowers exercised exclusively bytheStateinthestrategic
sectors described inArticle 28oftheConstitution, intellectual property rights ofartists andinventors,
associations ofworkers formed inaccordance withtherelevant legislation toprotect theirinterests,
andcooperative associations thatselltheirgoods directly abroad, provided thattheycomply withthe
conditions established inArticle 6oftheLFCE, donotconstitute monopolies (section (3)(vii)).
However, Article 4oftheLFCE states thattheagencies andbodies responsible forthefunctions in
strategic areas aresubject totheprovision oftheFLEC regarding actsnotspecifically considered as
strategic sectors.45Moreover, evenwhen thesectors andactivities referred toinArticles 4to6cannot
bechallenged asmonopolies, theymaystillbechallenged forcarrying outmonopolistic practices which
diminish, impair orprevent competition andfreemarket participation.
134. TheLFCE empowers theSECOFI tosetthemaximum priceofproducts andservices considered
essential forthedomestic economy orformassconsumption, inorder toprevent shortages. Forthat
purpose, SECOFI isalsoauthorized toagree orcoordinate thenecessary actions withtheproducers
anddistributors concerned. Such behaviour isnotdeemed asaviolation ofcompetition law,but
SECOFI, when acting pursuant tothisprovision, musttrytominimize theeffects oncompetition and
freemarket participation. Inthisregard, theLFCE alsoprovides thattheFederal Consumer Protection
Agency, under thesupervision oftheMinistry, shallberesponsible fortheverification andsurveillance
ofthemaximum prices determined bythelatter, inaccordance withtheFederal Consumer Protection
Act.
135. TheLFCE created theCFC asanautonomous administrative entity ofSECOFI responsible
fortheprevention,investigationandcontestingofmonopolies,monopolisticpracticesandanti-competitive
mergers.Forthispurpose,theCFCisempoweredtoconductinvestigations,issueadministrativerulings,
andimposeremediestoanti-competitivemarketpractices.TheCFCiscomposedoffivecommissioners,
appointed fortenyears bythePresident ofMexico. Proceedings maybeinitiated exofficio oratthe
44Ithasbeen noted that"In1992, twenty-five companies accounted for47.1 percentofMexico 'sGDP"
andthat"One firm, forexample, controls 90percentofthemarket forglass inMexico and100percentof
themarket forfibreglass. Asingle firmcontrols over60percentofthemarket ofcement. Three banks account
for73.9percentoftotalfundsintheMexicanbankingsystem.Fivefirmsaccountedforapproximately70percent
oftotalsales receipts inMexico 'sconstruction industry in1991. Thishighlevel ofindustrial concentration has
been maintained orexacerbated bytheongoing (andotherwise generally salutary) process ofprivatization".
(Newberg, 1994, p.603.)
45Activities defined asstrategic under Article 28,andthusreserved exclusively totheState, include postal
services,telegraphandradio-telegraphservices,petroleumandotherhydrocarbons,basicpetrochemicals,radioactive
minerals, generation ofnuclear energy, electricity transmission.Mexico WT/TPR/S/29
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request ofaninterested party. Mergers exceeding certain pre-established thresholds mustbenotified.
Proceedings aresubject toestablished timelimits. Once analleged responsible party issummoned,
ithas30(calendar) daysforthesubmission ofpleas; upon completion ofthefile,theCommission
must issue adecision within 60days. TheCommission mayrequest additional information within
20daysafterreceiving anotification. Theinterested parties must provide suchinformation within
15daysunless anextension isjustified. TheCommission mustissue itsdecision within 45days; in
exceptional cases, thePresident oftheCFC mayorder anextension of60days. IftheCommission
failstorender adecision within thestatutory period, itisdeemed tohaveconsented toatransaction.
136. TheLFCE distinguishes twobroad categories ofillegal behaviour (i)absolute; and(ii)relative
monopolistic practices. Absolute monopolistic practices include agreements between competitors to
fixprices, torestrict production ordistribution, todivide markets ortorigbidsoncontracts. These
practices canbedenounced byanyperson andareconsidered tobeanti-competitive perse.Onthe
other hand, relative monopolistic practices mayonlybedenounced byanaffected party; theyinclude
vertical restraints suchasexclusive dealing and"tie-in" agreements, aswellascertain unilateral conduct,
suchaspricediscrimination andpredation. Incertain cases, thistypeofconduct isconsidered toproduce
pro-competitiveeffects;therefore,suchcasesrequiremoredetailedexaminationthrougharule-of-reason
analysis. Moreover, these cases areonlyconsidered illegal when theeconomic agent involved inthe
conduct hassubstantial power intherelevant market. TheLFCE establishes finesofuptotheequivalent
of375,000 times theminimum general wage prevailing inMexico City(some 10million pesos) for
having engaged inabsolute monopolistic practices andsanctions ofupto225,000 times suchwage
forengaging inrelative monopolistic practices.
137. Onmergers, theLFCE hasestablished apolicy based onpriornotification, intended toprevent
concentrations whose purpose oreffect istodiminish, impair orimpede competition andfreemarket
participation. Inorder todetermine whether aconcentration needs tobecontested orpenalized, the
Commission evaluates these operations under arule-of-reason analysis. TheLFCE considers fines
ofupto225,000 times theminimum wageinMexico Cityforparticipating inaconcentration prohibited
bythisLaw, andafineupto100,000 times suchwage forfailures tonotify aconcentration tothe
Commission. Inaddition, theLFCE gives theCFCauthority toimpose conditions ortoblock parties
fromproceeding withaproposed merger andtodissolve acompleted merger ororder apartial ortotal
divestiture.
138. TheLFCE provides forreconsideration oftheCFC'sresolutions before theCommission itself
toamend orsustain anappealed decision. Inaddition, economic agents havetherighttostartanaction
(amparo )before aFederal District Court totesttheconstitutionality oftheLFCE ortheCommission
itself, andtoreview whether theproceedings before theCommission aredeveloped inaccordance with
constitutionalrights.SomeCFCdecisionshavebeenreviewedundertheseprovisions;however,actions
questioning theCommission 'sconstitutionality havenever continued. Theauthorities expect thefederal
courts toplayamore important roleinthefuture, intheinterpretation oftheLFCE.
139. LFCE empowers theCommission toreview andcomment upon existing laws, regulations or
amendments. Asaresult, theCFC collaborates withother public authorities inthedevelopment of
newregulatory frameworks andpolicies, aswellasprogrammes andadministrative actions. For
example, theCommission recently handed down opinions about long-distance telephone regulations,
therulesfortheairwaves auctions andtherulesfortheprivatization oftherailway system. Although
these opinions arenotlegally binding, theauthorities believe thattheyenhance awareness ofthe
importance ofcompetition criteria intheday-to-day activities ofthepublic sector. Inthisrespect,
theIndustrial Policy andForeign Trade Programme (PPICE -Chapter II(2)) establishes thattheCFCWT/TPR/S/29 Trade Policy Review
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mustcollaborate withother federal andstateagencies toeliminate excessive regulation oftheeconomy,
particularlywheresuchregulationconstitutesanartificialbarriertoentryorgrantspreferentialtreatment.
140. TheMexican authorities consider competition policy animportant tooltomaintain openaccess
tointernational markets. Inthisrespect, thePPICE intends tostrengthen thecollaboration between
theCFC andSECOFI ontheapplication oftrade defence measures. Theauthorities noted thatboth
agencies maintain acontinuous dialogue through CFCparticipation intheForeign Trade Commission
(COCEX),givingopinionsonSECOFI'sfinalresolutionsonanti-dumping,countervailingandsafeguard
investigations before theyareissued. Views arealsoexchanged onother problems suchasmarket
access. ThePPICE considers thatbroad communication among competition authorities mayserve
asauseful tooltoprevent monopolistic practices originated abroad. Hence, theCFCpromotes active
communication withitscounterparts andsupports international cooperation within theframework of
relevant international fora. Inthisregard, theauthorities drew attention tothecooperation principles
established inNAFTA 'sArticle 1501aswellastheOECD 'sRecommendation Regarding Cooperation
withRespect toAnti-Competitive Practices Affecting International Trade.
141. NAFTA Chapter 15setstheframework forcooperation andenforcement ofcompetition law
inthefree-trade areatoenhance consultation onmutual legalassistance, notification andinformation
exchange related tocompetition policy. Inthisrespect, NAFTA Article 1504 establishes aWorking
Group onTrade andCompetition, whose objective istoreport onissues concerning therelationship
between trade andcompetition inthefree-trade areaandtomake recommendations totheNAFTA
FreeTrade Commission onfurther work nolaterthan31December 1998. Todate, theGroup has
finalized studies defining aframework fordiscussions, comparing competition law,andcovering other
specific issues relevant totradeandcompetition. Particular emphasis hasbeengiven totheidentification
ofdifferences incompetition lawandpolicies between theNAFTA members toassess whether there
areimplications ontrade among thethree contracting parties.
142. Between June1993andJune1996theCFCprocessed 754files,including mergers, acquisitions,
privatizations, monopolistic practices, other restrictions tocompetition andconsultations, ofwhich
675wereconcluded. Monopolistic practices andother restrictions tocompetition accounted for125
cases. Thenumber ofpre-merger notifications received amounted to305,ofwhich 285wereresolved.
Thedecisions issued included 266cases inwhich noobjections were made, 18inwhich conditions
wereimposed, andonethatwasrejected. Allcases wereconcluded within theestablished timelimits.
There weretwoexofficio investigations intostate-owned companies, onerelating toairport services
andtheother toPEMEX-Petrochemicals. During thisperiod theCommission examined anumber
ofhighvisibility cases including thefollowing:
(i) Anexofficio investigation ofthecompetitive conditions inthebankcredit-card market, which
concluded withtheexecution ofaconsent agreement between themain national banks that
issue credit cards. Thisagreement established atransition period toadapt theoperation of
thepayment systems tothenewcompetition provisions.
(ii) Astudy ofthegasoline service stations market toadapt gasoline station operations totheLFCE.
Thestudy demonstrated thatitwasnecessary toincrease competition inthismarket andthat
transparent guidelines were required forthecontracts andconditions established between
PEMEX-Refining andprivate parties wishing toparticipate inthisactivity. Therefore, the
Commission andPEMEX-Refining executed aconsent agreement which setsforththenecessary
conditions tomeetconsumer demand more efficiently, introducing competition criteria forthe
establishment ofnewgasoline stations andsalesofcomplementary goods andservices.Mexico WT/TPR/S/29
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(iii) Anevaluation ofthemerger between thetelephone firmSERCOTEL, asubsidiary ofTELMEX
(Chapter IV(5), andEmpresas Cablevisión S.A. deC.V., acable company subsidiary of
Televisa, thecountry 'slargest television company. Inthiscase, theCommission decided to
setconditions ontheproposed concentration tosecure thecompetition process.
(iv) Anassessment ofthemerger between Kimberly Clark Mexico andCrisoba, following the
concentration between Kimberly Clark Corporation andScott Paper; conditions weresetby
theCommission.
143. Although theenactment oftheLFCE isrelatively recent, theCFC hasplayed animportant
roleinstrengthening theprocess ofcompetition inmarkets forgoods andservices inMexico. While
therehasbeensomecriticism ofCFCdecisions, thismaybeattributed totheindividual interests affected
andbecause ofinherent difficulties involved intheapplication ofcompetition policy inparticularly
complex cases.
(ii) State-trading, public enterprises andprivatization
144. Stateinvolvement intheproduction andsupply ofgoods andnon-public services hasdeclined
considerably since1982when theprocess offederal public divestiture started. Between December 1982
andJuly1996, theprocess hadaffected some 1,078 entities (including divestitures inprogress), of
which 318involved thesaleofcompanies, 362liquidations, 174extinctions, 89mergers, 39transfers,
and87mandatory divestitures when entities didnotmeettherequirements established intheFederal
LawofState-Owned Enterprises. Asaresult, thenumber offederal entities fellto230inJuly1996
(ofwhich 35wereintheprocess ofdivestiture), fromatotalof1,155 in1982. Entities stillinoperation
comprise 76decentralized organizations, 97enterprises withmajority Stateparticipation and22public
trusts. State corporations employed justover700,000 persons attheendof1995; interms of
employment thelargest entities were involved inthesupply ofsocial security services (IMSS with
49percentoftotalparastatalemployment,andISSSTEwith11percent),energy(PEMEX,18percent,
andCFE, 7percent), andrailways (FNM, 7percent).46
145. Between 1980 andDecember 1996 justoverUS$27 billion were collected from thesaleof
State participation incompanies andfromconcessions ofservices. Divestitures haveincluded firms
inprimary activities (fishing andmining), manufacturing (textiles, sugar andsteelmills) andservices
(banking, airlines andtelephones); privatization hasbeen lessextensive intheenergy sector
(ChapterIV(3)).Recentprivatizationshavebeenmorecomplexastheyhaveaffectedactivitiespreviously
considered strategic under theConstitution; moreover, since several oftheentities affected were
operating under monopolistic arrangements, ithasoften been necessary toestablish asatisfactory
regulatory framework.
146. Articles 27and28oftheConstitution define various areas considered strategic andreserved
exclusively totheState. Under theseprovisions, certain hydrocarbons andbasicpetrochemical-related
activities, aswellasthepublic distribution ofelectricity, havebeenreserved forthenational petroleum
andelectricity companies, PEMEX andtheCFE(Chapter IV(3)).
147. Article28oftheConstitutionalsoprovidesthelegalbasisforCONASUPOtoestablishguidelines
forthemaximumpriceofgoodsconsideredessentialforthenationaleconomyor"popular"consumption,
46Seetheglossary forthecomplete names oftheentities listed (data from Poder Ejecutivo Federal (1996c),
p.45).WT/TPR/S/29 Trade Policy Review
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aswellasthemechanisms forthedistribution ofsuchgoods, avoiding unnecessary intermediation
which could result insupply shortages orprice rises. Thecompany imports milkpowder andother
foodstuffs suchassorghum andsoybeans; mostimport licences (import certificates aftertariffication)
granted bySECOFI fortheimportation ofmilkpowder, maize andkidney beans havetraditionally
beengiven toCONASUPO. CONASUPO setstheprices formilkreconstituted from powder ona
cost-recovery basis, butthese prices aresubject toreview bySECOFI. Theauthorities haveindicated
totheWTO Secretariat thattheprivate sector isalsoallowed toimport powder milksubject onlyto
thepayment oftherespective tariffs (about 139percentadvalorem equivalent).
148. Theprevious Trade Policy Review ofMexico noted that,according toGovernment information,
eight state-trading companies operated inMexico, ofwhich CONASUPO wasthemost important.
Under thenewWTO notification requirements, theMexican authorities haveindicated thatthere are
nostate-trading enterprises.47
(iii) Marketing andpricing arrangements
149. Inearly 1997, price controls were used onlyinrelation tocornflour, corntortillas and
pharmaceuticals; thisfollowed thegradual elimination ofcontrols applied in1993tosugar, beef,ham,
wheat flour, milk, corn, cornflour, bread, fresh fish,softdrinks, bottles andfoodcontainers, aswell
aschemicals andbasicpharmaceuticals usedinmedicines. Pricecontrols areapplied equally todomestic
andimported products. Noproducts havebeensubject toprice registration requirements since 1993.
150. Thesystem ofprice controls forpharmaceutical products soldintheprivate domestic market
hasbeensubstantially altered since July1993; before thatdate,theprice ofeachproduct wasbased
onproduction costs, plusfixed margins tocover producers 'profits, marketing anddistribution. The
current system requires eachproducer toadopt aformula forupdating prices, based onmovements
intheconsumer andproducer price indices aswellasthepesoexchange rate. Theformula cannot
bechanged onceithasbeenagreed bytheauthorities. Within thelimits setbytheformula, firms
arefreetomodify prices astheydeem appropriate; however, atleastthreemonths mustelapse between
pricechanges, andattheendofeachyeartheannual average ofpriceincrements mustnothaveexceeded
theincrement resulting fromtheagreed updating formula. Thedomestic pricefornewpharmaceuticals
whose main active constituent isnotmarketed inMexico maybefreely established bythefirm, but
itmustnotexceed theworld price; forother products, thepricemustbeproportional tothatofsimilar
products already intheMexican market.
151. Official prices fortortillas areestablished foreachofthree regions intowhich Mexico has
beendivided forthispurpose. Price controls oncornflour wereeliminated inOctober 1995, except
forflourinbulkforuseinthetortilla-making industry. Until March 1996, differential regional flour
prices wereapplied, asfortortilla prices; sincethen,asingle pricehasbeensetforthewhole country.
152. Maize andkidney beans were subject toprice supports in1993; agricultural policies have
increasingly favoured income support measures overprice support (Chapter IV(2)).
153. PricecontrolsonmotorvehicleswereeliminatedinNovember1993;however,sinceApril1990
theGovernment anddomestic vehicle assemblers havemaintained aprice-fixing agreement under which
prices inMexico aresetwithreference totheU.S.price ofsimilar models soldintheUnited States.
47Notification pursuant toArticle XVII:4(a) ofGATT 1994 andparagraph 1oftheUnderstanding onthe
Interpretation ofArticle XVII. WTO document G/STR/N/1/MEX, 10March 1997.Mexico WT/TPR/S/29
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Allgasolines, diesel, otherpetroleum-based fuels, aswellaspetrochemicals aresubject toofficial prices
administered bytheMinistry ofFinance. Tariffs forpublic services aresetbytheMinistries ofFinance
orEconomic Development ofeachFederal State andtheFederal District.
(iv) Production controls
154. Theauthorities indicated thattheproduction ofenergy, basic petrochemicals oragricultural
products wasnotsubject tocontrols. However, theproduction levels forcrude petroleum aredecided
bytheGovernment. Petroleum production issetatlevels "inconcordance withthegeneral principles
ofMexico 'seconomic policy"; production ofrefined petroleum products isafunction ofprocessing
capacity andthevolume ofcrude destined forrefining.
(v) Local-content schemes
155. Local-content requirements aremaintained formotor vehicles under aspecial regime topromote
theuseofparts andcomponents produced bythedomestic automotive parts industry (section (xiv)
below). Eligibility conditions forofficial export finance andexport credit guarantees mayalsoinclude
minimum national content requirements (section (3)(xii) and(xiii)). Other schemes seektoincrease
theparticipation ofMexican suppliers indomestic public tendering (section (vi)below) orinthein-bond
(maquiladora )industry (section (xii)below). TheNAFTA provides foraregional value content (RVC)
forexporters inMexico wishing tobenefit frompreferential ratesunder theAgreement (section (2)(iii)).
(vi) Government procurement
156. PolicyobjectivesongovernmentprocurementarespelledoutintheIndustrialPolicyandForeign
Trade Programme (PPICE), which supports greater participation ofthenational industry ingovernment
procurement.ThePPICEproposestopromotestrategicalliances,supportedbythenationaldevelopment
banks, toallow national suppliers andbuyers toestablish direct interactions andthejointformulation
ofobjectives andproject planning. Theauthorities expect those alliances toincrease theprofitability
ofconstruction andindustrial firms, improve quality, lower theprice ofprojects andincrease the
participation ofdomestic suppliers inpublic procurement.48
157. Thebasic legal framework forgovernment procurement isdefined inArticle 134ofthe
Constitution, which establishes thatthepublic purchase ofgoods andservices must, ingeneral, be
undertaken through public tenders involving sealed offers. These guidelines areimplemented through
various laws, mainly theLawonPublic Procurement andWorks, Regulations totheLawonPurchases,
Leasing andSupply ofServices Relating toMovables/Property, Regulation totheLawonPublic Works,
andthespecific chapters ongovernment procurement included inthefree-trade agreements concluded
byMexico. TheLawonPublic Procurement andWorks (LAOP) of30December 1993, abrogating
previous legislation onthematter, defines government procurement asincluding stateexpenditure on
andexecution, preservation, maintenance andcontrol ofgoods, services andconstruction services
contractedbyfederalgovernmententities,includingministries,administrativedepartments,decentralized
agencies andgovernment enterprises. Thepublic procurement procedures provided forintheLAOP
aredescribed inBoxIII.1.
48SECOFI (1996), p.83.WT/TPR/S/29 Trade Policy Review
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BoxIII.1: Public procurement procedures
TheLAOP provides fortwotypes ofprocurement procedures: (i)public tendering inwhich all
interested suppliers mayparticipate, and(ii)restricted invitations under which anentity may contract
suppliers individually either byinvitation ofatleast three suppliers orbyadirect award ofthecontract.
Restricted invitations may beused, inter alia,forcontracts relating totheprotection ofpatents or
copyrights; consulting services involving confidential information; andpurchases made withaview to
commercial resale bygovernment-owned retail stores. Public entities mayuserestricted invitations when
theestimated value ofthecontract doesnotexceed anamount specified annually inthefederal budget for
each entity.
Noregistration, nationality orresidence prerequisites forparticipating intenders areimposed on
suppliers; lists orregisters ofapproved suppliers arenotused.
Public invitations totender arepublished (inSpanish) intheOfficial Journal andindomestic newspapers;
restricted invitations arenotpublished. Tenders financed entirely orpartly byforeign credits are
published according totheguidelines ofthecredit institution. Offers must besubmitted inwriting in
sealed envelopes. Time-limits ofatleast40days following thedateofpublication ofatender invitation
areallowed inrelation tosubmissions ofinternational bidsforpurchases, leasing, services andpublic
works, andwith respect todomestic tenders forpublic works. Thetime-limit fordomestic tenders for
purchases, leasing andservices isatleast 15calendar days following thepublication ofthetender; this
period maybereduced incases ofurgency justified bythepurchasing entity. Parties participating in
tenders must provide bidsecurity andguarantees.
Contracts areawarded onthebasis ofthelowest price among thebidsmeeting thespecified technical
requirements. Thecriteria applied totheevaluation oftenders aredefined intheinvitation totender and
thebidding conditions; entities arenotpermitted tonegotiate theprovisions contained inthebidding
conditions. Tenders must besubmitted intwosealed envelopes: onecontaining thedocumentation to
identify thebidder andadescription oftherequired technical specifications oftheproduct orservice in
question, andthesecond containing theprice bidtogether withthebidsecurity document. Theenvelope
containing theprice bidisopened only fortenders whose technical characteristics have been found to
meet thespecified requirements. Allbidsareopened inthepresence oftheparticipants.
Thecontracting agency must supply thenon-winning bidders, inwriting, with thereasons forthenon
selection oftheir bid. Within 72days following thedateoftheaward, thecontracting agency must
publish intheOfficial Journal theidentity anddetails ofthewinning bid. Complaints against theaward
ofacontract may belodged with Ministry ofComptrollership andAdministrative Development
(SECODAM).
158. Government procurement legislation doesnotestablish quantitative preferences fornational
overforeign suppliers orgoods, since onlynational suppliers anddomestic goods mayparticipate in
national public tenders. National suppliers aredefined asenterprises ornatural persons incorporated
underMexicanlegislation;domesticgoodsarethosecontainingatleast50percentofdomesticcontent.49
International tenders, i.e.those inwhich domestic andforeign bidders mayparticipate, mayonlybe
usedwhere theyaremandatory under international agreements; ifmarket research bythetendering
agency shows thattherearenoappropriate national suppliers; when theresources areobtained through
foreign credits; orwhen thecontract isspecifically covered byinternational agreements. Moreover,
theLAOP stipulates thatforeign suppliers mayberefused therighttoparticipate ininternational tenders
49Domestic goods donotinclude foreign goods which aresimply packaged, packed, labelled, diluted inwater
oranyother substance which doesnotaltertheir characteristics, orassembled orputtogether inthecountry.Mexico WT/TPR/S/29
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when anagreement hasnotbeenconcluded withtheircountry oforigin, orthatcountry doesnotgrant
reciprocal treatment toMexican suppliers.
159. Thefollowinggovernmentagencieshaveresponsibilityforimplementinggovernmentprocurement
legislation: theMinistry ofFinance, SECODAM andSECOFI. There isnocentral procurement office
inMexico: federal government agencies, statecorporations andFederal States areautonomous inthe
planning andcarrying outofpublic purchases.
160. TheSecretariat report fortheprevious Trade Policy Review ofMexico noted thatprior
authorization fromSECOFI wasrequired forpublic sector imports when thepurchasing entity belonged
tothecentral government; suchauthorizations wereautomatic forgoods requiring noimport licences.
Under theLAOP nopreferences aregranted either inrelation totaxes, customs duties, other charges,
orrestrictions andformalities related toimport regulations. Theauthorities indicated thatprocurement
isnotsubject tooffset provisions, suchastechnology transfer orcountertrade requirements.
161. Datafor1994 show thatstatecorporations account forabout 80percentofthetotalvalue
ofpublic procurement, while ministries andother federal agencies account fortheremainder
(Table III.6). Thenational oilcompany, PEMEX, accounted forthelargest share, almost onethird
ofthetotal, followed farbehind bythefederal power utility, CFE. Large purchases werealsomade
byhealth-related entities (theMinistry ofHealth, theIMSS, ISSSTE andISSFAM) andbodies associated
withtheprovision oftelecommunications andtransport services (theMinistry ofCommunications and
Transport, theInstitute ofTelecommunications, Telecommunications ofMexico, FNM, andASA).50
Nodatawere available onpurchases bysub-federal agencies orbytypeofprocurement.
162. Mexico isnotamember ofthePlurilateral Agreement onGovernment Procurement, butthe
authorities indicated thatMexico waswilling toconsider subscribing toanynewagreement on
government procurement.51Mexico wasnotasignatory totheGATT Government Procurement
Agreement.
163. Provisions ongovernment procurement arecontained intheNAFTA andMexico 'sfree-trade
agreements withBolivia, Costa Rica, andColombia andVenezuela (G-3). Theauthorities havenoted
thatthose agreements weregradually extending international disciplines andtransparency toagrowing
proportion ofMexico 'sgovernment purchases.52
164. Under theNAFTA, which covers onlypurchasing bytheFederal Government, bothPEMEX
andtheCFEwererequired toopenup50percentoftheirprocurement contracts tocompetition from
Canadian andU.S. companies, subject tocertain exclusions; 70percentofPEMEX andCFE
procurement contracts mustbeopened aftereightyears, andaftertenyears alltransitory procurement
restrictionsmustbeeliminated.ExceptforPEMEXandCFE,Mexicomaysetasidefromtheobligations
oftheNAFTA procurement contracts withaglobal annual value ofuptoUS$1 billion untiltheend
of2002. After thatdate,thevalue ofset-asides willincrease toUS$1.2 billion, andMexico maythen
include PEMEX andtheCFEcontracts. TheNAFTA Agreement provides foranindependent review
authority, which ismandated toreceive complaints, conduct enquiries andmake recommendations
intheevent ofdisputes. InMexico, SEDOCAM constitutes suchauthority.
50SeeChapter IVforfurther information onthese telecommunications andtransport related entities
51SeealsoWTO document WT/REG4/1, 23June 1995.
52SECOFI (1996), p.81-2.WT/TPR/S/29 Trade Policy Review
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Table III.6
Public procurement, 1994
(US$ million andpercent)
Value Percent
Ministry ofCommunications andTransport 552.5 6.7
Mexican Institute ofCommunications 372.8 4.5
Ministry ofHealth 176.2 2.1
Ministry ofAgriculture 165.4 2.0
Ministry oftheNavy 111.3 1.3
National Institute ofStatistics, Geography andInformatics 84.2 1.0
Other Agencies 213.0 2.6
AllFederal Government Agencies 1,675.4 20.2
Petróleos Mexicanos (PEMEX) 2,683.0 32.3
Mexican Institute ofSocial Security (IMSS) 857.9 10.3
Federal Electricity Commission (CFE) 839.7 10.1
National Council forEducation Promotion 747.7 9.0
Administrative Committee fortheSchool Construction Federal Programme 436.7 5.3
National Commission forFreeTextbooks 195.4 2.4
National Railroads ofMexico 139.8 1.7
National System fortheIntegral Development oftheFamily 88.9 1.1
Paper Producer andImporter Company 70.9 0.9
National Commission forAridZones 61.6 0.7
Industrialized Milk (CONASUPO) 60.4 0.7
State Workers Social Security Institute (ISSSTE) 57.7 0.7
Telecommunications ofMexico 52.5 0.6
Airports andAuxiliary Services (ASA) 49.5 0.6
Social Security Institute fortheArmed Forces (ISSFAM) 47.7 0.6
Other enterprises 242.0 2.9
Allstate-owned enterprises 6,631.4 79.8
Allpublic procurement 8,306.8 100.0
Source: Mexican authorities.
(vii) Production subsidies, taxconcessions
165. Mexico hasinformed theWTO thatitmaintains nomeasures notifiable under Article XVI:1
oftheGATT 1994orArticle 25oftheAgreement onSubsidies andCountervailing Measures, except
fortheProgramme ofTemporary Imports toProduce Export Goods (PITEX) andcertain programmes
intheagriculturalsector.53ThePITEXisdescribedinsection(3)(xi);agriculturalsupportsarediscussed
inChapter IV(2).
166. The1989 programme tosupport theproduction ofautomobiles for"popular consumption"
remains inplace; themotor vehicle industry alsobenefits from other taxconcessions andaspecial
import regime (Chapter IV(4)). Fiscal incentives forthecomputer industry wereeliminated inearly
1993.
167. Adocument released withtheannual statement toCongress bythePresident ofMexico explains
thatassistance isusedtosupport thedevelopment ofpriority activities ofgeneral interest, andtoprovide
53SeealsoWTO document G/SCM/N/3/MEX, 21November 1996.Mexico WT/TPR/S/29
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basicgoods andservices atprices below theirmarket levelorproduction cost.54Government assistance
amounted tosome 30.1billion pesos (about US$3.9 billion) during 199655;themain support was
provided through:
- CONASUPO, which spent some 6,460 million pesos asageneralized subsidy totortilla
consumers, andforthedistribution ofcorninrural areas;
- Apoyos yServicios alaComercialización Agropecuaria (ASERCA) which provided subsidies
amountingtoabout7,557millionpesostosupportagriculturalproductionandtheflourindustry;
- DICONSA,whichused2,389millionpesosonprogrammestosupplybasicfoodstolow-income
groups;
- thepower utility fortheMexico Citymetropolitan area,LuzyFuerza delCentro ,which used
about 3,942 million pesos tocover itsoperational deficit;
- thenational railway company, FNM, which wasgranted 2,073 million pesos tocover its
operational deficits;
- thefederal road agency, Caminos yPuentes Federales deIngresos yServicios Conexos
(CPFISC), which applied about 3,015 million pesos tostrengthen itstrustfunds forroads; and
- thefederal power utility CFE, which needed some 383million pesos tocover subsidized
electricity ratesfordomestic, industrial andagricultural producers.
Other assistance amounted to4,297 million pesos andwasusedmainly tosupport milkprogrammes
forchildren andother activities suchastheinterest ratedifferentials maintained byBANRURAL.
168. According tothesame document, theGovernment made transfers amounting to44.8billion
pesos (about US$5.8 billion) inthefirsthalfof1996 tosupport educational, health andother public
services, andtomaintain theproduction andservice levels ofstatecorporations andfederal organisms.
During thatperiod, transfers toorganisms andenterprises under indirect budget control amounted to
close to22billion pesos, orabout halfoftotalfederal transfers, while transfers toorganisations and
enterprises under direct budget control reached justover2.3billion pesos.
169. Datafrom theMinistry ofFinance show thattheGovernment usedclose to80billion pesos
infinancial aid,subsidies andtransfers granted tostatecorporations during thefirstninemonths of
1996.56Thetotalwasdistributed asfollows:
- financial aid(ayudas )amounting to1.5billion pesos, mostly forsocial programmes;
54Poder Ejecutivo Federal (1996c), p.66.
55Notincluding theLegislative andJudiciary andautonomous agencies.
56ElEconomista, 24October 1996.WT/TPR/S/29 Trade Policy Review
Page 82
- subsidies, equivalent tosome 15.5billion pesos, 54percentofwhich wasdestined forentities
under direct budget control (notably CFE, CONASUPO, CPFISC andFNM), andtherest
fororganizationsunderindirectbudgetcontrol(mainlyASERCA,DICONSAandBANRURAL);
and
- transfers, reaching some 63billion pesos financed suchactivities aseducation andirrigation
projects.
(viii) Credit programmes
170. Asdetailed inthebanking section ofChapter IV(5), thenumber ofofficial credit programmes
isrelatively large, withspecial financing programmes available through various specialized institutions,
notably thenational foreign tradebank, BANCOMEXT, andthenational development bank, NAFIN.
Credit fortheagricultural sector isalsodirected through thesector 'sdevelopment bank, BANRURAL,
andvarious specific trusts (Chapter IV(2)). Therelative importance ofdevelopment banks inoverall
financing increased markedly between 1993 and1996: thetotalaccumulated financing granted by
development banks increased fromtheequivalent ofonethirdofthefinancing fromcommercial banks
in1993, toalmost halfin1995 and1996.
171. Mostofficial credit schemes would appear tosetinterest ratesatlevels thatensure costrecovery,
yetoffering implicit assistance bycharging interest atbelow-market rates. Quantifying anysuch
assistance isdifficult asmarket interest ratesreflect notonlythecostofmoney tolending institutions
butalsothecostsandrisksassociated withspecific debtors andprojects. Interest ratesonagricultural
loans wereinthepastmuch lower thanratesapplied toothersectors andthusinvolved subsidized credit;
thisstillappears tobethecase, withavailable estimates showing BANRURAL receiving subsidies
of1,369 million pesos during thefirsthalfof1996 tofinance interest ratedifferentials andother
activities. Special programmes, established infavour ofmicro andsmall enterprises, mayalsoinvolve
adegree ofassistance. However, noestimates areavailable ofthelevel ofassistance, nor,more
generally, ofthesupport provided through other official credit programmes. Given theapparent
importanceattainedbysuchprogrammesinrecentyears,explicitassistanceestimateswouldsignificantly
increase thetransparency ofgovernment support ingeneral.
(ix) Adjustment assistance
172. TheSecretariatreportforthepreviousTradePolicyReviewofMexiconotedthattheGovernment
maintained various adjustment programmes aimed atmodernizing industries considered torequire
additional (transitional) assistance toadapt tothecountry 'sneweconomic conditions. These industries
included motor vehicles, specialty steels, pharmaceuticals, textiles, garments, footwear andcomputers.
Asdiscussed inChapter IV(4), theadjustment programme forthecomputer hardware industry expired
inDecember 1993; other sectoral programmes stillinplace areintended toprovide temporary support
while adjustment takesplace, forexample, inthetextiles, garments andfootwear industries. Supporting
adjustment isalsoanaimoftheIndustrial Policy andForeign Trade Programme (PPICE), including
through thetemporary increase ofeffective levels ofprotection toboost profitability.
173. WithintheframeworkoftheStability,CompetitivenessandEmploymentPact(PECE),anumber
ofprogrammes havebeenimplemented toimprove thecompetitiveness ofvarious industries andtheir
degree ofintegration. Following thefinancial crisis of1994, thecreation ofalternative employment
hasbecome apriority, andtheGovernment hasprovided financial support forthecreation and
consolidation ofso-called "social sector enterprises" engaged inactivities suchasagriculture, fishingMexico WT/TPR/S/29
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andforestry. Special programmes havealsobeenestablished toprovide assistance fordrought-affected
agricultural areas (Chapter IV(2)).
174. Micro, small andmedium-sized enterprises asagroup playanimportant roleinMexico 's
economy, accounting forabout 78percentofformal employment and99percentofregistered
establishments.57These enterprises havebenefited fromfinancial support tohelpthem copewiththe
sharp increase ininterest ratesin1995. Theadopted measures aimtohelpwithloanrestructuring,
toprovide alternative payment mechanisms andtosupply newlinesofcredit. Inorder todesign and
coordinate support measures formicro, small andmedium-sized enterprises, theNational Council for
theMicro-,Small-andMedium-sizedEnterprises(CNMPME),establishedinMay1995,hasparticipation
from several ministries; NAFIN, BANCOMEXT, andvarious private sector organizations; and
SECOFI 'sVice-Minister forforeign trade andinvestment acting astechnical secretary. Assistance
measures envisaged bytheCouncil cover areassuchasproduction, design, marketing, export promotion
andtechnical standards.
(x) Assistance forresearch anddevelopment
175. Nodirect fiscal incentives forresearch anddevelopment (R&D) aregranted inMexico. The
main mechanisms tosupport R&D aremaintained byNAFIN andtheNational Council forScience
andTechnology (CONACYT). NAFIN administers anumber ofprogrammes topromote technological
development,technicalassistanceandincreasedproductivity.Theprogrammesinvolvecreditguarantees
aswellasfinancing fortechnical helporinvestment projects inmicro, small andmedium-sized
enterprises. CONACYT iscurrently focusing ontechnology acquisition, andthestrengthening oflinks
between industry andresearch organizations. TheCouncil hascreated various programmes tofoster
theestablishment offirms capable ofexploiting technological innovations andtopromote information-
dissemination among medium-sized enterprises. R&D activities intheagricultural sector arepromoted
through various government institutions (Chapter IV(2)).
176. Official estimates for1996show thatfederal expenditure inR&D amounted toabout 8.8billion
pesos (some US$1.1 billion). Thatfigure represented about 2.3percentofallprogrammed expenditure
bytheFederal Public Sector, orabout 0.4percentofGDP; bothindicators increased slightly between
1993 and1996. Thelargest shares offederal expenditure inR&D were foractivities inacademic
institutions (38percent), theNational System ofScience andTechnology (22percent), inenergy
(13percent) andinagriculture, fishing andforestry (7percent).
177. Despite growing public andprivate expenditure inR&D, theauthorities acknowledge thatby
international standards Mexico 'stechnological infrastructure islimited.58Mexico ranks among the
lowest OECD countries interms ofR&D expenditure asashare ofGDP, atlessthan0.5percent,
orinterms oftheratio ofengineers andscientist intheworkforce, about 1:1,000. Moreover,
technologicalsupportlacksappropriatelinkageswithindustry,resultingintheconcentrationofpractically
allR&D resources inthehigher education andpublic sectors. Mexican industry 'sR&D capabilities
arealmost non-existent among allbutthelargest enterprises.
57Micro, small andmedium- sizeenterprises aredefined asemploying upto15,100and250persons and
withannual sales inmillion pesos ofnomore than0.9,9and20.
58SECOFI (1996), p.91.WT/TPR/S/29 Trade Policy Review
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(xi) Regional assistance
178. Theauthorities consider thatnoregional assistance programmes requiring notification tothe
WTO aremaintained inMexico.59
179. Inpractice, elements ofMexico 'stradepolicy havebenefited certain regions more thanothers.
Inthepast,import-substitution policies encouraged theconcentration ofeconomic activities around
thelargest demand centres, notably Mexico City. Free-trade zones andthemaquiladora industry,
bothmainly oriented towards export activities, tended topromote theindustrial development inMexico 's
northern border strip. Although these special regimes arebeing phased out(seefollowing sections),
itislikely thatMexico 'snorthern regions willderive greater benefits from theNAFTA thanother
regions, asMexican firms become increasingly integrated intotheNorth American production system.
Inorder toreduce disparities inregional development, theGovernment isimplementing aseries of
programmes, including various schemes tostrengthen thelandtenure system andthusencourage
development inruralareas, anurban programme todevelop some 100cities considered strategic, a
special programme fortheFederal District (Mexico City), andseveral mechanisms tofightextreme
poverty withastrong biasinfavour ofthemost disadvantaged areas.60
(xii) In-bond (maquiladora )industry
180. Themaquiladora industry isbased onduty-free temporary importation ofmachinery and
equipment, parts, rawmaterials andother components utilized inexport-manufacturing processing
orassembly.61In-bond firms maquiladora maycurrently sellgoods ofavalue equivalent toupto
70percentoftheprevious year'sexports onthedomestic market; by2001 theywillbeabletosell
alloftheiroutput onthedomestic market. Maquiladoras payduties ontheforeign content ofthe
products soldonthenational market according tothetariff ratesapplicable totheindividual imported
components. Maquiladoras benefit from streamlined customs procedures. Materials imported
temporarily under themaquiladora programme arenotrequired tomeetcertain non-tariff requirements
onimportation, suchasmandatory official standards (NOMs -section (2)above), which would apply
iftheywereconsidered definitive imports. Maquiladoras (likeother largeexporters) arenotrequired
topayvalue-added taxonimported materials, thusavoiding theadministrative costs associated with
claiming acredit orrefund ofthevalue-added taxonexports.
181. Themaquiladora programme, administered bySECOFI 'sGeneral Directorate ofInternational
Trade Services (Chart II.1)through SECOFI 'sregional offices, isbased onthe1989 decree forthe
promotion andoperation oftheexport maquiladora industry, asamended. Adecree of
24December 1993sought toadapt theexisting regime totherequirements oftheNAFTA; thedecree
introduced, interalia,themaquiladora concept forservices activities, allowed subcontracting between
maquiladoras andfirms outside themaquiladora programme, andeliminated theauthorization
59WTO document G/SCM/N/3/MEX, 21November 1996.
60Poder Ejecutivo (1996b), section 4.8.3. Theauthorities haveidentified Chiapas, Guerrero, Puebla, Oaxaca
andVeracruz astheFederal States withtheworst poverty indicators.
61Forproducts destined fortheU.S. market, additional benefits were provided under HSitems 9802.0060
and9802.0080, whereby nodutyisapplied bytheUnited States tothevalue ofU.S.-made components.Mexico WT/TPR/S/29
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requirements formaquiladoras toengage indomestic sales.62Adecree of23October 1996wasaimed
atstrengthening themaquiladora industry, asenvisaged intheIndustrial Policy andForeign Trade
Programme (PPICE), andstreamlining theadministrative procedures related tothemaquiladora regime.
Thedecree defined timelimits fortheprocessing ofdocuments, introduced theconcept ofindirect
export, expanded touptotwoyears theperiod allowed forimported inputs toremain temporarily in
Mexico, andmade itpossible toinclude inthemaquiladora programme different plants orprojects
operated byasingle firmunder aPITEX programme.
182. Asexplained insection (3)(xi), themaquiladora andPITEX programmes arescheduled tobe
modified on1January 2001, asstipulated under theNAFTA. From thatdate, fullorpartial duty
concessions onfinished products exported toCanada ortheUnited States willbeavailable onlyon
materials imported intoMexico fromnon-NAFTA countries ifthefinished product issubject toimport
duties inthose twocountries. Mexican exports toother countries willnotbenecessarily subject to
restrictions ondrawback. Ithasbeenpointed outthatproducers seeking totakeadvantage oftheNAFTA
mustconsider thesource oftheirmaterials todetermine whether theiroutput willqualify forpreferential
dutyonexport toCanada ortheUnited States; some manufacturers appear tohavechanged theirsupply
sources toNorth American suppliers tomeetNAFTA rules oforigin.63Theeconomic performance
ofthemaquiladora industry isdiscussed inChapter IV(4).
(xiii) Free-trade zones
183. Free-trade-zone status wasgranted tocertain regions toencourage theireconomic development
andpromote increased foreign trade. Fivezones hadthatstatus untiltheendof1993; these andthe
northern border stripbenefited untilthatdatefromimport taxpreferences intheformoftariffs atzero
or5percent. Adecree of24December 1993, amended in1994, eliminated thefivefree-trade zones,
which wereincorporated intoatransitional border region scheme aimed atconsolidating those areas
intoMexico 'sgeneral import regime bytheendof2000. Thedecree listed thespecific tariff lines
thatmaybeimported dutyfreeforuseinindustry, construction, fishing, repair ormaintenance activities;
duty-free status wastobeeliminated instages ending on31December 2000, withdifferent schedules
forNorth American andother imports. Adecree of29December 1995, abrogating earlier legislation
onthematter, added aconcessional rateof5percenttotheduty-free status andintroduced afewtariff
quotas; thedecree maintained different schedules byregion, andprovisions foraphase-out of
concessions bytheendof2000.
184. There arenoexport-processing zones inMexico.
(xiv) Trade-related investment measures (TRIMs)
185. Under Article 5.1oftheAgreement onTrade-Related Investment Measures (TRIMs), on
31March 1995Mexico notified various instruments relating totheautomotive industry andcommercial
vehicles (trucks andbuses). These measures aremaintained under legislation adopted in1989 and
1990, asaresult oftheentry intoforce oftheNAFTA. Thelegislation provides, interalia,forthe
62Prior toNAFTA, toavoid restrictions ondirect sales from maquiladoras intotheMexican market, parts
assembled inmaquiladoras ,suchaswiring harnesses, were exported totheUnited States andthenre-exported
toMexico; currently, agreater percentage ofsales seem tobemade directly from maquiladoras instead offrom
theUnited States (United States Department ofCommerce, 1996).
63Angulo-Parra andElías-Fernández (1996).WT/TPR/S/29 Trade Policy Review
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useoflocal-content andtrade-balancing requirements topromote theuseofparts andcomponents
produced bythedomestic automotive parts industry (Chapter IV(4)).
186. Allrequirements thatmight beinconsistent withtheTRIMs Agreement must beeliminated
bytheyear2000, unless anextension isgranted bytheWTO Council forTrade inGoods; inthis
respect, theMexican authorities haveindicated thatanymodification toitsexisting motor vehicle
legislation willdepend onMexico 'sfuture development, financial andtrade needs aswellasonits
WTO rights andobligations. Ontheotherhand, under theNAFTA, Mexico mustcomplete by1January
2004 theprocess ofphasing outanyaspects ofthemotor vehicle legislation inconsistent with
thatAgreement.
187. According topress reports, reduced tariffs linked toinvestment commitments wereaccorded
inlate1996toalocalvehicle manufacturer (Volkswagen) forimports ofassembled luxury vehicles.64
Inthisrespect, theMexican authorities noted thatfourtarifflineswerecreated (87032301, 87032302,
87032401 and87043103) toallow theimportation, withareduced tariff, ofaparticular typeofvehicle
byanymanufacturer inorder tocomplement theirdomestic supply.
188. Under theprovisions oftheNAFTA, localgovernments remain freetoimpose performance
requirementsrelatingtoinvestment,e.g.inrelationtoexports,localcontent,preferences,andtechnology
transfer, without anytime-limits; thisexemption applies toallperformance requirements inexistence
onNAFTA 'sentry intoforce. Moreover, theexclusions andmeasures setoutinAnnexes I,IIand
IIIofNAFTA (onreservations forexisting andfuture measures, andstateactivities) mayinclude GATT-
inconsistent TRIMs, although theNAFTA partners haveindicated thattheadoption ofsuchmeasures
isunlikely.65
(xv) Trade-related aspects ofintellectual property rights (TRIPS)
189. Mexico hasprovided theCouncil forTRIPS withthedatarequired under Article 69ofthe
WTO TRIPS Agreement oncontact points: theMexican Institute ofIndustrial Property (IMPI) and
theCopyrights General-Directorate (since replaced bytheNational Copyright Institute -INDA).66
TheIMPI isanindependent organization created bySECOFI toassume responsibility forpatent and
trademark registration, aswellastoheardisputes atanadministrative levelonareas covered bythe
Industrial Property Law(LPI). Mexico alsosubmitted anotification under Article 4(d)oftheTRIPS
Agreement totheCouncil forTRIPS on29December 1995, where itindicated thattheprovisions
oftheNAFTA concerning TRIPS came intoforce on1January 1994.67
190. Mexicoisapartyto,interalia,theBerneConvention,theInter-AmericanCopyrightConvention,
theParis Convention, thePatent Cooperation Treaty, theUniversal Copyright Convention, andthe
LisbonConventionfortheProtectionofAppellationsofOrigin,theGenevaConventionfortheProtection
ofProducers ofPhonograms, andtheBrussels Convention relating totheDistribution ofProgramme-
64ElEconomista (Internet edition), 25November 1996 and6December 1996; Reforma (Internet edition),
15February 1997.
65WTO document WT/REG4/1, 23June 1995.
66WTO document IP/N/3/Rev.2, 22July1996.
67WTO document IP/N/4/MEX/1, 12February 1996.Mexico WT/TPR/S/29
Page 87
Carrying Signals Transmitted bySatellite. In1995, Mexico signed theInternational Convention for
theProtection ofNewVarieties ofPlants.
(a) Industrial property
191. Aspartofitsbroader economic liberalization programme, Mexico hasprogressively liberalized
itsintellectual property lawsduring the1990s. TheIndustrial Property Law(LPI) of1991, asamended,
covers, interalia,patents, trademarks andtrade secrets; theLPIisadministered bytheIMPI (see
above). Theauthorities noted thattheLPIsignificantly simplified administrative procedures and
reinforced protection levels by,interalia:
- adding patentable areassuchaschemical compounds, pharmaceuticals, agricultural chemicals,
beverages, andfoodforhuman andanimal consumption;
- extending thetermofprotection forpatents to20years from thedateoffiling;
- introducing protection ofutility models;
- protecting trade secrets; and
- extending thetermoftrademark registration totenyears fromthefiling dateoftheapplication.
192. Tocomply with Mexico 'scommitments under theNAFTA andtheTRIPS Agreement,
amendments totheLPIentered intoforce on1October 1994. Improvements highlighted bythe
authorities weretheestablishment oftheIMPI; decreasing thenumber ofnon-patentable areas; and
introducingtheconceptofa"well-knownmark",definedwithrespecttoknowledgeinMexicoorabroad.
Work isinprogress tointroduce statutes fortheprotection oflayout designs ofintegrated circuits.
193. TheLPIprovides thatpatent rights maybelicensed ortransferred, subject totheconditions
andformalities ofordinary legislation. Suchcontracts mustberegistered attheIMPI. Mexican law
doesnotinclude anyspecific rules governing minimum ormaximum royalties; registration isnota
precondition forthepayment ofroyalties abroad.
194. Patent rejections maybeappealed bymeans ofapetition forreconsideration filedinwriting
withtheIMPI within 30daysfollowing thedateofnotification. Administrative procedures areavailable
todeclarethenullification,expirationorcancellationofapatentortrademark.Administrativeviolations,
suchaswrongfully labelling aproduct protected byapatent oratrademark, maybesanctioned with
afineofupto20,000 times thedaily minimum wage prevailing intheFederal District, temporary
orpermanent closure oftheinfringer 'spremises orarrest forupto36hours. Theinfringement of
atrademark oratradesecret ispunishable byuptotwoyears inprison orafineequal to100to10,000
times thedaily minimum wage (uptoUS$30,000).
Patents andtrade secrets
195. TheLPIoffers patent protection forinventions thatmeettherequirements ofnovelty, inventive
activity andindustrial application, except forareas explicitly excluded. Exclusions cover, interalia,
biological processes forthereproduction ofplants oranimals, biological andgenetic material asfound
innature, animal species, thehuman bodyorparts, vegetable varieties (thelatterare,however, protected
under Mexico 'snewFederal Plant Variety LawandtheInternational Convention fortheProtectionWT/TPR/S/29 Trade Policy Review
Page 88
ofNewVarieties ofPlants). Under theprovisions oftheNAFTA, Mexico maynotgrant patents to
inventions whose commercial exploitation mayendanger theenvironment.
196. Theperson whofirstfilesthepatent application isconsidered theinventor andowner ofthe
patent. Patents aregranted fora20year, non-renewable period, beginning fromthedateofthefiling
ofanapplication. However, theneteffective lifeofapatent would seem tobesignificantly shorter,
asthepatent application process reportedly takes from three tofiveyears from thedateoffiling.68
Theapplication process maybeshortened ifapetition foraccelerated publication isfiled. TheIMPI
mayalsoagree toexpedite granting when apatent hasbeengranted inamember country ofthePatent
Cooperation Treaty. Thedateoffiling apatent application abroad istreated asthedateoffiling in
Mexico.
197. There isnoexpress obligation towork aninvention, butthelawallows interested parties to
apply totheIMPI foracompulsory licence incases where apatent hasnotbeenworked without a
valid reason within (i)three years afterissuance ofthepatent, or(ii)fouryears afterthefiling ofthe
applicationwhicheverislonger.TheauthoritiesnotedthatinfacttheIMPIhasnevergrantedcompulsory
licences. Importation ofapatented itemorofaproduct made withthepatented process issufficient
tosatisfy theworking requirement.
198. Utility models andindustrial designs mayberegistered iftheyarenewandhavepotential for
industrial application. Protection forutility models isgranted fortenyears from thedateoffiling;
industrial designs areprotected for15years. Thelegislation doesnotprovide forrenewal ineither
case. Protection covers onlydomestic novelty. Trade secrets aredefined asindustrial orcommercial
information keptbyacorporation oranindividual asconfidential andwhich canbeusedtoobtain
ormaintain aneconomic orcompetitive advantage overthirdparties. Owners ofindustrial secrets
maytransfer orlicense them tothirdparties; thelicensee maynottransfer theinformation without
authorization.Individualsorentitiesunlawfullyrevealingorobtainingsecretsmaybeliablefordamages,
andsubject tocriminal procedures andpenalties.
199. TheNAFTA required Mexico tocomply withthesubstantive provisions oftheInternational
Convention fortheProtection ofNewVarieties ofPlants within twoyears ofsignature oftheAgreement,
aswellastobeginacceptingandgranting,from1January1994,applicationsforplantvarietyprotection.
Article 20oftheLPIprovided thatplantvarieties could beprotected asutility patents. Although this
article waseliminated inOctober 1994, Article 5oftheLPI'stransitory provisions authorized theIMPI
toaccept applications fortheprotection ofplantvarieties while newstatutes onthematter werebeing
prepared. APlant Varieties Lawwaspublished on25October 1996, andwork isinprogress onnew
regulations. Between June1991 andDecember 1994, 70applications forplant varieties hadbeen
submitted totheIMPI, ofwhich 26weresubmitted as"plant patents". Under the1996Plant Varieties
Law, theIMPI sent29applications forplant-breeder certificates totheMinistry ofAgriculture, the
competent authority under thenewlaw.
Trademarks
200. TheLPIrecognizes trademarks andservice marks, whose exclusive useinbothcases maybe
obtained onlythrough registration. Trade orservice marks cover onlyspecific goods orservices within
asingle classofproducts. Atrademark maynotberegistered ifitissimilar toanother totheextent
thatitmaycause confusion. Theregistration process takes approximately fourtosixmonths ifno
68Rowat (1993).Mexico WT/TPR/S/29
Page 89
objection israised. Asageneral rule,registration isgranted tothefirsttofile,butafirstuserinMexico
orabroad hasapreferential righttoregister. Firstuseabroad doesnotgenerate anyrights inMexico
except forfamous orwell-known marks, theLPIinitially required reciprocity ontheuseoftrademarks
abroad, butthe1994 amendments eliminated thisrequirement.
201. Trademarks maybe,interalia,anyname orvisible design which issufficiently distinctive;
tri-dimensional forms; trade names andcorporate names; andpersonal names, unless there isa
homonym previously registered. Some marks maynotberegistered, including theproper, technical
orcommonly usednames ofproducts orservices, names designating theplace ofmanufacture of
products, andthetranslation toother languages ofnon-registrable marks.
202. Trademarkregistrationsarevalidfortenyearsfromthedateoffiling.Renewalsmaybeobtained
indefinitely every tenyears provided thatthetrademark isinactual use.TheMexican concept ofintent
touserequires theowner ofthetrademark tousethemark within thefirstthreeyears following filing;
thisperiod maybeextended foranother three-year period. Registration ofmarks notusedforthree
consecutive years maybesubject tocancellation actions filedbyaninterested party. Third parties
maybelicensed orfranchized tousearegistered trademark.
203. Trade names ofcommercial, service orindustrial establishments areprotected without need
forregistration. Users mayapply forpublication ofthetradename toestablish apresumption ofgood
faithintheuseofthename. Thepublication isvalid fortenyears andmayberenewed. Trade or
service marks cover onlyspecific goods orservices within asingle class ofproducts. Collective
trademarks mayberegistered bylegally incorporated associations. Acollective trademark maynot
betransferred tothird parties, anditsuseisreserved forthemembers oftheassociation.
204. Under theLPI,thename ofaregion from which aproduct originates maybeprotected by
adeclaration totheIMPI andpublication intheOfficial Journal. Producers oftheproduct mayapply
forsuchprotection. Inaddition to"appellations oforigin", theLPIprovides protection against the
unlawful useofgeographical indications, including through administrative andcriminal sanctions.
205. Anyperson maylegally import intoMexico products covered byaregistered trademark, for
theiruse,distribution orsale. Legal licensees ofatrademark registered inMexico covering imported
products donothaveanylegalrecourse against alawful importer.
(b) Copyrights
206. Copyrights areprotected bythenewCopyright Law(LFDA) of24December 1996, amended
on19May1997, andtheCriminal Code. Copyright protection doesnotrequire registration, although
thefirsttoregister hasthelegalpresumption ofownership. Copyrights areregistered bytheNational
Copyright Institute (INDA) under theMinistry ofEducation. Thetermofprotection isforthelife
oftheauthor plus75years. Theauthorities noted thatthelawprovides protection forthefullrange
ofcopyrights andneighbouring rights such asliterary (including software), scientific, computer
programmes,musical,artistic,architecturalworks,cartoons,films,graphicandtextiledesigns,databases,
phonograms, periodicals, magazines, television andradio programmes. Thedoctrine offairuseis
recognized, encompassing suchareasasthetranslation orreproduction ofsmall fragments foreducation
orscientific investigation, oraback-up copyofacomputer program. Authors holdbothpatrimonial
rights andmoral rights; thelatter arenotassignable anddonotexpire ifaction toenforce them is
notexercised.WT/TPR/S/29 Trade Policy Review
Page 90
207. The1996LFDAstatesthatcomputerprogramsareprotectedasliteraryworkswithinthemeaning
oftheBerne Convention. Suchlawprotects bothsource andobject codes; theholder ofthecopyright
onacomputer program controls thereproduction oftheprogram andanyformofdistribution. Original
databases areprotected for75years, while non-original databases receive protection forfiveyears.
208. Theamendments ofDecember 1996callforenforcement tobecoordinated between theIMPI,
theINDA, theAttorney-General 'sOffice (PGR) andcustoms authorities. Themaximum allowable
fineswere increased to3,000 times thetotaldaily netincome received bythetransgressor from the
illegal activity. Federal Courts havetheauthority tosettle disputes oncopyright violations, withthe
Attorney-General 'sOffice incharge ofcriminal procedures andpenalties asprovided intheFederal
Criminal Code.
(c) Enforcement
209. Given theimportant legislative changes inrecent years, theenforcement ofintellectual property
rights inMexico isstillbeing developed.69Some U.S. reports haveexpressed concern about law
enforcement, especially lackofcriminal prosecution ofviolations.70However, itappears thatexisting
problems arebeing resolved through aseries ofmeasures taken bytheauthorities. Forexample, the
United States andMexico haveestablished abilateral working group comprising members fromeach
country 'scompetent agencies, including trade, patent andtrademark, copyright, agricultural (plant
varieties) andcustoms authorities aswellasrepresentatives oftheAttorney-General 'sOffice, todiscuss
various intellectual property andrelated enforcement issues, including developing aneffective border
enforcement system inMexico forintellectual property rights.
210. Asrequired bytheNAFTA, inDecember 1995Mexico 'sCustoms Lawwasamended togrant
thecustoms service theauthority todetain infringing products. TheMinistry ofFinance maysuspend
thefreecirculation offoreign goods ifaresolution isissued byacompetent administrative orjudicial
authority. TheIMPI istherelevant competent administrative authority, while theDistrict Courts are
thecompetent judicial authorities.
211. TheINDA conducts administrative proceedings regarding certain infringements ofthelaw,
including thetransfer ofrights without proper authorization; breach oftheterms ofmandatory licences;
operation ofcollective societies contrary totheprovisions ofthelaw;andpublication ofwork without
reference totheauthor. TheINDA mayimpose sanctions ranging from 1,000 to15,000 times the
minimum daily wage.
212. TheIMPI isempowered toconduct administrative proceedings regarding infringements that
involve commercial activities where direct orindirect profit isobtained, including making aprotected
work publicly available without explicit authorization fromtherightholder; theuseofaperson 'simage
without his/her authorization orthatofhisrightholders; theproduction, reproduction, storage, or
distribution ofcopies ofprotected works, sound-recordings, videograms orbooks without the
authorization oftherightholder; andtheimportation, sale,lease oranyother actthatwould permit
someone toobtain adevice orsystem forthepurpose ofdeactivating electronic means ofprotecting
software. TheIMPI mayimpose sanctions ranging from500to10,000 times theminimum dailywage.
69Christina Moeckel (1995).
70USTR (1995).Mexico WT/TPR/S/29
Page 91
213. TheGeneral Attorney 'sOffice conducts judicial proceedings regarding violations ofcertain
intellectual property rights, including profiting from freetextbooks distributed bytheMinistry of
Education; theproduction ofcopies ofprotected works inexcess ofthose authorized bytherightholder;
theproduction, reproduction, import, storage, transport, distribution, sale,lease, oruseofcopies of
protected works onacommercial scalewithout authorization oftherightholder; theproduction, import,
saleorleaseofadevice orsystem todecode anencrypted programme-carrying satellite signal without
authorization ofthelawful distributor ofsuchsignal; decoding encrypted programmes carrying satellite
signals, without authorization fromthelawful distributor ofsuchsignal. ThePenal Courts mayimpose
prison sentences ranging from sixmonths tosixyears andfinesranging from 300to3,000 "forfeit
days". Economic sanctions maybeapplied without prejudice totheaward ofdamages, whose amount
must notbelessthan40percentofthesaleprice ofproducts orservices involving rights protected
bytheCopyright Law.