TITLE: CUSTOMS PROCEDURES FOR EXPORTING TO MEXICO

SUBJECT COUNTRY(IES): MEXICO

POST OF ORIGIN: TIJUANA

SERIES: INDUSTRY SECTOR ANALYSIS (ISA)

ITA INDUSTRY CODE: ZRG

DATE OF REPORT (YYMMDD): 020329

DELETION DATE (YYMMDD): 050329

AUTHOR: JUDITH VALDES

APPROVING OFFICER: RENATO DAVIA

OFFICER'S TITLE: COMMERCIAL OFFICER

NUMBER OF PAGES: 20

INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2002. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

SUMMARY:

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The following guide presents the customs regulations, formalities and practices to be followed when exporting to Mexico from the U.S. All products exported go through a customs clearance before entering the country. This clearance includes the consent of the U.S. Customs authority to export the products from the U.S. and the corresponding authorization of the Mexican Customs authority to import them. Before shipping the products to Mexico, the exporter must be sure the Mexican company importing the products is properly registered with the Mexican authorities as an importer. A Mexican Customs broker (MCB) is required to process all commercial exports and the use of a U.S. Customs broker (USCB) is strongly recommended. The MCB will prepare the customs entry form, better known as ‘Pedimento de Importacion’ the only document Mexican Customs Office (MCO) will accept for clearing the import of products into the country. He will also make sure the products comply with all regulations and standards. The USCB prepares the Shipper Export Declaration (SED), a document required by US Customs to expedite the shipment. He will also make sure that products under export controls comply with them. A significant part of this report makes reference to the North American Free Trade Agreement (NAFTA) that came into effect on January 1, 1994. Nafta is a preferential agreement between the United States, Canada and Mexico which will lead to the elimination of tariffs on the majority of the products originating in the participating countries over a period of fifteen years. U.S. exporters should keep in mind that only the Nafta text itself and the customs regulations are definitive in the export process of U.S. products to Mexico. End Summary.

1. Following is a glossary of terms mostly used in the export process to Mexico:

Aduana (Mexican Customs Office). It is part of the Servicio de Administracion Tributaria, a branch office of Mexico’s Ministry of Treasure (Secretaria de Hacienda y Credito Publico -SHCP) in charge of direct inspecting all imports of products into the country. Mexico has 46 ports of entry for commercial purposes, including land, air and sea.

Agente Aduanal Mexicano (Mexican Customs Broker). Individual authorized by SHCP to handle on behalf of a US company the import of products into Mexico. He is a specialized agent in international trade and is responsible for the veracity and accuracy of the information provided. This includes the determination of the customs regimen under which the merchandise is being imported, the correct classification of the products, and the fulfillment of all regulations and restrictions not related to import duties (according to the Mexican Customs Law and other laws that may apply).

Arancel Ad-Valorem (Ad-Valorem Import Duty). It is a duty charged to a product imported into Mexico based on a percentage of the value of the product. It is published in Mexico’s Duty Tariff Book.

Base Gravable (Taxable amount to the General Import Tax). It is the value of the product considered for import duty purposes. In some cases, the amount paid by the buyer and reflected in the invoice does not correspond to the real value of the goods. In those cases, MCO estimates the value based on a recent import of a similar product in any other commercial port of entry in Mexico. According to an officer of Mexican Customs, it is a

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common practice to reduce the price of the goods imported to avoid paying high import duties, and in an attempt to control this, his office is creating a database with all imports into Mexico and the corresponding price. When there is an issue on the price of a product, MCO contacts other ports of entry for costs of similar products imported and takes it as the taxable cost for import duties.

Bien Originario (Originating Good). A product that complies with the rules of origin established in Nafta and receives best preferable import duties when imported to Mexico.

Cuotas Compensatorias (Compensatory Quotes). Duties imposed on certain products originated in a country (ies) that are being imported violating international trade laws, such as dumping.

Cupos de importacion (Import Quotas). Quantity of products and periods of time in which imports of certain products are allowed into Mexico.

Fraccion Arancelaria (Customs Tariff Classification). It is the numeric description of the product based on the Harmonized Tariff Code.

Franja Fronteriza (Boder Zone). The territory that extends from the border line inland for 20 kilometers (approx. 13 miles).

Normas Oficiales Mexicanas - NOMs (Official Mexican Standards). All products imported into Mexico must comply with applicable standards and requirements. Mandatory and proposed standards are published by the Mexican Government in the Diario Oficial de la Federacion (Official Gazette) - the Mexican equivalent of the US Federal Register. They are published in the form of a Norma Oficial Mexicana (NOM) (Official Mexican Standard), or a Proyecto de Norma Oficial Mexicana (Proposed Official Mexican Standard). For specific information on the NOMs that apply to a product please refer to the Direccion General de Normas, web page address is http://www.economia.gob.mx/dgn1.html. Go to the ‘Catalogo de Normas’ section to search for proposed and enacted standards. Most used NOMs refer to labeling, packaging, commercial and nutritional information (for food).

Pedimento de Importacion (Customs entry form). It is the only document MCO accepts for clearing products imported to the country.

2. Mexico has 46 commercial ports of entry and trade is regulated both by the U.S. government and the Mexican government through their respective Customs offices.

3. U.S. Customs manages the export of merchandise, including the verification of export licenses for those products that may need them. Before leaving the U.S., every shipment must present before U.S. Customs the Shipper’s Export Declaration (SED) form filled out by the vendor of the merchandise, along with the proper attachments, such as export licenses, if required. This form can be obtained from the Customs

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District Office. For additional information please call the Customs Office at 1-800-829-1906 or contact the Bureau of Export Administration at www.bxa.doc.gov.

4. Exports with a commercial value of US$5,000 or more require the participation of a MCB to process the export. U.S. companies are advised to work closely with the Mexican importer in the selection of a Customs Broker. He will make sure the merchandise is properly classified and documented to gain the best import duties and that it complies with all requirements and regulations before it is sent to MCO. Some Customs Brokers specialize in servicing the different sectors of the Mexican market, such as temporary imports for the maquiladora industry, or definitive imports for general consumption. A listing of MCBs and contact information is available at www.caaarem.org.mx.

5. U.S. companies must have a Mexican importer with a valid import permit. This permit is issued by SHCP. Not all companies in Mexico have this permit and without it, they have to contract the services of an export-import marketing office, known as ‘comercializadoras’. The import permit is specific for certain products and is valid for a period of time, therefore it is important to make sure that the Mexican counterpart has the proper documentation to import the products being exported, otherwise the shipment may be retained or confiscated by MCO.

6. In an attempt to reduce uncertainty and abuse at the commercial ports of entry, Mexico instituted a system for the customs clearance of merchandise. It combines a two-level customs inspection, with a “random selection device” at each level. This device determines whether the customs inspection of merchandise is performed. If affirmative (red light), the customs official will inspect the shipment in the presence of the person who carries out the import. Independently of the outcome of the random selection device, importers must activate a second device to determine a second inspection by private sector examiners. If it results negative (green light), the merchandise will be delivered immediately, and the shipment may proceed into Mexico.

If irregularities are found in either the first or second customs inspection, it may lead to a cautionary seizure of the merchandise, a fine and the temporary or permanent cancellation of the import permit or license to the MCB.

7. To expedite the import process of the merchandise by MCO, U.S. exporters should review the following information and make sure their shipment complies with it:

a) The invoice should have a detailed description of the merchandise included in the packages or containers;

b) Prepare the invoices carefully and clearly. Do not leave any spaces in between lines and keep the information required in the column that corresponds;

c) When the description of the products in the invoice is written in other than English, Spanish or French, it should be accompanied by a translation to Spanish in a document attached to the invoice;

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d) Make sure the invoice has the same information on the products included in the shipment form and customs entry form;

e) Mark and number every package, bottle or container in such a way that it could be identified with the corresponding numbers in the invoice;

f) Mark the merchandise with the country of origin, even if the products are exempted of payment of import duties.

g) Be alert of any requirement that applies to the export of your product to Mexico. Most common cases are pharmaceuticals, alcohol, cosmetics, food and reactive materials;

h) Carefully observe all regulations pertaining to invoices, packaging, labeling, etc. They are known as NOMs. Make sure you work closely with your customs broker who should verify that all requirements are met before the shipment is sent to MCO.

i) Take security precautions not to allow the insertion of forbidden products into the packages.

8. Mexico allows the import of products to Mexico under different regimens, including:

a) Permanent Import;b) Temporary Import, to be exported back to the country of origin in the same condition

or processed, transformed or repaired under the maquila program or for companies enrolled in the export program (Pitex);

c) Fiscal deposit;d) Merchandise in transit (in-bond);e) To be processed, transformed and/or repaired in a fiscal area.

9. Following is a description of the two import regimens that relate to commercial transactions and the documented needed to process the export from the U.S.:

Permanent Import Regimen: It is considered a permanent import of merchandise the one that will stay in Mexico

for unlimited time. Whoever imports into the country under this regimen is subject to the payment of import duties and must comply with all regulations pertaining to the products, as per articles 96 and 101 of the Mexican Customs Law.

To process this type of export, the following is the procedure and documentation needed:

a) Customs Entry Form (Pedimento de Importacion). It is the only document MCO use for clearance of imports into the country. In it, the exporter must declare the following information:

1) The Customs regimen under which the merchandise is being imported;2) Information sufficient to determine the import duties applicable to the products

and compensatory fees;3) Documentation proving that all regulations and standards are met, special

permits/authorizations, country of origin of the merchandise, weight and volume, including serial number, brand, model and/or technical specifications;

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4) The bar code, confidential number or electronic signature of the Customs Broker who confirms that the merchandise meets all requirements to be exported into Mexico.

b) Commercial Invoice. The customs entry form must be accompanied by a commercial invoice for the merchandise that is being exported, when the value of the merchandise in MCO exceeds US$300. The invoice must contain the following information:

1) Place and date of issuance;2) Name and address of Mexican importer of the merchandise;3) Detailed commercial description of the merchandise, including specifications of

the products per class/type, quantity, identification numbers (when available), individual value and total value of the transaction in the invoice;It should also include the transaction value of the merchandise: cost, packaging, transportation and insurance costs. No codes should be used instead of the product’s description and it must be in English, Spanish or French otherwise will have to be accompanied of formal translation to Spanish.

4) Name and address of the vendor.

If the invoice lacks any of above information or if it has any alterations to the original information provided/written, the invoice is considered altered by MCO and is automatically voided. There are cases in which the modification is valid if accompanied by a sworn declaration stating the truth by the importer or the Customs Broker. This declaration must be presented before the automatic selection mechanism is activated (fiscal traffic light).

c) Certificate of Origin. It is a uniform document used by the Nafta countries to demonstrate when a product is originated in one or more of the Nafta countries. This certificate will guarantee the best import duty to U.S. products and is used to qualify goods for Nafta preferential duty treatment. It is advantageous and worth claiming if your product qualifies since this can save your Mexican importer money by securing a lower or no import tariff rate, often making your product more competitive in Mexico against 3rd country suppliers. As a result of the Nafta agreement, approximately 85 percent of all U.S. exports enter Mexico duty-free. Please refer to section two of this report on Instructions for Completing the Exporter's Certificate of Origin.

10. With all the above documentation, the MCB obtains the permit to import the merchandise into Mexico. This permit or clearance is carried out electronically simultaneously between the MCB and the MCO. The information is encoded and reflected in a bar code place in the customs entry form. Once the merchandise is cleared by MCO, the next step is the payment of the appropriate import taxes and duties involved in the import process. Taxes are paid upon presentation of the customs entry form for processing and prior to activating the random selection device.

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11. The general import tax is based on the customs value of the merchandise, which is the total value paid by the importer including expenses such as:

1) the brokerage fees and expenses (between 1.5 and 2 percent of the shipment’s value);

2) the costs of packing or wrapping incorporated into the merchandise;3) the cost of transportation, insurance and related expenses such as handling,

loading and off-loading rising from the transportation of the merchandise.

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Following is an example of the procedures to follow in processing a permanent export into Mexico:

Mr. Smith is a U.S. manufacturer of paper cups and has a buyer in Guadalajara, Mexico interested in distributing his products. The steps to follow are:

a) Make sure the Mexican buyer has an import permit that allows him to import the paper cups;

b) Contact a MCB to process the export;c) Contact a U.S. Customs Broker to process the Shipper’s Export Declaration;d) Provide the MCB the invoice with detailed information on the shipment and

description of the products and the certificate of origin;e) The Customs Broker prepares the customs entry form with information provided by

the manufacturer;f) Mr. Smith should make sure his products are getting the Harmonized Code

classification that guarantees that the best import-tariff is given to him. To guarantee the best (lower) import duties assures his products will remain competitive in the Mexican market. The imposition of a duty to the imports is immediately added to the price paid by the end user of the product. An easy way to get the exact classification is to find out the translation of the product in to Spanish and access the Ministry of Economy’s web site (http://www.economia-snci.gob.mx). By providing the term in Spanish you will get all the possible HS codes that apply to the product and the import duties from the different countries. For example, paper cups are classified under HS 48236001 and has an import duty of 2 percent. It does not have any additional duty, but it must comply with NOM-050-SCFI-1994. This NOM refers to the commercial information on the product, such as volume, capacity, use, resistance, among others.

g) The plastic cups are made in the U.S. with Canadian components, so they classify as a Nafta product (Criterion C). Mr. Smith should fill out a certificate of Origin and provide it to the Mexican buyer to have it available upon request.

h) Mr. Smith verifies that the packages are sealed and that no forbidden products are inserted into his packages.

Following is an example and breakdown of the duties and taxes paid in the importation of a product to Mexico:

1. Customs Duty 2 percent2. Value-Added Tax 10 percent for the border states and 15 percent

for the rest of Mexico3. Customs Agent Duty 1.2 percent (approximately)

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The example below shows the case of a finished good (paper cups) imported for resale by a Mexican company:

Base Price of shipment $1,000.002 percent Customs Duty (orother applicable duty rate) (*) 20.00Fee to use Customs port (validation ofimport entry form)($8 dollars for every $1,000) 8.00VAT Base $1,028.00

VAT 15 percent(if the merchandise stays inthe free border zone, the VATis 10 percent) 154.20

Customs Agent's charge (1.2 percent of the goods' cost) 12.00

Freight: 9 percent of goods' cost(depends on distance) 90.00

Insurance 1.5 percent of the cost 15.00

Unloading of goods at Customs(depends on the type ofmerchandise, approx. 7 percentof cost) 70.00

GRAND TOTAL --------------------- $1,369.20

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Temporary Import

Temporary imports from the United States do not pay import duties, taxes nor compensatory fees, but they must comply with the rest of the obligations in terms of regulations (Article 104 of the Mexican Customs Law). There are different types of temporary imports into Mexico, including:

a) To be returned in the same condition;b) Manufacture, transformation, and repair under the Maquila and Pitex programs;c) Instruments of foreign artists;d) Cultural and sporting events;e) Conventions and congresses;f) Press, journalism, and cinematography.

a) To be returned in the same conditionA temporary import remains in Mexico for a limited time and with a specific purpose and should be returned to the U.S. in the same condition and within the time limits established in the Law (Art. 106). Such is the case of demonstration equipment which is temporarily imported into Mexico for exhibitions or sales visits. In these cases, U.S. representatives do not need to contract the services of a MCB, and may themselves do the declaration of the products to MCO, using the declaration lane at the time they enter the country. Overlooking this requirement may result in the confiscation of the products by MCO, without possibility of getting it back, unless a high penalty fee is paid to the Mexican government. The fee usually doubles the market value of the products. Temporary import may remain in Mexico for up to six months.

The import is processed under a temporary importation form and there are basic requirements to obtain the clearance from MCO, including:

1) The list of the products temporary imported into Mexico;2) A letter form the U.S. company stating that the product(s) is for temporary entry

into Mexico and that it will not be sold;3) A letter from the Mexican partner or company indicating that they take full

responsibility for ensuring that the products are returned to the U.S. within the period allowed. The letter should also indicate that there is a business relationship between the Mexican party and the importer;

4) Preparation of a Temporary Customs Entry form (Pedimento de Importacion Temporal);

5) A fee of US$15.00 or its equivalent to Mexico’s currency must be paid in cash to MCO as processing fee;

6) The list of the products temporary imported into Mexico must also be presented to U.S. Customs before the equipment enters Mexico in order to facilitate the duty free return to the U.S.

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b) Manufacture, transformation, or repair under the Maquila and Pitex programs

A maquila or maquiladora refers to a special Mexican industrial program which allows under a unique customs allowance, mostly non-Mexican operations, to set up manufacturing or assembly plants that can temporarily bring in duty free raw materials, equipment, machinery and parts to be used in its production processes. The final product of these plants is shipped out of the country. Most of the production of these plants goes to the U.S. and the 29 additional countries which whom Mexico has signed free trade agreements, including the European Union and Latinamerican countries. Mexico is practically a free trade zone that has made the country attractive to Asian and European investors interested in supplying from Mexico the U.S. market and rest of the countries with whom Mexico has signed these agreements.

Under Nafta, Mexico can no longer waive import duties for products or components that are coming from outside Nafta and that are exported to a Nafta partner. The new regulations stipulate that, as of 2001, a maquiladora company that exports its final product to the United States or Canada will have to pay the Mexican government, within 60 days after the export takes place, the import duties for the products’ non-Nafta contents.

The machinery and equipment temporary imported under the maquiladora program to be used in the production process is subject to the import duties and the customs processing fee (approx. US$15). If it qualifies as a Nafta product, it is excepted from import duties.

Maquiladoras may transfer the merchandise that they have temporary imported to other plants under the same regimen if they are going to be used for production or manufacturing. In case a final product contains components or parts from non Nafta and is exported to the U.S., the general import duty is paid on the corresponding part of the merchandise that is coming from outside Nafta and the value of the merchandise at the exchange rate valid in the date in which the payment takes place and when the customs entry form is processed (Art. 56 of the Mexico’s Customs Law).

Most of the maquiladoras established in Mexico have their Mexican and U.S. Customs Brokers who they work with and they process the import of the products. These plants have a listing of components, parts, equipment and supplies that are authorized by Mexico Secretary of Economy to import under this regimen of temporary import.

These changes to the law affecting the import of materials, components, supplies, machinery and equipment for the maquiladora industry grant U.S. companies competitive advantage over non-Nafta suppliers. U.S. companies are encouraged to learn about the rules affecting the maquiladora industry and to comply with the necessary requirements to become potential suppliers, including the preparation of the Nafta Certificates of Origin that would grant them the benefit of exporting their products duty-free into Mexico to supply this industry.

The import of products into Mexico to be repaired at an officially approved facility

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requires that the product stay within the approved facility and that under no circumstances it is removed from it. The approving authority for these facilities is the MCO.

The documents needed to process a temporary export of merchandise to Mexico are:

1) Temporary Customs Entry Form (Pedimento de Importacion Temporal). Exporters to Mexico have to present to MCO a temporary customs entry form, better known as Pedimento de Importacion Temporal in the official form approved by SHCP. In the pedimento, the exporter must declare the following information:

The Customs temporary regimen under which the merchandise is being exported;

Documentation proving that all regulations are met, special permits and authorizations, weight and volume and identification number or codes, including serial number, brand, model and/or technical specifications;

The bar code, confidential number or electronic signature of the MCB who confirms that the merchandise meets all requirements to be exported into Mexico.

2) Commercial Invoice, with a detailed description of the products being exported, as mentioned before in page 5 of this report.

3) Certificate of Origin. It is used to claim Nafta preferential treatment. Please refer to section two of this report on Instructions for Completing the Exporter's Certificate of Origin.

Following is an example of the procedures to follow when processing a temporary export of components for the maquiladora industry in Mexico:

Mr. Smith is a U.S. manufacturer of small speakers used in television sets and has contacted a maquiladora in Tijuana interested in buying his products. The steps to follow are:

The Mexican maquiladora (MM) places an order for 200 speakers and sends Mr. Smith the address for delivery of the products and invoice in the U.S.;

MM contacts its MCB to process the export and the USCB to process the Shipper’s Export Declaration;

Mr. Smith provides the MCB the invoice with detailed information on the shipment and description of the products and the certificate of origin;

The MCB prepares the temporary customs entry form with information provided by the manufacturer;

The speakers are manufactured in the U.S. with U.S. components, so they classify as a Nafta product (Criterion C). Mr. Smith should fill out a certificate of Origin and provide it to the Mexican buyer to have it available upon request;

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Following is an example and breakdown of the fees paid in the temporary importation of a product to Mexico:

- Customs Duty 0 percent- Value-Added Tax N/A- Customs Agent Duty 1.2 percent (approximately)

The example below shows the case of a good (speakers) imported to be assembled into a television set by a maquiladora company:

Base Price of shipment $1,000.000 percent Customs Duty (orother applicable duty rate) (*) Fee to use Customs port($8 dollars for every $1,000) 8.00VAT Base $1,008.00

Value Added Tax N/A

Customs Agent's charge (1.2 percent of the goods' cost) 12.00

Freight: 9 percent of goods' cost(depends on distance) 90.00

Insurance 1.5 percent of the cost 15.00

Unloading of goods at Customs(depends on the type ofmerchandise, approx. 7 percentof cost) 70.00

GRAND TOTAL --------------------- $1,195.00

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c) Equipment and instruments for artists

The temporary import of equipment and instruments to Mexico by U.S. artists may be done directly by the artist, or he may opt for hiring the services of a MCB to do the process. The products imported must be directly related to the development of his activities and for a period no longer than 30 calendar days.

The procedure to follow is:

1) Present written promotional material specifying: name of the artist, representative in Mexico, address and telephone number of the artist’s operations center;

2) Purpose and extent of the artist’s visit;3) Detailed description of the equipment and instruments imported, including

brand name, model and serial number (if available);4) Written commitment to return the equipment and instruments to the U.S.

within 30 calendar days;5) When the weight of the instruments and/or equipment is more than 1500

kilograms, the procedure should be done through MCO for commercial shipments.

6) The Mexican counterpart must submit to MCO a document by which he assumes legal responsibility for taxes and duties that may be derived for not returning the equipment and instruments to the United States within the established time period.

If the artist decides to do the import process himself, when entering Mexico, the U.S. exporter must take the “Lane to Declare” and go directly to MCO Offices. After presenting the documentation, the next step is to activate the automated selection mechanism. As with other import processes the green light indicates that the merchandise will not be subject to inspection and red light indicates that both documents and physical inspection will be done.

This temporary import is not subject to import duties and the exporter will only have to pay the US$15.00 fee to MCO and the services of the MCB (if used).

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d) Merchandise for cultural and sports events

The temporary import of equipment and products for cultural events may be processed directly by the U.S. exporter, but it is recommended to contract the services of a MCB to prepare the temporary import permit. This entry form must specify the use intended for the merchandise, as well as the place or places where it will remain during its stay in Mexico. These products may stay in the country for a maximum of one year. The requirements to import under this category are:

1) That the Mexican counterpart is a national public entity, university, or private organization and that it is authorized to receive deductible donations according to SHCP and/or

2) That they intend to use the products for scientific purposes.

In the case of competitions and sports events, Mexico’s Sports Federation may facilitate the temporarily import of U.S. merchandise inherent to a particular event’s purposes. To process this type of import, Mexico’s Sport Federation (prior to the celebration of the event) must send a letter to MCO indicating the place and date that the event will take place, a description of it and the customs port of entry through which the merchandise will be imported. Attached to the letter they should send a complete listing of the products, description and quantity. If there are products that are exported for free distribution, it should be specified.

In those cases in which the exporter decides to do the process himself, when entering Mexico, he must take the “Lane to Declare” and go directly to Mexican Customs Offices. After presenting the documentation, the next step is to activate the automated selection mechanism. As with other import processes the green light indicates that the merchandise will not be subject to inspection and red light indicates that both documents and physical inspection will be done.

This temporary import is not subject to import duties and the exporter will only have to pay the US$15.00 fee to MCO and the services of the MCB (if used).

Overlooking Mexico’s temporary import law may result in the confiscation of the products by Mexican Customs, without possibility of getting it back, unless a high penalty fee is paid to the Mexican government. The fee usually doubles the market value of the products.

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e) Merchandise for conventions and congresses

To import from the U.S. under this category, Mexican Customs defines Conventions and International Congresses as conferences, symposia, meetings and similar events whose main goal is to meet during pre-established dates, having a confirmed audience of a determined number of individuals.

In order to temporarily export under this regimen, the requirements are:

That the organizer of the Convention is not a Mexican resident or that the majority of the participating entities are foreign;

The products imported for free distribution have to be marked with a marking or seal that distinguishes as intended for the convention or congress;

The maximum period of stay in the country is one year as long as they comply with the general applicable regulations to be imported into the country.

It is recommended to contract the services of a MCB to prepare the temporary entry form. The form must specify the use that will be given to the merchandise and the place or places where it will remain while in Mexico.

As with any other temporary import into Mexico, these products are not subject to import duties, but must comply with all regulations and standards established. The exporter will only have to pay the US$15.00 fee to MCO and the services of the MCB (if used).

Overlooking Mexico’s temporary import law may result in the confiscation of the products by Mexican Customs, without possibility of getting it back, unless a high penalty fee is paid to the Mexican government. The fee usually doubles the market value of the products.

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f) Merchandise for journalism or documentary cinematography

U.S. journalist and/or writers may import temporarily products used in their activities, such as journalism, radio, television, or for activities related to cinematography. Before coming into Mexico, they should obtain a letter from the closest Mexican Consulate to their residence, identifying them as a media company.

They do not need to contract the services of a MCB, and may do the process themselves by taking the ‘Lane to Declare’ to the MCO and filling out the application for authorization for temporary import of products.

As with any other temporary import into Mexico, these products are not subject to import duties, but must comply with all regulations and standards established. The exporter will only have to pay the US$15.00 fee to Mexican Customs.

Overlooking Mexico’s temporary import law may result in the confiscation of the products by Mexican Customs, without possibility of getting it back, unless a high penalty fee is paid to the Mexican government. The fee usually doubles the market value of the products.

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INSTRUCTIONS FOR COMPLETING THE EXPORTER'S CERTIFICATE OF ORIGIN

As mentioned before, under Nafta U.S., Mexican and Canadian tariffs are being phased out on "originating" goods. Originating goods are those that meet the appropriate Nafta rule-of-origin, meaning that they have sufficient North American content to qualify for Nafta tariff preference. The exporter is responsible for determining whether his/her products qualify and must provide a Nafta Certificate of Origin to the importer so that he can claim Nafta tariff preference.

The exporter must send the certificate of origin to the importer. It does not have to accompany the shipment but the importer must have a copy of it in hand before claiming the Nafta tariff preference and it must be completed accurately and legibly.

It shall be completed in English or Spanish, at the exporter's discretion and the Mexican importers must submit a translation of the Certificate to MCO when requested. It may cover a single importation of goods or multiple imports of identical goods. Certificates that cover multiple shipments are called blanket certificates and normally apply to goods imported within any twelve-month period. Nafta defines identical goods as goods that are the same in all respects, including physical characteristics, quality, regardless of minor differences in appearance that are not relevant to the determination of origin of those goods under the Nafta rules of origin.

Even when it must be completed and signed by the exporter of the goods, in cases in which the exporter is not the producer, he/she may complete the Certificate on the basis of knowledge of where the good originates.

It is not required for a commercial importation of a good whose value does not exceed US$2,500 or its equivalent amount in Mexico's currency. However, the invoice accompanying the commercial import must include a statement certifying that the good qualifies as an originating good. The statement should be attached to, handwritten, stamped or typed on the commercial invoice. This exception is valid as long as the import is not part of a series of imports arranged to avoid the certification requirement.

The Mexican importers can make the claim for Nafta tariff preference up to one year after the importation of a good, and apply for a refund of customs duties paid as a result of the good not being accorded preferential tariff treatment. It will be accepted by Mexican Customs for a period of four years after the date when the certificate was signed by the exporter. Exporters or producers who prepare Certificates of Origin shall provide copies to their own customs administration upon request and must maintain records pertaining to the exportation for five years or longer and should keep information on the person to whom the certificate was given and of any change that could affect its accuracy or validity.

The following explains some of the instructions on the Nafta Certificate of Origin form:

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Field 1. Exporter Name and Address.

Field 2. Blanket Period (dd/mm/yy). It is used for the dates. Either the one-year blanket date or one for one time shipment.

Field 3. Producer Name and Address. This field requires information regarding the producer of the goods. It allows exporters to state "Available to Customs Upon Request," if they do not want to disclose the producer's name to the importer, for example. It also allows exporters to state "Unknown." It is important to note that although the producer may be unknown, the exporter must still be able to document the North American origin of the good and demonstrate that the exported good originates in the U.S.

(Nafta article 406 covers the treatment of fungible materials, i.e., goods that are interchangeable for commercial purposes and whose properties are essentially identical. If an exporter has fungible materials that are originating and non-originating, or has manufactured a product containing originating and non-originating fungible products, theexporter should refer to Nafta Treatment of Fungible Goods and Materials (Article 406), Spare Parts and Tools (Article 407), and Indirect Materials (Article 408).)

Field 4. Importer Name and Address.

Field 5. Description of good(s). It is where the description of the goods goes. The description should be sufficient to match the description on the commercial invoice and the Harmonized Tariff Schedule number.

Field 6. HS Tariff Classification Number. It should be filled with the Harmonized Tariff Schedule number up to 8 digits.

Field 7. Preference Criterion. For each good described in Field 5, you must state the Nafta originating criterion. Criteria A-F are the ways in which goods may qualify for Nafta tariff preference. The most common of these Nafta originating criterions are:

Criterion A. The good is wholly obtained or produced entirely in the territory of one or more of the Nafta countries. For example: cut flowers grown in California.

Criterion B. The good is produced entirely in the territory of one or more of the Nafta countries and satisfies the specific rule of origin set out in Annex 401 of the Nafta, which is specific tariff shift, value added, or a combination of these two. For example: Newsprint (HTS 4801) manufactured in the U.S. containing Kaolin clay (HTS 2507) from China is being exported to Mexico. This newsprint would qualify for Nafta originating status since the Nafta specific rule for newsprint allows inputs from outside the HTS chapter 48 to be sourced from non-Nafta countries.

Criterion C. The good originates in the territory of a Nafta country where the good is produced entirely in the Nafta region exclusively from originating

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materials. In an analysis to apply this criterion, each component of the product must be assessed to see if it is Nafta originating. For example: A wooden desk made from Canadian wood and metal hardware made in the U.S. from steel imported from Germany. The wooden desk qualifies for Nafta duty treatment since the metal hardware meets the Nafta originating requirements, even though it was made from German steel, this is due to a Nafta tariff “shift” rule for hardware.

Criterion D. In a very few cases a good that has not undergone the required tariff change can still qualify for preferential Nafta treatment if a regional value content requirement is met.

Criterion E. Applies to certain automatic data processing goods and their parts, specified in Annex 308.1.

Criterion F. Applies to certain agricultural goods imported into Mexico. For more information, please call the Foreign Agricultural Service at (202) 720-7420. Exporters should review the Nafta definition of an "agricultural" good, to determine if they need to use criteria "F." Processed foods, often not considered an agricultural product, fall within the Nafta definition of agriculture, as does raw natural fibers (silk, cotton, etc.) and fur-skins.

Field 8. Producer. If you are a producer, state ‘yes’, otherwise state ‘no’.

Field 9. Net Cost. This field cannot be filled out until the producer or exporter has determined the "preference criteria" for their products as required in field 7.

If the producer or exporter has met the requirements of one of the "preference criteria" in field seven and has not had to calculate "regional value content" in order to do so, then they would indicate "NO" in field 9.

If the producer or exporter has used the "net cost" methodology of calculating regional value content to determine that their good qualified for Nafta preference under one of the preference criteria in field 7, then they would indicate "NC" in this field. If the exporter or producer has calculated regional value content over a period of time, using either the net cost or transaction value method, they must indicate the beginning and end dates of that period.

Field 10. Country of Origin. If an exporter or supplier has qualified his/her products for Nafta tariff preference based on production in just one of the three Nafta countries, then the country of origin in field 10 would be the country in which the production has taken place. However, if production has taken place in one or more Nafta party, (for example, a good is assembled in United States, with inputs from both the United States and Canada), then exporter/suppliers will need to refer to the "marking rules" to determine country of origin.

The "marking rules" should not be confused with the Nafta rules of origin. Nafta rules of

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origin are used to determine whether or not a product has sufficient North American content to qualify for Nafta tariff preference. A second set of rules, the "marking rules," also known as the "non-preferential" rules of origin, are used to determine country of origin. Marking rules are based entirely on tariff-shifts -- there are no value content requirements.

For U.S. goods being exported to Mexico, the country of origin will determine if Mexico will apply the preferential tariff rate for the goods. In some, but not all cases, the Nafta tariff phase-outs differ depending on whether a product is from the United States or Canada. For U.S. exports to Mexico, a U.S. producer can state "US" if the good qualifies for Nafta tariff preference with no Canadian or Mexican parts, and no production carried out in Mexico or Canada. However, if there are Mexican and/or Canadian parts, or part of the production process was carried out in Mexico and/or Canada, exporters must use the "marking rules" to determine country of origin.

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The following contacts are offices which along with the Bureau of Export Administration, control certain exports and re-exports:

Bureau of Export AdministrationWeb Site: http://www.bxa.doc.gov

For export of defense articlesU.S. Department of State, Office of Defense Trade ControlsTel. (703) 875-6644Fax. (703) 875-6647

For export of certain chemicals:Drug Enforcement Administration, International Chemical Control UnitTel. (202) 307-7202Fax (202) 307-8570

For export of controlled substances:Drug Enforcement Administration, International Drug UnitTel. (202) 307-2414Fax. (202) 307-8570

For exports of natural gas and electric power:U.S. Department of Energy, Office of Fuel ProgramsTel. (202) 586-9482Fax. (202) 586-6050

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DIRECTORY OF MEXICO’S CUSTOMS OFFICES

General Administrator Lic. Jose Guzmán MontalvoAv. Hidalgo 77, Módulo IV, Piso 3 Col. Guerrero.Delegación Cuauhtémoc 06300, México D.F.Tel: 01152-55-52183069 y 01152-55-52210456

Sea Ports of Entry:

Tuxpan-VeracruzEstado de Veracruz y Tamaulipas hasta la desembocadura del Rio Cazones.

Acapulco-Guerrero: Ubicada en la sala internacional del Aeropuerto “Teniente Azueta”, de Zihuatanejo, Guerrero.

Tampico-Tamaulipas: Ubicada desde la desembocadura del rio Pánuco hasta el puente El Prieto, Hasta los límites de Tampico y Cuidad Madero.

Salina Cruz-Oaxaca: Ubicada desde los límites de los estados de Chiapas y Oaxaca hasta el estado de Guerrero.

Progreso - Yucatan: Ubicada en la calle 25 x 32, en la entrada al muelle fiscal, se extiende desde el límite con el estado de Campeche hasta el estado de Quintana Roo.

Mazatlán – Sinaloa: Ubicada desde los límites de los estados de Nayarit y Sinaloa, hasta el punto demominado Agiabampo, en el límite de los estados Sinaloa y Sonora.

Manzanillo – Colima: Ubicada desde los límites de los estados de Michoacán y Colima hasta los límites de los estados de Colima y Jalisco.

Lázaro Cárdenas Ubicada desde el límite de los estados de Guerero y Michoacán: Michoacán hasta el límite de los estados de Michoacán y Colima.

La Paz-B.C.S : Ubicada en Loreto, esta cuenta con dos puntos de revisión, una en el muelle de transbordadore en la garita Pichilingue y el otro en Santa Rosalia en el Kilometro 10 de la Carretera Federal Transpeninsular #1.

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Guaymas- Sonora: Ubicada desde la desembocadura del rio Colorado hasta el punto denominado Agiabampo, en los límites de los estados de Sinaloa y Sonora.

Ensenada-B.C.N: Ubicada en el vértice de la franja fronteriza de Baja California de 20 kilometros en el litoral del Océano Pacifico, hasta el limite con Baja California Sur, y siguiendo el litoral del golfo de California hasta el puerto de San Felipe.

Ciudad del Carmen: Ubicada en el litoral del Golfo de México, desde el límite de los estados de Veracruz y Tabasco hasta el límite de los estados de Campeche y Yucatán, y en la frontera con Guatemala, siguiendo la franja fronteriza hasta de Campeche con Guatemala y Belice, siguendo el vértice hasta Quintana Roo.

Cancún : Localizada a un costado del Aeropuerto Internacional de Cancún ubicada en el límite de los estados de Quintana Roo y Yucatán, hasta la Bahía Venustiano Carranza.

Coatzacoalcos: Está ubicado en la porción sureste del estado de Veracruz, asentado en el margen izquierda del río que lleva su mismo nombre. Sirve estratégicamente a la región geoeconómica del Golfo y Pacífico sur por su conexión terrestre con el puerto de Salina Cruz, Oaxaca a través del centro del Istmo de Tehuantepec.

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Terrestrial Customs Office.

Acapulco-Guerrero: Ubicada en la sala internacional del Aeropuerto “Teniente Azueta”, de Zihuatanejo, Guerrero.

La Paz - B.C.S : Ubicada en San Jose del Cabo, en el Aeropuerto Internacional de “Los Cabos”.

Toluca: Ubicada en el Estado de México con jurisdicción en el perímetro de la ciudad, depende de esta aduana el Aeropuerto Internacional de Toluca “Lic. Adolfo López Mateos”.

Querétaro: Ubicada en Via del ferrocarril 248 mas 340 mts, Delegación Carrillo Puesto Frente Fracc. Las Teresas C.P. 76136, Querétaro, Qro.

Puebla: Ubicada en el parque Industrial 2000 del Libramiento Puebla -Tehuacán.

Naco: Con sede en la ciudad de Naco, Sonora, y con jurisdicción desde el punto denominado La Bota, aproximadamente a 46 Km de la población, hasta otro denominado Anivacachi a 22 Km al oriente de la misma, incluyendo el Municipio de Cananea, Sonora, hasta el Km 117 de la carretera federal número 15 en el tramo Cananea-Imuris, y km 164 de la carretera interestatal, en el tramo Cananea-Arizpe, Municipio de Baacoachi, Sonora.

Aeropuerto Internacional de la Ciudad de México:Tiene su jurisdicción en el perímetro del propio Aeropuerto, denominado “Lic. Benito Juarez”, en la ciudad de México, D.F.

Monterrey: Se encuentra en el Km 5.5 de la carretera a Colombia, en el estado de Nuevo León. Dependen de esta aduana las secciones aduaneras de los aeropuertos internacionales “Mariano Escobedo” y “Del Norte”. No cuenta con garitas ni ferrocaril.

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Matamoros: Se encuentra ubicada la aduana en la calle 14 y Galeana s/n, Col. Ferrocarriles, Matamoros, Tamaulipas.

Guadalajara: Se encuentra ubicada a un costado del Aeropuerto Internacional “Miguel Hidalgo”, en Tlajomulco de Zuñiga, Jalisco. Cuenta con dos secciones aduaneras; “Puerto Vallarta” y la “Terminal Intermodal Ferroviairia” de la ciudad de Guadalajara, un almacén fiscal, “Lopez Mateos” y un patio vehicular “El Salto”.

Aguascalientes: Se localiza en Aguascalientes y tiene jurisdicción en el perímetro de dicha ciudad.

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Fronterizaz Customs Officer.

Veracruz: Tiene su sede en la ciudad de Veracruz, Veracruz, con jurisdicción desde la desembocadura del río Cazones (Punta Delgada), hasta la Barra de Santecomapan.

Torreón: Tiene su sede en el Ferropuerto Laguna (km 8 de la carretera Torreón-Mieleras, en Torreón, Coahuila), con jurisdicción en el perímetro de Ciudad Torreón.

Tijuana: Su domicilio se encuentra en Avenida Línea Internacional s/n. C.P. 22510, Tijuana, B.C.N. Teléfono: (664) 624-2200. Con sede en la ciudad de Tijuanan, en el estado de Baja California, con jurisdicción desde el vértice que forma la línea divisoria internacional y el Océano Pacífico, hasta el monumento 252 de la propia línea internacional, inclusive, y siguiendo el litoral del Océano Pacífico desde el vértice anteriormente mencionado hasta que forma el límite de la franja fronteriza de 20 Km y el litoral antes mencionado.

Tecate: Con sede en la ciudad de Tecate, en el estado de Baja Calirfornia, con jurisdicción desde el Monumento 252 de la línea divisoria internacional, exclusive, hasta el punto donde cruza la propia línea la cañada denominada Nacho Guero.

Subteniente López: Con sede en la población de Subteniente López, Quintana Roo, con jurisdicción desde la Bahía Venustiano Carranza hasta el vértice que forma el Estado de Yucatán con el paralelo 20.

Sonoyta: Con sede en la ciudad de San Luis Río Colorado, Sonora, con jurisdicción desde el punto denominado La Salada, distante aproximadamente 25 Km al occidente de Sonoyta, hasta la Puerta de San Miguel.

San Luis Río Colorado: Con sede en la ciudad de San Luis Río Colorado, Sonora, con jurisdicción desde el Monumento 205 que se encuentra en el límite del estado de Sonora, siguiendo el curso del río Colorado.

Reynosa: Con sede en la ciudad de Reynosa en el estado de Taumalipas.

Piedras Negras: Con sede en la ciudad de Piedras Negras, Coahuila, con jurisdicción desde el arroyo Merlo, situado a 27 Km al oriente de

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la ciudad de Acuña hasta la línea divisoria de los estados de Coahuila y Nuevo León.

Puerto Palomas: Con sede en la Ciudad General Rodrigo M. Quevedo (Puerto Lomas), en Chihuahua, con jurisdicción desde un punto que se encuentra a 72 Km al oriente de Agua Prieta, en el cual está situado el Monumento 65 de la línea divisoria internacional, hasta el Monumento 13 que se encuentra frente al lugar denominado Malpaís, 30 Km al oriente del Puerto Palomas.

Ojinaga: Con sede en la ciudad de Ojinaga, Chihuahua, con jurisdicción desde la población de Pilares, 280 Km al oriente de Ciudad Juarez, hasta el lugar conocido con el nombre de Las Garzas, que se encuentra en los limites de Coahuila y Chihuahua.

Nuevo Laredo: Desde los límites de los estados de Nuevo León y Tamaulipas hasta la Presa Falcón. Cuenta dentro de su jurisdicción con el Aeropueto Internacional “Quetzalcóatl” y los cruces internacionales Puente número 1 “Miguel Alemán” y el Puente número 2 “Juarez-Lincoln”. En el primero se realiza el cruce de pasajeros y de operaciones de importación y exportación.

Nogales: Con sede en la ciudad de Nogales, Sonora, con jurisdicción desde la Puerta de San Miguel hasta el lugar denominado La Bota, situado a 46 Km al occidente de Naco.

Ciudad Miguel Alemán: Esta ubicada en la ciudad de Miguel Alemán, Tamaulipas. La jurisdicción va desde la Presa Falcón hasta la población denominada Guardados de Abajo.

Mexicali: La aduana de Mexicali, B.C., tiene jurisdicción desde el punto donde cruza la línea divisoria internacional con los Estados Unidos de América; hacia el oeste hasta la cañada denominadaNacho Guero, al este hasta el río Colorado, y siguiendo el curso del mismo, hasta el Monumento 205, que se halla en el límite del estado de Sonora. También tendrá jurisdicción la misma aduana en el litoral del Golfo de California, desde la desembocadura del río Colorado hacia el sur, hasta el puerto de San Felipe.

Colombia: La aduana de Colombia esta situada en el Km 34.5 de la carretera Nuevo Laredo-Piedras Negras. Su jurisdicción corresponde desde los límites de los estados de Coahuila y Nuevo León hasta los límites del propio estado de Nuevo León con el de Tamaulipas.

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Chihuahua: La Aduana esta ubicada en Av. Homero 540, Complejo Industrial Chihuahua, C.P. 31109, Chichuahua, Chihuahua.

Ciudad Juarez: Se encuentran ubicados dentro de la jurisdicción de esta aduana los puentes “Santa Fe”, “Reforma”, “Córdova”, “Guadalupe”, “Porvenir” y “Zaragoza”.

Ciudad Acuña: Con sede en Ciudad Acuña, Coahuila, con jurisdicción desde el punto denominado Las Garzas, en los límites de los estados de Chihuahua y Coahuila, hasta el arroyo Merlo, que se encuentra a 27 Km al oriente de Ciudad Acuña.

Ciudad Hidalgo: Con sede en Ciudad Hidalgo, de Chiapas, con jurisdicción desde el lugar donde entra a territorio nacional el río Usumacinta, en el vértice en los estados de Chiapas, Tabasco y Guatemala, inclusive; en la frontera con Guatemala, hasta la desembocadura del río Suchiate y el Océano Pacífico, en los límites de Chiapas con Guatemala, y siguiendo por la costa del Océano Pacífico, hasta los límites de los estados de Chiapas y Oaxaca.

Camargo: Esta aduana se localiza en la carretera Camargo-Río Grande, Texas, km 6 s/n, Ciudad Camargo. Se trata de una aduana tipo 2 que no cuenta con secciones aduaneras, aeropuerto ni terminal de autobuses.

Altamira: Tiene jurisdicción en la totalidad del municipio de Altamira, hasta el límite de los municipios de González, Aldama, Tampico, Ciudad Madero y el límite de los estados de Veracruz y Tamaulipas.

Agua Prieta: Con sede en la ciudad de Agua Prieta, Sonora, con jurisdicción desde el punto llamado Anivachi, a 22 Km al oriente de Naco hasta otro que se encuentra A 72 Km al oriente de Agua Prieta, en el cual está situado el Monumento 65 de la línea divisoria internacional.

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Sanctions

If necessary, the following sanctions will be applied:

Fine from $919.00 to $1,379.00, if the return is verified in spontaneous manner, for each fifteen days or fraction beyond the expiration date until the merchandise is returned. The fine amount will not exceed the value of the merchandise.

Fine from 130% to 150% of the tariffs on foreign trade omitted: If the omission of timely return is discovered by the authority. If the merchandise is intended for a use different than the one stated. If the merchandise is taken to places different than the specified ones. If the merchandise is used by individuals other than its owners. If the merchandise is transferred or sold. Payment of tariffs and compensatory duties.

Note: there are two different types of temporary importing. The importer may opt to use the ATA booklet or --------

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Article 305: Temporary Admission of Goods 1. Each Party shall grant duty-free temporary admission for:

a) professional equipment necessary for carrying out the business activity, trade or profession of a business person who qualifies for temporary entry pursuant to Chapter Sixteen (Temporary Entry for Business Persons), b) equipment for the press or for sound or television broadcasting and cinematographic equipment, c) goods imported for sports purposes and goods intended for display or demonstration, and d) commercial samples and advertising films, imported from the territory of another Party, regardless of their origin and regardless of whether like, directly competitive or substitutable goods are available in the territory of the Party.

2. Except as otherwise provided in this Agreement, no Party may condition the duty-free temporary admission of a good referred to in paragraph 1(a), (b) or (c), other than to require that such good:

a) be imported by a national or resident of another Party who seeks temporary entry; b) be used solely by or under the personal supervision of such person in the exercise of the business activity, trade or profession of that person; c) not be sold or leased while in its territory; d) be accompanied by a bond in an amount no greater than 110 percent of the charges that would otherwise be owed on entry or final importation, or by another form of security, releasable on exportation of the good, except that a bond for customs duties shall not be required for an originating good; e) be capable of identification when exported; f) be exported on the departure of that person or within such other period of time as is reasonably related to the purpose of the temporary admission; and g) be imported in no greater quantity than is reasonable for its intended use.

3. Except as otherwise provided in this Agreement, no Party may condition the duty-free temporary admission of a good referred to in paragraph 1(d), other than to require that such good:

a) be imported solely for the solicitation of orders for goods, or services provided from the territory, of another Party or non-Party; b) not be sold, leased or put to any use other than exhibition or demonstration while in its territory; c) be capable of identification when exported; d) be exported within such period as is reasonably related to the purpose of the temporary admission; and e) be imported in no greater quantity than is reasonable for its intended use.

4. A Party may impose the customs duty and any other charge on a good temporarily admitted duty-free under paragraph 1 that would be owed on entry or final importation of such good if any condition that the Party imposes under paragraph 2 or 3 has not been fulfilled.

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5. Subject to Chapters Eleven (Investment) and Twelve (Cross Border Trade in Services):

a) each Party shall allow a vehicle or container used in international traffic that enters its territory from the territory of another Party to exit its territory on any route that is reasonably related to the economic and prompt departure of such vehicle or container; b) no Party may require any bond or impose any penalty or charge solely by reason of any difference between the port of entry and the port of departure of a vehicle or container; c) no Party may condition the release of any obligation, including any bond, that it imposes in respect of the entry of a vehicle or container into its territory on its exit through any particular port of departure; and d) no Party may require that the vehicle or carrier bringing a container from the territory of another Party into its territory be the same vehicle or carrier that takes such container to the territory of another Party.

10. For purposes of paragraph 5, "vehicle" means a truck, a truck tractor, tractor, trailer unit or trailer, a locomotive, or a railway car or other railroad equipment.

Article 306: Duty-Free Entry of Certain Commercial Samples and Printed Advertising Materials Each Party shall grant duty-free entry to commercial samples of negligible value, and to printed advertising materials, imported from the territory of another Party, regardless of their origin, but may require that:

a) such samples be imported solely for the solicitation of orders for goods, or services provided from the territory, of another Party or non-Party; or

a) such advertising materials be imported in packets that each contain no more than one copy of each such material and that neither such materials nor packets form part of a larger consignment.

Article 307: Goods Re-Entered after Repair or Alteration 1. Except as set out in Annex 307.1, no Party may apply a customs duty to a good, regardless of its origin, that re enters its territory after that good has been exported from its territory to the territory of another Party for repair or alteration, regardless of whether such repair or alteration could be performed in its territory. 2. Notwithstanding Article 303, no Party may apply a customs duty to a good, regardless of its origin, imported temporarily from the territory of another Party for repair or alteration. 3. Annex 307.3 applies to the Parties specified in that Annex respecting the repair and rebuilding of vessels.

Import of Merchandise for donation

It could be imported into Mexico, merchandise that is donated and will not be subject to import duties if:

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1) the merchandise is destined for cultural, teaching, research and public health or social service purposes.

2) It is complies with all regulations and restrictions no related to import duties applicable to the import of such product.

3) If the donor is foreigner and he is the owner of the merchandise.

The donor must be certified by the SHCP as an “authorized donor” or in its defect, must comply with the following requirements to be credited:

1) he must be registered with a public notary in the terms of article 70-B of the Mexican Law of Taxes (Ley del Impuesto sobre la renta)

2) He must be resgistered with Hacienda;3) Obtained from the General Administration or Local Tax Juridica or/and Large

contributors, authorization to receive donations deductive from the tax revenues (impuesto sobre la renta) which will come into effect when is published in the Federal Official Gazzette.

It is necessary that to have

1) a letter from the donor in which the products that are being donated are described in detail and include the destination.

2) Request from the General Administration or Local Jurisdiction of Taxes (Local Juridica de Ingresos) or Large contributors closest to the address of the donor, authorization to receive the donation.

3) Request the services of an agent or customs apoderado.

Important note

Merchandise that is donated by a government representative or a foreign government requires an opinion issued by Mexico’s Secretary of Foreign Relations.

The following products (among others) require import permit from other federal agencies:

Government OfficeMedicine Health Ministry

Plants andWoods Ministry of Agriculture, Rural Development, Fisheries and Food

Clothes andUsed calzado Ministry of Economy

Small Import

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Small distributors or importers that are residents of the border region or free zone may also import using the same procedures, it is only needed that the importer (in Mexico) is registered with the Ministry of Economy and that the value of the merchandise imported does not exceed 5,000 fof merchanside imported from the United States.

This type of import does not requires the participation of a customs agent. The importer has to fill out the Customs declaration form and the form of contributions to Foreign Trade, pay in the bank and proceed to the automated mechanism of selection. IT can also be done by a customs broker.

Regimen of fiscal deposit

The regimen of fiscal deposit consist on the storage of merchandise that is coming from a foreign country in the called general storage wharehouses for companies that can provide the service in the terms specified by the General Law of Organzations and Credit Auxiliary Activities and that are authorized for that by the customs authority. This regimen comes into effect once the import duties are applied and also the compensatory quotes.

This regimen allows the postponement of that specific import regimen and allows the particulars the storage of the merchandise for a determined period of time, considering that the storage contract is still valid and the payment for the services provided is done. The merchandise could be extracted totally or partially for its import, previous payment of the corresponding duties, contributions and compensatory fees, updating the information from the period in which the merchanidse entered the country and the moment in which is was taken from the warehouse. THe merchandise may also be returned to the country of origin o by a internal transit into the country. It is also that the merchandise is destined for comercialization. There are products that are not subject to this regimen.

Articles 119, 120 2nd paragraph and 123 of the Customs Law.

Persons authorized to promote the customs processThe agents or customs agents or brokers, are the legal representatives for the importers and exporters, once a letter of assignation is issued (carta de encomienda) signed by the importer, and are the only ones allowed to process all the acts and notifications that are related to the customs processing of the merchandise.

There are some cases in which the customs broker is excepted of this responsibility, among others when the same is derived from false information provided by the client, in those cases in which the agent had no opportunity to know the truth by examining the merchandise; of the veracity of the value declared when he has a copy of the value declared by the exporter and a copy of the document which guarantees the estimated value; when the omission to the contribution is derived from the aplication of a preferable tariff derived from the application of a free trade agreement, always and when a copy of

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the certificate of origin and when the merchandise complies with the rules of origin aplicable. These exceptions do not apply to those cases in which the RFC is false.

The customs broker is responsible for the payment of all taxes for import duties and the rest of the contributions and the compensatory fees that are charged by the introduction of the merchanidse into the country, in those cases in which the customs broker participates personally or an authorized representative of his office. The solidary responsibility includes accessories, with the exception of paying the penalties.

As an exception to all above, individuals may process the export of the merchandise through customs without the services of a customs broker, only in those cases:

1) When the value of the merchandise that is being imported as passanges, excluding the franchise does not exceeds the equivalen in Mexican pesos of $3,000 USD or equivalent in other foreign coins.

2) When the merchandise imported is computer equipment and its value, added to the rest of the merchandise does not exceeds $4,000 USD or equivalent in foreign currency.

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Nevertheless, all shipments entering a country must be cleared by customs, regardless as to whether or not the shipments qualify under Nafta preferential tariff treatment. The Nafta Rules of Origin determine what qualifies for preferential treatment.

The effect of Nafta on exports to Mexico has varied. Some products under Nafta instantly qualify for Nafta preferential treatment. Other items will see a reduction in tariffs over a period of 5 to 15 years and some of these goods will eventually become duty-free. Furthermore, there is possibility that a product manufactured in the United States, Canada or Mexico will not qualify for Nafta.

The United States, Canada and Mexico established a standard Certificate of Origin which must be completed by the exporter or the producer of the goods in order to claim preferential treatment under the Nafta agreement. A Nafta Certificate of Origin must be completed when the merchandise being exported from the United States to Mexico is valued US$1,000.00. The Certificate of Origin certifies that the goods being exported fall under one of the preference criteria to meet Nafta Rules of Origin and may be impacted by tariff classification changes outlined in the Nafta agreement.

Maquiladoras

Ask the TIC

http://export.gov/tic http://export.gov/tic

Nafta UpdateJune 2001

Nafta UPDATE: FREQUENTLY ASKED QUESTIONS ABOUT THE NORTH AMERICAN FREE TRADE AGREEMENT

by Joanne QueenTrade Information Center, Trade Development

The information presented in this document is meant to serve as a guide to Nafta issues faced by U.S. companies. Only the Nafta text itself and the customs regulations of each country that may be issued to implement the Nafta are

37

definitive. For complex issues or where interpretation is required, exporters should seek legal assistance or an advanced ruling from the Customs Administration in the country to which they are exporting.

WHAT ISSUES ARE COMMONLY MISUNDERSTOOD ABOUT THE Nafta?

The Nafta establishes special preferential tariff treatment for goods "originating" in and traded among Nafta countries. However, the Nafta Certificate of Origin is not a required entry document for shipments between the United States and Mexico or Canada and should only be prepared if the product qualifies under the Nafta Rules of Origin for preferential tariff treatment. The exporter must first initiate a process to determine if the product qualifies and whether a Certificate of Origin is needed.

Completion of a Nafta Certificate of Origin is an affirmation that the party signing the document has researched the terms of the Nafta and has determined that the goods covered by the certificate are "originating", as defined in the agreement. Preparation of this certificate imposes certain legal rights, obligations and liabilities on the party signing the document and should be based on a careful inquiry into the terms of the Nafta as they apply to each product.

One of the most difficult issues exporters face when exporting to one of the Nafta countries is determining whether the product can be considered an "originating good". Origin is not determined by where the product begins its export journey. The term "originating" means qualifying under the rules of origin set out in Chapter Four of the Nafta agreement. The Nafta Certificate of Origin must be completed in order to receive preferential tariff treatment upon entry into the importing country.

Many U.S. companies are unfamiliar with the agreement and mistakenly believe that products produced in the United States, Canada, or Mexico qualify for Nafta treatment. Most firms are unaware that they need to determine whether there are any foreign parts, components, or raw materials used to manufacture their final product.

U.S. companies must obtain or confirm the appropriate Schedule B or Harmonized Tariff Classification Number for their product(s) in order to reference the rules of origin that govern the allowable percentage of foreign components. The classification number is also used by shippers in reporting export shipments, by governments in compiling official trade statistics, and by customs authorities in determining the relevant import duties to be paid. Rules of origin can be found at www.Nafta-customs.org under Annex 401 of the Nafta agreement.

WHAT EXACTLY DOES "WHOLLY OBTAINED OR PRODUCED" MEAN?

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Preference criteria tell Customs and the importer how the goods qualified as originating. It is impossible to choose an origin criterion without first reading and fully understanding the rules of origin frequently referred to as Article 401 of the Nafta and Annex 401. There are six preference criteria: A through F.

Criterion A corresponds to goods wholly obtained or produced entirely in Canada, Mexico or the United States. "Obtained" does not mean "purchased," but is simply used to acknowledge that production is not the only way goods are created.

When qualifying products and determining the preference criterion, many exporters experience difficulty answering the question of whether their product has been wholly or totally produced in a Nafta territory.

For the purpose of Nafta, "wholly obtained or produced" means that the goods contain no foreign parts, components or raw materials. Some examples of products wholly obtained or produced entirely in the territory of one or more of the countries are mineral goods; vegetable goods; live animals; and goods obtained through hunting, trapping, or fishing. Additional information concerning preference criteria and a complete list of goods considered to be wholly obtained or produced in one of the Nafta countries is available on the TIC website at www.tradeinfo.doc.gov

HOW ARE PRODUCTS QUALIFIED FOR SPECIAL TARIFF TREATMENT UNDER THE Nafta?

Under Nafta, U.S., Mexican, and Canadian tariffs on "originating" goods are gradually being phased out. Originating goods are those that meet the appropriate Nafta Rule of Origin. In order to obtain preferential tariff treatment on these products, exporters must complete a Nafta Certificate of Origin.

The following process can be used as a guide to determine if your product qualifies and how to fill out a certificate of origin:

1. Check with the production manager [or the supplier(s) of the product] about any foreign components, parts, or raw materials used to manufacture the product.

2. If there are foreign components, parts, or raw materials, visit the Census website www.census.gov/foreign-trade/www: Click on the Schedule B Search Engine (or call 301-457-1084) and obtain the Schedule B number for the foreign component and the end product.

3. Check with the Trade Information Center (TIC) to see if there are any duties on the end product.

4. If there are no duties, it is not necessary to complete the Nafta Certificate of Origin.

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5. If the duties using Nafta Preference are less than the usual duties applied under Most Favored Nation (MFN) status, complete a Nafta Certificate of Origin.

6. Read or review the Nafta Agreement and Annex 40l, Rules of Origin.

7. Look up the specific rule of origin for the product (listed according to the tariff classification number) and apply the rule to the product to determine whether it meets the requirement. Use the Schedule B numbers obtained in Step 2 above.

8. If the product does not meet the specific Rules of Origin, it does not qualify for preferential tariff treatment and the Certificate of Origin should not be completed.

9. If the product meets the specific Rules of Origin, review the Preference Criterion, choose the appropriate letter (A thru F), and complete the Nafta Certificate of Origin.

10. For additional guidance or clarification on Steps 6, 7, & 9 above, visit the Trade Information Center website at http://tradeinfo.doc.gov or call the TIC at 1-800-USA-TRAD(E).

HOW ARE COMPLICATED, MULTI-PART PRODUCTS QUALIFIED UNDER Nafta?

U.S. manufactured products are often composed of many inputs or components. For such products, it may be necessary to obtain an advance customs ruling from the customs authority in the importing country. Advance rulings are issued on a wide range of Nafta-related issues, including whether an imported good qualifies as an originating good; whether a specific regional value-content requirement or tariff classification change requirement is met; and whether the proposed marking of a good satisfies country of origin marking requirements.

For Mexican or Canadian Customs contact information, call the Trade Information Center at 1-800-USA-TRADE.

WHAT ARE THE CHANGES TO MEXICO'S MAQUILADORA REGIMEN IMPLEMENTED JANUARY 1, 2001?

Additional information about the maquiladora sector is available on the Trade Information Center's (TIC) website at http://tradeinfo.doc.gov

WHERE CAN I FIND MORE INFORMATION ON THE Nafta OR ON HOW TO QUALIFY PRODUCTS?

The text of the Nafta agreement can be found on the following websites:

40

http://tradeinfo.doc.gov

http://www.Nafta-customs.org

http://www.sice.oas.org/trade/Nafta/Naftatce.asp

For assistance with specific questions on qualifying products under Nafta or clarification of unfamiliar trade terms, International Trade Specialists are available at the Trade Information Center (TIC) at 1-800-USA-TRAD(E).

The North American Free Trade Agreement (Nafta) grants benefits to a variety of goods from North America. Maximum benefits are reserved for those goods that "originate" in the region.

There are six preference criteria: A through F. These letters tell Customs and the importer how the goods qualified as originating. It is impossible to choose an origin criterion without first reading and fully understanding the rules of origin frequently referred to as Article 401 of the Nafta and Annex 401.

Changes to the Nafta rules of origin (Annex 401) are published in Federal Register notices that are posted to the website of the Office of the United States Trade Representative (USTR). General Note 12 (t) of the Harmonized Tariff Schedule of the United States (HTSUS) reflects the updated version of Annex 401. General Note 12 (t) is available on the Nafta Customs website. (Select Nafta Topics, then Annex 401). For updates click on General Note 12(t).

CRITERION A corresponds to goods wholly obtained or produced entirely in Canada, Mexico or the United States. "Obtained" has a unique meaning in the Nafta context; it does not mean "purchased," but is simply used to acknowledge that production is not the only way goods are created.

For a good to qualify under this criterion, it must contain no non-North American parts or materials anywhere in the production process. It is generally reserved for basic products such as those harvested, mined or fished in the Nafta territory, although can include a manufactured good with no non Nafta inputs.

CRITERION B: Article 401 (b) indicates that goods may "originate" in Canada, Mexico or the United States, even if they contain non-originating material, if the materials satisfy the rule of origin specified in Annex 401 of the Agreement. The Annex 401 rules of origin are commonly referred to as specific rules of origin and are based on a change in tariff classification, a regional value-content requirement, or both.

When a rule of origin is based on a change in tariff classification, each of the non-originating materials used in the production of the goods must undergo the applicable change as a result of production occurring entirely in Canada, Mexico and/or the United

41

States. The specific rule of origin defines exactly what change in tariff classification must occur for the goods to be considered "originating."

Some specific rules of origin require that a good have a minimum North American regional value content or (RVC). There are two formulas for calculation the regional value content, the "transaction value" method or the "net cost" method, requiring, in most situations, either 60% or 50% value added, respectively.

Exporters should refer to the rule associated with the product being exported. Exporters may only use regional value content when it is allowed under a product-specific rule.

CRITERION C corresponds to goods produced entirely in Canada, Mexico and/or the United States exclusively from materials that are already originating.

CRITERION D: In a very few cases a good that has not undergone the required tariff change can still qualify for preferential Nafta treatment if a regional value content requirement is met.

CRITERION E applies to certain automatic data processing goods and their parts, specified in Annex 308.1.

CRITERION F applies to certain agricultural goods imported into Mexico. For more information, please call the Foreign Agricultural Service at (202) 720-7420.

Please visit the Nafta Certificate of Origin page for more information on Nafta documentation.

Note: This document is meant to be a guide on the Rules of Origin provisions of the North American Free Trade Agreement. Exporters should keep in mind that only the Nafta text itself and the customs regulations of each country that may be issued to implement Nafta are definitive. For complex issues or where interpretation is required, exporters should seek legal assistance or an advanced ruling from the Customs Administration in the country to which they are exporting.

This document is meant to be a guide on the Rules of Origin provisions of the North American Free Trade Agreement. Exporters should keep in mind that only the Nafta text itself and the customs regulations of each country that may be issued to implement Nafta are definitive. For complex issues or where interpretation is required, exporters should seek legal assistance or an advanced ruling from the Customs Administration in the country to which they are exporting.

Overview

Only goods which qualify under the Nafta rules of origin can obtain Nafta tariff

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preference, i.e., reduced or eliminated tariffs. (Refer to Annex 401 of the Agreement.) The Nafta rules of origin take into account where goods are produced and what materials are used to produce them. The purpose is to ensure that North American goods traded among the three Nafta partner countries receive preferential tariff treatment. Products of other countries merely being transhipped through or undergoing only minor operations in North America are not eligible for Nafta benefits.

When products meet the rules of origin and therefore qualify for Nafta tariff benefits, they are said to "originate." Chapter 4 of the Nafta sets out most of the principles governing origin determination. Exporters need to fill out a Nafta Certificate of Origin and provide this certificate to their importer in order for the importer to claim Nafta tariff preference.

The Nafta sets out four "origin criteria," meaning that there are four ways in which goods generally meet the Nafta rule of origin, and therefore qualify for Nafta tariff preference.

A. Goods "wholly produced or obtained" in the Nafta region, i.e., they contain no non-Nafta material.

B. Goods containing non-originating inputs, but meeting the Annex 401 origin rules.

C. Goods produced in the Nafta region wholly from originating materials, i.e. produced from materials which may contain non-Nafta materials, but meet the Nafta rule of origin.

D. Unassembled goods and goods classified in same (HS) Harmonized System category as their parts, which do not meet the Annex 401 rule of origin, but contain sufficient North American regional value content. (Goods qualify in this category only in very limited circumstances.)

Special provisions apply for agriculture, some automatic data processing equipment and textile goods. These provisions are described in this document.

The Origin Criteria

The Nafta "origin criteria" are described below.

A. Wholly Obtained or Produced

Goods that are "wholly obtained or produced" entirely in one or more Nafta countries originate. For a good to qualify under this criterion, it must contain no non-North American parts or materials -- see Nafta article 415, reprinted below, for a definition. Coal mined in Pennsylvania, corn grown in Iowa, and livestock born and raised in Texas, and silver jewelry made in Arizona exclusively from silver mined in Mexico are all examples of goods wholly obtained or produced in North America. "Obtained" has a unique meaning in the Nafta context; it does not mean "purchased," but is simply used to acknowledge that production is not the only way goods are created. This relates to

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preference criterion "A" on the Nafta certificate of origin. Article 415 of the Nafta defines wholly produced or obtained in the following manner:

Goods wholly obtained or produced entirely in the territory of one or more of the Parties means:

(a) Mineral goods extracted in the territory of one or more of the Parties;

(b) Vegetable goods, as such goods are defined in the Harmonized System, harvested in the territory of one or more of the Parties;

(c) Live animals born and raised in the territory of one or more of the Parties;

(d) Goods obtained from hunting, trapping or fishing in the territory of one or more of the Parties;

(e) Goods (fish, shellfish and other marine life) taken from the sea by vessels registered or recorded with a Party and flying its flag;

(f) Goods produced on board factory ships from the goods referred to in subparagraph

(e) Provided such factory ships are registered or recorded with that Party and fly its flag;

(g) Goods taken by a Party or a person of a Party from the seabed or beneath the seabed outside territorial waters, provided that a Party has rights to exploit such seabed;

(h) Goods taken from outer space, provided they are obtained by a Party or a person of a Party and not processed in a non-Party;

(i) Waste and scrap derived from:

(1) production in the territory of one or more of the Parties, or (2) used goods collected in the territory of one or more of the Parties, provided such goods are fit only for the recovery of raw materials; or

(j) goods produced in the territory of one or more of the Parties exclusively from goods referred to in subparagraphs (a) through (i), or from their derivatives, at any stage of production.

B. Goods Containing Non-originating Materials and Meeting the Annex 401 Origin Rules

Goods made from non-originating materials may also qualify for Nafta treatment as long as each non-Nafta input undergoes a tariff classification change as specified in Originating Goods (Article 401 ) and meets other requirements that may apply. This relates to preference criterion "B" on the Nafta certificate of origin.

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Harmonized System Terms Used in Origin Rules

HS numbers break down like this:

Chapter--2 digits Heading--4 digits Subheading--6 digitsTariff item--8 digitsStatistical break--10 digits

For example, a computer printer (HS # 8471.92.65) is classified in Chapter 84, Heading 8471, Sub-heading 8471.92 and Tariff Item 8471.92.65.

Classifications are "harmonized" internationally at the subheading level; after the first 6 digits, each country assigns its own numbers.

The Annex 401 rules of origin may be based on:

o A change in tariff classification;

o A regional value-content requirement;

o Both a change in tariff classification and a regional value content requirement.

Exporters should refer to the rule associated with the product being exported. Exporters may only use regional value content when it is allowed under a product-specific rule.

Tariff Shift: HS classification change is the basis for most Nafta rules of origin and is used instead of value to measure the North American contribution to a product. This method compares imported inputs and the finished good to be exported; the extent of tariff classification change ("tariff-shift") indicates whether sufficient North American processing has taken place. Exporters must know the HS classification of both the exported good and their non-North American parts to apply the rules.

Annex 401 is organized by the Harmonized Schedule (HS) numbers. Exporters must know the HS number of the product they wish to export. The HS number (sometimes knows as the Schedule B) can be found on the Internet at http://www.census.gov/foreign-trade/www/ . Then click on Schedule B.

Below is an example of a tariff shift rule of origin, and a product which qualifies for Nafta tariff preference based on tariff shifts.

Products: Breads, pastries, cakes, biscuits (HS 1905.90)

Non-North American input: Flour (classified in HS chapter 11), imported from Europe.

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Rule of Origin: "A change to heading 1902 through 1905 from any other chapter."

Explanation: For all products classified in HS headings 1902 through 1905, all non-North American inputs must be classified in an HS chapter other than HS chapter 19 in order for the product to obtain Nafta tariff preference. These baked goods would qualify for Nafta tariff preference because the non-originating are classified outside of HS chapter 19. (The flour is in chapter 11). However, if these products were produced with non-originating mixes, then these products would not qualify because mixes are classified in HS chapter 19, the same chapter as baked goods.

Regional Value Content: For goods subject to a regional value content rule of origin, please refer to Regional Value content (Explanatory Material and Article 402), for an explanation of regional value content rules of origin.

C. Goods Produced in the Nafta Region Wholly from Originating Materials.

Another way for goods to originate is if they are produced entirely in one or more Nafta country using only originating materials. This provision encompasses goods made of parts and materials that themselves meet Nafta rules of origin, even though containing some non-North American inputs. This relates to preference criterion "C" on the Nafta certificate of origin.

For example, an agricultural machine such as a wine press made in California of all originating parts could qualify, even if the parts contained non-North American metals. The difference in this case is that foreign materials have been transformed in North America to such an extent that new, originating parts have been created. These originating components are then used to produce the originating wine press.

D. Unassembled Goods and Goods Classified with Their Parts which do not Meet Annex 401 Rule of Origin, but Contain Sufficient Regional Value Content.

Under two limited circumstances, if a product fails to qualify under product-specific tariff-shift rule of origin, it may qualify under a regional value content requirement, even if the product-specific rule of origin in Annex 401 does not contain regional value content provisions. These provisions NEVER apply to products classified in HS chapters 61-63 (apparel and other made-up textiles items such as blankets, linens and bags).

These two circumstances are applicable when the good is produced entirely in the territory of one or more of the Nafta countries, but one or more of the non-originating materials provided for as parts under the Harmonized System that are used in the production of the good does not undergo a change in tariff classification because:

1. The good was imported into North America in an unassembled or disassembled form, but was classified as an assembled good under the HS system. This relates to preference criterion "D1" on the Nafta certificate of origin.

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2. Parts and final products are classified in the same heading or subheading (as long as the description of the HS heading for the good provides for and specifically describes both the good itself and its parts and is not further subdivided into subheadings, or the subheading for the good provides for and specifically describes both the good itself and its parts). This relates to preference criterion "D2" on the Nafta certificate of origin.

In the two above situations, no tariff shift is possible because of how the goods were classified. Goods in this situation may obtain Nafta tariff preference if they have 50 or 60 percent North American value content, depending on method used. Refer to Regional Value content (Explanatory Material and Article 402).

Special Provisions

E. Automatic Data Processing Equipment: Certain automatic data processing goods and their parts that are not "originating" under the Nafta rules of origin are considered as "originating" when they are imported into the territory of one of the Nafta countries from another Nafta country. The reason for this is that the Nafta countries have agreed to adopt a common external tariff on certain products. Once these products enter into Nafta territory, they can be traded duty-free among the countries.

Per Annex 308.1 of the Nafta, as of January 1, 1994, the Nafta countries have agreed to eliminate all tariffs, including those on Non-Nafta parties, on a number of products. These are listed below, with their Mexican and Canadian tariff numbers.

Metal Oxide Varistors

Canada: 8533.40.10 Mexico: 8533.40.07

Diodes, Transistors and Similar Semiconductor Devices; Photosensitive Semiconductor Devices; Light Emitting Diodes; Mounted Piezo-electric Crystals

Canada and Mexico 8541.10 8541.21 8541.29 8541.30 8541.408541.50 8541.60 8541.90

Electronic Integrated Circuits and Microassemblies

Canada and Mexico 8542

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Because these goods are duty-free for imports from all countries, and not just Nafta countries, exporters will not have to fill out a certificate of origin to obtain a zero tariff assessment.

However, this provision becomes important in the year 2004, at which time the Nafta countries have agreed to adopt a common external tariff on other products, such as automatic data processing machines, digital processing units, input or output units, storage units, parts of computers and computer power supplies. Beginning in the year 2004, once one of these goods enters into a Nafta country and is subsequently exported to another Nafta country, an exporter will not have to fill out a Nafta certificate of origin in order to waive the payment of duties on those products. Until the year 2004, however, exporters of automatic data processing machines, digital processing units, input or output units, storage units, parts of computers and computer power supplies must complete a Nafta certificate of origin if their importers want to claim Nafta duty preference.

The preceding provisions on automatic data processing goods relate to preference criterion "E" on the Nafta certificate of origin.

Agricultural Goods: If the good is an agricultural good, as defined by the Nafta, then exporters must ensure that their goods qualify under the special criterion for agricultural goods. Exporters should review the Nafta definition of an "agricultural" good. Processed foods, often not considered an agricultural product, fall within the Nafta definition of agriculture, as does raw natural fibers (silk, cotton, etc.) and furskins.

The agricultural provisions of the Nafta were not negotiated on a trilateral basis -- i.e., there are separate agreements between the U.S. and Mexico, and Canada and Mexico. The agricultural provisions negotiated under the U.S.-Canada Free Trade Agreement remain in place. Nafta section Annex 703.2, Section A, covers agricultural trade between the United States and Mexico. (Section B covers agricultural trade between Mexico and Canada, and therefore is not applicable to U.S. exporters to Mexico. The reference on the certificate of origin to appendix 703.2.B.7 does not apply to U.S. exporters to Mexico.)

U.S. Exports to Mexico: When determining whether or not U.S. agricultural goods are eligible for Nafta tariff preference when imported into Mexico, exporters need to review two factors:

1) The definition of an "agricultural good" applicable to U.S. exports to Mexico;

2) The definition of "qualifying good" for U.S. agricultural exports to Mexico.

Once U.S. exporters to Mexico determine that their products fall into the Nafta definition of agriculture, they should examine the rules of origin for their products, keeping in mind the definition of "qualifying good" for agricultural exports.

Exporters should note that for certain products, which are identified below, Mexico has established tariff rate quotas which will be in existence during the Nafta transition period

48

(for 10-15 years). For the goods subject to the tariff rate quotas, importers will only be granted the preferential rate up to a certain specified volume of importations.

Definition of Agricultural Good for U.S. Exports to Mexico: agricultural good means a good provided for in any of the following:

Note: For purposes of reference only, descriptions are provided next to the corresponding tariff provision.

(a) Harmonized System (HS) Chapters 1 through 24 (other than a fish or fish product);

(b) HS subheading 2905.43 manitolHS subheading 2905.44 sorbitol HS heading 3301 essential oilsHS headings 3501 to 3505 albuminoidal substances, modified starches, gluesHS subheading 3809.10 finishing agentsHS subheading 3823.60 sorbitol n.e.p.HS headings 4101 to 4103 hides and skinsHS heading 4301 raw furskinsHS headings 5001 to 5003 raw silk and silk wasteHS headings 5101 to 5103 wool and animal hairHS headings 5201 to 5203 raw cotton, cotton waste and cotton carded or combedHS heading 5301 raw flaxHS heading 5302 raw hemp

Definition of Qualifying Good for U.S. Agricultural Exports to Mexico: If an exporter's product falls into one of the categories identified above, then that product must meet the definition of "qualifying good," as defined by the Nafta in order for the good to be eligible for Nafta tariff preference.

Nafta Annex 703.2, Section A defines "qualifying good" in the following manner.

Qualifying good means an originating good that is an agricultural good, except that in determining whether such good is an originating good, operations performed in, or materials obtained from Canada shall be considered as if they were performed in or obtained from a non-party."

This means that U.S. exporters to Mexico must treat Canadian production and Canadian inputs as non-originating for the purposes of obtaining Nafta tariff preference. Canadian production and inputs would be treated the same manner as input from or production in Europe. Tariff preference eligibility can only be obtained on the basis of production and inputs in the United States and Mexico.

These agricultural provisions relate to preference criterion "F" on the Nafta certificate

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of origin.

Textiles: Exporters to Mexico of certain carpets and sweaters should review the following text for applicability to their product.

Nafta Article 300-B, Appendix 6.A: Rules Applicable to Certain Carpets and Sweaters

For purposes of trade between Mexico and the United States, a good of either Party of HS Chapter 57, subheading 6110.30, 6103.23 or 6104.23 shall be treated as if it were an originating good only if any of the following changes in tariff classification is satisfied within the territory of one or more of the Parties:

(a) A change to subheading 5703.20 or 5703.30 or heading 57.04 from any heading outside Chapter 57 other than headings 51.06 through 51.13, 52.04 through 52.12, 53.08, 53.11 or any headings of Chapter 54 or 55; or a change to any other heading or subheading of Chapter 57 from any heading outside that chapter other than headings 51.06 through 51.13, 52.04 through 52.12, 53.08, 53.11, any heading of Chapter 54 or 55.08 through 55.16;

(b) A change to U.S. tariff item 6110.30.10.10, 6110.30.10.20, 6110.30.15.10, 6110.30.15.20, 6110.30.20.10, 6110.30.20.20, 6110.30.30.10, 6110.30.30.15, 6110.30.30.20, or 6110.30.30.25 or Mexican tariff item 6110.30.01, or a good of those tariff items that is classified as part of an ensemble in subheading 6103.23 or 6104.23, from any heading outside Chapter 61 other than headings 51.06 through 51.13, 52.04 through 52.12, 53.07 through 53.08, 53.10 through 53.11, any heading of Chapter 54 or 55, 60.01 or 60.02, provided that the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one or more of the Parties; or a change to any other tariff item of subheading 6110.30 from any heading outside Chapter 61 other than headings 51.06 through 51.13, 52.04 through 52.12, 53.07 through 53.08, 53.10 through 53.11, any heading of Chapter 54, 55.08 through 55.16, 60.01 or 60.02, provided that the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one or more of the Parties.

Other Considerations

1. Nafta De Minimis Provision

The North American Free Trade Agreement contains a de minimis provision. This is beneficial to exporters because it keeps small amounts of non-originating material (seven percent of the value of the good in most cases) from preventing a good from obtaining Nafta tariff preference. Refer to De Minimis (Explanatory Material and Article 405) for additional information.

2. Advance Rulings

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Exporters may seek advance rulings as to whether or not their products qualify for Nafta tariff preference. Refer to How to Obtain an Advanced Customs Ruling for further information. Some of the information contained in this document has been drawn from a U.S. Customs Service document entitled The North American Free Trade Agreement: A Guide to Customs Procedures that outlines rules of origin and customs procedures under the Nafta. This 44 page document is available from the Government Printing Office, (202) 512-1800, or by fax: (202)512-2250, at a cost of $6.00.

NaftaNafta Certificate of Origin and Rules of Origin: Overview

Click the icon below to download the Nafta Certificate of Origin./ticwebsite/Naftaweb.nsf/504ca249c786e20f85256284006da7ab/2cb667fc745400

398525684d00571dea/$FILE/Nafta Certificate of Origin.pdf /ticwebsite/Naftaweb.nsf/504ca249c786e20f85256284006da7ab/

2cb667fc745400398525684d00571dea/$FILE/Nafta Certificate of Origin.pdfThis is an Adobe PDF file and requires the Adobe Acrobat Reader.

http://www.adobe.com/products/acrobat/readstep.html http://www.adobe.com/products/ acrobat/readstep.html

Qualifying Goods for Preferential Duty Treatment under NaftaQualifying goods for Nafta preferential duty treatment and completing the Nafta

Certificate of Origin for the first time may be complex and time consuming depending on the products to be exported. The following documents are key to understanding the

process involved in qualifying your product under the Nafta rules.

Instructions on Filling Out Certificate of Origin

Find out the basics about filling out the Nafta Certificate of Origin http://www.adobe.com/products/acrobat/readstep.html

Frequently Asked Questions about the Nafta Agreement /ticwebsite/Naftaweb.nsf/3c5a68c244d2af1a85256691006d7add/

7645b10ad5e47d4a852566fa0078ab1b!OpenDocument

What is the Preference Criterion?

How do I make the Rule of Origin Determination for my product?

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/ticwebsite/FAQs.nsf/6683dce2e5871df9852565bc00785ddf/55dddb5d73a189f4852565bc00699444!OpenDocument How to get an Advanced Ruling for Origin Determination

For other useful documents on the North American Free Trade Agreement, please see the Trade Information Center's Nafta database.

General Information on the Nafta Certificate of Origin Document provides preferential duty treatment; a plus for the importer. Without

the document, the importer will pay the usually higher most-favored-nation (MFN) tariff.

May be completed in French, Spanish, or English. A translation may be requested by customs officials.

Does not need to be notarized. No requirement that the exporter must submit the original document. Companies planning to use privately created certificates of origin should obtain

Customs approval beforehand. Not required: (1) for shipments less than the equivalent to US$1000, (2) for goods

which do not qualify under the Nafta provisions for the lower tariff rate, or (3) for temporary entry goods.

Certificate can be submitted for a refund up to 1 year after the importation of the good.

The U.S. and Canada require that the certificate be kept for 5 years, Mexico for 10 years.

Updated Nafta Rules of Origin: Annex 401 of the Nafta is available on the U.S. Customs Nafta Website. http://www.Nafta-customs.org/Click on Annex 401. Note: Updated rules of origin as of January 10, 2002 can be found in General Note 12(t). These notes reflect changes in the tariff classification rules of Annex 401.

Changes to the Nafta rules of origin (Annex 401) are published in Federal Register notices that are posted to the website of the Office of the United States Trade Representative (USTR). http://www.customs.gov/impoexpo/Nafta_newf.htm

Annex 401, trilaterally approved in February 2000, has been updated to include both the technical changes that have been made to the Rules of Origin and to make it more generic in application.

The Original Nafta Rules of Origin (Annex 401) are located in the text of the Nafta agreement on the Internet.

The following two documents can also be downloaded from the U.S. Customs website. Form 434 -- Nafta Certificate of Origin and Continuation SheetForm 446 -- Nafta Verification of Origin Questionnaire

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Note: This document is meant to be a guide on the Rules of Origin provisions of the North American Free Trade Agreement. Exporters should keep in mind that only the Nafta text itself and the customs regulations of each country that may be issued to implement Nafta are definitive. For complex issues or where interpretation is required, exporters should seek legal assistance or an advanced ruling from the Customs Administration in the country to which they are exporting.

1) All paperwork related to the shipment of the merchandise by port and guide of the air shipment have to be certified by the port authority and the authorized Customs brokers.

2) The documents that prove the merchandise complies with the regulations and no-import duty restrictions (permits and/or authorizations), exclusively those that have been established by –acuerdo- by the Mexican Ministry of Economy (Secretaria de Economia) or in its defect by officials of the Federal Executive, when they have been published in the Federal Official Gazette and are identified in terms of import duty and the namenclature that corresponds according to the Tariffs in the General Import Duty Law (Tarifa de la Ley del Impuesto General de Imprtacion (TIGI).

3) When the import of the merchandise is subject to import permit by Mexican Ministry of Economy it would be necessary to comply with all and each one of the requirements established with the respective permits, among others, the customs agent authorized to enforce the permit, the country of origin, specifications of the products and customs agents who processed the shipment, etc.

4) The document that determines the country of origin in order to apply the preferable import duties, compensatory fees, quotas, inscribing the country of origin and other measures that to that effect are applicable.

5) The document that proves the guarantee demanded by the SHCP when the value of the declared merchandise is inferior to the estimated value established by that office.

6) Weight or volume certificate issued by the certifying company authorized by SHCP in those cases in which the merchandise is shipped in bulks in customs offices located in the ports, according to the ruling established by the Customs Law.

7) The report that allows the identification, analysis and control established by the SHCP, according to the regulations.

8) For the merchandise that is able to be identified individually, the report must include serial numbers, parts, brand, model or in its defect, the technical or commercial specifications needed to identify the products and distinguish them from others that are similar when that information is not available. This information could be included in the pedimento, in the invoice, in the shipment document, or in a listing attached that indicates the corresponding pedimento, signed by the importer, the agent and the customs apoderado broker.

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This does not apply for the import of merchandise under a regimen of “differing the value” or return of import duties, nor for that merchandise that is destined for temporary import that is not to transferef or sold, except between maquiladoras, businesses with an export program or businesses that have a registry from Mexico’s Secretary of Economy. The temporary imports done by those companies in machinery, equipment, tools, instruments, molds and parts to be used in the production process. Under this same program we include the products that are temporary imported by other maquiladoras or companies with export programs that are going to do manufacturing and or repair processes.

TEMPORARY IMPORTATION INTO MEXICO

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