IMMEX Highlights: NAFTA Implications on IMMEX Operations
Under an IMMEX Program, a company may temporarily import materials and assets into Mexico to be used in the production of final products to be exported, or in rendering export-related services with certain benefits.
IMMEX authorized companies may, as a general rule, import raw materials and take advantage of benefits such as the exemption from the payment of import duties, preferential fixed customs processing fees, and when applicable, an exemption in the payment of countervailing duties.
However, it is worth noting that in accordance with the North American Free Trade Agreement (NAFTA), when importing materials originating from non-NAFTA countries (non-NAFTA materials) to incorporate into final products to be exported to NAFTA countries, the exemption from the payment of import duties is restricted.
According to NAFTA, duties upon the importation of non-NAFTA materials (even under an IMMEX program) must be paid, but may be deferred until the moment of the exportation of the final product or within 60 days after the date of exportation.
Under NAFTA provisions, duties could be reduced or exempt in an amount not exceeding the lesser of: (i) the custom duties to be paid on the imports into Mexico, or (ii) the custom duties payable in the NAFTA country upon the importation of the finished goods (Lesser of the two rule). Under this rule, it is most likely that duties to be paid in Mexico will not be reduced nor exempt since for almost all the cases no duties will be paid upon the importation of final products to the United States of America or Canada.
It is worth mentioning that under the applicable law in Mexico, for purposes of calculating the amount to be paid upon the importation of non-NAFTA materials incorporated into finished products to be exported to other NAFTA countries, IMMEX exporting companies may apply preferential duty rates under other free trade agreements entered into by Mexico or those established in other Mexican trade facilitation programs (i.e.: Sectorial Promotion Programs), instead of applying the general import duty rates (most favored nation rates).
As a final consideration, please note that if the final products are exported to countries other than NAFTA countries, NAFTA restrictions will not be applicable and consequently no duties shall be paid upon the temporary importation into Mexico of non-NAFTA materials.