WORLD TRADE WT/TPR/M/29/Add.1
19December 1997
ORGANIZATION(97-5592)
Trade Policy Review Body
7-8October 1997
TRADE POLICY REVIEW
MEXICO
MINUTES OFTHE MEETING
Addendum
Replies toWritten Questions
Thefollowing communication wasreceived on4December 1997fromthedelegation ofMexico
responding towritten questions submitted bythedelegations andparticipants during themeeting of
theReview Body.
_________________
Replies byMexico
Inkeeping withtheoutlines suggested bytheWTO Secretariat, thequestions havebeengrouped
together under fourthemes: (1)economic anddevelopmental policies, (2)regional andmultilateral
trade, (3)implementation oftrade policies, including sectoral policies, and(4)specific questions.
1. Economic anddevelopmental policies
Farfromtackling the1994 crisis withprotectionist measures, Mexico decided todeepen and
accelerate itsrestructuring andeconomic liberalization programme, while reaffirming itscommitment
tothemultilateral disciplines ofamarket economy. Thanks totheseriousness ofthisprogramme and
more thanadecade ofeffort, thecrisis wasovercome inarelatively short period, andgrowth has
resumed inavigorous andsustainable form.
Fiscal policy
Fiscal policy hassought tomaintain asound public financial position, promote macroeconomic
stability, strengthen public domestic savings andencourage productive investment. Thecurrent
Government 'seconomic programme hasforecast apublic deficit rising, asaproportion ofGDP, from
0.5percentin1997to1.3percentin1998, andthenfalling to0.3percentby2000. These estimates
takeaccount ofthecostofsocial security reforms, debtors relief programmes, andthereorganization
offinancial institutions; theyalsoassume lower world petroleum prices withrespect to1996.
Inorder toattain these goals, non-petroleum fiscal revenue willincrease, asashare ofGDP,
from7.5percentin1996 to9.1percentin2000byexpanding thetaxbaseandreducing taxevasionWT/TPR/M/29/Add.1
Page2
andavoidance. Public expenditure istobereduced innon-priority areas, withnetexpenditure falling
from 23percentofGDP in1996 to22.7percentin2000.
Theexpected performance ofpublic finances willmake itpossible forthemeasures taken to
tackle thepublic deficit tofocus, overthenextyears, onrefinancing already existing obligations to
secure lower costsandabetter debtstructure. Thegross totalpublic debtasashare ofGDPisexpected
tofallfrom35.6percentin1997to31.3percentin2000, thuslowering interest payments, reducing
thedebttosustainable levels andchannelling more resources intosocial expenditures.
Taxreform
Thetaxreform of1997comprised anumber ofmodifications which sought, ontheonehand,
tofacilitate voluntary compliance withtaxobligations andstimulate economic activity, andontheother
hand, toencourage prompt payment oftaxes andtoimprove taxcoverage, thusboosting taxrevenue.
- Modifications aimed atpromoting economic activity andfacilitating taxpayment
Thereforms tothetaxsystem were intended tostimulate private economic activity andthe
allocation ofresources topriority areas, aswellastoprovide greater legalsecurity. Tothatend:
- Thesystem ofpayment ininstalments hasbeenaltered infavour ofpunctual taxpayers,
andtherateofsurcharge hasbeenmodified;
- thecrediting oftaxes paidabroad, including those paidatthesecond corporate level,
isnowpermitted;
- provisions havebeenmade forsupplying, taxpayers withatransfer-pricing resolution
valid forfouryears, andinsome cases, fortheprevious fourfiscal years;
- donations tocivilsocieties orassociations devoted totheconservation ofprotected
natural areas canbededucted;
- thetaxsystem provides greater incentive forinvestment intechnology research and
development funds byallowing theinvestment ofreserves andreducing thetaxon
returns, provided theyareusedforthatpurpose within amaximum oftwoyears;
- taxpayers whose statements areaudited byapublic accountant mayadjust theirown
taxsituation.
- Amendments aimed atfavouring taxpayment andimproving taxcollection
Themeasures taken inthisrespect areaimed attightening control, eliminating thegreyareas
oftaxlegislationwhichprovideloopholesfortaxevasionandavoidance,andreviewingthetaxlegislation
forinternational operations, chiefly those taking place inlowtaxjurisdictions.
Asregards fiscal consolidation, thegreyareas which lendthemselves totaxevasion arebeing
reduced:
- Profits andlosses mustbemodified incaseofanytransfer ofshares fromthecontrolling
company tothecontrolled company;WT/TPR/M/29/Add.1
Page3
- thecontrolling companies areexcluded from theexemption pertaining totheassets
taxoncontrolling companies (IMPAC) introduced tocover thestartofoperations (four
years). Atthesame time, thecontrolled companies included intheconsolidation are
eligible forthesaidexemption totheextent oftheirownership outside ofthegroup
andwithrespect tonewgoods acquired bythem;
- afineisimposed forfailure tonotify takeovers anddivestitures ofcompanies, orto
include allofthecontrolled companies intheconsolidation request.
With respect tooffences, thefollowing measures havebeenadopted:
- Thepenalties imposed fortaxevasion arebeing restructured withaviewtomaking
them more progressive, reducing thepenalties fortaxevasion involving small and
medium amounts;
- thecases inwhich thecrime oftaxevasion isaggravated havebeendefined. Insuch
cases, theprison sentence isincreased byuptoonehalf;
- anewcategory ofoffences hasbeencreated forofficials oremployees oftheMinistry
ofFinance whothreaten thetaxpayer withcriminal liability;
- certain fines havebeenincreased, andpenalties havebeenintroduced inrespect of
anumber oftaxobligations whose violation hadnotpreviously beenpenalized.
Asregards international taxpolicy, thetaxsystem hasbeenbrought intolinewithinternational
practice andthedouble taxation treaties inforce inthecountry. Anumber ofmeasures havealsobeen
introduced toprevent operations from being conducted inlowtaxjurisdictions (taxhavens):
- Thecriterion applied bytheOECD countries, according towhich residence fortax
purposes istheplace ofestablishment ofthecompany rather thantheplace of
administration, isnowapplied;
- asinother countries, alistofjurisdictions considered tobetaxhavens hasnowbeen
incorporated intothelaw;
- theprofits ofcompanies located insuchjurisdictions cannowbecumulated annually
forshareholders orbeneficiaries residing inMexico;
- allinvestments carried outinsuchjurisdictions mustbereported andfailure todoso
isconsidered acrime;
- payments tolow-tax jurisdictions maynotbededucted except where itisshown that
theoperations were conducted atmarket prices;
- commissionsandotherpaymentsforagencyservicestoresidentsofthesaidjurisdictions
aresubject toawithholding taxof30percent;
- theprogressive rateforforeign residents supplying independent personal services in
Mexico formorethan183daysperyearhasbeeneliminated, andreplaced witha21per
centwithholding taxonthegross income, regardless oftheduration oftheservices;
- thetransfer pricing methods usedbytheOECD countries havebeenadopted;WT/TPR/M/29/Add.1
Page4
- awithholding taxof15percentisapplied tothepreviously untaxed income deriving
from royalties payed fortelecommunications andsatellite transmissions.
Promotion ofdomestic savings
Thereform ofthepension system, which entered intoforceon1July1997, marks thebeginning
ofafar-reaching reform ofStatesocial security institutions which willhaveanimportant impact both
onincome distribution andonfostering domestic savings. Ithasbeencalculated thatunder thenew
pension system, some 3percentofGDP willbedrawn intoindividual pension accounts bytheyear
2000. This, initsturn, willstrengthen financial intermediation andhelptochannel resources into
productive investment.
Inorder toachieve sustained growth, itisessential topromote long-term aggregate savings.
Tothatend,aregulatory andoperational framework hasbeenestablished toboost saver confidence,
reduce transaction costs andpromote theefficiency ofintermediation. Thus, another cornerstone of
theeconomic programme isthemodernization ofthefinancial system.
Savings areexpected toincrease from thecurrent levelof20.9percentofGDP to25.4per
centbytheyear2000. Oneofthelessons ofthe1994 crisis isthatgrowth cannot depend onforeign
savings. Domestic savings willfinance mostoffuture investment, anditisestimated thatforeign savings
willamount toonly3.2percentofGDP bytheyear2000.
Pension fund
TheLawonSavingSystemsforRetirementisdesignedtoincreasedomesticsavingsanddevelop
amarket forlong-term savings instruments adapted tothepensions system. Atthesametime, itseeks
toprovide greater security andtoensure reasonable profitability ofworkers 'savings. TheLawprovides
forthechannelling ofresources, through thepurchase ofsecurities, mainly towards promotion of
domestic production, employment generation, housing construction, development ofinfrastructure and
regional development.
Thus, theinvestment companies specializing inretirement funds (siefores) mustwork either
withMexican Government securities andinstruments orwiththose thatareentered intheNational
Register ofSecurities andIntermediaries.
Finally, Mexico hasnointention, forthemoment, ofmodifying theinvestment system ofthe
siefores assetforth intheLawonSaving Systems forRetirement.
Arrears oftheMexican banking system
Thearrears oftheMexican banking system currently amount toPtas106,000 million,
representing 13.58 percentofthesystem 'stotalportfolio.
Forthemoment, therearenoplanstodevelop anynewMexican bankdebtor relief programmes;
however, certain debtors havealready beenabletosubscribe toalready existing programmes.
Exchange ratecompetitiveness
Since the1994crisis, Mexico hasmaintained afloating exchange ratesystem. Monetary policy
hasbeen used toinduce lower interest rates andavoid short-term capital inflows leading toan
appreciation oftherealexchange rate. Thismechanism wasusedforthefirsttimeinSeptember 1997.WT/TPR/M/29/Add.1
Page5
Monetary andexchange ratepolicies, together withstructural change, haveallowed rapid,
sustained export growth, which isexpected tocontinue overthenextyears.
Impact ofeconomic policy ondevelopment
The1994crisis hasunquestionably taken ahightollinterms ofgrowth andofliving standards
ingeneral. Solving thecrisis thusconsisted inestablishing thebasis forsustained growth inorder
toraisethose standards. Thebestshort-term strategy fortackling thiscrisis consisted inadopting a
medium-term growth strategy. Thus, Mexico continued withitsprogramme ofstructural reform of
theeconomy.
TheGovernment, acknowledging thatnosimple solutions existed tolower thesocial costof
thecrisis, isseeking toconsolidate economic growth togenerate employment. Thisisprobably the
most important policy option toredistribute income andincrease leaving standards.
Theopen unemployment ratereached 7.6percentinAugust 1995 inthewake ofthe1994
economic crisis, butfelltoa3.4percentinJune1997, aratecomparable tothepre-crisis level. The
productive apparatus isexpected togrow overthenextfewyears ataratewhich would allow itto
absorb thelabour force expansion.
Atthesametime,theMexican Government targeted agrowing proportion ofpublic expenditure
towards health, education, social security, housing andprogrammes toalleviate extreme poverty. A
growing economy willallow anincrease insocial expenditures andprovide forthebasic needs ofthe
mostdisadvantaged sectors ofthepopulation. Such expenditures already account for56percentof
thebudget, ashare thathasdoubled intenyears.
Nosocial policy issustainable without economic growth.
Economic outlook
Theoutlook foreconomic growth infuture years isverypositive. In1996, GDP increased
5.1percentafterafallof6.2percentin1995; andasmentioned, during thefirsthalfof1997 it
roseby7percentascompared tothesame period in1996. Theauthorities recently raised their
forecasts: inaccordance withtheirnewestimates, GDP isexpected togrow atleast6percentthis
yearandnextyear, and5.5percentin1999and2000. Exports willcontinue toplayaveryimportant
roleinthateconomic growth.
Industrial policy
Before concluding thisfirstsection, Iwould liketorefer tosome ofthepoints made by
Ambassador Corrales concerning Mexican industrial policy.
TheIndustrial Policy andForeign Trade Programme acknowledged thatachieving sustainable
economic growth, well-paid jobsandhigher living standards requires more thanalimited number of
competitive production factors, norwould theisolated efforts byfirms orindustries ormarket forces
alone suffice. Intheglobalized world inwhich thenational economy isevolving andwillcontinue
toevolve, industrial policies willberequired tocorrect market failures, coordinate theefforts ofthe
different sectors and,ingeneral, encourage industrial competitiveness.
Industrial andforeign trade policy recognizes thatenterprises and,inparticular thesmaller
enterprises, arefaced withproblems inaccessing information, hightransaction costs, anddifficulties
inachieving economies ofscaleandspecialization, andininnovating andobtaining newtechnologies.WT/TPR/M/29/Add.1
Page6
Tofacilitate access toinformation andreduce transaction costs, theFederal Government is
developing public databases toidentify andestablish linksbetween supply ofanddemand forproducts,
inputs andservices among enterprises, aswellaslinks withofficial industry andtrade support
programmes. TheMexican Managerial Information System (SIEM) isofparticular interest. Itbegan
operating inJanuary 1997, offering avirtual business centre withmore than200,000 registered firms
todate.
Supplierandexportpromotionprogrammeshavealsobeensetuptoencouragegreaterintegration
indomestic production chains andtoinvolve smaller firms indirect andindirect exports.
Toencourage economies ofscaleandspecialization, especially among thesmaller firms, further
efforts arebeing made topromote "integrating" firms tomake itpossible tonegotiate asagroup for
thepurchase ofinputs, thesaleofproducts andthedevelopment oftechnology under themostfavourable
conditions.
Tothesame end,theFederal andState Governments arealsopursuing theirprogramme of
industrial groupings tobenefit from theconcentration ofsimilar producers inthesame area. Thus
far,fivesectors in14Federal States havebeenidentified andfeasibility studies areunder waywith
aviewtocreating orconsidering suchgroupings.
Recognizing thatthecostofdeveloping newproduction andmarketing processes andspecialized
advisoryserviceswasprohibitiveformicro,smallandmedium-sizedenterprises,theFederalGovernment
hasimplemented anumber ofprogrammes tofacilitate access tosuchservices andpromote technology
transfer andtraining ofhuman resources aswellasinvestment intechnological research.
TheNational Network ofManagerial Competitiveness Regional Centres (CRECES) began
operating inSeptember 1996, providing advice onadministration, accounting andengineering. There
are21centres inoperation todate,covering two-thirds ofthecountry, andbyOctober 1997onecentre
isexpected tobeoperating ineachFederal State. Aspartofthesame effort, theTechnology Services
Information System (SISTEC) wasbrought intooperation, providing information onmore than
400centres andinstitutions involved inapplied research andtechnology development atthenational
level, andproviding specialized consulting services inthatarea.
Thesecond stageoftheIntegral Promotion Programme fortheUseofInformation Technology
inMicro, Small andMedium-Sized Enterprises wasimplemented asameans ofsupporting theuse
anddevelopmentoftechnologies,andinadditiontoallowing2,000firmstoacquirecomputerequipment,
ithasprovided 31,000 training courses for364,000 entrepreneurs andworkers.
2. Regional andmultilateral trade
Mexico 'spositive roleintheWTO
Inthecourse oftheUruguay Round, Mexico wasamong thefirstcountries tohighlight the
need totransform theGATT intoapermanent organization withaneffective dispute settlement
mechanism.
During thefirsttwoyears oftheWTO 'sexistence, Mexico hasbeenabletoappreciate the
value ofthemechanism. Indeed, asitbecomes increasingly integrated inworld tradeflows along with
theother developing countries, Mexico recognizes theimportance ofamechanism which enables it
todefend itself against unilateral measures. Infact,Mexico hasbeenoneofthechief users ofthe
dispute settlement system, participating asaninterested party orasaclaimant invarious cases inwhich
itsinterests havebeenthreatened.WT/TPR/M/29/Add.1
Page7
Mexico 'smembership intheWTO played acrucial roleinthewayinwhich itaddressed the
1995crisis. InJanuary ofthatyear,inthemidst ofthemostsevere crisis inthecountry 'srecent history,
Mexico complied withitsWTO commitments including thetariffication ofagricultural products. This
wasinsharp contrast with thehandling ofthe1982 crisis, when Mexico notonly introduced
prior-licensing requirements andincreased tariffs onallproducts, butevenresorted toforeign exchange
controls.
Reaffirming itsWTO commitments intimes ofcrisis hashadapositive influence onthe
expectations ofthebusiness andthefinancial communities andhascontributed tospeedier economic
stabilization.
RoleofNAFTA inthedifferences between preferential andnon-preferential tariffs. Effects onMFN
suppliers
TheMexican-US trade relationship isoneofthemostintense andcomplex intheworld, and
hadtraditionally accounted forbetween 75and80percentofMexico 'stotaltrade evenbefore the
entry intoforce ofNAFTA.
Thestrengthening ofeconomic links inNorth America received amajor boost from the
establishment ofapermanent legal framework togovern therelationship between Canada, Mexico
andtheUnited States, including theliberalization ofallproducts, disciplines beyond those achieved
intheUruguay Round andadispute settlement mechanism.
Perhaps oneofthemostimportant, yetleastobvious, benefits ofNAFTA hasbeenMexico 's
increased participation inother regional andmultilateral fora, which NAFTA promoted bymaking
Mexico more competitive andhelping ittosetmore ambitious goals, boththrough regional agreements
andthrough theWTO.
Unfortunately, progress inthemultilateral trading system hasbeenconsiderably slower than
under regional agreements. ThusMexico, likemany other countries, willcontinue toseekreciprocal
market liberalization through regional agreements. Besides negotiations intheWestern Hemisphere,
Mexico istobegin negotiations withtheEuropean Union andIsrael, while seeking deeper integration
intheAsia-Pacific region through APEC.
Nevertheless, asmentioned earlier, Mexico iswilling tocontinue lowering itsWTO tariff
bindings through future rounds ofnegotiations. Mexico openly supports theideaofanewround of
negotiations, andconsiders thatitisuptoWTO Members todecide thescope andpaceofworld trade
liberalization.
Conditions under which NAFTA benefits areextended toother WTO Members (e.g. government
procurement andfinancial services)
Thebenefits ofMexico 'sFTAs arenotlimited tomembers oftheagreements only. Especially
intheareaofservices, except forfinancial services, preferential liberalization hasbeenunilaterally
extended onanMFN basis. Infinancial services, subsidiaries fromthirdparties established incountries
withwhich Mexico hasFTAs benefit from theliberalization granted under those agreements.
Recently, Mexico unilaterally eliminated, onanMFN basis, investment restrictions insuch
important sectors as:ports; telecommunications; airtransport; storage, transport anddistribution
ofnatural gas; railroads; financial services andairports.WT/TPR/M/29/Add.1
Page8
Since 1992, Mexico hasunilaterally liberalized, onanMFN basis, more than1,200 tarifflines
covering inputs andmachinery intheagricultural, chemical, electrical, electronic, textile andpublishing
sectors. These reductions havechiefly benefited suppliers from AsiaandtheEuropean Union.
Duringthe1995-1996economicrecoveryperiodMexico'snon-NAFTAimportswereparticularly
dynamic, growing atarateofover17percentandexceeding the5.3percentgrowth rateofworld
imports forthesame period. During thefirstquarter of1997, non-NAFTA imports grew 29.6per
centcompared tothesame period in1996, while NAFTA imports increased 19.5percent.
Asweshallseefurther on,Mexico believes thatnational andMFN treatment aretwoprinciples
thatmust alsoapply togovernment procurement. Even though Mexico hasnotsigned theWTO
Plurilateral Agreement onGovernment Procurement, inpractice theFederal Government 'spublic
procurement regime isextremely transparent andnon-discriminatory.
Acquisitions reserved tonational suppliers areclearly defined intherelevant international
agreements signed byMexico, suchasitsFTAs, withtenders announced sufficiently inadvance.
General concerns astotherelation between regional agreements andMFN liberalization
Withrespect toconcerns regarding theinterrelationship between regional agreements andthe
multilateral trading system, Mexico considers thattheformer considerably complement andstrengthen
thelatter.
Regional agreements make itpossible tocompletely eliminate tariff barriers andtocreate
disciplinesinareasnotyetcoveredbytheWTOsystem,ornotsatisfactorilycovered,suchasinvestment,
government procurement, customs procedures andrules oforigin.
Moreover, regional agreements create strong incentives tocontinue negotiations inother areas
byallowing greater competitiveness andthesearch fornewmarkets, creating asortofdomino effect
which willinevitably leadtocloser integration ofworld markets andtofuture rounds ofnegotiations
intheWTO.
LAIA
TheLatin American Integration Association (LAIA) wascreated bythe1980 Treaty of
Montevideo, signed byArgentina, Bolivia, Brazil, Colombia, Chile, Ecuador, Mexico, Paraguay, Peru,
Uruguay andVenezuela. Under theAgreement, partial scope andregional agreements formthebasis
fornegotiation. Partial scope agreements arethose signed bytwototenmembers, andregional
agreements arethose signed byallofthecountries.
Mexico hassigned anumber ofagreements onthisbasis through theLAIA, including partial
scope bilateral agreements withChile andBolivia, andjointly withColombia andVenezuela (G3).
Asregards regional agreements, Mexico participates intheRegional Tariff Preferences Agreement
(PAR) andtheAgreement onCultural Goods.
Noneofthesebilateralandtrilateralagreementsinterferewiththeregionalagreementsnegotiated
years agowithin theframework oftheLAIA, particularly since thenewagreements haveeither been
assimilated intoorhavesuperseded thepreferences contained intheregional agreements.WT/TPR/M/29/Add.1
Page9
Notification andreview ofregional agreements within theframework oftheWTO
Thefollowing regional agreements havebeennotified: (i)NAFTA, and(ii)through theLAIA,
theG3Agreement withColombia andVenezuela, andtheAgreements withChile andBolivia.
Mexico expects shortly tobenotifying itsagreement withCosta Ricaand,oncethelegal
formalities havebeencompleted, itsagreement withNicaragua.
Need todiversify within andbeyond theregional markets
Beyond theWTO multilateral agreements, Mexico haspromoted increased openness through
thenegotiation offree-trade agreements, which form acornerstone ofitstrade policy.
Mexico iseither concluding orextending agreements withpractically allother countries of
theWestern Hemisphere, andisparticipating actively intheFreeTrade AreaoftheAmericas (FTAA).
Itwillalsobeinitiating negotiations intheforeseeable future withIsrael.
Finally,Mexicohasrepeatedlyproposedtheinitiationofanewmultilateralroundofnegotiations
intheWTO.
3. Implementation oftrade policies, including sectoral policies
Tariffs
Continuation ofliberalization ingeneral
Theliberalization offoreign trade inMexico hasnotbeentheresult oftrade negotiations, but
ofdevelopmental needs; anditwillcontinue onaunilateral orcontractual basis depending onthe
willingness oftrade partners togrant greater market access toMexican products.
Inanycase, autonomous liberalization hasbeenundertaken onanMFN basis, thusbenefiting
allofourtrading partners. Asmentioned above, thesemeasures haveincluded theelimination oftariffs
onmore than1,200 products.
Bound andapplied tariff rates
Thegapbetween applied andbound tariff rateshaswidened asaresult ofreductions made
unilaterally orinthecontext ofFTAs, andincreases inbound ratesresulting fromtheUruguay Round
tariffication process.
Unilateral reductions havebenefited everyone, while FTAs areWTO compatible. Thus, the
onlywaytoclose thegapistolower bound tariffs ortosetupamechanism totakeproper account
ofunilateral measures.
Mexico iswilling tolower thebound tariffs through multilateral negotiations conducted by
theWTO, asitdidduring theUruguay Round. Moreover, during theUruguay Round Mexico proposed
theexamination ofways togivecredit andrecognition forunilateral liberalization. Unfortunately,
littlehassofarbeenachieved inthatrespect.
Apart from legalcommitments suchasbindings, orsimple averages thatdonotreflect real
trade flows, anddespite the1994 crisis, Mexico hasoneofthemost openeconomies intheworld,WT/TPR/M/29/Add.1
Page10
asdemonstrated bythefallintheweighted average tariff from 7.8percentin1993 to2.7percent
in1997.
Tariff increases
In1995, tariffs oncertain footwear, clothing andleather products wereincreased from20to
35percent. Firstly, thisdidnotcallfortheuseoftheexception measures provided forunder the
GATT, since theyremained lower thanorequal toMexico 'sbound levels. Secondly, theincreases
concerned onlyaverysmall number ofproducts compared totheproducts subject tounilateral tariff
reductions.
Themainconsideration isthatdespite theneedfortheMexican industry tomodernize rapidly
tomeetthecountry 'sneeds andfaceforeign competition, Mexico hasnotonlycontinued complying
withitsGATTcommitments,buthassucceededinmaintainingthegeneralthrustofitstradeliberalization
policy.
Customs valuation
Thequestion oftheuseofc.i.f. orf.o.b. bases forcustoms valuation hasbeenextensively
discussed intheWTO Customs Valuation andRegional Agreements Committees; ithasalsobeen
thesubject offormal consultations under thedispute settlement mechanism which, asweknow, is
confidential. Nevertheless, itisworth recalling that:
TheAgreementonCustomsValuationallowstheuseofc.i.f.orf.o.b.systemswithoutpreference
foroneortheother. Bothsystems areequally valid. Moreover, thegreatmajority ofMexico 'strading
partners, particularly thedeveloped countries, usethec.i.f.system. Thus, thereisnothing questionable
about thesystem itself.
Mexico 'sc.i.f. system applies indiscriminately toproducts fromallcontracting parties ofthe
GATT 1994, including theUnited States andCanada. However, according totheNAFTA provisions
onrulesoforigin, thesegoods arenotconsidered tocome fromthose twocountries, butfromtheNorth
American FreeTrade Area, andarethussubject tothef.o.b. system.
Theuseofthef.o.b. system forgoods originating inNorth America isunimportant, since the
increase inthetaxable value onNAFTA-originating imports would benegligible andtemporary under
thec.i.f. system. Itshould berecalled that:
(a) For90percentofMexican imports from theUnited States, thedifference between
c.i.f. andf.o.b. values isnegligible owing totheirproximity;
(b) mostMexican imports fromtheUnited States andCanada arealready dutyfree,i.e.
thedifference between c.i.f. andf.o.b. iszero; and
(c) attheendoftheNAFTA transition period, thedifference between thec.i.f.andf.o.b.
systems willbenil.
Itshould bestressed thatthec.i.f. system hasnoprotectionist ortrade-diversion aims. Ifthe
intention hadbeentoprotect domestic industry, Mexico could haveincreased itsMFN tariffs using
theexisting gapbetween applied andbound tariffs. Asregards trade diversion, nothing prevented
Mexico from speeding uptariff reduction schedules under NAFTA.WT/TPR/M/29/Add.1
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Themechanism ofestimated prices isapplied onageneral basis, andimports carried outby
small andmedium importers mustcomply withtheprovisions contained intheResolution onEstimated
Prices.
Thismechanism wasintroduced inresponse toproblems ofundervaluation ofimported goods,
apractice usedtoavoid paying different contributions, totheserious detriment ofnational income
andofthecounty 'seconomy asawhole.
Itisinkeeping withtheinternational agreements towhich Mexico isaparty inthatitdoes
notreject thevalue declared bytheimporter, butallows theimporter towithdraw goods fromcustoms
bypresenting aguarantee covering thedefinitive dutyforwhich thegoods maybeliable.
Itisworth noting thattheWTO Agreement ontheApplication ofArticle VIIstipulates that
if,inthecourse ofdetermining thecustoms value ofimported goods, itbecomes necessary todelay
thefinaldetermination ofsuchcustoms value, theimporter ofthegoods willnevertheless beableto
withdraw them fromcustoms if,where sorequired, theimporter provides sufficient guarantee inthe
form ofasurety, adeposit orsome other appropriate instrument, covering theultimate payment of
customs duties forwhich thegoods maybeliable.
Registration ofimporters andrequired documentation
Article 59(IV)oftheCustoms Lawrequires thatimporters should beentered intheregister
ofimporters. Articles 71,72,73,74,75and76oftheRegulations governing theCustoms Lawset
forth thedocuments tobesubmitted bypersons wishing toimport goods intothecountry.
With respect tosmall-scale imports orpossible imports, thefollowing procedures must be
followed:
- Entry intheregister ofimporters isnotrequired forthegoods indicated inRule3.6.3
oftheMiscellaneous Foreign Trade Resolution for1997 andArticle 76ofthe
above-mentioned Regulations;
- entry intheregister isnotrequired forgoods thatarenottobemarketed andthatobtain
anauthorization from thecustoms authorities under thelastparagraph ofArticle 71
andRule3.6.7 oftheMiscellaneous Foreign Trade Resolution for1997;
- sector-specific registers were established inresponse toarequest tothecustoms
authoritiesbythedifferentchambersofindustryandcommerceofthecountrytomonitor
importedgoodsmorecloselysincetherewasagreaterlikelihoodoftheirbeingsmuggled
orundervalued withconsequent effects onthenational market;
- moreover, fortheinterested parties tobeabletoenter goods subject toinscription in
thesector-specific registers, theymust meet alloftherequirements laiddown in
Rule3.6.5 ofthementioned Resolution. There isnolimittothenumber ofimporters
thatcanbeentered inthesector-specific registers;
- finally, itisimportant tomention thattheauthorized customs points forcertain goods
werecreated toenhance themonitoring ofsuchgoods without causing anydisruptions
toforeign trade. More than90percentofimports ofsuchgoods passthrough the
authorized customs points.WT/TPR/M/29/Add.1
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Anti-dumping
ThecommenthasbeenmadethatMexicohasoneofthemostactivelyusedanti-dumpingsystems,
andthequestion wasasked whether there wasanyplantoremedy thatsituation.
Theinitiation ofanti-dumping investigations depends onrequests presented bytheinterested
parties which ifproperly filed, theGovernment isrequired topursue. TheGovernment hasnodeliberate
policy toencourage orreduce theuseofanti-dumping. Thesystem cannot beevaluated onthenumber
ofinvestigations; theimportant factor isthatinvestigations should becarried outinconformity with
theagreed disciplines. Thenumber ofinvestigations isnotsurprising inaneconomy asopen as
Mexico 's;astheimportance ofinternational trade increases, sodoestheprobability thatthere will
bemore requests foranti-dumping investigations thanwhen theeconomy wascompletely closed.
Moreover, initiations canrefertotherequest forcountervailing duties orforrevisions ofalready
existing duties. Between 1994 and1996, 33initiations and17revisions tookplace, and22requests
wererejected. Thegreater number ofapplied measures since1994isduetotheconclusion ofpreviously
initiated investigations andnottoasystematic increase insuchinvestigations overthepastfewyears.
Questions were alsoraised concerning reforms todomestic legislation inorder toreconcile
itwiththeWTO Anti-Dumping Agreement. Mexico hasnoproblems reconciling thetwosince in
Mexico, unlike inother WTO Members, international agreements havethestatus ofsupreme law.
Inother words, incompatibility between domestic andWTO rulesismerely theoretical. Reforms to
thedomestic legislation arisefrom theconvenience ofharmonizing internal andinternational rules,
thusfacilitating theirapplication inthecountry.
There isnoprecise datefortheentry intoforce ofthereforms totheMexican Anti-Dumping
Law, which willoccur oncetheyhavebeenapproved bytheMexican Congress.
Procedures forthedetermining dumping
Inorder todetermine theaccuracy andadequacy oftheevidence, SECOFI applies thecriteria
andprocedures provided forinMexico 'sdomestic legislation andpractice. Atthesametime, aneffort
ismade toensure thattheinformation contained intheevidence submitted bytheapplicant isconsistent
withthevarious sources ofinformation attheapplicant 'sdisposal (e.g.bychecking import volumes
andprices against national statistical bases).
Once theaccuracy andadequacy oftheevidence hasbeenestablished, SECOFI determines
whether theevidence makes itpossible tocertify thetruthofthealleged facts, i.e.whether itestablishes,
interalia,thevolume andvalue oftheidentical orlikeproduct; thevolume andvalue oftherequesting
party'sshare ofdomestic production; theevolution ofimports; theexistence ofthemargin ofdumping
ormargin ofsubsidy; andtheeffect oftheimports onprices andonthedomestic industry.
SECOFI may,onceonly,asktherequesting partytoclarify, correct orcomplete theapplication,
which itwillreject iftheapplicant failstodososatisfactorily.
Once therequesting party hasdescribed, intheapplication forinitiation oftheinvestigation,
itsshare indomestic production andtheextent towhich thedomestic industry supports theapplication,
andbacked itsstatements withevidence, SECOFI determines whether theevidence provided issufficient
toshow thattheapplication issupported bytherestofthedomestic industry, andmayrequest more
information where appropriate, either from theapplicant, orfrom thechambers ofcommerce ofthe
industry inquestion, orfromothergovernmental departments, tohelptoestablish thedegree ofsupport
oropposition.WT/TPR/M/29/Add.1
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According totheForeign Trade LawandtheAnti-Dumping Agreement, interested parties have
accesstonon-confidentialinformation(containing,ofcourse,non-confidentialsummariesofconfidential
information) submitted bytheother parties inthecourse oftheinvestigation, andcanobtain immediate
access tothenon-confidential version ofthefilebysimply going totheoffices oftheinvestigating
authority andproviding proof ofofficial involvement inthecase.
Theamount oftheguarantee wasfixed taking account oftheexperience ofother countries
withsystems ofaccess toconfidential information suchasCanada, where afineofCan$100,000 to
Can$1 million isimposed forfailure torespect theconfidentiality commitment.
Origin Certification System (ADandSCM)
TheOriginCertificationSystem(CPO)wasintroducedin1994inresponsetothemassiveevasion
ofanti-dumping orcountervailing duties through transshipment viathirdcountries ofexports ofthe
productsconcerned,i.e.productsforwhichtherehadbeenafinaldeterminationofdumpingorsubsidies.
Thesystem wasadopted aftertheMexican authorities hadvisited thecapitals ofanumber of
WTO Members andsought theirviews astothebestwaytotackle theproblem oftheevasion ofduties.
Notwithstanding theurgency oftheproblem, implementation waspostponed several months totake
those views intoaccount.
TheCPOdoesnotrepresent animproper oronerous requirement forgovernments orexporters
given that: (i)foreign governments themselves designate theforeign bodyorauthority certifying the
information contained intheCPO withitsstamp orsignature, and(ii)theregistration oftheforeign
bodyorauthority withtheMexican Government isundertaken onlyonce, andnotforeachtransaction.
Confirmation ofaCPO byaMexican Embassy (legalization) isrequired onlyforproducts from
non-GATT 94Members.
Notrequiring aCPO forproducts originating incountries withwhich Mexico hasanFTA
isnotadiscriminatory measure contrary totheGATT; suchrequirement isneedless, asorigin will
already havebeendefined inthecertificate oforigin required toobtain preferential treatment under
theFTAs.
Finally, itshould benoted thattheCPO isanadministrative procedure required toensure
compliance withexisting lawsandregulations withrespect toanti-dumping andcountervailing duties
thatarenotincompatible withtheGATT.
Review oftherules oforigin applicable totextiles andclothing inNAFTA
Thereview oftherules oforigin applicable totextile andapparel goods under NAFTA will
beconducted inaccordance withAnnex 300B,section 7,paragraph 3,which stipulates:
"TheParties shallreview therulesoforigin applicable totextile andapparel goods within five
years ofthedateofentry intoforce ofthisAgreement totakeintoaccount theeffect of
increasingglobalcompetitionontextileandapparelgoodsandtheimplicationsofanyintegration
intotheGATToftextileandapparelgoodspursuanttoanysuccessoragreementtotheMultifibre
Arrangement.ThePartiesshallgiveparticularconsiderationtooperativerulesinothereconomic
associationsorintegrationagreementsanddevelopmentsrelatingtotextileandapparelproduction
andtrade."WT/TPR/M/29/Add.1
Page14
Agreement onTechnical Barriers toTrade
None oftheprovisions oftheAgreement onTechnical Barriers toTrade (TBT) require that
100percentofacountry 'sstandardization measures should beinstrict concordance withinternational
standards. According totheAgreement, international standards aretobeusedonlyasabasis, and
inanycase, onlytotheextent thattheyareconsidered relevant. TheAgreement alsoprovides for
exceptions toenable acountry toattain thelegitimate objectives ofitsstandardization policy.
Nevertheless, Mexico 's1995-2000 Development Planacknowledges theneedtoencourage
themodernization ofindustry while focusing onquality intheproduction ofbasic goods andservices
mainly through theuseofinternationally recognized standards which would ensure thedevelopment
ofamore competitive economy asameans ofachieving economic development. Oneofthereasons
whyMexico hasfound itinappropriate incertain cases toapply international standards isinfactrelated
tothebasic technological problems towhich theTBTAgreement refers. Thisapplies toareas such
aselectrical ortelephone equipment, where technological developments inMexico haverequired certain
types ofspecifications which havenotalways corresponded tointernational standards. Thus, ithas
sought recognition ofitstechnical infrastructure (testandcalibration laboratories, accreditation and
certification bodies, etc.)abroad, andoftheinfrastructure ofother countries inMexico. Thishas
provided thebasis fortheconclusion ofmutual recognition agreements.
TheNational Standardization Commission isanational organization withparticipation from
various sectors (academic, industrial, commercial, consumers) andpublic agencies withtheauthority
toissue standards andtechnical regulations, aswellasprivate standardization firms registered with
SECOFI according tointernational conventions. Themain regulations andstandards areestablished
throughCommitteeswiththeparticipationofallinterestedparties,bothdomesticandforeign.Regardless
ofwhether avoluntary standard willeventually betransformed intoamandatory standard, alldraft
standards, bothvoluntary andmandatory, arepublished intheOfficial Journal. TheFederal Lawon
Metrology andStandardization provides fora60-day period toaccept comments.
Aspartofitseffort inthefieldofmetrology andstandardization toimprove efficiency inthe
development ofmandatory Mexican Official Standards, theIndustrial Policy andForeign Trade
Programme ensures thatstandards areusedonlywhen needed, thuscontributing toderegulation in
thatarea. TheProgramme alsoaimstoencourage theestablishment ofgenerally accepted voluntary
Mexican standards asaself-regulating mechanism fortheprivate sector. Asarule,efforts arealways
made toachieve maximum overall costeffectiveness andefficiency.
Under Mexico 'slegislation, certification istheresponsibility oftheauthorities andaccredited
Mexican organizations withtherequired capacity. However, anycountry mayrequest approval for
certification. Concerning thequestion oncertification under ISO9000, thereareanestimated 500firms
certified, although only120to125ofthem have been certified byMexican organizations; no
organization inMexico isaccredited tocertify theISO14000 standard, butsome 15firms haveobtained
such certification from foreign agencies. Adjustments arecurrently being made toMexico 's
environmental legislation, andintheframework ofthatprocess thepossible roleofISO14000 inthe
country 'senvironmental policy isbeing considered.
Itisworth mentioning thatNAFTA hasaprovision similar toArticle 2.4oftheTBTAgreement
andArticle FoftheCode ofGood Conduct withrespect tovoluntary standards, aprovision which
forms thebackdrop forthetrilateral cooperation activities withrespect tostandards between NAFTA
members, including within theCommittee onFood Labelling. Thisensures thatthetrilateral and/or
bilateral measures andactions taken byMexico within NAFTA areperfectly compatible withits
commitments under theTBTAgreement andtheannexed Code ofGood Practice.WT/TPR/M/29/Add.1
Page15
Finally, thethirdstage ofthecooperation programme onstandards andcertification between
Mexico andtheEuropean Union wasconcluded inJune1997. TheProgramme focused ontechnical
cooperation activities, training andinformation exchange between Mexican andEuropean certification
agencies. InJuly1997, Mexico requested anextension oftheProgramme, anditishoped thatthis
willmake itpossible tosetupaframework fortheconclusion ofmutual recognition agreements.
Labelling
Mexico hasmodernized itsstandards andlabelling legislation. Inalldeveloped countries,
Mexican exporters must comply withthelabelling standards established bytheimporting country.
Insome countries, these requirements varyatsub-federal level, andincertain markets labelling must
beprovided inmore thanonelanguage. Mexico 'slabelling requirements arelaxcompared withthose
ofother countries.
There isacertain amount ofconcern thatMexico hasadopted three technical regulations not
consistent with international standards. This concern isinfactunfounded. Mexican Official
Standard NOM-050 ontrade information isbased onISOGuides 14,37and41,while NOM-051 on
general specifications forprepackaged foodandnon-alcoholic beverage labelling isinagreement with
CODEX STAN 1-1985, 107-1981, CAC/GL 1-1979, CAC/GL 2-1985 andothers. Finally, itwas
notpossible tobaseNOM-004 concerning textiles andclothing labelling onanyinternational standard
since there arenointernational standards inthatarea.
Itisimportant toaddthatunder NOM-051 itisnotalways mandatory toinclude thenutritional
content inthelabelling ofeachproduct, butonlywhen declaring nutritional properties inquantitative
orqualitative terms.
Asregards theAgreement Establishing Verification Procedures forImporters Complying with
NOMs 050and051intheNational Territory, published intheOfficial Journal of24February 1997,
itshould bepointed outthatitdoesnotrelate totechnical rules, buttoaninstrument created bySECOFI
tofacilitate compliance byimporters withthesaidstandards. Itprovides different alternatives for
labelling inMexico.
Emergency measures
Incases ofemergency, thecompetent department maydraw upaMexican Official Standard
directly without submitting adraft orpreliminary draft, incooperation withtheother competent
departments. Suchstandards mustalsobepublished intheOfficial Journal andarevalidforamaximum
ofsixmonths. Under Article 48oftheMexican Standardization Law, thesame standard maynotbe
issued more thantwice.
Sanitary andphytosanitary aspects
TheNational Agricultural Sanitary Commission wasestablished bytheinternal regulations
oftheMinistry ofAgriculture published intheOfficial Journal of12April 1996 asadecentralized
agency responsible forstandardizing, regulating andcoordinating activities inthefieldofagricultural
health. ThisCommission wascreated sothatasingle bodywould beresponsible forallsanitary and
phytosanitary matters aswellasinspections atports, airports andborders.
Unlike previous arrangements, theCommission hasfinancial andadministrative autonomy,
charging forsome ofitsservices tostrengthen itscapacity tofulfil thetasks assigned toit.WT/TPR/M/29/Add.1
Page16
Thisfacilitates theprocess ofstudying andanalysing phytosanitary conditions foreachproduct
inallofthemember countries withaviewtoidentifying disease- andpest-free countries orregions
orestablishing sanitary protocols toexpedite agricultural trade.
Government procurement
Mexico hasstriven tohaveachapter ongovernment procurement included inthedifferent
free-trade agreements towhich itisaparty, andbelieves thatnational andMFN treatment should also
apply togovernment procurement.
AlthoughMexicoisnotapartytotheWTOPlurilateralAgreementonGovernmentProcurement,
inpractice theprocurement regime applied bytheFederal Government isalready atransparent and
non-discriminatory one.
Tenders reserved tonational suppliers areclearly defined intheinternational agreements to
which Mexico isaparty, including thefree-trade agreements, andpublic tenders areannounced
sufficiently inadvance inthecallsforbids.
Thegreat majority (about 80percent) ofprocurement bytheFederal Government involves
international tenders offering national andnon-discriminatory treatment.
ThefactthattheLawonPublic Procurement andWorks contains aclause providing theright
toexclude countries withwhich itdoesnothaveafreetrade orreciprocal treatment agreement from
international tenders reflects bothamarket reality andthemaintenance byother countries ofregimes
offering lessinthewayoftransparency andopportunities. Although inpractice Mexico excludes no
country from international tenders, ithasreserved itsrighttodosowhen there isnoreciprocity.
Mexico supports theWTO Working Group onTransparency inGovernment Procurement,
considering thatithasgreat global importance. Italsosupports taking intoaccount national policies
aslongastheyaremade inatransparent manner.
Finally, Mexico considers theWTO Agreement onGovernment Procurement toolimited,
excluding, asitdoes, thevastmajority ofcountries; indeed, membership doesnotensure reciprocity
withnon-members. Thus, itprefers tosupport theWorking Group onTransparency asawayofmaking
progress towards atrulymultilateral agreement ongovernment procurement.
CONASUPO
Intheprevious Mexican Trade Policy Review, CONASUPO wasdescribed asastatetrading
enterprise because itwastheonlyentity allowed toimport powdered milk. Asaresult ofMexico 's
modernization programme andtheUruguay Round negotiations, thissituation hasradically changed.
CONASUPO isnolonger theonlyimport channel. Powdered milkcanbeimported dutyfree
within atariff quota byholders oftheproper import certificate, orbyother parties afterpayment of
above-quota duties. Although thissituation isnotentirely satisfactory forsome WTO Members, this
doesnotmean thattheimport liberalization agreed intheUruguay Round hasnotoccurred, orthat
thenewarrangement islessfavourable thanthesituation afewyears agowhen nooneexcept
CONSASUPO could import powdered milkintoMexico.
Theassignment ofcertificates forin-quota imports should notbeconfused withtheprovisions
thatapply tostatetrading enterprises: theformer arehandled bytheCommittee onAgriculture for
agricultural products, while thelatter refertotheexclusive orspecial privileges granted toenterprises.WT/TPR/M/29/Add.1
Page17
Assignment onahistorical basis isnotanexclusive orspecial privilege under theGATT 1994, but
acommon administrative licensing practice usedbymany WTO Members invarious sectors.
Mexico hasnointerest inusing tariffquotas forpowdered milkforprotectionist reasons. Not
onlydoesitcontinue tobetheworld 'slargest importer ofpowdered milk, butithasexceeded thetariff
quota while continuing toimport onaduty-free basis bothwithin andabove thequota.
CONASUPO always seeks toobtain powdered milkthrough international brokers atthemost
favourable conditions ontheinternational market. Domestically, itsellspowdered milktoindustrial
users through bidswiththebaseprice related toworld prices plustransport andadministrative costs.
Participants obtain thelowest price offered.
Maquiladoras
Asof1January 2001, modifications willbemade totheapplication ofthemaquiladora regime
toMexico 'sexports toother NAFTA trade partners andtotheirexports toMexico.
From thatdate,Mexico willbeabletorefund, grant exemptions fromorreduce tariffs byan
amount notexceeding thelesser ofthetariffs paidordueoninputs, orthetotalduties paidtoother
NAFTA members ontheexported good incorporating thesaidinputs. Thus, ifinafree-trade area
thefinished good isgiven duty-free treatment intheimporting country, theexporting country may
notreimburse, grant exemptions from orreduce theduties applicable toinputs.
Thereasoning behind thismechanism isthatinafree-trade areaexports should notbefavoured
overdomesticsales.Existingtariffrefund,exemptionorreductionsystemsseektoavoiddoubletaxation
oninputs, oncewhen theinput enters themanufacturing country andonceagain when thefinished
good enters theexport market.
When preferential treatment isgiven onafinished good inafree-trade area, there should be
notariffrefund, exemption orreduction withrespect toinputs, orelseexports would befavoured over
domestic sales.
Theeffect ofthenewmaquiladora programme istoestablish thesame tariff forinputs when
thegoodissoldonthedomestic market aswhen itisexported toanother Stateparty totheAgreement,
thusensuring thatdomestic producers paythesameduties when selling onthedomestic market aswhen
selling toother parties totheAgreement.
Finally, these NAFTA-related changes innowayaffect MFN tariffs oninputs imported from
non-NAFTA countries. Norcanthenewmaquiladora programme violate WTO disciplines, since the
WTO imposes noobligations onthegranting oftariff refunds, exemptions orreductions.
Asthemaquiladora industry generates overonemillion jobsandisanimportant source of
foreign exchange, theMexican authorities andtheindustry areconsidering theimplications ofmodifying
itsspecial regime inorder tobeready tointroduce, ifnecessary, aprogramme tomaintain its
competitiveness.
Ithasnotbeenpossible toobtain unitfigures orthetotalorannual amount budgeted forthis
programme because theMinistry ofFinance andPublic Credit (responsible formaintaining theregisters)WT/TPR/M/29/Add.1
Page18
keeps these general datawithout aspecific breakdown. Accordingly, PITEX programmes maybe
mixed withdataontemporary imports under non-PITEX programmes.1
Agriculture
PROCAMPO
TheDecree regulating Mexico 'sprogramme ofdirect payments forfarmers, PROCAMPO,
waspublished intheOfficial Journal of25July1994, anditsoperational ruleswerepublished inthe
Official Journal of23April 1997. PROCAMPO 'smain features include:
(a) Fixed payments perhectare tosupport theincome ofproducers, delinked from
production volumes, productivity orselling needs;
(b) tobeeligible forPROCAMPO payments, farmland musthavebeenusedatonetime
during thethreeyears before August 1993togrow corn, beans, wheat, sorghum, rice,
soyabeans, safflower, cotton orbarley;
(c) farmers whohavenotcultivated oneoftheabove products during thesaidperiod but
arecurrently doing soarenoteligible forsupport;
(d) farmland cannowbeusedforcrops, cattle, forestry orenvironmental protection.
Fulfilment ofmarket access commitments
Mexico hasfulfilled allofitsUruguay Round market access commitments setinitsSchedule,
including forsugar. When domestic demand sorequires, imports oftarified products canexceed the
minimum access levels intheSchedule.
Official prices
Theonlyagricultural products subject toofficial prices aretortillas andcornflour inbulkfor
making tortillas.
Rice
Mexican Official Standard NOM-013 Fito-1995, establishing external quarantine toprevent
theintroduction ofricepests, published on2December 1996, classifies anumber ofcountries, including
Thailand,ashighriskareas.Inthisconnection,theauthoritiesofThailandhavenotprovidedtheGeneral
Department ofPlantHealth ofthecompetent Mexican authorities (SAGAR) withtheevidence ofcontrol
ofricepests, inparticular Tilletia Barclayana ,needed toestablish thephytosanitary requirements for
apossible lifting ofthesaidprohibition.
During themeeting oftheCommittee onSanitary andPhytosanitary Measures heldduring
theweek from 13to17October 1997, theMexican delegation, made upofSECOFI andSAGAR
authorities, dealtindetail withthequestions oftheThaidelegation.
1Notification byMexico totheCommittee onSubsidies andCountervailing Measures (G/SCM/N/3/MEX).WT/TPR/M/29/Add.1
Page19
Quality standards formeat
Quality standards formeatreflect theconsumption patterns ofthepopulation. Thus, thelocal
congresses oftheStates ofBajaCalifornia, Chihuahua andSinaloa haveissued lawsconcerning quality
standards fortheconsumption ofbovine meatinthose States. National producers andexporters must
comply withthose standards intheestablished tradecircuits, sothatthereisnoviolation oftheprinciple
ofnational treatment. Exporters thatdonotcomply withthose standards mayselltheirproducts in
special stores.
Under theWTO commitments, itispossible tosetquality standards bothatthenational and
subnational level; thus, there isnoobligation toapply inMexico thequality standards established
bytheUnited States foritsownmarket. Infact,theUnited States establishes quality standards
(marketing orders) atState level.
Automotive sector (TRIPS)
Afteryearsofexcessiveprotection,theMexicanGovernmentdecidedthattheautomobileindustry
hadtobemodernizedtoreflectMexico'snewcircumstancesinanincreasinglyglobalizedandcompetitive
world.
TheDecree fortheDevelopment andModernization oftheAutomotive Industry aimsabove
alltoopenthesector gradually toforeign competition through thetransformation ofplants andprocesses
andtheintegration ofproduction chains.
TheAutomotive Decree, asitiscommonly known, provides forthegradual elimination of
restrictions onproduction andtheestablishment ofnewassembly plants aswellascertain specific local
content requirements andtheobligation toincorporate certain domestic components.
Thismechanism hasproved tobeaneffective industrial policy instrument, creating afavourable
environment forthesector 'sdevelopment. Beyond thedifficulties encountered inthemacroeconomic
sphere, Mexico nowhasamore modern andcompetitive automotive industry thanadecade ago,with
asolidanddynamic export basewhich ensures itsparticipation intheworld market, asshown byits
performance overthepastfewyears.
Inordertoensurecompletetransparency,theAutomotiveDecreewasdulynotifiedtotheTRIMs
Committee. Thenotification provided alltheinformation multilaterally agreed, andthetextofthe
legislation onwhich theapplication oftheentire system isbased. Moreover, thedoubts expressed
concerning NAFTA weredispelled during theexamination oftheagreement intherelevant committee.
Asindicated atthetime, itisnotyetpossible tosaywhen theAutomotive Decree willend
inthecontext oftheWTO. Itshould berecalled thatinthatconnection theTRIMs Agreement does
notestablish aperemptory deadline, astheCouncil forTrade inGoods canextend thetransition period.
Inanycase, Mexico 'sdecision concerning theeventual fateoftheAutomotive Decree inthe
context oftheWTO willdepend onitsfinancial, commercial anddevelopment needs andonitsWTO
rights andobligations atthetimethedecision ismade andnotbefore.
Services
Although thereport bytheSecretariat mentions persistent inefficiencies inareas suchas
transport, telecommunications andfinancial services, thesame document stresses thatthisview is
erroneous. Liberalization andmarket opening during recent years hashelped increase supply andWT/TPR/M/29/Add.1
Page20
improve competitiveness inthose sectors. While therearecertain deficiencies insome areas, increasing
efforts arebeing made toovercome them. Asexplained inthereport 'ssections ontransport,
telecommunications andfinancial services, thelegalframework hasbeenreviewed, andvarious support
andmodernization programmes implemented. Thispolicy hascontributed, interalia,toencouraging
domestic andforeign investment andpromoting transparent competition, resulting inmore modern
andefficient services thatsupport thecompetitiveness andefficiency ofother economic activities.
Mexico 'sonlytwoMFN GATS exceptions relate toanagreement onlandtransport tofacilitate
access forUnited States tourists. Thisisduetotheparticular operation oftheUnited States-Mexico
border, anditisimpossible toextend thistreatment toother countries. Nevertheless, inreviewing
itsSchedule ofCommitments Mexico willconsider eliminating asmany barriers aspossible onanMFN
basis.
Mexico'sWTOcommitmentsonserviceshaveoneofthebroadestandmostambitiouscoverages.
Although inmostareas there arenolimits toforeign investment, some subsectors listed inMexico 's
GATS Schedule ofCommitments allow foreign participation inexcess of49percentpending approval
from theForeign Investment Commission. Such approval isbased onclear, objective criteria, such
as:
(a) Impact onemployment andtraining;
(b) technological contribution;
(c) compliance withtheenvironmental provisions contained intherelevant environmental
orders; and
(d) ingeneral, contribution tothecompetitiveness tothecountry 'sproduction system.
Clearly, noneoftheabove criteria constitutes aTRIM.
Between January 1995 andSeptember 1997, 193requests were submitted totheNational
Commission onForeign Investments, andallofthem were approved.
Telecommunications
TheMexican telecommunications sector isoneoftheworld 'smostopenandadvanced. Mexico
bound theliberalization during thenegotiations successfully concluded inFebruary 1997onthebasis
ofthelegislation inforce. Thus, there arenoplans atpresent toundertake further liberalization.
Thetelecommunications agreements withtheUnited States wereconcluded intheframework
ofNAFTA. Thus, noconsideration isbeing given forthemoment toenlarging theirprovisions on
anMFN basis asprovided inArticle V:7(a) oftheGATS.
Thesubject ofvalue-added services willbeexamined during thenextround ofmultilateral
negotiations onservices.
Maritime transport
Maritime transport inMexico isamong themostopenintheworld. Norestrictions areapplied
toforeign-flag ships intransport onthehighseas. Foreign direct investment isallowed upto100per
centsubject toprior approval bytheForeign Investment Commission onthebasis ofthementioned
criteria. Moreover, Mexico isoneofthefewcountries thatallows foreign-flag ships, under certainWT/TPR/M/29/Add.1
Page21
conditions, toparticipate incabotage activities when there isaninsufficient supply ofnational-flag
ships foragiven route, inwhich casetemporary permits areissued forforeign ships.
Asregards theCode ofConduct onLinear Conferences towhich Mexico isaparty, theMinistry
ofCommunications andTransport applies Article 33,paragraph 2oftheLawonNavigation which
stipulates that:
"TheMinistry, afterhearing theopinion oftheForeign Investment Commission, maywholly
orpartly reserve specific international deepseatransport toshipping companies which are
Mexican orrecognized asMexican, where theprinciples offreecompetition arenotobserved
andthenational economy isaffected."
Asregards MERCOSUR, theMinistry ofCommunications andTransport hasnotyetreceived
anycomplaint fromMexican shipping companies ofbarriers orrestrictions toMexico 'smaritime trade
withmember countries asaresult oftheopening upofhighseanavigation stipulated inArticle 33
oftheLawonNavigation inforce.
Between 1995 and1997, almost allportservices were privatized and3,273.3 million pesos
(409.2milliondollars)worthofprivatesectorinvestmentsweremadeintheconstructionofnewfacilities
andequipment forhandling bulk, liquids, general cargo, etc.
Portservices
Mexican lawallows upto49percentforeign investment inIntegral PortAdministration (API)
entities, responsible fortheadministration ofports. Itallows ownership above 49percentinsuch
entitiessubjecttoapprovalbytheForeignInvestmentCommission,throughconcessionsfortheoperation
ofportservices forinland navigation activities suchastowing, mooring andlighterage, andinshipping
companies operating ships solely forhighseastraffic.
Land transport
There areagrowing number offoreign enterprises intheinternational cargo transport sector,
which iscurrently being liberalized according tothefollowing timetable:
Year Share ofinternational direct investment
Today
2001
200449%
51%
100%
100percentinternational direct investment isallowed subject toauthorization bytheNational
Committee onForeign Investment inaccordance withthecriteria mentioned above.
There havebeennorequests forforeign investment inthissector thusfar.
Financial services
Mexico hasassumed anumber ofcommitments initstrade agreements, including inthefield
offinancial services, suchasgranting foreign financial institutions treatment nolessfavourable than
thatgranted todomestic financial institutions, i.e.national treatment.WT/TPR/M/29/Add.1
Page22
Itisworth noting thatthefinancial institutions ofcountries thatarenotparties toFTAs with
Mexico alsobenefited fromthefinancial services provisions through theirsubsidiaries established in
areas covered bythose FTAs, andreceive exactly thesame treatment.
Within theOECD, Mexico undertook toexamine, in1998, thepossibility ofextending NAFTA
benefits toOECD members. Mexico 'sposition withrespect totheOECD Codes iscurrently being
reviewed, sothatitisimpossible toprovide anyconcrete reply inthisrespect.
InMexico, foreign financial institutions canengage inthesame typeofactivities asintheir
place oforigin. Theyreceive national treatment, sincetheycancarry outthesameactivities asMexican
firms, subject toauthorization bytherelevant financial authorities. Financial institutions areexpected
tohaveexperience intheservices theyseektoprovide inMexico.
Subsidiaries offinancial institutions mayengage inthesame operations asdomestic financial
institutions, andaresubject tothesame prohibitions.
Initially, subsidiaries wererequired atalltimes tobe99percentowned bytheforeign financial
institutions, butthisshare wasreduced inFebruary 1995 to51percenttoallow co-investments.
Neitherthechairman/presidentnortheboardmembersarerequiredtohaveMexicancitizenship;
itisenough forthemajority ofboard members andthechairman/president tobeMexican residents.
Thegreater opening upoftheMexican financial sector andthegrowing confidence itinspires
atthenational levelisdemonstrated byforeign direct investment flows ofUS$3.6 billion between 1994
andSeptember 1997 (notincluding profit reinvestment orintra-firm transactions).
Asregards legal reforms inthissector, inDecember 1993 amendments were made toeach
oneofthefinancial lawswithaviewtoimplementing themeasures stipulated inNAFTA. Provisions
were introduced withrespect tothesubsidiaries offoreign financial institutions. These concerned,
interalia,ownership structure (foreign financial institutions hadtoownatleast99percentoftheshares
oftheirsubsidiaries), restrictions, theboard ofdirectors andthepresident/chairman, etc.These reforms
were introduced subject totheinternational agreements towhich Mexico wasaparty.
In1995, theownership structure ofsubsidiaries under thefinancial lawswasrevised, andthe
minimum share offoreign financial institutions inthecapital oftheirsubsidiaries wasfixed at51per
cent,except inthecaseofcompanies operating investment firms andtheinvestment firms themselves,
where theminimum share is49percent. Moreover, foreign financial institutions areallowed totake
overMexican multiple banking institutions whose netcapital doesnotexceed 6percentofthetotal
capital ofthebanking system.
Mexican lawpermits thesetting upofrepresentative offices byforeign reinsurance companies
provided thecompany inquestion isregistered withtheMinistry ofFinance andPublic Credit. These
offices mayonlyincur liabilities onbehalf oftheirmainoffice, sincetheyhaveneither legalpersonality
northeirownequity andcannot assume obligations intheirownname. Thisisnotthecase,however,
forinsurance subsidiaries offoreign financial institutions which dohavelegal personality andtheir
ownequity, andcantherefore assume obligations intheirownname.
Theschedule ofoffers submitted byMexico under theGATS allows foreign investment of
upto30percentinallfinancial intermediaries listed therein. Itimposes limits oninvestment, both
aggregate andindividual, below those provided forbyMexican law. Mexico 'sposition remains to
bedefined, andwilldepend ontheoverall status ofthenegotiations andontheproposals made by
theother Members.WT/TPR/M/29/Add.1
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TheNAFTA mechanism forparticipation ofCanadian andUnited States institutions inthe
Mexican financial system provides forindividual andaggregate market share limits which increase
overtime.
Energy
Anewstrategy iscurrently being introduced inthepetrochemical industry consisting inthree
stages. Thefirststage, consisting inthedrafting, approval bycongress andpublication oftheRegulatory
LawofConstitutional Article 27onPetroleum, wascompleted on13November 1996. Atthesame
time, theOfficial Journal published therevocation oftheRegulations oftheRegulatory Lawof
Constitutional Article 27onPetroleum withrespect topetrochemicals, eliminating, inter alia,the
so-called "petrochemical permit", andtheResolution classifying petrochemical products wasrescinded.
Asaresult ofthese measures, Mexican andforeign individuals maynowinvest upto100per
centofthecapital ofnewnon-basic petrochemical enterprises withfulllegalcertainty.
Thesecond stage, involving thesetting upofPEMEX-Petrochemicals Subsidiaries, formally
began on8November 1996 when theBoard ofDirectors ofPEMEX-Petrochemicals authorized the
establishment oftenmajority State-owned subsidiaries andasked theChairman oftheBoard ofPEMEX
tosubmit toitsmembers aproposal tothateffect. On13December 1997, theBoard ofDirectors
ofPEMEX, including representatives ofthetrade unions, unanimously accepted theproposal.
These subsidiaries willbesetupatthecurrent work centres inCosoleacacque, Escolín, Tula,
Camargo, Morelos, Pajaritos, LaCangrejera, Independencia, Salamanca andReynosa.
Atthesame time, PEMEX andtheMinistry ofEnergy havebeencarrying outpreparatory
work, inconsultation withthePetroleum Workers 'Union oftheRepublic ofMexico where appropriate,
withaviewtoensuring thatthesubsidiaries aresetupasrapidly aspossible.
Ineachcase,apresidential decree willbeissued previously divesting theStateofthebuildings
ofthevarious industrial units andplants andtransferring them from thepublic domain tothenew
subsidiaries. Once thesesubsidiaries havebeensetup,efforts willbemade toenhance theiroperational
andadministrative autonomy intheshortest possible time. Initially, theywillbe100percentState
owned, withthemajority oftheshares heldbyPEMEX-Petrochemicals. Thisstage hasnotyetbeen
completed.
Thethird stage willconsist inplacing 49percentoftheshare capital ofthenewly-formed
subsidiaries inprivate hands.
Tothatend,guidelines arebeing prepared withaview, interalia,toensuring fulltransparency
ofthetransfer process andencouraging private investment.
4. Specific questions
Foreign investment
Liberalization
TheNAFTA negotiations gaveanimportant impetus totheliberalization offoreign investment
initiated in1989, andinvestment limits wereeliminated inalmost allactivities. Liberalization under
NAFTA wasextended onanMFN basisbytheForeign Investment Law(LIE), andforeign investment
isnowpermitted without restriction, regardless ofthecountry oforigin, inthegreatmajority ofareas.WT/TPR/M/29/Add.1
Page24
Only16ofthe704activities included intheMexican Classification ofActivities andProducts isreserved
toMexicans, andtentotheState.
Theliberalization in1995ofsatellite communications, railroads, andthestorage andtransport
ofnatural gas,activities previously reserved totheState, required changes totheConstitution.
Reforms totheLIEin1996
Inorder togivelocal andforeign investors greater legal certainty, theMexican Congress
reformed theLIEinDecember 1996. These reforms essentially consisted in:
(a) Establishing time-limits fortheauthorities torespond toinvestment project applications
afterwhich approval becomes automatic;
(b) promoting thecapitalization ofMexican enterprises withminority foreign investment
toensure thattheirparticipation isinnowaydiminished, sinceasminority shareholders
suchenterprises mayparticipate inactivities forwhich there isamaximum limiton
foreign investment;
(c) introducing changes toimprove foreign direct investment statistics;
(d) simplifying theadministrative procedures forforeign investors inSECOFI andthe
Ministry ofForeign Affairs, andmaking theLIEself-contained byadding toitprevious
changes toother statutes laying down limits toforeign direct investment.
Newregulations totheLIEarecurrently being drafted toreplace the1989 Regulations.
Restrictions onforeign investment intransport, theautomotive industry andconstruction
Therestrictions inthese sectors are:
(A) International landtransport ofpassengers, tourists andcargo between points within Mexico
andadministration services forpassenger busstations andauxiliary services arereserved exclusively
forMexican citizens orMexican companies withanexclusion-of-foreigners clause.
However, foreign investment intheabove activities willbepossible asfollows:
(i) From 18December 1995, upto49percentoftheshare capital ofMexican companies;
(ii) from 1January 2001, upto51percentoftheshare capital ofMexican companies;
and
(iii) from1January 2004, upto100percentoftheshare capital ofMexican companies,
without needforauthorization from theCommission.
(B) Foreign investors mayholdupto49percentofthecapital stockofMexican enterprises involved
inthemanufactureandassemblyofparts,equipmentandaccessoriesfortheautomobileindustry,without
prejudice totheprovisions ofDecree forthePromotion andModernization oftheAutomotive Industry.
Beginning on1January 1999, foreign investors willbeabletoholdupto100percentofthecapital
stock ofMexican companies without having toobtain authorization from theCommission.WT/TPR/M/29/Add.1
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(C) Authorization from theCommission isrequired foracquisition ofmore than49percentof
thecapital stock ofcompanies involved inconstruction andinstallation ofpublic works. Starting on
1January 1999, foreign investors willbeabletoholdupto100percentofthecapital stock ofsuch
companies without obtaining prior authorization from theCommission.
International framework
Thefree-trade agreements concluded byMexico (NAFTA, G3,Bolivia andCosta Rica) and
those currently being negotiated, asanimportant component ofitsforeign policy, contain disciplines
oninvestment andmechanisms tosettle investor-State disputes. Mexico hasalsoconcluded bilateral
investment protection agreements withSwitzerland, Spain andArgentina, andhasbeennegotiating
similar agreements withother European countries including Germany, withwhich itjustsigned an
agreement. Atthesame time, itisparticipating actively inthenegotiation oftheOECD Multilateral
Investment Agreement.
Meanwhile, Mexico isexamining theinformation ontheMultilateral Investment Guarantee
Agency (MIGA) andconsidering thepossibility ofjoining.
Finally, although Mexico isaware thattheOECD Multilateral Investment Agreement does
notprovide foraninvestment incentive mechanism, itconsiders thatthesignature oftheAgreement
would helptoenhance investor protection andencourage thecountries concerned toinvest inMexico,
since theAgreement itself would provide theincentive.
Foreign direct investment figures
ThefiguresreportedbytheWTOSecretariataredifferentfromtheofficialfiguresoftheMexican
Government, owing chiefly tomethodological differences. Consistent with theIMF's
Balance-of-Payments Manual, theofficial definition offoreign direct investment includes:
(a) Investment notified toSECOFI 'sForeign Investment Registry byforeign firms and
individuals uponestablishment inMexico, sharecapital innewfirms orcapital increases
inestablished companies, andflows intorealestate trusts;
(b) machinery andequipment imported temporarily bymaquiladora firms, which appear
intheforeign trade statistical data;
(c) profits reinvested infirms withforeign direct investment; and
(d) debt-related transactions between associated firms.
TheWTO Secretariat report doesnotinclude categories (b),(c)and(d).Onthebasis ofthe
appropriate methodology, foreign direct investment inMexico between 1994 and1996 reached
US$31.5 billion.
Economic deregulation
Economic deregulation inMexico hasbeenundertaken atvarious different levels. Initially,
aspartoftheeconomic policy ofopening upandliberalization, anextensive programme ofprivatization
andderegulation wasundertaken intraditionally regulated sectors oftheeconomy such as
telecommunications, transport, tourism, railroads, ports, electricity, fisheries andmining.WT/TPR/M/29/Add.1
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Deregulation through theEconomic Deregulation Council, abodycomprised ofrepresentatives
ofthepublicsectoraswellasbusiness,labourandacademiccircles,hasfocusedchieflyonadministrative
streamlining toreduce theinefficiencies associated withexcessive regulations andpaperwork in
commercial andinvestment transactions.
TheCouncil conducted anextensive review oftheFederal regulatory framework andsought
coordination with31Federal states which havealsoreached deregulation agreements.
Asaresult, anumber oflegislative reforms wereproposed andadopted, including totheLaw
onAdministrative Procedures, theFederal LawonMetrology andStandardization, theMining Law,
andtheLawonForeign Investment, aswellastocommercial andcivilstatutes which havereduced
by50,000 thecases intheFederal District tribunals withsavings ofabout 1billion pesos.
Competition policy
RoleoftheFederal Competition Commission (CFC)
TheCFChasthetechnicalandadministrativeautonomytoapplycompetitionpolicies,especially
onprevention, investigation andcombatting ofmonopolies, monopolistic practices andanti-competitive
concentrations, andthedetermination andapplication ofpenalties. TheCommission 'scredibility
increased aseconomic operators gradually changed theirattitudes; thisisshown bythe42percent
increase inthenumber ofcases between 1994 and1996.
TheCFCalsoparticipated inderegulation andprivatization, andintheelaboration andupdating
ofvarious draftlawsandregulations, thuspromoting competition invarious sectors oftheeconomy,
including telecommunications, railways, aviation, ports andairports.
TheCFC maydemand ofindividuals andother economic agents anyinformation itrequires
toinvestigate anti-competitive practices, anddefines coordination mechanisms toprevent andfight
suchillegal practices.
International aspects ofcompetition policy
Mexico participates actively invarious international competition-related organizations andfora,
including theUnited Nations Conference onTrade andDevelopment (UNCTAD), theLatin American
Economic System (LAES), theOrganization forEconomic Cooperation andDevelopment (OECD)
andtheWTO Working Party onTrade andDevelopment, nottomention theWorking Group onTrade
andCompetition intheframework oftheFreeTrade Area oftheAmericas (FTAA), andinthe
workshops,seminarsandtechnicalassistanceprogrammesoncompetitionpolicyorganizedinthecontext
oftheAsiaPacific Economic Cooperation (APEC).
TheCFCalsoparticipates intheworking groups setupbyNAFTA, which hasbeenconducting
important studies ontrade andcompetition andcomparative analysis ofthelegislations ofthethree
signatories, andintheG3FreeTrade Agreement.
Asregards international cooperation Mexico, asanOECD member, follows OECD
recommendations concerning cooperation onanti-competitive practices affecting trade. NAFTA also
establishes principles andfoundations forthedevelopment ofcooperation inthefieldofcompetition
policy through consultations, mutual legalassistance, notification andinformation exchange. Atthe
bilateral level, theCFC hasalsopromoted close communications withthecompetition agencies ofa
number oftrading partners suchasCanada, theUnited States, Spain, France, theEuropean UnionWT/TPR/M/29/Add.1
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andvarious Latin American countries, inaddition towhich ithasparticipated inprogrammes oftechnical
assistance anddissemination ofcompetition policy through seminars andlectures.
Intellectual property rights
Mexico hasusedthetransition period provided fordeveloping countries under Article 65of
theAgreement onTrade-Related Aspects ofIntellectual Property Rights (TRIPS), although itslegislation
ismodernandoffersadequateandefficientprotectionofallintellectualpropertyrights.Ithaslegislation,
inparticular, ontheprotection ofindustrial property (1991, reformed in1994), copyrights (1996,
reformed in1997) andplant varieties (1996).
Industrial property
Industrialpropertylegislationcoverspatents,utilitymodels,industrialdesigns,industrialsecrets,
brand names, appellations oforigin andundisclosed information. Theinformation required bythe
special lawsforensuring thesafety andefficiency ofpharmaceuticals andagrochemicals using new
chemical components willremain protected under theinternational agreements towhich Mexico is
aparty.
The1994 reforms established theMexican Institute ofIntellectual Property (IMPI) which is
therelevant administrative authority responsible, interalia,forprocessing, granting, registering or
cancellingpatentsasappropriate,aswellasconductinginvestigationsonpossibleinfractionsandadopting
provisional measures orsanctions asappropriate.
With respect topatents, thelawprovides forthepossibility ofgranting compulsory licences
onatemporary basisandsubject toroyalty payments tothepatent holder when without avalidreason
apatent hasnotbeenworked, andproviding thepatent holder wasnotabletodoso.
Compulsory licences arenotgranted when thepatent holder orcontractual licence holder has
beenimporting theproduct patented orobtained through thepatented process. Inother words, the
applicant foracompulsory licence musthavethetechnical andeconomic capacity toexploit thepatented
invention efficiently.
Thelawprovides bothforadministrative sanctions, tobeapplied bytheIMPI intheformof
finesofupto20,000 times theminimum dailysalary plus500salary daysforeachdaythattheinfraction
remains, closure ofestablishments oradministrative arrest forupto36hours. Penal sanctions bythe
judicial authorities arealsopossible, withfinesofupto10,000 times theminimum daily salary and
prison terms oftwotosixyears. Theprocedure forpenalizing suchinfractions isgoverned bythe
procedures andformalities laiddown inTitleVIandVIIoftheIndustrial Property Law.
With respect topatents, theIndustrial Property Lawisinkeeping withArticle 27ofthe
TRIPSAgreement,whichallowsmemberstoexcludefrompatentabilityessentiallybiologicalproduction
processes; indeed, theIndustrial Property Lawexcludes from patentability, aspartofthatprocess,
thereproduction ofplants andanimals. Thefactthatbiological andgenetic material asfound innature
isconsidered asanon-patentable material isfullyjustified bythefactthatsuchmaterial doesnotmeet
thebasic requirements forpatentability (according toArticle 27.1oftheTRIPS Agreement inventions
must benew, involve aninventive stepandbecapable ofindustrial application).
TheIndustrial Property Lawisalsoinkeeping withtheTRIPS Agreement asregards the
exclusion frompatentability ofthehuman body andlivepartsthereof, which ispermitted inorder to
protect morality, health andlife(Article 27.2oftheTRIPS Agreement).WT/TPR/M/29/Add.1
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Ontheother hand, theIndustrial Property Lawdoesnotexclude frompatentability inventions
which, through theircommercial exploitation, could endanger theenvironment. However, itconsiders
aninvention tobeanyhuman creation which permits thetransformation ofmaterials orenergy existing
innature forusebyhuman beings insatisfying theirspecific needs, andthose creations only.
TheMexican authorities areworking onadraftinitiative toprotect layout designs (topographies)
ofintegrated semi-conductors which willshortly besubmitted toCongress.
Finally, inOctober 1996 Mexico promulgated theFederal Plant Variety Law, protecting the
rights ofcreators ofnewplantvarieties toberecognized assuchandgranting themtheexclusive right
toexploit themandtheirpropagating material. TheMexican authorities areintheprocess ofdrafting
regulations fortheLaw, which aretobepublished shortly.
Mexico isamember oftheInternational Convention fortheProtection ofNewVarieties of
Plants (Actof1978). On31December 1995, Mexico deposited itsinstrument ofratification ofthe
mentioned Act; andon9August 1997Mexico wasadmitted asthe34thmember oftheInternational
Union fortheProtection ofNewVarieties ofPlants (UPOV).
Procedure fortheimposition ofadministrative sanctions
Applicationstoinitiateadministrativedeclarationproceduresmustbeaccompaniedbyacertificate
ofpayment oftheapplicable fee.
During theadministrative declaration procedure, theapplicant mayrequest theadoption of
provisional measures.
Theparty against which aprovisional measure hasbeenordered hastendaysinwhich tosubmit
itsobservations totheInstitute.
TheMexican Industrial Property Institute works incooperation withtheNational Copyright
Institute, theOffice oftheProcurator oftheRepublic (through itsDepartment ofIntellectual Property
Crimes) andtheMinistry ofFinance andPublic Credit toachieve theobjective ofprotection entrusted
toitbytheIndustrial Property Law.
Theabove authorities areresponsible forpreventing theimport intoMexico ofgoods which
violate intellectual property rights. Inaddition totheauthority conferred upon itbytheFederal Tax
Code andother laws, theMinistry ofFinance andPublic Credit alsohastheauthority tosuspend the
freecirculation ofgoods from abroad within thetax-free areaoncetherandom selection mechanism
hasbeenactivated, subject toaresolution bytheadministrative orjudicial authority responsible for
intellectual property matters, andtoplace themattheimmediate disposal ofthesaidauthorities atthe
place indicated bythem.
Article 148oftheCustoms Lawstipulates thatforeign goods whose freecirculation hasbeen
suspended bytheadministrative orjudicial authority responsible forintellectual property matters shall
bewithheld bythecustoms authorities andplaced atthedisposal ofthecompetent authorities ina
warehouse indicated bythem.
Upon applying theabove withholding measure, thecustoms authorities mustdrawupdetailed
records containing thefollowing:
I. Theidentification oftheauthority carrying outthemeasure;WT/TPR/M/29/Add.1
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II. theresolution ordering thesuspension oftheforeign goods from freecirculation on
which themeasure andthenotification thereof totheinterested party isbased;
III. description ofthenature andcharacteristics ofthegoods inquestion;
IV. thelocation atwhich thegoods aremade available tothecompetent authorities.
Theperson against whom themeasure isapplied isasked toappoint twodefence witnesses.
Ifthewitnesses arenotappointed orthepersons appointed refuse toappear aswitnesses, theauthority
applying themeasure appoints them.
Acopyoftherecords istransmitted totheperson against whom themeasure hasbeenapplied
together withacopyoftheresolution suspending thegoods fromfreecirculation issued bythecompetent
administrative orjudicial authority sothattheadministrative orjudicial procedure maycontinue in
accordance withtherelevant legislation.
Finally, Article 149oftheCustoms Lawstipulates thattheprovisions ofArticle 148shallonly
applyiftheresolutionissuedbythecompetentadministrativeorjudicialauthorityorderingthesuspension
from freecirculation oftheforeign goods contains thefollowing information:
I. Name oftheimporter;
II. detailed description ofthegoods;
III. customs postthathasprovided theinformation thatthegoods aretoenterthecountry;
IV. estimated timeforentry ofthegoods, notexceeding 15days;
V. thewarehouse inwhich thegoods aretobeplaced atthedisposal ofthecompetent
authorities, which shallbelocated within thedistrict ofthecustoms office inquestion;
and
VI. theexpress designation oracceptance oftheroleofdepositary.
TheCustoms Lawsetsoutprocedures forwithholding infringing goods fromfreecirculation
attheborder, attherequest oftheIMPI ortheOffice oftheProcurator General.
Copyrights
ThenewFederal Copyright Lawoffers protection forworks andneighbouring rights. The
Lawprovides forthecreation oftheNational Copyright Institute (INDA) astheadministrative authority
inthatfield. Itschiefresponsibilities consist, interalia,inpromoting andprotecting copyrights and
neighbouring rights, andinthatconnection itmayconduct investigations foralleged violations and,
where appropriate, apply administrative penalties. Under theLaw, INDA mayalsocombat piracy
byadministrative means andapply fines ofupto10,000 times theminimum daily salary plus500
additional daysofsalary foreachextradayofinfraction. ThePenal Code classifies copyright crimes,
including piracy, forwhich apenalty ofuptosixyears'imprisonment maybeimposed.
TheMexican authorities havebeenworking ondrawing upregulations totheLaw, andintend
tocomplete them shortly.WT/TPR/M/29/Add.1
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Theprocedures pertaining tocopyright infringements donotapply totrade-related aspects of
intellectual property rights, andremain entirely outside theTRIPS Agreement. Theprocedures for
dealingwithtrade-relatedinfringementsaretheresponsibilityoftheIMPIinconformitywithArticle231
oftheFederal Copyright LawandTitles VIandVIIoftheIndustrial Property Law.
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