WT/REG349/2  
10 November 2015  
(15-5927)  Page: 1/5  
Committee on Regional Trade Agreements  Original: English/Spanish  
 
  FREE TRADE AGREEMENT BETWEEN MEXICO AND CENTRAL AMERICA - COSTA RICA, 
EL SALVADOR, GUATEMALA, HONDURAS, AND NICARAGUA 
(GOODS AND SERVICES) 
QUESTIONS AND REPLIES 
 The following communication, dated 6 November 2015, is being circulated at the request of 
the delegations of Mexico and Central America – Costa Rica, El Salvador, Guatemala, Honduras, 
and Nicaragua. 
 
_______________ 
 
 
 This document reproduces the questions addressed to the Parties and the responses 
submitted. 
Question from the delegation of Canada 
 
Trade Environment 
 1.1.  Paragraph 1.1, the Factual Presentation re marks that "The Parties indicated that 
the purpose of making a single treaty between Mexico and Central America was to achieve convergence of the three existing ag reements in a single instrument so as to 
strengthen trade relations by harmonizing tr ade provisions, rules of origin, cooperation 
and the extension of the agreement." 
 Could the Parties elaborate on how this  single agreement strengthens the high 
standard established by the three previous agreements? 
  The negotiations with a view to establishing  a free trade area between Central America and 
Mexico emerged as one of the initiatives of the First Presidential Summit held in Tuxtla Gutiérrez, 
which led to three separate trade agreements: the Free Trade Agreement between Mexico and Costa Rica, in force since 1995, the Free Trade Agr eement between Mexico and Nicaragua, in force 
since 1998, and the Free Trade Agreement betw een Mexico and the Northern Triangle 
(El Salvador, Guatemala and Honduras), which has been in force since 2001. 
  The June 2009 Declaration of Tuxtla Gutiérrez subsequently provided the overall framework 
for meeting the objectives of upgrading and unifyin g the three existing agreements, in a drive to 
achieve a higher level of trade facilitation and greater integration of production chains.  
 This new treaty strengthened trade relations between Central America and Mexico by 
providing a convergent legal framework across the six countries, thus consolidating Central American economic integration through a single set of legislation for all the countries, in line with the legal instruments making up the Central American Economic Integration Subsystem.  
 
 As regards rules of origin, one of the main outcomes was the definition of common rules of origin that allow the use of inputs from the Parties. Likewise, agreement was reached on a single 
certificate of origin for obtaining preferential tari ff treatment, which enables economic operators to 
use a single form instead of three different forms, as had been the case prior to the entry into force of the Central America-Mexico Free Trade Agreement. 
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   As regards market access, the single treaty extended product coverage by including some 
products that had been excluded from the previous agreements.   As regards trade facilitation, matters of topical interest have been addressed, such as the 
establishment of a single window and of authoriz ed economic operators to expedite trade, whilst 
ensuring customs control of goods. As to the chapter on customs procedures relating to the origin of goods, provisions have been incorporated wi th the aim of preventing customs officials from 
exercising discretionary powers at the time of import. 
 
Lastly, common provisions were agreed in the other treaty chapters concerning Services, 
SPS, TBT and so forth. 
 
Questions from the delegation of Thailand 
 
Provisions on trade in goods 
Import duties and charges, an d quantitative restrictions 
 
1.1.  Paragraph 3.4, are there any time frames imposed on the provision of duty-free 
temporary admission for some goods? 
 Article 3.6 of the Agreement provides for the temporary admission of a number of goods. 
 
 Pursuant to Article 427 of the Regulations implementing the Central American Uniform 
Customs Code (RECAUCA), the time-frame pres cribed for the temporary admission of goods 
without payment of duty or specific taxes is six months  counted as from the acceptance of the 
declaration, which does not preclude the establis hment of special time-frames by each State Party 
in keeping with the nature and specific purpose of temporarily imported goods. In the case of the temporary import of containers, platforms and chassis, their period of stay within the customs 
territory is three months  counted as from the time of entry. 
 1.2.  Do these measures constitute a discrimina tory action, which is incompatible with 
the principle of free trade or WT O regulation? Please explain. 
 No, these are provided for in the WTO Agreem ents. The measures indicated are consistent 
with the Customs Valuation Agreement, since there is no discrimination among importers.  
Tariff rate quotas 
 
1.3.  Paragraph 3.29, in the case of the Free Trade Agreement between Mexico and 
Nicaragua which tariff rate quota is impose d on certain import products, why it is 
different from other FTAs between Mexico  and the remaining countries of Central 
America? 
 The difference stems from the treatment prev iously applied under the bilateral Free Trade 
Agreement between Nicaragua and Mexico to "milk powder or granules", for which Mexico had 
established an import quota linked to a reduction timetable which ended on 30 June 2012. Today, there are no tariff quotas between Mexico and Ni caragua, as the product has been traded freely 
since 1 July 2012. 
 Horizontal commitments  
 
1.4.  Paragraph 4.30, Thailand would like to seek  more clarification on which services 
sectors, sub-sectors and activiti es will be covered and specif ic criteria or qualification 
that foreign investors need to abide under the neutral share. 
 Neutral investment is investment in Me xican firms or authorized trust funds. 
  In Mexico, economic activities and companies reserved exclusively for Mexican nationals or 
Mexican companies from which foreigners are explicitly excluded are the following: 
 
 domestic land transportation of passengers, tourism and freight (excluding messenger 
and parcel services); WT/REG349/2 
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   development banking institutions, under the terms of the relevant law; and 
 
 professional and technical services expressly reserved by sector-specific legislation. 
 As regards the aforementioned activities, foreign investment may not participate through 
trusts, agreements, shareholder pacts, by-laws, pyramiding schemes, or any other mechanism 
that grants it control or participation, except through the neutral investment mechanism.  
 The following percentages apply to foreign investment stakes in the following activities and 
companies:  I.-  Up to 10% in production cooperatives; 
 
II.-  Up to 25% in domestic air transport, ai r taxi services and specialized air transport; 
 
III.-  Up to 49% in: 
 
 the manufacture or marketing of explosives, firearms, cartridges, munitions and 
fireworks, excluding the acquisition, preparation or use of explosives for industrial and 
mining activities;  
 printing and publication of newspapers for circulation only in Mexico; 
 
 series-"T" shares in companies that own ag ricultural, ranching or forestry lands; 
 
 fresh water, coastal, and exclusive economic zone fishing (excluding aquaculture); 
 
 integrated port administration; 
 
 port pilot services for vessels engaged in inland navigation under the terms of the 
relevant law;  
 companies involved in the commercial operation of vessels engaged in inland and coastal 
navigation, excluding tourism cruisers, marine dredging activities, and implements for port construction, conservation and operation; 
 
 supply of fuel and lubricants for ships,  aircraft and railway equipment, and 
 
 Broadcasting. The ceiling on foreign investment is subject to reciprocity in the investor's 
country or the country of the economic operator that ultimately exercises direct or indirect control over the operator. 
 The above limits on foreign holdings may not be exceeded directly through trusts, 
agreements, shareholder pacts, by-laws, pyra miding schemes, or any other mechanism that 
grants higher levels of control or participation than those which have been stipulated, except through the neutral investment mechanism. 
 
The Ministry of the Economy, acting through the Directorate-General of Foreign Investment, 
is responsible for examining and taking decisions on requests for neutral investment involving the 
issuing of neutral shares and neutral instruments by the trust companies; in both cases, the 
instruments grant their holders only pecuniary rights or limited corporate rights. The time-limit for taking a decision on requests received is 35 working days; in the absence of any decision by the authority, the request is deemed approved under the terms specified therein. 
 
Requests for participation by international development finance companies in Mexican firms 
through the neutral investment mechanism are examined and, where appropriate, authorized by 
the National Foreign Investment Commission (CNIE). The CNIE has 45 working days as of the date 
of submission of the request to take its decision; in the absence of any decision by the Commission within the prescribed time-limit, the request must  be deemed approved under the terms specified 
therein. 
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  Authorization to issue shares or transfer shares to a trust through the neutral investment 
mechanism is obtained by complying with the following requirements : 
 
I. A written request specifying the general details of the trust company and, where 
appropriate, the economic activity and shar eholding structure of the firm seeking to 
transfer its shares to the trust; 
 
II. The transfer of shares to a trust requires  submission of the draft trust deed, or, where 
appropriate, the changes intended to be made to a previously authorized trust; and 
 
III. Proof of payment of the duties stipulated in the Federal Law on Duty. 
 
Moreover, international development finance companies seeking to make neutral 
investments in Mexican companies must be recognized by the CNIE, which requires them to 
submit: 
 
I.  The duly completed original plus an informal copy of a questionnaire containing the 
applicant's general details and corporate data; 
 
II. Document, deed, certificate or any other instrument of incorporation, as well as the 
articles of association governing the international development finance company; 
 
III. Financial statements of the international development finance company for the latest 
fiscal year, where the company has been incorporated for more than one year; and 
 
IV. Three-year projected financial statements, where the international development 
finance company has been incorp orated for one year or less. 
 
In examining the requests, the Commission applies the following criteria:  
I.- Impact on employment and worker training; 
 
II.- Technological contribution; 
 
III.- Compliance with the environmental provisions in the relevant environmental legislation; 
and 
 
IV.- In general, the contribution to enhancing the competitiveness of the country's 
production system. 
  Such companies must receive the CNIE's approval to participate in the capital of Mexican 
companies engaged in activities that are reserved for Mexican nationals or subject to specific 
regulations.  
 In any event, documents issued abroad must  be authenticated by a Mexican consul, or 
where applicable, bear an apostille pursuant to the Decree enacting the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents. 
 
 Documents submitted in any language other than Spanish must be accompanied by a translation by a translation expert.  
 The documents must be submitted to the Directorate-General of Foreign Investment in the 
Ministry of the Economy.  
Dispute settlement 
 
1.5.  Paragraph 5.19, please advise the defini tion of the term "proposed measure". 
 When and under which conditions would a measure be considered as being 
"proposed" and thereby subject to the dispute settlement provision?  WT/REG349/2 
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   Pursuant to Chapter 17 of the Agreement, a proposed measure means any provision that a 
Party intends to adopt, that has not entered into  effect and that affects the trade of any other 
Party.  
1.6.  Paragraph 5.23, as the Agreement provides  for the post-retaliation review, what 
would be the remedy for the respondent Pa rty if the panel finds that the level of 
concessions suspended is excessive or the respondent Party has already complied with 
the final report? 
 Article 17.19.2 stipulates as follows: "If the Arbitration Panel hearing a case under 
paragraph 1(a) rules that the level of concessions suspended is manifestly excessive, it shall determine the level of applied concessions that it co nsiders to be of equivalent effect. In this case 
the complaining Party shall adjust the suspension that is being applied to that level. If the 
Arbitration Panel hearing a case under paragraph 1(b) rules that the respondent Party has complied, the complaining Party shall immediatel y lift the suspension of concessions. If the 
respondent Party consists of two or more Parties and the Arbitration Panel decides that one of 
them has complied, the complaining Party shall imme diately lift the suspension of concessions with 
respect to that Party". 
 
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