2.1 Legislation on trade and investment

2.1.1 Legislation on trade administration

The main laws and regulations governing foreign trade in Mexico include Article 131 of the Mexico Constitution, the Foreign Trade Act and its Regulations, Regulations on Unfair International Trade Practices, the Law on Economic Competition, the Law for Acquisitions, Leases and Services, the Law for Public Works, the Customs Law, General Import and Export Tariff Law, the Law on Metrology and Standardization, and the Industrial Property Act, etc.

The Foreign Trade Act (hereinafter referred to as FTA) is the basic law governing foreign trade in Mexico. The FTA, combined with other related laws, regulates and adjusts Mexico's foreign trade activities. On December 3, 2004, the Mexican House of Senate approved the amendments to the FTA, including the shortening of the time period between the initiation of an anti-dumping investigation and the making of the final award by the Ministry of Economy from 260 days to 210 days; the prior inquiries that must be made among domestic producers before decisions are made either to approve or refuse importation or exportation of certain goods; the nomination of the agencies and the formulation of procedures with regard to the examination of tariffs and screening of new exporters; the mandate that is to granted to the Ministry of Economy to conduct investigations based on adequate evidence.

2.1.2 Legislation on investment administration

The Foreign Investment Law (hereinafter referred to as FIL) is the main law governing foreign investment in Mexico.

In addition to the FIL, foreign investments, when made in some sectors, shall be governed by the laws and regulations applicable to the specific areas, for instance, the Federal Telecommunications Law, the Natural Gas Regulations, the Railroad System Act, and Port Act.

2.2 Trade administration

2.2.1 Tariff System

2.2.1.1 The average tariff rate and its changes

In 2005, the Mexican simple average bound tariff rate was 34.9 percent, the simple average applied tariff rate, 13.1 percent, and the simple applied tariff rate for agricultural products, 24.31 percent.

In 2005, the tariff rates for 4,176 products ranged from 5 percent to 10 percent, and the major items were chemicals, iron and steel, and photographic goods; those for 2,926 products, from 10 percent to 15 percent mainly covering textiles, apparel and chemical products; those for 1,855 products, from 15 percent to 20 percent, mainly including agricultural products and aquatic products; 634 products with tariff rates beyond 20 percent, such as leather, rubber and footwear.

2.2.1.2 Tariff administration

In Mexico, there are 7 ad valorem tariff rates on its imported goods, namely, 0 percent, 5 percent, 10 percent, 15 percent, 20 percent, 35 percent and 45 percent. The items in the Mexican tariff reduction/elimination list are often subject to adjustment. Tariff changes are issued through Presidential decrees published in the Official Journal.

Mexico adopts an import and export quota system. The quotas must be allocated through public biddings, other means as stipulated in international treaties signed by Mexico, or by any justified procedure established by the Ministry of Economy. Most quotas for agricultural products are reserved to specific countries. MFN tariff rates may apply to the non-agricultural products when quota certificates have obtained.

The Customs Law of Mexico stipulates that an additional duty (also called a customs processing fee) shall be levied on all imported goods, and the rate is 0.8 percent of the declared FOB value. In addition, the Mexican Customs levies a 15 percent value added tax on most imported goods.

2.2.2 Import and export licensing and prohibitions

2.2.2.1 Import licensing and prohibitions

The import licensing system of Mexico is established on the basis of the Foreign Trade Act and its related regulations. The Ministry of Economy publishes the catalogue or list of commodities under licensing administration through the Official Journal.

The import licensing administration stipulates that imported goods shall be reported to the Mexican department in charge at least 10 days in advance. If the declared price is lower than the reference price determined by the Ministry of Treasury, a pre-shipment inspection must be undertaken. The import license has a validity of one year and shall be applied for renewal upon expiry.

The products on which Mexico maintains import prohibitions are marijuana and its preparations, suctorial medicament, sulphur thallium, biacetyl morphine, glutamate, etc. Mexico also applies import and export prohibitions on a number of products as provided for in the United Nations Security Council resolutions.

2.2.2.2 Export licensing and prohibitions

Mexico conducts export licensing administration for certain goods. The involved products include livestock, petrochemical products, radioactive products, leather and meat of endangered animals, currencies in circulation, corn powder, etc. The prohibited products for exportation include specific animal products, plants, narcotics, tropical timber, archeological relics, etc.

2.2.3 Technical standards and inspection and quarantine of animals and plants

The Mexican Standardization System consists of about 800 NOMs (Norma Oficial Mexicana ---Official Mexican Standard) by which products must be certified for compliance and about 11000 voluntary standards NMX (Norma Mexicana — Mexican Standard) that improve and assure the quality of Mexican products. Mexican voluntary standards become mandatory in the following cases: when a company or individual voluntarily adopts it; when a NOM makes reference to it; Government procurement.

Under the Law on Metrology and Standardization, regulatory agencies are authorized to issue emergency technical regulations to avoid possible damage done by importation when they conclude that there is an imminent risk of damage to a legitimate objective. Emergency regulations may be applied for up to six months and in no case may the technical regulation be issued more than twice consecutively. Before the second issue, a regulatory impact statement should be submitted to the Ministry of Economy. In addition, the NOMs and the NMXs should be reviewed every five years from the date they come into effect. The result of the review should be notified to the Technical Secretariat of the National Standardization Commission. If it is not notified, the application of the regulation is suspended and the agencies that issued it should publish the cancellation in the Official Journal.

2.3 Investment administration

The Mexican Foreign Investment Law provides that unless specifically stipulated otherwise, Mexico allows foreign investors to invest in most of the economic sectors within its borders, even allowing 100 percent foreign ownership in operation.

All the foreign invested firms must register at the Foreign Investment Registration Office under the Ministry of Economy; and a few foreign investment projects shall be subjected to the examination and approval procedure of the National Commission of Foreign Investment (hereafter referred to as NCFI). As to some projects concerning national security, the NCFI is entitled to halt the foreign investment. The examination and approval of the NCFI is required when the total fixed assets of a foreign firm reach 394 million Peso (about US$41.47 million) or when a foreign investment project is to exceed 49 percent of the equity. The related business sectors include: specific dock services including piloting, mooring and lighterage, administration of air terminals, private education services legal services, credit information companies, securities rating institutions, insurance, cellular telephone services, pipelines laying, the drilling of petroleum and gas wells, the construction of railways and roads, etc. Foreign companies are free to remit their profit, equity, dividends, interest and capital. In case of difficulties in the balance of payments, international transfers may be temporarily restricted by the Mexican government.

2.4 Competent authorities

The governmental bodies responsible for foreign trade administration are the Ministry of Economy, the Ministry of Foreign Affairs, the Ministry of Treasury, the Ministry of Agriculture, the Ministry of Communications and Transport, the National Foreign Trade Bank, the Customs Administration, and the National Commission of Foreign Investment.

The Ministry of Economy is in charge of foreign trade, responsible for making economic and trade policies, coordinating international trade policies with the Ministry of Foreign Affairs, coordinating and directing FDI, jointly researching and formulating tariff level with the Ministry of Treasury, administering licenses on imported and exported goods, addressing rules of origin and monitoring foreign trade, stipulating import and export quotas, formulating trade protection measures and export encouraging policies, organizing negotiations with relevant foreign countries, etc.

Under the Ministry of Economy, there are the International Commerce Negotiations Office, the Standardization, Foreign Investment and International Commerce Custom Office, and the Industry and Commerce Office. They all exercise management on foreign trade. Besides, the International Trade Measures Office under the Ministry of Economy, is responsible for conducting for different trade remedy measures.

Under the Ministry of Foreign Affairs, there is the Vice-Ministerial Office of Economic Relations and International Cooperation. It is mainly responsible for coordinating and dealing with policymaking issues on bilateral trade and economic affairs with relevant countries as well as on OECD affairs. Its focus is to do some liaison and coordinating work in the economic and foreign trade affairs through diplomatic channels, in collaboration with the Ministry of Economy.

Subordinate to the Ministry of Treasury, the Mexican Customs Administration's responsibilities include: managing the Customs houses on behalf of the government, formulating tariff levels in collaboration with the Ministry of Economy, conducting customs valuation, levying customs duties, investigating and formulating the level of anti-dumping duties for imported goods, and collecting duties.

Under the leadership of the Ministry of Economy, the Mexican Foreign Trade Commission (hereinafter referred to as MFTC) works as a consultative body. The MFTC comprises representatives of the Central Bank, the Federal Competition Commission, the Ministry of Foreign Affairs, the Ministry of Treasury, the Ministry of Economy, the Ministry of Energy Resources, the Ministry of Agriculture, Rural Development, Fisheries and Food, the Ministry of Environment and Natural Resources, etc. The METC is responsible for holding consultations with all the federal public administrative departments on the matters concerning trade policy formulation, including giving consultative advice or making recommendations on the proposed and existing regulations on tariff and non-tariff import measures, export restrictions, and contingency measures, but its advice and recommendations are not binding. The MFTC deals with policies concerning merchandise trade only; issues concerning service trade or investment are beyond its competence.
 
As a consultative body on foreign investment The National Foreign Investments Commission (NFIC) provides guidelines for the areas where the rules and regulations regarding investment are to be implemented. It also conducts evaluation of a foreign investment project and makes decisions accordingly in case the investor shall be subject to its approval.