Mexico Imposes Compensatory Duties on Eighty-Nine U.S. Products in Response to the Cancellation of the Cross-Border Trucking Demonstration Program

On March 18, 2009 an unprecedented resolution was published in Mexico’s Official Journal of the Federation (Diario Oficial de la Federación). Forthe first time since the North American Free Trade Agreement (NAFTA) entered into force, Mexico cancelled preferential tariff rates and imposedhigher duties on the importation of 89 products, most of them of an agricultural or industrial nature, originating in the United States of America. Suchmeasures constitute a reprisal resulting from the United States’ cancellation of the Cross-Border Trucking Demonstration Program as part of the U.S.Omnibus budget legislation for 2009. The criteria used by Mexican authorities to choose the 89 products, which as of March 19 th will be subject toincreased duty rates ranging from 10% to 45% with a majority being taxed at 20%, was to select products representing high volumes of imports intoMexico from the United States, but which will not affect Mexican consumers with higher prices because of the availability of Mexican products orgoods imported from other countries. However, based on an analysis carried out by CCN on the economic value and volumes represented inimportations from the United States to Mexico during 2008, as published by the Banco de Mexico and Mexico’s Department of the Economy, one mayconclude that products such as Christmas trees, onions, seeds and lettuces, fruits, sunflower seeds and vegetable oils are products that during 2008 wereimported into Mexico only from the United States of America, and whose prices, if secondary suppliers are not found on the short-term, could increaseand affect consumers in Mexico. In addition, it appears that political and market protection criteria were also considered for certain industries, such asthat of paper and office products, and pens and pencils, since these Mexican domestic industries have clearly been affected by direct competition withthe United States over the last several years. It is important to note that with respect to paper, certain businesses such as independent newspapers thatdo not buy paper from the government paper company (PIPSA) will clearly be affected by the increase in prices. Among the 89 products worthmentioning are plated precious metals, battery waste, batteries and automotive batteries, prepared stock, soup and stews, which according to the datarepresent the highest monetary value of imports originating in the United States in 2008; as well as books and printed materials, dog and cat food,onions and pencils, which together with battery waste, batteries and automotive batteries, represent the highest volume of importations into Mexicofrom the U.S. in 2008.