Mexican Estimated Prices--January 15, 1999

Comments of the Joint Industry Group Regarding Mexican Customs Use of Estimated Prices

In response to the request of the US Department of Commerce, the Joint Industry Group (JIG) submits these comments regarding the impact of the Mexican Customs practice of estimating prices on US imports to Mexico.

The JIG is a member-driven coalition of over one hundred-thirty companies, trade associations, and businesses actively involved in international trade. We both examine and reflect the concerns of the business community relative to current and proposed international trade-related policies, actions, legislation, and regulations, and undertake to improve them through dialogue with the Executive Branch, Congress, the World Trade Organization, and the World Customs Organization. JIG membership represents more that $350 billion in trade.

Several JIG members that export goods to Mexico that are subject to valuation based on estimated pricing by Mexican Customs have indicated that this practice has caused undue costs -- through higher duties and delays in getting products to market -- with respect to their exports of goods to Mexico. Mexico's customs valuation practice unfairly protects Mexican domestic industries at the expense of foreign competitors. More importantly, the process of appraising the value of goods based on an arbitrary minimum amount is not consistent with Mexico's obligations under the Agreement Establishing the World Trade Organization.

Article VII of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and the Agreement on Implementation of Article VII of GATT 1994 set forth the legal requirements that Mexican Customs must meet in its valuation of imported goods. Generally, the valuation should be based on the "transaction value"-- the price paid or payable for the imported goods. WTO valuation rules prohibit the use of the following seven methods of valuation:

Selling price in Mexico of merchandise produced in Mexico;
A system that provides for the appraisement of imported merchandise at the higher of two alternative values;
The price of merchandise in the domestic market of the country of exportation;
A cost of production, other than a value determined for merchandise that is identical merchandise, or similar merchandise, to the merchandise being appraised;
The price of merchandise for export to a country other than Mexico;
Arbitrary or fictitious values; and,
Minimum values for appraisement.

The employment of estimated prices or setting minimum values for appraisement is in direct contradiction to the GATT Valuation Code.

JIG members who have been impacted by estimated pricing are forced to raise prices to meet the estimated price or have the merchandise inspected by an inspection agency before it enters Mexico. Both methods add to the cost of importation and complicate the ability of importers to compete with domestic producers.

Following are comments of JIG members who have had varying experiences with estimated prices:

Some estimated prices are based on a different unit of measure than on what the product is sold. For example, ceramic tableware and kitchenware (HS 6912.00.01) is appraised based on weight (kg) rather than per unit. This creates the need to recalculate prices based on the weight of the good.

SECOFI requires an "Aviso" or permit that outlines those items subject to estimated prices from certain countries. For every different unit of price, country of origin, and HS number, SECOFI requires a separate Aviso for every item. Each Aviso is assessed a charge both by SECOFI and the importer’s Mexican brokers. SECOFI has not developed a system to transmit these permits electronically.

The Aviso requires ten days to process. This waiting period can cause delays in processing shipments and slows final delivery of merchandise to Mexican retailers.

SECOFI fails to update estimated prices according to exchange rate fluctuations. It is likely that fewer items would fall below the estimated prices if SECOFI were to modify its minimum appraisement values regularly.

The Joint Industry Group thanks the Department of Commerce for considering our comments on Mexican estimated prices. Please contact us if you require more information or assistance.