INTERNATIONAL BUSINESS

ASSIGNMENT NO: 2
GROUP MEMBERS: HAMMAD KHAN (9182013)
MURAD HYDER (9182003)
AMINA NAZIR (9182020)
BUSHRA KAUSAR (9182025)

SUBMITTED TO: DR.HAROON

DEPARTMENT OF MANAGEMENT SCIENCES
DATED: 13-12-2-2021
Trade tariffs between USA and Mexico
There are no tariffs for products made in the United States that meet rules of origin
requirements under the United States–Mexico–Canada Agreement (USMCA).
However, there are several exceptions and caveats noted below that may affect
overall pricing of U.S. exports. See our Trade.gov USMCA Day One website for
a thorough explanation of USMCA certification of origin. The USMCA includes
new rules of origin for autos, auto parts, chemicals, and steel-intensive products,
thus affecting their tariff treatment. For a complete review of the USMCA, visit the
Office of United States Trade Representative website. Few U.S. exports are
subject to antidumping duties that limit access to the Mexican market. A list of
these products may be found at the U.S. International Trade Administration’s page
on Mexico Anti-Dumping and Countervailing Duty Measures.

Mexico has implemented a Sectoral Promotion Program (Programs de Promoción

Sectorial or PROSEC), which reduces Most Favored Nation (MFN) tariffs to zero
or five percent on a wide range of important inputs needed by Mexico’s export
manufacturing sector. This program includes 20 different industry sectors and
affects 16,000 HS codes. Mexican companies must be registered under this
program to participate. The complete list of HS codes and sectors that must comply
with PROSEC can be found in Annex 10 - Sectors and HS Codes via the Mexican
Tax Administration Service’s website.

All USMCA-compliant products “definitively” imported into Mexico are no longer

assessed the customs processing fee (CPF). Products temporarily imported for
processing and re-export may be subject to the CPF since the imports are not
considered “definitive.” The import duty, if applicable, is calculated on the U.S.
plant value (FOB price) of the product, plus the inland U.S. freight charges to the
border and any other costs listed separately on the invoice and paid by the
importer. These can include charges such as export packaging, inland freight cost,
and insurance.

We strongly urge all U.S. companies planning to bring samples, equipment,

displays, or any other item into Mexico on a temporary basis to utilize an ATA
Carnet (www.atacarnet.com). Mexico signed onto the international carnet system
in 2014, and companies have had temporary import goods impounded by Mexican
Customs when those goods were not accompanied by an ATA Carnet. See our
Temporary Entry topic below for more information on temporary imports. To
contact ATA Carnet Mexico executives for more information, please check
their website.

In addition, Mexico has a value-added tax (IVA) on most sales transactions,

including sales of foreign products. The IVA rate is 16 percent for all of Mexico.
Basic products, such as food and drugs and some services, are exempt from the
IVA.

A special tax on production and services (IEPS) is assessed on the importation of

alcoholic beverages, cigarettes and cigars, soda pops, energy drinks, high calorie
foods, junk foods, and fuels. This tax may vary from 25 to 160 percent depending
on the product.

Special Economic Zones (Zonas Economics Especial or ZEEs) are now entirely
under state jurisdiction. As of April 2021, there are only two federal ZEE-style
projects being developed where fiscal incentives would apply. These are the Trans-
Isthmic Interoceanic Corridor and the Chetumal State border area. See the section
on Transportation Infrastructure for more information.

Export Controls and Export Licenses

Export licenses are required for sensitive products and high-end technologies
before being exported and delivered to end-users. Exports licenses also cover re-
exports or transfers, and temporary defense services transactions. Full export
license processing in the United States may take several months before a license is
granted. Some export licenses are the responsibility of the U.S. Department of
State. For defense and military items and services, the State Department issues
licenses under the International Traffic in Arms Regulations (ITAR) through the
Directorate of Defense Trade Controls (DDTC) and the Bureau of International
Security and Nonproliferation (ISN). Licenses for dual-use technologies, products,
and services are administrated by the U.S. Department of Commerce’s Bureau of
Industry and Security (BIS) under the Export Administration Regulations (EAR).
The U.S. Department of Treasury (OFAC) and the U.S. Department of Defense
(DSCA) also have oversight roles in trade and security.
1) The agriculture sector is large,
Diversified, and heavily integrated with the United States, making it a best prospect
industry sector for U.S. companies in Mexico.

Mexico is the United States’ third-largest agricultural trading partner. In 2020, U.S.
agricultural and related product exports to Mexico totaled USD 18.3 billion. Even
after taking into account the effects of the COVID-19 pandemic in 2020, the United
States maintained its number one position in Mexico´s agricultural imports with
nearly 70 percent market share. The United States remains Mexico’s principal
agricultural trading partner, receiving USD 33 billion of Mexico’s total agricultural
exports. Overall, U.S. market share in Mexico has remained high, as geographic
advantages continue to make the United States the best supplier for most major
agricultural goods.

Leading Sub-Sectors
The United States enjoys a commanding market share for several sub-sectors. Mexico
is the top destination for U.S. agricultural exports of corn, dairy products, poultry
meat (excluding eggs), sugar and sweeteners, milled grains, and distiller’s grains. It is
the second or third-largest market for more than 20 other key product groups such as
soybeans, pork, beef, wheat, oilseed meals, fresh fruit, and many processed foods or
beverages. Below are summaries of a few of these sub-sectors of the agricultural
market in Mexico. Additional information on each of these topics (as well as other
agricultural sectors) is available on the U.S. Department of Agriculture’s (USDA)
Global Agricultural Information Network (GAIN) at gain.fas.usda.g
Major Agricultural Exports from the United States to Mexico
(Values in thousands of dollars)

2) Automotive industry
Mexico is the sixth-largest global passenger vehicle manufacturer, producing
approximately three million vehicles annually. Eighty nine percent of vehicles
produced in Mexico are exported, with 80 percent destined for the United States.
Established automakers in Mexico include Audi, Baic Group, BMW, Stellantis (made
up of FCA and PSA Group), Ford, General Motors, Honda, Kia, Mazda, Nissan,
Toyota, and Volkswagen.

Mexico is the sixth-largest manufacturer of heavy-duty vehicles for cargo, with 14

manufacturers and assemblers of buses, trucks, tractor trucks and engines through 11
manufacturing plants, supporting 18,500 jobs nationwide. Mexico is the leading
global exporter of tractor trucks, exporting 94.5 percent of its production to the United
States. Mexico is also the fourth-largest exporter of heavy-duty vehicles for cargo, and
the second-largest export market after Canada, for U.S. medium and heavy-duty
trucks. Top players include Cummins, Detroit Diesel Allison, Freightliner–Daimler,
Kenworth Mexicana, Mack Trucks de México, International-Navistar, Dina
Camiones, Scania, Volvo Group VW, Man Truck & Bus, Mercedes-Benz, Hino
Motors, and Isuzu Motors.

The United States–Mexico–Canada Agreement (USMCA), which went into effect on

July 1, 2020, included a number of changes to the rules of origin for the automotive
sector. The USMCA requires that 75 percent of a vehicle’s content (70 percent for
heavy trucks) be produced in North America, and that core auto parts originate from
the United States, Canada, or Mexico. Following a phase-in period ending in 2023 for
vehicles and 2027 for trucks, only goods meeting these content requirements will
receive duty-free access. For additional information, please visit the Office of United
States Trade Representative (USTR) website (www.ustr.gov) or see USTR’s
USMCA U.S Automotive Sector Impact Analysis.

3) Education and Training

Mexico is the 10th-largest country of origin for students studying in the United States.
In the 2019–2020 academic year, 14,348 Mexican students were enrolled in U.S.
schools, primarily in undergraduate programs. Mexican students often choose to study
in the United States due to the prestige of the American higher education system, as
well as the strong ties and proximity between the countries.

Mexican Students in U.S. Colleges and Universities 201–2020 Academic Year

Academic Level Number of Students from

Mexico
Undergraduate 7,993
Graduate 3,817
Other / Non-Degree 813
Optional Practical Training 1,725
Total 14,348

Mexican private education institutions have prioritized international education,

fostering student mobility and academic exchanges with institutions abroad, to
become more competitive in the international market. The COVID-19 pandemic is
dramatically impacting student mobility, forcing higher education institutions to
implement virtual recruitment strategies and increase online collaboration.
Mexican higher education institutions actively participate in regional and bilateral
education programs to increase collaboration with international institutions. Launched
in 2014, the 100,000 Strong in the Americas (100K) Innovation Fund is the Western
Hemisphere’s signature education initiative that stimulates and supports institutional
partnerships and student exchange and training opportunities through collaboration
among regional governments, the private sector, foundations, NGOs and higher
education institutions to strengthen regional education collaboration as well as
increase student mobility and workforce development. As of June 2021, the
Innovation Fund has awarded 250 grants to more than 500 higher education
institutions working in teams in 25 countries and 49 U.S. states. In seven years,
Mexico has become the leading country in this hemispheric-wide education initiative
to form partnerships with U.S. colleges and universities and implement new models of
student training and exchange and training programs in both countries. To date, 20
Mexican states and 27 U.S. states benefit from 100K Innovation Fund partnerships
and programs.