On December 31, 2001, Mexico’s Economy Secretariat published in the Official Gazette (Diario Oficial) a new Decree amending existing Sectoral Development Programs ("Sectoral Programs"). The article on Maquiladoras and Mexico’s Sectoral Programs in 2001, previously posted in The Chamber News, explained the key features of the Programs: their origin, what they are, how they work and their significance to Mexico-based manufacturing companies.

A Summary of the Programs

Mexico’s Sectoral Programs (Programas de Promocion Sectorial or PPS or PROSEC by their Spanish acronym) provide fixed, reduced duty rates on the importation of qualifying inputs for the manufacture of a variety of finished products. The Programs were basically designed to alleviate the negative impact of the elimination of NAFTA duty drawback on Mexico-based manufacturing companies. As of January 2002, Mexico had established a total of 22 Programs benefiting well over 5460 products, identified by tariff item. The Programs have been in effect for Maquiladora and PITEX plants since November 20, 2000 and for all other manufacturing companies since January 1, 2001.

The December 31, 2001 Sectoral Programs Decree^/ marks the fourth round of amendments to existing Programs.^/ The new Decree added approximately 284 new items, modified the duty rates of inputs in six industry sectors and eliminated previously qualifying items in ten industry sectors.^/

The new Decree affected the following industry Programs:

Additionally, the December 31, 2001 Decree listed, by tariff item, approximately 3392 inputs to benefit from a 0% import duty rate if imported between November 20, 2000 and November 30, 2001.^/ All the industries benefited from this provision in the Decree, except for the Chocolate, Candy and Similar ("Like" Products) and Coffee industry Programs. Companies that imported any of the listed qualifying inputs during the referenced time period need to correct their import "pedimentos" in order to secure the duty exemption.

The December 31, 2001 Decree became effective on January 1, 2002.

Careful review of the December 31, 2001 Decree is highly recommended to manufacturing companies currently operating under the Programs or interested in benefiting from the preferential duty rates afforded by the Programs. We also continue to recommend companies to keep track of the recurrent publication of Sectoral Programs decrees, since modifications to the Programs could have an immediate impact on a company’s operational costs and sourcing strategies. Reliable Economy Secretariat sources have indicated that the next round of amendments to existing Programs could be published as early as March or April 2002.