On 24 July 2020, the First Resolution of Amendments to the Foreign Trade General Rules for 2020 (Resolution) was published in the Federal Official Gazette. In addition to the modifications we discuss in this article, the Resolution includes Annex 1 of such rules (referred to as foreign trade formats and models).
It is noteworthy that the Ministry of Finance and Public Credit did not issue an advance version of the Resolution, which (with certain exceptions) entered into force the day after its publication.
The most important amendments effected by the Resolution relate to the Comprehensive Business Certification Scheme, in the VAT and IEPS (“VAT Certification”) and Authorized Economic Operator (AEO) modalities. Set forth below is a summary of the most notable changes.
I. Legal Term for Stay Applicable to Temporary Virtual Operations
The Resolution provides that only AEO companies now enjoy the 36-month legal stay in Mexico for temporary virtual importations. Companies with a VAT Certification only now have a six-month term for such importations. No transitory provision applies to this modification, meaning that companies should carefully evaluate the impact, depending on the reliability of their foreign trade inventory control systems.
II. Eligibility Requirements
Companies seeking to register in the Comprehensive Business Certification Scheme, in any of its modalities, must take the following steps:
- Register with the SAT all addresses used to carry out activities related to the Maquila or export program or to develop economic and foreign trade activities;
- Update contact list for tax mailbox purposes; and
- Pay fees referred to in article 40, paragraph m) of the Federal Law of Governmental Fees (currently MXP$29,478 / USD$1,344).
III. VAT Certification Modality
A) Elimination of benefits
Prior to the Resolution, companies with VAT Certification enjoyed 26 benefits related to the facilitation, operation and correction of their trade operations, in addition to the general benefit of having a VAT and IEPS tax credit for their temporary imports. The Resolution eliminates most of those benefits for VAT Certification companies. As mentioned below, most of the VAT Certification benefits that were eliminated now apply only to companies with AEO registration.
Among the benefits eliminated for VAT Certification companies are the following:
- No immediate suspension from Importers’ Registry;
- Not required to transmit and deliver to the customs broker the value manifest for temporary imports that they document;
- Period of stay for temporary imports of raw materials, parts and components is reduced from 36 to 18 months;
- Period of stay for virtual temporary imports of raw materials, parts and components is reduced from 36 to 6 months;
- Reduced terms for reimbursement of favorable VAT balances;
- Immediate registration in Importers’ Registry’s Specific Sectors;
- No need for companies in the electrical and electronics sector to indicate individual merchandise identification data in customs documentation; and
- Tax and customs self-correction scheme by prior notice through tax single window.
Under a transitional provision, companies with current VAT Certifications continue to enjoy these benefits until the registration expiration date. The benefits will be lost when the VAT Certification is renewed.
The obligation to transmit and deliver the value manifest to the customs broker becomes effective thirty business days from the date of publication of the Resolution.
B) Sections A, AA, and AAA
With the elimination of benefits discussed in the previous section, the distinction of benefits that existed between the different modalities of the VAT Certification is also eliminated. Therefore, the three sections (A, AA and AAA) now contemplate the same benefits. However, applicable requirements are maintained for each section depending on the applicable term of the VAT Certification (1, 2 and 3 years).
C) Specific requirement – export threshold
The Resolution requires temporary imports under the IMMEX Program have been carried out during the last twelve months, making a clear distinction between IMMEX manufacturing programs and service programs. In both cases, it is mandatory to demonstrate returning abroad 60% of the value of temporary imports in said period.
D) Bases for investigation and information requests
National input suppliers’ non-compliance with tax obligations is included as a basis for the Customs Authorities to investigate or require information from companies that have VAT Certification. With this change, the burden of constantly monitoring these suppliers falls on the VAT Certified companies.
E) VAT Certification applications pending at time of Resolution
A transitional provision specifies that VAT Certification applications under any modality, which are in process at the entry into force of the Resolution, will be resolved by applying the procedures, deadlines, and benefits in force at the time of issuance of the corresponding VAT Certification resolution.
IV. AEO modality
With the elimination of benefits for companies with VAT Certification, the following benefits now apply to companies with AEO registration:
- Period of legal stay in Mexico of temporary imports of 36 months, including virtual operations;
- No obligation to transmit or provide the customs broker with the value manifest for temporary imports; and
- No immediate suspension from the Importers’ Registry, having to follow a special procedure to grant prior right to respond.
V. Payment of renewal fees for any modality
To request the renewal of the VAT Certification, the payment of governmental fees referred to in article 40, paragraph m) of the Federal Law of Governmental Fees must have been made, in accordance with the updated amount established by Annex 19 of the current Miscellaneous Tax Resolution.
VI. Extension of term to response to information requests
For purposes of requirements issued under the Comprehensive Business Certification Scheme, that a company provide information, documentation, or proof of compliance with any obligation, a one-time extension of the original term may be requested, for up to ten additional business days.
In view of the aforementioned changes, and taking into account that many companies with VAT Certification registration (section AAA) will have to renew their registrations in January 2021, it is important to start taking the steps to obtain the AEO registration in order to continue with important benefits of facilitation, operation and correction of foreign trade operations, such as the immediate non-suspension of the list of importers by the Tax Administration Services.
Likewise, as a result of the temporary change to temporary imports under the VAT Certification registry, it is important to review the status of inventory control systems for temporary effects and VAT credit control (commonly known as Annexes 24 and 31).