The Mexican government has begun using reference prices to prevent the undervaluation of imported goods. This policy currently applies to textile, apparel and footwear items but within the next few months could also be extended to products such as toys, electronics, bicycles and steel. Shipments of affected goods not accompanied by documentation sufficient to confirm the correct value could be seized and/or subject to penalties . Although this mechanism was created in December 2011 after the elimination of transitional duties, the number of associated seizures has increased recently.
Mexico’s Tax Administration Service (SAT) determined that in 2011 68% of textile, apparel and footwear items imported from China, Hong Kong, Taiwan and other countries were entered at prices lower than the cost of raw materials used in their production. To discourage this practice, SAT has implemented a program called “Precios de Referencia” (reference prices) with respect to 413 tariff lines for textile items and 59 tariff lines for footwear . These reference prices are determined on a computed value basis but will not be published in the Diario Oficial ( Official Gazette ) and importers will not have access to them.
SAT officials have emphasized in several forums in Mexico that the reference prices are only used to analyze the risk of importers using lower values and are not used in deciding whether to reject or accept the value declared in entry summaries ( pedimentos ). However, if the merchandise is imported at a price lower than the reference price, Mexican Customs will require the importer to have a guarantee of import duties based on the reference price.
When an importer becomes aware that the price agreed with its supplier is low it must obtain the proper documents to support that price and notify the customs broker of this situation. The broker will then include in the pedimento the code “PV” ( prueba de valor ) indicating that it has the documentation to prove the transaction value and clear the shipment through customs. In this context Mexican Customs may require the commercial invoice as well as the following documents.
• customs value declaration
• title of credit related to payment
• proof of payment/transfer of funds
• lease agreement
• insurance payment
• export declaration
In light of this new practice and the fact that the reference prices will remain unpublished, foreign suppliers of affected goods are advised to provide Mexican importers proper documentation to demonstrate the accuracy of the value declared during the import transactions. Otherwise, the merchandise could be seized and penalties could apply. Moreover, when goods are seized the importer’s import license is temporarily suspended, preventing the importer from conducting import operations for up to four months.
Source: STTAS de Mexico | Evelyn Almaraz – Manager, Consulting Practice