Issue #
April 2007

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Recent Customs Law Case Decision

April 23, 2007

The Supreme Court of Justice of Mexico recently held that customs duty classifications contained in the Law of General Taxes on Importation and Exportation, which establish the payment of fixed duties on the importation and exportation of products which use as a reference the units of products, and not the value of the goods imported, are unconstitutional. Such ruling was issued based on the fact that the invalid provisions do not link the duty imposed to the taxable base of the goods and do not take into account the contributing capacity of the importer or exporter, which violates the principal of tax proportionality contained in Article 31, Section IV of the Political Constitution of the United Mexican States. This ruling introduces the possibility of protesting those customs classification sections that establish payment of fixed duties based on the units of the article being imported, which do not pertain to the contributing capacity of the taxpayer.

New Third-Party Outsourcing Structure under IMMEX Program

April 23, 2007

The Decree for the Development of the Manufacturing, Maquiladora and Export Services Industry (IMMEX Decree)includes the new concept of “Third-Party Outsourcing” (Terciarización) also commonly known simply as “outsourcing”. Inaccordance with the IMMEX Decree, third-party outsourcing exists when a certified company does not have the facilities to carry out a certain production process and uses a third-party to perform such process under the third-party’s IMMEXProgram. Companies hired to perform third-party outsourcing services shall be fully liable to the IMMEX company, and arerequired to sign a letter accepting liability for all merchandise temporarily imported into Mexico. The IMMEX Decree statesthat it will not be necessary to carry out “virtual” operations between a certified company and the third-party outsourcingfirm in order to transfer inventory or sub-assembly components to said companies. Parties in this situation are required toobtain authorization for third-party outsourcing from the Central Administration of Customs Operations of the GeneralCustoms Administration Division of the Mexican Taxpayer Administration Service. This certification requires applicants topresent, among other items, a diagram describing the production process to be carried out by the third-party outsourcingcompany.

Financial Transactions of Multiple Purpose Financial Entities

April 23, 2007

In conformity with the General Law of Credit Institutions and Auxiliary Activities (Ley General de Organizaciones yActividades Auxiliares de Crédito), Multiple Purpose Financial Entities (“SOFOMES”) are those business associationswhose bylaws expressly provide that the principal corporate purpose of the company is the frequent and professionalengagement in one or more of the following activities: providing loans; financial leasing; or financial factoring, activitieswhich, in conformity with the law, may be carried out frequently and professionally by any party without the necessity ofobtaining authorization from the federal government for same. SOFOMES may be of two types, a regulated SOFOM and anunregulated SOFOM, the first being one that by law forms part of a regulated financial group which must attach to theirnames the words “Multiple Purpose Financial Entity” or its acronym SOFOM and “Regulated Entity” or its abbreviation ER,and the second being those companies that must follow their names with “Multiple Purpose Financial Entity” or its acronymSOFOM, as well as “Unregulated Entity” or its abbreviation “ENR”. Multiple purpose financial entities that are regulatedare subject to various provisions of the Mexican Law of Lending Institutions (Ley de Instituciones de Credito), as well as theLaw of the National Banking and Securities Commission (Ley de la Comisión Nacional Bancaria y de Valores). It is worthnoting that, according to the terms of the Law of Protection and Defense of Financial Services Consumers (Ley de Proteccióny Defensa al Usuario de Servicios Financieros), the protection and defense of the rights and interests of general publicfinancial services consumers is the responsibility of the National Commission for the Protection and Defense of FinancialServices Consumers (“CONDUSEF”).