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Mexico’s New NAFTA Audit Procedures Leave Exporters Confused

Wednesday, June 12, 2013
Sandler, Travis & Rosenberg Trade Report

Mexico’s Servicio de Administracion Tributaria has recently announced what are supposed to be more streamlined procedures for conducting audits to verify claims of preferential treatment under NAFTA. However, the nature and extent of the changes remain subject to the individual reviewer’s discretion, leaving U.S. exporters and their Mexican customers confused about applicable requirements. Sandler, Travis & Rosenberg and Sandler & Travis Trade Advisory Services are hosting a webinar June 19 to provide an update on this situation.

U.S. Under Secretary of Commerce for International Trade Francisco Sanchez, who traveled to Mexico City May 29 for a workshop with SAT officials on this issue, said the revised audit procedures were developed in response to complaints that the previous procedures were “costly and overly burdensome.” The procedures have had a particularly significant impact on the textile and apparel sector because it was deemed a high-risk area for increased NAFTA scrutiny and because the associated rules of origin require review backward through multiple levels of processing, which usually occurs at different companies.

However, the new revisions to those procedures may not be as extensive as some had hoped. SAT officials say 71% of the more than 1,000 NAFTA verifications the agency has conducted over the past three years had a negative outcome; as a result, SAT intends to continue heavy auditing of the entire NAFTA pool. 

In addition, SAT has recently reorganized and it appears there has been poor communication about which companies have previously been audited and whether the results were positive or negative. While there has been some talk of SAT improving its audit planning, there has been no public announcement to that effect, nor has there been any indication that SAT will utilize risk management to select companies for verification audits.

There are also a number of inconsistencies regarding related policies. SAT has said publicly that Mexican importers may submit NAFTA documentation instead of exporters, but that policy is contained in an internal memo that has not been made public nor, apparently, distributed to all the agency’s regional offices. SAT has also said it will accept samples to conduct NAFTA verifications, but verification notices still ask for 100% documentation for the specified time period and importers have to specifically negotiate with the agency whether those documents can be submitted electronically. In addition, no formal sampling method has been prescribed, so importers continue to have to reach out to SAT to propose a sampling method. 

A joint ST&R/STTAS webinar June 19 will help dispel some of the confusion surrounding SAT’s audit procedures. After reviewing the current situation, presenters will discuss topics such as strategies to successfully manage the audit process and best practices for documents to verify NAFTA claims. Click here to register to participate in this webinar.

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