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A prime objective of the government of Mexico is to promote its interests abroad. Efforts to revitalize its economy and open up to international competition have resulted in scores of free trade agreements — more so than any other country. In addition, Mexico seeks to improve its cross border processes by revamping outdated customs processes and procedures. Currently, Mexican customs officials are working to pilot a new customs regime that seeks to attract more foreign investment by improving importers' supply chain speed and mitigating the delays frequently associated with time-intensive processes and procedures at the port of entry.

RFE — A New Customs Regime

A customs regime is a country's specific set of trade regulations, processes and practices that regulate the actions of importers and exporters. This new customs regime is known as Regimen de Recinto Fiscalizado Estratégico (RFE), or loosely translated as a Strategic Bonded Warehouse. It is similar to a Foreign Trade Zone within a geographical area, where tariffs and quotas are eliminated and bureaucratic requirements are minimized in an effort to attract foreign investment.

The benefit of the new customs regime is to allow goods to be imported into Mexico and remain for up to two years on a tax-free and duty-free basis. It is expected to mimic the current automotive fiscal deposit regime (Deposito Fiscal para la Industria Automotriz) and expand to include more industries and to be more competitive than the current IMMEX (previously Maquila & Pitex) regime. The government believes that RFE will decrease logistics cost in terms of dollars per container and numbers of days in transit which in turn will help attract additional production to Mexico.

As a growing export center in central Mexico, the state of San Luis Potosi will pilot the new RFE customs regime. The Mexican government has partnered with local businesses to develop and test the new regime, including two large automotive parts makers, a robotics and electronics manufacturing company, a warehousing facility administrator and J.P. Morgan's Global Trade Services unit. Preparations began in November 2007 with the pilot program going live in July. The program is expected to open for additional manufacturers in early 2009.

Key elements of the new customs regime include:

• Allows goods to remain in a Mexican warehouse for up to 2 years on a tax-free and duty-free basis

• Elimination of customs inspection at the port of entry, resulting in cost reductions and reduced time-to-market.

• No secondary customs inspections required

• Simplified customs clearance process results in reduced customs brokers fees

• Importers have a three-day grace period within which to correct import declarations

Mexico Customs estimates that the RFI clearance process will save an importer between US$200 and US$600 per shipment.

Differences between RFE and IMMEX

RFE is similar to the well-known IMMEX program and is expected to be slightly more favorable due to greater flexibility and simplified customs inspections that will speed goods through customs.

RFE IMMEX Goods may undergo manufacture, transformation, repair, handling, storage, distribution, exhibition and sale. Goods may undergo manufacture and transformation; certain services are also permitted. Importer permitted to correct customs declarations within three days. Customs broker will require his physical inspection (previo) prior to submitting a declaration (pedimento). Goods exempt from customs inspection at country's point of entry. Goods are subject to a first and a second customs inspection at country's point of entry. Simplified import declaration required (aviso). Simplified import declaration required (aviso). Reduced services required of customs broker will result in lowered costs. Customs broker fully engaged and liable in the import process, hence higher costs. Goods destined to local market enjoy a duty and tax deferral of up to two years from arrival date in Mexico. Authorized items imported duty and tax deferred destined to a manufacture or transformation process. Lessened manipulation of goods in transit reduces costs, time and risk of damage and or pilferage. Goods subject to three inspections, transfers, loading and unloading resulting in higher fees and delays in transit. Odds of misrouting increase thereby subjecting goods to greater risk of damage and pilferage.