The North American Free Trade Agreement supplanted Mexico's Automotive Decrees on light and heavy vehicles, providing for the staged elimination of Mexican tariffs, local content requirements, market access restrictions, import trade balancing requirements, and market share restrictions. With only the two exceptions noted below, all barriers have been eliminated on imports from the U.S. that meet the NAFTA rule of origin.
• Mexican import duties on cars and trucks produced in the United States or Canada that meet the NAFTA rule of origin were reduced to zero on January 1, 2003, one year ahead of schedule.
• Mexico maintains a 30 percent tariff for new vehicles, and 50 percent tariff for used vehicles on U.S. and Canadian vehicles not meeting the NAFTA rule of origin and on vehicles from all other countries that don’t have a free trade agreement with Mexico. Mexico has also signed 12 Free Trade Agreements covering trade with 44 countries, including such major markets as the United States, Canada, Japan and the EU member states See a complete list of Mexico’s free trade partners at: http://www.economia.gob.mx/swb/en/economia/p_Tratados_Acuerdos
• The Mexican Value Added Tax (VAT) is 11 percent for vehicles that are registered in the Northern border region (within 60 miles of the border). The VAT for the remainder of the country is 16 percent. The VAT is assessed on the sum of the Customs value of the vehicle, plus import duty and the Customs processing fee of 0.8 percent of the Customs value.
Rule of Origin:
• The NAFTA rule of origin is a regional content measurement that establishes the minimum criteria that products must meet in order to qualify for preferential tariff treatment between the U.S., Canada, and Mexico.
• As of January 1, 2002, at least 62.5 percent of a passenger car or light truck's net cost must be of value originating in North America. All other vehicles must reach 60 percent North American content to qualify for zero duty rates.
• There is an additional, special category for vehicle manufacturers setting up a new plant, or significantly retooling an existing plant, to produce a class or size of vehicle not previously produced at that plant. This provision allows for 50 percent regional content to meet rule of origin requirements, for a period of either two or five years (two years for production of a new type of vehicle at an existing plant, five years for a new type of vehicle in a new plant), beginning on the date the first prototype vehicle is produced in the (qualifying) plant.