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     For three years maquiladora operations have been challenged by NAFTA Article 303.  Readers will recall that, effective January 1, 2001 , NAFTA Article 303 restricted duty deferral and drawback on materials imported into Mexico and subsequently exported to the United States and Canada .  This article reviews the effect of the NAFTA Article 303 restrictions on duty deferral and drawback, and the development of the Mexican Sectoral Promotion Programs designed to reduce the negative impact of the restrictions and now subject to regular amendments.

NAFTA duty deferral restrictions revisited

      Even though maquiladora operations are now permitted to sell a portion of their production into the domestic Mexican market, the traditional purpose of the Maquiladora Program is to encourage the assembly or manufacture of finished goods for export.  For most, the Maquiladora Program operated as a temporary importation program under which duties and value added taxes were waived on materials imported into Mexico for incorporation into finished products for export.  Indeed, the temporary import benefits of the Maquiladora Program were the perfect example of the type of duty deferral program restricted by Article 303 of NAFTA.

            Now, if materials are imported into Mexico for use in the manufacture of finished products exported to the United States , Mexico may only waive the duties on the imported materials to the extent of duties paid to the United States upon importation of the finished product.  If the Mexican manufacturing produces a NAFTA originating good, then it is most likely to be free of U.S. duty, thus requiring full payment of the Mexican duty on the imported materials.  It is worth noting that the NAFTA Article 303 restrictions do not apply to certain products, such as goods exported in the “same condition” in which they were imported, and NAFTA originating goods.  Moreover, Mexico ’s Maquiladora Decree does not apply the restrictions to textile and apparel products that qualify for certain NAFTA benefits upon importation into the United States despite not...

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