Mexico Issues Decree establishing measures to combat the illicit fuel market, related to the importation of goods regulated by SENER
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On October 23, 2023, the Mexican Executive published in the Federal Official Gazette the "Decree establishing measures to combat the illicit market of fuels, related to the importation of goods regulated by SENER" ("Decree").1
Objective of the Decree
The Decree temporarily restricts the importation of various mineral products and products from the chemical and related industries to combat smuggling and the alteration or adulteration of petroleum products until new measures are implemented for importers to prove the legitimate use of the imported products.2
Highlights of the Decree
- Products for which import is restricted by the Decree
Among the products for which import is being restricted by the Decree are crude oil, certain light oils, aviation gasoline, gasoline with a rating below 87 octane, fuel oil, certain waxes and paraffinic products, among others. It is important to mention that the Decree does not restrict the trade of gasoline (regular and premium) and diesel as finished products that comply with the applicable regulations.3
- Temporariness of the measures
The Decree establishes a temporary restriction on the importation of the goods listed therein, with the purpose of combating the illicit fuel market and smuggling to prevent: (a) imminent harm to health and the environment; (b) harm to the health and safety of the population near fuel handling facilities; and (c) the negative impact on private and public transportation vehicles.
The Decree entered into force the day after its publication on October 24, 2023, and the temporary restriction of the products listed in the Decree will be in force until the authorities implement the measures described below.
- Authorizations to import the goods restricted by the Decree
The Decree establishes that individuals intending to import the goods listed therein must request authorization, for which they must demonstrate to the Undersecretariat of Hydrocarbons of the Ministry of Energy ("SENER") that the volume and destination of the goods they seek to import are necessary for their production process and will serve the purpose of lawful activities that do not contravene the Decree.
It is important to note that some of the products listed also require a prior permit for importation. In such cases, those interested in importing such goods must demonstrate to the Undersecretariat of Hydrocarbons that the volume and destination of the goods to be imported are necessary for their production processes, will serve the purpose of lawful activities, and do not contravene the Decree. In addition, they must comply with the current requirements for obtaining a prior importation permit.
Individuals who already possess a prior permit for the importation of any of the goods listed in the Decree (as applicable) must inform the Undersecretariat of Hydrocarbons at SENER of their intention to continue with the operations covered by their permit within a maximum period of 30 business days from the effective date of the Decree. These operations should correspond to a volume and destination of goods necessary for their production process, with the purpose of serving a lawful activity that does not contravene the Decree.
SENER must resolve the requests submitted within a maximum period of 15 business days from their receipt. For this purpose, SENER has already published on its website: (i) an example of a free-form document outlining the information that those wishing to import the goods listed in the Decree must provide; and (ii) a guide for complying with the notification and the information that the interested parties must include.
- Additional measures to be implemented in the short term
The Decree grants a period of ten business days from its date of entry into force for the Ministries of Economy and Energy to develop the non-tariff regulations necessary to control the imports and traceability of the goods listed in the Decree’s single Annex.
Similarly, the Decree establishes a period of 30 business days from its effective date for the Ministries of Economy, Energy, Environment and Natural Resources, Infrastructure, Communications and Transportation, as well as the Tax Administration Service, the National Customs Agency of Mexico, the Energy Regulatory Commission, the National Agency for Industrial Safety and Environmental Protection in the Hydrocarbons Sector, the Federal Attorney for Environmental Protection, and other federal authorities to make adjustments to records, registries, physical or electronic systems and platforms related to the importation and traceability of the goods subject to this decree, and to perform any necessary adjustments to regulations or take any other actions required for the effective compliance with this instrument. Within the 30-day period, the National Customs Agency of Mexico must determine the specific customs facilities through which customs clearance should be carried out for the importation of the goods specified in the Single Annex of the Decree.
Observations on the Decree
While the Decree aims to regulate the importation of certain products to combat the illegal market of adulterated petroleum products and the environmental consequences they generate, it may also harm various legitimate participants in the hydrocarbon industry or in companies that, despite not being related to that sector, depend on the importation of the products included in the Single Annex of the Decree. This is because it imposes additional obligations, the compliance with which is subject to the discretion of the authorities.
The Decree does not establish consequences in case the authorities do not carry out the instructed activities within the specified time frames, potentially extending the temporary restriction indefinitely.
It will be important to monitor the non-tariff regulations that both the Ministry of Economy and SENER implement to understand the traceability of the goods subject to the Decree, as well as the increased verification and inspection by the authorities. Similarly, it will be important to analyze the determination made by the National Customs Agency of Mexico regarding the specific customs facilities through which customs clearance should be conducted for the importation of the goods mentioned in the Decree, as well as the implications that could arise in the supply chains of companies.
Finally, the Decree could be challenged through an indirect amparo trial within the following 30 business days of its entry into force. The viability of this means of defense must be analyzed in accordance with the specific activities of the company to support its interest and legitimacy. From a preliminary review of the Decree, we believe that there are reasonable grounds to suggest that it presents constitutional flaws such as possible violations of fundamental rights to freedom of trade, economic competition and legal security in terms of proportionality, administrative reasonableness and legitimate trust.
1 Available in: https://dof.gob.mx/nota_detalle.php?codigo=5706285&fecha=23/10/2023#gsc.tab=0 (in Spanish).
2 See Recitals and First Article of the Decree.
3 The goods covered by the Decree are classified in Chapters 27, "Mineral fuels, mineral oils and products of their distillation; bituminous materials; Mineral Waxes," Chapter 29, "Organic Chemicals" and Chapter 38, "Miscellaneous Products of the Chemical Industries" of the General Import and Export Taxes Act tariff.
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