Executives at Nuvocargo believe Mexico’s passage and ongoing implementation of the “Miscellaneous Tax Resolution,” which imposes new requirements on carriers, intermediaries and shippers moving cargo within and in and out of Mexico by ground, maritime, air and rail transportation, will go a long way toward battling counterfeits.
“The Mexican government’s main desire is to reduce contraband and smuggling, in addition to taxing cargo properly,” said Deepak Chhugani, founder and CEO at Nuvocargo, a digital logistics platform for cross-border trade between the U.S. and Mexico that offers freight forwarding, customs brokerage, cargo insurance and trade financing. “Enforcement is likely to slow transport considerably on the Mexico side of the border and reduce shipping capacity, already strained, even further.”
However, Carlos M. Sesma Jr., partner at law firm Sesma, Sesma & McNeese, who works with Nuvocargo, told Sourcing Journal that the stricter regulations are “in line with other countries efforts, such as the U.S. and even Brazil.”
“It is certainly additional requirements and so, it does establish an additional layer of compliance for all of the players in the industry,” he said. “Challenges around these regulations are varied and are mostly related to control, third-party information management, data privacy, correct risk allocation and management through contracts, implementation of new and novel technology, increment of administrative operations, and actually ensuring that the flow of operations continues with all these additional requirements. For businesses to continue operating, they will have to prepare and make sure their partners are ready as well.”
Anaid Chacón, head of product at Nuvocargo, believes the implementation will help with “bringing more regularity of things that are transporting into and just in Mexico.”
“Obviously, it’s going to have a ripple effect on border crossings,” she said, adding that eventually,” there are other things that will be affected, as well.”
“I would say that the primary objective of this regulation is more to really have trucks moving what they’re supposed to be moving and not having additional items that are not disclosed, and really creating more transparency in the whole process for both vendors…and for shippers to be able to work with vendors that can certify that…they’re not going to be putting at risk the delivery of their cargo because they’re adding other things into the vehicles,” Chacón said.
Sesma noted that the law is being implemented in stages and authorities are expected to begin trial enforcement without liability in December, with true enforcement beginning Jan. 1.
Rule 220.127.116.11. of the Miscellaneous Tax Resolution for the year 2021 imposes new record-keeping requirements–paperwork that must accompany each shipment that verifies its origin and ownership. Without compliance, parties may be subjected to penalties, inability to operate, or even felony charges. Mexican authorities will conduct random inspections of this paperwork at existing transportation checkpoints.
Nuvocargo’s Chhugani says that the company will be updating its software to help clients get ahead of the new regulations. He also advises shippers, carriers and intermediaries operating in Mexico, as well as U.S. companies importing from Mexico, that speed and communication will be key. Companies should leverage technology to make sure the information exchange between all parties involved in a shipment happens swiftly and without generating additional delays. Financial departments will have to be quickly trained to prepare the required documents and ensure compliance, and they should consult an attorney to manage any risks and consequences related to compliance and document errors.
“We already have features that have helped to shave about 60 percent of the time out of collecting documents as we onboard new shippers to work with us,” Chacón said. “The same thing with carriers. Now, we’re going to be taking those learnings to think about what is the best way to obtain documentation and information that shippers need to hand off to carriers, so at the moment that the pickup happens, we have all the documentation and the certification that we need so that cargo can move in compliance with those rules.”
She expects an adjustment period, and teams that have operations in Mexico, have cargo that touches the border, or providers or suppliers in Mexico need to make plans around that.
Josefina Blanco, legal and compliance lead at Nuvocargo, said the regulations are certainly going to affect the apparel, textile and footwear industries, since they are “very much affected by counterfeit products.”
“The positive impact is that in every industry…this regulation is enforced against counterfeit or illegal products being transported,” Blanco said. “A big part of this will be enforcement with the Federal Police.”
Chacón added that “simply creating more transparency and also [a] better paper trail even for us as intermediaries in this process” is a win as well.