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WASHINGTON — Exporting to Mexico could soon become easier and less costly.
This story first appeared in the June 18, 2013 issue of WWD. Subscribe Today.
Francisco Sanchez, undersecretary of international trade at the U.S. Commerce Department, who recently joined 20 U.S. textile companies and Mexican government officials for a workshop in Mexico City, now feels new Mexican product verification audit procedures will begin lessening the burden and costs for textile producers exporting their goods to Mexico.
The country’s tax and Customs authorities have begun implementing the streamlined import procedures — a process that has been plaguing U.S. textile producers for a year and a half.
“We are very pleased with the progress that we’ve made on this issue,” said Sanchez. “While we applaud the Mexican government for wanting to make sure there aren’t transshipments of goods that might be going in under a U.S. label, for example, it needed to be done in a way that isn’t overly burdensome on our industry. I think overly burdensome is a major understatement in some cases here, particularly for small and medium-size companies that really find it very difficult, if not impossible, to comply.”
In many cases, Mexican authorities were asking companies to provide two years’ worth of export data within 30 days as part of the audits, forcing companies to collect and turn over thousands of export documents for review. Sanchez said his office has been contacted by more than two dozen U.S. textile firms caught up in costly audits over the past 18 months.
“Under the previous approach, [Mexican authorities] were asking for documentation on literally every transaction that took place,” Sanchez said. “So if you are a small company and over a period of three years you’ve done 5,000 transactions, to try to pull that documentation together and to do it in 30 days is next to impossible.”
Mexico is the second-largest market for U.S. exports, with trade between both countries reaching nearly $500 billion in 2012, according to Commerce. The textile and apparel sector accounted for about $10 billion of the total bilateral trade last year.
Kim Glas, deputy assistant secretary for textiles and apparel at Commerce, said about 90 percent of companies, based on volume, have been targeted by Mexican authorities over the past two years.
Sanchez accompanied 20 U.S. companies, including officials from Milliken & Co., Parkdale Mills, Intertek Commodities, Levi Strauss de Mexico, Mount Vernon Mills, VF Jeanswear and Hanesbrands Inc., to Mexico City at the end of May.
The new Mexican procedures will incorporate a sampling method aimed at reducing the amount of paperwork, cost and time for U.S. companies trying to comply with the rules, Sanchez said.
“I think there are three big things that will come out this,” he said. “One is that when you are audited it is not so onerous that it is almost impossible to comply. That hopefully will go away. Number two: If you are found to be a company in good standing and compliance, you should not be subject to continuous audits or one audit after another. There should be a grace period before you get subject to another audit. Three: I hope we have moved the ball forward in trying to resolve the cases that still exist.”
Glas said there are currently eight open cases.
Unifi Inc. was one company targeted in late 2011. The firm had to provide two years’ worth of export data from 2007 to 2008 to Mexican authorities within 30 days, covering more than 2,000 shipments, according to Jane Johnson, manager of governmental relations. Unifi was ultimately required to gather 10,000 documents at a cost of $20,000 and another $25,000 in legal fees to a lawyer in Mexico, Johnson said.
“Even at Unifi, which has a highly automated system, it still took us hundreds of man hours to pull information out of the system in the form the Mexican authorities wanted it,” said Bill Jasper, president and chief executive officer of Unifi Inc. and chairman of the National Council of Textile Organizations, who did not attend the meeting but has since been briefed. “We are probably more computerized and automated than smaller textile companies that have to comply. We had a list of issues down there that were raised. The fact that we had high-level people from Commerce, particularly Undersecretary Sanchez, had more of an impact on Mexican authorities, and I think they at least appeared to have heard what we had to say and they seem like they will try to improve the process.”
Sanchez said his office will continue to work closely with Mexican authorities and is planning to hold another joint workshop in Washington next month.
“This is not a victory lap,” Sanchez said. “This is part of an ongoing effort to make sure this gets resolved over the long term.”