By and  on June 20, 1994

WASHINGTON -- Does Mexico's $50-per-day, per-person limit on the value of goods individual Mexicans can carry duty-free across the U.S. border run counter to the spirit of free trade?

That's what U.S. retailers along the border are grousing about and what U.S. Customs officials have begun exploring with their Mexican counterparts.

Bob Mall, U.S. Customs' deputy assistant commissioner for international affairs, said the limit was discussed last month at a meeting in San Francisco of North American Customs officials.

So far the talks on the limit have been informal, and the U.S. hasn't asked Mexico to change the restriction, Mall said. The $50 limit went into effect in November 1992. Before that, it was $300, and according to those familiar with the situation, rarely enforced.

Mexican Customs officials here did not return calls on the matter, but Mall said they have defended the $50 daily limit as being more lenient than the $400 monthly cap the U.S. places on goods American citizens can bring into the country duty-free, Mall said.

"What they have explained to us is that a family can go shopping and still be able to buy a lot," Mall said.

For years, U.S. retailers like Wal-Mart, Kmart, J.C. Penney and Dillard's have realized the potential of Mexican sales, strategically placing their stores at border crossings. Although the total impact of the $50 limit has never been tallied, business spokesmen report retailers have seen sales plummet.

In Nogales, Ariz., alone, the Chamber of Commerce estimates merchants lost $16 million in sales last year due to the $50 ceiling.

"To me [the $50 ceiling is] grossly unfair," said Fred Johnson, executive director of the chamber, who called the limit flying "absolutely in the face" of the North American Free Trade Agreement. "It's an effort to retrain the Mexican to shop in Mexico, and it is choking the border communities...It has the potential of destroying some very fine border retailers."

Almost all the apparel stores in Nogales's Grand Court Plaza, a low-end strip center "a rock's toss from the border," have closed since the law went into effect, said Louie Doyle, a realtor with R/Max Associates, which operates the center. "Everybody's wondering what's going to happen [with the space]," he said. "We're trying to get some other people, but it doesn't look like it's panning out."Similar complaints are heard elsewhere along the border, with some smaller towns losing up to 50 percent of their sales, said Ernesto Grijalva, a trade lawyer and chairman of the Greater San Diego Chamber of Commerce International Trade Coalition.

"There certainly was a negative impact," said Charles Siegal, chairman, president and chief executive officer of 50-Off Stores Inc., San Antonio, with 10 of its 114 discount apparel stores serving a predominantly Mexican clientele.

Retailers also complain that the duty rates on goods taken into Mexico over the $50 limit, which range up to 20 percent, are generally higher than the 10 percent duty rate of the U.S.

Many products could be entered duty-free under NAFTA, but individuals attempting to do so would have to provide country of origin documents and other paperwork required of large importers.

While many retailers hope Mexico will adopt a limit comparable to that of the U.S., others are setting their sights higher. The International Mass Retail Association is pressing to get rid of limits altogether, in the spirit of free trade under which NAFTA was negotiated, said Robin Lanier, IMRA vice president, international trade and the environment.

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