RETAILERS GO BALLISTIC OVER MEXICO TARIFFS

Byline: Jim Ostroff, with contributions from Anna Fusoni, Mexico City

WASHINGTON — U.S. retailers doing business in Mexico — already bearing the uncertainties of the continuing economic crisis there — have been handed another headache.
Retail and importer officials expressed outrage Wednesday at a move by Mexican President Ernesto Zedillo to immediately impose quotas and higher tariffs on various textile, apparel, footwear and leather goods imported there from most of the world.
While goods made within Mexico’s free trade partners are not covered by the Zedillo decree, U.S. analysts said it would particularly harm U.S. retailers with stores in Mexico, who effectively will not be able to ship to those stores a large amount of their inventory made in the Far East or Europe.
Robert Hall, a National Retail Federation vice president, said the tariffs being imposed “would translate into prohibitive prices for consumers there.” Retailers, he added, see the action as a move to block U.S. competition in Mexico.
Mexican retailers, however, weren’t any happier.
“As usual, it’s all very confusing,” said Felipe Sanchez Navarro, purchasing manager for El Palacio de Hierro, one of Mexico’s fashion majors. “We still don’t know how much our fashion suppliers, like Anne Klein and Vittadini, will be affected. It is all very much up in the air and it will take the next couple of weeks to sort things out.”
The Zedillo initiative, announced Tuesday in Mexico City before its National Chamber of Industry, stipulated that effective Wednesday, Mexico’s apparel, textile, footwear and leather import duties of 20 percent on average, would rise to their so-called bound rate of 50 percent or more. As a GATT signatory and World Trade Organization member, Mexico, as all nations, agreed to set or bind, most of its product tariffs at a specific level, which means the duties can not exceed this level. Mexico, as most nations, set its effective import duties much lower.
Import of goods sourced within Mexico’s free trade partners, which include the U.S., Canada, Chile, Costa Rica, Colombia, Venezuela and Bolivia, are not affected by Zedillo’s decree. Trade analysts here said the measure likely was taken to reduce that nation’s foreign trade deficit and improve its dire economic situation. Mexico’s president also said temporary import quotas will be imposed for textiles, apparel, footwear and leather imported from non-free-trade-agreement nations.
According to Mexican government figures, its free-trade partners supply only about one third of its apparel and accessories imports.
Officials with the U.S. Trade Representative reported Wednesday night that Mexican Customs officials apparently had not implemented the new trade restrictions, but expected this would begin today.
The USTR officials were said to have protested Mexico’s unilateral action to its government.
“These actions effectively bar many imports to the Mexican market, since the additional duties likely would make it prohibitively expensive to import textiles apparel, footwear or leather goods from any of Mexico’s non-free-trade partners,” said Brenda Jacobs, an attorney with Powell, Frazer, Goldstein & Murphy, and Washington trade counsel to the U.S. Association of Importers of Textiles and Apparel.
Jacobs said a review of Mexico’s import tariff schedule at USTR indicates that while its bound rates for most of these goods is 50 percent, there are significant exceptions. Mexico never bound its duties for knit apparel, leather products and bed linens, and only bound some footwear and woven apparel duties. Where there are no bound rates, a nation can set duties at any level and in the past, some countries have set these at above 100 percent.
Jacobs, who had worked as an attorney with the Commerce Department’s Office of Textiles and Apparel, said it is not clear whether Zedillo’s unilateral actions violates WTO rules governing the textile trade and other trade.
The NRF’s Hall, meanwhile, asserted “the U.S. retail industry sees this as an anti-Mexican-consumer move and one designed to block U.S.-based retail companies from competing in Mexico… Retailers there cannot afford to pass on the increase costs because of the economic situation there. This effectively will dry up the supply of goods to Mexico’s consumers, since the only supplies will be those sourced locally.”
Hall said the initiative, coupled with Mexico’s decision last fall that all imported goods had to bear original certificates of origin, deal a double blow to U.S. retailers. He explained U.S. retailers have found it is too expensive to comply with Mexico’s rules for goods imported first into the U.S. and then shipped south of the Rio Grande.
Instead, he said, some U.S. retailers operating in Mexico are importing goods directly from some Far Eastern nations, while continuing to seek an accommodation with Mexico that would allow for reimporting and certification in that country.

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