Trade Deals, Green Policies, and the Rise of Trade Strategists

Machine Operated Script:

00:01

Anna, Hi everyone. Welcome to the simply trade news roundup with your host, Annick. And that is me. I’m so lucky to be here. I just was recovering from a little bit of sickness, so my voice still sounds a little raspy. I don’t actually hate it, but here we are. So please excuse that. Secondly, I want to announce that we have a de minimis. So the minimus is gone. We all know that, right? And what can we do? What can e commerce businesses do? How do we strategize? We have Cindy Allen for that, and that is on October 3, for $35 I mean, seriously, it’s such a steal. And it’s, if you don’t want to forget. It’s also on Taylor Swift’s release date off her new album, the life of a show girl, which you guys know I’m like, hysteric about

00:50

hysterical. How do you say that? Yeah, that’s the right word. I think. Cannot wait. So excited you. I mean, you’re gonna know when I talk about it this on Friday, next Friday, because

01:03

you guys know how much I love being a Swiftie. Anyways, our lovely President Trump also announced some few things just yesterday. I think that was September 25 he came back with with some key points that might go into effect October 1. We’re not sure yet, because it’s a little bit of time. It’s six days in advance. That is 100%

01:25

tariff on imported branded pharmaceuticals. 25% tariff on imported heavy duty trucks. Wow. 50, 50% tariff on kitchen cabinets, bathroom vanities and related products, and a 30% tariff on upholstered upholstered furniture. Yeah, that is, I mean, I don’t even know what to say. We’ll see if that comes into effect. Good luck to all the people that have to work on that right now and figuring out how they’re gonna strategize their supply chains. So with that being said, this is not a US based, I mean, it is US based podcast, but we’re not talking about the US per se. Today we’re going to kind of travel to Mexico. Oh, I would love to be at the beach right now. Anyways, today’s episode features Manuel Moniz, an expert in global trade and Mexican customs, and we’re going to discuss President Claudia shine bombs, ambitious 2025 proposals to reform Mexico’s customs law

02:26

and the general import and export tariffs law, which they call li G we’re going to get into that these measures were introduced as part of the 2026 economic package promised to reshape Mexico’s approach to trade tariffs and Customs Enforcement. It seems like they’re approaching the US in a closer light. We’ve seen a lot of back and forth from the US nowadays, and US and Mexico. And it seems like they’re taking a step towards the US, having a better relationship, kind of, you know, strengthening their their, tight, their How do you say that their ties? Yes, there we go. Anywho with that being said, Manuel, I’m so happy that you’re here, because you’re an expert in all of this, and you can share with us what’s going on, how this will change. So thank you for being here. Sorry for my long intro. No, that’s great. It was good. It was good and fun listening to your intro. Thank you for having me, and it’s always great to connect with, with with a foreign country trying to explain what’s going on and what’s happening outside of US borders, right? Yeah. Can we first get into why? Claudia Shane bomb, I always want to say shine bone, because it’s like the German way

03:41

is making this approach, um, these changes? Yeah, so, so we so we need, without going way back into history, we need to contextualize why these reform changes are happening and why are they happening now, right? So, basically,

03:59

if we go back in time, not too much, but to the prior Trump administration, where China tariffs started to go into full effect through the 301 section tariffs, those, those persisted throughout Biden’s administration as well. But in that period of time,

04:21

you know, Mexico was doing business with China because of all the near shoring right? So near shoring activity created a lot of inbound investment, foreign direct investment from Asia into Mexico, trying to reach a closer market, which is the US and and on top of that, having a 301, Section tariff, so Asian in foreign direct investment, thought, let’s go closer to that market. Let’s get ourselves invested in Mexico. Let’s produce there and send and send it out to the US.

04:56

Come in the new you know the second term.

05:00

Concern of a Trump administration, the conversation was not like the near shoring conversation kind of drifted into Hey, Mexico. We are having hard data and evidence that we are protecting ourselves, us from China flooding our market through the 301 section tariffs. But we’re finding out that through Mexico, these products are still coming in, and they’re being declared as usmca origin, or China origin, whatever it is, they’re coming in, into the US. So we’re not really, you’re not helping my cause, right? So there was, there was a series of conversations thrown at Mexico government, IEEPA tariffs because of fentanyl.

05:52

This was a back narrative. It was a narrative that was not shown in the media, but it was basically, it was definitely a conversation held between the Secretary of Commerce in the US and with the Ministry of Economy in Mexico. That was a perception, right? So given that perception, at some point,

06:13

the conversation had to be drawn. A lot, a line had to be drawn in the conversation, and the US government kind of put the Mexico government in a position to choose, like, are you with China, or are you with the US? Like, who’s who are you going to benefit? Right? So I think also, again, these are contextual conversations that I’ve picked up from different scenarios and forums and conversations that I’ve had, but ultimately, my point of view and the conclusion of all these pieces put together is Mexico has chosen, basically, Mexico is trying to align with its major commercial partner, who is the US. And that’s what, that’s what this reform package for customs in part, in part, I’m not saying fully, is trying to it’s not the full driver, alignment with the US, but in a big way, it is trying to align with the US. In global trade policy, in tariff policy, in investment opportunity and in specific areas of it. Another component and driver of this tax reform, part of the economical package, or better said, customs reform, is its collection, collection, revenue collection for Mexico government.

07:39

And so those are the two key drivers. One is, let’s get ourselves aligned with our with our long life commercial partner and most important commercial partner that we’ve known. And then also, let’s get ourselves in a position where we can collect revenue and collect it fast, like the the efficiency and speediness with which Mexico government wants to collect revenue is very important in the context of this new customs tax reform. Yeah, yeah. I mean, it seemed everything is you say makes sense, and we, I feel like we’ve seen a few steps happening like this prior to this upcoming reform that she’s proposing. But when, when we look into, I mean, the US has been challenged, challenged with, you know, these terrorists and importers have been struggling, you know, to apply these especially because they’re changing every so often, right? So we’re going back and forth here all the time. But how will the proposed reform increase compliance obligations and expand the liability of customs brokers and importers under these updated customs law right? So that’s a key component of the customs law changes that are being proposed, the one related with Customs brokers and the responsibility of the Customs Brokers up until now, even up until today, because let’s, let’s keep in mind that these are proposed changes that are in Congress. These are not even though Congress has majority of the same party of the presidential and the ongoing administration is still proposed proposed changes, right? So one of the key components of these proposed changes has to do with Customs Brokers responsibilities. Up until today, the responsibility has been to declare whatever the importer is declaring. So I’m a customs broker. I have a series of clients. The clients give me their data points so that I can declare before customs my import documentation, my export documentation, and my responsibility goes as far as declaring what they told me,

09:55

that the value was, that the origin was that the tariff.

10:00

Of classification was, I can help them in determining classification. I can advise them as a broker, and kind of like getting into valuation a little bit, I can tell them what I would do, but ultimately, it’s the importers say that I have to to show and reflect on my declarations as a broker. But now take it even further. It’s not only my responsibility as a broker to declare with truthfulness what the importer is telling me, but it’s to make sure that the declaration or the determination of duties and taxes is correct. That means that I now need to make sure that the origin that they’re telling me is correct, that the value that they’re giving me is the correct one, or that the classification is actually an accurate one. So it goes a little beyond just being truthful about the data and information that the importer is giving me to do my work as broker. It goes beyond. It goes to ensure that the Declaration and the determination of taxes and import duties and all the non tariff restrictions and regulations and everything comes along with it are, in fact, correct and accurate. So it seems to me, it seems to be that the case that the brokers will now have some extended responsibility, not only in being truthful, but in being accountable for that truthfulness, and on that note, so how are the penalties for customs violations increasing? Because I know, I mean, we’ve talked prior to this, and it seems like the penalties are going increasing, correct, yes. So how, what are those penalties going to be, and how much are they increasing, and what are the examples of responsibility that the customs broker has in this, in these responsibilities? Yeah. So there are different types of penalties that are going to be changed or are being proposed to be reformed, not necessarily the ones with the brokers. The brokers have a different type of, let’s say, scrutiny in their in their in their licenses, for example, I’ll give you two examples how, how these changes are impacting brokers licenses, per se, as a business and as a license, and then on the on the penalty side, I’ll give you an example of the penalty increase to importers. Okay, so let’s say brokers licenses, up until today, have been lifetime, like they are for life, and they could be transferred down bloodline to like Sons Daughters, okay,

12:50

but not anymore. These the proposed changes are, the licenses are valid for 10 years, and every other year they will be examined by a special committee, and they will be reviewed and revoked or renewed. So you have a broker license that now will have a term of 10 years with an expiration well, not not an expiration date, let’s say an examination of every other year, two years. So, so that is a big part of the broker is going to be, not only a risk, extended responsibility, but even more, working under more, you know, scrutiny. So they have to up the level of compliance and all of that. So, but on the other side, on the on the, on the penalty side, which are directed to actions or missed actions from the importers. Just to give you one example, how they are increasing the penalties, there are specific actions where if you,

13:56

if you imported something and not declared the proper tariff classification that leads to a penalty associated with avoiding import duty. The penalty associated with that, if it happens to be duty free, it’s a 70 to 100%

14:16

of the commercial value of the goods coming in. That’s the penalty associated with not paying import duties because of incorrect declarations when a duty rate happens to be accept. But now, instead of 70 to 100% of the commercial value, that threshold is raised, and it’s going to be between 203 100 of the commercial value. So the races in penalties and the ups in penalties are significant

14:47

to the ones that we have currently. And that’s just one example of many examples of situations where an importer by Miss declaring by missing a call on.

15:00

A valuation thing, on Origin, on classification, or any other of the data fields that connect directly to the determination of duties and taxes, that’s the type of penalties that they could be facing versus the ones they’re facing now. So it’s significant. Yeah, and then, so we’re kind of talking about the internal side, but which this is still actually internal. But the new tariff regime implies duties of 10% to 50% on 1000 around 1371

15:32

product categories not covered by free trade agreements, mainly targeting imports from China and other non FTA partners, which we’ve obviously discussed that they’re trying to step closer to ties with us, right? But businesses currently Mexican, businesses that are importing from China, how are they going to be affected? Because they’re going to have to change their supply chain. I mean, they have enough time, it seems like, well, actually, it’s not that much time anymore. We’re at the end of the year, right? We’re rounding it up, yeah, what can they do? Do you think that was like kind of a hard hit for them? Or have they been preparing for something like this?

16:09

I think no one was preparing, probably textile and probably steel industry, because we have a decree that came up this year, earlier this year, where they raised, temporarily raised the import duties on specific steel products coming in and then specific textile products coming in. Think of the chapters 60 through 64 a lot of that is taxed right now at 35%

16:36

so a lot of companies, even though there were exemptions to specific companies where they can still import exempt or duty free. Many others cannot, and are already, in fact, paying the 35% import duties. So probably those are the only ones that have kind of like a head start as to, oh, we’re already paying that, and we’re already living the actual tariff shift up. But to your point the other, and I love that you have the specific number 1371 it’s around 1400 tariff codes that are being, uh, that are being changed. No, that’s the exact number you you said it right, yeah, okay, okay, yes, a number that I gathered from that

17:21

you never know. Really, you never know. Yeah, yes, correct. So the the L, I G, i e, basically is late and impostor, general importation, that’s how you translate. You should have told me this earlier. I kept, I keep saying, which I love. I’m like lychees. I love lychees.

17:41

Okay? G, i e, please correct me on that one. You know what? I make my own names for everything. Okay, move on. I’m sorry. That’s great. So that’s basically the import and export tariff law where, and you want to translate it to layman US Customs term. It’s the HTS us and the HTS chapter B. Basically it’s our import and export compile law compiled together. And basically, you look at it, it’s all the tariff classifications associated with, let’s say the column one

18:15

tariff rates. That’s basically what it is. So, so 1371,

18:22

tariff codes are going to have a shift normally our Tariff right now, if you take all the universe of the tariff classifications, we’re at an average of 7% five to 7% tariff. So almost a lot of things are except duty free coming in. This is most favored nation, right? Applies for everyone. So our general law for tariff applies to everyone. So around 1400 of those tariff codes, which is give or take, 17, 18% of the universe of tariffs are going to be proposed, or are being proposed to be, to be to be raised in tariff from anywhere from 1015, to 50% five zero. So if you, if you get all those tariffs together, and kind of come up with an average, you come up with an average of 20 to 25% versus the 7% that we have now universally, right? So if you take only those 1400s the tariff, the average tariff rate is going to go up a lot. And now, what are these? What are these tariff codes like, what? What sectors are we hitting, right? So we have the steel products, we have the we have the textile products, which are already in a decree, that are temporary decree, and now this will become permanent. And believe it or not, there is a lot, if you compare the universe of tariff codes, of these 1400 with the second, with the 301 section tariff codes, there’s partial coverage. So a lot of these.

20:00

Tariffs are ultimately aligned with 301, Section tariffs, plus a, let’s say a protectionist or a promotion. You can see it either way.

20:12

Of domestic industry that is trying to trying to thrive, trying to grow, and they’re complaining that they’re not growing because we have a duty free regime, so we’re kind of raising the tariffs on those to help domestic industry, not, you know,

20:31

cease to exist because of this rates. That’s the claim internally. But then there’s also the alignment with a 301 section. So it’s a combination of both that are raising the rates for anywhere from 10 to 50. And it’s going to be very interesting, because now companies that are importing under these tariff codes

20:52

might have to look hard into duty drawback, into other types of

21:00

solutions that we haven’t been used to in the last 15 years, because everything was let’s let’s go. All the countries should go to duty free. We were trying to reach a point where all countries would be duty free, and commerce would be duty free across the board, across the world. But now we’re going back to we had a policy in the 70s in Mexico that’s called substitution importaciones, import substitutions, where we were raising tariffs to avoid importing milk or jeans or, you know, tennis shoes and stuff like that, that we weren’t producers. So that helped the growth of domestic industry. But you know, domestic industry didn’t grow to a level where you can be competitive in an international market. It just stuck with being domestic and national industry. But now the trend in the last decade was to lower the rates, and now they were all again suffering from global competition, right? You got China producing massive amounts of shoes, flooding the international market, and then being duty free in Mexico. It’s like you got Chinese shoes everywhere. And what’s happening with the domestic shoe industry, which is a whole, you know, a city, complete city, of building shoes. Anyway, this measure should give them breathing room to kind of revamp their production, their their their domestic industry, production in specific sectors. So it’s a combination of that and alignment with the US to also cover 301, Section tariffs. So yeah, I mean, we’re gonna get have to go back to draw duty drawback and old methods of trying to manage, you know, funds for duties. So do you think it’ll make it harder for Mexico, or do you think this is a path to making it easier for businesses? I truly believe that this is the new standard. I truly

23:01

okay question. I know a new standard globally, a new standard that was set by the US. You think probably started jump started by the US, followed by all countries. Because what else can you do?

23:15

You cannot be the only duty free country in the world where everyone is charging average 10% 15% so what, what do we do as a country? Like, what do you do? You start thinking about what’s, what’s going to be your global policy, and what you want to do as a country is to be

23:33

associated with the US, which is the huge market globally, in the lowest brackets of the duty rates. So if you’re a country right now that you’re being taxed or duty impacted average 10% if your duty rate or point of entry into the US market is 10%

23:52

then you’re winning. So and the US basically, what were they doing? What they’re doing is anyone who is in the reciprocal tariff list on the higher brackets, and wants to come to me to create a free trade agreement. I’ll give them benefits, so I’ll put you on the lower brackets. It’s super negotiation. Call it. I don’t want to label it. There’s a lot of labels, depending on your angle and perspective on the whole situation. But if you look at it purely from a negotiation perspective, this is what’s happening. The world is reorganized. The global trade world is basically reorganizing itself and trying to get to a lower bracket of point of entry and duties into the US market. And I think Mexico is very well positioned to do that upcoming the usmca negotiation renegotiation, which is going to be key to to to land on a specific tariff bracket. And I think even now, even with the IPA tariffs, even with.

25:00

The section 232, which are also impacting Mexico, we are still pretty competitive, better than a lot of Asia countries that are in the higher bracket. And mind you, they were already, you know, taking investment away from Mexico into Asia because they had market access into us. So it’s kind of super weird. If you read it could be bad, could be good, depends on where your stand, depends on where you’re looking at it from, depends on your business. It’s definitely not all gray. It’s a lot of gray. I’m sorry, not all white, metal, black, yeah, no. And, and, you know, usmca is being reviewed next year as well. What I guess when the reform also is getting put in place? Yeah, do you think she kind of did this ahead of usmca, because she knows usmca is going to change a lot of things. I mean, we don’t know, right, but we have a feeling that Trump will make some changes that he maybe, or, like, will propose some changes. Do you think that’s why she’s also putting her foot forward and saying, we need to change something now? So we’re in a good position to say, you know, we we have a good alignment with the US, like, let’s keep usmca, as is, it definitely is a minor proof of will to say we’re aligned. So in part, this economic reform, and specifically talking about the customs legislation, is trying to show goodwill so that when we get to renegotiate usmca, the hostility

26:47

of negotiations is not up high, super high, right? So that we can say, hey, we’re in the same boat here. We’re like, we’re like, a region where North America will share 1000s of miles of borders. There are communities that are intertwined in the border, like there’s a lot of history. So we are partners on this. We’re in it together. So let’s renegotiate the usmca,

27:15

and let’s be kind of fair. We know there’s going to be pulling,

27:20

you know, a tug of war, if you will, in specific

27:25

sectors, in specific industries. That’s just expected. But here’s the thing, it is also expected that, as a good result and a new usmca comes forth in 2026

27:41

we will be able to be on the lower, lower, lower bracket of point of entry of duties into the US, meaning, I’m not sure if we’re going to ever be exempt again, like duty free. I know that usmca will grant some duty free. I’m not sure across board, across industries, across products. But if it’s not exempt, it should be at five or 10% which will make Mexico very attractive for foreign direct investment, which is also a another strategy for bringing in investment, creating jobs, developing technology and having us market access. So it’s a huge play. It’s way bigger than just tariff codes, okay? And while it is going to propose a lot of change for Mexico, and there’s going to be a lot, you know, strategy involved, compliance training,

28:38

how in the US on the US side, do you think the US is benefiting from it as well? Or what do we see for the

28:46

US in terms of compliance and just developing skills and getting trained and learning? I think that is basically, it is a big game changer, and not necessarily because of the of the alignment with the US and the new negotiation. That’s that’s going to be very organic, because if you, if you’re part of the treaty from a US perspective, you want to learn that treaty. You want to use it properly. You want to be very well versed on it. That’s just, you know, normal. But the component, the other component, of the Mexican government, trying to collect revenue and collect it fast. That’s going to be the real part where US organizations will have to implement true and best practice, best industry standard, operations, compliance. So definitely, I expect to see an increase in funding for compliance programs abroad the US. I don’t think that you will be able to thrive as a company saying, oh, we’ll let the Mexico guys handle that in the south of the.

30:00

Border, like, let’s just leave compliance to them, to my operating Mexico team. I mean,

30:08

I expect to see kind of similar to like, what finance transformation did for organizations. Finance transformation basically went from just documented procedures to centralizing controls, to optimizing, you know, controls and execution. So probably a global trade transformation, compliance transformation could be happening eventually. So what is that? I have an investment abroad. I have an investment in Mexico. I have a ton, you know, double down. I’m betting on that business. I want business continuity. I want to safeguard my investment. I want to make sure that I’m not only invested there, but that I’m safeguarding my investment. How do I do that? By knowing the subject, by controlling what I can control by at least having a dashboard that can indicate, you know, my my performance, or that I can step ahead or jump ahead of a curve, when something’s going to impact my organization down in Mexico. So yes, I definitely expect a lot of training, as you mentioned, that’s how we learn, right? But also a lot of more funding to definitely say we’re up leveling compliance, compliance programs, professionals, technology, you name it like we cannot be reactive at this point. Yeah, I like that, because it does ultimately bring more jobs. I mean, I’m not sure about the reform yet, and I think it does. It’s bringing a lot of chaos for businesses, for sure, especially moving away from China. I mean, now it takes time, right? You can just say from one day to the next, okay, fine. We’re not dealing with China anymore. We’re looking into the US. Things are also a lot more expensive in the US, right? So they kind of have to outsource from other places and see what they can work with best to still profit. And then also it comes in with, you know, the whole compliance aspect of things. So what is something? What are like, three things that are majorly going to change that you can think of for for businesses that they have to react to, or should be proactive to.

32:27

So I think, I think we need to be proactive in, in having a grip of our compliance, not only in the US. I know us throws a lot I know the US is a handful, but not only in the US, anywhere we have investments. If we’re talking from a US based perspective, I need to start getting a grip of my compliance outside of the my borders, because it ultimately impacts myself. Right? So that’s one part. Another part is, what can I what can technology do for me so that I can become more strategic person to the business, instead of a doer like, can I, instead of outsourcing to people? Can I outsource to Technology X, Y and Z processes that are, you know, I know how to do manually. I just don’t have the time or the staff to do it. Let’s do it with technology. So anything, anything related with technology that will give us an advantage and an edge to take time off our hands so that we can create that time and implement it for strategy, strategy on compliance, strategy on growth, strategy on business decisions, that’s going to be huge, huge and very valuable. And just I think ongoing and continuing education is going to be very important for any trade compliance, any trade professional out there, either you’re in industry or consulting, wherever you play a role in this trade community. I think ongoing and continuing education is going to be key. But not only that, but connecting the dots between that, you know, information, that education and the real world, and what’s going on and what’s the trend, and how are countries reacting and acting. So connecting all those dots, I think it’s going to be highly valuable for organizations. Yeah, I know we discussed a lot. I think you gave so much information and and this is just before the reform has even been established, because we haven’t even seen the real problems yet. I mean, we can, obviously, everyone has to stay proactive, and you guys are giving, or, you know, these businesses are giving a lot of time to prepare, which it’s not a lot of time and trade really, but in life, it seems like endless of time right now, but probably the best thing is to get after it now, to look at what you can do. How do you can use this perform to your own advantage, and and getting after it. But.

35:00

And Manuel. Thank you so much. This was so informative. And I truly think on on the US side, or on the Mexican side, because we do have a lot of listeners from other countries,

35:11

it’s beneficial to just know what’s coming, how how to prepare, and know that if you’re having ties with Mexico, with Mexican businesses, what what they’re going to be going through and how business might change with them, right? Because things might have to change across borders. So again, thank you so much. And,

35:30

and we’ll have to get after this once, once the reform is set words. So for sure, there are a lot of there are a lot of proposed changes that, you know, we didn’t touch on. Probably these are proposed changes, but it’ll definitely be very valuable to keep track or keep tabs on those changes, what is going through Congress, and then ultimately what ended up happening. And now we can have a real before and after view of customs legislation, tariffs and everything. So for sure, I will invite myself for a follow. You’re invited on this, on this matter. Thank you so much. Yeah. Thank you so much. And to our listeners again, if you have any questions, the notes are below in the description, you’ll find all of Manuel’s information as well. And if you have any questions, please reach out. We’ll connect, and we’ll find someone to take care of whatever you need.

36:25

And that being said, Next this week is huge week. It’s Taylor Swift week, right? So wishing you a great happy week. I’m excited, so we’ll see you next week, Monday. So have a great week. Okay, bye, bye. Have a great weekend. Thank you so much. You.