The used car market is not as wide open as it once was. Under pressure from dealerships and manufacturers, the government however recently tightened restrictions on used-car imports, cutting the number of vehicles brought in across the border from around 70% to 64,000 through May of this year, compared with 228,000 in the first five months of 2014. (1)
There are 22 million used cars in Mexico. The imported cars are what critics call garbage or junk cars. Often more than 10 years old and not roadworthy in the US. Sold in bulk at auction and come to Mexico for a new lease of life. There are fewer restrictions on cars on the roads. (2)
According to the blog, Best Selling Cars Nissan still holds the greatest market share with 25.6% share above Chevrolet (18.2%), Volkswagen (13.2%), Ford, Honda, and Toyota. With the split of FCA Mexico into brands, Mazda (+24%) now ranks 7th above Dodge (+39%) and Hyundai (+95%) while Ram is up a spectacular 86%. (3)
- A Large population needs quality used cars due to the market being flooded with marginal products.
- Proximity to the United States
- Favorable ease of trade from the United States due to NAFTA
- Quantitative restrictions on the import of used cars.
The United States Department of Commerce outlines the process for the registration and importation of a used vehicle into Mexico. The process is as follows:
- Confirm that the vehicle meets NAFTA requirements. The vehicle must not be older than ten years. Also, the vehicle – manufactured in the U.S., Canada, or Mexico.
- Assemble the following documents:
- Document stating the value of the vehicle
- Name of the person legalizing the vehicle
- A copy of the customs official’s identification
- A copy of the purchase receipts
- Vehicle Identification Number of a NAFTA country
- 10% base tariff, plus 3% in the border zone
- ISAN tax
- Tenencia tax (Vehicle Usage Annual Tax) – removed in 2012
- DTA payment (Custom’s Paperwork Fee)
- Reference price: If the reference price is higher than the price listed on the shipping invoice, the seller will pay a deposit for the difference. If the seller can justify that the vehicle is properly valued on the shipping document price within three months; the deposit is returned. (4)
- To qualify, an imported used vehicle must be between five and ten years old and manufactured in the NAFTA region (the U.S., Canada, or Mexico). The vehicle can be for use by the importer for up to twelve months without the requirement of an import license.
- Importers can import an unlimited number of used vehicles. As long as they are registered at the Padron de Importadores, Mexico’s official importer’s registry, and have an RFC – Federal Taxpayer’s Registration. In addition, it is mandatory to provide import records every month to the Mexico Government Entity of Taxation (SAT). (5)
Used vehicles in a condition restricted or prohibited from circulating in their own country of origin, will be prohibited from importation into Mexico.
Other Import Procedures
Additional import procedures for Mexico.
Import Duties and Taxes
Mexican import duties on cars and trucks produced in the United States or Canada that meet the NAFTA rule of origin were reduced to zero on January 1, 2003. One year ahead of schedule.
Mexico also maintains a 50 percent tariff on used vehicles on U.S. and Canadian vehicles not meeting the NAFTA rule of origin and on vehicles from all other countries that do not have an FTA with Mexico. (6)
Import duty and taxes are due when importing goods into Mexico whether by a private individual or commercial entity. The valuation method is CIF – Cost, Insurance, and Freight. This means import duty and taxes payable are on the complete shipping value. Which includes the cost of the imported goods, the cost of freight, and the cost of insurance. In addition to duty, imports are also subject to sales tax, customs processing fee (DTA), and in some cases excise.
0% if under NAFTA
VAT is levied on imports at a standard rate of 16% of the sum of the CIF value, duty, DTA, and excise if applicable. Some products are VAT free when importing.
Other taxes and custom fees
DTA or Customs Processing Fee is applied to all imports at a rate of 0.08% of the sum of the CIF value and duty.
Local Customs office and contacts
More information on import declaration procedures and import restrictions can be found on the Mexican Customs website.