Border Blues : Mexico’s Anti-Dumping Rules Create Big Hassles for Small Businesses

Punk rocker Victor Mendez is a regular at the Saturday underground rock music market here. He sells heavy metal and punk rock recordings imported from the United States, Britain and Germany.

But lately he has been short of inventory. Last month, customs officials at the Mexico City airport impounded a suitcase full of cassette tapes because Mendez could not produce a certificate of origin to prove they did not come from China.

Mexico has accused China of dumping--selling products in Mexico at below cost or at prices below those charged in other markets--and has acted to ensure that punitive duties are imposed on all Chinese goods coming into the country.

From Mendez’s viewpoint, the requirement was absurd. “This is completely arbitrary,” he said. “They don’t even make cassettes and compact discs in China. I’m being affected by something that has nothing to do with my business.”

Nonetheless, his experience illustrates how importers are having to adjust as Mexico attempts to balance free trade with rules and procedures to protect it from unfair trade. The multinationals who account for most of Mexico’s foreign trade are accustomed to the new rules because the rules are similar to regulations in other industrialized nations. So they have adapted without much complaint.

For entrepreneurs such as Mendez, who operate on a shoestring, the new rules have caught them off guard and produced a crisis. The freewheeling atmosphere that followed the easing of restrictions in the late 1980s and allowed small-scale entrepreneurs to build a flourishing cross-border trade has gradually been replaced by formal rules and procedures as the consequences of tearing down trade barriers have become clear.

For one, free trade left Mexico vulnerable to dumping.

Mendez says that in April, when Mexico announced tariffs of up to 1,105% on 16 types of Chinese goods (including recorded music) he did not realize that certificates of origin would be needed for all imports. Mexican officials say the duties are pointless unless they can intercept Chinese-made goods that officials suspect are coming in through the United States and Hong Kong. Direct imports from China amounted to barely $300 million last year.

In subsequent weeks, container-loads of goods have piled up at the border and in ports and airports as other importers have scrambled to obtain certificates. No one is sure how many millions of dollars’ worth of merchandise has been stalled because of the new rules.

For Celia Stilwell, a San Diego-based sales agent for a lingerie company, it’s “over $30,000 worth of merchandise stuck at the border.” She represents NCC Industries, which manufactures in Brazil, Colombia, the Philippines, Taiwan and the United States.

“This is a nightmare,” Stillwell said, explaining that a $500 shipment of merchandise might require five different certificates of origin.

Customs officials were demanding original certificates from the country of origin, she said. They would not accept copies, facsimiles or documents written in the United States for foreign-made goods. Frantic, Stilwell called trade offices in Washington and Mexico City, as well as garment industry organizations, trying to find an alternative that would allow her to get her product into Mexico.

Finally, early this month, a client in northern Mexico told her the rules had been relaxed. A notarized letter from NCC, stating the origins of each product, would suffice. When the goods arrived at the border, however, customs agents rejected the letter because it lacked a stamp from NCC’s hometown chamber of commerce.

Stilwell is trying to get the chamber’s stamp, while her merchandise piles up in border warehouses and customers in Mexico become impatient, threatening to pull their orders. She looks upon the rule change as another in a litany of problems she has encountered in exporting to central Mexico over the last five years. Two decades of selling in the border free-trade zone did not prepare her for the difficulties of exporting to the rest of the country.

“Just when you think you have reached the top of the mountain, something comes along to pull you down,” she said.

At the end of last year, Mexico began enforcing rules that say all imported goods must be labeled in Spanish. The resulting delays caused Stilwell to miss the Christmas selling season.

But at least her product is not perishable. Last year, Mexico began registering importers by computer. The idea was that imports would be expedited because registered importers would be able to send information about shipments in advance to custom officials. When goods arrived, officials could then match shipments with information in the computer.

But some information got lost and shipments were held up while officials worked out glitches in the system.

“I got stuck with 30 tons of Beluga caviar,” lamented Mexico City importer Fernando Cervera. He obtained a court order forcing the government to release his cargo, but not before he had agonized for several hours over whether he could save the shipment.

For music importer Mendez, the agony is stretching into weeks.

At the market stall where he has sold tapes for five years, he tells customers he cannot guarantee delivery on special orders because he does not know when he will be able to import again.

He says he buys his tapes from record stores, not the manufacturers, and therefore has little hope of obtaining even a notarized letter, much less a chamber of commerce stamp.

He says he is especially frustrated because he has taken pains to stay inside the law by keeping careful tax records and paying import duties. Unlike many of his competitors at the music market, Mendez says, he refuses to sell pirated tapes, in part because he is an amateur composer and musician and appreciates the effort that goes into making music.

Doing things legally is more expensive and more trouble, he says, but he has managed to stay in business.

Or at least he had, until Mexico’s trade dispute with China began.