On October 13, 2000, the Ministry of Commerce and Industrial Development ("SECOFI"), published in the Federal Official Gazette, the Accord Making Known Various Provisions regarding the Sectoral Promotion Programs, as well as the Application Form for Authorization or Extension of a Sectoral Promotion Program (the "Accord"). Beginning October 23, 2000, Maquiladoras and PITEX companies will be able to request authorizations for a Sectoral Promotion Program in respect of items that have been authorized under their Maquila or PITEX program.

In Client Bulletin 07/00, we informed you of the publication on May 9, 2000, of the Decree Establishing Various Sectoral Promotion Programs (the "Decree"). (This Decree revoked the prior Decree Establishing Diverse Sectoral Promotion Programs published on November 14, 1998, which had created Sectoral Promotion Programs for the electrical and electronics industries only.) Additional Sectoral Promotion Programs are expected to be published in the near future. As you are aware, these Sectoral Promotion Programs are intended to mitigate the effects of provisions of the North American Free Trade Agreement, which are being implemented in Mexico on November 1, 2000, by allowing producers in the specified industries to import machinery and equipment, as well as inputs, at preferential duty rates, usually 0 or 5 percent depending on the industry and the tariff classification of the item in question.

• Direct versus Indirect Producers: Under the Decree, in order to qualify for the benefits of a Sectoral Promotion Program, the importer must be a producer of goods. The Decree sets out by tariff classification (heading or subheading) the products which fall into each industry or sector. The tariff classification of the finished good will determine whether the producer qualifies for one or other of the Sectoral Promotion Programs. The Decree then sets out by tariff item (eight digit classification number), the machinery and equipment and inputs which may be imported at preferential duty rates under each Sectoral Promotion Program.

The Accord establishes a new concept, that of an "indirect producer". An indirect producer is a company that manufactures merchandise, using machinery and equipment or inputs that are included in a Sectoral Promotion Program, which it then supplies to direct or indirect producers of goods (identified by tariff classification) in a Sectoral Promotion Program. In other words, an indirect producer is one which produces merchandise which is not identified in a particular Sectoral Promotion Program, but supplies that merchandise to a producer which does produce goods identified in a Sectoral Promotion Program. Pursuant to the Accord, an indirect producer will also be able to benefit from a Sectoral Promotion Program, provided it is previously registered as an indirect producer by the direct producer, or another indirect producer.

• Application: In order to obtain authorization for a Sectoral Promotion Program, an application must be filed with the office of the General Director of Services to Foreign Trade, or before the Delegation or Sub-Delegation office that corresponds to the address of the plant where the production process will be carried out. The Accord contains a copy of the application form, which sets out the information which must be provided and the documentation which must be attached to the application. The application must be prepared using the PROSEC.EXE software; both a diskette and two hard copies must be submitted to SECOFI.

• Date for Filing: SECOFI will be receiving applications as of the following days:

• October 23, 2000, for companies that already have a Maquila or PITEX program, exclusively for items that are authorized to be imported under their respective program.

• December 1, 2000, for companies that do not have a Maquila or PITEX program. For practical purposes, the effective date will be December 4, 2000, since December 1 (Friday) is an official holiday for the inauguration of Mexico’s President Elect, Mr. Vicente Fox-Quezada.

• Timing of Authorization: SECOFI will respond to applications for authorizations within 20 working days, and extensions to existing programs, within 15 working days.

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For further information with respect to the foregoing, please contact Edmundo Elías in our Guadalajara office at 011-52-3-819-0300; Manuel Padron in our Juárez office at 011-52-16-29-1300; Mariana Ruiz in our Monterrey office at 011-52-8-399-1300; or Leobardo Tenorio in our Tijuana office at 011-52-6-633-4300.