Smith Leads Letter Urging USTR and Treasury to Hold Mexico Accountable Ahead of USMCA Joint Review

Congressman Adrian Smith (NE-03), Chair of the Ways and Means Subcommittee on Trade, led a letter with 19 of his Republican colleagues to U.S. Trade Representative Jamieson Greer and U.S. Treasury Secretary Scott Bessent, urging them to hold Mexico accountable ahead of the six-year joint review of the United States-Mexico-Canada Agreement (USMCA). 
 
In the letter, the lawmakers expressed concern over recent actions by Mexico’s Servicio de Administración Tributaria (SAT), warning that new interpretations and enforcement practices could unfairly target American companies operating in Mexico. They urged Ambassador Greer and Secretary Bessent to work with Mexican officials to ensure tax and customs policies are implemented fairly, transparently, and consistent with Mexico’s commitments under USMCA. 
 
The lawmakers write: “Among these issues is the onerous and irregular enforcement practices currently being implemented by Mexico’s Servicio de Administración Tributaria (SAT), which are placing retroactive and unprecedented burdens on U.S. companies. Mexico should not be allowed to right its budget imbalances on the back of American companies, particularly given its commitments under USMCA. In particular, we are concerned that Mexico is reinterpreting tax provisions, conducting retroactive and capricious audits, and employing aggressive ‘pay-to-play’ appeal requirements.” 
 
In addition to Smith, the letter was signed by U.S. Representatives Aaron Bean (FL-04), Ron Estes (KS-04), Mike Carey (OH-15), Michelle Fischbach (MN-07), Kevin Hern (OK-01), Darin LaHood (IL-18), Tracey Mann (KS- 01), Carol Miller (WV-01), Max Miller (OH-01), Mariannette Miller-Meeks (IA-01), Blake Moore (UT-01), Nathaniel Moran (TX-01), Greg Steube (FL-17), Beth Van Duyne (TX-24), Rudy Yakym (IN-02), Derek Schmidt (KS-02),  Randy Feenstra (IA-04), Jodey Arrington (TX-17), and Brad Finstad (MN-01).  

Read the full letter here or below: 

Dear Ambassador Greer and Secretary Bessent, 
 
Thank you for your continued engagement with our trading partners to advance trade agreements and level the playing field for American industry. As you conduct the first ever six-year “joint review” of the United States-Mexico-Canada Agreement (USMCA), full enforcement of the deal and resolution of outstanding irritants must be high priorities.  
 
Among these issues is the onerous and irregular enforcement practices currently being implemented by Mexico’s Servicio de Administración Tributaria (SAT), which are placing retroactive and unprecedented burdens on U.S. companies. Mexico should not be allowed to right its budget imbalances on the back of American companies, particularly given its commitments under USMCA. In particular, we are concerned that Mexico is reinterpreting tax provisions, conducting retroactive and capricious audits, and employing aggressive “pay-to-play” appeal requirements.  
 
Mexico has applied new interpretations and documentation requirements for value-added taxes (VAT) levied on U.S. products, including agricultural ingredients such as animal protein meals and feed additives. We understand this change is in contrast to previous SAT rulings affirming these products should be VAT-exempt, resulting in an additional 16 percent VAT in some cases. Retroactive application of this tax acutely impacts companies as they are unable to adjust past pricing decisions. These changes make U.S. exporters less competitive, as the VAT is not applied to domestic sources of these ingredients. We are concerned that this disparity fails to uphold the central USMCA principle of national treatment. 
 
Further, we understand that U.S. companies are facing sudden demands for repayment of credits and denials of deductions, accompanied by fines for previously unannounced violations. Across all such practices, recent amendments to Mexico’s federal tax code have eliminated the exemption for guaranteeing tax interest when filing an appeal with the tax authority. This requires U.S. companies to post a deposit equal to the full disputed assessment, in addition to surcharges and fines, if they choose to dispute the findings.  
 
To maintain strong supply chains and cooperation throughout North America, businesses need certainty, level treatment, and transparent regulations. We urge you to work with Mexico to ensure new SAT interpretations and provisions are not implemented in a discriminatory or overly burdensome manner and stand ready to assist in strengthening USMCA.