Changes to Mexico Fulfillment (“Section 321”) and Tariffs part 2

Late last week, Mexican President Claudia Sheinbaum issued a decree effective immediately (Dec 20, 2024) that introduced measures to protect the Mexican textile and apparel industries while addressing compliance challenges under the country’s IMMEX program.

XB Fulfillment notified their customers that they will no longer be able to import apparel into Mexico for them, declaring force majeure on their contracts.

The decree increases from 20-25 percent to 35 percent the import duty on 121 apparel products and 17 made-up textiles of Chapters 63 and 94, and from 10 percent to 15 percent the import duty on 17 tariff headings related to textiles. These increases aim to level the playing field for Mexican industries facing competition from lower-priced imports, particularly from countries without free trade agreements with Mexico, and they will remain in effect until April 23, 2026.

Under the new decree, certain finished products are excluded from temporary importation under IMMEX. These exclusions include finished clothing and textile articles classified under Harmonized Tariff Schedule Chapters 61, 62 (coats, suits, jackets, pants, dresses, shirts, and sweaters, textile accessories such as gloves, belts, and ties), and 63 ( - home goods (bed linens, blankets, pillow cases, curtains, towels, etc.), tents, awnings, needlecrafts, rags); quilts and comforters classified under HTS subheading 9404.40; and pillows, cushions, and other bedding materials classified under HTS subheading 9404.90.

This creates an immediate nightmare scenario for these 3PLs and brands who work with them. On Monday evening, one of the largest 3PLs servicing US-brands in Mexico, XB Fulfillment, sent a note to their customers that they will no longer be able to import apparel into Mexico for them, declaring force majeure on their contracts. The vast majority of their customers are apparel brands, some of the largest Shopify brands. Brands are now scrambling to get the government to not destroy their business, and their customers are searching for solutions. vast majority of their customers are apparel brands. According to Flexport's founder Ryan Peterson, at least 30 of the top 100 American brands on Shopify now fulfill from just across the Mexican border, mostly in Tijuana, to avoid these customs duties.

A boon to U.S. based 3PL's but a mess for these wonderful brands who are now scrambling to find new solutions.