The essence of the PROSEC program is to provide Mexican importers of the parts and components used to manufacture specific finished products, with zero or reduced (usually 5%) duties on certain of the non-NAFTA parts and components.
An initial PROSEC decree issued in November 1998 covered only the electronics and electrical sectors.
Once a manufacturer has completed the necessary registration process, it is eligible for PROSEC treatment if a) the finished product falls within one of the tariff categories listed in the decree, and b) the particular imported parts and components originating outside of North America are specifically listed in the decree as well.
Thus, Article 3 of the PROSEC decree provides a list of product sectors that are covered by the decree.
The December 31, 2000, PROSEC decree, which remains in force, covers twenty-two sectors: furniture; toys; sports equipment; footwear; mining and metallurgy; capital goods; agricultural machinery; automotive and auto parts; textiles and apparel; chocolate; candy and similar products; coffee; and a miscellaneous "basket" of products.
The electronics industry was the first to be subject to a PROSEC decree, in November 1998.
The PROSEC decree, in itself a special series of tariff rates (including zero), is specific in its coverage, and to some extent reflects careful choices by SECON after negotiations with the affected industries.
The fine-tuning of the PROSEC program is an on-going process.
Initially, at least, it appears that SECON is being very liberal in its treatment of requests for the addition of additional tariff items to the PROSEC lists of parts, components and machinery subject to 5% or zero tariffs.
A more difficult question is the extent to which Mexican authorities in the future will be prepared to remove items from the PROSEC listings if and when they are persuaded that adequate supplies exist in North America, a process that will be essential to increasing direct foreign investment in parts and components producers in Mexico, and to treating United States and Canadian parts suppliers fairly.
Even though the PROSEC program and the maquiladora programs are legally distinct, it can reasonably be expected that the maquiladoras will be the primary beneficiaries of the PROSEC program, raising questions as to whether the new regime is in fact NAFTA and WTO legal.
The new system, imposing the PROSEC requirements on top of the modified requirements for maquladoras is in this respect a step in the opposite direction.