Why Are There Six Tax-Free Liquor Enterprises Near Downtown with Minimal Customer Traffic?

While numerous recently remodeled downtown bars have closed due to lack of customer traffic, establishments that offer tax free liquor to customers willing to walk or drive across a U.S.-Mexico bridge, re-entering the U.S. and paying liquor taxes, continue to function with almost no visible customers.

We visited the newest of the "tax free" entities recently, "The Border Tax & Duty Free," located on E. Elizabeth Street.  There were no customers in the store, only a young, female clerk.  No "sales" were offered, with a tiny price sticker on the bottom of each bottle.  For those familiar with liquor prices, none of the items would be considered a bargain.  This new addition to the "tax free" liquor business downtown means that at least six of these business exist near the three bridges downtown with one of them having a gated parking lot on a half block of prime downtown real estate including a guard booth.

Baja Duty Free, does have some semblance of foot traffic during the Winter Texan season.  In past years it has offered deals on liquor purchases that would actually justify walking across the border and paying the requisite liquor taxes.  Adult beverage t-shirts and other trinkets have sometimes been part of the sales package.  But like its competitors, the Baja is about as empty as the palatial IBC Bank's lobby on Ruben Torres Blvd. is during weekdays.

These existence of these businesses have always intrigued those who understand the necessary customer flow to justify the rent, utilities, wages and other overhead, not to mention actually turning a profit.  While some have speculated that money laundering may be the engine that drives these operations, an downtown business owner who shall remain anonymous recently offered another possibility:

"Jim, I've noticed a loading up in the alley behind "The Border" at least twice a week, loading it up with scotch and other liquors, then driving it across the Gateway Bridge, not Los Tomates with other commercial traffic, but Gateway. . . . . . . sometimes they load Bud Light instead.  I've seen those passenger vans pass through customs in Matamoros with just a wave."  

Would untaxed American beer and liquor be a sellable commodity in Mexico?  Without a doubt.

The U.S. Department of State website offers these rules for individuals (at the bottom of this article, we site the rules for businesses) importing into Mexico:

Customs Regulations: For information about U.S. customs, please refer to our Customs information page. U.S. citizens bringing gifts to friends and relatives in Mexico should be prepared to demonstrate to Mexican customs officials the origin and value of the gifts. U.S. citizens entering Mexico at land borders can bring in gifts with a value of up to $75.00 duty-free, except for alcohol and tobacco products. U.S. citizens entering Mexico by air or sea can bring in gifts with a value of up to $300.00 duty-free. Please refer to Mexico's customs guide for passengersfor more specific information, including requirements related to declaring cash or other financial instruments exceeding the equivalent of $3,000 U.S. dollars.

REQUIRED DOCUMENTS

The following is a list of the documents that must be presented in order for the imported product to be released from the Mexican Customs authorities.

• Importation Declaration (Pedimento de Importación)
• Commercial invoice -- must include issue date and place, name and address of the consignee, detailed listing of goods (including quantities, types, identification numbers, unit value, etc.), and name and address of supplier
• Bill of lading or Airway Bill of lading
• Sanitary import notice (to be done on company letterhead, and which should contain the name of the product, quantity, name and address of the producer, name and address of the importer, the port of entry, and the applicable import tariff numbers.  The letter should be addressed to theSecretaria de Salud [Ministry of Health])
• NAFTA Certificate of origin (as applicable), in order to obtain NAFTA tariff benefits
• Certificate of Free Sale (U.S. exporters can request these through TTB.  Visit our Export Documents section for more information)

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LICENSING

The following steps are required of importers in Mexico who are seeking to import beverage alcohol from abroad.  U.S. exporters are advised to obtain the services of an experienced and reputable importer (through various sources, including through the U.S. Agricultural Trade Office in Mexico City) who will import their products into Mexico.  The information below is provided in order to help exporters understand U.S./Mexico trade requirements.

Importers of beverage alcohol products must first register in the Registro Federal de Contribuyentes (Federal Taxpayers Registry or RFC), before commencing business.  This process is to be completed with the Servicio de Administración Tributaria (SAT).

Importers must subsequently enroll in the “Padrón de Importadores” (or Registry of Importers) and also in the “Padrón de Importadores de Sectores Específicos” (Registry of Importers in Specific Sectors).  This last requirement is applicable to importers of various products, including wines, spirits, beer, cigarettes, and denatured alcohol products.

For enrollment in the “Padrón de Importadores”, importers must apply online, at http://www.aduanas.gob.mx, filling out the application titled “Solicitud de Inscripción al Padrón de Importadores”.  In order to complete this process, the importer is required to have an advanced electronic signature issued by SAT and an active RFC.  The importer will also be required to register all of the Customs brokers that will clear shipments on their behalf*.

*Please note that importers are required to retain the services of a Customs broker or in-house Customs agent.

After enrollment in the “Padrón de Importadores”, the importer should proceed to register in the “Padrón de Importadores de Sectores Específicos” by filling out the SAT registration form as well as submitting company documents attesting to the company’s establishment (e.g. act of incorporation), a copy of the requestor’s ID, and a power of attorney, if applicable.

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IMPORT PROCEDURES

Mexican law permits only customs brokers to file requests for the clearance of goods through Customs.  Clearance is done electronically, through a system called SAAI (Sistema Aduanero Automatizado Integral).

Customs brokers must submit a Pedimento de Importación (Import Declaration) to Customs through the SAAI system.  The Pedimento is then validated by Customs.

Once the Pedimento is validated, the customs broker pays all applicable duties and taxes on behalf of the importer. The Pedimento is then presented to a Customs official who reviews the documentation and approves/disapproves it.  An inspection may be done subsequently (these are done on a random basis) and then final clearance is granted.