Introduction
Mexico could face a scenario of trade tension with its main USMCA partners if it does not adequately adjust its transfer pricing policies. The recent imposition of US tariffs and the country’s fiscal responses have put various industries on alert, especially those with cross-border operations.
The origin of the trade conflict
It all started with the United States applying tariffs on key Mexican products such as steel and aluminum. In response, the Mexican government implemented mirror measures, raising concerns about possible violations of the United States-Mexico-Canada Agreement (USMCA).
Impact on Transfer Pricing
The reimposition of tariffs of 25% on steel and aluminum imported from Mexico and Canada has directly affected the Mexican automotive industry, which depends on these imported inputs, significantly increasing its production costs.
In addition, the USMCA now requires vehicles to have a higher regional content, raising the integration percentage from 62.5% to 75% for automotive companies to benefit from the treaty’s preferential tariffs. This poses strategic challenges for manufacturers, who must decide between adjusting their supply chains to meet these requirements or seeking alternatives outside the region, which could represent additional costs and greater operational complexity.
In this context, the correct application of transfer pricing becomes essential to avoid tax adjustments and possible sanctions. Companies with cross-border operations must ensure that their pricing policies comply with arm’s length principles and adapt to changes in costs arising from USMCA tariffs and regulations.
The OECD position and the need for documentation
The OECD has emphasized the importance of having robust documentation in the area of transfer pricing. In this context, Mexico must strengthen its auditing processes and companies must ensure that they have local files and well-founded Master Files.
In addition, the OECD has pointed out that, although the USMCA is a positive step towards strengthening the Mexican economy, it will not, on its own, solve all the country’s structural problems. The organization emphasizes the need to implement complementary internal policies that boost economic growth and improve the well-being of the population.
Call to action
At TPC Group, we help companies in Mexico and the region comply with transfer pricing obligations under international standards and treaties such as the USMCA. If your company engages in cross-border intercompany transactions, now is the ideal time to evaluate your policies and mitigate tax risks.
Source: https://www.eluniversal.com.mx/cartera/aranceles-precios-de-transferencia-y-el-t-mec-se-avecina-una-tormenta-comercial/