November 15, 2022

Uncertainty for the Corn Industry in Mexico

A Decree Set to Enter into Force Would Ban the Importation of Genetically Engineered Corn into Mexico
Holland & Knight Alert
Carlos Vejar | Peter Tabor | Ander Javier Aguirre

In 2020, Mexico issued a decree banning the importation and use of genetically engineered corn (GE corn) in Mexico. This ban, set to enter fully into force on Jan. 31, 2024, threatens to severely limit Mexico's access to U.S. corn, on which Mexico's animal agriculture sector relies. As the deadline approaches, Mexican officials have issued contradictions recognizing the critical importance of U.S. feed corn for the Mexican economy, but at the same time confirming the entry into force of the ban.

If Mexico's ban on imports of GE corn enters into force in 2024 – and recent Mexican government statements do not indicate a change in course – Mexican imports of U.S. yellow corn (used as animal feed) are set to be cut in half. Mexico's agriculture department indicated it may enter into direct contracts with U.S., Brazilian and Argentine farmers to grow non-GE corn for export to Mexico. But whether such contracts can secure 17 million tons of non-GE U.S. yellow corn – the amount Mexico imported last year, per U.S. Department of Agriculture data – is far from certain. And, according the American Seed Trade Association, nearly all non-GE corn planned to be grown in the United States next year is under contract to customers in Japan, Europe and elsewhere.

Meanwhile, Mexico is taking steps to address food price inflation. Some estimates are that Mexican importers will pay 26 percent more for non-GE corn imports, but even with a premium paid for non-GE corn, imports will be insufficient to replace the corn excluded by the ban.

Due to the approaching deadline to implement a full revocation and elimination of all authorizations to use GE corn in Mexico, clients are urged to ensure their supply chains are prepared to deal with anticipated disruptions and to avail themselves of opportunities to provide input to Mexican and U.S. officials, since the decree's implementation could result in the lodging of a dispute under the U.S.-Mexico-Canada Agreement (USMCA).

State Dispute Settlement Panel

If the measure at hand is applied, countries exporting GE corn or its seeds into Mexico under a free trade agreement may request formal consultations with Mexico. For example, the Office of the United States Trade Representative (USTR) can request consultations with Mexico under the dispute settlement mechanism in Article 31 of the USMCA. USTR Ambassador Katherine Tai hinted that she may pursue this option in a recent press release: "Ambassador Tai underlined the importance of…avoiding a disruption in U.S. corn exports and returning to a science- and risk-based regulatory approval process for all agricultural biotechnology products in Mexico." Ambassador Tai's comments reflect concerns of U.S. corn producers and exporters, highlighted in a letter from Sens. Charles Grassley and Joni Ernst in representing Iowa, the largest corn-producing state.

If consultations fail to resolve the matter, a USMCA dispute settlement panel could be established, and if it concludes that the measure at hand violates the USMCA and no resolution of the dispute is agreed, the U.S. could retaliate against Mexico, imposing restrictive measures to Mexican exports into the United States.1

Amparo Lawsuit

Companies whose rights are impaired under an existing permit or authorization to plant seeds or use GE corn may file an amparo lawsuit (constitutional challenge) within 15 business days of any denial or revocation of permits or authorizations. The consequence of a favorable amparo would suspend the application of the decree, allowing the complainants to continue operations until the amparo challenge proceedings conclude. The amparo lawsuit result could result in permanent suspension of the decree or revocation of the temporary suspension.

A decision by Mexico to import only non-GE corn would not constitute a violation of Mexico's international trade or constitutional obligations, a point Mexican government officials have made. What is and could be questioned are the discriminatory effects of the decree, the apparent lack of a scientific basis for the ban, and other legal and technical requirements that such measures must meet under Mexico's international and national legal requirements, particularly when the reasons declared in the decree make broad references to concepts such as the Precautionary Approach contained in the Rio Declaration: "In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation."

Unfortunately, given that the decree also prohibits the use of glyphosate, the objectives and reasoning of the decree are confusing with regard to GE corn, and should also be read under trade and environmental provisions contained under the USMCA, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and other free trade agreements (see, for example, Article 24.14 "Trade and Biodiversity" of the USMCA).

Notes

1 Foreign investors established in Mexico, using GE corn and seeds, may revisit plausible parallelisms with investment claims filed by U.S. investors under the North American Free Trade Agreement (NAFTA) against the tax on soft and other drinks as well as other non-alcoholic beverages, syrups and concentrates sweetened with high fructose corn syrups (HFCS).


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.


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