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Mexico Removes Duty on Gas Imports

Mexico Removes Duty on Gas Imports

Mexico last Monday lifted its 4% tariff on natural gas imported from the United States, the Energy Ministry announced. This clears the way for expanded gas sales by U.S. companies into the fast-growing markets in northern Mexico.

The decree eliminating the tariff was signed by President Ernesto Zedillo. It came a week after the U.S. Commerce Department rejected a petition brought by an Oklahoma-based group of independent producers to have tariffs assessed on crude oil imports from Mexico, Venezuela, Saudi Arabia and Iraq. The producers accused the foreign countries of dumping oil in the United States and driving them out of business.

The International Trade Association, a Commerce agency, dismissed the petition on Aug. 9th because it lacked adequate support from the domestic industry. Under law, at least 25% of the production in the affected region must back the petition for it to be accepted. Support for the petition was mostly confined to the struggling independent producers, while the major oil/gas producers and gas pipelines opposed it.

Although the producer petition primarily addressed oil, it had repercussions for the U.S. gas industry because Mexico - which had pledged to remove its 4% tariff on gas imports on July 1 - decided to put it on hold in retaliation. "...[I]f you hit somebody in one place, they're going to strike back in another," observed Allen Mesch, a professor at Southern Methodist University in Dallas, and expert on the industry.

"Mexico welcomes this decision by the Department of Commerce," the Mexican Embassy said in a press statement. The petition, which was filed by a group of producers called "Save Domestic Oil," contained "spurious and false" claims.

Had Commerce accepted the independent producers' petition, Mesch believes the immediate reaction would have been "hostility towards U.S. companies," which would have been reflected in reduced commercial opportunities. Moreover, he seriously doubted domestic producers would have seen any marked improvement in the price of oil as a result.

Susan Parker

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