On November 30, 2020, the Ministry of Energy (“SENER”) and the Ministry of Economy sent to the National Commission for Regulatory Improvement (“CONAMER”) a draft of the Order establishing the goods which import and export are subject to regulation by the Ministry of Energy (the “Draft”).

The Draft seeks to supersede the current regulation related to the application and granting of prior import and export permits of hydrocarbons, refined products and petrochemicals, as provided under the Order establishing the classification and codification of the hydrocarbons and refined products which import and export is subject to a prior permit by the Ministry of Energy, originally published in the Federal Register (“DOF”) on December 29, 2014 (as amended, the “Current Permit Order”).

In addition to regulating other materials and goods, such as nuclear and radioactive material, the Draft  is intended to: (i) amend the terms and conditions to apply for a prior import or export permit; (ii) establish a new process to be followed by SENER in order to review, approve and reject prior permit applications; (iii) repeal and supersede the long-term prior permit modality; (iv) increase the lists of goods that will be subject to a prior permit, in respect to the refined products sector, and (v) clarify matters related to revocation, expiration and termination of permits.

Below is a list of the most relevant points of the Draft:

1. Regarding 1-year prior import permit applications, in addition to the requirement currently applicable under the Current Permit Order, the following requirements are included: (i) the applicant that is a permit holder of a marketing and/or distribution permit of gasoline, diesel or jet fuel conducting sales to service stations or end users, shall provide documentation evidencing its compliance with the obligations established under the Public Policy for Minimum Storage of Refined Products, (ii) a monthly estimate of the import costs of the applicable good, and (iii) submission of a document that evidences its compliance [good standing] with its administrative, tax and customs obligations.
2. In the case of exports, in addition to the requirements for import permits (and a specific requirement for natural gas exports), the Draft provides that the applicants shall demonstrate that the export will not impact the supply of the product in the national territory in the mid and long term. 
3. In the event the applicant fails to justify the requested volume, SENER may grant the applicable prior permit with a revised volume (as it happens today).
4. The Draft eliminates the possibility to obtain a prior permit for a 20-year term (as provided under the Current Permit Order), and instead provides the possibility to obtain a prior import permits for a 5-year term.
5. For the application of a 5-year prior permit, in addition to evidence the [purchase and sale] contractual commitments  for a minimum effective term as the above period, the applicant shall prove its “contribution to the development or expansion of storage and/or transportation infrastructure”, by means of which the relevant permit for the applicable activity shall be submitted.
6. For both granted prior permits of 1-year and 5-year terms, the Draft provides the possibility to request an extension not only of its effective term, but also for the originally granted volume (for two occasions for 1-year permits, and one occasion for 5-year permits).
7. SENER shall issue the resolution for the granting or rejection of a prior permit within the 12 business days following the submission of the relevant application; however, as opposed to the deemed approved provision currently established under the Current Permit Order, the Draft provides that in the event SENER fails to issue a resolution within the abovementioned term, the application shall be deemed rejected.
8. Additional events and details for revocation are established, including but not limited to: (i) not informing SENER about the changes in the corporate by-laws and ownership structure of the permit holder; and (ii) that the Mexican Internal Revenue Service notifies SENER that the corporate name or tax domicile of the permit holder does not exist. SENER may initiate on its own the revocation procedures once it has knowledge of the occurrence of the event.
9. SENER may declare the expiration (and, therefore, the early termination) of a prior permit in the event no import or export activities are performed for a consecutive period of 30 calendar days (for 1-year prior permits) or 365 calendar days (for 5-year prior permits).
10. Annex II to the Draft expands the list of goods which are subject to prior permits, such as undenatured ethyl alcohol with an alcoholic strength by volume greater than or equal to 80% by volume, ethyl alcohol, benzene, in addition to those goods currently included under the Current Permit Order.
11. The Temporary Provisions under the Draft establish that:
    1. the prior permits that are in effect upon the effective date of the Draft shall remain effective until the conclusion of its term and the rights and obligations stemming thereof shall be governed by the regulation applicable upon the date of its issuance;
    2. the prior permit applications submitted prior to the effective date of the Draft shall be reviewed until its conclusion in accordance with the effective provisions on the date on which the application was submitted; and
    3. the applications to extend prior permits shall be carried out in accordance with the Draft unless such were submitted before the effective date of the Draft.

Given its relevance, the Ministry of Economy and SENER deemed that the Regulatory Impact Analysis of the Draft is of “material impact”; therefore, in accordance with the General Law of Regulatory Improvement, the Draft shall remain available for comments of the general public in CONAMER’s website for a period of at least 20 business days.