A loophole in tariff arrangements within the North American Free Trade Agreement (NAFTA) provides opportunities for Mexican cartels to use trade-based financial crime as a way of repatriating to Mexico revenue generated in the US from the sale of illegal drugs.

Competitively priced and even counterfeit goods from China provide the cartels with particular opportunities to repatriate funds while Chinese criminal networks also stand to benefit from the loophole.

Tariff differentials

Mexico imposes hefty tariffs on many imported Chinese goods. So while products from China might be cheaper initially, the tariff imposed on them by Mexico makes them prohibitively expensive.

But reports are emerging that criminal networks with influence over Mexican customs officials are transporting Chinese goods from California to Mexico.

US made

The goods are labelled as being produced in the US, so the criminal network – or a business associated with it – obtains cheap goods because they are tariff-free under the NAFTA arrangements.

These goods are then sold in Mexico, with the corrupt customs officials taking a share of the profits.

Counterfeiting threat

Chinese manufacturers of counterfeit goods such as electronics, clothing, and pharmaceuticals can also make additional profits.

Large Chinese counterfeiting operations reportedly now see this loophole in NAFTA’s tariff arrangements as a significant opportunity to sell goods in the Mexican market while the cartels see it as a good alternative to more tightly policed forms of repatriating drugs proceeds.

Categories: Trade Based Financial crimes News