On January 23, 2020, the Mexican Ministry of Economy (Secretaría de Economía) published in the Mexican Federal Official Daily Gazette (Diario Oficial de la Federación) two resolutions regarding oil and gas exploration and production activities.
- Resolution1 setting forth the mandatory provisions for the verification of compliance with local content requirements by assignees and contractors regarding exploration and production activities in Mexico
The Unit of National Content and Promotion of Productive Chains and Investment in the Energy Sector (Unit), through the General Direction of National Content in the Energy Sector of the Ministry of Economy (DGCNSE, per its acronym in Spanish) will be in charge of implementing these rules, directly or with the support of independent third parties and, in essence, will verify the veracity of the local content obligations submitted by the assignees and contractors to the Ministry of Economy through the following means:
A. Verification of the measurement of the percentage of national content reported:
- The purpose of the verification is for the DGCNSE to corroborate that the information submitted by the assignees and contractors in their local content reports filed with the Ministry of Economy for the past five years is correct, complete, and truthful, and that they have fulfilled their obligations regarding local content, in accordance with the applicable regulations.
- This verification is focused on the concepts and amounts included or excluded by the assignees and contractors.
- Information filed for local content that lacks of documentary support will be considered to have a local content equal to zero, and the local content will be deducted accordingly from the value reported by the assignee or contractor.
Once the DGCNSE has performed the corresponding verification, it may perform:
B. Cabinet verifications:
- Carried out by means of official requests to produce documents and information to assignees and contractors, as well as their direct or indirect suppliers, authorities, and anyone who can have access to relevant information.
- The methodology to select assignees and contractors will be established in the provisions issued by the Unit within a period not to exceed 90 calendar days from January 24, 2020. Within such time frame, the older local content reports will be selected; and/or
C. Verification visits: Carried out in the place or places indicated in an inspection warrant and pursuant to the Federal Law of Administrative Procedure.
The DGCNSE will notify the National Hydrocarbons Commission within five days from issuing a resolution that an assignee or contractor breached their obligations for local content requirements.
- Resolution2 that modifies the resolution, published in the Federal Official Daily Gazette on May 26, 2017, establishing local content requirements for assignees, contractors, and permit holders to provide information on local content in the activities carried out in the hydrocarbon industry
The Ministry of Economy also published on January 23, 2020, this resolution pursuant to which, among other obligations: (i) permit holders will no longer provide every five years the information on the local content requirements of their corresponding permits, and instead will provide it only at the request of the competent authorities; and (ii) the term to keep documentary support for the information filed with the local content report by each assignee, contractor, or permit holder is extended from 18 months to five years after submitting the corresponding report.
Both resolutions became effective on January 24, 2020.
- “ACUERDO por el que se establecen las disposiciones para la verificación del cumplimiento de las obligaciones de contenido nacional de Asignatarios y Contratistas, respecto de las actividades de Exploración y Extracción que realicen en territorio nacional.”
- “ACUERDO que modifica al diverso por el que se establecen las disposiciones para que los asignatarios, contratistas y permisionarios proporcionen información sobre contenido nacional en las actividades que realicen en la industria de hidrocarburos.”
Client Alert 2020-030
