August 26th, 2014 Infrastructure and Logistics Panel

From January to June 2014, the total worth of import and export goods was 386 billion dollars (bd), 3.7% more than that of the same period in During the same time, taxes collected from foreign trade operations totaled 13.2 bd, a growth of 5.5% regarding with the same period of last year. Such amount represents 18.7% of total revenue collection. Furthermore, Customs collected 45.9% of the total value-added tax paid in the country between January and June The following operations are registered daily in Ports of Entry across the country: 44,500 operations (automated selection device) and more than 28,000 cargo vehicles participating in foreign trade. More than 184,000 privately-owned vehicles and around 944,000 people cross the border into our country. Almost 49,000 international passengers arrive through the airports. Economic figures 1

Modernization Plan of Customs Infrastructure Infrastructure Projects TypeNorthern Border Southern Border Seaside Customs Inland Customs Total New facilities Reorganizing facilities Expansions Total Mexican Customs Administration has set a policy to modernize its infrastructure in order to properly meet the dynamics of foreign trade. The modernization plan for this administration ( ) includes 56 projects, classified as new facilities, reorganizing of current facilities, and expansion of facilities. The plan aims to improve and optimize current infrastructure in order to facilitate foreign trade and promote competitiveness. The execution of this plan will require an investment of over 700 Million Dollars between 2013 and

Automated clearance (pilot program in Nuevo Laredo III). Benefits in customs clearance for certified enterprises. Exclusive lanes for certified enterprises (AEO Mexico, CTPAT-FAST). New scanning technology for license plate identification. Relocation and updating of non-intrusive inspection equipment. Optimizing of non-intrusive inspection procedures to expedite clearance. Integrated systems to automate operations and improve risk assessment. Sharing of images from non-intrusive equipment in the US-Mexico border (pilot program in Matamoros-Brownsville rail crossing). Deployment of identification mechanisms for pedestrian crossings. Development of “mirror customs” (pilot program in Otay II-Otay-Mesa East). Innovative aspects of the projects 3

Progress to July, 2014 New rail crossing Matamoros-Brownsville Progress: Starting in the near future (September, 2014) Investment: 84 MD (SCT/Licensee funding) New rail crossing Matamoros-Brownsville Progress: Starting in the near future (September, 2014) Investment: 84 MD (SCT/Licensee funding) Matamoros New pedestrian access “Puerta Este” Progress: Starting in the near future (September, 2014). Investment: 5.1 MD (State Government funding) New pedestrian access “Puerta Este” Progress: Starting in the near future (September, 2014). Investment: 5.1 MD (State Government funding) Tijuana Reynosa Relocation of lanes Progress: Starting in the near future (September, 2014) Investment: 381 thousand Dlls. Relocation of lanes Progress: Starting in the near future (September, 2014) Investment: 381 thousand Dlls. 4 Modernization Plan of Customs Infrastructure

Full reorganizing of bridge “Zaragoza-Ysleta” 50% increased capacity in inspection platforms, 66% in import exit lanes and 25% in equipment. Progress: Starting in the near future (September, 2014). Investment: MD Full reorganizing of bridge “Zaragoza-Ysleta” 50% increased capacity in inspection platforms, 66% in import exit lanes and 25% in equipment. Progress: Starting in the near future (September, 2014). Investment: MD New bridge crossing and port facilities “Guadalupe Tornillo” New infrastructure POV and cargo inspection. Progress: Starting in the near future (September, 2014). Investment: MD New bridge crossing and port facilities “Guadalupe Tornillo” New infrastructure POV and cargo inspection. Progress: Starting in the near future (September, 2014). Investment: MD Ciudad Juárez 5 Ojinaga Tecate, Acuña, Puerto Palomas, Ojinaga, Mexicali II y Subteniente López Progress: Under design (December, 2014). Investment: 2.7 MD Tecate, Acuña, Puerto Palomas, Ojinaga, Mexicali II y Subteniente López Progress: Under design (December, 2014). Investment: 2.7 MD Project Outlines to expanding and reorganizing 6 different ports of entry. Nuevo Laredo Expanding overall facilities (Phase I) Progress: Starting in the near future (September 2014). Investment: MD Expanding overall facilities (Phase I) Progress: Starting in the near future (September 2014). Investment: MD New certified enterprises lanes and buffer zone Progress: Starting in the near future (August, 2014). Investment: 1.15 MD (State Government funding) New certified enterprises lanes and buffer zone Progress: Starting in the near future (August, 2014). Investment: 1.15 MD (State Government funding) Prospective 2014 Modernization Plan of Customs Infrastructure

Joint projects with California, USA Construction of toll intermodal port for commercial and non- commercial traffic Completion date: Construction of toll intermodal port for commercial and non- commercial traffic Completion date: Pedestrian crossing “Puerta Este” Progress: 80% completed New northbound lanes Progress: To be initiated once connection of I5 to El Chaparral is completed (2015). Pedestrian crossing “Puerta Este” Progress: 80% completed New northbound lanes Progress: To be initiated once connection of I5 to El Chaparral is completed (2015). El Chaparral – San Ysidro Connection to I5 and 9 northbound lanes Progress: Project outline completed New pedestrian inspection and administrative building Completion date: 2015 Connection to I5 and 9 northbound lanes Progress: Project outline completed New pedestrian inspection and administrative building Completion date: 2015 Construction of new toll border crossing Completion date: Construction of new toll border crossing Completion date: Otay II – Otay Mesa East Reorganizing of import area 50% increase in capacity for cargo clearance. Completion date: Investment: Over 52 MD. Reorganizing of import area 50% increase in capacity for cargo clearance. Completion date: Investment: Over 52 MD. Otay-Otay Mesa Tijuana Airport Pedestrian Connection 100% increase in infrastructure for Customs personnel and expanding of passenger inspection area. Progress: 80% completed Completion date: Pedestrian Connection 100% increase in infrastructure for Customs personnel and expanding of passenger inspection area. Progress: 80% completed Completion date: Expanding of Border crossing Construction of a new building for pedestrian inspection, improved connections with the city’s roadways, and greater capacity for crossings north and southbound. Completion date: Investment: Over 42 MD. Expanding of Border crossing Construction of a new building for pedestrian inspection, improved connections with the city’s roadways, and greater capacity for crossings north and southbound. Completion date: Investment: Over 42 MD. Mexicali I – Calexico West Reorganizing of cargo inspection areas 75% increase in capacity for import and export cargo inspection and high specification equipment. Completion date: Investment: Over 175 thousand Dlls. (import area) and nearly 13 MD (export area). Reorganizing of cargo inspection areas 75% increase in capacity for import and export cargo inspection and high specification equipment. Completion date: Investment: Over 175 thousand Dlls. (import area) and nearly 13 MD (export area). Mexicali II – Calexico West Tecate - Tecate Project outline for expanding Customs facilities 100% increase in infrastructure and equipment for cargo inspection areas and expanding of POV and pedestrian inspection areas. Completion date: Investment: Nearly 250 thousand Dlls. Project outline for expanding Customs facilities 100% increase in infrastructure and equipment for cargo inspection areas and expanding of POV and pedestrian inspection areas. Completion date: Investment: Nearly 250 thousand Dlls. USA projects 6

Unifies data contained in the cargo manifests, allowing carriers to submit information to Customs authorities in Mexico and the United States (SAT and CBP) simultaneously in electronic format. Enables customs authorities of both countries to perform joint risk assessment. Additionally, traders will benefit from having an identical format to convey information, resulting in faster and less expensive procedures. Rail freight. A pilot program is being deployed for northbound traffic (from Mexico to the US) at Nogales, Sonora – Nogales, Arizona, and at Mexicali, Baja California – Calexico, California. It is expected to be operating by the end of Land cargo: The Mexican Revenue Service (SAT) will develop a manifest for truck cargo, starting with northbound traffic. Pilot testing will start in Sea and air cargo: Pilot testing of harmonized manifests is expected to begin in Single Rail Manifest 7

CBP and SAT will conduct a joint inspection at a single checkpoint, facilitating customs clearance. The project includes three initial pilots: Laredo (Texas) Airport to clear air cargo destined to 7 Mexican airports. Tijuana Port of Entry, at Mesa de Otay, to clear agriculture products. “Foxconn” facilities, near Ciudad Juárez Port of Entry, to clear computer shipments. 8 Cargo Pre-inspection

AEO Mexico certifies manufacturing enterprises, shippers (transporters) and customs brokers. In the near future, the program will extend to other parties in the supply chain to include industrial parks, port operators and couriers. By July 31th, 2014, 447 applications have been submitted (not including shippers), among which: 390 have been authorized 35 are being processed 12 have relinquished 10 have been denied The 390 certified enterprises have a total of 763 facilities, of which 276 are C-TPAT. 390 Certified Enterprises 763 Certified Facilities Authorized Economic Operator- Mexico 9

Certified Cargo Infrastructure Pilot Program: Certified cargo confined lanes Main objectives Develop infrastructure, equipment and operation rules to expedite clearance for AEO Mexico and US. Benefits are divided in four stages: 1.Reaching Customs facilities. 2.Entering Customs facilities. 3.Inspection and verification at Mexican ports of entry. 4.Inspection and verification at CBP. Pilot Program selection process 1.Review built in capacity and traffic flows in customs facilities along US/MX border. 1.Joint visits in the following crossings: Zaragoza/Ysleta Mexicali/Calexico Tijuana/Otay Nuevo Laredo/Laredo 3. Recommendation for pilot execution based on: Required infrastructure Potential impact Stakeholder support 10

Pilot Program: Certified cargo confined lanes POE reconfiguration Certified Cargo Infrastructure Next steps 1.Project timeline approval 2.Stakeholders outreach Certified companies State and local authorities 3.Define operation rules and communication plan 4.Improve existing infrastructure 5.Define milestones Benchmarking (before/after) Monitoring Stakeholder feedback StageActivitiesExecution period Reaching Customs Facilities Lane confinement: - Stakeholders commitments - Improving infrastructure January-March 2014 May- September 2014 Entering Customs facilities and inspection and verification at Mexican Ports of entry ‐Operation rules and communication plan ‐Temporary infrastructure improvements ‐POE reconfiguration April-June 2014 July-October 2014 May 2014-July 2015 Monitoring before and after improvements 11

Mexico has the most solid Authorized Economic Operator (AEO) in Latin America. Therefore, various countries have approached Mexico with the intention of subscribing a Mutual Recognition Agreement (MRA). An MRA allows for the recognition between the AEOs of two countries and the compatibility of their respective levels of exigency. Both parties in an MRA recognize their counterpart as reliable, promoting the development of new supply chains between the two Nations. On March 11 th, the MRA between Mexico’s and Korea’s AEOs was signed, constituting the first MRA in Mexico and Latin America. We are currently completing the last phase in the negotiation to subscribe a similar agreement with the United States of America’s C- TPAT program. Once this agreement is formalized, the benefits for certified enterprises that take part in foreign trade with the US will be tangible. Mutual Recognition Agreement 12

Improved Passenger Inspection A new procedure was recently implemented in 12 airports, by which baggage inspection is done using X-ray equipment, and only if the automated selection device requires it, reducing the time for passenger customs clearance. Trusted Traveler Program (Viajero Confiable) A Trusted Traveler will be able to clear immigration and customs through special desks located at the Mexico City, Cancun and Los Cabos airports. By June 30 th, there were 468 members of the program. Payment of duties for exceeding personal exemption at point-of-sale (POS) terminals By June 30th, 125 POS terminals have been installed in 46 Ports of Entry across the Country, registering a total of 44,569 operations that equal 3.7 million dollars in revenue collection. Facilitation Strategies for Passengers 13