Implementing Technical Regulations in Mexico

Introduction

Mexico’s technical regulations (NOMs)

The scope of this review covers the implementation and delivery of “NOMs”, the Mexican technical regulations. NOMs are one of the regulatory instruments that the Mexican Executive branch can deploy to pursue its policy objectives, together with primary laws and subordinate regulations (Table 1). They are defined as the binding instruments issued by public bodies of the federal public administration that establish rules, specifications, attributes, directives, characteristics, or provisions applicable to a product, process, installation, system, activity, service or production or operation method, as well as rules regarding terminology, packaging, use of marks and/or labelling.1 Together with Mexican Standards (NMXs), NOMs contribute to the Mexican “standardisation system”. However, NMXs are voluntary instruments that fall outside of the scope of this review.

The Federal Law on Metrology and Standardisation (Ley Federal sobre Metrología y Normalización, LFMN) establishes a broad scope of application for technical regulations. Articles 52 and 53 state that all products, processes, methods, facilities, services, or activities domestic or imported must comply with NOMs. As of January 2020, there were 702 NOMs in force. The Ministries of Health, Economy, Agriculture, Environment and Communications and Transport are responsible for over 75% of all NOMs (Figure 1).

This approach grants a broader scope to “technical regulations” than usually contemplated in other countries (Box 1), in particular by going beyond product regulation and including a range of non-industrial services and food. This difference in scope explains why some aspects of international experience may be more-or-less difficult to match with elements of the Mexican system. In an attempt to map the range of measures covered by NOMs in Mexico, Box 2 organises them in a number of broad families with similar features.

Table 1. Mexico’s regulatory instruments

Regulatory instruments
Primary laws Primary laws initiated in the executive branch (approximately 9% of the total universe of primary laws)
Subordinate regulation Bylaws Decrees Ministerial agreement or notice Circulars Manuals, methodologies, calls, programmatic rules of operation
Technical regulation Official Mexican Standards – NOM
Standards Mexican Standards – NMX

Source: (OECD, 2018[1]), Review of International Regulatory Co-operation of Mexico, Paris, https://dx.doi.org/10.1787/9789264305748-en.

Figure 1. NOMs per Ministry or Federal Agency

Source: DGN (2020).

Box 1. Definitions of technical regulations

In the EU, Directive 2015/1535/EU1 defines technical regulation to mean “technical specifications and other requirements or rules on services, including the relevant administrative provisions, the observance of which is compulsory, de jure or de facto, in the case of marketing, provision of a service, establishment of a service operator or use in a Member State or a major part thereof, as well as laws, regulations or administrative provisions of Member States, except those provided for in Article 7, prohibiting the manufacture, importation, marketing or use of a product or prohibiting the provision or use of a service, or establishment as a service provider.”

De facto technical regulations under the EU definition include:

1. laws, regulations or administrative provisions of a Member State that refer either to technical specifications or to other requirements or to rules on services, or to professional codes or codes of practice which in turn refer to technical specifications or to other requirements or to rules on services, compliance with which confers a presumption of conformity with the obligations imposed by the aforementioned laws, regulations or administrative provisions;

2. voluntary agreements to which a public authority is a contracting party and which provide, in the general interest, for compliance with technical specifications or other requirements or rules on services, excluding public procurement tender specifications; and

3. technical specifications or other requirements or rules on services which are linked to fiscal or financial measures affecting the consumption of products or services by encouraging compliance with such technical specifications or other requirements or rules on services; technical specifications or other requirements or rules on services linked to national social security systems are not included.

The World Trade Organization (WTO) Agreements on Technical Barriers to Trade (TBT) and on the Application of Sanitary and Phytosanitary Measures (SPS) provide a notification system for regulatory measures with potentially significant trade effects as well as for agreements on technical regulations, standards or conformity assessment procedures between members. For the purposes of WTO disciplines, technical regulations are defined as: “Documents which lay out product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method”.³

ISO/IEC Guide 2:2004⁴ defines technical regulations as “a regulation that provides technical requirements, either directly or by referring to or incorporating the content of a standard, technical specification or code of practice”.

Generally, “technical regulations” are understood as covering industrial products and equipment – and, in some cases, services directly associated with them. These “technical regulations” cover primarily safety aspects, as well as environmental protection, but may also regulate product information and labelling, as well as other issues. Typically, food safety is not covered under the “technical regulations” term, given the very different way in which food safety is to be guaranteed, compared to industrial products – and likewise “conformity assessment” and other elements are mostly applied to non-food items.

¹ Directive 2015/1535/EU, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32015L1535&from=EN.

² 1998 Office of Management and Budget Circular A-119 defines standards for the purposes of 1995 National Technology Transfer and Advancement Act, https://www.whitehouse.gov/wp-content/uploads/2017/11/circular-119-1.pdf.

³ Annex 1.1. to the TBT Agreement.

⁴ ISO, Standardization and related activities - General vocabulary, https://isotc.iso.org/livelink/livelink/fetch/2000/2122/4230450/8389141/iso_iec_guide_2_2004_%28multilingual%29_-_standardization_and_related_activities_--_general_vocabulary.pdf?nodeid=8387841&vernum=-2 (accessed 9 September 2019).

Box 2. Overview of the use of NOMs in Mexico

The use of NOMs in Mexico extends beyond the scope of “technical regulations” in other systems, covering not only product requirements and including a range of non-industrial services and food. These uses include the following, inter alia:

• NOMs that set technical requirements for non-food and non-agricultural products. In Mexico, NOMs may contain specifications and other requirements or rules on non-food and non-agricultural products and services for use by consumers or professionals. These NOMs are typically oriented at guaranteeing a high level of safety protection for consumers, the environment, among others. A number of these NOMs deal exclusively with the labelling requirements of such products. Oversight of these technical regulations typically falls on the relevant sectoral regulators and/or PROFECO.

• NOMs that set technical requirements for medical products (drugs and medical devices). A range of NOMs are aimed at ensuring a high level of protection of human health, setting requirements for approval of drugs and medical devices, as well as labelling rules, and requirements on manufacturing (GMP), among others. COFEPRIS, the sectoral regulator responsible for health in Mexico, oversees compliance with these NOMs.

• NOMs that set requirements for food and agricultural products. These issues are covered by a range of NOMs that can relate to the final product composition and contents, production process, labelling and storage, handling, transport, trade, service, among others. COFEPRIS and SENASICA, as well as State authorities, are responsible for overseeing compliance with most of these NOMs.

• NOMs that set content for standard form contracts. A number of NOMs in Mexico provide mandatory key elements for standard form or boilerplate contracts used in a variety of regulated sectors. These include agreements or language for transactions such as certain loans, real estate and vehicle purchase, car rental services, time-share agreements, and online sells, among others. Most of these NOMs are under the responsibility of the Ministry of Economy and their compliance is supervised by PROFECO.

The development of NOMs follows a systematic process regulated in the LFMN and led by the General Bureau of Standards (DGN) within the Ministry of Economy. This process involves six stages (Figure 2) that include an impact assessment procedure overseen by the National Commission for Regulatory Improvement (Comisión Nacional de Mejora Regulatoria or CONAMER) and the National Advisory Committees (CCNN) responsible for the development and monitoring of a specific NOM, a 60-day public consultation phase, and an ex post review 5 years after a NOM has entered into force.

Figure 2. NOM life cycle

Note: Annex A includes a full description of the process for NOM development.

Source: (OECD, 2018[2]), “Standard-setting and Competition in Mexico: A Secretariat Report”, OECD, Paris.

Mexico has put in place a strong regulatory policy framework (for primary and secondary legislation originating from the executive) led by CONAMER (Figure 3). However, similar to other OECD countries, Mexico’s efforts to strengthen its regulatory policy framework have centred in the early stages of the “regulatory lifecycle”, targeting mainly the design of laws and regulations. This is the case notably of the 2018 reform of the General Law of Regulatory Improvement that focused on reinforcing good regulatory practices such as RIA. Similarly, a proposal currently under discussion in Congress aims to reform the LFMN including the process of design and development of NOMs.

In Mexico and across OECD countries there is much room for improvement in order to reap the full benefits of good regulatory quality (OECD, 2018[3]). In particular, there is a need to bridge the gap between the design and the implementation and enforcement of regulations. The way in which governments enforce regulations and standards is critical. Inflexible or inefficient enforcement increases administrative burdens needlessly, affects compliance and reduces the benefits of regulations (Hampton, March 2005[4]).

Figure 3. Indicators of Regulatory Policy and Governance (iREG): Mexico, 2018

Notes: The more regulatory practices as advocated in the OECD Recommendation on Regulatory Policy and Governance a country has implemented, the higher its iREG score. The indicators on stakeholder engagement and RIA for primary laws only cover those initiated by the executive (34% of all primary laws in Mexico).

Source: Indicators of Regulatory Policy and Governance Surveys 2014 and 2017, https://oe.cd/ireg.

Addressing challenges in the implementation of technical regulations

Good regulation and their appropriate delivery are key factors to promote the trust needed to build markets. In particular, the enforcement of and compliance with technical regulations have critical implications for domestic markets and international trade.

A sound framework for technical regulations benefits consumers by guaranteeing safety, and the normal functioning of markets (including price signals). It allows manufacturers and suppliers to demonstrate the quality of their products across markets and avoid unnecessary inspections. Promoting the implementation of technical regulations allows governments to reduce unnecessary market surveillance, streamline public procurement, foster technological development and increase industrial quality levels.

A strong regulatory framework enables domestic producers to become trusted partners for foreign markets – be it as direct suppliers of consumer products, or as participants in the international supply chain. Conversely, poor use of technical regulations creates barriers to trade and innovation, and hurts competiveness and growth. A lack of trust in the CAP system will result in poor recognition internationally and lowered foreign demand for Mexican products. This issue is especially important for Mexico, for which trade represents more than a third of its GDP.

However, Mexico has faced challenges in encouraging the implementation of technical regulations at the local level. A high proportion of products in Mexico do not meet the requirements and standards set out in NOMs. PROFECO reports that about 20% of products were in non-compliance with Mexican NOMs in 2018 (PROFECO, 2018[5]). More broadly, the informal sector or shadow economy (i.e. businesses operating outside official frameworks) is very large in Mexico. Mexico has one of the largest grey markets among OECD countries, second only to Greece as of 2015. In 2018, the IMF reported that Mexico’s shadow economy2 represented between 24.8% to 31.7% of GDP, a figure far greater than any other OECD country (Schneider, 2018[6])3. These businesses are likely unexposed to the rigorous government processes and requirements set under NOMs. Indeed, the large informal sector – primarily sole traders – could be hard to convince of the benefits of NOMs.

Regulatory delivery of NOMs in Mexico is in practice structured around two pillars: conformity assessment which takes place in the pre-market phase and regulatory inspections carried out during the production process and/or post-market phase. (Figure 4). The first pillar are conformity assessment procedures (CAPs), typically performed by conformity assessment bodies (CABs). This relates to demonstrating ex ante the compliance of proposed products (or, in exceptional cases, services) with the requirements established in each NOM, before such products are effectively placed in the market. The second pillar are regulatory inspections carried out by the government authority responsible for each NOM and/or by PROFECO. Regulatory inspections focus on products or services that are authorised to enter the market and/or are not subject to pre-approval. They can target production processes and conditions or the actual conformity of the product or service with the requirements set in a NOM (ex post). Both pillars are complementary and necessary to ensure the effective functioning of markets and the delivery of the policy goals set in each NOM.

Figure 4. Schematic of regulatory delivery of NOMs

Source: Author’s elaboration.

Governments use technical regulations to ensure the safety and well-being of citizens. These allow to guarantee the particular specifications of a product or service to reduce risks to the health, safety or well-being of citizens. However, the mere existence of technical regulations is not enough to secure these objectives. A successful technical regulations system requires a coherent and functional national quality infrastructure (NQI), i.e. the interplay of metrology, standardisation, accreditation, conformity assessment, and market surveillance that ensures that the requirements set under NOMs are fulfilled.

Conformity assessment procedures (CAPs) are critical to effectively connect the requirements set out in technical regulations with the products and services available in the market. Conformity assessment is the demonstration that a product, process, service, system, person or body meets the relevant regulatory requirements (ISO/IEC 17000:2004). Accreditation provides an additional layer of assurance to verify that conformity assessment bodies (CABs) have the competences and impartiality to perform their functions.

Once a product is placed on the market, governments engage in regulatory inspections (including market surveillance) to monitor that products sold continue to meet the requirements set under technical regulations. Regulatory inspections of technical regulations may include:

• Testing the quality of products;

• Checking stores to ensure that products continue to meet the technical regulations;

• Removing non-compliant products from the market; and/or

• Inspecting factories, power plants, and industrial equipment that must meet technical regulations.

Governments must be very careful in how they design the implementation and enforcement of technical regulations and other legal requirements. The implementation of regulatory inspections itself can have significant impacts on society because of the potential costs for the public administration, possible burdens on businesses, and the impacts on consumers. Poorly designed inspections or surveillance programmes may create high costs for businesses or consumers, reduce competition/choice, or ineffectively assure citizens’ safety. To support countries in this endeavour, the OECD developed Best Practice Principles and a Toolkit on Regulatory Enforcement and Inspections. The Toolkit presents a checklist of 12 criteria to help officials, regulators, stakeholders and experts assess the development of inspections and enforcement systems across a country or in a particular sector (Box 3).

Box 3. The OECD’s Best Practice Principles on Regulatory Enforcement and Inspections

1. Evidence-based enforcement: Regulatory enforcement and inspections should be evidence-based and measurement-based: deciding what to inspect and how should be grounded in data and evidence, and results should be evaluated regularly.

2. Selectivity: Promoting compliance and enforcing rules should be left to market forces, private sector actions and civil society activities wherever possible: inspections and enforcement cannot take place everywhere and address everything, and there are many other ways to achieve regulations’ objectives.

3. Risk focus and proportionality: Enforcement needs to be risk-based and proportionate: the frequency of inspections and the resources employed should be proportional to the level of risk, and enforcement actions should aim at reducing the actual risk posed by infractions.

4. Responsive regulation: Enforcement should be based on “responsive regulation” principles; that is, inspection and enforcement actions should be modulated depending on the profile and behaviour of specific businesses.

5. Long-term vision: Governments should adopt policies on regulatory enforcement and inspections, and establish institutional mechanisms with clear objectives and a long-term strategy.

6. Co-ordination and consolidation: Inspection functions should be co-ordinated and, where needed, consolidated: less duplication and fewer overlaps will ensure a better use of public resources, minimise the burden on regulated subjects, and maximise effectiveness.

7. Transparent governance: Governance structures and human resources policies for regulatory enforcement should support transparency, professionalism, and results-oriented management. The execution of regulatory enforcement should be independent from political influence, and compliance promotion efforts should be rewarded.

8. Information integration: Information and communication technologies should be used to maximise a focus on risks, promote co-ordination and information sharing and ensure an optimal use of resources.

9. Clear and fair process: Governments should ensure that rules and processes for enforcement and inspections are clear. Coherent legislation to organise inspections and enforcement needs to be adopted and published, and the rights and obligations of officials and of businesses, clearly articulated.

10. Compliance promotion: Transparency and compliance should be promoted through the use of appropriate instruments such as guidance, toolkits and checklists.

11. Professionalism: Inspectors should be trained and managed to ensure professionalism, integrity, consistency and transparency. This requires substantial training focusing not only on technical but also on generic inspection skills, and official guidelines for inspectors to help ensure consistency and fairness.

12. Reality check: Institutions in charge of inspection and enforcement, and the regulatory enforcement and inspection system as a whole, should deliver the levels of performance expected from them – in terms of stakeholder satisfaction, efficiency (benefits/costs), and overall effectiveness (safety, health, environmental protection etc.).

Source: (OECD, 2018[7]), OECD Regulatory Enforcement and Inspections Toolkit, Paris, https://doi.org/10.1787/9789264303959-en.

The structure of the review

This report highlights the opportunities and entry points to secure better regulatory delivery of technical regulations (NOMs) in Mexico. For this purpose, Chapter 1 provides an overview of the legal and institutional frameworks governing the implementation and enforcement of technical regulations. It describes the main laws and policies that govern technical regulations, outlines the institutions that are involved in their development and implementation, and provides an overview of recent and ongoing reforms affecting NOMs. Chapter 2 focuses on the pre-market regulatory delivery of NOMs, presenting the conformity assessment and accreditation frameworks applicable in Mexico and specific sectoral illustrations of conformity assessment techniques. Finally, Chapter 3 discusses the regulatory inspection mechanisms used to supervise, promote and enforce compliance with NOMs (including market surveillance activities). The chapter delivers an overview of the resources and approaches used to organise inspections and enforcement activities, and discusses the challenges of the Mexican system against the OECD Best Practice Principles and Toolkit on Regulatory Enforcement and Inspections.

References

[4] Hampton, P. (March 2005), “The Hampton Review – Final Report”, in Reducing administrative burdens – effective inspection and enforcement, HM Treasury.

[7] OECD (2018), OECD Regulatory Enforcement and Inspections Toolkit, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264303959-en.

[3] OECD (2018), OECD Regulatory Policy Outlook 2018, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264303072-en.

[1] OECD (2018), Review of International Regulatory Co-operation of Mexico, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264305748-en.

[2] OECD (2018), Standard setting and competition in Mexico 2018, OECD, http://www.oecd.org/daf/competition/WEB-Standard-setting-Mexico-2018.pdf.

[5] PROFECO (2018), Informe Anual, https://www.gob.mx/cms/uploads/attachment/file/485958/INFORME_ANUAL_PROFECO_2018.pdf.

[6] Schneider, F. (2018), “Shadow Economies Around the World: What Did We Learn Over the last 20 Years?”, IMF Working Paper Series.

Notes

← 1.  Article 3, XI Federal Law on Metrology and Standardisation.

← 2.  For the paper, the authors defined the shadow economy as all economic activities that are hidden from official authorities for monetary, regulatory, and institutional reasons.

← 3.  The OECD country with the smallest shadow economy is Switzerland at 6.94% in 2015.