What is VAT Tax?

A Value-Added Tax (VAT) is a consumption tax assessed on the value added in each production stage of a good or service. VAT is calculated as follows – (Base Rate + Fuel Surcharge + Accessorial Charges) x 16%.

Why is it Important For Shippers to Understand?

All southbound, Mexican cross-border freight moves will now be subject to VAT, which was previously recoverable by rail carriers and not reflected in rates. However, effective January 1, 2022, VAT will be assessed on all rail shipments travelling from the United States into Mexico. The following is how some of the Class I carriers will be adjusting to take the VAT into account:

Union Pacific (UP)

The UP through rates with the Ferromex (FXE) or Kansas City Southern (KCSM) will include VAT charges on UP invoices.


BNSF is cancelling through rates with the FXE and KCSM.


FXE and KCSM will charge the VAT on their portions of Rule 11 moves from the United States into Mexico.