Sophisticated fuel smuggling operation into Mexico has been delved into, revealing how cartels utilize maritime tankers and corrupt practices to import vast quantities of untaxed fuel, often in collaboration with a U.S. trading entity.
Anatomy of an Illegal Fuel Shipment
The core of the smuggling operation involves mislabeling high-value petroleum products to evade Mexican import taxes:
- The Vessel and Cargo: On March 8, a petroleum tanker entered the Port of Ensenada, an unusual sight for the port, which lacks the proper infrastructure for safely handling flammable hydrocarbons. The vessel carried nearly 120,000 barrels of diesel.
- The Operation: The discharge operation was risky and fast, with waves of fuel-hauling trucks rolling up to the dock to receive the diesel directly from a large hosepipe connected to the ship, bypassing safe marine terminals. This practice, known as direct vessel-to-truck offloading, is used to expedite the process and avoid oversight.
- The Tax Dodge: The diesel cargo, valued at about $12 million, would have incurred nearly $7 million in tax upon legal entry into Mexico. To evade this levy, the cargo was declared in customs paperwork as a petrochemical product, specifically “additives for lubricants” or simply “lubricants,” which are exempt from Mexico’s IEPS tax.
The Criminal Enterprise and Participants
The successful execution of the scheme relies on a network of criminal, logistical, and corporate partners:
- The Cartel Link: The operation was reportedly the work of smugglers connected to one of Mexico’s largest and most violent cartels. The cargo’s recipient in Mexico, a company based in Monterrey, is suspected by Mexican authorities of being a front for the Jalisco New Generation Cartel.
- The U.S. Trading Entity: A Houston-based company played a key role. It purchased the Canadian diesel, claimed in paperwork that the fuel was mislabeled products, and chartered the tanker for delivery. This U.S. entity arranged at least four other maritime deliveries to the Port of Tampico, with mislabeled cargo declared as “additives for lubricants” in customs documents.
- The “Dark Fleet”: U.S. officials have begun referring to vessels carrying this illegal fuel as a new “dark fleet,” a term previously associated with illicit shipping aimed at evading sanctions on crude oil from certain regions.
Scope and Impact of the Smuggling Racket
The illegal fuel trade has become a major crisis, rivaling drug trafficking profits and causing significant economic damage:
- Revenue Source: Illegal fuel and stolen crude oil are now the largest non-drug revenue source for Mexican cartels, per the U.S. Treasury Department.
- Market Share and Value: Bootleg imports account for as much as one third of Mexico’s diesel and gasoline market. The value of illegal fuel entering the country is estimated at more than $20 billion a year.
- Lost Revenue: The cost to the Mexican government in lost IEPS tax revenue was nearly $4 billion in 2024, according to a source who assisted in calculating the illicit trade’s size.
- Market Distortion: The bootleg diesel is sold at a discount of 5% to 10% below the price of legitimate imports, severely undercutting established oil companies. One major European multinational disclosed the sale of its retail fuel business in Mexico, due in part to the difficulties of competing with the cheaper cartel fuel.
- Law Enforcement and Corruption: The surge in tanker smuggling has triggered a corruption scandal within the Mexican Navy, which is responsible for port administration and has long been one of the country’s most trusted institutions. The U.S. government has offered rewards of up to $10 million for information on cartel fuel crimes.
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Source: Reuters
