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More and more manufacturers are asking, just what is Mexico’s IMMEX program, and how can it help my business? To better understand how this trade instrument significantly cuts import/export costs for foreign companies, we will break down its various components, benefits, and regulations.
For those interested in establishing a manufacturing operation, we will also discuss how to go about it. What are the important considerations when exploiting the Maquila program or IMMEX? How can it cut your costs? These and other questions will be addressed below as we explore the history, impact, and requirements of this increasingly popular outsourcing option.
Labor sharing between the US and Mexico goes back many decades. In the 19th and early 20th centuries, this primarily took the shape of migrant workers crossing the Rio Bravo to work in US farm fields. Cheap, unskilled labor helped get harvests in and planting done on time. This was largely due to the Bracero Program, which ended in the 1960s.
The glut of labor left on the Mexican market led to advent of a more proactive cooperation between the North American countries. Eventually, this interest in skill sharing and cooperative production led to the modern institution of the maquiladora or assembly factory for US companies. The Maquila Program (IMMEX) has become a pilar of the Mexican economy and a vital element of US competitive manufacturing.
The Maquila program established in the 1960s was later codified in 2006 according to the IMMEX Decree. This federal decree affords US companies the unique opportunity to temporarily export equipment and materials into Mexico duty-free on a temporary basis. Maquiladora factories in Mexico use these imports to produce goods that are then exported back to the States duty-free. While in Mexico, the inputs and equipment are considered for tariff purposes still in the US, since they will soon be shipped back.
The IMMEX Decree aims to:
There are five classifications of maquila operations, depending on your goals and situation. However, option 4 benefits US manufacturers most:
Mexico’s IMMEX program provides an immense benefit to US companies wishing to take advantage of the highly skilled but very low cost of labor in Mexico. Depending on the nature of the finished product, the company may entirely sidestep value added tax (VAT) and general import tax on goods that enter Mexico for a specified period of time (usually 6-12 months) and for the express purpose of being later exported. This temporary assignment presents foreign manufacturers the equivalent of a significant tax incentive for doing business in Mexico.
There are other cost-saving benefits, too:
Obtaining registration under Mexico’s IMMEX Program is actually not difficult. But companies must meet certain requirements:
If you are considering Mexico’s IMMEX Program as a potential solution for your manufacturing needs, there are some things you will need. Opening a factory in a foreign country can be a daunting process. To simply things somewhat, below is a list of requirements in addition to your IMMEX application for registration:
If you’d like to eliminate the complexity and get right to leveraging IMMEX’s benefits, contact us now to discuss our simplified shelter services!