How Foreign Manufacturers Use Mexico’s IMMEX Program to Their Advantage

The benefits of manufacturing in Mexico have become common knowledge for most, though few may know about the specific importance of the IMMEX program. The IMMEX (formerly known as the maquiladora) program was established in the 1960s as a way to boost the manufacturing industry in Mexico. Due to its tax advantages, global companies have been able to expand their operations at a much lower cost for decades.

A maquiladora is a foreign-run factory in Mexico, and the IMMEX program is what all maquiladoras must operate under. Approved manufacturers that also obtain VAT certification are exempt from the 16% value-added tax placed on all temporarily imported materials, tools, and machinery as long as the final products are exported.

However, to receive these cost-saving benefits, regulations require diligent record-keeping of all inventory. Any miscalculations can be costly, either due to financial penalties or production delays. Therefore, it’s helpful for those new to manufacturing in Mexico to partner with a shelter services company.

The Added Benefit of Working with a Shelter Partner

Though each company is different, all manufacturers share one common goal: to reduce operational costs. This can be achieved by moving all or part of the production to Mexico and enlisting the help of a shelter company.

A shelter company is unique to Mexico and offers all the administrative services necessary to get a production up and running. Shelter services in Mexico include everything from HR and payroll to tax, accounting, and trade. By partnering with a shelter, manufacturers have all these departments managed together rather than hiring outside consulting, making it more cost-effective and efficient.

Also, a shelter provides immediate savings on permits and license fees, including IMMEX and VAT certifications, as well as reduced labor costs. Mexico labor rates are significantly lower than in the U.S. with greater accessibility to technically skilled talent. A shelter has the connections and network in place to quickly source workers needed to fulfill specific roles.

Shelter services also include site selection to determine which area and facility best supports each company’s specific processes and production goals. Nearly 80% of maquiladoras are set up in the border areas of Mexico, though competitiveness has caused the industry to spread out to other regions where there is more access to industrial space and labor. Regardless, U.S. and other foreign operators save money by being closer to their target markets and maintaining protection of their intellectual property. Plus, due to the close proximity, manufacturing in Mexico reduces travel and transportation costs while improving quality oversight for U.S. manufacturers.

Because of the benefits, most choose to operate under a shelter, though there’s the option of establishing a standalone entity. However, as a standalone, it can take weeks if not months to receive IMMEX program and VAT certification approval, which means all taxes and duties will be applied accordingly. Furthermore, standalone entities are legally exposed and take nearly twice as long to launch production.

At IVEMSA, we customize our shelter services for manufacturers whether they’re operating as a standalone or under the shelter. Either way, registering for the IMMEX program is the first step as a new company operating in Mexico, and we have that already taken care of.

Contact IVEMSA today to learn more about how our shelter services can support your goals.

Source:
https://www.gao.gov/assets/gao-03-891.pdf