Leveraging Shelter Services to Maximize Mexico Manufacturing Benefits
01.30.24Customization continues to be a business buzzword in 2024, and it’s no different for manufacturing. Though more companies are becoming familiar with the benefit of nearshoring to Mexico, not all business leaders know exactly what it entails and if the solution is a right fit for them.
For decades, global leaders have found success when manufacturing in Mexico as a way to cut costs and improve operational efficiency. Mexico’s geographic location, skilled industrial workforce, and favorable trade agreements have made it a go-to strategy, particularly for those with a U.S. audience.
And, when moving operations to Mexico, there’s the unique option of working with a shelter company. A shelter company handles all the administrative duties necessary to launch production. Their services include everything from HR and accounting to trade and legal compliance.
However, to optimize the opportunities available, companies must recognize how Mexico manufacturing is different, who benefits most, and how Mexico shelter services can be tailored to fit their changing needs.
How Mexico Manufacturing Differs
There are specific rules, regulations, and benefits associated with Mexico manufacturing that aren’t applicable in other countries. The most notable is the IMMEX program which offers a generous tax benefit to U.S. and other foreign operators. Those who qualify receive exemption from the 16% value-added tax on temporarily imported equipment, materials, and goods.
While manufacturers may apply for IMMEX certification and permits as a standalone entity, it can take several weeks before they are approved. Whereas, a Mexico shelter company provides this tax savings from the start.
Who Benefits from Shelter Services
Automotive, aerospace, and electronics manufacturing, in particular, are among the top sectors exploring Mexico as part of their growth strategy. And, typically, it’s small to mid-sized operations that benefit most from what a shelter company offers.
Shelter services allows business leaders to leverage local expertise and networks to streamline their operational setup. For foreign manufacturers, it is the most cost-effective way to do business while minimizing legal risk and exposure.
Additionally, when partnering with a Mexico business shelter, companies can remain flexible depending on growth. They can scale up production or switch gears as needed. Shelter services are tailored to each operation, and manufacturers maintain full control over production and intellectual property rights.
Why a Shelter Company Is Advantageous
With cost-effective labor, steady supply chains, and lower transportation costs, it makes sense for U.S. operators to expand their production to Mexico. Plus, the close proximity between the U.S. and Mexico allows companies to get products to market much faster.
Due to ever-increasing competition, operating under quick timelines (without compromising quality) is essential. A shelter company in Mexico helps manufacturers launch production within three to four months. Whereas, those operating as a standalone entity take closer to six to seven months.
Furthermore, a shelter company also provides:
● Built-in departments (versus individual outsourcing) for HR, accounting, and trade
● Cost savings on administrative and back office responsibilities, compliance, labor, infrastructure, and permitting and licensing fees
● Reduced learning curve regarding international customs compliance
Manufacturing in Mexico already provides an advantage for U.S. and other foreign operators wanting to save on costs and expedite production. However, it’s working with a shelter company that can give companies the extra competitive edge.