According to a New York Times story on May 31, 2014, American trade with Mexico has increased nearly thirty percent just since 2010. Additionally, many companies who have in the past imported from Asian sources have recently turned to Mexico, causing an eleven percent increase in shipments to the US to the tune of $964.7 million in the last year alone, according to Furniture/Today research. In the race to compete for import business, Mexico has become the dark horse in the running, able to compete head to head with China with its competitive labor costs and added bonus of convenient logistics for US manufacturers. Logistically, products from Mexico are just across a land border, making over the road transport times measured in days or even hours rather than months at sea from Asian sources. The same goes for raw materials used in furniture production and upholstery and related sub-assemblies in Mexican plants that specialize in cut and sew, and overall assembly of furniture components.
Of course there is a flipside to all of this. As one supply chain executive for Crate and Barrel has said, “Nearshoring to Mexico can reduce transit time and transportation costs, but those savings can be offset by added costs for customs clearance and security inspections.” While this may be true in some cases, contract manufacturers such as MFI International employ their own (in-house) Corporate Mexican Customs broker who helps alleviate delays and costly glitches at the border.
For example: If a product is classified incorrectly, the client could incur penalties, or lose out on valuable NAFTA or other preferential treatment reductions. That’s why it’s important to choose a seasoned turnkey manufacturer who has extensive experience with U.S. and Mexican Customs authorities, and can ensure that your products receive the proper tariff classification and trade incentives.
If you want the “best of both worlds”, contract manufacturing in Mexico is an excellent option.
In this model, you are contractually dealing with a US company, getting a guaranteed price, the benefits of Mexico labor, lead times and logistics, but without the risks of customs clearance, cross border security and penalties.
MFI not only finesses these, it is also the first manufacturer of textile assemblies in Mexico with its own corporate Mexican Customs broker. Jorge Fierro, who coordinates all cross-border and Customs activities for the company with the Mexican government, explains: “It’s a huge benefit. It speeds up the entire process and makes it far more efficient because we control every aspect and do not need to rely on an outside Mexican broker.”
MFI is also certified partner with the United States Customs and Border Protection (CBP) agency in the Customs- Trade Partnership against Terrorism (C-TPAT) program. There are significant advantages as a C-TPAT certified company, some of the benefits are:
Client goods are completely secured from manufacturing plant to final destination
CBP provides priority inspections for its C-TPAT partners
Fewer CBP inspections mean fewer border delays
Access to the Free and Secure Trade (FAST) process that expedites many cross-border shipments
C-TPAT supply chain security training is available
The bottom line with Mexico contract manufacturing with a US Based company is: your product is manufactured at a fixed cost, delivered in the US with customs cleared, duties paid and securely shipped to the United States.