COVID-19 Response

Leveraging the Benefits of Duty Free Manufacturing in Mexico

The manufacture in Mexico of a wide variety of products destined for the markets of the United States offers a number of significant advantages over cross national manufacturing facilities in other countries. While transportation, inventory and administrative costs are also lower, the chief benefit with manufacture in Mexico comes from the duty free relationship between the U.S. and Mexico.

Manufacture in Mexico

For many decades, the United States and Mexico have understood that, with cooperation, both parties could benefit from the Mexican manufacture of goods bound for U.S> markets. These manufacturing facilities, known as “maquiladoras,” operate in Mexico in a free trade zone near the border with the United States.

The maquiladora system benefits Mexico and its companies as they provide gainful employment for Mexican nationals from laborers to engineers. In addition , they gain the advantages of foreign investment in specialized and improved manufacturing technologies. In return, the U.S.. companies and their customers can buy products at more affordable prices. The only problem was how to deal with any duties, taxes or fees that were incurred when the raw materials entered Mexico and when the finished product crossed back into the United States.

The IMMEX Program

Various strategies and programs have been tried throughout the years but, by far, the most effective is the current Mexican program known as IMMEX. Not only does this program provide for the temporary importation of goods, their enhancement or improvement and the subsequent exportation to the U.S., it also consolidates all the importation and exportation guidelines and rules of the Mexican government under one authority. In short, it significantly simplifies the cross border transfers of products across the border of the two countries.

In addition to simplification, IMMEX greatly reduces the tax and duty burdens on finished products shipped to the United States from Mexico. In particular, the General import tax, the VAT tax and any payments for compensatory quotas are avoided. Similarly, payments on domestic purchases and any import duties on machinery or products used in the repair of equipment are also diminished or eliminated.

Getting the Most from IMMEX

The effective of this program requires that companies examine their entre cross border manufacturing operations. The use of an experienced Mexico manufacturing service provider can significantly and costs effectively expedite this process. Every company considering a change in the location of their operations should examine all the advantages of manufacture in Mexico.