Maquiladora operations date back to the 50's and have gradually changed over the years with the advent of NAFTA and the opening of the Mexican market. The Mexican government changed the program in 2006 to implement the IMMEX program, or, Decreto para el Fommento de la Industria Manufacturera Maquiladora y de Servicios de Exportación.
Maquila Operations Under the IMMEX Program
In its simplest form, a Maquila operation under the IMMEX program is a Mexican subsidiary wholly owned by a foreign parent for the purposes of contract manufacturing in Mexico. The program allows a company to import equipment, machinery, raw materials and semi-finished goods into Mexico duty-free, perform value-added operations to them, and export the goods back abroad, and, if desired, sell a percentage of goods in Mexico. The equipment and machinery may be held in Mexico on a bail out basis while the Maquila/IMMEX program is in effect, after which it has to be re-exported or sold for its then-current value.
The advantages also include a streamlined process for company formation, a lower income tax rate and the ability to have the work performed by lower wage Mexican workers. The relationship between the foreign parent and the Mexican subsidiary is memorialized in Maquila agreement, which must be filed with the government as part of the approval process. An IMMEX company may further sub-contract parts of its operation to other IMMEX companies in Mexico, which helps to broaden its manufacturing base. The IMMEX application is filed with and approved by the Mexican Secretaria de la Economia (Economic Secretary), and many of the formalities of forming the Mexican IMMEX company that will contract manufacture are similar to the formation of other enterprises in Mexico.
Applying for the IMMEX Program
The IMMEX application process is somewhat bureaucratic and, while not difficult, the application must be prepared properly to avoid delays. A great deal of operational data is required (goods to be imported, materials to be used, length of time equipment will be used, copies of purchase orders, etc.) as well as the formation documents of the Mexican entity, the inter-company Maquila agreement and any other inter-company agreements such as management services. Good U.S. and Mexican customs brokers are essential to ensure that all import-export paperwork is completed properly on both sites of the border.
Procedures and Documentation
Operating an IMMEX program properly also requires diligence on the part of both the foreign and Mexican affiliate. Each item imported into Mexico receives a pedimento, a paper which documents the import. Upon export of the good or its transfer to another company, the pedimento, the certificate of origin and the invoice (factura) must accompany the item being transferred. The Mexican tax authorities audit IMMEX companies to determine whether all the papers are in order, that all the pedimentos match, and duty owed has been properly paid. Companies that are lax about their procedures and documentation have found to their distress that in addition to hefty tax fines for unpaid duty. The Mexican tax authorities can open an administrative process to investigate the company's customs filings, and impound machinery or equipment until the company can demonstrate that it was properly imported under an approved IMMEX or Maquila Program.
Manufacturing Communities and IMMEX
The Offshore Group's manufacturing communities are an evolution of the traditional shelter service, and offer a base infrastructure for a low cost manufacturing environment hosting a range of services that includes HR services and employee leasing, facilities leasing or sub-leasing, customs brokerage, contract manufacturing, and general administrative services. Manufacturing communities also offer "instant Maquilas" that permit new companies to operate under their business license, thus offering a "soft landing" to foreign companies that may be new to Mexico.
The advantages of using a manufacturing communities in Mexico for a new entrant into market are clear: the company can set up quickly, without many of the legal burdens that may be difficult or time consuming at the outset. The shelter company within The Offshore Group's manufacturing communities is the legal employer of the employees, may be the tenant, in some cases, on the lease of a building, and is responsible for the taxes and other administrative burdens related to the manufacturing communities. There is usually no long-term commitment required, and offers a new company time to organize and to become familiar with the environment in which it is located in Mexico.