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Establishing a maquiladora operation in Mexico doesn’t have to be difficult

Establishing a maquiladora operation in Mexico doesn’t have to be difficult

There are many benefits to be gained by manufacturers that establish a maquiladora operation in Mexico. These include the ability to:

  • access a skilled labor force at globally competitive
  • service North American markets, while optimizing transportation costs and turnaround times
  • combine duty free material inputs from across the NAFTA region in the manufacture of competitively priced goods
  • work with international resources within domestic time zones

As they gather their information, companies that research the establishment of a maquiladora operation in Mexico, will learn that they can choose to go the route that enables them to focus solely on the core manufacturing competencies and value-added functions that make will make them successful vis a vis their competition. Contracting with a shelter company in Mexico allows firms to establish a maquladora operation in Mexico, without incorporating directly in the country. This provides several distinct advantages in terms of cost and risk:

  • the shelter company is the “legal employer” of its manufacturing firm client workforce in Mexico, thereby assuming all employer responsibilities for its employees under Mexican Labor Law;
  • the shelter company client is present in Mexico under the Mexican corporate entity of the shelter company in Mexico, thereby reducing manufacturers’ risk in the important areas of tax considerations; Mexican Customs laws and regulations, as well as in the areas of environmental and worker health and safety regulation compliance. These issues become the primary responsibility of the shelter company;
  • while the manufacturer operating under the auspices of a shelter company in Mexico is responsible for providing manufacturing know-how, and raw materials, components and machinery, the shelter firm provides companies seeking to establish a maquiladora operation in Mexico with the infrastructure in the areas that it needs to go about the conduct of its business. These include:.

Human resources
Mexican payroll and benefits management
Mexican accounting
Logistics and transportation
Customs and import-export services
Facilities management
MRO vendor management and procurement
Environmental and health regulation compliance
Supply chain services

There are companies,however, that, for reasons of company culture or preference, will choose to take on all of the responsibilities associate with incorporating own their own to initiate a manufacturing operation in Mexico, as to expend the resources to identify and recruit the human resources to replicate the infrastructure that a shelter company has already put in place. For companies that choose to travel this route, a summary of the steps required to do so is provided below:

  1. Legal Steps for Incorporation
    Mexican attorneys must complete and file the appropriate paperwork for incorporation in Mexico, involving the following steps:
    Attorneys must obtain a denomination permit from the Ministry of Foreign Affairs.
    Standard incorporation or limited liability must be settled upon and by-laws drafted, which must be notarized and recorded with the Public Registry of Commerce.
    Stock certificates must be prepared and issued.
    Corporate ledgers must be prepared for the recording of all minutes and sessions.
  2. Environmental Considerations
    An Environmental Preventive Report must be submitted to the appropriate government authorities that detail the nature of the activities to be performed in the maquiladora operation in Mexico, and demonstrating that such activities pose no environmental hazards.
  3. Real Estate Decisions
    A Purchase and Sale, or Lease Agreement must be drafted and executed to show commitment to a specific parcel of land, or industrial rental space. If the project is to be a “greenfield” effort, and the lot is not located land designated for industrial use, an additional land use permit must be acquired.
  4. Tax Matters
    After incorporation is achieved, the new company must be recorded and compliant with local and federal tax authorities and regulations: A Federal Taxpayer Registry Number (RFC) may be obtained from the corresponding federal tax authority.The company’s Advanced Electronic Signature must be processed for the Ministry of Finance and Public Credit. A payroll tax of will be due to the state in which the maquladora operation in Mexico each month based on the total payroll cost. Maquiladoras are required to pay a corporate federal income tax at a rate of thirty percent.
  5. Intercompany Agreements
    Appropriate agreements must be finalized between the Mexican maquiladora and the foreign parent company. Possible agreements to file may include:

    • Bailment Agreement
    • Commodatum Agreement
    • Maquiladora Agreement
  6. Labor Considerations
    Every two years, a Collective Labor Agreement must be executed with any one of the local labor unions. If the maquiladora has more than 20 employees, a Collective Bargaining Agreement or
    Individual Employment Agreement may also apply.
  7. Work Visa Acquisitions
    All foreign workers conducting business in Mexico must obtain one of the following visas depending on the case:

    • FMN
    •  FMVC
    • FM3
  8. IMMEX Application
    Finally, a Maquila application must be filed with IMMEX, which includes the following:

    • A list of all materials, tools, equipment, etc. along with their tariff classifications;
    • Company name;
    • Number of employees;
    • Special permits from the Health or Labor departments, possibly required for some equipment usage;
    • Additional contracts with utilities and service providers,possibly required;

For some companies that wish to initiate and maintain a maquiladora operation in Mexico under the country’ s IMMEX, or maquiladora program, going the route of contracting with a shelter company for the provision of non-core services, while focusing on the business of manufacturing and making a better, more competitive product is the less cumbersome and more logical choice. For other firms, exercising direct and complete control, although doing so entails the acceptance of more risk and responsibility (as well as cost, in many instances), may be the preference of the organization’s culture.

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