A Deep Look Into the IMMEX Program and Its Importance When Choosing Maquiladoras
Updated: Feb 1, 2022
Establishing manufacturing operations for your business in Mexico with an IMMEX certified maquiladora provides many advantages in regard to tax incentives, costs, labor, and much, much more. What is an IMMEX permit? What type of impact does it have on outsourcing manufacturing? What type of benefits does an IMMEX certified maquiladora offer? Read on to find the answers to these questions and more.
What is an IMMEX Program? Formally known as the IMMEX maquiladora program, the IMMEX program makes it possible for foreign manufacturers to bring components and raw materials into the country of Mexico so that those materials and components are tax-free and duty–free. There is a condition, however, and that is that all of the raw material and finished products that are used or what the manufacturer makes will be shipped out of Mexico with a specific time period, and that time period is mandated by the Mexican government. The main objective of the IMMEX program is to boost the economy of Mexico by allowing companies from other countries to make their products in an environment that’s competitive, thereby generating jobs for the whole socioeconomic spectrum.
The program allows companies from other countries to join forces with their companies or with third parties in Mexico that offer labor, a framework that’s legal, as well as oversight of the manufacturing process for a cost that is remarkably lower than the company would likely be subjected to in their native countries. The final cost of the finished products is reduced and in turn, the profit margins are higher for the company.
An Overview of the Maquiladora Program Initiated in 1965 by the government of Mexico, the maquiladora program was established as a way to answer issues with unemployment while offering foreign business owners with an assortment of tax-free and duty-free perks, terms that apply to special customs, and access to labor that’s both highly skilled and affordable. By the year 1985, maquiladoras had grown to become the biggest foreign exchange source in the country of Mexico. By 1994, the maquiladora program was booming, thanks to the North American Free Trade Agreement (NAFTA), which established foreign grade lines between Mexico, the United States, and Canada by removing a large amount of tariffs and other barriers that are related to free trade between these three countries.
NAFTA also eliminated quotas that stopped Mexico and the United States from sharing their markets in full while making it possible for maquiladoras to make products without the limitations that had previously been in place. Ever since then, Mexico has comprised about 50 percent of all country exports and has established more than a million jobs through more than 3,000 export assembly and manufacturing plants.
The simplest way to establish a maquiladora and enjoy the operational expenses that are associated with manufacturing is by operating through a Mexican Shelter Company. In doing so, and if your company is interested in moving the manufacturing component of your business to Mexico, you can make use of the advantages and resources that are made available via the maquiladora program.
Types of IMMEX Registrations In order to take advantage of the benefits that IMMEX offers, you have to register with the IMMEX program through Mexico’s Department of Economy. This status is given to companies that have annual abroad sales of a minimum of $500,000 USD or exports that account for a minimum of 10 percent of the total of your organization’s invoices. By law, IMMEX companies must report their total sales and exports, so as to ensure that are meeting the minimum amount requirement.
There are five different types of IMMEX registrations, which include:
This is the easiest and most straightforward way to establish an IMMEX program. It covers a company that is utilizing imported goods in an industrial manner in order to generate or modify a product that it will be exporting.
Holding Company IMMEX
This type of IMMEX registration covers businesses that offer necessary services that support the export of goods that are relevant as per the registration. For instance, a software developer could be registered in Mexico under the IMMEX Services Program and registration is provided at the discretion of Mexico’s Department of Economy.
This type of IMMEX registration covers businesses that offer necessary services that support the export of goods that are relevant as per the registration. For instance, a software developer could be registered in Mexico under the IMMEX Services Program and registration is provided at the discretion of Mexico’s Department of Economy
IMMEX Outsourcing Program or Third-Party
If a business is certified but doesn’t own the facilities that are needed to perform the production processes, the business can manufacture their products via a third-party that has registered its program. It should be noted, however, that companies that perform the outsourcing to accept joint liability for the imported goods
A Mexican company that is registered can act as the legal entity that assumes the legal liabilities for companies that operate under its IMMEX registration. Foreign businesses earn the benefit of having access to the knowledge and insight of an experienced partner and can work on their manufacturing process.
The Impact IMMEX Programs Have on Outsourcing Manufacturing Initially, IMMEX focused mainly on textiles, general electronics, and industrial products; however, by the 21st century, the country of Mexico has expanded its manufacturing to include a variety of industries. In fact, Mexico is currently one of the biggest manufacturers in the auto industry, as 89 of the top auto parts manufacturers are situated in the country.
Other industries that use IMMEX programs for manufacturing include:
Aerospace and engineering
General consumer products
Benefits of IMMEX Some of the most notable benefits of IMMEX include:
Flexibility for locations and products and services
Simple administrative management
Lower production and operational costs, as well as tax incentives
Summing It Up With so many benefits and options, it’s easy to see why so many companies are taking advantage of the IMMEX program with Maquiladoras in Mexico. Contact us at Javid LLC to find out if IMMEX can benefit your business, too.