Nearshore manufacturing has a long history in Mexico, it started in 1965 and had its greatest expansion in 1994 with the introduction of NAFTA (North American Free-Trade Agreement), the IMMEX program (which stands for the Maquiladora, Manufacturing and Export Services Industry, commonly known as MAQUILADORA) was created by the Mexican government to strengthen national exports.
Under the IMMEX program, foreign manufacturing companies are allowed to temporarily import raw materials and components (and machinery and equipment for the manufacturing process) into Mexico, tax and duty free, with the condition that all finished goods produced with that raw material, will be exported outside of Mexico (or transfer them to another IMMEX company) during a timeframe specified by the government (18 months as a general rule).
Compared to offshore operations in China, the main advantages of the Maquiladora operations in Mexico are:
The Maquiladoras mainly serve US companies, but Mexico holds 13 different free trade agreements with over 43 countries, which allow manufactured items and finished goods to move in and out of the country without paying duties, that represent more business opportunities.
There are currently more than 5,000 Maquiladora-IMMEX operations in Mexico, and due to their proximity they are mainly in the border states, with the highest concentration in the State of Baja California (911 operations).
Most of the products manufactured in maquiladoras, are from the following industries:
In general, you can operate with three types of Maquiladora configurations.
Standalone Entity
Under this type of set up, the company has full control and responsibility of all legal and administrative matters, including tax, labor issues, import-export, plus it must register their own company with the government, usually it will take between 16 to 24 weeks to start production.
Shelter program
Operating under this program, the foreign company will operate using the legal entity of a shelter company, maintaining full ownership of all machinery and equipment, but focusing on the control and performance of the manufacturing process, including engineering, quality, supply chain, and operations performance. All the legal, labor, tax, import export and administrative functions will be handle by the shelter company and will charge a fee for its services, generally it will take between 6 to 8 weeks to start production.
Contract Manufacturing
Under this configuration, the company generally provides raw materials and manufacturing equipment, the Contract manufacturer has full responsibility for component manufacturing or complete assembly of finished products, takes care of all logistics including import-export and the potential distribution. In this type of configuration, the company establishes the requirements that the contract manufacturer must meet in relation to quality of the products, packaging specifications, the lead time and the delivery schedule. If your company doesn’t have equipment available, there are companies that can still manufacturer your products with this configuration, including providing design and product improvement services.