Many businesses are manufacturing their products in Mexico and shipping them to their customers in the U.S, taking full advantage of the lower shipping costs compared to overseas partners.
Shipping costs can quickly add up if left unchecked, and you’d be surprised at how much shipping alone can make or break your margins. In this article, we’ll show you the cheapest way to import from Mexico.
The Benefits Of Importing From Mexico
In the United States, many companies take advantage of the free trade agreement – the United State Mexico Canada Agreement (USMCA) – to import products. This trade agreement allows for duty-free trade for products made in the region, making Mexico an ideal place for American companies to manufacture their goods.
There are various advantages associated with importing goods from Mexico:
- Reduced Import Duties
Usually when importing goods, import taxes make up a large chunk of your costs. Because these are calculated based on the value of goods, the more products you’re moving the quicker the costs stack up. One of the reasons why so many businesses import from Mexico is because these import taxes are waived for nearly all manufactured goods. For the few products that are subject to tax, the rate itself is reduced compared to imports from other countries.
- Fast Shipping Times
Thanks to the close proximity of Mexico to the United States, shipping takes considerably less time compared to other countries. Not only does this really help you work to a tighter timeline, but it gives you the breathing room to stay agile when you want to move with market trends.
- Cheaper Shipping Costs
For various reasons, global shipping costs have risen dramatically over the past few years. This squeeze not only affects your bottom line, more often than not these price hikes affect your consumers directly. The less distance your goods have to travel, the more money your business will save on shipping – giving you room to be competitive on price during tough times.
Using the IMMEX Program to Import from Mexico
The IMMEX Program stands for the Spanish translation of Maquiladora, Manufacturing and Export Services Industry. IMMEX is an incentive program that facilitates the entry of foreign manufacturing companies into Mexico.
Under the IMMEX program, goods used in manufacturing are allowed to be temporarily imported without general import taxes. This means that companies can manufacture or repair goods in Mexico without paying import and export duties.
Eligible goods under the IMMEX program are:
- Raw Materials, Parts, and Components – These refer to materials that will be used during the manufacturing process of exportable goods.
- Shipping containers and boxes – this category includes pallets, labels as well as other packaging materials.
- Machinery, equipment, tools, instruments, molds, and parts – This equipment is used in the manufacturing process as well as quality control, research and even administration.
There are two main options that businesses have when manufacturing in Mexico – a standalone basis or a shelter company service.
Depending on your company’s needs, there are some important considerations when deciding which structure to operate on. These considerations aren’t just based on cost saving, there are also administration concerns to take into account.
– Standalone Company
To be eligible for IMMEX, the value of your company’s exports must exceed $500,000. If your company can meet this bar, and you can also ensure your standalone company can adhere to local business regulations, you will be able to incorporate a standalone company.
To get a sense as to whether this approach is right for you, there are a few key elements of a standalone business to take into account:
- Start-up Time – VAT accounts for 16% of the import value in Mexico. While import duties are waived under IMMEX, registering for a VAT certification can take up to 6-12 months, so be sure to take this into account when developing a timeline.
- Potential Government Incentives – The Mexican government may offer incentives such as payroll tax exemption or training grants to foreign direct investments from time to time. Being a standalone company allows you to take advantage of these incentives.
- Independent Company Presence – For companies interested in expanding their footprint in Mexico, incorporating a company directly under their own name may help to further position their branding.
– Shelter Company
Because many of the requirements of the IMMEX are tough to get up and running quickly, companies who are working to a tighter timelines will likely want to turn to a Shelter company for advice. Shelter companies will allow manufacturers to get a facility up and running in the shortest time possible, as well as help navigate the red tape on the local level.
Here are some of the reasons why shelter companies might be suitable for your business:
- Convenience – With the shelter company handling much of the bureaucracy, businesses can expect a shorter startup timeline. Shelter companies can also offer help with payroll, legal services and administrative tasks.
- Compliance with Law and Regulations – The shelter company often serves as a local advisor to meet your best interests. This will help your business minimize risk and liability due to miscommunication or lack of transparency.
Finding The Right Shelter Company in Mexico
While any manufacturer can sign up for the IMMEX program, there are a lot of requirements to be eligible, many of which can be tricky to satisfy. Companies looking to launch quickly in Mexico can do so simply by partnering with a shelter service provider who can help simplify the process of launching your manufacturing in Mexico.
By finding a shelter IMMEX company, you’ll be able to secure a capable manufacturing partner who will deal with the Mexican government on your behalf. This is, currently, the cheapest and easiest way to import from Mexico.
Are You Ready To Import From Mexico?
Working with one of our shelter companies not only gives you immediate access to the IMMEX program and its benefits, it offers you peace of mind. That’s because every manufacturer has been hand-picked and vetted to ensure they meet our exacting standards.
Still undecided on which set-up is the best for your business? We want to help. Why not click below to browse either our list of top-rated manufacturing partners, or browse our articles designed specifically to offer the guidance you need to succeed.
