The advent of Mexico's maquiladora industry in the 20th century signaled a seismic shift in how many U.S.-based companies manufactured product and provided an indirect benefit to Mexico's economy by way of boosting employment. Seeking lower cost manufacturing alternatives, U.S. companies sent their raw materials and equipment on a temporary duty-free basis to Mexico for manufacture or assembly and then re-exported back to the U.S. Though most profits generated by the finished products are realized in the U.S., the maquiladoras have provided employment to thousands. But many U.S.-based companies still ask how the maquiladora program in Mexico (IMMEX) can help improve their operations by reducing costs. The duty-free programs have changed over the years, so it's important to keep informed in order to be compliant with regulations.

Mexico's IMMEX program is defined as an instrument to temporarily import goods and services that will be manufactured, transformed or repaired, and then re-exported without payment of taxes, compensatory quotas, and other specific benefits. In the past there used to be two separate programs in Mexico; Pitex for 'temporary' imports and exports, and the Maquila program for maquila-specific operations. The new IMMEX program consolidates the benefits of these legacy programs and facilitates interaction with government authorities to operate under the program.

There are four high-level trading activities the companies should consider in order to assess the appropriate usage of the maquila program:

1. U.S. and/or Foreign Exports
2. Mexico Imports
3. Mexico Exports
4. U.S. and/or Foreign Imports

As the Maquila program (IMMEX) is regulated in Mexico, "b" & "c" activities are appropriate to consider for IMMEX. These activities occur when a firm temporarily imports goods and materials for six, 12 or 18 months or more depending on the type of goods, and then later exports the processed or finished goods. The objective of the IMMEX program is to promote the export of goods so Mexican companies may access international markets. In addition, IMMEX should also stimulate modernization of the national manufacturing infrastructure by attracting specialized technology and transferring technical knowledge to the workforce in the region.

Benefits of IMMEX

The main benefit of the IMMEX program is the ability to defer taxes on goods that are temporarily imported into Mexico and the ability to consolidate import declarations. In addition, companies can access the PROSEC program (Sectoral Promotional Program) to reduce or possibly eliminate import duties for goods and materials that are imported temporarily or definitively depending on the industry or services they provide. Key benefits available to IMMEX participants include:

• Avoid paying the General Import Tax in Mexico (IGI, Arancel-Ad-valorem) which varies by industry and goods/materials
• Avoid the payment of VAT which is typically 15% of the import value or 10% for cities that border the United States
• Avoid the payment of compensatory quotas which are duties applied to products protected by Mexico's government (i.e. anti-dumping)
• Reduce Customs fee (DTA) from 8% to 1.76% of the value for machinery and a flat fixed fee of 179.00 pesos for goods
• Avoid payment of taxes in domestic purchases (which will be incorporated to the goods exported)
• Ability to create virtual pedimentos (also known as import/export declarations) between companies registered in the IMMEX program
• Ability to create consolidated Import pedimentos
• Receive a VAT refund when a company has a positive balance in its declarations, typically within a term of 20 days according to the law
• Ability to use Sectorial Benefits Program (PROSEC) which allows the import of machinery, equipment and spare parts by services companies
• Automatic inscription in the National Importers registry without performing the petition

IMMEX Requirements

The process to obtain IMMEX approval is not difficult; however, companies must meet a specific profile and are beholden to government reporting requirements.

• To export US$500,000 in a one year period or to export 10% of the company sales in Mexico
• To import only the approved goods (HTS classifications)
• To use the goods solely for what they have been approved
• To respect the terms under the law (Article 108 Mexico Customs Law & Article 4 IMMEX Decree)
• To be a legal entity in Mexico with the obligation to pay income tax (ISR)
• To have the good in the registered & approved addresses
• To inform in advance to the Economy Secretary (SE) previous to the petition to SHCP about the following:

• Changes on the legal name of the company, Tax ID (RFC) or address
• Changes of the addresses of the companies which provide sub-maquila services (3 days of advance). Notify the suspension of activities in a period no later than 10 days
• To have an inventory control according to what is stated in Customs Law (Article 59)

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