Is a maquiladora right for you?

Thinking of setting up a maquiladora operation in Mexico? Consider this readiness checklist before you proceed. There’s more to a Mexican move than first meets the eye.

First established in the mid-1960s, maquiladoras now account for a large proportion of Mexico’s industrial capacity. Maquiladoras are either owned-locally or foreign-owned Mexican assembly plants that import materials and/or equipment from abroad, which they then use to produce goods to re-export.

Because the finished goods are shipped abroad, for instance to the country of the foreign owner, the maquiladora pays no duties or taxes on its imported materials or machinery — provided the finished goods leave Mexico within a specified time, which varies from 6 to 18 months, depending on the product.

They work best for labour-intensive manufacturing and make many different kinds of products, such as machinery, electronics, textiles, clothing, food, chemicals, tools, medical equipment and sporting goods. The concept has also been extended to the export of services. There are companies that import equipment and raw materials under the same maquiladora conditions, and the those companies provide those services to foreign clients. Call centres and software development firms would be two examples of such services. There are also maquiladoras that carry out research and development for various advanced technologies. Mexico places very few restrictions on what can be produced in a maquiladora and, as a result, these plants have become the country’s largest source of foreign income, exceeding even petroleum.

Tax and duty benefits of maquiladoras

Numerous Canadian companies, especially in a variety of light manufacturing and assembly sectors, are already operating successfully in Mexico’s maquiladora environment. By doing so, they benefit from several tax and duty exemptions, such as:

Questions to consider

But do these benefits mean that shifting your Canadian production to a maquiladora is the right move for your company? To decide, carry out a readiness assessment that outlines specific cost savings, potential operational risks and regulatory requirements.

This assessment includes answering questions such as:

Types of maquiladora

If you decide to go ahead and set up a maquiladora, you have three major ways to do it:

Setting up a maquiladora

To qualify for maquiladora status, your company’s plans and intentions must be approved by the Mexican Ministry of the Economy (SECOM) (in Spanish only), which provides all the permits and licences required to establish and operate a maquiladora. The application must include complete information about:

Maquiladora operations, defined in what is known as IMMEX regulations, are complex. As well as carrying out a readiness assessment such as the one described above, you should retain qualified Mexican advisers who specialize in the IMMEX/maquiladora area, and follow their recommendations carefully.

For more information on doing business in Mexico, and to explore other manufacturing options, contact the Canadian Trade Commissioner Service in Monterrey, Guadalajara or Mexico City.

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