Nearshoring to Mexico

WHY NEARSHORING
TO MEXICO?

FIRST OF ALL…

WHAT IS NEARSHORING?

Nearshoring is the process of transferring a business operation from an overseas location to a nearby country.

This could be your own operation, a partnership, or a subcontracted operation. While the concept applies to products or services, this article focuses on products.

WHY IS NEARSHORING RELEVANT TODAY?

MEXICO’S ADVANTAGES FOR NEARSHORING

WHAT NEEDS TO BE
IMPROVED WHEN
NEARSHORING IN MEXICO

Time to market

While it’s very easy to find a supplier in China, in Mexico it may take weeks to get quotes and samples (with some exceptions).

Additionally, due to the increasing number of American companies seeking to source products from Mexico, the timing could get longer.

WHAT NEEDS TO BE
IMPROVED WHEN
NEARSHORING IN MEXICO

Industrialization and quality

Mexico is experiencing accelerated growth in the automotive, aerospace, medical, electronics, appliance, and textile industries. While this is not different from the United States, small and medium businesses in Mexico may not have the awareness of the need to industrialize their companies.

This lack of industrialization could have a negative impact on the quality of the products. Things like written specifications for products, regular quality audits, among others, may be needed until trust in the manufacturing process is built.

WHAT NEEDS TO BE
IMPROVED WHEN
NEARSHORING IN MEXICO

Competitiveness

Chinese manufacturers have advantages in subsidies, prices for certain commodities, economies of scale, and infrastructure, which can make it hard for others to compete.

Any product that has substantial labor content or shares similar properties is a great candidate for manufacturing in Mexico. For some projects, it may be needed to bring raw materials or components from China.

PROGRAMS AND CERTIFICATES

IMMEX PROGRAM

Industria Manufacturera, Maquiladora y de Servicios de Exportación (IMMEX) is an agreement between Mexico and the United States designed to incentivize value-added export manufacturing along the border cities in Mexico and at the same time, disincentivize migration from Mexican nationals into the United States.

With the implementation of the USCMCA (also called Nafta 2.0, T-MEC), this program nowadays aims the export manufacturing in Mexico with heavy regional content of raw materials and components. This program allows a manufacturing company to bring foreign raw materials and components and import them temporarily in Mexico without paying VAT (normally 16%) and mostly without duties (tariffs may still apply). On top of the benefits of lower-cost manufacturing, the program offers significant tax incentives for companies.

IMMEX CERTIFICATE

IMMEX is the actual certificate provided by the Mexican government and required for a company to operate as a maquiladora and enables the company to temporarily import raw materials and components mostly without duties. It may take up to a year to obtain this certificate.

VAT CERTIFICATE

It is a certificate provided by the Mexican government that enables a maquiladora company to import raw materials and components without paying the 16% VAT. It may take up to a year to obtain this certificate.