Exploring the Advantages of Moving Manufacturing from China to Mexico

Key Takeaways:

• Exclusive advantages of manufacturing in Mexico continue to convince U.S. and other foreign companies to move production from China.
• Manufacturers can establish a standalone entity or partner with a shelter company to launch production, the latter of which comes with its own benefits.
• Consulting with a Mexico shelter company can confirm whether or not this business model is the best fit.

Manufacturers are always looking for ways to scale effectively, and Mexico has been a significant part of successful growth strategies for decades, continuing to attract new expansion year after year.

While several global companies maintain production in China, many manufacturers are making the move to Mexico because the comparable advantages are too alluring to overlook. Some of the benefits of manufacturing in Mexico that don’t apply in China include:

USMCA Incentives

This trade agreement includes regional value content requirements, most notably for automotive manufacturing, that allow for tariff-free access to qualified components.

With tariff uncertainty continuing to drive a wedge between the U.S. and China, transitioning production to Mexico may help ease some of this additional financial burden.

Value-Added Tax Savings

Additional savings are available when manufacturing in Mexico through VAT certification and IMMEX program approval. Once these are secured, goods that are exported within the required timeframe are eligible for exemption from the 16% value-added tax on temporarily imported materials and equipment necessary for production.

This translates to significant cost savings, which can take effect more quickly when working with a Mexico shelter company.

Convenient Proximity

Proximity plays an important role in maintaining delivery timelines, accessing steady supply chains, and saving on transportation costs.

Shipments from China to the U.S. can take weeks in transit and cost upwards of several thousand dollars, compared to what’s often next-day or same-day delivery from Mexico to the U.S.

Workforce Availability

Cheap labor in China was once the biggest allure for manufacturers wanting to keep production costs low.

However, China’s wages have steadily increased over the years, and without the same technical skill level or workforce ability that Mexico maintains at a lower cost.

All of these advantages are available whether setting up a standalone entity or working with a Mexico shelter company. However, the shelter company model is the quickest, safest way to launch production.

Preparing to Launch Production in Mexico

A Mexico shelter company provides the legal framework necessary for production and has administrative departments already in place to get production up and running more quickly and cost-effectively. Among the responsibilities a shelter company handles include:

• Site selection and leasing of industrial facilities
• Recruiting, hiring, and onboarding qualified workers
• Managing customs compliance for Mexico and the U.S.
• Handling taxes, accounting, and payroll

U.S. and other foreign manufacturers also have the advantage of being automatically connected to established supply chains and equipped with permits and certifications to save on time and benefit from immediate tax advantages.

Additionally, even if you decide to establish a standalone entity, shelter services are still available to support as needed.

Streamline the Transition with a Mexico Shelter Company

There are a number of advantages of moving production from China to manufacturing in Mexico, and an experienced shelter company can help to ease that transition.

We are here to answer any questions you have about manufacturing in Mexico and how shelter services can benefit you. Contact IVEMSA today.