Do’s and Don’ts for Manufacturing in Mexico

Article Overview: There are several do’s and don’ts to consider when manufacturing in Mexico as a U.S. or other foreign company. From production costs and industrial talent accessibility to understanding current regulations and setup timelines, here are a few need-to-know tips that will help streamline the process.

Manufacturing in Mexico is a complex endeavor, with many moving parts, such as site selection, hiring industrial talent, securing permits, and more.

To ease the learning curve for U.S. and other foreign manufacturers seeking to expand production to Mexico for the first time, it’s helpful to review these simple do’s and don’ts.

Do Your Homework

Always perform comprehensive research before any production takes place. This involves choosing the right location, assessing regional lease availability, and recruiting local labor.

Even in this early stage of exploration, it’s productive to work with a Mexico shelter company, as information specific to your production goals won’t be easily found online.

A shelter company can provide a cost analysis of all manufacturing-related expenses, such as industrial leasing prices and cost-competitive salaries based on your project needs.

Seeing a side-by-side comparison with local insight and research helps make decision-making easier, so manufacturers are well-informed as they move forward with the production setup.

Don’t Go It Alone

A plant manager cannot handle the entirety of setting up production in Mexico alone. It takes a team of trusted experts, sharing their respective knowledge and experience, to streamline setup and ensure its effectiveness.

To save time, money, and stress, most manufacturers choose to work with the expertise of a shelter company.

It alleviates the risk of compromising sensitive information, slowing down production launch, and trusting unreliable sources and consulting individuals who are unable to handle the setup or scale of projects.

Do Remove Guesswork

There are several misconceptions about manufacturing in Mexico. For instance, IMMEX is not a duty-free program as many assume.

To qualify for VAT exemption, it requires IMMEX program approval and VAT certification, both of which can take several months to secure. Additionally, in order for materials to qualify for the 16% VAT exemption, the accuracy and organization of the Bill of Materials is essential to meet customs approval.

This can be a timely and costly process when done incorrectly, and calls for the expertise of a team that knows what’s needed and can identify incomplete or inaccurate information more quickly.

Don’t Think Manufacturing in Mexico Is the Same As 10 Years Ago

Changes to the IMMEX program, tariffs, and other factors involved in Mexico manufacturing occur regularly.

In the past decade alone, there has been a significant uptick in production demand and competitiveness, as well as updates to the free trade agreement between the U.S., Mexico, and Canada that affect origin rules, intellectual property protections, and more.

Even if a manufacturer has operated in Mexico in the past, it’s important to perform due diligence before investing in a project to have a clear understanding of the current compliance rules, regulations, and costs.

Do Replicate Your Current Production

For companies already successfully manufacturing elsewhere in the world, it makes sense to replicate these efforts in Mexico rather than relying on contract manufacturing.

On the other hand, when outsourcing production, it’s typically better to engage in contract manufacturing in Mexico versus working with a shelter company or establishing a standalone entity. Consider which setup method is best based on individual project needs and goals.

Don’t Assume a Quick and Easy Setup

Compared to years past, the IMMEX approval process entails more regulations than before to check software, components, and data. Additionally, there has been an increase in the number of audits, removing companies from the IMMEX program that aren’t in full compliance.

To reap the financial and operational benefits of the IMMEX program more quickly, partner with a shelter company to make sure you comply. Also, as a shelter company completes documentation for IMMEX approval, other setup activities are simultaneously underway to make progress on a project and tremendously reduce the rejection rate.

Do Build a Strong, Experienced Local Team

Manufacturing in Mexico takes time, experience, and access to local networks. Though there are multiple ways to set up production, the shelter model continues to be the fastest and most cost-competitive option.

A Mexico shelter company has an extended team made up of U.S. and Mexico customs brokers, labor law-related experts, environmental consultants, specialized departments for customs, legal, and tax disputes – essentially, everything that’s needed to handle any administrative tasks.

IVEMSA has over 40 years of experience providing clients with flexible solutions to reach their production goals and prolong their manufacturing success.

If you’re considering making the move to Mexico, start the conversation with one of our team members today.