Mexico Shelter Manufacturing Services Defined
07.24.26Key Takeaways:
- The value of shelter manufacturing services has created massive growth opportunities for several industrial sectors since the mid-1960s.
- Shelter services involve five key functional areas that streamline production setup and help manufacturers save costs.
- Though some manufacturers choose to establish their own standalone entity and can still benefit from shelter services, the majority decide to work with a shelter company.
A Brief Overview of Mexico Shelter Manufacturing
The uptick in Mexico manufacturing has held steady since the introduction of the maquiladora program in the mid-1960s. In an effort to boost foreign direct investment, government leaders allowed maquiladoras (foreign-owned manufacturing companies) to import raw materials, machinery, and equipment necessary for production VAT tax-free under a temporary importation scheme, as long as they were exported within the specific time parameters.
Since then, various industrial sectors have benefited from the cost-effective shelter manufacturing services the IMMEX program provides. When manufacturing in a foreign country, there is a lot of behind-the-scenes work necessary to help companies understand costs and logistics leading up to the official launch.
Several administrative departments must get involved and collaborate in the early stages to answer questions, provide cost models, schedule visits, and review files to provide a customized, cost-effective approach.
Partnering with a Mexico shelter company provides a unique opportunity for manufacturers
A shelter company already has a multi-disciplinary team in place rather than having to hire individuals to work together as one. Additionally, the team has the collective experience and expertise to focus on economies of scale, while communicating the complexities of operational setup in a simplified way.
Furthermore, with a straightforward cost model, the comprehensive suite of shelter services in Mexico all falls under one umbrella without any extraneous or surprise costs.
These services cover five functional areas working together to meet the collective objectives.
1. Customs and Import/Export Assistance
The chosen shelter company will be responsible for guiding you through the process of obtaining all certifications and permits necessary to operate in Mexico, including IMMEX program registration.
This is beneficial as being approved for the IMMEX program grants exemption of the 16% value-added tax (VAT) on temporarily imported goods, materials, and equipment required for the manufacturing process.
Working with a shelter company like IVEMSA minimizes the risk of rejection and expedites IMMEX program approval. This is highly cost-beneficial as those operating as standalone entities will face a longer timeline to obtain a new IMMEX license from scratch.
Without the IMMEX program and VAT certification, companies must pay VAT, since the exemption benefit cannot be applied until the IMMEX Program and VAT certification are granted.
Those establishing standalone entities likely have to wait five to six months before their IMMEX Program is approved. This waiting period delays setup time and adds costs manufacturers working with a shelter don’t have to contend with or accrue.
A shelter services provider already has these necessary permits in place which allows manufacturers they partner with to benefit from this tax savings from the first day of operations. Whereas, those establishing standalone entities likely have to wait weeks, if not months, before their certifications and permits are approved. This waiting period delays setup time and adds costs manufacturers working with a shelter don’t have to contend with or accrue.
2. Human Resources
One of the main costs when launching production is establishing the right number of qualified workers for the project. Fortunately, recruitment and retention, compliance with Mexico labor laws, and HR supervision are other key parts of the full scope of shelter services.
The availability of cost-effective, industrial labor is a deciding factor for U.S. manufacturers that want to expand production to Mexico. With the shortage of American laborers willing or able to take on manufacturing roles, Mexico’s skillfully trained workforce is helping to fill the much-needed employee gap.
Having HR services in place also allows companies to stay competitive when attracting and retaining top talent. This is in addition to helping navigate cultural differences in the workplace and keeping up with labor law modifications, including Mexico’s paid holidays, extended work weeks, and severance pay requirements.
3. Government and Legal Compliance
Another valuable benefit of working with a shelter provider is minimizing risk and liability for manufacturers when operating in a foreign country. Shelter manufacturing services include oversight of environmental, health, and safety regulations as well as real estate legal compliance.
Additionally, accounting, administration, and tax oversight ensure compliance regarding taxes, payroll, payments, and financial reports is handled. As the industry evolves and trade laws change, it’s important to have local shelter experts who can keep companies protected when manufacturing in Mexico.
4. Site Selection
Shelter manufacturing services also include an analysis of facility locations, available labor pool, and vendor sourcing, which allows manufacturers to review and narrow down their choices based on their operating goals.
With these services, they can significantly save on time and costs in choosing the most viable location for their production. Having this knowledge and support is especially valuable as manufacturing in Mexico continues to increase, and competition for facilities increases as well.
5. Value Added Services
Other value-added services include support for sourcing consulting, transportation, and environmental health and safety support. With this general overview of shelter services in Mexico, manufacturers can then address specific areas of concern regarding labor laws, customs regulations, manufacturing costs, etc. which will factor into their chosen approach.
Is Working with a Shelter Company or Establishing a Standalone Entity the Best Model?
There are two main ways IVEMSA helps businesses maximize efficiency and minimize risk when setting up production in Mexico, and each can be tailored to suit each company’s needs.
Shelter Company
Under this model, the shelter is responsible for leasing the facility, recruiting employees, submitting tax payments, and obtaining the necessary permits and licenses to do business.
Essentially, everything needed on the administrative side is taken care of by the shelter, which allows manufacturing leaders to focus on production.
Companies maintain ownership over all equipment, processes, and proprietary information while at the same time reducing their costs and liability.
The shelter business model is also designed to adapt as a company grows. If a company decides the shelter model is not the right option, it’s easy to stop production and discontinue shelter services without the hassle of undoing a legal entity. However, what’s more common is assistance with scaling production as companies grow and eventually graduate from the shelter program and become a standalone entity.
Standalone Entity
Some companies prefer to work as a standalone model versus operating under the shelter umbrella.
With this option, the value of shelter services in Mexico still applies. The only difference is the shelter does not maintain legal exposure since the company will be operating using its own entity or corporation.
Under this model, the shelter provider will work with you during the incorporation of this new Mexican company that will be used to establish the operation and conduct the business.
All administrative responsibilities are still handled, including recruiting, payroll, HR, accounting, and trade compliance. However, it’s important to note this option requires a longer setup time, closer to six to seven months, compared to the three to four months it takes with a shelter.
The reason for this extended time is that all permits, including the IMMEX program, must be obtained from scratch since you are operating through a brand new entity.
Cost Comparison Between a Shelter and Standalone Operation
Manufacturers that choose to work with a shelter company save approximately 30-35% compared to the overhead costs of establishing a standalone entity. This includes salaries for HR, accounting, and trade compliance personnel, among other administrative departments, as well as expenses like manufacturing software fees.
Though both business models allow companies to benefit from the cost-effectiveness of manufacturing in Mexico, the majority choose to work with a shelter.
Read more about the comparison of a shelter vs. standalone.
Which area is best to launch production when manufacturing in Mexico?
Setting up production near the U.S./Mexico border is advantageous because of proximity to the U.S. audience.
However, while Northern Mexico is among the country’s most developed manufacturing regions and offers world-class infrastructure for industrial operations, there are also several locations in Central Mexico that can be excellent options, depending on your industry, supply chain requirements, and target market.
Selecting the right location ultimately depends on factors such as your manufacturing process, workforce requirements, logistics strategy, and customer base.
IVEMSA can put together a site selection analysis based on your production goals to determine costs and area-specific advantages to help finalize the best choice.
How long does the manufacturing setup take with a shelter company?
The setup timeline typically takes three to four months from the time a lease is signed, compared to six or seven months required when setting up production as a standalone entity.
If I sign with a shelter company, what if I eventually want to become a standalone entity?
A shelter company helps manufacturers get production up and running in Mexico, faster and more cost-effectively than it would to establish a standalone entity.
While some shelter companies make it difficult to evolve past this shelter model, IVEMSA is set up to allow clients to “graduate” from the shelter program as they grow.
There is transition assistance and à la carte services available even if and when a company chooses to become its own entity.
Advantages of Working with IVEMSA
Working under the shelter model is the most preferred method for manufacturers setting up operations in Mexico, though each company has its own specific project needs.
Our team of experts is here to help guide you toward the best business model for your business goals. With over 45+ years of experience in the industry, IVEMSA has installed over 150 operations in Mexico and maintains a 15-year average customer retention rate. We value our partnerships and are invested in our customers’ growth.