Mexico Shelter Services: A Quick Overview of Benefits

Key Takeaways:

• Working with a shelter company is the preferred way for foreign manufacturers to set up production in Mexico due to the time, costs, and stress it saves.
• All administrative departments are included as part of shelter services, including IMMEX program approval and VAT certification.
• Choosing the right shelter company is critical for cost and service transparency, as well as assistance if and when the time comes to transition to a standalone entity.

Mexico shelter services began in the 1960s, introducing a way for foreign manufacturing companies to be “sheltered” under the IMMEX program; thereby, reducing the risks and liabilities typically associated with production. For decades, industrial sectors such as automotive, aerospace, medical device, and electronics manufacturing have used shelter services as part of their operational strategy.

These special services are provided by shelter companies and include a range of administrative responsibilities necessary to get production up and running, including site selection, HR and recruiting, and legal, tax, and trade compliance, among other tasks. Since their inception, global companies have reaped the benefits and continued profitable growth while nearshoring to Mexico.

Therefore, understanding the benefits, particularly the cost-saving opportunities, of working with a shelter company gives companies an advantage, as Mexico shelter services help to deliver a valuable, flexible manufacturing solution.

What’s Included with Mexico Shelter Services?

One of the goals of operating under a shelter is to create a more seamless transition to nearshoring in Mexico. Delegating administrative tasks allows company leaders to focus on production while still maintaining full control over all processes and ownership of equipment and materials. Under a shelter company, services include:

• Site selection analysis
• Labor cost analysis
• Human resources (recruiting, retention, payroll, etc.)
• Legal and tax services
• Trade compliance
• Environmental health and safety

These shelter services can be customized to fit the needs of each company and are a cost-effective way to launch production for companies new to Mexico manufacturing.

What Shelter Services Do Not Include

All administrative responsibilities are included. However, there are scenarios in which the manufacturing company would be responsible for external expenses.

The most common expenses include utilities, taxes, and employee salaries. While these are paid through the shelter company, they are paid by the manufacturer.

IVEMSA can provide a cost analysis to give manufacturers an estimate of what leasing costs and salaries will be, based on the region and type of production involved.

There is also complete transparency regarding costs and identifying which party (the shelter company or the client) is responsible for which expenses.

However, not all shelter companies operate in the same way. Therefore, it’s important to clarify line items and what they include as part of the shelter services prior to engaging in a partnership.

Shelter Services Benefits

The majority of manufacturers choose to work with a shelter company due to the extensive list of benefits it provides, such as:

• Cost savings – Manufacturers operating under a shelter benefit save on labor, permits, licenses, taxes, and infrastructure costs.
• Quick startup time – Shelter services in Mexico typically launch production in three to four months, nearly half the time it takes as a standalone entity.
• Reduced learning curve – Operating in Mexico can be challenging, but the local expertise and experience of a shelter company ensures compliance with laws and regulations as well as insight into best options when selecting a facility site.
• Flexible manufacturing – Mexico shelter services allow for agility as production needs change. Manufacturers can scale up production and/or eventually graduate from the shelter program altogether as part of a long-term strategy.
• Production control – Administrative tasks are handled through the shelter company, while manufacturers maintain full production control and intellectual property rights.

These are a few of the many benefits shelter services in Mexico provide. However, to ensure a shelter company is a good fit, evaluate your processes, goals, and needs, and start by asking the following questions:

• What fees are involved?
• What are the specific services offered?
• What’s included with lease costs?
• Is there a separate operating license for each company?

IMMEX Program Application Assistance

In addition to the benefits already listed, one of the biggest advantages of working with a Mexico shelter company is help navigating the complexities of the IMMEX program application process.

If a manufacturer has already leased a building in Mexico, they may be paying months’ worth of rent before production even begins, as IMMEX program approval can take months.

Moreover, if denied, there isn’t typically a reason indicating what needs to be corrected, and the waiting time starts over.

The difference in working with a shelter company like IVEMSA is that it is already part of the IMMEX program and can add companies to its permits.

Also, a shelter company can identify potential problems more quickly to prevent delays. In short, this partnership:

• Minimizes risk and reduces application rejection
• Expedites IMMEX program approval
• Saves manufacturers 16% on VAT on all temporarily imported goods, materials, and equipment from day one after IMMEX program approval.
• Allows other administrative departments to simultaneously prepare for production launch, contributing to a faster setup timeline

Lastly, a shelter company can directly handle any questions or discrepancies the Ministry of Economy or any other government office may have, saving manufacturers time and stress.

The Difference Between IVEMSA and Other Shelter Companies

IVEMSA provides flexibility and allows manufacturers to choose their own buildings and set terms regarding salaries, benefits, etc.

Some shelter companies own real estate and require their clients to use their buildings. This could create a conflict of interest if a manufacturer decides to become its own standalone entity, as they may lose the lease on their building.

With IVEMSA, there is full transparency without any hidden or surprise costs. Additionally, the team works collaboratively with its manufacturing partners to meet each company’s unique demands.

There is also assistance available to streamline the transition process if and when a manufacturer decides to graduate from the shelter program and establish their own entity.

Thanks to a straightforward approach, extensive support, and over 45+ years of experience in the industry, business leaders feel confident partnering with a shelter company like IVEMSA.

To learn how our shelter services can help you save on costs and reach your production goals, contact IVEMSA today.