Why Nearshoring to Mexico Is Favored over Chinese Manufacturing

12.11.19

The recent tariff increase on imports from China has caused several U.S. manufacturers to examine alternative routes to handle their operations at the most cost-effective rate. With new tariffs on the horizon, affecting products such as laptops, cell phones, and tablets, many are contemplating or have already taken action to start nearshoring to Mexico.

 

Logistically, it makes sense. Plus, labor costs in China ($4.95 per hour USD) continue to surpass labor costs in Mexico ($4.00 per hour USD); yet another reason why manufacturers are shifting strategies to either diversify their production or move facilities from China altogether.

 

Although the ongoing trade war between the U.S. and China has caused companies to heavily consider Mexico as an option, many global manufacturers have been nearshoring to Mexico for decades with great success. Thanks to Mexico’s IMMEX program, U.S. manufacturers receive favorable tax benefits, in addition to other unique advantages including:

 

  • Reduced transportation costs
  • Lower labor rates with access to a highly skilled workforce
  • Intellectual property protection under the USCMA (United States-Canada-Mexico Agreement)
  • Closer proximity to the U.S., making it highly convenient in terms of communication and travel

 

Additionally, manufacturers have the benefit of working with a shelter services provider in Mexico to help initiate faster startup times, increase productivity, and reduce costs. Rather than navigating the manufacturing industry in a foreign country alone, shelter services benefit companies by ensuring compliance and efficiency with minimized risk and liability.

Switching from China to Manufacturing in Mexico

The benefits of manufacturing in Mexico vs. China are apparent, but the idea of switching locations may initially seem overwhelming. With the help of a shelter services provider, the process is straightforward, yet flexible enough to accommodate a manufacturer’s changing needs.

 

First comes the decision of whether to move all or part of operations from China to Mexico. Second, the shelter aids in site selection, employee recruiting, and other HR, accounting, and administrative matters. This is addition to scheduling the transportation of equipment and technology to Mexico from China. The goal is to make the transition as smooth as possible and alleviate the burden from the manufacturer.

Working with a Mexico Shelter Services Provider

Starting a new operational base is less time-consuming and costly when working with a shelter versus being a standalone entity. Additionally, by working under a shelter, companies can defer taxes as part of the IMMEX program when importing raw goods, equipment, and materials as part of their manufacturing process and pay lower or no tariffs when exporting the finished goods back to the U.S.

 

Part of the shelter services also includes securing all permits and licenses, ensuring customs compliance, and helping to manage operations to run smoothly and efficiently. Expanding operations closer to home allows manufacturers to more easily maintain quality control and visit facilities on a regular basis when necessary. As companies search for cost-effective ways to maintain their production levels, Mexico is quickly becoming the leading alternative to China.

 

Want to learn more about the benefits of nearshoring to Mexico? Contact IVEMSA today for a free consultation.

 

Source: https://www.cnn.com/2019/12/03/politics/tariffs-iphones-cheese-trump/index.html

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