Why Shelter Services in Mexico Are a Viable Option for U.S. Firms05.23.22
Evaluating risk versus rewards is the cornerstone of any business strategy. It’s understandable then for U.S. firms to err on the side of caution as they determine how best to expand their operations. For decades, China was considered the most efficient, inexpensive way to proceed.
Though over the past several years, labor and transportation costs have continuously increased and quality has begun to decline, leaving many manufacturers to realize it wasn’t exactly the partnership to take them into the future. As a result, U.S. firms are looking for new ways to sustain their production demands and still maintain a cost-effective solution. Rather than continue manufacturing in China, they want to diversify their operations or move them to Mexico altogether.
In addition to the close proximity, stable supply chain, and reduced transportation costs, one of the greatest advantages of manufacturing in Mexico is working with a shelter company. Mexico shelter services provide the administrative support foreign manufacturers need to make the transition seamless and achieve an efficient, cost-effective setup. It also allows for flexibility to decide if the shelter option is the right solution, which helps to minimize the risk and maximize the reward.
To further explore how shelter services in Mexico help U.S. and other foreign manufacturers succeed, here are several advantages to consider.
Operating under a Mexico shelter company is the safest way to do business. U.S. firms can work under the umbrella of the shelter without having to create a standalone entity, a model which leaves businesses legally exposed.
Furthermore, manufacturers aren’t tethered to a shelter services solution. It leaves room to scale up, shift gears, or stop production altogether, as needed. However, regardless of whether a company chooses to operate under a shelter or receive shelter services support as a standalone entity, the manufacturer maintains full operational control and ownership over all assets, machinery, and inventory.
Provides Local Expertise
Operating in a foreign country requires ample time to navigate unique import/export compliance measures, labor laws, and other regulatory policies necessary to start production. Having a local expert reduces this learning curve and better prepares U.S. firms to start manufacturing in Mexico quicker, more efficiently, and within compliance.
Partnering with a Mexico shelter company is such a viable option because it provides access to attorneys, fiscal advisors, customs compliance brokers, and administrative personnel as part of one collective, cost-competitive solution. Whereas, with a standalone entity, the manufacturer is responsible for individually hiring these roles and coordinating different tasks to successfully get an operation up and running.
The savings of monthly administrative management labor and software costs of working under a shelter can equal over a 25% to 30% savings per month compared to working outside a shelter, depending on how many employees your operation includes. In addition, shelter services allow businesses to save on infrastructure and value-added tax, or VAT.
The IMMEX maquiladora program exempts foreign manufacturers from the 16% VAT tax on qualified temporarily imported goods, materials, and equipment. U.S. and other foreign firms that operate under the shelter umbrella have immediate access to IMMEX maquiladora certification without having to go through the approval process.
Speeds Up Start Time
One of the biggest advantages of working with a Mexico shelter company is a quick and efficient start-up time. With IVEMSA, the time to get an operation up and running starts three months after a lease agreement is signed versus a standalone which takes closer to seven or eight months to be ready. However, U.S. firms can receive shelter services support regardless of their operating model, which includes:
- Human resources and payroll
- Recruiting and hiring
- Accounting and taxes
- Import and export customs compliance
- Freight control
- Legal counseling
- Accounts payable
- Project management support during the startup phase
In addition to the extended setup timeline, the other difference when choosing a standalone option is the manufacturer remains the importer of record and will need to establish its own entity. Either way, Mexico shelter services provide a competitive edge, allowing manufacturers to stay flexible as their companies grow.