Keller-Koch Realtors LLC- Maquiladoras, Frequently Asked Questions

Keller-Koch Realtors LLC

Frequently Asked Questions

What is a Maquiladora?

A maquiladora is a Mexican assembly or manufacturing operation that ca be subject to up to 10)% non-Mexican ownership. A maquiladora utilizes a competitively priced Mexican labor in assembly processing and / or other manufacturing operations that temporarily import most component parts from the US and other sources. Mexican law also allows these operations to bring in most capital equipment and machinery from abroad. Maquiladora operations are generally labor-intensive cost centers, with most production geared for export from Mexico. Maquiladoras may be entirely foreign managed, unlike multi-nations operating in Mexico.

Where can a Maquiladora Locate?

Although most locate along the US / Mexican border, it is possible to locate anywhere else in Mexico, except for Mexico City.

What products can Maquiladoras manufacture?

Maquladoras can manufacture a broad array of products under Mexican Law. There are exceptions to this allowance that includes such industries as petroleum, petrochemicals, other chemicals, arms, and items containing radioactive elements.

Do products have to be fully assembled or processed in Mexico?

No. In fact, most items are further processed in the country to which they are ultimately re-exported.

Are Maquiladoras required to incorporate Mexican inputs?

No. Maquiladoras are not required to use any Mexican components in assembly processing or manufacturing.

What are the Mexican Tariff Duty policies relating to this program?

As long as the imported components brought into Mexico are destined for export, no Mexican import duty is levied on the temporarily imported maquiladora inputs. In Lieu of duties, maquiladora operators must post a bond with the Mexican Customs Service to guarantee that components and raw materials are re-exported from Mexico within a 6 moth period. A bond on capital equipment and machinery ensures that they will be fully returned to the maquiladora operator's country or origin once it ceases operations in Mexico.

What are the US Tariff Duty Policies relating to this program?

US Customs has three regulations that complement the maquiladora program:

Allows the import into the US of metal products process abroad with duties assessed on the value added to those goods (e.i. the total value of Mexican inputs, including labor, electricity, component parts, etc.) rather than levying an import duty on the total value of the product. The products must have been processed in the US before being sent abroad and then must be further processed in the US upon their return.

Customs provisions allows an article assembled in Mexico from US made components to be exempt from duty on the value of such components. These good may or may not involve metal components. US customs law allows for machinery of US origin to be returned to the US duty free.

If the value of the goods assembled or manufactured in Mexico contain at least 35% Mexican content upon import into the US, they may be eligible for treatment under the US Generalized System Preferences (GSP). GSP eligible item may enter the US market with no duty levied.

What other options exist besides starting my own stand-alone maquiladora?

"Shelter," "sub-contract," and "turnkey" operations represent viable alternatives to full fledged maquiladora operations. A sub-contract maquiladora operation involves the least commitment activity on the part of the non-Mexican investor.

What about foreign employee and management entry into Mexico?

The maquiladora may bring in as many foreign employees as necessary with the exception of hourly laborers. All hourly employees are required to be Mexican. Foreign employees must obtain work visas which usually require a 3 - 5 day wait.

The In-Bound (Maquiladora) Program

Was established in 1965 by the Mexican Government to help alleviate unemployment along the US / Mexico border.
Allows foreign (non-Mexican) individual or firm to establish wholly owned operations in Mexico for the purpose of manufacturing products for exportation.
Allows for temporary, duty-free (in-bound) importation of the capital equipment and machinery as well as the materials for production.

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