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Thursday, August 30, 2012

Mexico's Maquila Program is still Thriving

The Promotion of the Manufacturing, Maquila and Export Service Industry (IMMEX) program allows the temporary importation of goods that are used in an industrial process or service to produce, transform or repair foreign goods imported temporarily for subsequent export or provision of export services, without covering the payment of general import tax, value added tax and, where appropriate, countervailing duties.

The categories available under the IMMEX program are:

1. IMMEX Holding Company Program: the manufacturing operations of a certified holding company and one or more subsidiaries are included in the same program;

2. IMMEX Industrial Program: goods are manufactured or transformed for subsequent export through an industrial process;

3. IMMEX Services Program: export goods are serviced or export services are provided, solely to develop those activities established by the Secretariat, following review by the Ministry of Finance and Public Credit;

4. IMMEX Shelter Program: one or more foreign companies provide technology and production material, without direct involvement in the Program, and

5. IMMEX Outsourcing Program: a certified company lacks the facilities to perform production processes itself and performs the manufacturing operations through a third party who it registers in its Program.
The attractiveness of the IMMEX program and the fact that it is still thriving is undebatable.  Just the Mexican aerospace industry received more than 4.2 billion in foreign direct investment between 2008 and 2012, according to the Mexican Aerospace Industry Federation, which forecasts a foreign direct investment of $1.3 billion in 2012 alone.  Similarly, between 1999 and 2011, vehicle production in Mexico registered an increase of 65%, from 1.5 million units per year to more than 2.5 million. Between 2005 and 2011, cumulative foreign direct investment in that sector was $10.3 billion and expectations for 2012 are encouraging.  The biomedical, technological, and auto-part sectors are also taking significant advantage of the IMMEX program. 
IMMEX program authorizations are generally granted if the applicant commits to have annual sales abroad of at least US$500,000, or an equivalent sum in pesos, or invoice exports accounting for at least 10% of total invoices. Because of the high volume of applicable legislation (more than 12 laws and international treaties, including NAFTA) involved, it is best for the applicant to obtain legal advice from a reputable law firm, preferably one with cross-border expertise and capabilities, on how to obtain proper authorization and remain compliant.
Mauricio Leon de la Barra is an international law attorney licensed to practice law in Mexico and California, and has more than 15 years of experience representing clients in business and real estate transactions and litigation involving international, U.S. and Mexican laws.