IMMEX Program In A Nutshell

Hi! and thanks for considering Start-Ops Mexico to incorporate your company. We know the uncertainty of moving a part of your operation to a different country can be freighting, but don't worry. We will make this process smooth and hassle-free for you. Here is a quick overview of the IMMEX Progam, commonly known as Maquiladora.

General Information

The Manufacturing, Maquiladora, and Export Services Program, most commonly known as IMMEX, is a promotion instrument that enables companies to temporarily import the goods necessary to be used in an industrial or service process destined for the elaboration, transformation, or repair of merchandise of foreign origin imported temporarily for export or for the provision of export services, without covering the payment of the general import tax (IGI), the value-added tax (IVA), production services tax (IEPS) and, where appropriate, the countervailing duties.

Historic Background

Maquiladora in Mexico first operated under a specific government program known as the Maquila Program, created in 1965 to facilitate industrialization on the United States-Mexican border. Initially the program replaced an older initiative dating from World War II that allowed agricultural workers from Mexico to work in the United States due to wartime labor shortages. Few American companies took advantage of the maquiladora program / IMMEX Program in the early years due to the low value of the U.S. dollar against the Mexican peso. 

During the 1980s, more companies invested in Mexico's manufacturing operations, seeking competitive labor rates and lower operational costs, especially electronics manufacturing and car assembly companies. Mexico proved favorable over the United States competitors due to Mexico’s lowered currency value, decreased labor costs, and changes in U.S. Customs laws. 

The greatest growth of the maquiladora industry so far occurred in the years after Mexico, Canada, and the United States signed the North American Free Trade Agreement in 1994. Employment and the number of maquiladoras jumped nearly 200% as Mexico benefited from the increased trade with Canada, the US, South America, and the European Union. The maquilas and NAFTA (North American Free Trade Agreement) also increased the visibility of Mexico manufacturing as a potential choice for foreign companies looking to locate assembly operations outside the United States.

On November 01, 2006, the Decree for the Promotion of the Manufacturing, Maquiladora and Export Services Industry – IMMEX Decree, was published in the Official Gazette of the Federation (Diario Oficial de la Federación or DOF), with the purpose to strengthen the competitiveness of the Mexican export sector, grant certainty, transparency, as well as for continues monitoring of operations, for the reduction of logistics and administrative costs.

General Benefits

IMMEX Program allows importing temporarily free of import tax (IGI) and Value Added Tax (IVA) (provided they have the VAT and IEPS Certification), goods and/or raw material necessary to be used in an industrial or service process for elaboration, transformation, or repair of imported merchandise of foreign origin, temporarily for export or for the presentation of export services.

Other benefits of the program are:

1. The temporary importation of specific merchandise to carry out the manufacturing operation processes, and thus may remain in Mexico for different periods.
2. The exemption from obligations, such as:
   1. Process the customs clearance of merchandise at authorized customs and special hours for importation, except for those that may represent a risk in terms of public health and national risk.
3. The simultaneous approval of the authorization of the IMMEX Program and a Sector Promotion Program, according to the type of products it manufactures, or the export services it performs.
4. Transfer the imported merchandise temporarily under its Program, to other companies within Programs or registered companies to operate in its Program.

General Obligations

Legal entities will be required for authorization as well as to maintain the validity of the program, comply with the following:

1. Make annual sales abroad for a value greater than 500,000 USD, or its equivalent in national Mexican currency, or invoice exports, at least for 10% of its total turnover.
2. Comply with the dispositions for the modality that was authorized. 
3. Have the temporarily import merchandise for the authorized purposes.
4. Keep the goods that have been temporarily imported in the address or addresses registered in the Program.
5. Timely notify the Ministry of Economy of any changes in the partners, shareholders, or legal representatives.
6. Maintain inventory control in an automated manner, in accordance with the provisions of the SAT (Tax Authority) through General Rules.
7. Submit an annual report electronically to the Ministry of Economy, regarding total sales and exports, corresponding to the immediately preceding fiscal year, no later than the last business day of May. 
8. Any omission of any obligation will have severe consequences, such as a provisional suspension or definite cancellation of the program. Also, depending on the transgression, the authority may cancel the electronic signature of the company, this is, the company will not be able to issue invoices. 

Merchandise Deadlines

Companies with the Program may temporarily import the following merchandise to carry out the manufacturing operation processes and may remain within Mexico for the following periods:

Up to eighteen months, in the following cases:

1. Fuels, lubricants, and other materials that will be consumed during the production process of the export merchandise.
2. Raw materials, parts, and components that will be totally destined to integrate export merchandise.
3. Containers and packaging.
4. Labels and brochures.

Up to two years, in the case of containers and trailer containers.

1. Machinery, equipment, tools, instruments, and spare parts for the production process.
2. Equipment and material for pollution control; for research or training, industrial security, telecommunication and computing, laboratory, measurement, product testing, and quality control; as well as those involved in the handling of materials directly related to export goods and others related to the production process.
3. Administrative development equipment.

It should be clarified that the merchandise subject to transfer by means requesting importation or exportation of virtual operations subject to the Program, will have a permanence period of up to six months, counted from the date on which it was carried out, except for those transferred by domestic providers without a Program, whose term of permanence will be eighteen months.

IMMEX Authorization Requirements

1. Filing the application before the Ministry of Economy in the established formats, attaching the following:
   1. Information corresponding to the partners and/or shareholders and legal representatives.
   2. A detailed description of the production process or service that includes the plant’s installed capacity to process the goods to be imported or to perform the service object of the Program and the percentage of that capacity in use.
   3. List of goods to be imported temporarily, indicating the description and tariff classification, origin, provenance, destination, and end-user.
   4. The commercial description of the good that will be imported temporarily under the program.
   5. Detail the productive sector to which the company belongs.
   6. The commitment to make annual sales abroad for a value greater than 500,000 USD, or its equivalent in national currency, or the commercial invoice exports, at least for 10% of its total turnover.
2. The following documentation must be attached to the application:
   1. Incorporation Deed and any amendments to it (if any). 
   2. Lease Contract and photographic report (We recommend a minimum term of 18 months)
   3. Maquila purchase and sale contract, purchase orders, or firm orders, proving the existence of the export project.
   4. Investment program with detailed information.
   5. Federal Taxpayer Registry
3. Certification of facts issued by a Commercial Notary Public (Due to lack of staff the Ministry of Economy does not do visits <not anymore>, that is why we need a Certification of Facts):
   1. Location of the address(es) in which the production or service processes will be carried out, indicating the characteristics, conditions, details of the facilities, surfaces in square meters, photographic evidence must be attached.
   2. Background property ownership status, as well as a document that proves it.
   3. Inventory of the machinery, equipment, and furniture through which the production or service process is carried out, attaching photographic and documentary support regarding legal possession.
   4. Description of the merchandise to be imported and the description of the physical space where it will be stored, attaching photographic evidence.
   5. The number of employees at the facilities at the time of the Certification of Facts, and the activity carried out, attaching photographic evidence of the supporting of them. As well as the following documentation: payment of employer-worker fees before the Mexican Institute of Social Security – IMSS.

VAT & STPS Certification

Once we have the IMMEX Program Authorization, we need to apply for the Value Added Tax & Special Tax for Production and Services (STPS) Certification. Provided the company has complied with all tax and customs obligations, the company can apply for VAT and STPS certification. The certification can be obtained under 3 different modalities: A, AA, and AAA, with this you acquire a tax credit equivalent to 100% of VAT and IEPS for temporary imports of merchandise.  

Prior to getting the Certification, the Company must be running actively the IMMEX Program for at least twelve months. 

VAT REIMBURSEMENT

Type A certified companies will obtain a tax credit on their operations destined for temporary import customs regimes for manufacturing, transformation, or repair in maquila or export programs and will obtain the VAT refund within a period not to exceed 20 days from the day following the filing of the respective application. In the case of AA and AAA certifications, the VAT refund will be in 15 and 10 days respectively, as well as the right to automatic renewal if the application is submitted 30 days prior to its expiration date. The AA and AAA Certifications contemplate other important benefits such as the fact that prior to the initiation of verification faculties, the customs authority will send them a letter of invitation, as well as the benefit that if prior to verification faculties the company wishes to regularize itself, the authority will grant it 60 days to correct its situation, prior presentation of a free document, among others.

Companies interested in obtaining authorization for VAT and STPS certification must comply with various requirements indicated in Rule 7.1.2 of the current General Rules of Foreign Trade (RGCE), which are:

• Submit the format called “Application for Registration in the Company Certification”.
• Have at least 10 employees registered before the IMSS and pay the total of the employer-employee contributions.
• Have investment in national territory.
• Suppliers must NOT be on the list of companies published by the SAT in terms of Article 69-B, fourth paragraph of the Federal Fiscal Code (Shell or Fraudulent Presumed Companies)
• Have a valid IMMEX program.
• Have the necessary infrastructure to carry out the operation of the IMMEX Program
• Have temporarily imported goods under its IMMEX Program and to have returned 60% of the value of temporary imports of inputs during the last 12 months.
• Describe the activities related to the production processes or services provided under the Program modality.
• Have a maquila contract, purchase and sale contract, purchase order or service order, or firm orders with which to prove the continuity of the export project.

Once the above requirements have been met, the authority has 60 days to issue a resolution to authorize or reject the application for VAT and STPS certification, in which they may issue a request for additional information and/or make an inspection visit to ensure that the established requirements are met. 

Bond Guarantee

In the meantime, of having the VAT & STPS Certification, the Company may opt to contract a Bond that will guarantee timely payment of VAT & STPS. This is to say, that the company may be able to import products and assemble them in Mexico, without paying VAT or STPS Taxes. To do so, a Guarantee Bond will be needed. The term of the Bond would be until the company obtains the VAT & STPS Certification. 

The cost of the Bond will be tabulated in accordance with the law and regarding the tax activities that the company files. The Tax Authority has a webpage to tabulate the bond cost, however, the company needs to be incorporated to be able to obtain a quotation. 

Strategic Bonded Warehouse 

Pursuant to the first paragraph of Article 14 of the Customs Law, customs are responsible for the handling, storage, and custody of foreign trade goods. Article 14-A identifies another type of bonded warehouse, that may be located outside the customs office, on an adjacent site, or within the port area, these types of spaces are called strategic bonded warehouses. Such regime consists of the introduction for a limited period of time of foreign, national, or nationalized goods, so that they may be handled, stored, kept, exhibited, sold, distributed, processed, transformed, or repaired. The merchandise destined to Strategic Bonded Warehouses must comply with their respective regulations or non-tariff restrictions and will not be subject to the payment of foreign trade taxes, not even for the losses or wastes resulting from the processes to which they are subjected. In the case of national or nationalized goods, these will be considered as exported at the moment of being subject to the regime declared in the corresponding customs declaration.

Another advantage of the regime is that it allows foreign raw materials to remain in the country for a maximum period of two years as a kind of temporary import. On the other hand, fixed assets, their parts, molds, and spare parts, as well as specialized and administrative equipment, may remain in the country for a term that does not exceed the depreciation term established in the Income Tax Law (ISR).

Foreign merchandise destined to the RFE regime may be withdrawn to be definitively imported, returned abroad, transferred to the export maquiladora industry, or entered into the tax warehouse_ Domestic or nationalized merchandise may be definitively exported or reincorporated into the domestic market.

Timeframe

Consider these timeframes as approximates. The real time frame is conditioned to several factors, including rendering information on time.  

IMMEX Program

Once the company is incorporated, with an address and Tax ID, we will then file for the IMMEX Program. Filing and obtaining the IMMEX PROGRAM will take between three to six months (maximum).

Import – Export Bond

Once we have the IMMEX Program we could apply for a Guarantee Bond prior to filing for the VAT and STPS Certification. However, the cost and time of the bond vary for each company, and we require to have a Mexican Company. Consider the Company will have to pay for the Bond and perhaps even a Letter of Credit. 

VAT & STPS Certification 

To file for VAT & STPS certification, the IMMEX Program must be running for at least twelve months. Once such time has passed by, we will file for the Certification. Usually, it takes between 60 to 120 days. 

Bonded Warehouse 

Recinto Fiscal Especializado – Immediate Contracting, through a Mexican Company. These warehouses are limited within Mexico.