Industry Experts Expect Boom To Continue Until At Least 2020
Detroit is often called “Motor City,” but calling Mexico “Motor Country” is becoming increasingly more accurate.
In 2012, Mexico had 579,000 of North America’s 1.5 million automobile industry jobs while the American Midwest, including Detroit, had roughly 450,000. Since 2004, the number of auto industry manufacturing jobs in Mexico has increased roughly 50 percent while the number of the same kind of jobs in the Midwest has decreased approximately 15 percent, according to a Brookings Institution report.
In 2012, more than 3 million automobiles were manufactured in Mexico, but that number is expected to increase dramatically within the next few years because Audi, BMW, Chrysler, Ford, General Motors, Honda, Mazda, Nissan, Toyota and Volkswagen all intend to build new plants or make substantial investments in their current plants, according to articles in The New York Times and Reuters.
“The Mexican auto industry is about to go on a $10 billion factory building spree, illustrating the nation's rising economic challenge to rivals from the United States to China,” according to the Reuters article.
More importantly, the Mexican auto manufacturing boom is part of an overall production increase that is projected to continue for the next several years. The Boston Consulting Group estimated in a 2013 report that Mexican manufacturing exports will increase up to $60 billion annually by 2018.
The boom should help companies with manufacturing plants in Mexico like MFI that manufacture products designed by other companies. MFI is a contract manufacturer for company in numerous industries, including electronics, medical devices and textiles.
In addition, Ciudad Juarez, the city on the Mexican side of the Mexico-U.S. border where the MFI plant is located, has become a manufacturing hub for the automobile, electronics and medical devices industries. The city’s auto manufacturers include Delphi, Johnson Controls and Lear. Its electronics manufacturers include Electrolux, Flextronics, Foxconn and Lexmark. Its medical device companies include Cardinal Health, GE, and Johnson and Johnson.
The fact that large companies are manufacturing products in Ciudad Juarez should encourage medium-sized companies to move to the city as well, said MFI's President Lawrence Wollschlager, who noted that MFI has been manufacturing products for original equipment manufacturers (OEMs), public companies, and other medium- and large-scale production companies since 1982.
“Ciudad Juarez has the specialized workforce to staff leading-edge companies,” said Wollschlager. “Juarez is known for the high-quality standards in its production facilities, the efficiency and productivity of its workforce, and its easy access to the U.S. MFI’s growth and success is due in large part to Ciudad Juarez’s outstanding workforce.”
The Boston Consulting Group report cited Mexico’s low labor and manufacturing costs in comparison to China and several other nations as a crucial reason for the projected export boom. It also predicted that production in several industries, including the automobile, appliances, computers, electronics, and machinery industries, could increase by up to 19 percent by 2017 and the increased production could create up to 900,000 manufacturing jobs annually.
The manufacturing boom is about way more than low costs, Carlos Ghosn, Nissan’s CEO, told Reuters as the company opened a new $2 billion plant that will increase its annual production from 683,000 automobiles in 2012 to 1 million automobiles in 2016.
"It's not only about cost, it's also about quality and it's about responsiveness -- capacity to respond to variation of the market very quickly," Ghosn said. "Mexico is becoming the export hub for the Americas -- not only North America but also South America."
Mexico’s manufacturing and export boom is also abetted by the nation’s “far greater access to major global auto markets,” according to the Brookings report. Mexico has trade pacts with 44 nations, while the United States only has deals with 20 nations. This means that Mexican exporters often pay none or very low tariffs.
Does your company want to move its manufacturing plant to Mexico?
Are you confident that your company can manufacture its products itself in Mexico rather than outsource the production to an established manufacturer in Mexico?
If the answers to both of these questions is ‘yes,’ you might think that your company doesn’t need the assistance of a Mexican manufacturing company. You might think about it twice, because you also might need the startup and managment services of a Mexican manufacturer. These services are called shelter services.
Mexico has a high-quality, competitive-cost workforce so moving to Mexico is a good decision. In fact, more American manufacturers have been moving to Mexico in recent years because they’re becoming more interested in higher-value products, the wage gap between Mexico and China is shrinking, Mexican manufacturers have faster production turnaround times than Asian manufacturers, and Mexican plants have higher workplace safety and labor standards than Asian plants.
Moving to Mexico, also requires knowing and understanding Mexico so well that your company has to be skilled in managing a Mexican operation. That means being able to navigate the nation’s import, export, tax, regulatory and environmental laws as well as the zoning and administrative laws of the municipality where you want to start your operation.
Fortunately, MFI International is the answer to your Mexico project.
MFI has been a contract manufacturer for American companies since 1982 with operations in Ciudad Juarez, which is adjacent to El Paso, Texas. The company has succeeded in a multitude of industries because its clients include companies in the consumer products, electronics, furniture, mattress, medical, pet products, and specialty seating industries.
While handling the contract manufacturing for companies in all of these industries, MFI has also become an expert and leading provider of shelter services in the region. These include:
* Acquiring start-up permits
* Saving money on customs duties and taxes
* Complying with environmental laws
* Purchasing supplies and consumables
* Handling administrative and legal paperwork
* Handling many fiscal and accounting responsibilities
*Taking care of all cross border logistics
Contacting MFI to find out more about the company’s shelter services is easy.
If you’re a company that is looking to open an operation in Mexico and wants to have full control of the quality and quantity of its own production, hiring a company like MFI to handle your shelter services is a very smart investment.
Hiring an expert in shelter services minimizes the risk that non-Mexican foreign companies take when they set up a facility in Mexico. By taking advantage of the expertise of shelter providers, there is no reason why companies of any size and scope can’t follow the example of global industry leaders and open an operation in Mexico.
Some organizations that have studied the potential impact of the Affordable Care Act have concluded that it will negatively affect the American business community.
Other organizations have concluded the 2010 law that was intended to address the problem of roughly 50 million Americans not having health insurance will spur the creation of small businesses by employees who now fear they will lose their health insurance if they leave their jobs.
The effect of the law, which has become commonly known as Obamacare, or the new health care reform, is uncertain, but one thing is certain, many American business executives are very worried. In fact, most members of the Small Business and Entrepreneurship Council want the law repealed because they think it will increase health insurance costs, according to Forbes magazine.
"For small business owners--and most other Americans--Obamacare is the devil we don't want to know," wrote Jim Blasingame of Forbes.
The new health care reform gives American manufacturers an excellent opportunity to explore the Mexican option.
American manufacturers that utilize Mexican Manufacturing are saving money.
"Our clients typically experience cost savings equivalent to $1 million per year every 50 employees when they move their operation from the U.S. to Mexico," said Fatih Akben, MFI's Director of New Business Development.
The statistic about how much manufacturers with 50 employees save is important because the new health care reform mandates that businesses with at least 50 full-time employees must pay fines if they don't provide health insurance for those employees. Many small business executives have said publicly that they have already reduced their full-time staff in an effort to avoid those fines although the Affordable Care Act won't even go into effect for employers until 2015 (it goes into effect for individuals in 2014).
Reducing the number of employees can negatively affect production, but American companies can maintain their level of production by hiring companies like MFI International MFG., which has been a contract manufacturer for American companies in numerous industries, including the textiles industry, since 1982. "Nearshoring" with MFI has saved American manufacturers a lot of money and doesn't slow down their production schedule because MFI's manufacturing plants in Mexico are located in Ciudad Juarez, which is on the American border and is so close to major transportation routes that the expense of bringing the product to market is very reasonable.
The Affordable Care Act doesn't have provisions that explicitly affect one industry more than another, although industries with a larger share of companies with more than 50 employees will be affected more by the law.
Objective analysis of the impact of the Affordable Care Act are hard to find, but Politico.com gives it a crack in an article entitled "How the new health care reform affects businesses -- large and small." The points the article makes include:
* Beginning in 2015, all employers with "the equivalent of 50 or more full-time workers" who don't offer health insurance must pay a $2,000 per worker fine annually "not counting the first 30" (employers with 100 employees will pay a $140,000 annual fine -- 70 workers times $2,000).
* Very few small businesses are using the tax credits that are supposed to help small business pay for health insurance because the credits are "underwhelming," according to an official from the National Federation of Independent Business.
* Many employers have praised the Obama administration for postponing the requirements for businesses to report the details of their health insurance policies to the U.S. government.
Textiles companies have several major problems, including a shortage of skilled sewers.
MFI International has the solutions, including a highly-skilled workforce.
According to a Sept. 30, 2013, article in The New York Times entitled “A Wave of Sewing Jobs as Orders Pile Up at U.S. Factories,” textiles companies have become dissatisfied with the quality of products made in Asia, the safety record of factories in Asia, and the reliability of the factories’ production schedules.
The article reports that the American textiles industry has a huge opportunity to regain the business it has lost during the past 20 years, but it has had trouble taking advantage of the opportunity because it has a shortage of skilled workers. Since 1990, the American textile industry workforce has declined by 77 percent and the industry is now “scrambling to find workers to fill the specialized jobs that have not been taken over by machines.”
Curiously, the article doesn’t mention the Mexican textile industry at all. It should have because Mexico’s textiles industry is “reclaiming a growing proportion of the US market as it benefits from an increasing focus on higher-value products and greater diversification,” according to BanderasNews.
The Mexican textile industry, including MFI International, has become increasingly successful because its highly-skilled workers are making high-quality products expeditiously and reliably at safe factories. With operations on the Mexican side of the El Paso, Texas-Juarez, Mexico, border, MFI has been a reliable contract manufacturer for American companies for more than 30 years, turning around orders at competitive costs and providing many other benefits for its clients.
MFI’s workmanship is superb because its highly-skilled workers understand that high-quality manufacturing requires detailed attention to a product’s design and relationships with customers. MFIs textile operation in Mexico includes:
* Sewing and assembly
* Inspection and cutting
* Embroidery and quilting
* Engineering and sourcing
* Packaging and fulfillment
* Shipping and distribution
During the early part of the 21st century, the textiles industry in China and other Asian nations boomed as companies sought cheap labor. In the last few years, though, nearshoring -- moving manufacturing and other business operations as close as possible to the huge American market -- has become more prevalent.
"A shift to onshore or nearshore manufacturing operations for producing local demand in nearby low-cost countries, such as Mexico for the United States, appears to be here to stay as manufacturers look for the next level of competitive advantage," John Ferreira of supply chain consulting firm Accenture told Inbound Logistics magazine. "In the case of Mexico and Latin America, these moves serve a dual purpose: the ability to accommodate growing markets near customers there, as well as being nearshore to the large U.S.-based demand."
"Mexico's Superior Safety and Labor Records Drive Productivity and Profits to Higher Levels"
The news about the April, 2013, tragedy in Bangladesh received worldwide attention. And it should have because 1,129 Bangladeshi garment workers died when the building they were working in collapsed.
What’s far less known is that textile plants in several Asian nations have had tragedies as well as safety and labor problems, according to reports by Minnesota Public Radio and The New York Times.
Mexican textile plants, though, have superior safety and labor relations records. They are taking the right approach because there is a correlation between safe workplaces that honor promises to pay workers fairly and long-term financial success, according to Drusilla Brown, who represents the International Labor Organization in its efforts to set labor standards at manufacturing plants around the world.
Brown said that companies trying to cut costs by paying workers low wages and forcing them to work long hours are making a mistake in the long run.
"(The International Labor Organization) has found a lot of evidence that better working conditions actually correlate with higher productivity and higher profits," she said.
According to a U.S. Department of Commerce chart, China, Vietnam, Indonesia, Bangladesh, India, and Cambodia are first, second, third, fourth, sixth and eighth in apparel exports to the U.S. Sandwiched in between those nations in Mexico, which is fifth but was first in 2000 before China became a member of the World Trade Organization in 2001 and then increased its exploitation of cheap labor in the textiles industry. Many Asian nations became more interested in the industry when they saw China’s success.
The Mexican textiles industry, though, is making a comeback because of its superior safety and labor record, according to Lawrence Wollschlager, the President and C.O.O. of contract manufacturer, MFI International.
“We've never had a fire, serious accident, or labor strike during the 30 years that MFI has manufactured textiles products in numerous industries for American companies in northern Mexico,” said Wollschlager. “MFI ensures that our workers are completely safe and adheres to Mexico’s safety and labor laws, which are far stricter than the laws in Asia and Bangladesh.”
Mexico’s safety standards include a long list of requirements for manufacturing plants, including emergency exits and stairs, fire-detection and fire-extinguishing safety equipment, mandatory evacuation routes, and safe places for workers. MFI also requires employees to report malfunctions in electrical equipment that could lead to accidents and frequently practices emergency and fire evacuation procedures.
In contrast, an investigation by The New York Times concluded that safety inspections of textiles plants in China, Indonesia, Pakistan and Vietnam are so flawed that “thousands of factories in those countries will no doubt continue to be reviewed through the perfunctory “check the box” audits.”
MFI has proven since 1982 that the International Labor Organization’s conclusion that better working conditions correlate with higher productivity and profits is correct. The company has achieved these objectives by implementing the most rigorous labor and safety standards in the textiles industry, said Wollschlager. Consequently, he added, production at MFI plants has been 100 percent reliable.
Wollschlager noted that MFI offers its American partners numerous other benefits, including high-quality products, costs that are competitive with the costs of the less reliable Asian textiles plants, a location that is so close to the United States that MFI’s lead-time can range from one to six weeks, in a low-risk and ethical business environment.
"Companies Appreciate Mexico's High-Quality Workforce, Logistics Advantages & Cost Savings"
Marty McFly time-traveled from 1985 to 1955 in the movie “Back to the Future.”
This year, many companies are sort of time-traveling to 2000 -- the year they began leaving their operations in Mexico -- because they’re returning to Mexico. Abandoning Asia, they’re “nearshoring” -- moving some business operations closer to their American market, according to Inbound Logistics magazine’s analysis of nearshoring to Latin America.
The nearshored operations include specialty apparel manufacturers that utilize MFI International as their contract manufacturer in Mexico, as well as other manufacturing in Mexico operations.
Many of these operations moved to China about a decade ago to save money. They’re returning in 2013 to a different Mexico.
This Mexico has a “well-educated bilingual workforce,” according to Inbound Logistics. In this Mexico, more Mexicans -- almost 100,000 -- earn engineering degrees annually than Canadians and Germans. In this Mexico, managers are so skilled that 80 percent of Mexican plant managers are Mexican nationals.
Nearshoring to become closer to the American market has become more popular in recent years as China’s wages and fuel costs have risen. By 2015, manufacturing in China will cost as much as manufacturing in the U.S., according to Entrepreneur magazine.
Nearshoring to Mexico has become so appealing that senior manufacturing executives by a 37 to 5 percent margin prefer Mexico to Central and South America as their most attractive region for businesses that need to be close to the U.S., according to AlixPartners 2013 Nearshoring Survey.
Surveyed executives cited the following expected advantages of nearshoring, which is also sometimes referred to as nearsourcing, according to the survey:
Lower freight costs -- 75 percent
Improved speed to market / lower inventory (in-transit) costs -- 71 percent
Fewer supply disruptions -- 35 percent
Time zone advantages (easier management coordination, etc.) -- 31 percent
Shrinking wage gap – 22 percent
Better quality control – 21 percent
Lower input costs (e.g. natural gas, raw materials) – 17 percent
Improved intellectual property security – 14 percent
Other – 8 percent
Nearshoring Trend Helps MFI
MFI has manufactured goods for American companies for more than 30 years at its plant in Ciudad Juarez, which is on the Mexican side of the El Paso, Texas-Mexico border.
The goods include electronics, furniture, mattress soft goods (mattress covers), medical equipment, pet products, and specialty seats. The nearshoring trend could be particularly beneficial to MFI’s efforts to manufacture specialty apparel.
Sourcing Journal reported that a retailer that manufactured its products in China shifted to Latin America because its factories “have a better preproduction structure and discipline” and are better at joint planning. The products manufactured at recently nearshored Latin American plants include denim, intimate apparel, khakis, t-shirts, work pants, and work shirts.
The industry leaders interviewed by Sourcing Journal said that apparel manufactured in Latin America takes three to five weeks to get to the U.S. market, while it’s “impossible” to bring apparel manufactured in Asia to the same market in less than 90 days. In addition, transportation costs are “becoming prohibitive,” according to Inbound Logistics.
Apparel manufacturers that hire MFI also have the advantage of MFI’s managerial services, including finding talented employees, keeping financial records, completing administrative and legal paperwork, purchasing supplies, and making sure that all local laws are complied with.
Should your company nearshore?
Entrepreneur recommends that prospective nearshorers calculate moving costs, analyze delivery needs, figure out the potential risks of overseas vendors, and study the competition.
IndustryWeek recommends considering labor issues, supply chains, infrastructure, workforce and intellectual property protection.
Did you know that a product that says it is “Made in Mexico” is actually 40 percent manufactured in the United States?
The percentage of an imported product from Mexico that is essentially manufactured in the U.S. has increased in recent years because partnerships by Mexican and American companies are increasing, according to research by The Washington Post. Oftentimes, products are completed in Mexico, but they are manufactured on both sides of the border because American companies are increasingly confident that Mexicans have the skills to manufacture high-quality products.
“Mexico is fundamentally a sophisticated manufacturing economy that is growing at a very acceptable rate when compared to other emerging market economies,” wrote Andres Rozental, a senior fellow at the Brookings Institution, which is ranked as the world’s No. 1 think tank.
Years ago, many American companies were building manufacturing plants in China, but Rozental wrote that many of these companies are relocating to Mexico because of its increasingly skilled labor, its improving infrastructure, its economic and political stability, its proximity to the U.S. and its “ability to provide just-in-time sourcing and a relatively transparent regulatory framework in which to do business.”
Mexican-American partnerships are often very successful. The relationship between Neenah, Wis.-based Dormeo Octaspring and MFI International, which has manufacturing facilities on the Mexican side of the Ciudad Juárez, Mexico-El Paso Texas, border, is an example. Dormeo designs and manufactures high-quality mattresses in the U.S., and contract manufacturer MFI produces Dormeo’s soft goods (mattress covers) in Mexico and ships them to the U.S.
“MFI has been a great partner for us as we have started up production in the U.S.,” said Jon Stowe, Dormeo Octaspring’s senior vice president for North America. “MFI quickly turned around orders and produced a high-quality product for us.”
Mexico Has Many Advantages
Rozental wrote that Mexican maquiladoras are gaining the “upper hand” on Chinese factories because of their proximity to the U.S.
In fact, only 4 percent of a product that says it is “Made in China” is manufactured in the U.S., according toThe Washington Post’s Sept. 9, 2012 article.
Years ago, American companies often used Mexican labor for farm work, but they are now using the labor for “the high-skill manufacturing necessary to make airplanes and satellites,” according to The Washington Post.
In a March 11, 2013, speech, U.S. Ambassador to Mexico Earl Wayne pointed out that Mexico is the fourth-largest exporter of automobiles in the world, the No. 1 producer of flat-screen televisions and refrigerators, and the No. 4 provider of information technology services.
Wayne noted the following at his March 11 speech and his Nov. 13, 2012, presentation at the Mexican Business Summit.
* Almost 100,000 Mexicans earn degrees in Engineering annually. This is more than Canada and Germany.
* American companies, particularly small- and medium-sized manufacturers, can benefit from “just-in-time” manufacturing. The companies’ proximity to Mexico allows them to move the raw materials needed for manufacturing in small quantities, reduces the cost of warehousing these supplies, and allows them to change their production process regularly.
* The manufactured products can be delivered more expeditiously and more inexpensively from Mexico than other nations.
* American and Mexican manufacturing is becoming so “increasingly integrated” that many companies are moving their manufacturing plants from Asia to Mexico.
“U.S. companies are choosing Mexico over other markets for manufacturing and assembly,” said Wayne.
Many Companies Moving To Mexico
MFI International Mfg., which has helped more than 100 companies establish successful manufacturing operations in Mexico, through contract manufacturing programs and shelter services has a list of why manufacturing in Mexico is cost-effective.
The reasons include saving on tariffs because of free trade agreements, no income and value-added taxes for manufacturers, technical training support, Mexico’s skilled and affordable workforce, and how expeditiously products are manufactured.
Non-Mexican companies that outsource some of their manufacturing operations in Mexico include companies in dozens of industries, including appliances, electronics, furniture, medical devices, metal, petrochemical, plastics, pharmaceuticals, software design and textiles. In addition, most of the world’s largest automobile companies have manufacturing facilities in Mexico and, The Washington Post reports that Mexico became “the No. 1 investment destination for the aerospace industry” in 2012.
"When the legend becomes fact, print the legend."
Journalist in the movie “The Man Who Shot Liberty Valance”
Many journalists have been ignoring the facts about Mexico for years. Mexico, they write, is a dangerous third-world nation whose citizens desperately want to immigrate to the United States to escape a poverty-stricken nation with few job opportunities.
Perhaps, more journalists should print the facts – Mexico has been remarkably stable economically and politically for a long time, it has a world-class infrastructure, and it is the site of offices and manufacturing plants owned by more than 70 Fortune 500 companies.
The Mexican government’s commitment to becoming a first-world nation is best reflected in its investment in improving the education and workplace skills of its citizens, particularly in the field of engineering.
“Mexico is now one of the top producers of engineers in the world,” Oscar Suchil, National Polytechnic Institute’s director of graduate affairs, told The Washington Post in an Oct. 28, 2012 article.
The Truth About Mexico
Here are some of the facts about Mexico’s commitment to and achievements in engineering and related fields:
* From 2006-2012, the six years of Felipe Calderon’s presidency, Mexico built 140 colleges and universities and 120 of those schools are focused on engineering and science. In 2012, Mexico had twice as many two- and four-year colleges and universities than it had in 2002.
* Mexico has almost as many students earning bachelor’s degrees in engineering as the U.S. although it has 115 million people, while the U.S. has 314 million people. In the latest years for which figures are available, Mexico had 75,575 students earning undergraduate engineering degrees in 2010, while the U.S. had 83,000 students earning the same degree in 2011, according to the American Society for Engineering Education, the United Nations and the CIA.
* About 130,000 Mexican citizens earn degrees in engineering and other technician-related subjects from universities and specialized high schools per year. This is more than Germany and Brazil, which has almost twice as many citizens as Mexico.
* Mexico’s commitment to engineering is so great that it is subsidizing the cost of education for engineering students. Tuition for the approximately 98,000 engineering students at the public National Polytechnic Institute is $12 per semester. The number of college scholarships nationwide doubled from 2006 through 2012.
Many Companies In Mexico
Mexico is changing so rapidly that about 30% of Mexico’s citizens are in the middle class. By comparison, only about 40 percent of American citizens are in the middle class.
Mexico’s workforce is becoming so sophisticated that companies such as General Motors, Honeywell and Delphi employ hundreds of Mexican engineers in research & development (R&D) centers in Mexico, according to Bloomberg Businessweek Magazine.
MFI International, which has had manufacturing facilities on the Ciudad Juarez, Mexico, side of the El Paso, Texas/Ciudad Juarez border since 1982, has demonstrated how companies can utilize Mexican engineers to manufacture products such as auto parts, medical devices, mattress and furniture soft goods, among others products for MFI’s American clients. Engineers working for MFI work together on R&D and prototypes of new products that are eventually sold to American companies. MFI's location also reduces transportation costs and time and, thus, expedites how quickly the products are brought to the market.
The relationship between MFI and its American clients is only part of a trend toward a greater trading relationship between the U.S. and Mexico. In 2011, trade between the two nations increased 17 percent and Mexico is closing in on becoming the USA’s second-largest trading partner, according to The Washington Post.
In fact, trade between the two nations has increased six fold since they signed the North American Free Trade Agreement in 1994, according to The Washington Post. Currently, 80 percent of Mexico's exports go to the USA. That figure could increase as American companies hire more engineers at their Mexican subsidiaries.
"We constantly have major multinationals here trying to recruit dozens of engineers at a time," said Alfredo Juarez, a director at the National Polytechnic Institute, told Businessweek.
The perils of manufacturing overseas at factories without adequate fire and workplace safety standards are risks that every CEO and compliance officer need to consider.
Last November, a deadly fire struck a Bangladesh textile factory, killing more than a hundred workers. Yet many large U.S. companies were still caught unaware again last month when 1,200 workers were injured in a Bangladesh textile factory collapse. Two chilling, yet noteworthy, details to emerge from this latest tragedy are:
Police ordered the building evacuated the day before when cracks were found in the structure.
Several giant U.S. retailers said they were unaware production for their brands was being completed at the site because orders were shuttled through apparently murky sub-contract relationships in the Asian apparel industry.
Every product-maker wants to reap the rewards of manufacturing in a lower cost country. But when evaluating textile contract manufacturers, it’s imperative that before committing, businesses probe a factory’s social and human rights commitments, as well as safety records.
The reason: Large companies like Wal-Mart have the resources to hire outside auditing firms and invest in risky regions to implement and improve worker safety. But other manufacturers can be devastated by such a tragedy.
Mexico has built emergency workplace safety precautions and procedures into its maquiladora (or nearshore manufacturing and assembly) program. In December 2010, Mexico’s Department of Labor and Social Welfare (“STPS” for its acronym in Spanish) updated its emergency safety standards (Nom-002-STPS-2010), requiring fire-detection and fire-extinguishing safety equipment on sites and mandatory evacuation routes, emergency exits, emergency stairs and safe places for workers.
Textile contract manufacturer MFI International also takes extra steps to enforce workplace safety in its assembly plants. Our policy complies with Mexico's fire and safety standards, and it also requires employees to report malfunctions in electrical equipment that could lead to accidents. Emergency and fire evacuation procedures are practiced frequently.
The bottom line: When manufacturing products off-site, know your contract partner’s safety record and commitment, and where your contract manufacturers are completing your work.
MFI International has more than 30 years experience in contract assembly and manufacturing in Mexico support "shelter services". For more information on safe and cost-effective manufacturing, call 866-918-2260.
To download an executive summary of Mexico's Fire and Safety Standard Regulation click here:
Manufacturing in Mexico Fire and Safety Standards
When evaluating whether to manufacture in Mexico, it’s wise to consider customs issues such as import duties and taxes in order to accurately calculate your total landed cost.
For example, items produced and assembled by maquiladoras (or contract manufacturing companies) in Mexico are eligible for preferential customs duty rates, some as low as 0%, when working through the IMMEX program.
Mexico’s IMMEX (or maquiladora) program enables companies to temporarily import materials so they can be manufactured into goods and then re-exported without payment of taxes and compensatory quotas. Under IMMEX, companies can avoid the General import tax and the pricey VAT tax, which can be as high as 15%.
But in order to qualify, these goods must first be classified to meet certain Rules of Origin requirements, described here on the NAFTA Certificate of Origin form provided by the U.S. Department of Homeland Security.
Most of the Rules of Origin criteria have to do with whether the raw materials come from a NAFTA member. If so, duty fees are waived. But because the language is complex, it can be easy for an inexperienced manufacturer to make a mistake that can blow out your bottom line.
MFI International works closely with clients to evaluate and classify raw materials and goods correctly.
Even if your product doesn’t qualify for preferential import duty rates, MFI’s Corporate Custom Broker Jorge Fierro advises, you can still work through these other avenues:
Mexico’s PROSEC (or “promotional sector”) program provides specific industries, such as automotive and medical, with reduced duty rates as low as 0%.
Regla Octava allows the maquiladora to petition the government for a 0% duty rate.
Industry-specific programs, such as a “Tariff Preferential Level" also known as TPL’s, permits Mexican manufacturers to import materials temporarily without preferential import duties.
To learn more about special customs duty rates and Mexico trade incentives, visit our post entitled “Understanding the Maquiladora Program and NAFTA’s Role,” or call an experienced MFI International specialist at 866-918-2260.