DIFFERENT OPTIONS OF OPERATING MEXICO

SHELTER OPERATION

SHELTER” is essentially an Administrative Services Company (ASC), which provides new companies looking to manufacture in Mexico with all of the start-up assistance they require to successfully operate in Mexico.
It provides all administrative services on an on-going basis, allowing the Client-Company to focus its attention on manufacturing its products, confident with the knowledge that the ASC manages all of the complicated and bureaucratic administrative tasks.

An ASC can supply the physical facilities upon demand. It will also obtain all Maquiladora related operating permits from the various government entities as required, to ensure compliance with Mexican Law.
The Client-Company normally provides all materials, supplies, machinery & equipment, working capital, quality control, training and other operational requirements to support the manufacturing operations.

Using the Shelter option, the Client-Company has complete control over the operation without having to deal with the burdensome day-to-day administrative issues of a foreign business environment. It allows foreign companies to ease into Mexico, gaining valuable experience to assimilate more easily on their own at a later date.

Fees will vary according to plant size, employment levels, import-export complexity, logistics requirements, etc., and are normally calculated on a cost-per-labor hour basis.

Services included in administrative fees:

LABOR SUBCONTRACTING

This option works well for inexperienced companies, uncertain about their own Mexican start-up operation, whose processes involve fairly simple tasks.  This method is similar to contract manufacturing, but the Client-Company provides all materials to be assembled.

The Client-Company contracts with an established company in Mexico to work on the product, providing all direct materials.

The Labor Subcontractor takes care of the rest using its facilities. This option works well because the investment and potential exposure to Mexican labor laws, taxes and other types of liabilities are minimal.

TURNKEY CONTRACT MANUFACTURING
(Manufacturing Support Companies)

This option is based on both parties signing a “Turnkey Agreement”, in which the pricing is “Bid to Print”. The Turnkey Contractor provides raw materials and will assume all quality control, production, and administrative management, as well as all legal responsibility in Mexico. For difficult to source raw materials, the Client-Company may have to provide. The Client-Company will also provide technical assistance if required.

This option provides the Client Company with one or more of the following services: DFM (design for manufacturability), procurement, quality control, engineering & design, packaging and/or distribution. The “Manufacturing Support Company” Considers every customer a strategic partner, striving to meet its client's needs cost effectively.

“Manufacturing Support Companies” create solution for their customers.

OPPORTUNITIES

Favorable tariff provisions

MAQUILA PROGRAM (Twin Plant)
Generalities

Definition:
The Maquila Operational Program is a tool which allows temporarily importing the necessary goods so as to be employed in the transformation, manufacture or repair of products to be exported without having to pay for the general import tax, the value added tax or any countervailing duty when applicable. Also, this program is used for carrying out service activities in relation to goods to be exported.

Benefits:
The Maquila Operational Program offers holders the possibility to temporarily import tax-free materials to be incorporated and employed in the productive process of goods to be exported; holders are also entitled to carrying out service activities to goods to be exported established by the Ministry of the Economy acknowledged as issued in the Federation Official Journal.
These goods are listed as follows under four categories:

I. Raw materials, spare parts and components, auxiliary materials, packing, packing material and oils and lubricants employed during the manufacturing process of goods to be exported;

II. Containers and truck trailers;

III. Tools, equipments and investigation commodities of industrial security and products necessary for cleaning, asepsis and the prevention and control of pollution of the manufacturing plant, manuals and industrial blue prints as well as telecommunication and computing equipment;

IV. Machinery, devices and spare parts for the completion of productive processes, laboratory equipment, measuring and testing equipment for their manufactured goods and those required for quality control, for training personnel and equipment for the administrative development of a company.

Types:
Industrial Maquila (concerning manufacturing operations for the design or transformation of goods to be exported)

Service Maquila for goods to be exported, such as:
Supplying, storage, logistics of materials, parts and components for companies under    export maquila and PITEX program conditions;

Shelter Maquila (concerning export projects by foreign companies which make it available the technology and the productive material to Mexican companies without directly managing such projects