It is common to hear that auto part manufacturers with plants in Mexico that export their final products or that sell them to Mexican Original Equipment Manufacturers (OEMs), operate under trade facilitation programs that allow them to import into Mexico raw materials, machinery and equipment with certain benefits. Most of the manufacturers operate as IMMEX authorized companies.
IMMEX is the Spanish acronym for the Manufacturing, Maquila and Export Services Industries Program. The IMMEX Program is a foreign trade facilitation instrument created by the Mexican government that allows authorized companies to import goods into Mexico on a temporary basis, to be used in the production of final products destined for export or in rendering export related services.
This article provides a short overview of the IMMEX Program, its modalities, benefits, duration and primary obligations. To determine whether specific benefits can be obtained through joining the IMMEX Program, companies must conduct a thorough analysis.
Mexican companies may be authorized as IMMEX companies as long as they comply with the requirements set forth in the Decree for the Promotion of the Manufacturing, Maquila and Export Services Industries (“IMMEX Decree”).
There are 5 modalities in which the IMMEX Program may be authorized for a Mexican company. Within the most popular modalities in which companies enroll in the program, we find: (i) the industrial, (ii) the services and (iii) the shelter modality.
Under the IMMEX program, machinery and equipment may be imported under a temporary basis and kept in Mexico under the program as long as it is in effect. Raw materials may be kept in the country only for 18 months (as a general rule), during which time they must be incorporated to finished goods and exported or imported in a definitive basis.
IMMEX authorized companies may, as a general rule, import raw materials and take advantage of benefits such as the exemption from the payment of import duties, preferential fixed customs processing fees, and when applicable, an exemption in the payment of countervailing duties. Import duties are always paid in the temporary importation of machinery and equipment.
As an important benefit that comes with an IMMEX Program, authorized companies may have access to a Value Added Tax (VAT) Certification, which allows them to avoid paying the applicable VAT upon the importation of goods used in their manufacturing operation. This benefit may be the only important one when importing goods subject to preferential duties treatment under Free Trade Agreements entered into by Mexico, such as the North America Free Trade Agreement (NAFTA) or the Agreement with the European Union (EUFTA), where as a general rule import duties are not paid.
As per its duration, the IMMEX Program authorization will remain in force as long as the authorized company continues to meet the requirements of the program and complies with its IMMEX related obligations.
The most significant obligations that an IMMEX authorized company needs to comply with are: (i) carry out annual export sales grater than USD $500,000 or representing at least 10% of its total sales; (ii) keep an inventory record in an automated inventory control system; (iii) return abroad temporarily imported goods within their authorized entry period; (iv) submit an annual electronic report on the total sales and exports; and (v) submit monthly information for statistical purposes; among others.
IMMEX authorized companies are required to comply with additional controls when using third parties to perform sub-manufacturing activities, or when carrying out sales and transfers of finished goods to OEMs.
It is highly recommendable to carry out periodic internal audits to verify the compliance of IMMEX authorized companies with their general and particular obligations under their IMMEX Program.