Month: January 2024

To import a shipment from Mexico to the United States, a truck must have a Bill of Lading, Complemento Carta Porte, Commercial Invoice, Carrier Information, Certificates of Origin, Document of Operations for Customs Clearance (DODA), a US Customs Declaration, and a physical Carta Porte. Overwhelmed yet?

One of the latest items added to this list is known as the Carta Porte, and it has been causing confusion and stress for companies for the better part of the last three years. The Carta Porte was first announced back in 2020 as a way for the Mexican Government to get a handle on the taxation of shipments. At its core, it is a bill of lading, which has had no cultural bearing in Mexican transportation in its history. Bill of ladings have been used and incorporated into the US system for decades, and companies have leveraged them as proof of deliveries or double-check KPIs within their organizations. The rock in the shoe in the Mexican system from the start has been that the Carta Porte has also doubled as a checks and balance system for the federal government in Mexico, including information about the goods transported, origin, destination, quantity, type, value, and the vehicle information in which it is being transported.

Prior to the Carta Porte, the Mexican government was missing out on a tax base for services that were required to be self-reported. This new action is a way to keep honest companies honest and helps in other ways as well. This allows for statistics gathering on shipping lanes, prevention of tax evasion, and enables the tax authority to ensure it is getting its due amounts in revenue from services.

How this process is able to be tracked is via a Comprobante Fiscal Digital por Internet (CFDI). The CFDI is not new, but it simply has not been used in the transportation realm in regards to specific shipments. The CFDI is an electronic invoice that allows for validating commercial transactions in Mexico. All Mexican companies that are certified are utilizing the CFDI system. It is important to have a continuous and constant auditing program within organizations to maintain a healthy and good standing with the Mexican government. The CFDI allows for a service provider to verify that goods were transferred and are now in the hands of the client or vice versa. Expanding the program will allow for leverage auditing trails for companies to see valuable information for outflows and inflows of goods.

For the cross-border community, an additional document is required. The Complemento Carta Porte is a digital document that is an extension of the physical Carta Porte and is integrated with the CFDI. For a truck to cross the border, this digital document must also be included with the shipment.

The completion of the Carta Porte implementation has had numerous delays. For 2024, the stated goal and completion are the first quarter. Many companies are behind in their current efforts to gain compliance within the system. It does take some effort to not only understand its importance but the implementation and training of staff are paramount to success. The future of this system is very positive. Allowing a more transparent and visible shipping sector will allow for increased volume in trade and more visibility for companies of goods and capital invested in their supply chain.

In its 2021 reshoring index, Kearney consultancy agency found that 92% of CEOs had considered nearshoring as a viable operational strategy for their future manufacturing needs. Questions surrounding supply chain disruptions, diplomatic frustrations, and general geopolitical fallouts have become significant pressures affecting business strategies for the upcoming decades. The challenges associated with nearshoring can be substantial, but industry disruptors pursuing nearshoring strategies are experiencing success.

In 2023, globalized entities faced numerous supply chain issues. Factors such as increased competition, shifting consumer demands, disputes among longshoremen, rising container costs, extended transit times, environmental sustainability concerns, labor shortages, and security issues were prevalent. These challenges, combined with offshoring, presented a myriad of complications. For instance, companies operating in China, grappling with intellectual property rights issues, also confronted extended time-to-market periods and significant capital tied up in goods. Consequently, many firms have initiated evaluations of nearshoring options. Mexico, a longstanding neighbor to the United States, offers a closer, less complicated environment that enables better control over processes and a more efficient logistical timeframe for the movement of goods and services.

The economic outlook for China in 2024 appears bleak. The real estate market has reversed its 20-year boom, largely driven by government encouragement. Youth employment rates are declining, and despite easing COVID-19 restrictions, businesses face challenges in product movement due to various geopolitical factors. Furthermore, tariffs pose additional constraints; for instance, car manufacturers importing from China to the U.S. encounter a tariff of 27.5%. These circumstances underscore why nearshoring is gaining traction in the North American continent.

Examining the success stories of Fortune 500 companies that have transitioned operations to Mexico provides valuable insights. Tesla is establishing a significant production facility near Monterrey, GM operates its largest arm outside the U.S. in Mexico near Toluca, and Polaris has chosen to initiate production in Mexico as well. For numerous foreign investors, nearshoring represents a once-in-a-lifetime opportunity, offering stability, closer cultural connections, and enhanced supply chain controls. The time to capitalize on nearshoring advantages is now.

Written by: John Rippee

What is a Mexican Shelter Company?

Value-added tax, or VAT, in Mexico is a tax applied to most goods and services sold in the country. Known in Mexico as Impuesto al Valor Agregado (IVA), it serves as an essential form of taxation for funding government systems and services, including programs aimed at benefiting the population. Navigating these tax codes can be challenging for foreign companies aiming to maximize their cash flow. The rate can be as high as 16%, but there are exceptions in border states, where it is 8% for certain goods.

The responsibility for paying these taxes falls on businesses, including those in the manufacturing sector. Calculating and tracking these services and goods may seem daunting, especially when an entity aims to recover VAT at a later date. Ultimately, consumers bear the cost of these taxes, but the impact on negative cash flows can create challenges for entities operating within Mexico.

IMMEX Program Benefits

Fortunately, foreign manufacturers benefit from exemptions for specific entities operating in Mexico. Manufacturers can import raw materials for manufacturing or assembly without paying VAT or IEPS, provided these goods are exported within a specified timeframe. These timeframes vary based on the specifics of the imported components, and Customs brokers can assist with the details. The term used for these imports is “Temporary Imports.”

The IMMEX company facilitating the foreign manufacturer’s imports must comply with Mexico’s regulations and be certified. Meeting these qualifications can be stringent and time-consuming. However, a Shelter company with existing entities in Mexico can expedite this process, resulting in savings for the foreign manufacturer.

Qualifications

Manufacturers must meet certain criteria to qualify for the IMMEX program and its benefits. The company must have a track record of manufacturing goods in Mexico and exporting them to foreign countries. Additionally, there must be a reporting structure in place to reconcile all products moved into and out of the country. Once these qualifications are met, processing times for imports and exports may decrease, and foreign operations can recover VAT from the Mexican government. Materials that were previously taxed may become exempt once the company meets all certification requirements.

Navigating the process for obtaining benefits in Mexico can be challenging for foreign companies due to unfamiliarity with local regulations. However, partnering with a trusted entity in the same space can streamline the process, allowing manufacturers to focus on their core competencies.