Legal and Incorporation

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Foreign investors and companies must understand the Mexican legal system. Despite the attempts by the Mexican government to clarify and facilitate the process necessary for establishing and maintaining a maquiladora operation, there are some legal requirements imposed that call for specialized attention. These requirements include filings with each of the authorities that regulate foreign investment, customs, taxes, social security, transportation, environmental protection and immigration.

LEGAL ASPECTS

The maquiladora program is controlled and regulated through different bodies of law: the Law on Foreign Investments, which went into effect on December 28, 1993, and the Foreign Investment Regulations promulgated in 1989, the 1998 Decree for the Encouragement and Operation of the Maquiladora Industry for Exportation, and its November 1998, October 2000, and December 2000 amendments; the Customs Law and Regulations; Labor Laws, Corporate Laws, Banking Laws and Tax Laws.

Recognition of different types of Maquiladoras

The current Maquiladora decree expressly recognizes the existence of specialized maquiladora companies: agro industrial maquiladoras, companies involved in the exploitation of mineral resources, fishing and forestry, service maquiladoras and companies operating as “shelters”.

The recognition that maquiladoras may be involved in service activities opens up many opportunities including repair services; maintenance of plants, machinery and equipment; telecommunications; personnel training and other types of support services needed by the maquiladora industry. There is also the possibility of establishing maquiladoras that offer services to financial institutions, such as check processing, credit card services, data processing and telemarketing.

Leasing Vs. Direct Ownership of the Facility

Acquiring the manufacturing facility can be accomplished through a lease agreement or ownership in fee. Lease agreements are normally executed by Maquiladora companies who view the operation on a short-term basis and who wish to have a limited investment in the operation. Lease agreements typically range from three to ten years. One of the more significant problems experienced by maquiladoras who lease facilities is that they outgrow the initial facility and may be forced to develop another facility at some distance from the initial location. This may entail transportation and management difficulties.

For a maquiladora operator who has a long-term commitment and has either a projected growth requirement or a need for a specialized facility, the purchase and construction of a facility may be a more desirable alternative. Normally, in a purchase arrangement, additional land is acquired to enable future expansion.

To learn more about industrial real estate in Mexico check our Real Estate chapter in the Information Center. This chapter provides you with info on:

  • Laws Governing Real Estate in Mexico
  • Mechanics of a Real Estate Transaction
  • Purchasing Real Estate in Mexico
  • Leasing Real Estate in Mexico
  • Leasing and Purchasing costs

Temporary Importation

Maquiladoras are capable of importing, on a temporary basis, machinery and equipment, replacement parts, raw materials, and anything needed to carry out their activities and fulfill their production goals without paying customs duties. In order to carry out the importation procedures, a customs broker or an attorney-in-fact for customs purposes, should handle such matters on behalf of the maquiladora company.

In general there are three types of temporary importations related to maquiladora companies:

  • Initial importations, which are those authorized for the initiation of the Maquila Program;
  • Subsequent importations, which are those necessary to continue fulfilling the Maquila Program; and
  • Emergency importations, which are those imports needed at any given moment and are not included in the Maquila Program

Specifically, Mexican customs regulations provide for the following temporary imports for a maquiladora company:

  • Raw and auxiliary materials required for the fulfillment of the manufacturing or assembly operations, pursuant to an approved Maquila Program;
  • Machinery, apparatuses, instruments, and equipment necessary to carry out manufacturing or assembly operations, together with those required for the quality control of its products;
  • Spare parts for the items referred to in the foregoing sub-section;
  • Tools and ancillary production and safety equipment, as well as environmental pollution control devices, telecommunication and computing equipment, work manuals and industrial blueprints; and
  • Containers, trailers, packaging material, tags and pamphlets

Restriction on Type of Products to be Manufactured

Mexico does not place restrictions on the type of product to be manufactured, assembled, packaged, processed, sorted, produced, transformed, or rebuilt other than requiring a special permit be obtained in advance from the Ministry of Defense (Secretaria de la Defensa Nacional) for production of firearms or from the Mexican Nuclear Regulatory Agency if the product has radioactive content.

(Source Bancomext)

Environmental Issues

Mexico's environmental laws are similar to those of the U.S. It is in the enforcement of those laws, not the laws themselves, that Mexico has fallen behind. The Political Constitution of Mexico mandates preservation and restoration of the environment through the “General Law of Ecological Equilibrium and Environmental Protection”. Thus, environmental issues are elevated to a constitutional status.

Companies operating in Mexico must meet the following environmental requirements:

  • Environmental Operating License
  • Environmental Impact Statement
  • Hazardous Waste
  • Storage of Hazardous Substances
  • Residual Water Discharge Registration

Working Permits

The maquiladora regulations permit up to 10% of the work force in the Mexican facility to be foreign nationals. These foreign nationals working in Mexico are legally admitted to work through a work permit (FM-3 visa), which is issued by the Mexican government. The FM-3 visa is valid for one year and may be renewed annually for a total of two years and is normally obtained through a Mexican Consulate or Embassy outside of Mexico.

INCORPORATION AND REGISTRATION PROCESS

Incorporation

The maquiladora corporation must register as a normal corporation with all of the appropriate government agencies, along with specific registrations regarding the maquiladora program and Foreign Investment Law. These registrations are performed in the normal course of business activity.

The initial permit needed is the incorporation permit from the Ministry of Foreign Affairs (Secretaria de Relaciones Exteriores), a requirement common to all companies that establish in Mexico. Incorporation proceedings take approximately three weeks after receipt of the permit or franchise and the related Special Powers of Attorney.

After incorporation, it may be possible to execute the following agreements:

  • Lease
  • Purchase, or
  • An Option to Lease or Purchase

Application to SECOFI

Once the permission to incorporate is received, an application needs to be made to Ministry of Commerce and Industrial Development (SECOFI) for a maquila program. Maquiladora companies must provide the necessary Maquila Program (“Programa de Maquila”) documentation, which contains general data of the maquiladora company, describing the manufacturing process, the characteristics of the products it will manufacture, a list of the necessary equipment and raw materials to be temporarily imported into Mexico or bought in the Mexican market. It also states the volume of labor to be used and proposed exports.

In processing the application, SECOFI will obtain the needed registrations with the National Maquiladora Industry Registry, the National Foreign Investment Registry, Foreign Relations, the Federal Taxpayer Registry, the National Workers Housing Fund Institute and Social Security. SECOFI will also notify the Customs Bureau of the maquila program approval so that machinery, equipment and materials can be temporarily imported into Mexico.

SECOFI must respond an application within ten (10) business days. Once a Maquila has been approved, the applicant is granted a Maquiladora Registry Number that is used in every contact with the government.

Registration Process

Once the incorporation proceeding has been carried out the company must be registered with the corresponding Federal Tax Authorities, with the Public Registry of Property and Commerce ("RPPC"), with the National Registry of Foreign Investment ("RNIE"), with the Mexican Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales "SEMARNAT") or the corresponding State Department of Ecology. Special permits for discharging wastewater, handling hazardous materials, or producing air emissions may be necessary depending on the circumstances.

Additionally, a sanitary license is needed from the Health Secretariat (Secretaria de Salud); import/export registration from the Ministry of Finance and Public Credit (Secretaria de Hacienda y Credito Publico); registration with the Department of Statistics; authorization from the Ministry of Labor for operation of mechanical energy and machinery used for transformation. Furthermore, companies need to apply for a permit for telecommunications systems from the Ministry of Communications and Transportation (Secretaria de Comunicaciones y Transportes).

State and local registrations and licenses include a land-use license from local authorities. Maquiladoras need to register employee training programs, labor contracts and internal shop rules with the State Labor Authority. Finally, companies need to register with both with State Tax Authorities and with the Public Registry of Property (Registro Publico de Propiedad).

Incorporation usually takes about three weeks once the Foreign Relations permit is received and the remaining permits and registrations take another thirty days.

(Source Bancomex)