Nearshore Manufacturing: What U.S. Companies Moving to Mexico Need to Know

Published On: April 22, 2022

Ready for a more efficient, cost-effective way to manufacture high-quality products? Here’s everything you need to know about moving your manufacturing to Mexico.

Why Are Companies Relocating to Mexico?

Now one of the world’s top manufacturing locations, Mexico offers U.S. companies significant benefits that give them a more competitive edge over other global manufacturers. Read more to learn about moving your U.S. company to Mexico.

STRONGER SUPPLY CHAINS

You’re always looking for ways to strengthen your supply chains. However, in the face of COVID-19 and rising taxes and tensions in China, rethinking your supply chains is perhaps more critical than ever. Luckily, Mexico’s close proximity to the United States means manufacturers don’t have to deal with managing long, complex supply chains that are prone to disruptions, many of which are still being affected by the COVID-19 pandemic.

LOW TRADING COSTS

Mexico’s proximity to the United States doesn’t just have logistical advantages. It also offers manufacturers significant cost-savings benefits. Companies with markets in the United States no longer need to worry about the high costs of overseas transportation and can take advantage of Mexico’s robust ground transportation infrastructure. Even companies with overseas markets have access to large international air and sea ports.

To further reduce costs, companies manufacturing in Mexico are able to import raw materials tax-free when they operate under the country’s IMMEX program, which exempts foreign manufacturers from VAT taxes, as long as their materials are exported as a completed product within a specific timeframe.

TALENT AVAILABILITY & LOW LABOR COSTS

As wages rise and the labor pool slowly declines, China is losing some of its biggest manufacturing advantages. Mexico, on the other hand, has an abundant, highly-skilled workforce and has invested heavily in higher education and technical training, graduating over 100,000 engineers each year. Plus, wages have remained relatively stable and are significantly lower than in the United States. As a result, more and more companies are setting up manufacturing facilities in Mexico, not only boosting the revenue of U.S. companies but stimulating the Mexican economy as well.

Key Factors to Consider When Moving Your Manufacturing

While there are many different factors you’ll need to consider in your planning, here are two of the most critical you need to know in order to set your business up for success in Mexico.

LOCATION

Not all locations are created equal in Mexico. Because of the country’s long history of manufacturing, different regions are usually well-suited for specific manufacturing industries. Automotive manufacturers, for instance, often benefit from manufacturing in Monterrey, the capital of the Nuevo Leon Region. Full of automotive industrial parks, manufacturers gain instant access to critical resources and local supply chains.

Given the importance of choosing the right location, many American companies moving their manufacturing to Mexico will outsource to experts like NAPS to assist in the site selection process. Together, we won’t just find the best city for your industry. We’ll work with you to find the perfect real estate according to your unique operations.

BUSINESS MODEL

There are many modes of entry into Mexico, and you’ll need to choose the one that works best for your business. Some of the most common strategies include:

  • Standalone model: Best fit for those looking to maintain 100% control of their business, this model requires companies to establish their own legal entity.
  • Joint Venture: This model involves two businesses combining to form a cooperative that shares everything from resources to risks and rewards.
  • Shelter model: This model is unique to Mexico and allows businesses to set up their manufacturing operations underneath an already established Mexican entity.

Support Services for U.S. Companies in Mexico

Many companies have chosen to take advantage of our wide range of administrative and compliance services, which offer everything you need to find long-term success in Mexico while maintaining complete control over your production. Here’s a glance at how we support you.

HUMAN RESOURCES

From recruiting to training and talent management, we meet all of your human resources and recruitment needs while helping you navigate Mexico’s complex labor laws.

TAX & ACCOUNTING

Tax laws in Mexico are highly complex, too. With NAPS, you get a team of experts handling your payroll, tax compliance, social security, and more so you can get back to focusing on your production.

MATERIAL SOURCING

If you’re looking to source materials or services within Mexico, we’re ready to help you find exactly what you need by locating the highest-quality vendors at the best prices.

IMPORT/EXPORT

Take full advantage of Mexico’s IMMEX and USMCA tax benefits by working with NAPS. We’ll help you optimize your import and export process while ensuring you stay fully compliant with all rules and regulations.

Curious to learn more about our Administrative and Compliance Management program or our Shelter Services? Contact NAPS about how we can help you successfully move your operations to Mexico.

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