MANUFACTURING, MAQUILA AND EXPORT SERVICE INDUSTRY

MANUFACTURING, MAQUILA AND EXPORT SERVICE INDUSTRY

Given the fierce competition for global markets, it is vital for Mexican businesses to have, at least, the same conditions offered by our main competitors, to allow them to successfully position their goods and services in the international trade arena.

On November 1st, 2006 the Federal Government published the Decree for the Promotion of the Manufacturing, Maquila and Export Service Industry (IMMEX Decree), aimed at increasing the competitiveness of the Mexican export sector, and bringing certainty, transparency and continuity to companies' operations, specifying and simplifying compliance factors; allowing companies to adopt new ways of operating and doing business; reduce logistics and administrative costs; and modernize, streamline and reduce procedures, thus increasing oversight capacity in an environment which encourages the capture and retention of investment.

This instrument integrates the programs for the Development and Operation of the Maquila Export Industry and the Temporary Import Programs to Produce Export Goods (PITEX). The companies supported by those programs, jointly represent 85% of Mexico's manufactured exports.

OVERVIEW

Definition:

The IMMEX Program is an instrument which allows the temporary importation of goods that are used in an industrial process or service to produce, transform or repair foreign goods imported temporarily for subsequent export or provision of export services, without covering the payment of general import tax, value added tax and, where appropriate, countervailing duties.

Beneficiaries:

The Secretariat of Economy (SE) shall authorize legal entities resident in national territory referred to in Article 9 of the Fiscal Code of the Federation, which are taxed according to Title II of the Income Tax Law, one IMMEX program, which can include the categories of holding, industrial, services, shelter and outsourcing companies, providing they meet the requirements set forth in the Decree for the Promotion of the Manufacturing, Maquila and Export Service Industry (IMMEX Decree) published in the Official Gazette of the Federation on November 1st, 2006.

Benefits:

The IMMEX program provides holders the opportunity to temporarily import, free of import tax and VAT, the goods necessary for use in an industrial process or service to produce, transform or repair foreign goods temporarily imported for subsequent export or the provision of export services.

These goods are classifed as follows:

1. Raw materials, parts and components which are to be totally integrated into export goods; fuels, lubricants and other materials for consumption during the production process of export goods; containers and packaging; labeling and leaflets.

2. Shipping containers and boxes.

3. Machinery, equipment, tools, instruments, molds and spare parts for the production process; equipment and devices for contamination control, research or training, industrial security, telecommunications and computing, laboratory, measurement, product testing and quality control; and those involved in handling materials directly related to export goods and others linked to the production process; administrative development equipment.

Categories:

1. IMMEX Holding Company Program: the manufacturing operations of a certified holding company and one or more subsidiaries are included in the same program;

2. IMMEX Industrial Program: goods are manufactured or transformed for subsequent export through an industrial process;

3. IMMEX Services Program: export goods are serviced or export services are provided, solely to develop those activities established by the Secretariat, following review by the Ministry of Finance and Public Credit;

4. IMMEX Shelter Program: one or more foreign companies provide technology and production material, without direct involvement in the Program, and

5. IMMEX Outsourcing Program: a certified company lacks the facilities to perform production processes itself and performs the manufacturing operations through a third party who it registers in its Program.stos bienes están agrupados bajo las siguientes categorías:

Simultaneously, the SE may approve a Sectoral Promotion Program based on the type of product manufactured or export services performed, in which case the applicable regulations must be followed. In the case of a service company, only goods referred to in Article 4, Fraction III of this Decree may be imported under the Sectoral Promotion Program, providing they belong to the sector in which it is registered.

Duration:

IMMEX programs will remain valid while the holder continues to meet the requirements for authorization and the obligations established in the Decree.

Length of Stay:

Goods imported temporarily under an IMMEX program may remain in national territory for the periods established in Article 108 of the Customs Law.

When goods mentioned in Annexes II and III of the IMMEX Decree are imported as raw materials, the length of stay shall be up to twelve months. In the case of goods included in Annex III of the IMMEX Decree, when they are imported as raw materials, and only when they are destined for activities classified as services, the length of stay will be up to six months.

Goods mentioned in Annex I of the IMMEX Decree may not be imported under the Program.

Commitments:

To enjoy the benefits of an IMMEX program the terms established in the Decree must be fulfilled. Authorization of the Program will be granted under the commitment to have annual sales abroad of at least US$500,000, or an equivalent sum in pesos, or invoice exports accounting for at least 10% of total invoices.

Reports:

The holder of an IMMEX program must submit an annual electronic report of total sales and exports for the immediately preceding tax year, no later than the last business day of May, according to the form announced by the Secretariat of Economy through the General Rules and Criteria on Foreign Trade.

In addition, the company with an IMMEX program shall submit the information that, for statistical purposes, is determined under the terms established by the SE in the General Rules and Criteria on Foreign Trade.

For more information about the program please contact 01 800 410 2000 throughout the country or the Secretariat of Economy through its mailbox at www.economia.gob.mx; or call Sergio Manríquez Fernández, Subdirector of Tax Refunds at 52-29-61-00, ext. 34347.

PROCEDURES

Operation:

Procedures relating to the IMMEX Program are free and can be done at the public service windows of the federal agencies of the Secretariat of Economy corresponding to the address of the plant where the production process or service is carried out.

Interested parties can apply for the following procedures:

Interested parties can apply for the following procedures:

A) New Program

Fill out the application in the IMMEX.EXE* program and submit it on magnetic disc or CD with two printed copies, duly completed. The applicant must have the following:

1. Certificate of advanced electronic signature from the SAT.

2. Active Federal Taxpayers Registration.

3. The registered address and premises where the operations are carried out under the Program must be registered and active in the Federal Taxpayers Register.

The following documentation must be attached to the application:

1. Certified copy of the company's articles of incorporation and, where appropriate, its amendments.

2. Copy of the document legally certifying possession of the property where the IMMEX program operation is intended to take place, specifying its location and attaching photographs of the property. If the property is leased or loaned, it must be proved that the contract establishes a mandatory period of no less than one year and that a minimum of eleven months remains of that period, on the date the application is filed.

3. Maquila contract, purchase contract, purchase orders or confirmed orders, which prove the existence of the export project.

4. Corresponding Power of Attorney (original or certified copy and single copy); or show a copy of the Central Register of Accredited Persons (Registro Único de Personas Acreditadas or RUPA).

5. Free format letter detailing the production process or services referred to in the program application.

6. In the case of goods referred to in Article 4, Fraction I of the Decree for the Promotion of the Manufacturing, Maquila and Export Service Industry** (IMMEX Decree), a letter detailing the production process or service which includes the installed capacity of the plant to process the imported goods or perform the service covered by the program and the percentage of that capacity actually used.

7. Letter of conformity from the company or companies which perform the sub-manufacturing process stating under oath the joint liability for the temporarily imported goods (original).

8. In addition, for IMMEX Holding Company programs, submit:

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