Legal Framework Governing IMMEX Operations
As we have previously explained in other articles, an IMMEX is a duty deferral program from the Mexican federal government created in 2006, which stands for Industria Manufacturera, Maquiladora y de Servicios de Exportación (Manufacturing, Maquiladora and Export Services Industry). Generally, companies awarded with an IMMEX program are allowed to temporarily import into Mexico raw materials, components, inputs, parts, including machinery and equipment used to elaborate, transform or repair a finished product for further export or return abroad. This program is for companies located in Mexico which operate under the so-called customs regime for “temporary importation of merchandise for the elaboration, transformation, or repair under maquila or export programs”.
IMMEX is a program aimed to promote and attract foreign investment into Mexico, therefore, provided it has the required certifications and proves compliance, it may receive benefits such as savings on import duties, value added tax, including exemption to comply with standardization requirements (Mexican Official Norms). However, they are highly scrutinized and supervised by the Mexican customs authorities, and where a violation is detected by the authorities, sanctions and penalties may occur including cancellation of the MX importer´s license or the IMMEX program itself. Therefore, it is of utmost importance for anyone participating in IMMEX to be aware of the legal framework containing the applicable provisions to IMMEX, as it is said that the ignorance of the law does not exempt one from the consequences.
There is a broad list of regulations governing IMMEX:
Article 2.5 of this treaty applies to drawback and duty deferral program. This article is important for those companies moving their operations to MX looking for a closer location to the US or CA market, especially for those using components, raw material, inputs, parts, etc. originated in Asia. As a general rule, an IMMEX is responsible for paying import duties, even for the goods it imports temporarily into Mexico. Since the IMMEX is a duty deferral program, it is allowed to defer/postpone such payment. If the goods are exported or returned abroad within the allowed times and if the IMMEX is in compliance, it will not owe customs duties for such operations. Nonetheless, if the goods are originated in any country, other the MX, US or CA, (non-USMCA origin) and are exported or used as a material to produce another good exported for consumption to the US or CA, the IMMEX will be responsible for paying import duties on the non-originating goods, even if after the production process, the final good complies with a rule of origin under the USMCA.
- Customs Law
This law regulates the entry and exit of goods in Mexico, including the various means of transportation, the facts and acts arising from such operations as well as the parties that participate as owners, holders, consignees, recipients, shippers, proxies, legal representatives, customs brokers, customs agencies or anyone participating in the introduction, extraction, custody, warehousing, handling and holding of the goods.
Considering the IMMEX operations are directly and indirectly related to the above, understanding the scope and applicable requirements set forth under the MX customs law is relevant for an IMMEX to be in compliance. First, this law defines what a duty deferral program is, customs control, customs clearance, documents needed for imports and exports, time when duties must be paid, responsibilities of importers, customs valuation methodology, sanctions and penalties, etc. However, the most relevant portion of this law for IMMEX is under articles 108 through 112 because it sets forth the basic and general information about the goods allowed to be imported and periods of time in which those goods may remain in MX, returns, virtual transfers, waste and scrap, among others.
- General Foreign Trade Rules from MX Customs
These rules are published by the Tax Administration Service and is a compilation of general legal provisions applicable to foreign trade and customs operations. These rules are aimed to facilitate compliance with the responsibilities set forth under the MX customs law and other laws, such as inventory control systems, bonds, importation of containers, packaging, labels, fliers, goods restricted to be imported, destruction of waste, virtual transfers to sub manufacturers, reports, sugar exports, correction of pedimento codes, automotive industry operations, returns, virtual operations, benefits. It also includes the benefits and requirements for VAT and other customs certifications for IMMEX.
The rules above include 30 Annexes which provide more detailed information about customs and foreign trade operations. Two of the most important are Annex 24 which provides a guideline for compliance with the inventory controls for IMMEX and Annex 30 which provides a guideline for controlling and administering VAT for IMMEX.
- Foreign Trade Law
This law regulates foreign trade operations and other tasks related to the competitiveness of the MX economy. Article 5, Roman Numeral XI, sets forth that the Minister of Economy is the office of the federal government with the authority to create promotion and export programs, including the legal provisions governing such programs. Also, article 91 states the Minister of Economy in coordination with other departments shall establish the promotion programs by means of decrees.
- General Rules and Criteria for Foreign Trade from Minister of Economy
These rules are published by the Minister of Economy and are intended to provide details and clarifications regarding requirements for foreign trade operations and facilitate compliance. For example, it provides information regarding trade and non-trade barriers measures, import licenses, quotas, Mexican Official Normas, countervailing duties, certificates of origin. An important section for IMMEX is under Title 3, chapter 3.1, which sets forth the requirements and process to apply for an IMMEX program, as well as any further amendments to the program, extension, registration of sub manufacturers, change of IMMEX modality, cancelation of IMMEX, PROSEC, among other details.
- Federal Fiscal Code
This includes legal provisions regarding tax responsibilities for taxpayers in Mexico, such as the requirements to register as taxpayer, recordkeeping, all of which apply to IMMEX. However, one important article under this code is 103 which states that acts performed by IMMEX can be considered to be contraband, which is a crime sanctioned by monetary penalties, but also by imprisonment. Thus, if you are dealing with IMMEX, you want to know what you need to do or avoid in order to prevent violations that can be deemed to be a crime or even a felony.
- Value Added Tax Law
As a general rule IMMEX goods imported by IMMEX are subject to paying a 16% of VAT. However, provided they obtain the IVA Certification (A, AA or AA), one can save this payment. Specific information about this can be found under articles 25 through 28-A of this law.
- Income Tax Law
Foreign companies dealing with an IMMEX can be deemed to have permanent establishment in MX even if they are not located in Mexico. Information about this can be found under articles 181 and 182 of this law.
- IMMEX decree
The IMMEX decree includes specific information about the different modalities or type of IMMEX (industrial, shelter, controller, services, third party), the goods allowed for importation as well as the statutory periods of time, transfers, benefits for certified IMMEX, application process and requirements, sub manufacturing, cancellation, suspension or nullification of the program. It also includes the Annexes regarding goods restricted from being imported by IMMEX, or goods that need to comply with specific requirements prior to importation, the list of activities allowed for the services modality, among other topics.
This publication is not intended to serve as a guide or advice for IMMEX compliance because the above do not include all of the legislation and legal provisions that apply to IMMEX. However, these include some created specifically for IMMEX. Also, we must note that not all legal provisions applicable to IMMEX are compiled in one single publication, or published by one government entity, on the contrary, they tend to be dispersed, published by different entities, in different dates and amended constantly. Therefore, if you need advice or clarifications on any of the above, please do not hesitate to contact us.