A maquiladora is a Mexican assembly or manufacturing operation that can be subject to up to 100% non-Mexican ownership. A maquiladora utilizes competitively priced Mexican labor in assembly processing and/or other manufacturing operations, that temporarily imports most components parts from the U.S. and other sources. Mexican law also allows these operations to bring in most capital equipment and machinery from abroad. Maquiladora operations are generally labor-intensive cost centers, with most productions geared for export from Mexico. Finally, Maquiladoras may be entirely foreign managed, unlike other multi-nationals operating in Mexico.

Location:

Most maquiladoras are located along the Mexican border.

Products:

Maquiladoras can manufacture a broad array of products under Mexican law. Exceptions to this allowance include such industries as petroleum, petrochemicals, other chemicals, arms, and items which contain radioactive elements. Most products are further processed in the U.S. Mexican tariff/duty policies As long as the imported components brought into Mexico are destined for export, no Mexican import duty is levied on the temporarily imported maquiladora inputs. In lieu of duties, maquiladora operators must post a bond with the Mexican Customs Service to guarantee that components and raw materials are re-exported from Mexico within a six month period. A bond on capital equipment and machinery ensures that they will be fully returned to the maquiladora operator's country of origin once it ceases operations in Mexico.

U.S. tariff/duty policies:

U.S. Customs has three regulations that complement the maquiladora program. The first allows the import into the U.S. of metal products processed abroad with duties assessed on the value added to those goods by their processing abroad (i.e. , the total value of Mexican inputs, including labor, electricity, component parts, etc.) rather than levying an import duty on the total value of the product. The products must have been processed in the U.S. before being sent abroad and then must be further processed in the U.S. upon their return. A second Customs provision allows an article assembled in Mexico from U.S. made components to be exempt from duty on the value of such components. These good may or may not involve metal components. U.S. customs law allows for machinery of U.S. origin to be returned to the U.S. duty free. Finally, if the value of the goods assembled or manufactured in Mexico contain at least 35% Mexican content upon import into the U.S., they may be eligible for treatment under the U.S. Generalized System of Preferences (GSP). GSP eligible items may enter the U.S. market with no duty levied.

Foreign employee and management entry into Mexico:

The maquiladora may bring in as many foreign employees as necessary with the exception of hourly laborers. All hourly employees must be Mexican. Foreign employees must obtain work visas, which usually require three to five day wait.

Exchange controls:

It is the desire of the Mexican government to foster the growth of maquiladora industries, as they are a primary foreign exchange earner for Mexico. Mexico has no foreign exchange requirements for fixed asset expenses, such as for the purchase of buildings and computers, which can be negotiated in U.S. dollars or at the free market exchange rate. Only operating expenses are regulated, with leases, utilities, payroll taxes, insurance, etc. to be paid in pesos with U.S. dollars that have been exchanged in the Mexican banking system at controlled