How a Shelter Program Really Works for Companies Wanting to Set Up Manufacturing in Mexico

By Doug Donahue

Understanding how Mexican shelter operations work can help companies seeking information about how to manufacture in Mexico. The issue of establishing offshore manufacturing in Mexico has become a loaded one, but much of that perception is based on some long-held misconceptions. Many people think that the practice of running a manufacturing facility in Mexico initiated with the passage of NAFTA, which came into force in 1994, eliminating trade and investment barriers between Mexico, US and Canada.

However, shelter services programs have been in existence since the 1960s. Such services allow foreign manufacturers to setup a maquiladora in Mexico without owning a Mexican business. The foreign company would contact a specialized provider like Entrada, already established in Mexico for the purpose of offering shelter services and allowing companies turnkey entry into Mexico. The shelter services company is responsible for finding an appropriate location, sourcing a facility equipped for the client’s production volume and processes, conducting any necessary real estate transactions and securing permits and legal approvals. The shelter service is also responsible for registering with the Mexican government as a maquiladora, acquiring import and export permits, as well as securing any additional required local and federal permits and licenses.

This establishment and setup process could take many months, even years, for a private company to complete on their own. But working through an established shelter provider means that much of the start-up expertise is established beforehand, facilities are already in place and ready to go, and important relationships to facilitate smooth, legal startup are facilitated. Additionally, the shelter firm handles all border crossing documentation, U.S. and Mexico broker coordination and transportation arrangements. All that remains is for the client manufacturing company to move their equipment and machinery to the newly established facility in Mexico and begin production.

Workforce Management

A shelter service also oversees another of the more difficult aspects of running a successful manufacturing facility in Mexico – human resources. The shelter provider takes care of all the screening, interviewing, hiring and training of the onsite workforce in Mexico. They set up the requisite bank accounts, accounting and tax payment programs too, freeing the foreign manufacturer of time-consuming HR programs and procedures. Ongoing payroll, withholding, hiring, termination, incentive and retraining programs are covered by the shelter package, as are compliance with labor law and relationships with labor boards. A shelter service further adds value to a foreign manufacturer by covering everything from tax compliance, customs, zoning, facility management and environmental protection.

The administrative burden of complying with the local and federal employment and tax law in an unfamiliar foreign country without the years of expertise and accumulated best practices of a shelter service provider can be overwhelming.

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