What business owners don’t know about export sales could be keeping them from untapped profits.
In an effort to boost export sales in Arizona, the U.S. Commercial Service, part of the U.S. Department of Commerce, last week took a group of 50 business owners, account managers and others into Nogales, Son., to gave them a primer in how to sell to maquiladoras.
A maquiladora or maquila is a manufacturing factory that imports materials and equipment on a duty-free basis for assembly or manufacturing and then re-exports the assembled product, usually back to the country of origin.
 Joe Pangburn photo |
According to Fernando Sandoval of Bordertec Inc. and an external consultant of the U.S. Department of Commerce, the 243 maquilas in Sonora alone purchase approximately $2 billion worth of components and raw materials every year.
"There are major opportunities to export products to these companies," Sandoval said.
Most business owners, however, just don’t know where to start.
The day-long tour, held Sept. 9, began at the Mexican Customs Office just south of the Mariposa Port of Entry.
Mexican immigration officials were on hand to help the group understand what is necessary to conduct business in their country.
The long and short of it lies in an FM3 visa. This visa enables a person to go back and forth between countries for one year and is renewable annually up to four times. The FM3 visa is required in Mexico to sign legally binding contracts or open bank accounts.
An FM3 visa costs around $220 for the initial application and a little less than $200 per renewal.
Applications for an FM3 visa also require:
• A letter from the company stating what business you will be conducting in Mexico.
• A copy of your passport.
• Three photos from the front and three from the side.
• The Mexican company’s last tax return.
• A original of any current visa.
The application form is available at www.inami.gob.mx or at the consulate’s office.
Alberto Gomez Bravo, director of customs for the City of Nogales, Son., gave the group a tour of the facility and explained the process shipments go through.
"All merchandise from the U.S. is first scanned by a gamma ray machine to certify that what you declare you have is actually in the truck," said Gomez, through Sandoval, who did the interpreting. "This is also to prevent weapons from coming into the country."
The shipping paperwork is scanned and confirmed through the home office in Mexico City. That information is then kept on file with the home office for 10 years. The main office will transmit back an all clear on the initial paperwork. At that point, customs officials will conduct a random search of trucks.
"For the first random selection, around 10 percent of all trucks coming in will be searched," Gomez said. "Of those searched, 10 percent will be searched again by an independent third party contractor. This is to give everything more credibility."
Gomez noted that if your shipment gets the green light you will be through customs in a matter of minutes. If it gets a red light, the shipment could be held up for as much as three hours.
Shipments containing shoes, clothing, food, toys and some chemicals are more likely to be searched, Gomez said.
It is also important to keep in mind shipments going into Mexico from the United States must change trucks if the shipment is going beyond 21 kilometers (13 miles) of the border.
"The box trailer may go further into Mexico, but the truck must change," Gomez said. "So you don’t need to unload the entire shipment and load it onto another trailer."
However, Gomez said shipments destined to go to maquiladoras are less likely to be checked and the process is usually much simpler and quicker.
All raw materials, parts and machinery are imported into Mexico on a temporary basis duty free for up to 18 months. For machinery, this can be renewed indefinitely; for raw materials and parts, they must leave the country as finished goods on a first-in, first-out basis over the 18-month period.
The group met with and learned of the many sales and cost-reduction opportunities through shelter companies such as Javid de Mexico.
A shelter program is a contractual relationship that gives an outside company the ability to establish its own operation in Mexico quickly and efficiently.
The shelter provider is a company that is an established, legal and working identity in Mexico. The provider takes in a client under its umbrella, gets it started quickly without the hassles associated with starting an operation.
"We currently have 24 clients under our shelter program," said Richard Rubin, co-owner of Javid LLC. "People really are surprised when they come down and see what there is in Mexico. Most people just think it is a third-world country, which some areas may be, but the plants are state of the art and the level of cleanliness and sophistication cannot be understated."
Javid de Mexico provides companies with human resource representatives, security, accounting and taxes, permits, logistics, IT support, lease contracts, utilities and they handle all the documents for U.S. and Mexican customs.
"Our services cost less for a company to come down and open a manufacturing plant here than it would for them to do it on their own," Rubin said. "They would have to hire their own staff when I have staff that can cover more than one company."
What drew Rubin to Mexico was that the proximity to the U.S. allowed him more control than having products manufactured in China and the costs are about the same as China now, he said.
"Mexico is very productive and capable of doing any kind of manufacturing," Rubin said.
Companies that don’t want to open a manufacturing plant in Mexico can also contact shelter companies for contract manufacturing to be done by one of their clients.
Craig Collins, a senior account manager for DRG Technologies in Safford, has been working with and selling to the Maquilas for nearly 30 years.
"We had been in business for more than 20 years and have never had anyone bring business from Nogales up to us, so we were going to have to go get it ourselves," Collins said.
Collins recommends getting down there and meeting the people in the plants.
"There is turnover in this industry and if you can build a relationship with people on the line or the engineer you can still be used as the main supplier when a need arises."
Collins also said while it helps to learn Spanish, it isn’t necessarily a prerequisite to doing business there.
"I had an engineer tell me he would like it more if he could practice his English on me than for me to practice my Spanish on him," he said. "When they learn English they can move up in their company."
Since beginning his sales calls to Mexico, Collins is making four times what he used to.
With the 36,000 manufacturing companies in Mexico, there are many options available to companies looking to export or to reduce costs.
Contact reporter Joe Pangburn at jpangburn@azbiz.com or (520) 295-4259.
Comments