Frequently Asked Questions About Navojoa and the Mo-Mex Shelter Plan
- Determine the size of the operation, the number of employees, the space required, and its configuration.
- Prepare a contract setting forth the responsibilities of the Shelter and the client.
- Have the client prepare a list of machinery, tools, equipment, components, and raw materials to be imported into Mexico.
- Have the Shelter secure permits from the Mexican government to establish the operation and to import duty-free everything which the client expects to import into Mexico for the startup of its manufacturing operation.
- Arrange for U.S. and Mexican customs brokers to handle and document cross-border shipments.
- Have the client ship goods required for start up to the Mexican port of entry and/or have the
- Shelter make local purchases within Mexico of goods and services required for startup.
- Have the Shelter prepare space, select (and with client’s approval hire) employees to staff the operation.
Which costs does the client pay prior to starting manufacturing?
The client pays for construction or installation of any special facilities required for the manufacturing operation. This will include such things as building partitions, industrial piping, wiring and venting, special foundations for large equipment, etc.
The client pays for the cost of freight within Mexico, which includes the delivery of all goods which the client imports into Mexico.
The client pays for services of U.S. and Mexican Customs brokers performed in conjunction with the import of goods and services.
The client pays for any services required to install and set up the client’s equipment within the manufacturing area.
The client pays for any personnel employed at the direction of the client prior to the startup of operations.
The client pays the cost of hiring the indirect personnel such the Engineers.
Do clients have to incorporate in Mexico?
Because each client operates as a division of the Shelter’s Mexican corporation, it is unnecessary for any client to incorporate in Mexico. Relations between each client and the Shelter are governed by the aforementioned contract which specifies the rights and responsibilities of the Shelter and the client. Each contract is individually negotiated to meet the special needs of any individual client.
Do shelter clients need to open a Mexican bank accounts?
No, because the Shelter makes all payments to vendors which require Mexican Pesos, and then bills the clients in equivalent U.S. Dollars, Canadian Dollars or Euros.
Who handles the paper work required for imports and exports?
All import/export administration is handled by the Shelter. Clients prepare invoices (in English) for goods shipped to Mexico, which the Shelter translates into Spanish for preparation of Mexican Documents. Clients also prepare documents required by the USMCA United States-Mexico-Canada Agreement, as well as bills of material and packing lists for goods shipped out of Mexico. Mexican and U.S. Customs authorities require that certain trans-border shipment documents be prepared by licensed Customs brokers, who impose a charge for each shipment which they document.
Do Shelter clients pay Mexican Income Taxes?
Shelter Clients must pay taxes under “safe harbor” rules, which currently calculate taxes at the highest of 30% of 6.9% of assets or 30% of 6.5% of expenses.
Do Shelter clients pay the Mexican 16% Value Added Tax (VAT) on goods imported into Mexico?
If goods are imported on a temporary basis, such as raw materials and components imported for processing and export, they are not subject to the VAT. However, if such imports are processed into products for the Mexican domestic market, they are subject to the VAT.
How are clients billed?
Each week clients receive an invoice charging them for labor, space rental and the Shelter Plan Fee. The Shelter Plan Fee is based on hours worked in that week. It covers all of the services described above and provides the shelter’s profit. There is never a mark-up on labor, rent or any purchases which the shelter makes for clients.
Clients also receive invoices for purchases which the Shelter has made for them from Mexican vendors. Such purchases include utilities, freight charges, customs brokerage, and miscellaneous goods and services. Invoices for purchases are in English and show the conversion of vendor charges from Mexican Pesos to the billing currency specified in the contract between each client and the Shelter at the bank exchange rate on the date the English invoice was prepared for the goods and services. The Mexican vendor’s invoice(s) in Spanish and Pesos will be supplied to support the English invoice.
Does anything have to be prepared by Shelter clients?
Yes, clients must supply the Shelter with a bill of material for each product which they intend to produce in Mexico, along with standard manufacturing hours for that product.
Can Shelter clients benefit from the free trade agreements which Mexico has with the European Union and other countries?
Yes, goods imported from those countries may enter Mexico duty-free, and in most instances goods produced in Mexico can be exported to those countries duty-free. This can provide substantial cost savings, particularly on big-ticket items. For example, expensive machinery, manufactured in European Union countries can be imported duty-free into Mexico at substantial cost savings.