Mexico’s General Importation Law specifies different import rates depending on the CIF (Cost, Insurance, and Freight) value. The normal import duties for goods that come from countries which do not have a trade agreement with Mexico vary from 13% and up to 30%; the average is usually 18%. Prior to NAFTA, Mexico’s average duty on U.S. goods was 10%. Today, over 80% of U.S. manufactured goods enter duty free.


Maquiladoras temporarily import raw materials, parts, components and machinery and equipment into Mexico for manufacturing, processing and/or assembly. The finished or semi-finished products are then exported out of Mexico. As of January 2001, the Mexican government allows up to 100% of the value of the maquiladoras annual exports of the preceding year to be sold to the domestic market.


The development of the maquiladora industry in Mexico was assisted by a U.S. customs program, still in existence, which allowed goods "assembled" outside the United States from U.S components to be imported into the United States without payment of U.S. import duties on the value of the U.S. components. That is, import duties were paid only on the foreign value-added. Today, if the original components come from a NAFTA member-nation they enter the U.S. duty-free. If the original components came from a non-NAFTA nation, U.S. customs duties apply on the basis of the value that is added in Mexico.


Beginning in January 2001, according to the Decree for the Encouragement and Operation of the Maquiladora Industry for Exportation, imports of raw materials and other components originating from NAFTA countries are exempt from the general importation tax. The exception to the general importation tax covers the duty free temporary importation of the following merchandise:

  • Raw materials, parts, components, complimentary materials, packaging materials, combustibles and lubricants used in the production process for other exported merchandise, that are originating from NAFTA countries;
  • Containers and trailer boxes;
  • Fabric that is completely made and cut in the U.S. or Canada, to be assembled in textile and apparel goods in Mexico, that are exported to the U.S. or Canada;
  • Items used in the production process, from outside the NAFTA region, that are incorporated in energy or basic petrochemical goods, that are exported to the U.S. or Canada;
    Merchandise from Canada or the U.S. that is subjected to procedures of repair or alteration, and subsequently exported or returned to Canada or the U.S.


Only if the finished products meet the NAFTA rules of origin will they qualify for preferential duty rates under NAFTA. A certificate of origin must be obtained from the producer or exporter in order to treat the material as NAFTA originating. There are four general rules of origin:

  • Criterion “A” on the NAFTA Certificate of Origin A good produced in the NAFTA territory (Mexico, the United States and Canada) will be considered to “originate” for NAFTA purposes if it is “wholly obtained or produced” in the NAFTA territory.
  • Under the second general rule of origin (referred to as origin criterion “B” on the NAFTA Certificate of Origin), a good will also qualify as originating if the materials which are not of NAFTA origin used in the production of the good undergo sufficient processing or transformation in the NAFTA territory.
  • Under the third general rule of origin (referred to as origin criterion “C” on the NAFTA certificate of origin), a good will qualify as NAFTA originating if all of the materials used to produce the good are NAFTA originating.
  • The fourth rule of origin (referred to as origin criterion “D” on the NAFTA certificate of origin) applies only in limited circumstances where a good ant its parts are classified under the same tariff heading or subheading. In such circumstance, the good must meet a regional value content requirement.


The biggest change resulting from NAFTA was the requirement that Mexico pass regulations by January 1, 2001, restricting the duty drawback and deferral characteristics of the Maquiladora Program. It was included in NAFTA because the U.S. Government felt the Maquiladora Program offered an unfair advantage to maquiladoras, since American manufacturers do not receive a drawback or waiver of duties on materials imported to produce goods for sale into the domestic market. In addition, the U.S. did not want producers who would benefit from duty-free entry of their products to the U.S. to also benefit from advantageous duty treatment of their inputs.

As a result, NAFTA’s Article 303 specifies that Mexico can no longer waive its duties for goods to be re-exported to the U.S. as long as re-exportation is a condition of the duty waiver. Foreign companies desiring to take advantage of lower production costs in Mexico must now pay Mexican duties for third-country components.

It should be noted, however, that Mexico found a way to comply literally with Article 303, and to continue to provide the Maquiladora Program and its benefits to foreign manufacturers by creating Industry Promotion Programs (Programas de Promocion Sectorial). This program allows certain industries that have traditionally imported components and parts not available in NAFTA countries to import such components and parts into Mexico at a new maximum tariff rate of 5%. In most cases the tariff rate will be 0%.

(Source: Fredikson & Byron P.A.)

A company moving manufacturing operations to Mexico may decide that it is more advantageous to operate outside the maquiladora program in order to avoid the restrictions of NAFTA’s Article 303. The debate of the advantages of NAFTA overtaking maquiladoras is open; the optimal company structure needs to be analyzed on a case by case basis.


From a tax point of view, the maquiladora functions in the same manner as a normal Mexican corporation. The tax regulations and accounting policies in Mexico are similar to those in the U.S. Documentation and record keeping requirements are slightly more stringent.

There are several federal tax laws that apply to maquiladoras, the most important being the Income Tax Law, the Assets Tax Law, and the Transfer Pricing Rules.

Asset Tax

Under the Mexican Asset Tax Law (“ATL”), both the maquiladora and the foreign company which owns assets used by the maquiladora, are subject to a 1.8 % percent asset tax. For the maquiladora, the asset tax applies to all the assets it owns, including financial assets, fixed assets and inventory.

Important note: Any maquiladora compliant with the transfer-pricing rules will automatically be exempt from the payment of the asset tax (1.8%).

Transfer Pricing Rules

Under the Mexico-U.S. Tax Treaty, Mexico is authorized to impose a “transfer pricing” regime. This means that Maquiladoras who assemble or manufacture goods for related parties must charge an arm’s length price (the price at which two unrelated and non-desperate parties would agree to a transaction for those services). Therefore, maquiladoras can no longer operate merely as cost centers but must register a profit.

Compliance with Mexico’s Transfer Pricing Rules

If a company complies with Mexico’s Transfer Pricing Rules it will avoid paying the asset tax. In order to comply a company must pay the higher amount that result from either of the following scenarios:

  1. If the maquiladora agrees to generate a taxable income of at least 6.9% over the total value of all the assets used in its operation
  2. If the maquiladora agrees to generate a taxable income of 6.5% over the total amount of the operating costs and expenses

If none of these scenarios are met, the company a will not comply with the transfer rules and, consequently, must pay the asset tax. It may be beneficial for the Maquiladora to hold manufacturing equipment on its books and take a depreciation deduction against the profits earned by the maquiladora.


The Income base for computing income is the total income received. This rate is 15% for income of less than $92,000 USD per year, and 30% if it is higher than $92,000 USD per year. (Source: Gonzales Vargas & Gonzalez Baz S.C.)


Mexico has a value added tax, but the rate on products that maquiladoras buy in Mexico is zero. Services are subject to this tax, but it is always refundable to the maquiladora with respect to exports. The general VAT is 15% in the interior of the country and 10% in the border zone.


Additionally, purchasers must pay a Real Estate acquisition tax, which in most states in Mexico averages 2% of the value of the property.