Interesting post by Chuck.
Chuck30 minutes ago
Manufacturing of equipment / devices can be done efficiently and at great advantage using an FTZ approach with Maquiladora (twin plant approach) that enables production in Mexico and some assembly (kitting and packaging) in the US. Not only does this approach deliver benefits in reduced labor, but the Foreign Trade Zone (FTZ) approach enable full access to all markets in NA and Latin America without import / export restrictions, taxes, levies or tariffs.
I have used the FTZ and Maquiladora approach in past production and go-to-market ramp ups and think that if SRNE is going that route then that is a very savvy move! Glad to see manufacturing units in Mexico!
What is a Foreign-Trade Zone?
A foreign-trade zone is a designated location in the United States where companies can use special customs procedures that help encourage U.S. activity and value added – in competition with foreign alternatives – by allowing delayed or reduced duty payments on foreign merchandise, as well as other savings.
A site which has been granted zone status may not be used for zone activity until the site has been separately approved for FTZ activation by local U.S. Customs and Border Protection (CBP) officials, and the zone activity remains under the supervision of CBP. FTZ sites and facilities remain within the jurisdiction of local, state or federal governments or agencies.
What is a maquiladora?
A maquiladora is a manufacturing operation or factory in Mexico, usually near the US-Mexico border, that acquires raw and/or semi-finished materials from a foreign principal and manufactures or assembles a finished product, which will then be exported back to the principal. The owner – the maquiladora principal – is usually located in the United States. Essentially, the maquiladora provides manufacturing services to its principal, and the foreign principal is the owner of the inventory, machinery and equipment.
Besides the economic advantages of competitive manufacturing costs, maquiladoras have significant tax advantages, in particular a statutory permanent establishment (PE) exemption. Under this exemption, a maquiladora does not constitute a PE for Mexican tax purposes, and corporate income taxes are essentially based on a small percentage of the production capital (total value of the assets or cost and expenses). In addition, there are significant duty and tariff exemptions in both Mexico and the US, as well as substantial VAT benefits, payroll tax and social security benefits, and overall TP certainty for manufacturing operations through safe harbor or APA."
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