Welcome to The Tecma Group of Companies

Glossary of Terms

 

Advanced Pricing Agreement (APA) – The second of two income tax payment options for maquiladora owners preferring to avoid “Permanent Establishment,” this provision allows maquiladoras to secure approval from the tax authority for transfer pricing policies up to five years in advance.

BANCOMEXT (Banco Nacional de Comercio Exterior, SNC) – Mexico’s federally operated bank charged with stimulating growth of Mexican enterprise through financial and export assistance, promoting foreign trade, and attracting foreign investment.

Border Assembly – A common term for maquiladora operations in the border regions of Mexico.

Bracero Program – A “guest worker” program in effect between the years of 1942 and 1964, it allowed agricultural workers from Mexico to work legally in the United States on a temporary, seasonal basis.

Contract manufacturing – The option of having products manufactured or assembled by an independent, contract manufacturing firm in Mexico or other domestic or foreign location.

Corporate shelter – A service that allows a manufacturing firm to establish operations in Mexico without actually owning a Mexican business. Corporate shelter services are provided by companies that specialize in this area, such as Border Assembly, Inc. In particular, this service represents the fastest way a US or foreign-owned company can establish manufacturing operations in Tijuana or other parts of Mexico while maintaining strict production quality control.

Customs Modernization Act (Mod Act) – A United States program designed to facilitate importation practices through shared responsibility and informed (voluntary) compliance between importers and the U.S. Customs Service.

Harmonized Tariffs and Generalized System of Preferences – A cooperative program that allows duties to be charged only on the value added to imported products.

INEGI (El Instituto Nacional de Estadística, Geografía e Informática) – Mexico’s National Institute of Statistics, Geography and Informatics is a decentralized agency operating under the Ministry of Finance and Public Credit that compiles and disseminates statistical data on demographic, geographic and economic trends in Mexico.

In-bond manufacturing (In-bond industry) – Another name for the maquiladora industry. A US or foreign-owned company may import “in-bond” (on a provisional, duty-free basis) the equipment, parts and raw materials required to support its manufacturing or assembly process.

Instant maquiladora – The slogan of Border Assembly Inc., referring to the ease and rapidity of which a maquiladora can be established through the firm’s corporate shelter program.

Maquila – Shortened version of the word maquiladora in Spanish. (See definition of “maquiladora” below.)

Maquiladora – A US or foreign-owned factory in Mexico, regulated under special provisions allowing the owner to import equipment, parts, and raw materials duty-free, and export finished goods tariff-free.

Maquiladora Program – A Mexican program that allows, among other provisions, maquiladoras to be 100% foreign owned.

Maquiladora Decree of 1989 – Legislation that establishes the rules for manufacturing or assembly in Mexico under the Maquiladora Program.

Mexican Transfer Pricing – Rules that determine income from maquiladoras are consistent with the United States Transfer Pricing rules, allowing the US or foreign-owned company a deduction for its maquiladora taxes.

Mod Act – (see “Customs Modernization Act”)

National Border Industrialization Program – An initiative created to attract foreign investment into Mexico and stimulate markets within the country through the maquiladora program.

National Counsel on the Export Maquiladora Industry (Consejo Nacional de la Industria Maquiladora de Exportación) – A quasi-governmental Mexican organization formed to assist the maquila industry.

NAICS (North American Industry Classification System) – A coding system for business sectors used by the governments of the United States, Mexico, and Canada. NAICS has replaced the United States’ Standard Industrial Classification system (SIC).

NAFTA (North American Free Trade Agreement) – An initiative implemented in 1994 that eliminated certain customs benefits under the maquiladora program and defined strict “rules of origin” for products to qualify for preferential tariffs.

Offshore Manufacturing – A term used to describe manufacturing or assembly plants owned by United States companies but operating in Mexico or other foreign location.

Permanent Establishment – A rule that gives Mexico the authority to tax a U.S. or foreign-owned company on an undefined portion of its income.

PITEX PROGRAM (Programa de Importación Temporal para la Exportación) – In English, the “Temporary Importation Program for Exportation” allows Mexican companies, like U.S. and foreign-owned firms, to import equipment, parts, and raw materials without paying import duties.

“Safe Harbor” – The first of two options for maquiladora owner’s payment of income tax to avoid “Permanent Establishment.” Allows income tax payment based on the highest of either 6.9% of the maquiladora’s asset values or 6.5% of its deductible operating expenses.

San Diego, California – Sister city to Tijuana, Mexico, with which it shares a Mediterranean-like climate, vibrant Latin-influenced culture, and an expanding, shared business network.

SECON (Secretaria de Economia) – In English, the Ministry of the Economy, which administers all permits and licenses required to operate a maquiladora in Mexico.

SECOFI (Secretaría de Comercio y Fomento Industrial) – In English, the Secretariat of Commerce and Industrial Development. The principal trade and tariff federal agency in Mexico, both foreign investment and foreign-owned businesses are tracked and registered through this arm of the government.

Tijuana, Mexico – The sixth largest city in Mexico, and the largest in the state of Baja California, it shares a border and a multitude of social and economic ties to San Diego, California. Due to logistical advantages and skilled workforce, Tijuana is home to one of the largest maquiladora concentrations in the world.

United States Generalized System of Preferences – A rule that allows the import of a Mexican product duty free when 35% or more of the import is deemed to be Mexican content.