Understanding Mexico's Automotive Fiscal Deposit scheme - what does it offer?

The automotive sector is among the most important parts of Mexico's economy, with the country rapidly becoming one of the world's largest manufacturing hubs for both passenger and commercial vehicles.

However, while the country is home to many final assembly plants, it still sources many of the components and machinery parts needed for its production lines from overseas, while the vast majority of finished products end up exported.

This means there are complex import and export requirements that carmakers will need to comply with in order to ensure the smooth running of these supply chains. To assist with this, the country's government offers a range of customs incentives - and one of the most notable is the Automotive Fiscal Deposit.

What is the Automotive Fiscal Deposit?

The Automotive Fiscal Deposit is part of a special customs regime dedicated to the country's vehicle manufacturing sector that aims to streamline key processes and offer deferrals for certain duties and taxes.

It works in a similar way to other bonded warehousing solutions by allowing original equipment manufacturers (OEMs) in the automotive sector to import, store and export specified items - including machinery, equipment and components that will be used in the assembly of vehicles - without the need to immediately pay import taxes or other duties.

The rules are intended to simplify customs rules related to imports and exports for Mexico's growing automotive industry, which, according to US government figures, is the world's seventh-largest manufacturer of passenger cars, producing 3.5 million vehicles a year. Of these, 88 percent are exported, with 76 percent heading to the US.

Mexico is also the largest export market for US automotive parts, while imports to the country from locations such as China have also been growing significantly in recent years, in large part thanks to its position as a gateway to the US market under the US-Mexico-Canada free trade agreement.

The benefits of the Automotive Fiscal Deposit to carmakers

The Automotive Fiscal Deposit covers a wide range of imports and exports. These include car parts and components, machinery and tooling to authorized facilities for use in the assembly of vehicles. The scheme allows for the deferral of any applicable foreign trade taxes, duties, and countervailing duties until any goods are introduced into Mexico's customs regime.

In practice, this means OEMs are able to temporarily import items for use in their manufacturing processes and then export manufactured goods without paying duties, as these are only required if and when items enter Mexico's domestic market.

Key benefits for firms that utilize the scheme include:

  • Simplified requirements - The scheme reduces the need for customs documentation for goods not entering the domestic market.
  • Improved cash flow - Deferral of duties can help businesses better plan their expenditure and avoid unexpected payments.
  • Streamlined supply chains -  Authorized OEMs are able to introduce prototype units, transfer vehicles between approved facilities, and bring in containers, machinery, equipment, tooling, spare parts, and equipment for pollution control, research, quality control, and administrative processes.

What must firms do to take advantage of the scheme?

In order to be eligible for duties relief under the Automotive Fiscal Deposit scheme, bonded warehouses must meet a range of requirements. These include the following:

  • Have separation between foreign and national goods
  • Have solutions available for the digital transmission of data to the Mexican Ministry of Finance for the entry or withdrawal of goods
  • Comply with all regulations and non-tariff restrictions

IMMEX-authorized auto part manufacturers that import products must also issue and deliver a monthly report called “constancia de transferencias de mercancías” (certificate of transfer of goods, or CTM). 

Direct communication with customer authorities for applications for the scheme and reporting of inventory and imports/exports is therefore also essential. Software tools that can combine all the necessary steps, including IMMEX, pedimento management and SAAI (Sistema Aduanero Automatizado Integral) integration, in one system for the handling of electronic clearance for imports and exports are essential in ensuring compliance with all customs regulations.

How to benefit from the IMMEX program

In order to take advantage of the tax and customs duties benefits of IMMEX, companies will need to be certified, which can take up to six months to receive. To do this, they must provide several key pieces of documentation.

The three main requirements to be submitted with an application are:

  • A certificate of Advanced Electronic Signature from the Mexican tax authority.
  • An Active Federal Taxpayers Registration.
  • A registered address and premises where manufacturing operations are carried out.

Other required documentation includes copies of the company's articles of incorporation, maquiladora contracts, purchase orders or other evidence that work is being carried out, and letters outlining the scope of the project, the number of people employed and the type and value of materials to be imported and exported.

This can be a complex process, so it pays to have a streamlined software solution in place to automate declarations, standardize workflows and connect directly with digital tax authority services.

MIC's software solution for the IMMEX program

Our Mexico specific functionality enables the automation of bonded, duty deferral, reconciliation programs and the IMMEX program while automating the creation of import and export declarations (pedimentos) leveraging one country’s export clearance into another country’s import clearance. These automations allow the customs process to be simplified and costs per clearance mitigated across the entire supply chain.

MIC’s Mexico customs solution set is web-based that can handle multiple facilities from a single hosted or licensed system. This allows for a standardized, organized and defined workflow process for your company helping you take full advantage of existing regulations and to get ahead of future changes.

 

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