Exporters who adopt this program may be authorized to temporarily import duty free: 1) raw materials, parts and components destined to integrate export goods; 2) containers and packaging and bottling materials, trailer containers; and 3) fuel, lubricants, spare parts and consumable goods used in the manufacturing process.
If exports represent at least 30% of total sales of the respective product or products, exporters in addition may temporarily import duty free: 4) machinery and equipment, instruments, molds and durable tools to be used in the production process, equipment for the handling of materials related to the exported goods; and 5) equipment for investigation, communication, industrial safety, quality control environmental control, and other equipment related to the manufacturing process.
Exporters under this program will be further entitled to benefit from the simplified customs dispatch system and to obtain authorization for a percentage of imported materials to represent losses and waste, which may be allowed to be freely disposed of by the exporter.
The goods manufactured with such imported materials may be sold in Mexico in an amount up to 30% of the value of the previous year's exports or the value estimated for the first year of operation. This authorization is subject to the maintenance of at least an equal balance between exports and imports.
Foreign trade companies have ready access to ALTEX registration (See C. below) and PITEX programs (See A. above).
ALTEX companies are granted benefits such as special treatment before administrative authorities, access to import quotas compensated with exports, customs advantages, and access to the value added tax automatic crediting system.
The imports listed in category 1) above may remain in the country up to one year from the date of import. Those listed in categories 2) and 3) may remain in the country as long as the authorized maquiladora program is still in effect. The imports listed in category 4 also may remain in the country as long as the program is still authorized, but for a period not to exceed twenty years.
Domestic sales have important tax consequences. When a maquiladora sells products in Mexico, it is subject to the general import duty on the foreign parts and components originally imported duty free.
Under NAFTA, these performance based duty waiver programs are prohibited, and all such existing programs will terminate by the year 2001.
In practice, many maquiladoras reported minimum profits but, at present, tax legislation has been enacted to regulate transfer pricing between affiliates. (See Section V.G. hereinabove).
When dealing through a commission agent, the vendor should be careful to have the agent considered an independent contractor, and not an employee.
The employee could claim a labor relationship exists under Mexican law for services while in Mexico, independently of the nationality or residence of the employer, and thereby entitlement to the benefits of an employee provided thereunder. Further, it is important to keep in mind that the Labor Law states that any person conducting sales, subject to direct supervision, is considered as an employee of the person for which he conducts the sale.
Mexican laws do not regulate the amount to be paid as commission. For tax purposes the agent's commission will be considered as his normal income. The sale by the foreign vendor could be subject to Mexican taxes. (See Sections XIV.D. and XXII. hereinafter).
Distributors, unlike commission agents, derive their income from the difference in the wholesale price at which they purchase, and the retail price at which they sell, whereas income of commission agents is the commission received, which usually is fixed as a percentage of sales. The risks of loss are suffered by the distributor upon accepting the purchase of products. Commission agents do not suffer risks of loss of products, acting only as intermediaries.
Since a franchise agreement implies the licensing of a trademark, it has to be recorded before the Mexican Institute of Industrial Property to gain protection of the trademarks against third parties. The franchisee will then be authorized to exercise all legal actions necessary to impede the illegal use of the trademark, as if he were its owner unless otherwise agreed.
The parties of a franchise agreement enjoy full contractual freedom. Their respective obligations include among others, the granting of a trademark license and technical assistance, protection of confidential information, compliance with quality and operational standards, payment of royalties, and access to the franchisor's system of operations.
Franchise agreements are not subject to governmental approval. In accordance with the Intellectual Property Law, franchisors must deliver to potential franchisees before execution of the franchise agreement, technical, economic and financial information regarding the franchise and its system.
The agreements governing the above relationships may be terminated by either party, in accordance with their terms. Mexican law does not contain specific provisions for the payment of damages or remuneration upon termination of the agreement except as may be provided in the agreement.
The vendor may prefer other ways to either enter the Mexican market or expand market penetration by creating a subsidiary or opening a branch in Mexico, in place of, or in addition to having a representative, distributor or franchisee. Rules are different in each case and give the foreigner different advantages. (See Sections X. XI. and XII. hereinafter).