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Complying regulations on inventory control

January 22, 2009. 00:00

The Mexican Customs Law rules the obligation for importers of having an electronic inventory control system in order to track the usage and destiny of the goods imported to Mexico. Maquiladora companies have to comply with specific requirements. The key idea is that a company must prove at any time the origin, destiny and customs legal status of the goods located at their facilities.

According to Article 185-B of the Mexican Customs Law, if a company fails by any means to fulfill this obligation, the Mexican Authorities can apply a flat fine of approximately US$1,000 to US$2,000 dollars.
Talking about Maquiladora (IMMEX) companies, this obligation bears more than a formal requirement. A company that fails to keep an updated inventory control system will face a critical tax exposure regarding its capacity to prove that the goods imported under the benefits of the Maquiladora Program (inbound imports) have really been re-exported on time. This means that, if the company is taken by surprise by an audit performed by the Mexican Tax Office and the company fails to prove the correct administration of the company with the support of an accurate inventory control system; then, the Maquiladora license will be cancelled and a penalty of an estimated 2 times the value of the goods imported with the Maquiladora scheme will be faced. Furthermore, not having an accurate inventory control system will imply that all the goods located at the company´s facilities were imported under the Maquiladora status; regardless their original precedence such as domestic purchases not beneficiated by the Maquiladora Program.
The Mexican Customs do not “certify” the suppliers of inventory control software; acquiring a local system or adapting the company´s Enterprise Resource Planning (ERP) system, should be a decision based on the management internal analysis.
It is important to mention that the Customs Office issues a norm (Annex 24) with the basic requirements of the system. The critical elements are listed below:

A. The system must be capable to prove which inbound imports have already been re-exported and the amounts of goods pending to export. This tool should also track the 18–months-period for inbound imports of raw materials, parts and components.
B. The system should facilitate the validation of particular cases:
a. the cases where the goods were changed to a nationalized status by paying the import duties,
b. when the goods were transferred to other Maquiladora companies,
c. the damaged and obsolete goods that were destroyed under supervision of the Customs Authorities,
d. the goods that have been donated after getting an authorization from the Customs Authorities,
e. the destiny of the scrap and wastage of the production process, along with the legal disposal of the scrap
C. The system should corroborate that the requirements expressed in article 303 from the North American Free Trade Agreement (NAFTA) have been fulfilled. This means that the import duties on non-originating goods have been paid by the company at any of the stages described in the Mexican Customs Law.
D. The system must have a reporting tool to show that all the premises mentioned above were complied by the company. These reports should be available at any time in order to address the Customs Authorities specific requests.

A. General Catalogues
1. Company details
2. Materials used in the production process
3. Finished goods
4. Materials Suppliers
5. Clients
6. Customs Brokers
7. Outsourcing suppliers
8. Machinery and equipment

B. Database Tables
1. Imports (raw materials, parts and components)
i. Inbound imports (18 months deadline)
ii. Definitive imports (nationalized goods)
2. Domestic purchases
3. Exports
i. By sending the goods out of Mexico
ii. By transferring them to another Maquiladora company
4. Change of customs status
i. Transit from an inbound import to a definitive one by paying the import duties
5. Scrap control
6. Outsourcing activities
7. Imports of machinery, equipment and spare parts
8. Reprocessing of RMAs (Return Merchandise Authorization)

C. System Interface and Connectivity
1. Bill of materials
i. This module must include the capability of doing engineering updates to the original formula
2. Article 303 (NAFTA) complies with specific track on payment records
3. Reports and queries

Finally, it should be mentioned that a few of the biggest and most representative Maquiladora companies in Mexico have engaged with the Mexican Customs in a project for developing a robust and certified Inventory Control System based on the principle of sharing online data with the Government; an Electronic Data Interchange program called Inventory Control System for Temporary Imports, or SECIIT by their Spanish initials. On the other hand, the Mexican Tax Office has started a deregulation process to facilitate the operation of these specific companies. However, the costs involved in developing the software and the administrative infrastructure needed to participate in this project has excluded most of the Maquiladora companies from the benefits.

DoingBusinessInMexico Staff
Published: January 22, 2009. 00:00 | Last updated: March 11, 2009. 20:03
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