7 Steps to Move Your Production to a Mexican Factory

The country registered a record US$31 billion in Mexico FDI manufacturing Foreign Direct Investment in the first half of 2024, with more than half coming from manufacturing. This surge reflects a broader nearshoring to Mexico trend as companies seek competitive advantages closer to U.S. markets.

Manufacturing relocation to Mexico offers significant benefits: cost savings, streamlined logistics, and access to skilled labor. But success requires careful planning. This guide walks you through the exact steps to move your production to a Mexican factory, from initial planning through full production launch.

Step 1: Define Your Production Requirements and Business Case

Document your baseline

Current operations:

• Manufacturing volumes
• Product specifications
• Quality standards
• Projected growth over the next 3-5 years

This baseline will inform every decision you make in your Mexico factory setup, from facility size to equipment requirements.

Run the numbers

Develop a comprehensive cost-benefit analysis comparing your current production costs against projected Mexico operations.

Factor in:

• Labor rates
• Facility costs
• Transportation expenses
• Compliance requirements
• Potential tariff savings under USMCA compliance
• One-time transition costs
• Ongoing operational expenses

Calculate your true ROI and payback period.

Set realistic timeline expectations

Moving production isn’t overnight. Realistic production transition timeline planning horizons:

• Direct ownership models: 6-12 months
• Shelter services: 3-4 months (can accelerate the process)

Build contingency time for regulatory approvals, equipment installation, and workforce training.

Understand IMMEX program eligibility

The IMMEX program (also known as the maquiladora program) is crucial; it allows companies to temporarily import raw materials, machinery, and components duty-free for manufacturing destined for export.

IMMEX program requirements to qualify:

• Export at least US$500,000 of finished products annually, OR
• Have exports account for a minimum of 10% of annual sales

Verify your projected volumes meet this threshold before proceeding.

Key Questions to Answer Before Moving

• Product specifications and quality. What are your exact requirements? Document technical specs, tolerances, certifications, and quality control protocols that must be maintained.
• Production volumes. How much capacity do you need? Calculate minimum, average, and peak requirements, including seasonal fluctuations and growth projections.
• IMMEX threshold. Does your export volume meet the US$500,000 requirement? This significantly impacts cost savings.
• Budget. What’s your realistic budget? Establish CapEx limits for facility setup and equipment, plus operating budget for labor, utilities, and overhead.
• Timeline constraints. What deadlines affect your move? Customer commitments, contract obligations, seasonal cycles, or market windows.
• Supply chain dependencies. What relationships must you maintain? Map critical suppliers, raw material sources, and distribution networks that must function seamlessly during and after the transition.

Step 2: Choose Your Operating Model

Mexico offers three primary operating models. Your choice fundamentally shapes your implementation approach, legal obligations, and speed to market.

Shelter Services (Fastest Path)

A shelter company handles all the administrative heavy lifting while you focus on manufacturing.

What they handle:

• Legal entity registration
• HR administration and payroll
• Tax compliance
• Regulatory filings

Timeline: 3-4 months to launch

Best for:

• Companies testing the market
• Rapid deployment needs
• Minimizing upfront investment
• Avoiding the learning curve of Mexican regulations

Direct Ownership (Maximum Control)

Establish your own Mexican legal entity with complete operational control.

What you manage:

• Entity registration and IMMEX certification
• Hiring, payroll, tax compliance
• All regulatory reporting

Timeline: 6-12 months for setup

Best for:

• Large-scale, long-term operations
• Companies wanting complete autonomy
• Operations with 200+ employees
• Multi-decade commitments

Trade-offs: Requires significant legal expertise, administrative infrastructure, and substantial upfront investment.

Contract Manufacturing (Minimal Investment)

Outsource production to an existing Mexican manufacturer who produces to your specifications.

Advantages:

• Minimal capital investment
• Leverage established facilities
• Fast market entry

Trade-offs:

• Less control over production processes
• Reduced quality oversight
• Potential IP risks

Best for: Standardized products or testing Mexican manufacturing without facility commitments.

Shelter Services vs. Direct Ownership: Making the Choice

Choose shelter services if you:

• Need rapid deployment (3-4 months)
• Lack Mexican regulatory expertise
• Want to test market viability first
• Prefer focusing resources on production rather than administration

Choose direct ownership if you:

• Are making a long-term commitment
• Require complete operational autonomy
• Have resources to build compliance infrastructure
• Plan operations at a scale where administrative costs become negligible

The reality: Direct ownership becomes more cost-effective after the initial 2-3 year payback period for large-scale operations.

When to Use Contract Manufacturing

It works best when:

• Product specifications are standardized
• You’re testing market demand before committing to facilities
• Production volumes are too small to justify facility investment
• You need immediate capacity without capital expenditure

Recognize the limitations:

• Reduced quality control oversight
• Potential intellectual property risks
• Less flexibility for process modifications
• Dependency on manufacturer’s capacity and priorities

Step 3: Select Your Manufacturing Location in Mexico

Location selection directly impacts logistics costs, labor availability, and operational success. Here are Mexico’s major industrial regions:

Tijuana (Electronics, Medical Devices, Aerospace)

Advantages:

• Immediate proximity to San Diego border crossing
• Access to Southern California markets
• Mature industrial infrastructure
• Skilled workforce in precision manufacturing

Trade-off: Higher facility costs and labor rates due to strong demand

Monterrey (Automotive, Appliances, Heavy Manufacturing)

Advantages:

• Mexico’s industrial capital
• Excellent highway connections to multiple border crossings
• Highly educated workforce from technical universities
• Most developed industrial ecosystem in the country

Location: 140 miles to Laredo border crossing

Ciudad Juárez (Automotive, Electronics, Consumer Goods)

Advantages:

• Cost-effective manufacturing
• Competitive labor rates
• Multiple border crossing options
• Extensive industrial park infrastructure
• Central border location with balanced U.S. market access

Across from: El Paso, Texas

Matamoros (Automotive, Electronics, Medical Devices)

Advantages:

• Lower facility costs than western border cities
• Access to Port of Brownsville for ocean freight
• Competitive labor markets
• Gulf Coast proximity

Trade-off: Less developed infrastructure than Tijuana or Monterrey

Timeline note: Site selection and IMMEX approval typically takes about 30 days.

Border Region Advantages

Logistics benefits:

• Same-day or next-day delivery to major U.S. markets
• Reduced inventory carrying costs
• Improved customer responsiveness
• Simplified logistics coordination
• Multiple daily truck trips between facilities and customers

Operational advantages:

• Supports just-in-time inventory strategies
• Reduces transportation costs per unit
• Minimizes customs clearance delays
• Facilitates management oversight and technical support visits
• Enables rapid problem resolution without extensive travel

Infrastructure ecosystem:

• Mature logistics services
• Experienced customs brokers and freight forwarders
• Warehousing facilities
• Transportation networks designed for cross-border operations

When evaluating strategic warehouse site selection, consider how border proximity affects your total supply chain costs and service levels.

Step 4: Navigate Legal and Regulatory Requirements

Business Entity Registration

For direct ownership:

• Establish a Mexican legal entity (typically S.A. de C.V.)
• Obtain tax ID number (RFC)
• Register with Mexican Social Security Institute (IMSS)
• Secure federal and state permits

Timeline: 4-8 weeks with experienced legal counsel

With shelter services: All of this is eliminated; you operate under the provider’s existing entity.

Mexican Labor Law

Labor law here is different from U.S. practices. You’ll need to handle:

• Employment contracts with specific requirements
• Profit sharing (PTU)
• Vacation policies
• Termination procedures
• IMSS registration for employee social security
• Compliant payroll systems

Heads up: Before IMMEX approval, Mexican authorities conduct a physical inspection of your facility to verify infrastructure, production capabilities, and safety/environmental standards.

Environmental and Safety Permits

Requirements vary by industry, but typically include:

Environmental permits:

• Wastewater discharge permits
• Air emissions registrations
• Hazardous waste handling authorizations

Safety certifications:

• Workplace safety standards verification from STPS
• Industry-specific requirements

Timeline: Budget 2-3 months for environmental and safety permitting (often runs parallel to facility construction).

IMMEX Program Registration

IMMEX allows you to temporarily import raw materials, machinery, and components duty-free for manufacturing destined for export.

Categories:

• Temporary imports: Raw materials for production
• Definite imports: Machinery and fixed assets

Both are exempt from the 16% VAT. This VAT deferral significantly reduces working capital requirements and improves cash flow.

Eligibility requirements. You must meet one of these:

• Export at least US$500,000 of finished products annually, OR
• Maintain exports representing minimum 10% of annual sales

Plus, you need to demonstrate:

• Legitimate manufacturing operations
• Adequate facility infrastructure
• Technical capability to execute proposed production

Timeline: Site selection and IMMEX approval typically takes about 30 days.

You must maintain strict automated inventory control systems and accurate records. Specifically, you need an Annex 24 inventory system, a standardized format for tracking:

• All temporary imports
• Work-in-process
• Finished goods
• Exports

This system lets Mexican customs verify that duty-free imports are actually incorporated into exported products, not diverted to domestic markets.

Don’t mess this up: Non-compliance risks program suspension, duty assessments, and significant penalties.

USMCA Trade Agreement Compliance

USMCA replaced NAFTA in 2020 with updated rules you need to understand to capture tariff benefits. These determine whether products qualify for duty-free treatment based on North American content thresholds and manufacturing processes.

Important: Rules vary by product category. Automotive products face particularly stringent requirements including:

• Regional value content minimums
• Labor value content rules

You must maintain detailed records documenting your products meet applicable rules: bills of materials, production records, and supplier certifications.

USMCA is more flexible than NAFTA here. You can provide origin certifications in various formats, including commercial invoices, as long as they contain required data elements.

Key details:

• Certifications valid for one year
• Can cover single shipments or blanket periods
• Importers, exporters, or producers can certify origin

Watch out: Certification errors can result in duty assessments and penalties.

Essential Permits and Certifications

Beyond IMMEX and entity registration, you’ll need:

• VAT certification. Enables you to defer the 16% VAT on temporary imports under IMMEX. Requirements:

• Registration with Mexico’s tax authority (SAT)
• Demonstration of adequate accounting systems
• Financial stability
• Customs compliance. Multiple registrations needed:

• Importer/exporter registry (Padrón de Importadores)
• Authorized economic operator status (if eligible, for expedited clearance)
• Industry-specific product certifications

Pro tip: Work with an experienced Mexico customs broker to ensure proper documentation and compliance.

• Environmental permits from SEMARNAT. Requirements vary by industry:

• Wastewater discharge
• Air emissions
• Hazardous waste generation and storage
• Environmental impact assessments for new facilities

Timeline: Budget 2-4 months (chemical manufacturing faces more stringent requirements than electronics assembly).

• Safety registrations with STPS

• Workplace safety programs
• Hazardous materials handling protocols
• Periodic facility inspections
• Industry-specific certifications. May include:

• FDA registration for medical devices
• COFEPRIS approval for food and pharmaceutical products
• Sector-specific quality certifications required by customers

Step 5: Find and Vet Manufacturing Partners

Whether you’re selecting a shelter service provider, contract manufacturer, or local suppliers, thorough evaluation protects your investment.

Facility audits

Visit facilities in person to evaluate:

• Physical infrastructure
• Equipment capabilities
• Quality systems
• Operational practices
• Cleanliness and organization
• Equipment maintenance
• Workforce engagement

Why in person matters: These observable factors often predict operational performance better than presentations or documentation.

Verify:

• Adequate capacity for your volumes (look for 20-30% buffer)
• Appropriate equipment for your processes
• Quality control systems matching your standards

Quality certifications

These provide objective validation, but don’t rely on them alone.

Common certifications:

• ISO 9001: Basic quality management systems
• ISO 13485: Medical devices
• IATF 16949: Automotive
• AS9100: Aerospace

Important: Verify that certified systems are actively implemented, not just documented for audits.

Financial stability assessment

Protect against partner failure mid-contract.

Request:

• Financial statements for past 3 years
• Credit references
• Bank references

For critical partnerships, consider third-party financial due diligence to identify red flags like declining revenues, increasing debt, or cash flow problems.

Reference checks

Speak with current and former clients. Ask specific questions:

• How do they handle quality issues?
• How flexible are they during demand fluctuations?
• How effective is their communication?
• How do they handle problems?

Speaking with companies in similar industries or with comparable production requirements yields the most relevant insights. Understanding 3PL selection criteria can inform your broader partner evaluation framework.

Due Diligence Checklist

IMMEX certification

• ✅ Request copies of IMMEX authorization
• ✅ Confirm certification is current and in good standing
• ✅ Ask about compliance issues or customs audits in past 3 years

Annex 24 inventory system

• ✅ Review system documentation
• ✅ Observe actual usage during facility visits
• ✅ Verify inventory records reconcile with physical counts

Quality management

• ✅ Verify relevant ISO or industry certifications are current
• ✅ Review recent audit results
• ✅ Observe quality control processes during production

Production capacity

• ✅ Confirm available capacity exceeds requirements by 20-30%
• ✅ Verify equipment is appropriate for your processes
• ✅ Assess equipment age and maintenance practices

Financial stability

• ✅ Analyze 3 years of financial statements
• ✅ Verify adequate working capital
• ✅ Assess customer concentration risk

Workforce stability

• ✅ Review turnover rates
• ✅ Examine training programs
• ✅ Check labor relations history

Site feasibility

• ✅ Evaluate facility location for supply chain efficiency
• ✅ Assess local labor market for required skills
• ✅ Verify infrastructure adequacy

Environmental and safety compliance

• ✅ Confirm all required permits are current
• ✅ Review safety incident history
• ✅ Observe workplace safety practices

Cultural fit

• ✅ Evaluate management’s communication style
• ✅ Assess responsiveness and problem-solving approach
• ✅ Ensure alignment with your operational culture

Client references

• ✅ Contact at least 3 current clients
• ✅ Speak with 2 former clients
• ✅ Ask specific questions about performance and challenges

Step 6: Establish Supply Chain and Logistics Infrastructure

Efficient cross-border logistics determines whether your Mexican operations deliver promised cost savings and service levels.

Cross-border logistics planning

Start by mapping material flows in both directions:

• Raw materials and components → into Mexico
• Finished goods → to U.S. markets

Identify optimal border crossings based on:

• Your facility location
• Destination markets
• Crossing wait times
• Infrastructure and hours of operation
• Congestion levels

Different crossings can significantly impact your transit times and costs.

Customs broker selection

An experienced broker is critical for smooth operations.

What they handle:

• Import/export documentation
• Regulatory compliance
• Customs issue resolution
• Duty optimization under IMMEX and USMCA

Choose brokers with:

• Specific experience in your industry
• Proven track record at your preferred border crossings
• Technology systems that integrate with your ERP
• Real-time visibility capabilities

Inventory management systems

Your system must track materials across borders and through production while maintaining IMMEX compliance.

Must interface with Annex 24 requirements:

• Track temporary imports from receipt → production → export
• Reconcile physical inventory with customs records
• Generate required compliance reports

Many companies implement specialized trade management software that integrates with ERP systems to automate compliance tracking.

Transportation network design

Balance cost and service level requirements.

Options:

• Dedicated contract carriers: Consistent service and equipment, but premium rates
• Common carriers: Flexibility and competitive pricing, but less control
• Hybrid approach: Dedicated for time-sensitive/high-value, common for standard freight

Nearshoring could generate up to $35 billion USD in additional annual goods exports for Mexico, driving continued investment in cross-border transportation infrastructure. Understanding Why warehousing in Mexico offers strategic advantages can optimize your inventory positioning.

Cross-Border Transportation Considerations

Trucking requirements. Verify carriers have:

• USDOT numbers
• Mexican carrier permits (SCT)
• Adequate insurance for international movements

Reality check: Not all U.S. carriers operate in Mexico, and not all Mexican carriers can deliver throughout the U.S. Sometimes freight transfers at the border are necessary.

Border crossing procedures. Prepare documentation in advance:

• Commercial invoices
• Packing lists
• USMCA certificates of origin
• Product-specific permits

Best practices:

• Submit electronic manifests before arrival
• Schedule crossings to avoid peak congestion
• Build buffer time into commitments

Wait times: Vary from 30 minutes to several hours depending on crossing, time of day, and day of week.

Transit time optimization. Understand total door-to-door timing, not just driving hours.

Factor in:

• Border crossing wait times (highly variable)
• Customs clearance processing (30 minutes to 4 hours)
• Required inspections

Pro tip: Many companies maintain safety stock on both sides of the border to insulate production and customer delivery from border delays.

Customs Brokerage and Compliance

An experienced customs broker is your primary interface with Mexican and U.S. customs authorities.

Documentation requirements. For Mexican imports under IMMEX:

• Commercial invoices (product descriptions and values)
• Packing lists (quantities and packaging)
• IMMEX pedimentos (customs declarations) for temporary imports
• Certificates of origin when claiming USMCA benefits

For exports: Mirror these requirements plus proof-of-export records for IMMEX compliance.

Broker selection criteria. Emphasize:

• Experience with IMMEX program compliance
• Knowledge of your specific product classifications
• Technology platforms that integrate with your systems
• Responsiveness to issues and questions

Do your homework:

• Request references from clients with similar products
• Verify the broker’s compliance history
• Check financial stability

Bottom line: Your broker integration with inventory systems is essential since IMMEX companies must maintain strict automated inventory control.

Step 7: Launch Production and Implement Continuous Optimization

Production launch is the culmination of months of planning, but don’t think of it as the finish line. High-performing operations view it as the beginning of continuous improvement.

Production ramp-up: Take it slow

Follow a phased approach that progressively increases volume while validating processes and quality.

The smart way to ramp up:

1. Start with pilot runs using actual production equipment, materials, and workforce to catch issues early
2. Begin at 25-30% of target capacity focusing on process validation and quality, not volume
3. Increase gradually in 20-25% increments as quality metrics stabilize and workforce proficiency improves

Quality control from day one

Establish clear specifications, measurement systems, and corrective action processes immediately.

Essential elements:

• Define critical quality parameters for your products
• Implement in-process inspection points to catch issues before they propagate
• Establish final inspection protocols that verify all specs are met
• Document all quality procedures
• Train workforce thoroughly
• Empower operators to stop production when quality issues arise

Track the right performance metrics

Monitor both operational efficiency and business outcomes.

Production metrics:

• Throughput rates
• First-pass yield
• Scrap rates
• Equipment utilization

Quality indicators:

• Defect rates
• Customer returns
• Compliance with specifications

Supply chain performance:

• On-time delivery
• Inventory turns
• Logistics costs

During ramp-up: Review metrics weekly, identify trends, and implement corrective actions promptly.

Build continuous improvement into your DNA

Don’t just launch and forget. Institutionalize ongoing optimization.

Best practices:

• Implement regular kaizen events or improvement workshops
• Engage workforce in identifying and solving problems
• Establish formal root cause analysis for issues
• Benchmark against industry standards
• Identify gaps and improvement opportunities

Good news: After IMMEX approval (about 30 days), you can immediately start importing equipment and materials, letting you focus on operational excellence rather than regulatory delays.

Typical Timeline from Decision to Full Production

Realistic timelines prevent unrealistic commitments and allow proper resource allocation.

Total timeline: 6-12 months for direct ownership, 3-4 months with shelter services

Phase 1: Planning (3-6 months)

Activities (many can overlap):

• Feasibility analysis and business case (4-6 weeks)
• Select operating model and location (4-6 weeks)
• Partner selection and due diligence (6-8 weeks)
• Finalize contracts and agreements (2-4 weeks)

Phase 2: Regulatory and setup (2-4 months)

With shelter services: Minimal, as providers have existing infrastructure—enabling fastest launch within 3-4 months total

With direct ownership:

• Site selection and IMMEX approval (~30 days)
• Entity registration (4-6 weeks)
• Facility preparation and equipment installation (8-12 weeks)
• Workforce recruitment and training (6-8 weeks)

Many activities run in parallel.

Phase 3: Ramp-up (1-3 months)

• Pilot production and process validation (2-4 weeks)
• Progressive volume increases to target capacity (4-8 weeks)
• Quality system validation and customer approvals (2-4 weeks)

Pro tip: Conservative timelines allow for addressing unexpected issues without jeopardizing customer commitments. Build contingency time; unexpected delays in permitting, equipment delivery, or workforce training are common.

How EP Logistics Supports Your Mexico Manufacturing Transition

Successfully relocating production requires more than manufacturing expertise—it demands seamless cross-border logistics, customs compliance, and supply chain coordination from day one.

Cross-border freight services

Reliable transportation between your Mexican facility and U.S. markets with:

• Expertise navigating border crossings
• Documentation management
• Optimized routes for cost and transit time
• Consistent service levels your production schedule demands

Customs expertise

Our experienced brokerage team handles:

• All import/export documentation
• IMMEX compliance management
• Duty optimization under USMCA
• Quick issue resolution to prevent costly delays

We integrate with your inventory systems to maintain accurate IMMEX records while providing real-time shipment visibility.

Warehousing solutions

Facilities on both sides of the border provide:

• Flexibility to optimize inventory positioning
• Buffer against border delays
• Support for just-in-time delivery
• Secure storage and inventory management
• Value-added services without capital investment

End-to-end supply chain management

We coordinate everything into a seamless system, from inbound raw materials to finished goods delivery. You focus on production excellence while we handle cross-border supply chain complexities.

Ready to explore how Mexico manufacturing can transform your operations? Contact EP Logistics today to discuss your specific requirements.

Frequently Asked Questions

How long does it take to move production to Mexico?

Timeline varies by operating model:

• Shelter services: 3-4 months total to production launch
• Direct ownership: 6-12 months typically

Site selection and IMMEX approval takes about 30 days, followed by facility setup, equipment installation, and workforce training.

Always: Build contingency time for unexpected permitting or equipment delays.

What are the cost savings of manufacturing in Mexico?

Labor costs: 60-70% lower than U.S. manufacturing

Logistics costs: 30-50% decrease compared to Asian sourcing

IMMEX program: 16% VAT exemption on imported materials and machinery provides immediate working capital benefits

Total operational savings: 25-40% depending on industry and product complexity

Do I need to speak Spanish to operate in Mexico?

Not mandatory, especially with shelter service providers who offer bilingual support. Many Mexican manufacturing regions have English-speaking management and technical staff experienced with U.S. companies.

However: Investing in Spanish language training for key personnel improves communication effectiveness and cultural integration.

What happens to my existing workforce?

Most companies maintain U.S.-based roles for:

• Engineering
• Sales
• Customer service
• Management

While transitioning production operations to Mexico. Some manufacturers retain small-scale U.S. production for prototypes, custom orders, or products requiring proximity to specific customers.

Key: Transparent communication and transition planning help manage workforce concerns during relocation.

How do I protect my intellectual property in Mexico?

Mexico provides strong IP protection through laws aligned with international standards.

Protection strategies:

• Register trademarks and patents with IMPI (Mexican Institute of Industrial Property)
• Implement confidentiality agreements with employees and partners
• Control access to proprietary processes and designs
• Use operational controls and legal safeguards

Many companies successfully protect IP through these measures.

What industries are best suited for Mexico manufacturing?

• Automotive and auto parts: 24% of Mexico’s exports with extensive supply chains
• Electronics and medical devices: Thrive in border regions with skilled technical workforces
• Aerospace: Significant growth in Querétaro and central regions
• Appliances, consumer goods, industrial equipment: Benefit from proximity to U.S. markets and cost advantages