Translator’s Note: Another word for "maquiladora" is "in-bond", since the program usually involves receipt of materials from abroad (imports) in order to be assembled, manufactured, etc. in Mexico into products for export purposes only. Theoretically, the imported materials never come into the country, and thus are called "temporary imports". Since the in-bond industry is distinctly named "maquiladora" (or "maquila") in Mexico, and has enjoyed a long history, we will use the Mexican term throughout this document.

Compiled December 1998
by Foreign Tax Law, Inc.
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Ormond Beach, Florida 32175-2189 USA
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DISCLAIMER: Though every effect has been made to present the legal texts and information accurately, due to the nature and scope of the material, we cannot be liable for errors, omissions or other problems in the texts. The material offered herein is not a substitute for competent legal assistance by a licensed attorney of the jurisdiction in question.

DECREE FOR THE ENCOURAGEMENT AND OPERATION OF THE MAQUILADORA (IN-BOND) EXPORT INDUSTRY

CHAPTER I. GENERAL PROVISIONS

CHAPTER II. MAQUILA EXPORT PROGRAMS

CHAPTER III. THE WORK GROUP FOR THE MAQUILADORA EXPORT INDUSTRY

TRANSITORY ARTICLES

First Transitory Article.

Second Transitory Article.

CHAPTER I. GENERAL PROVISIONS
Art. 1.
The objective of this Decree is to promote the establishment and regulate the operation of enterprises totally or partially engaged in carrying on maquila export activities.

Art. 2.
Maquiladora export enterprises must attend to the following national priorities:

I. To create sources of employment;

II. To strengthen the trade balance of the country through a higher net contribution of foreign exchange;

III. To contribute to a higher inter-industrial integration and cooperate in elevating international competitiveness of national industry, and

IV. To elevate the training of workers and prompt the development and transference of technology into the country.

Art. 3.
For the purposes of this Decree, the following shall be understood:

I. The Law, the Customs Law;

II. The Regulation, the Regulation of the Customs Law;

III. The Ministry, the Ministry of Trade and Industrial Encouragement;

IV. Repealed by Decree published on November 13, 1998 (effective November 14, 1998).

V. Maquila Operation, the industrial process or service intended to transform, manufacture or repair merchandise of foreign origin temporarily imported for its subsequent export, carried out by maquiladora enterprises or those who are partially engaged in export in the terms of this Decree;

VI. (Amended by Decree published November 13, 1998, effective November 14, 1998) Export Maquiladora, a legal person that in the terms of this ordinance is approved for a program of operation of a maquila;

VII. Maquiladora by idle capacity, an enterprise, individual or legal person, that though is established and oriented to the production for the domestic market, is approved in the terms of this ordinance for a maquila export program.

VIII. Service Maquiladora, an enterprise that in the terms of this ordinance is approved for a program of maquila operation, whose activity is to carry out services, the final purpose of which shall be for export or to support exports. Such service activities may also be made into maquiladora enterprises or made into enterprises with a program of temporary import for the purpose of producing articles for export;

IX. A Maquiladora that develops programs of shelter (albergue): an enterprise, individual or legal person approved for an export project in the terms of this ordinance, and to which foreign enterprises provide the technology and productive material, provided that such foreign enterprises do not directly operate said projects;

X. Submaquila, complementary industrial processes or services intended for the transformation, manufacture or repair of the activity that is the objective of the program, performed by a person other than the holder thereof;

XI. Program, the declaration of maquila operations activities, in accordance with the single format, in which are to be specified:

a) Company data,

b) A description of the process,

c) Characteristics of the product or service, and

d) A list of what temporary imports are proposed for utilization in the maquila operation;

XII. Indirect exporters, suppliers of merchandise that is used in the productive process of goods that shall be sold abroad by enterprises registered in the National Register of the Maquiladora Industry; enterprises with a Temporary Import Program to produce Commodities for Export, or those registered with the Register of Foreign Trade Enterprises, and

Please note: The Decree of November 15, 1998 has amended item XII, effective as from November 1, 2000, as follows: "Indirect exporter, the provider of maquiladora merchandise who carries out its exports by means of an export or deposit voucher, and"

XIII. Export Voucher, the document verifying indirect exports, issued by enterprises registered with the National Register of the Maquiladora Industry; with a Temporary Import Program to Produce Commodities for Export, or with the Register of Foreign Trade Enterprises.

CHAPTER II. MAQUILA EXPORT PROGRAMS
Art. 4.
The Ministry may authorize the registration in the National Register of the Maquiladora Industry of persons resident in the country in the terms of article 9 of the Fiscal Code of the Federation, that present a program and comply with the requirements provided in this Decree, under the following modalities:

I. Export maquiladora;

II. Maquiladora by idle capacity;

III. Service Maquiladora, and

IV. A Maquiladora that develops programs of shelter (albergue).

Please note: The Decree of November 15, 1998 has amended Article 4 as follows, effective as from November 1, 2000:

"Art. 4.

The Ministry may authorize the registration in the National Register of the Maquiladora Industry of persons resident in the country in the terms of article 9 of the Fiscal Code of the Federation, that export more than 30% of their production annually and comply with the requirements provided in this Decree, under the following modalities:

I. Export maquiladora;

II. Maquiladora by idle capacity;

III. Service Maquiladora, and

IV. A maquiladora that develops programs of shelter (albergue).

The Ministry, prior to the authorization of the registration, must request the opinion of the Ministry of Finance and Public Credit on the suitability of granting said authorization for purposes of verifying that the enterprise is current in its tax obligations, as well as that the applicant is not subject to the administrative procedure of distraint for any tax owed."

Art. 5.
(Amended by Decree published November 13, 1998, effective November 14, 1998) Upon approval of the program, the Ministry shall assign a National Maquiladora Industry Registry code number to each enterprise, which must be used in all procedural dealings with Federal Public Administration offices or agencies, without prejudice to other registers that require such.

The duration of the programs shall be indefinite, provided that the holder complies with the requirements established in this Decree.

Art. 6.
Parties interested in the approval or expansion of a program must file their application with the Ministry on the forms to be established for the purpose and comply with the following requirements, inter alia:

I. If applicable, to file a certified copy of the formation deed of the company and any amendments thereof;

II. Repealed by Decree published November 13, 1998, effective November 14, 1998.

III. To file a lease contract or bill of sale of the premises;

IV. Repealed by Decree published November 13, 1998, effective November 14, 1998.

V. To file a maquila contract duly notarized by a notary public;

VI. An opinion by the responsible authorities, in the case in which the application is related to agro-industrial projects, as well as those that are directed towards the use of mineral, fish or forestry resources. In accordance with the characteristics of technological processes of the project that are filed, the opinion of the corresponding authority in ecological and environmental protection matters must be received, and

VII. If required, to file the allotment of a textile export quota on the part of the competent of that Ministry or, if applicable, a responsive letter in which it is manifested that the raw material shall originate from the region pursuant to that which is established in NAFTA (North American Free Trade Treaty).

The Ministry must reply to the applications in a period of 10 working days; if the period is concluded without a resolution being issued, the respective application shall be understood to have been approved, the Ministry duly issuing the written voucher, upon petition of the applicant, within a period of no more than three working days.

Art. 7.
The Ministry shall communicate the terms by which the program or its expansion was approved to the Ministry of Finance and Public Credit within a period that shall not exceed three working days after the approval.

Art. 8.
(Amended by Decree published November 13, 1998, effective November 14, 1998, except for the last paragraph of this article, which will not be effective until November 1, 2000) Maquiladoras may temporarily import:

I. Raw materials, parts, components, auxiliary materials, containers, packaging materials, fuel and lubricants to be used in the process of production of the export merchandise;

II. Containers and trailer stocks;

III. Tools, equipment and accessories for research, industrial safety and products necessary for the health, sanitation and for the prevention and control of environmental contamination of the productive plant, work manuals and industrial plans, as well as telecommunication and computer equipment;

IV. Machinery, apparatus, instruments and spare parts for the productive process, laboratory equipment for product measuring and testing, and that required for quality control and personnel training, as well as equipment for the administrative development of the enterprise, the latter in the case of installation of new industrial plants.

The aforementioned goods that are imported temporarily in the terms of this Decree, may remain in national territory for the periods established in the Customs Law.

The merchandise to which items III and IV, above, refer, shall pay the General Import Tax as if they were being imported permanently. The tax to pay may be the preferential duty established in the Programs of Sectorial Promotion, provided that the holder complies with the stipulations of those programs.

Art. 8A.
(Added by Decree published November 13, 1998, effective November 1, 2000) Temporary imports of merchandise to which article 8, item I, of this Decree refers, shall pay the amount of customs duties corresponding to inputs not originally incorporated into merchandise exported to one of the member countries of NAFTA, pursuant to the following procedure:

I. Determine the amount of customs duties to pay on inputs temporarily imported to the country that are incorporated into the merchandise subject to be returned, as if such inputs had been imported permanently, considering the customs duty and rate of exchange that would be applied on the date on which the export shall be carried out;

II. Identify the amount of the duties paid for the merchandise in the country of destination, and

III. Calculate the final amount of duties to pay, deducting the customs duty that would be paid for the finished product in the country of destination, up to the amount of the duty that corresponds to the input in terms of item I.

For purposes of the preceding, the holder of the Program must present the following documentation to the customs authority within a maximum period of 60 calendar days from the date on which the return had been carried out:

a) A copy of the import bill in which the payment of taxes is recorded;

b) A copy of the temporary import bill of the input;

c) A copy of the import bill of the country of destination, including evidence that the Government of said country has registered the operation;

d) A copy of the export bill or of the export voucher, and

e) A sworn declaration of the exporter, that the documentation to which letter c) refers was obtained directly from the importer in the country of destination.

The maquiladora must notify the indirect exporter 10 days after the export is carried out, of the volume of merchandise of that supplier that has been exported to one of the member countries of NAFTA.

The foregoing in order that the indirect exporter shall pay the amount of customs duties corresponding to the inputs not originally incorporated in said merchandise, as if they had been imported permanently.

Said payment will be made within the 60 calendar days following the date of export notified by the maquiladora, considering the tariff and rate of exchange that apply on said date.

The indirect exporter must present the documentation to which letters a), b) and d) of this article refer to the customs authority, within the period cited in the preceding paragraph.

The maquiladora and the indirect exporter shall pay the General Import Tax determined pursuant to this article, for which the preferential tariff established in the Programs of Sectorial Promotion may apply, provided that the holder complies with that which is stipulated in said programs. The indirect exporter shall make this payment along with the provisional payment of Income Tax withholdings and Value Added Tax in the corresponding month in the terms of this article.

For purposes of this article, the origin of the inputs shall be determined pursuant to Chapter IV (Rules of Origin) of the North American Free Trade Agreement.

This article shall not be applied to temporary imports under the operations described in appendix 2.4 or in appendix 6 of Annex 300-B of the North American Free Trade Agreement (textile products and clothing), or to operations similar to maquila of textile products and clothing established by the United States of America and Canada, pursuant to that which shall be determined by the Ministry.

Art. 9.
When because of special circumstances the goods subject to maquila operations are subject to specific export quotas, the Ministry shall approve the programs in accordance with the allotment policies of the available amounts.

The allotment of export quotas shall be authorized by the federal delegations and sub-delegations of the Ministry, after authorization by the competent administrative unit.

Art. 10.
Applications related to agro-industrial projects, as well as those directed to the utilization of mineral, fish and forestry resources, shall be analyzed pursuant to the legislation and the Federal Government programs for said sectors, and those of preservation and restoration of the ecological balance and the protection of the environment. The offices involved in these projects shall respond in 10 working days to the opinions given by the Ministry on the particular project.

Art. 11.
Material already manufactured in the country which is rejected for quality control reasons by the enterprise, as well as containers and packaging materials which have been imported with all temporarily imported merchandise, may be included in waste.

Art. 12.
Enterprises approved for a program shall commit themselves to observe the following:

I. Comply with the terms established in the authorized program;

II. Use the goods imported under their program for the specific purposes for which they were authorized and, if applicable, duly use the export quotas assigned to them pursuant to article 9 of this Decree;

III. Contract and train personnel at each of the corresponding levels, as established by the relative existing legal dispositions;

IV. Be up to date as concerns the fiscal and labor obligations corresponding to them; and

V. In the case of the suspension of activities, notify the Ministry within a period not to exceed ten calendar days as of the date in which transactions are suspended.

Art. 13.
Enterprises approved for a program shall furnish the information requested by the Ministry and by the Ministry of Finance and Public Credit, and assure that it is directly related to verification of compliance with the program authorized, within the period which is stipulated by those organizations for that purpose. Likewise they must give the facilities required by the personnel of those organizations to make the necessary reviews concerning fulfillment of the program. Said verification must be subject to that which is provided in the Federal Law of Administrative Procedure.

Art. 14.
Every program must comply with the requirements of ecology and environmental protection, pursuant to the applicable provisions.

Art. 15.
Persons recorded in the Register must report annually to the Ministry concerning the foreign trade transactions carried out under the program, no later than the last working day of the month of April, pursuant to the form that shall be established for the purpose.

Art. 16.
This article shall be repealed as from November 1, 2000 (Decree published November 13, 1998).

Maquiladoras may intend a portion of their production for the domestic market pursuant to the following:

I. In 1994, up to 55% of the total value of their annual exports of the preceding year;

II. In 1995, up to 60% of the total value of their annual exports of the preceding year;

III. In 1996, up to 65% of the total value of their annual exports of the preceding year;

IV. In 1997, up to 70% of the total value of their annual exports of the preceding year;

V. In 1998, up to 75% of the total value of their annual exports of the preceding year;

VI. In 1999, up to 80% of the total value of their annual exports of the preceding year; and

VII. In 2000, up to 85% of the total value of their annual exports of the preceding year.

As from 2001, maquiladora sales to the domestic market shall not be subject to any limit, by means of which they may intend all of their production for the national market.

Art. 17.
Repealed by Decree published November 13, 1998, effective November 14, 1998.

Art. 18.
The payment of the general import tax on products to be sold on the national market shall be carried out by applying the tariff corresponding to the foreign components and parts. When proper, the corresponding preferential tariff shall be applicable pursuant to international commercial agreements and treaties signed by the United States of Mexico.

The preferential tariff shall be applied, provided that the merchandise had been deposited in national territory under the corresponding agreement or treaty, and that the importer complied with the conditions and requirements established therein.

Art. 19.
This article shall be repealed as from November 1, 2000 (Decree published November 13, 1998).

Maquiladoras wishing to sell on the national market must also comply with the following requirements:

I. To maintain the same quality control and standards as applied to their exports, as well as be subject to those which are in effect in the country, pursuant to the applicable provisions;

II. To pay the general import tax in accordance with the criteria established in the preceding article, as well as other contributions that may correspond thereto, and

III. To comply with the other requirements established by the legal dispositions applicable to the matter.

Art. 20.
The Ministry may authorize that enterprises operating under the benefit of the Decree that establishes Temporary Import Programs for Producing Articles for Export, published in the Diario Oficial of the Federation of May 3, 1990 and amended by means of miscellaneous provisions published in the same publication on May 11, 1995, shall benefit from this Decree in the case of plants or projects other than those that are registered under that system or, by the prior express waiver of the benefits of that Decree by the enterprise. In this latter case, the Ministry and the Minister of Finance and Public Credit, in the sphere of their respective jurisdictions, shall specify the conditions, periods and guarantees for the fulfillment of the obligations that they have subscribed as enterprises with a Program of Temporary Import for Producing Articles for Export, in the matter of customs, taxes, foreign exchange or other matters.

Art. 21.
Repealed by Decree published November 13, 1998, effective November 14, 1998.

Art. 22.
(Amended by Decree published November 13, 1998, effective November 14, 1998, except the second paragraph which shall not be effective until November 1, 2000) Merchandise to be transferred or sold to an enterprise registered on the National Maquiladora Industry Register, with a Program of Temporary Importation to Produce Articles for Export or with the Foreign Trade Enterprise Register, shall be considered as if it had been exported permanently, provided that the corresponding export voucher issued by the said enterprise is presented.

The issue of the export voucher shall not require the presentation of any import or export bill; nevertheless, the merchandise that the voucher covers must be directly exported in its entirety.

Transfers or sales of enterprises with a program for the terminal automotive industry must be carried out through a deposit voucher in the terms established by the Ministry of Finance and Public Credit for that purpose.

Art. 23.
Repealed by Decree published November 13, 1998, effective November 14, 1998.

Art. 24.
The Ministry may authorize submaquila operations, which it must communicate to the Minister of Finance and Public Credit. Said authorization must be issued by the Ministry within a period of five working days; if that period concludes without a resolution being issued, the respective application shall be understood to have been approved, the Secretariat duly issuing the written voucher, upon petition of the applicant, within a period of no more than three working days.

Such sub-maquila operation must be carried out between maquiladoras approved under the Decree or else between one of the latter and an enterprise outside of the program.

Art. 25.
The Secretary of Government, in accordance with the applicable laws on the matter, may authorize the internment of foreign administrative and technical personnel for the functioning of maquiladora enterprises. The corresponding permits shall be issued in the Offices of Immigration Services established in the country, or through the conduct of the Mexican foreign service abroad.

Art. 26.
The Federal delegations or sub-delegations of the Ministry shall be empowered to apply the provisions contained in this Decree within the jurisdiction of the Ministry.

Art. 27.
(Amended by Decree published November 13, 1998, effective November 14, 1998) If exporters do not comply with the provisions of this Decree, with the terms established in the authorized register, or by opinion of the Ministry of Finance and Public Credit relative to the fulfillment of their tax obligations, the Ministry shall suspend or cancel their registration in the National Register of the Maquiladora Industry.

CHAPTER III. THE WORK GROUP FOR THE MAQUILADORA EXPORT INDUSTRY
Art. 28.
Repealed by Decree published November 13, 1998, effective November 14, 1998.

Art. 29.
Repealed by Decree published November 13, 1998, effective November 14, 1998.

Art. 30.
Repealed by Decree published November 13, 1998, effective November 14, 1998.

Art. 31.
Repealed by Decree published November 13, 1998, effective November 14, 1998.

Art. 32.
The Consultative Committee of the Maquiladora Export Industry shall be an organ of consultation and harmonization for the development of said industry, and shall be composed of:

I. A representative of each one of the agencies of which the Work Group is composed, being presided over by the representative of the Ministry; and

II. The directive table of the National Council of the Maquiladora Export Industry and the National Council members representing the local associations of maquiladoras affiliated with the National Council.

TRANSITORY ARTICLES
First Transitory Article.
This Decree shall enter into force on the day following its publication in the Diario Oficial.

Second Transitory Article.
The Decree for the Encouragement and Operation of the Maquiladora Export Industry, published in the Diario Oficial of the Federation of December 22, 1989 is repealed.