At a time when the topic of international trade has become more prominent in the national discourse, it is worth looking at one of our nearest trading partners, Mexico, as an advantageous resource for Texas companies. Whether considering Mexico as a source of raw materials or as a manufacturing location, CEOs of companies from auto parts to technology — and the myriad of companies that serve them as suppliers — have discovered the benefits of “near-shoring” to optimize transportation and labor costs.
As an important example, Mexico offers greater proximity than Asia, whose goods and parts can be ocean bound for five to six weeks. For companies whose products are time sensitive — for example, parts for LED lighting that is constantly upgrading — cross-border trade with Mexico offers a competitive advantage.
At the same time, CEOs embarking on this strategy would do well to put key disciplines in place to protect themselves against unanticipated costs due to any number of factors from regulatory missteps to project inefficiencies. Knowledgeable suppliers can help by providing expertise in these and other areas such as quality control, security and efficient routing.
The following are key strategies CEOs can employ, themselves or in concert with cross-border suppliers. While these pertain to doing business in Mexico, they may also apply to manufacturing and logistics in other countries.
When building warehouse facilities and transportation functions, companies can partner with U.S.-based, bilingual staffing companies with a presence in Mexico. They can help ensure accountability and maintain strong employee relations in the area.
As with other business functions, it makes sense to hire a transportation expert who knows the dynamics of logistics and customs on both sides of the border. Insist on key certifications like the ISO 28000 for the highest standard available for supply chain security, and Custom Trade Partnership Against Terrorism (CTPAT) to ensure security at the border.
There are also tax considerations when crossing the border. Exporters can decrease or eliminate U.S. Federal taxes or duties if they go through a Foreign Trade Zone.
At the same time, request to have a person available by phone, any time of day or night, who can address service interruptions or shipping delays and implement a Plan B. Executives should be able to get all that information from a single source.
Cross-border business offers exciting opportunities to broaden resources and achieve greater profitability. With the right team of experts, CEOs can manage the risks and attain the rewards.
Keeli Jernigan is CEO and President of Trans-Expedite Inc., a global freight and logistics company providing end-to-end solutions for Fortune 500 corporations. Trans-Expedite is celebrating its 15 year anniversary. Trans-Expedite is headquartered in El Paso, with offices in Dallas, San Antonio, Houston and Austin, among others in the U.S. and Mexico.
Mar 13, 2017 Comments Off on Business Tax Issues for 2017