On December 19, 2024, a decree was published in the Official Gazette of the Federation, modifying the General Import and Export Law tariff as a measure for the Mexican Government to protect domestic textile production. It will be effective until April 2026. Let’s explore the tariff changes, their implications for the IMMEX program, and how they impact fashion and lifestyle brands.
Mexico’s recent decision to restrict textile tariffs under the IMMEX duty-deferral program will likely disrupt the global apparel brands operating in the US market. Some businesses are referring to these tariff changes as “Mexico’s IMMEX apparel import ban.” After all, if you import goods, especially textiles, into Mexico, you will face higher costs and potential supply chain disruptions due to the new regulation.
Apart from increasing tariffs on numerous finished textile goods and textile imports, this presidential decree by Mexican President Claudia Sheinbaum will forbid certain temporary imports under the IMMEX program that permits foreign companies to import goods into Mexico for manufacturing or assembling duty-free and then export them to the US or other markets. This decree mandates applying an additional 15% to 35% tariffs on certain apparel categories.
This decision or decree has also already created a “nightmare” for the third-party logistics providers handling cross-border shipments from Mexico. Let’s delve into these changes and their impact in more detail here.
Noteworthy Changes in Mexico Textile Tariffs
This decision to impose tariff changes by the Mexican Government is aimed at contending the unfair competition within Mexico’s textile industry, in which employment hit its lowest point in 2024. Under the new decree, tariffs increased on 138 garment product categories and 17 for textile categories.
The following are the changes to the tariffs:
- Tariffs on finished textile goods soared from 20% to 35%
- Tariffs on textile inputs increased from 10% to 15%
- Items impacted include 121 apparel products and 17 made-up textiles [HTS – Chapters 63 and 94]
Additionally, the following are the restraints imposed on IMMEX imports, effective from December 20, 2024:
- The program, which previously allowed duty-free imports of raw materials for manufacturing and re-export, will now restrict some finished products.
- Products bearing the impact include –
- Apparel (HTS Chapters 61 and 62) such as coats, suits, jackets, dresses, and sweaters
- Textile home goods (HTS Chapter 63), such as bed linens, blankets, and towels
- Exemptions only apply to products coming under the US-Mexico-Canada agreement [USMCA] of free trade.
These changes will be functional till April 2026.
Understanding the IMMEX Program
IMMEX stands for Industry for Manufacturing, Maquiladora, and Export Services. This program was launched in a Presidential Decree in November 2006 and has undergone multiple amendments since then. It is an import duty-referral government program that permits authorized companies engaged in manufacturing or maquila operations in Mexico. Under this program, you can import goods [duty-free] into Mexico to manufacture, assemble, and export the finished products if authorized.
Maquiladora denotes a factory or a manufacturing plant in Mexico. These organizations are permitted to operate by the country’s Secretariat of Commerce and Industrial Development under a decree established in 1989. Companies functioning under the Maquiladora model enjoy various benefits, such as a cheaper labor force in Mexico and certain tax advantages.
Companies Affected by the Rise in Tariffs
Companies that are significantly affected by these new regulations are the US eCommerce brands that depend on the IMMEX program. Many companies leverage Mexican warehouses for cheaper labor and re-export products to the US duty-free. These companies benefit from the ‘de minimis’ exemption known as Section 321, which permits consignments to enter the US without duties as long as the value is under $800 per day per consumer.
This new Mexico apparel import ban will likely disrupt the fulfillment operations of brands that rely on IMMEX warehouses. Consequently, these businesses will be required to come up with alternate strategies to adapt to these restrictions. They can relocate their operations back to the US or consider fulfillment in other regions, such as Canada. With Mexico’s cheaper labor as the main advantage, the increased tariffs and the logistics complications will likely outweigh the cost benefits.
Consequences for Fashion and Lifestyle Brands
The major impact of the tariff changes for the fashion and lifestyle brands are the following:
• Rising Expenses – Due to the higher tariffs and the loss of the IMMEX duty-free advantages, companies will face cost increases and compliance challenges in continuing to produce goods in Mexico.
• Disruptions in Supply Chain and Logistics – If you are leveraging Section 321 exemptions [de minimis exemptions], you must re-evaluate your dependence on Mexican warehouses due to the imposed restrictions on eligible products. Also, these new regulations mandate companies to adjust their fulfillment and supply chain processes.
• Adjusting to Compliance and Operational Changes – The newly imposed tariff classifications demand stringent compliance, leading to administrative overhead and the risk of penalties for non-adherence. If you are a US brand, you need to alter your fulfillment strategies or relocate to native US-based warehouses, while if you are a non-US brand, especially a fast-fashion and high-volume brand, you should adapt quickly to avoid disruptions in the US markets.
Conclusion:
So, these changes to the Mexican tariffs and the IMMEX program will lead to a critical shift for fashion and lifestyle brands, leading to several challenges and disruptions for importers and companies operating under IMMEX. Higher costs due to increased tariffs can affect profit margins and cause supply chain disruptions.
Navigating these changes requires careful consideration of costs along with logistics and operational efficiency. These emerging changes require you to take proactive steps in optimizing your operations, which demands agility and innovation in supply chain management.
However, if you are looking for a 3PL provider with a global fulfillment network and adept with international regulations, Connect with XPDEL, and we will be happy to help you adapt to the Mexican tariff changes.
About XPDEL:
XPDEL helps eCommerce brands accelerate their growth, empowering them with multi-channel fulfillment, whether shipping directly to consumers, delivering to businesses, or selling through retail stores. We are founded and operated by veterans with experience from Amazon, FedEx, UPS, JDA, Walmart, Target, and other leading companies in eCommerce and Retail. Guided by these experts, we provide customer experiences that help you grow your business.
