Finalllllllllllllll Bosss

7/27/2019 Finalllllllllllllll Bosss

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TRADE BETWEEN

MEXICO VS U.S


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Letter of Transmittal

22nA!ril 2"# 2$"2

Masura Rahamatullah

BBA, Department

American International University- Bangladesh

Banani, Dhaka.

Su!ect" Submission of Transmittal.

Dear Madam,

It is a %reat !leas&re for &s to s&'mittin% t(e re!ort to )o& on Trae an Barriers 'et*een Me+i,o

an U.S a'o&t a&tomo'ile in&str). It (as 'een a %reat !leas&re for &s to *or- on t(is re!ort as it

!roie man) o!!ort&nities to %ain insi%(ts a'o&t trae an its !oli,) in Me+i,o.

We are %ratef&l to )o& for )o&r ,ontin&o&s %&ian,e in !re!arin% t(e %ro&! !ro/e,t. 0inall)# *e

also 'eliee t(at t(is re!ort *ill satisf) )o&.

Sin,erel) )o&rs#

#ame

#ame

#ame

#ame


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Ta'le of Content1

Titles a%es

Intro&,tion of t(e or%ani3ation

Or%ani3ational Oerie*

Intro&,tion to t(e St&)

S,o!e of t(e St&)

Met(oolo%)

Limitation

Anal)sis an Dis,&ssion

Ma/or 0inin%s

Sol&tion

Con,l&sion

Referen,e

A!!eni+


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1. Introduction

Mexico is a federal constitutional republic in North America. It is bordered on the northby the United States; on the south and west by the Pacific Ocean; on the southeast by

uatemala! "eli#e! and the $aribbean Sea.

It is the fifth lar%est country in the Americas by total area and the thirteenth lar%est

independent nation in the world. It is the ele&enth most populous country and the most

populous Spanish'spea(in% country.


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It is a federation comprisin% thirty'one states and a )ederal *istrict! the capital city.

Mexico has one of the world+s lar%est economies! and is considered both a re%ional power

and middle power;

,his country was the first -atin American member of the Or%ani#ation for conomic $o'

operation and *e&elopment O$* and considered an upper'middle income country bythe /orld "an(.

Mexico is considered a newly industriali#ed country and an emer%in% power. ,he

economy is stron%ly lin(ed to those of its North American )ree ,rade A%reement

0NA),A1 partners! especially the United States. Mexico has been one of the emer%in%

mar(ets and star economy sector in the world. "oth domestic and international.

Mexico manufacturin% has been always impro&in%. After the 2"racero pro%ram3 was

si%ned between United States and Mexico! Mexico manufacturin% sector %rows rapidly.

$ompanies from United States started settin% up their assembly in Mexico becauseMexico had plenty of raw materials a&ailable.

1. Analysis and Discussion

Country Profile

Mexico


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United States

Area 4!567!789 (mPopulation : millionCapital City /ashin%ton *.$People /hite 84.47

Area !47=!:89 sB (mPopulation 6 millionStates :Capital City Mexico $ityLanguages Spanish! 76 indi%enous lan%ua%es.

Religion @oman $atholic 54

Currency Mexican PesoHead of State President )elipe de esus $alderon ?inoCosa

Government )ederal republic system

People mixed uropean and indi%enous ancestry


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T(e Me+i,an e,onom) (as %ro*n in re,ent e,aes to 'e,ome t(e *orl6s "2t( to "7t(lar%est# *it( a 8D of some 9:7$#$"2 million in 2$$;. Sin,e t(e " to 2?. in t(e !erio 'et*een 2$$$ an 2$$7.T(is (as lar%el) 'een t(e res&lt of sta'ilit) s&staine sin,e earl) "


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-abor forceD 85.6 million 06>6 S,.1

-abor force by occupation a%ricultureD >.861

UnemploymentD 7.6< plus considerable

UnderemploymentD067>41

lectronics! food and be&era%es!

,obacco! chemicals! iron and steel.

Now see the forei%n direct in&estment you can easily see that in manufacturin% sectors there

is a massi&e percenta%e %rew in 449'6>.

Mexico Unemployment rates!
http://en.wikipedia.org/wiki/Unemploymenthttp://en.wikipedia.org/wiki/Underemploymenthttp://en.wikipedia.org/wiki/Unemploymenthttp://en.wikipedia.org/wiki/Underemployment


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Mexico inflation rate!


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Political and Legal "actors!

,he political'le%al dimension of the %eneral en&ironment also affects business acti&ity. ,he

philosophy of the political parties in power influences business practices. ,he le%al en&ironment

ser&es to define what or%ani#ations can and cannot do at a particular point in time. ,he le%al

en&ironment facin% or%ani#ations is becomin% more complex and affectin% businesses more

directly. It has become increasin%ly difficult for businesses to ta(e action without encounterin% a

law! re%ulation! or le%al problem. A &ery brief listin% of si%nificant laws that affect business

would include le%islation in the areas of consumerism! employee relations! the en&ironment! and

competiti&e practices. Many of the laws also ha&e an associated re%ulatory a%ency. Powerful

U.S. re%ulatory a%encies include the n&ironmental Protection A%ency 0PA1! the Occupational

Safety and ?ealth Administration 0OS?A1! the Bual mployment Opportunity $ommission

0O$1! and the Securities and xchan%e $ommission 0S$1.

stimates of the cost of compliance &ary widely! but could well exceed E>> billion annually.

Many of these costs are passed to consumers. ?owe&er! costs of le%al expenses and settlements

may not be incurred for years and are not li(ely to be paid by consumers of the product or

owners of the company when the &iolation occurred. Still! potential le%al action often results in

hi%her prices for consumers and a more conser&ati&e attitude by business executi&es.

#ec$nological "actors!

,echnolo%y is another aspect of the en&ironment a firm should consider in de&elopin% strate%ic

plans. $han%in% technolo%y may affect the demand for a firm+s products and ser&ices! its

production processes! and raw materials. ,echnolo%ical chan%es may create new opportunities

for the firm! or threaten the sur&i&al of a product! firm! or industry. ,echnolo%ical inno&ation

continues to mo&e at an increasin%ly rapid rate. ,echnolo%y can chan%e the lifestyle and buyin%

patterns of consumers. @ecent de&elopments in the field of microcomputers ha&e dramatically

expanded the potential customer base and created innumerable opportunities for businesses to

en%a%e in business &ia Internet. /hereas computers were traditionally used only by lar%e

or%ani#ations to handle data processin% needs! personal computers are commonly used by

smaller firms and indi&iduals for uses not e&en ima%ined fifteen years a%o. Similarly! new


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de&elopments in technolo%y led to a reduction in prices for computers and expanded the potential

mar(et. -ower prices allow computers to be mar(eted to the %eneral public rather than to

business! scientific! and professional usersFthe initial mar(et.

,echnolo%y may also cause certain products to be remo&ed from the mar(et. Asbestos'related

illnesses ha&e se&erely limited asbestos as a resource used in heat'sensiti&e products such as hair

dryers. )urther! a number of chemicals that ha&e been commonly used by farmers to control

insects or plants are prohibited from use or reBuire licensure as a conseBuence of those chemicals

appearin% in the food chain.

%&' Goods Are #raded!

,housands of used &ehicles from as far away as $olorado and Missouri Cam tiny carlots and auto sal&a%e yards in this %ritty border city. An estimated 69!>>> families ma(e a li&in%here hustlin% U.S. castoffs. Amon% them is ose Ga&ala! a wiry used'car dealer with a truc(er+scap and an eye for bar%ains.

At a recent auto auction in nei%hborin% l Paso! ,exas! he sna%%ed a decrepit 48= )ord ran,orino that brou%ht snic(ers from the crowd. "ut it+s Ga&ala who may ha&e the last lau%h. ?efi%ures he can sell the wi#ened muscle car to some HStars(y ?utchH wannabe in uare# for atleast four times the E>> that he paid for it.

,hat+s precisely what is worryin% en&ironmentalists and new'car dealers! who say fallin% tradebarriers are fuelin% an in&asion of smo(y un(ers. More than : million late'model &ehicles ha&erumbled le%ally south of the border in the last 6 J6 years. Millions more are on the way! than(sto the North American )ree ,rade A%reement.

,he &inta%e metal is rattlin% Mexico+s retail car mar(et. Sales of new &ehicles ha&e stalled at .million a year as used imports ha&e o&erta(en them. Sales of new subcompacts '' the mostpopular class of cars in Mexico because of their price '' s(idded 7.=< last year as buyerssnapped up cheaper! roomier used &ehicles from the U.S.

)actory wor(er *a&id Orti# was chec(in% out sport utility &ehicles recently on $alle $arlosAmaya in $iudad uare#. ,he public street doubles as an open'air auto ba#aar with hundreds ofhi%h'milea%e! late'model &ehicles par(ed bumper to dented bumper. ?e said used cars from the


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U.S. were more desirable than those from Mexico because they tend to be bi%%er and to ha&espent less time on pitted! unpa&ed streets such as those common in parts of uare#.

)or decades! Mexico restricted imports of used &ehicles and slapped hefty taxes on new ones!which meant Mexicans! paid more than U.S. consumers for the exact same &ehicles. ,hat

spawned a hu%e blac( mar(et in Calopies! particularly in the border re%ion.

,hin%s chan%ed in summer 6>>9 as the Mexican %o&ernment was %earin% up to meet its NA),Aobli%ations. ,hat trade deal reBuires Mexico to be%in openin% its mar(et to some used &ehiclesfrom the U.S. and $anada next year. ,he pact is structured to protect Mexican car dealers fromimmediate competition a%ainst their newest! most profitable models. Only &ehicles > years andolder will be allowed in initially. ,hose a%e restrictions will %radually be reduced until 6>4!when the used'car mar(et will be completely open.

"ut in a mo&e that surprised en&ironmentalists and new'car dealers! former Mexican PresidentKicente )ox sped up the process in Au%ust 6>>9! si%nin% a decree to allow the import of &ehicles

> to 9 years old. ,hat decree was modified this year to allow imports of only 445 models forthe rest of 6>>5. NA),A re%ulations will %o into effect an. ! 6>>4.

Location economies leverage!

Mexico enCoys a strate%ic %eo%raphic position! %reat natural wealth and an exceptional

demo%raphic bonus. ,his! added to the &ariety of strate%ic industries! solid international

business relations! economic stability and a noteworthy political maturity constitute Mexico as

one of the best destinations for in&estment.

?istorically! the automobile industry has been a strate%ic sector for de&elopment in Mexico. Its

share in the national economy places it as the second most important industry in Mexico.

/ith a &ast infrastructure and o&er !>>> auto parts companies! the Mexican automobile sector is

the lar%est &ehicle producer in the world! and an important platform for manufacturin% %lobal

products to the hi%hest standards of Buality and safety.

In 6>>! Mexico produced 6!>6!5> cars! an increase of =< on 6>>! and exported !77!=>7

&ehicles! :< more than the pre&ious year. Such increases are noteworthy in the context of the

steep drop in sales of 5< recorded by the American automobile industry.

In the same year! &ehicle exports by the Mexican automobile sector rose than(s to a %reater

di&ersification of the mar(et. xports to urope increased by 4.5

,he Mexican automoti&e industry is focused on in&estment mar(ets as much as it is on exports.

Ley models built in Mexico for worldwide sales are the -incoln MLG! the Kol(swa%en "eetle!

the Nissan ,iida! the ?onda $@'K! the *od%e ourney and the armored "M/ 9. Precision


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machinin%! plastic inCection moldin%! aluminum castin%! nodular iron! cold and hot for%in%!

alon% with sheet metal stampin%! ma(e this a window of opportunity for the industry.

$*M Auto consultants forecasts that automobile production in Mexico will reach :. million

units by 6>:! double the 6>>5 output.

US(ME)*C+ Regional Economic *ntegration!

,he bilateral economic relationship with Mexico is amon% the most important for the United

States because of Mexico3s closeness and because of the lar%e amount of trade and in&estment

transactions. ,he most si%nificant feature of the relationship is the North American )ree ,rade

A%reement 0NA),A1 throu%h which the United States! Mexico and $anada form the world3s

lar%est free trade area with about one'third the world3s ross *omestic Product 0*P1.

Relative GP of Mexico, US and influential States!

Mexico3s *P has %rown at approximately twice the rate of the U.S o&er the last ten years on a

nominal basis. ,his has transformed into a noticeable increase in U.S exports to Mexico as the

country3s middle class %rows and pro&ides more opportunities for U.S firms to expand their sales

to Mexican consumers. $urrently re&enues %enerated from U.S consumer ' related exports are

o&er E9>" annually.

$on&ersely the &alue of U.S imports from Mexico! while partially influenced by the increase in

the price of the refined petroleum from Mexico! has increased by E>>" with the import of raw

materials! autos! aerospace! computer parts and food stuffs. Mexico has become the fourth

lar%est car producer in the world behind the bi% three United States! ermany and apan.

,he influence of the rapidly %rowin% ?ispanic! primarily Mexican! populations in $alifornia and

,exas on trade %rowth! each of these are considered borderland economies. /ith $alifornia!

while -os An%eles $ounty still carries the lar%est concentration of ?ispanic people! the $entral

Kalley 0$K1 re%ion3s ?ispanic population has been outsi#ed %rowth o&er the last ten years. In

fact the ?ispanic population %rew 9=< faster in the $K than it did on statewide basis.

Mexico(US multilateral "oreign irect *nvestment!


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)orei%n direct in&estment 0)*I1 forms another part of the economic relationship between the

United States and Mexico. U.S in&estment into Mexico has focused on Machinery and auto

manufacturin%! chemical and pharmaceutical processin%! and minin% and a%riculture. In contrast!

in&estment by Mexican companies in the U.S has focused on the food and be&era%e industries!

buildin% materials! communications and hospitality. Mexican )*I in the United Stated is much

lower than U.S in&estment in Mexico! with le&els of Mexican )*I fluctuation o&er the last years.

Approximately two'third of Mexican companies3 in&estment in the U.s has been in $alifornia

and ,exas historically. In sum! these capital flows' emi%rant remittances! tourism and )*I'

account for in excess E9>" in flow of funds in 6>> from the U.S to Mexico.

NA),A pro&isions on forei%n direct in&estment helped to loc( in the reforms and increase

in&estor confidence. Under Mexico %a&e U.S in&estors non discriminatory treatment of their

in&estments in Mexico as well as in&estor protection. Much of the %rowths ha&e occurred

Mexico would ha&e continued to free up its forei%n in&estment laws with or without NA),A.

-or.er remittances to Mexico!

@emittances from wor(ers abroad play a stron% role in the Mexican economy and form an

important aspect of the US'Mexico economy relationship. /or(ers in the U.S are the leadin%

source of for wor(er3s remittances worldwide.

Studies on remittance flows to Mexico report that in southern Mexico states! remittances mostly

or completely co&er %eneral consumption or housin%. One study estimates that 5>< of the

money recei&ed by households %oes for food! clothin%! health care! and other household

expenses. ,he economic impact of remittance flows is concentrated in the poorer states of

Mexico. ,he %o&ernment has sponsored pro%rams to channel the funds directly to infrastructureand in&estment rather than consumption. @emittances from mi%rant wor(ers o&erseas! mainly in

the United States! are expected to remain steady and support moderate %rowth of pri&ate

consumption.


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S-+# analysis of ME)*C+!

Strengt$s

It offers si%nificant sa&in%s on labor costs when compared to other in&estment options in

the Americas! Asia or urope.

Its wide &ariety of natural resources fa&ors the lar%e number of producti&e acti&ities

includin% those related to biotechnolo%y and %eneration of renewable ener%y.

,he amount of time and procedures to open and close a business! as well as the time and

procedures needed to obtain construction permits are easier compared to other countries.

It has flexible access to lar%er mar(ets

It has a low transportation cost which facilitates the business such as the demand and

in&entory costs.

,he operation costs are lower which includes tax rates! number of tax payments etc.

-ea.nesses

Is hea&ily dependent on US economy

Inefficient %o&ernment bureaucracy that is Coined with the corruption.

?as an inadeBuately educated wor(force.

Unfamiliarity with forei%n mar(ets

-ac( of exportin% experience


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+pportunities

It has se&eral internal distribution terminals which communicate with the main ports

which if used properly reduce costs and Buic( departure of %oods.

It will experience a better exchan%e actual performance than many of the countries itcompetes with international mar(ets.

It has le%al certainty for forei%n in&estment in the forthcomin% days

#$reats

Ille%al immi%ration and the political conflict it en%enders here will rise

Mexico3s lac( of economic pro%ress nurtures the increasin% influence of dru% %an%s!

which ha&e effecti&ely ta(en o&er half of Mexico and are threatenin% ci&il order and

democracy.

)inally! la%%in% %rowth means that the U.S. trade deficit with Mexico will continue to

%row.

S-+# analysis of US economy

Strengt$s

It has the lar%est and the most important mar(et in the world

It carries hi%h &alue in&estment on @esearch and *e&elopment and ducation.

It has the world3s lar%est economy! ha&in% *P approximately E=.67 trillion! which is

almost : times the si#e of apan3s economy.

It has the stature of bein% a bi% dri&er of the %lobal economy.

,he country has hu%e reser&es of natural resources such as Phosphates! Ginc! -ead! $oal!

Uranium and old.

Ad&anced in technolo%ical systems; computers! medical! aerospace! military eBuipment

etc.

Utili#es open trade as a stron% influence o&er international relations.

,reasury bills accounted for bein% sold as a means to %eneratin% money for %o&ernment

reser&es! in order to contribute to economic acti&ities.


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-ea.nesses

G ,he country has detected a record of low household sa&in% rate.

It has a lar%e fiscal deficit that is increasin% which ma(es it the bi%%est debtor country.

G $redit mar(ets are wea( and are lac(in% a sustainable amount supply of money to

stabili#e the economic conditions.

G ,he economy suffers from hi%h ener%y prices! many commodity shorta%es! and e&en

steeper coffee prices.

+pportunities

,he country can support different adCustments by stron% national sa&in% that would a&oid

the burden of fallin% on both in&estment and %rowth.

,he merchandise trade deficit can be decreased in order to decrease the o&erall deficit.

Inflation can be decreased due to the decreasin% commodity prices and the decrease in

demand in the domestic mar(et.

)inancial encoura%ement to the consumers will result in %reat help to stabili#in% the

economic conditions of the country.

Increased fundin% in sectors such as housin% will ha&e a %reat affect in times of crisis.

#$reats

,he %rowth rate is forecasted to %row at a lesser rate due to the adCustments for

housin% sector and the credit crunch! which will also ha&e ne%ati&e effects on the US

export mar(ets.

It has se&eral barriers to access the international mar(ets due to ri&als.


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,he %rowin% economies in urope and recent de&elopments in Asia which are

expandin% economies %lobally! especially $hina which is forecasted to o&erta(e the

US mar(et in si#e in :> years.

?ouse and mort%a%e crisis due to the occurrence of the financial crisis.

Stoc( &alue %oin% down.

Mexicos Automotive Production

Me$ico en!oys a strategic geographic position, great natural %ealth and an e$ceptional

demographic onus. &his, added to the variety o' strategic industries, solid international

usiness relations, economic staility and a note%orthy political maturity constitute Me$ico as

one o' the est destinations 'or investment.

(istorically, the automoile industry has een a strategic sector 'or development in Me$ico. Its

share in the national economy places it as the second most important industry in Me$ico.

)ith a vast in'rastructure and over *,+++ auto parts companies, the Me$ican automoile sector

is the largest vehicle producer in the %orld, and an important plat'orm 'or manu'acturing gloal

products to the highest standards o' uality and sa'ety.

In ++**, Me$ico produced ,*+,+* cars, an increase o' /0 on +*+, and e$ported *,11*,/+1

vehicles, 20 more than the previous year. Such increases are note%orthy in the conte$t o' the

steep drop in sales o' *0 recorded y the American automoile industry.

In the same year, vehicle e$ports y the Me$ican automoile sector rose thanks to a greater

diversi'ication o' the market. 3$ports to 3urope increased y 4.0, %hile sales to Asia and 5atin

America rose y .0 and 6.20 respectively, over the same period.

&he Me$ican automotive industry is 'ocused on investment markets as much as it is on e$ports.

7ey models uilt in Me$ico 'or %orld%ide sales are the 5incoln M78, the 9olks%agen Beetle, the

#issan &iida, the (onda :R-9, the Dodge ;ourney and the armored BM) recision


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machining, plastic in!ection molding, aluminum casting, nodular iron, cold and hot 'orging, along

%ith sheet metal stamping, make this a %indo% o' opportunity 'or the industry.

:DM Auto consultants 'orecasts that automoile production in Me$ico %ill reach 2.* million units

y +*2, doule the ++ output.

A&to e+!orts in 0e'r&ar) /&m!e 2=> to " ,om!are *it( t(esame !erio last )ear to 77=#$": e(i,les# an e+!orts *ere "$> (i%(er to =2#


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Mexico trade rules and regulation!

,he North American )ree ,rade A%reement supplanted Mexico+s Automoti&e *ecrees on li%ht

and hea&y &ehicles! pro&idin% for the sta%ed elimination of Mexican tariffs! local contentreBuirements! mar(et access restrictions! import trade balancin% reBuirements! and mar(et share

restrictions. /ith only the two exceptions noted below! all barriers ha&e been eliminated on

imports from the U.S. that meet the NA),A rule of ori%in.

#ariffs!

Q Mexican import duties on cars and truc(s produced in the United States or $anada that meet theNA),A rule of ori%in were reduced to #ero on anuary ! 6>>:! one year ahead of schedule.

Q Mexico maintains a 6> percent tariff on U.S. and $anadian &ehicles not meetin% the NA),Arule of ori%in and on &ehicles from all other countries not meetin% preferential tradearran%ements. Mexico has also si%ned 6 )ree ,rade A%reements co&erin% trade with =:

countries! includin% such maCor mar(ets as the United States! $anada! apan and the U memberstates

#axes!

,he Mexican Kalue Added ,ax 0KA,1 is > percent for &ehicles that are re%istered in theNorthern border re%ion. ,he KA, for the remainder of the country is 9 percent. ,he KA, isassessed on the sum of the $ustoms &alue of the &ehicle! plus import duty! plus the $ustomsprocessin% fee of >.5 percent of the $ustoms &alue.

Rule of +rigin!

,he NA),A rule of ori%in is a re%ional content measurement that establishes the minimumcriteria that products must meet in order to Bualify for preferential tariff treatment between theU.S.! $anada! and Mexico.

As of anuary ! 6>>6! at least 76.9 percent of a passen%er car or li%ht truc(+s net cost must be of&alue ori%inatin% in North America. All other &ehicles must reach 7> percent North Americancontent to Bualify for #ero duty rates.

,here is an additional! special cate%ory for &ehicle manufacturers settin% up a new plant! orsi%nificantly retoolin% an existin% plant! to produce a class or si#e of &ehicle not pre&iouslyproduced at that plant. ,his pro&ision allows for 9> percent re%ional content to meet rule ofori%in reBuirements! for a period of either two or fi&e years 0two years for production of a newtype of &ehicle at an existin% plant! fi&e years for a new type of &ehicle in a new plant1!be%innin% on the date the first prototype &ehicle is produced in the 0Bualifyin%1 plant.


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a. eneral Importation ,ax > percent of the &alue of the &ehicle

b. $ustoms ?andlin% *uties >.5 percent of the &alue of the &ehicle

c. New Kehicle ,ax 9>'>> percent of the &alue of the &ehicle

d. Kalue Added ,ax 0IKA1

i. > percent of :> percent of the &alue of the &ehicle if the importer li&es within 69 miles of theU.S.'Mexico border

ii. 9 percent of :> percent of the &alue of the &ehicle if the importer li&es beyond 69 miles ofthe U.S.'Mexico border7. Pay all taxes and fees at a desi%nated ban( and obtain the receipt necessary to continue thecustoms procedure.

8. Present the customs bro(er with payment receipt. ,he customs bro(er will wor( with theMexican customs a%ent to recei&e all documents necessary to complete the process! and torecei&e the holo%ram re%istration stic(er.

5. Pay the customs bro(er. )ees &ary bro(er to bro(er on a competiti&e basis.

In addition to the application for import or export! the exporter must chec( to see if a license is

needed to import or export! and if so! then he must acBuire it prior to import or export! as the

case may be. As well! if for import! the importer must &erify whether there is any duty payable

for the import! and if so! he must pay it.

Customs /ro.er!

,he )ederal o&ernment of Mexico licenses persons that ha&e shown 0by examination1 their

ability to handle the customs bro(era%e acti&ity on behalf of the %eneral public. ,he customs

bro(ers are pri&ate parties 0not %o&ernment a%ents1 that are in the business of assistin% pri&ate

parties and businesses in their importationJexportation acti&ities! by performin% filin%s! obtainin%

permits and payin% duties! as needed.See $ustoms "ro(ers below.

)ilin%s! Permits and *uties. ,he %eneral rule on imports to Mexico is that there will be a need of

a filin% 0HPedimentoH1 and possibly the payment of a duty andJor the acBuisition of an import

permit.

/onded -are$ouses!

Mexico permits the existence of bonded warehouses! under the control of $ustoms. /hen the

Mexican %oods are placed in one of these bonded warehouses it is considered as ha&in% been

exported from Mexico. ,his bonded warehouse procedure will permit the Mexican exporter to

see( certain tax incenti&es at the time of deposit.

0ational Registry of *mporters and Exporters of Mexico!


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Mexico maintains a National @e%istry of its authori#ed importers and exporters. ,hose personsand companies that customarily import or export are to be re%istered there! otherwise they cannot import or export. ,he Mexican %o&ernment a%ency controllin% o&er the re%istry 0?acienda1will reBuire more of the re%istrar for imports than exports 0since it fa&ors Mexico balance oftrade and forei%n debt ratios to export1. If you are a one time importer and of minor importance!

the $ustoms authorities will permit you to perform the import personally or with the assistanceof a customs bro(er! without this re%istry. If the matter is of %reater importance 0hi%her &alue1you may be able to %et help from a bro(era%e firm.

Provisions!

,he %oal of NA),A was to eliminate barriers to trade and in&estment between the US! $anadaand Mexico. ,he implementation of NA),A on anuary ! 44= brou%ht the immediateelimination of tariffs on more than one'half of Mexico+s exports to the U.S. and more than one'third of U.S. exports to Mexico. /ithin > years of the implementation of the a%reement! all US'Mexico tariffs would be eliminated except for some U.S. a%ricultural exports to Mexico thatwere to be phased out within 9 years. Most U.S.'$anada trade was already duty free. NA),Aalso see(s to eliminate non'tariff trade barriers. It also see(s to protect the intellectual propertyri%ht of the products.

,he fi&e lar%est cate%ories in 6>> were mineral fuel and oil 0crude oil1 0E7.6 billion1! &ehicles0E57.: billion1! electrical machinery 0E7.5 billion1! machinery 0E9.6 billion1! and preciousstones 0%old1 0E:.4 billion1.

/order States and *nternational #ruc.ing !

One person close to the NA),A transportation ne%otiations noted that when they were

completed! no one li(ed them. ,hese were difficult ne%otiations with many competin% intereststo satisfy. In the truc( transportation area! NA),A created a timetable for the remo&al of barriersfor cross'border truc(in% ser&ices.

International HRM Policies:

Wit( t(e aent of %lo'ali3ation# or%ani3ations 4 'i% or small (ae ,ease to 'e lo,al# t(e) (ae

'e,ome %lo'alH T(is (as in,rease t(e *or-for,e iersit) an ,&lt&ral sensitiities (ae

emer%e li-e neer 'efore. All t(is le to t(e eelo!ment of 8lo'al &man Reso&r,e

Mana%ement.

Een t(ose or%ani3ations *(o ,onsier t(emseles imm&ne to transa,tions a,ross %eo%ra!(i,al

'o&naries are ,onne,te to

,om!an) *o&l not li-e to 'e ,alle as lo,al# (o*eer t(e same *ants a omesti, to&,( in t(e

(ost ,o&ntr) an t(ere lies t(e ,(allen%e.


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Enumerate te o!"ectives o# $lo!al HRM as #ollo%s:

1. Create a lo,al a!!eal *it(o&t ,om!romisin% &!on t(e %lo'al ientit).

2. 8eneratin% a*areness of ,ross ,&lt&ral sensitiities amon% mana%ers %lo'all) an (irin%

of staff a,ross %eo%ra!(i, 'o&naries.

Trainin% &!on ,&lt&res an sensitiities of t(e *ier net*or- %lo'all). T(e) are in one *a) or

t(e ot(er e!enent &!on or%ani3ations t(at ma) een not (ae (ear a'o&t. T(ere is

intere!enen,e 'et*een or%ani3ations in ario&s areas an f&n,tions.

1. T(e !reliminar) f&n,tion of %lo'al &man Reso&r,e Mana%ement is t(at t(e or%ani3ation

,arries a lo,al a!!eal in t(e (ost ,o&ntr) es!ite maintainin% an international feel. To

e+em!lif)# an) m&ltinational J international t(e (ost ,o&ntr).

T(e strate%i, role of &man reso&r,es Mana%ement in s&,( a s,enario is to ens&re t(at RM

!oli,ies are in tanem *it( an in s&!!ort of t(e firm6s strate%)# str&,t&re an ,ontrols.

S!e,ifi,all)# *(en *e tal- of str&,t&res an ,ontrols t(e follo*in% 'e,ome *ort( mentionin% in

t(e ,onte+t of 8lo'al RM.

1. Decision Ma&in$: T(ere is a ,ertain e%ree of ,entrali3ation of o!eratin% e,ision

ma-in%. Com!are t(is to t(e International strate%)# t(e ,ore ,om!eten,ies are ,entrali3e

an t(e rest are e,entrali3e.

2. 'o-ordination:A (i%( e%ree of ,oorination is re&ire in *a-e of t(e ,ross ,&lt&ral

sensitiities. T(ere is in aition also a (i%( nee for ,&lt&ral ,ontrol.

(. Inte$ratin$ Mecanisms:Man) inte%ratin% me,(anisms o!erate sim&ltaneo&sl).

)lo!al HRM and te *ta##in$ Policy

ere also t(e role is no ifferent i.e. (irin% inii&als *it( re&isite s-ills to o a !arti,&lar /o'.

T(e ,(allen%e (ere is eelo!in% tools to !romote a ,or!orate ,&lt&re t(at is almost t(e same

eer)*(ere e+,e!t t(at t(e lo,al sensitiities are ta-en ,are of.

Also# t(e e,iin% &!on t(e to! mana%ement or -e) !ositions %ets er) tri,-). W(et(er to

,(oose a lo,al from t(e (ost ,o&ntr) for a -e) !osition or e!lo) one from t(e (ea&arters


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ass&mes im!ortan,e an finall) *(et(er or not to (ae a &niform (irin% !oli,) %lo'all) remains

a 'i% ,(allen%e.

Neert(eless an or%ani3ation ,an ,(oose to (ire a,,orin% to an) of t(e staffin% !oli,ies

mentione 'elo*1

1. Etnocentric:ere t(e Ke) mana%ement !ositions are fille ') t(e !arent ,o&ntr)

inii&als.

2. Polycentric:In !ol),entri, staffin% !oli,) t(e (ost ,o&ntr) nationals mana%e s&'siiaries

*(ereas t(e (ea&arter !ositions are (el ') t(e !arent ,om!an) nationals.

(. )eocentric:In t(is staffin% !oli,) t(e 'est an t(e most ,om!etent inii&als (ol -e)

!ositions irres!e,tie of t(e nationalities. 8eo,entri, staffin% !oli,) it seems is t(e 'est

*(en it ,omes to 8lo'al RM. T(e (&man reso&r,es are e!lo)e !ro&,tiel) an it

also (el!s '&il a stron% ,&lt&ral an informal mana%ement net*or-. T(e fli! sie is t(at

(&man reso&r,es 'e,ome a 'it e+!ensie *(en (ire on a %eo,entri, 'asis. Besies t(e

national immi%ration !oli,ies ma) limit im!lementation.

8lo'al RM t(erefore is a er) ,(allen%in% front in RM. If one is a'le to stri-e t(e ri%(t ,(or

in esi%nin% str&,t&res an ,ontrols# t(e /o' is (alf one. S&'siiaries are (el to%et(er ') %lo'al

RM# ifferent s&'siiaries ,an f&n,tion o!erate ,o(erentl) onl) *(en it is ena'le ') effi,ient

str&,t&res an ,ontrols.


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trade. &he >ort o' 5aaro :ardenas, located on the countryFs %est coast reported an **0

increase in automoile e$ports 'or the 'irst ten months o' +** over the same period in +*+.

Gor the 'irst ten months o' +**, the >ort o' 9eracru announced that automotive trade

increased .20. 9eracru is considered the gate%ay 'or Me$icoFs automoile industry, %hich isconcentrated in the center o' the country, in the states around Me$ico :ity. 5ocated on the

south-central coast, the port handles the ma!ority o' automoiles e$ported.

&he >ort o' Mananillo is located 'urther south o' 5aaro :ardenas, on the %est coast and

handles almost hal' o' all containeried cargo arriving in the country and 10 o' all cargo 'rom

the >aci'ic.

National Logistics Ambition in Mexico

Hovernment launches Innovation 'or logisticsJ

Increase competitiveness- cost and uality

5ogistics %orkshops o''ered to usiness

Gederal government support provided

Gederal 'unds 'or those %ho innovate

3ncourage est practice

>romote and sustain logistic leadership

:reate a 'orum 'or logistics e$pertise

Infrastructure Improvement Strategies

Moderniing *6=++ km o' high%ay

?1B in *++ pro!ects

Building */++km o' ne% rail track

?/.1? have een invested on e$pansion 'unds

Streamlining logistics in Mexico

Reduce miles %ith in'rastructure improvements

:onsolidation services and shared automotive delivery net%orks

3lectronic mani'ests and customs clearance

2>5 services providing standardiation


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utsourcing automobiles to Mexico

Me$icoFs auto industry is ooming, ut parts outsourcing is keeping a cover on %ages. &he

country produced a record million cars and light trucks last year, e$porting three-'ourths o'

them, %hile more than ?/ illion in 'oreign investment poured into the sector. But Me$icoFs auto

%orkers %ere %orried. &he reason" outsourcing. U.S. carmakers are shuttering plants up north,

%hich %ill likely lead to ne% 'actories in Me$ico. Heneral Motors :orp. 'or e$ample, is uilding a

?1++ million plant in San 5uis >otosK that has employed ,+++ starting in ++. &he Me$icans,

though, 'ear ne% investments may not mean plenty o' relatively high-paying !os. &hatFs

ecause even south o' the order automakers 'ace relentless pressure to cut costs.

So theyFre saving on inventory and laor y shi'ting %ork to suppliers, %hich delivered pre-

assemled pieces o' cars directly to the 'actory 'loor. More than *2,=++ parts !os %ere created

in Me$ico last year, vs. /,=++ popular assemly positions, %hich have een a ticket to the

middle class 'or many Me$icans. Gord and other automakers are increasingly relies on

outsourcing. Me$ican assemly %orkers average !ust ?2.=+ an hour plus ene'its, compared

%ith aout ?6 hourly plus ene'its at a HM or Gord plant in the U.S. But less skilled %orkers at

parts makers such as Delphi :orp. In Me$ico earn as little as ?*.=+ per hour and their ene'its

are skimpier ecause unions are %eaker in the 'ragmented parts industry.

But 'or the past 'e% years outsourcing to Me$ico has increased signi'icantly out o' %hich +**

has een the record year in automotive industry. ItLs estimated that net currency income 'or

Me$ico 'rom automoile sector %ill reach ?2+ illion in year +** %hich has e$ceeded ?6

illion received last year. Me$ican plants have manu'actured million *1/ thousand 2+6 units.

Some assemlers such as 9olks%agen have said they have gro%th e$pectations in their

production rates 'or this year. Gord has assemled 2=/,=6 units and the American Assemler,

Heneral Motors has manu'actured /1/,6/6 units and the Asian (onda has assemled 2,+++

units and &oyota assemled /,1 units in Me$ico.

ItLs elieved that ne% plants uilt y Mada, #issan, :hrysler-Giat representing more than ?=

illion in investment, %ill have opened in Me$ico in the 'orthcoming days.


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!.S.A logistics in automobile

Automotive industry in America is e$pected to e seasoned, sound and healthy. :armakers and

suppliers are carrying lo% levels o' det thanks to restructuring and ankruptcies, are making

strong pro'its, are carrying lo% levels o' inventory, and have average plant capacity utiliation.

But due to the 'inancial crisis, it have een going through, it %asnLt surprising that to hear that

'orecasts 'or US vehicle sales this year and ne$t have een do%ngraded. :aution appears to

have pushed the sector to%ards rene%ed interest in industry collaoration and e''iciency. Grom

redesigning inound net%orks through ne% 'uel-saving techniues, and 'rom pooled I& to

sharing ackloads 'or vehicle distriution, there %as evidence that the logistics sector has

learned the lessons o' the crisis %ell. &he 'uel ageL impact, comined %ith the %eak economy,

is likely to hold ack car sales over the medium-to-long term, according to I(S.

&he 'uel ageL impact, comined %ith the %eak economy, is likely to hold ack car sales over the

medium-to-long term, according to I(S. )hile in recent years carmakers appear to have given

more consideration to risk and logistics costs in their sourcing decisions. Some o' the natural

disasters that US have su''ered 'rom have a''ected the industry drastically. ne o' our iggest

challenges that US is 'acing today is developing port property. )ater property is not in

aundance, especially %ith docks that can handle ships %ith 2't or more dra't. Also at issue is

getting competitive rail into those ports. &here is no 'le$ile port availale to support the logistic.

Manu'acturers use the most land in the #ortheast, Glorida, and :ali'ornia. Due to container

pressures, cars have 'allen out o' 'avor in the #ortheast, and more are eing railed up 'rom the

South Atlantic ports. &here is land availale in Bruns%ick, ;acksonville, and :harleston, ut not

developed enough.

Beyond natural disasters, supplier capacity risks that are more related to the economic cycle

and a lack o' resources. Some suppliers, particularly o' tyres, had not increased their production

capacity at the rate o' the marketLs recovery. #o precautions %ere seen to e needed to

improve 'orecasting et%een carmakers, suppliers and providers to help anticipate and react to

these potential shortages.&he advantages US hold in logistics o' automoiles are"

Implementation o' asset tracking

>roactive transportation planning

Material scheduling to optimie transportation


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utsourcing automobiles to !SA

US outsourcing o' automoiles has een the most admired sectors since long. ItLs gro%ing

phenomenally. Its automotive industry has 'ull distriution rights 'or vehicles and parts. &he 'act

that it has een to the potential to produce certain parts due to its trained and skilled laor 'orce

and advanced technology, it holds the reputation despite several controversies. But it is also is

e$pensive in terms o' laor %hen itLs compared %ith other countries. &he very reason %hy USA

itsel' outsources to other countries in reducing and saving the cost .&he areas %here US have

een success'ul in various parts o' automotive are"

:hassis and drive train category"

ABS s)stems antilo,- 'ra-e s)stemsF

:lutch disks, 'acings, pads, rake hoses

Shock asorers

Aluminum alloy %heels


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"omparative Analysis of !S and Mexico are#

* &he ene'its en!oyed y Me$ico automotive logistics are 'ar competitive than USA such asmentioned elo%"

$enefits of trends in Mexico auto supply chain services

Scheduled pickup and delivery

Reduced transit time

Shared cost structure

Increased reliaility

Me$icoLs ports are much 'le$ile and developed that 'acilitates the logistics in comparison to

US

2 &he streamlining logistics o' Me$ico is supportive and handy %hich has een a success 'or

the last 'e% years.

/ 5ogistics is highly encouraged in Me$ico and has set the enchmark 'or others to 'ollo% in the

upcoming days.

= &he cost o' laor is cheap in Me$ico %hen it comes to outsourcing to Me$ico.

1 &echnologically, USA is sounder than Me$ico.

6 Me$ico has sho%n positive changes in comparison to US that had su''ered huge setacks

%hen the 'inancial crisis kicked in.


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