February 4, 2022
Mexico free trade zones worth exploring for stateside international shippers
Through FTZs and IMMEX, shippers are realizing time and tax savings
It’s no surprise that the U.S. West Coast ports have seen such horrendous congestion — everything seems to funnel through Southern California.
The Port of Long Beach reported last month that it moved more cargo in 2021 than any year on record, handling 9,384,368 twenty-foot equivalent units. This represents a 15.7% year-over-year (yoy) increase in containers overall, including a 14.6% yoy increase in imports (4,581,846 TEUs), smashing the previous container record set just a year prior.
As the port continued to break an unprecedented number of records, the sheer volume of containers exacerbated vessel traffic and overwhelmed the already at-capacity port.
Importers eager to avoid such massive delays this year are considering alternatives. After all, freight doesn’t have to lay over in Southern California.
Mark Vickers, Reliance Partners’ executive vice president of international logistics, recently connected with Raul Saucedo, president and CEO of SBGroup, for his thoughts on choosing Mexico for international shipments.
“As the saturation of the port and unloading of the vessels is strong right now in Long Beach, the Port of Manzanillo is an option,” Saucedo said. “Even though Manzanillo is not a very fluid port, the big difference between Manzanillo and Long Beach is the gap in time it takes to unload large vessels.” Queues for unloading at Long Beach can stretch to 40 to 60 vessels, he added.
The Port of Manzanillo is in the state of Colima on the west coast of Mexico. One of the busiest in Mexico, the seaport is responsible for handling Pacific Ocean cargo for the Mexico City area.
SBGroup helps importers and manufacturers, especially in the United States, facilitate the clearance of goods in Mexico as an alternative to shipping internationally via its West Coast ports.
The Guadalajara, Mexico-based freight forwarding and contract logistics company provides international air, ocean, and U.S. overland transportation services, and has a distribution center network with more than 700,000 square feet of bonded warehouses, inland ports, free trade zones (FTZs), as well as Manufacturing, Maquila and Export Services Industries Program (IMMEX) and other value-added services.
“[Manzanillo] I feel is sort of a hidden gem as it relates to the current congestion of the ports in Los Angeles …,” Vickers said. “They’re spending a lot of money on network strategies and figuring out where else they can take it in the United States, but not everyone is considering Mexico because they just don’t understand it.”
SBGroup offers FTZs when handling international freight. Also known as foreign trade zones, FTZs are secure areas under U.S. Customs and Border Protection (CBP) supervision but considered outside CBP territory. This, in turn, can provide significant savings on customs duties to U.S. manufacturers and distributors.
Foreign and domestic merchandise may be moved into a zone for operations that include storage, assembly, manufacturing and other processing. Zone procedures state that payments of duties on the products aren’t required until the merchandise enters CBP territory for domestic consumption. The importer then has the choice of paying duties at the lower rate of either the original foreign materials or the finished product.
“It is a huge value to any shipper in the world to have access to these FTZs so they can defer their taxes and duties; that frees up a ton of capital that they can use for other things for a period of up to 36 months,” Vickers said. “Right now is maybe the hardest time ever to find warehousing for groups that have that type of ability.”
SB Free Trade Zone, a segment of SBGroup, also has a IMMEX license, allowing SBGroup to temporarily import raw materials, machinery and goods necessary for production or repair purposes on behalf of its international clients.
Saucedo added that an IMMEX license allows his overseas suppliers to import duty-free under SBGroup’s bond, allowing for the storage of products in their warehouses for up to 36 months before delivering to the production line of their end customers, such as an OEM.
Combined, Saucedo said that the FTZ and IMMEX license allows for products under SBGroup’s bond to be kept in Mexico for up to 60 months before it must be delivered to stores or a production line, or reexported to another country.
“It’s ideal for an international shipper to use a 3PL like SBGroup, which is perhaps one of the few groups that possesses the ability to defer taxes during all of this supply chain congestion,” Vickers said, adding that he’s received quite a few questions from international shippers, many of which have manufacturing ties to China, that are considering moving their logistics operations to Mexico.
Shipping into Manzanillo has proved to be an efficient alternative for many of SBGroup’s logistics customers. Upon arrival, Saucedo said that containers stay no more than two days at the port, often being moved the same day to SBGroup’s FTZ in Jalisco.
“The average time it takes to unload a container from the vessel and deliver it to the American Midwest takes us between nine to 14 days,” Saucedo said. “In most cases, when the volume allows it, we’re converting three 40-foot containers into two 53-foot truckloads going to the Midwest.”
However, moving freight throughout Mexico isn’t without risk, as the country is notorious for cargo theft in certain regions, especially near the border. In addition to its advanced security and surveillance systems, SBLogistics’ risk management department has further mitigated risk by developing a global insurance solution for its client’s shipments, T90.
T90 provides coverage on overseas shipments entering Mexico using any of SBGroup’s bonded models, including IMMEX, FTZ or inland ports. Coverage is provided from the international portion of the shipment through up to 90 days of stay at any of its warehouses until it’s either delivered to its end destination domestically or is shipped out of the country.
“We are inviting our colleagues in less-than-truckload to use SBGroup to provide a borderless solution for their customers and to start using our FTZs as a new destination port,” Saucedo said.
“It’s great to see SBGroup’s clients finding value in shipper’s interest cargo insurance through the program that Reliance Partners helped put together,” Vickers said. “As our partnership continues to grow, I see groups that are bringing freight to the port starting to come to SBGroup for cargo insurance for all their freight, which in turn, is allowing SBGroup to provide better risk management of freight under their care.”
Similarly, Reliance Partners’ Borderless Coverage program provides All-Risk, Shipper’s Interest Cargo Insurance from the moment of pickup until final delivery regardless of mode. Protecting against cargo theft and damages, this coverage can be used on a per shipment or per project basis for high-value Mexico and international shipments.