Annex 24, a regulatory requirement under Mexico’s IMMEX program, plays an essential role in managing the operations of manufacturers who engage in import-export activities. In this blog, we aim to simplify the changes to Annex 24, and their implications for manufacturers.
What is the IMMEX Program?
The IMMEX Program aims to enable foreign companies to produce goods or provide services from Mexico, in a way that is cost-effective while still focusing on quality. You may have heard of “maquiladoras”, and these are factories that import raw material into Mexico, use it in a production or transformation process (think machining or assembly) and then export it to their home country.
There are fiscal benefits and requirements to this program; learn more here.
What is Annex 24?
Maintaining an automated inventory control system is an ongoing requirement for operating and retaining IMMEX Program Authorization in Mexico. Annex 24 is the regulatory requirement within Mexico's Foreign Trade General Rules, issued by the Customs and Tax Administration Service (or SAT for its acronym in Spanish).
The Annex 24 system is crucial for:
- tracking foreign trade items,
- ensuring compliance with customs laws, and
- keeping inventory records readily accessible for review by authorities
Under Annex 24, companies must manage detailed information about temporarily imported goods, verify their return or reclassification, and account for waste disposal. The inventory system must include essential modules covering catalogs, customs data for imports and exports, and comprehensive reporting tools to provide accurate tracking and auditing capabilities.
Key Components of Annex 24 Compliance
A compliant Annex 24 software system is essential for IMMEX companies, providing robust inventory tracking, customs management, and reporting capabilities to ensure accurate documentation and seamless regulatory compliance.
IMMEX Compliance Requirements for Annex 24
Companies with an IMMEX program are required to implement and maintain an inventory control system. Annex 24 compliance requires companies to adhere to specific timeframes for temporary imports, varying by product type:
- 18 months for raw materials and components
- six months for virtual temporary imports
- 36 months for IMMEX companies with VAT/IEPS certification
- four years for SECIIT-authorized importers
- two years for containers
Manufacturers must export or convert a minimum of 60% of the value of these temporary imports within the designated timeframe.
Required Annex 24 Software System Components
There are multiple systems on the market, and to be compliant they must have the following capabilities:
- General Inventory Catalogue Enables the recording of information on goods and materials to be temporarily imported, the SAT-registered facilities where these items will be stored and processed, and the finished products intended for export.
- The Customs Module Records specific customs details for temporary imports, used materials, exits (such as exports, destructions, donations), and fixed assets, automatically deducting material quantities, and tracking scrap or waste material during its final disposition.
- Used Materials Tracks the production process registered under the company's IMMEX Program, allowing cross-referencing of finished goods volumes with actual component or material consumption and resulting scrap or waste, typically based on each product's Bill of Materials.
- Reports Module This module generates reports on temporarily imported goods, including an Entries Report, Exits Report, Balance Report, and Used Materials Report.
Inventory Management
Accurate inventory management is at the heart of Annex 24. Manufacturers must maintain precise records of all temporary imports, ensuring that products imported into Mexico are documented from entry to exit.
Reporting and Documentation
Annex 24 mandates regular submissions of reports detailing the movement and utilization of goods.
Compliance Risks
It is important for companies to pay close attention to their temporary inventory controls and ensure proper management to avoid issues with the authorities. Penalties for non-compliance with inventory control obligations can result in fines and may even lead to the cancellation of the IMMEX Program.
Proposed Annex 24 Changes (2024)
Recent updates to Annex 24 have introduced more stringent compliance requirements, emphasizing technological adoption in inventory management.
Changes to Annex 24 Compliance
On October 14, 2024, the Mexican government published the 2nd Resolution of Amendments to the Foreign Trade General Rules (FTGR) for 2024, including changes to Annexes 1, 2, 5, and 24, in the Federal Official Gazette.
The new regulations took effect on October 15, 2024, with Annex 24 changes becoming effective on November 14, 2024. Additionally, modifications to import processes for courier and parcel companies will take effect on January 1, 2025.
These include:
- Inventory Control System (Annex 24) New requirements were added to ensure that companies registered under the Company Certification Scheme maintain an automated inventory control system that electronically transmits specific data to Annex 24 within 48 hours. Customs authorities are granted online access to verify compliance with temporary import controls and the proper return of goods.
- Registration in the Company Certification Scheme (RECE) For companies certified in VAT-STPS (Value-Added Tax and Social Security Contributions), the required export percentage for sensitive goods under the IMMEX Program has increased from 60% to 80%. New rules mandate personnel involvement in production or export services, labor contribution payments, and access for AGACE (General Administration of Foreign Trade Auditing) personnel for inspections.
- Guarantee for VAT-STPS Tax Interest The bond or guarantee period has been extended from a maximum of 24 months to 30 months, with new requirements for acceptance similar to those under VAT-STPS certification. Renewal applications must now be submitted during the first 10 days after the initial 12-month period, with renewals extending the bond or letter of credit term by an additional 12 months.
- Simplified Imports Through Courier Companies Courier and parcel companies can no longer use a generic Tax ID for imports. Individual importers must declare a Tax ID, or the courier company must use its own if the importer’s ID is unavailable. Goods without identifiable value or vague descriptions like “miscellaneous” or “gift” cannot use simplified import procedures. Courier companies may face registration cancellation for tax non-compliance, invalid certifications, or lack of tax domicile.
These amendments underscore the Mexican government’s commitment to tightening compliance and oversight within foreign trade and manufacturing, particularly under the IMMEX program and related schemes.
Who will this impact?
This new scheme affects all IMMEX companies certified under Title VII, including:
- Companies with VAT Certification
- Those certified as Authorized Economic Operators (AEO)
- Trade partners
- Traders and importers
The changes will go into effect on November 14, 2024.
Implementing Annex 24 Changes
To adapt to these regulatory changes, manufacturers should begin by conducting comprehensive audits of their current processes. Identifying areas requiring improvement ensures a smooth transition to compliance with minimal disruptions.
Preparing for the Future
As regulatory landscapes continue to evolve, staying informed is crucial. Manufacturers should monitor updates related to Annex 24 and be prepared to adjust their strategies accordingly. Initiatives such as regular briefings or subscription to industry publications can help maintain awareness of potential regulatory shifts.
Conclusion: the Path Forward
Successfully navigating the complexities of Annex 24 requires a proactive approach, one that balances understanding regulatory requirements with strategic adaptation. By embracing technology, training, and expert consultation, manufacturers can not only comply but also discover opportunities to enhance operational efficacy and maintain competitiveness in the global market.
As the regulatory framework continues to develop, manufacturers must remain vigilant and adaptable. With the right preparations, they can ensure compliance and sustain growth within the Mexican manufacturing landscape.
Stay tuned. Prodensa helps more than 60 clients maintain their Annex 24 in compliance and are actively supporting them to implement changes. We will be sharing additional insights in the coming weeks.
