Why Mexico is The Best Country For Clothing Manufacturers

October 10, 2020

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While China and Vietnam were once prominent partners for U.S. brands, wage inflation and changing trade agreements have left many clothing lines searching for new solutions for their manufacturing needs. With COVID-19 continuing to disrupt the garment industry, it’s more prudent than ever to diversify and shorten your supply chain—and, whenever possible, to lower your apparel manufacturing costs.

As these pressures coalesce on clothing and textile brands, the new USMCA trade agreement has made it more efficient and affordable than ever for U.S. companies to manufacture apparel in Mexico.

Thanks to a skilled labor force, trade incentives, and several other factors, Mexico is now an ideal country for clothing and textile manufacturing. 

In this guide, we’ll explain the many benefits of moving your manufacturing to Mexico.

History of Textile Manufacturing in Mexico

One reason for Mexico’s rise as a garment manufacturing powerhouse is its long history of artisanal craftsmanship, combined with the recent influx of automotive and aerospace manufacturing.

Since the conquistador era, leatherworking has been an artisanal trade in Mexico, gaining the nation a reputation as one of the world’s foremost producers of leather goods including shoes. Top U.S. companies that base their shoe production in Mexico include:

• Wolverine
• Lucchese 
• Tecovas

The proliferation of intricate, detail-focused cutting and sewing skills has made it easy for Mexico’s workforce to adapt to the needs of companies in the automotive and aerospace industries. In recent years, textile production in Mexico has expanded to include:

• Car seats
• Airbags
• Air filters

Thanks to the booming automotive and aerospace industries, the logistics for shipping the raw materials needed for textile manufacturing are now streamlined. Numerous vendors at all levels of the supply chain now maintain a presence in the country.

As a result of these changes, Mexico exported $6.95 billion (USD) worth of apparel in 2018, a 7.5% increase from the year before. Top categories included:

• Men’s suits
• Knit shirts
• Activeware

Footwear and headwear made up another $791 million in exports. These diversified products suggest the versatility of Mexico’s workforce, and the effectiveness of its clothing business supply chain. Now, Mexico is home to a growing textile industry, with clothing manufacturers in Mexico accounting for 6% of the country’s GDP. Clearly, the clothing industry and apparel export are driving more skilled labor towards garment production and positioning Latin America as an attractive market for clothing importer countries like the U.S. to manufacture in. And since the passage of the USMCA trade agreement, the market is only expected to grow.

Skilled, Cost-Effective Labor

As noted, Mexico’s evolving export industry has adapted, with cut-and-sew workers trained in the detail-oriented leather industry easily transitioning to specialty textiles and apparel.

This highly skilled workforce is another factor in Mexico’s number-one spot amongst clothing manufacturers. Mexico’s manufacturing towns boast a strong supply of semi-skilled laborers with 2-3 years experience, and of skilled laborers with 5+ years of experience.

While workers with advanced skills may be paid 20%-50% more than their unskilled counterparts, these wages still allow overall savings as compared to doing business in China. In 2018, producing a garment in Mexico was 12% less expensive than in China.  

In addition to the affordable wages, there are several benefits to hiring these skilled and semi-skilled workers:

• Less turnover – Hiring and training can result in significant administrative costs, as well as quality control issues. You’ll experience less turnover with a more skilled workforce.
• High-quality products – In Mexico, complex apparel and accessories are assembled in line with U.S. safety standards, making for top-notch products in suitable working environments.

Likewise, it’s straightforward to find indirect labor in the form of managers that can streamline the production process and make sure manufacturing takes place in line with your company’s timetable. 

Low Lead Times Due to Proximity

One of the most significant factors behind Mexico’s rise as a textile manufacturing nation is the low lead times for product delivery.

A skilled workforce ensures efficient garment production. However, several other factors contribute to the shortened timeline for receiving goods.

• A shortened supply chain can reduce costs, as well as minimize delays. 
• With numerous maquiladora factories operating close to the U.S.-Mexico border since the 1990s, the logistics for shipping goods are well-established. Thanks to the country’s proximity to the U.S., goods are easily transported across land rather than by sea.
• Beyond the border region, the presence of major manufacturers in the country’s Central “Bajio” region is creating a second hub for skillful manufacturing and streamlined transportation.

The preferential trade agreements between the U.S. and Mexico are another significant factor in the speedy arrival of apparel manufactured in Mexico. 

Trade Incentives

In 1994, The North American Free Trade Agreement (NAFTA) significantly decreased the barriers to trade between the U.S., Mexico, and Canada. This resulted in a boom in trade between the three countries—especially Mexico’s exports sector.

• While exports made up 25% of Mexico’s GDP in the 1990s, they now make up close to 40% of the GDP.
• 90% of Mexico’s exports go to the U.S. and Canada.
• NAFTA increased the practice of “nearshoring”—relocating manufacturing to nearby Mexico, as opposed to “offshoring,” relocating it to far-away locales including China and India.

The USMCA trade agreement, which updated NAFTA, took effect on July 1, 2020. It contains further provisions that can benefit the apparel industry, decreasing scrutiny and delays at customs and resulting in lower shipping times and costs.

Two USMCA updates, in particular, hold significance for clothing and textile companies.

Section 321

One important provision of the USMCA trade agreement is the Section 321 De Minimis restrictions, which eliminate duties on goods priced at less than $800. This rule impacts travelers bringing goods from Mexico into the U.S., but it is primarily meant to lower the cost and timeline for small businesses importing goods from Mexico.

Before USMCA, all goods over $200 had to formally enter the U.S. Customers and Border Control. That meant that shippers often employed customers brokers to prepare:

• A packing inventory
• A bond for anticipated duties
• Shipping information

A border control agent would confirm all information before releasing goods.

Now, goods valued under $800 are eligible to enter the U.S. under “informal entry.” While goods that enter formally must still be bonded, goods that enter informally do not require a bond and are not subject to taxes and duties. This streamlines the overall release process at Customs and Border Control.

While you cannot break up a shipment into multiple parcels to take advantage of the Section 321 De Minimis benefits, it may help to lower your company’s costs for some imports.

Labor Protections

As a clothing manufacturer, it’s essential to hire an international workforce in line with U.S. labor standards. New protections under USMCA give workers collective bargaining power and ban the import of products created with forced labor.

While these new protections may raise the cost of labor in Mexico, U.S. consumers are increasingly interested in ethically sourced apparel. The country’s strong labor protections ensure ethical sourcing, which can improve brand image and justify a higher markup on clothing.

Global Trade Agreements

Beyond its trade agreements with the U.S. and Canada, Mexico has a total of 11 free trade agreements that include 46 countries.

Mexico’s global connections have several benefits for U.S. companies:

• Streamlined production – Mexico’s well-established trade routes with other countries make it easy to source raw materials for apparel production
• Export from Mexico – Expand your brand’s global presence by exporting to countries outside of North America directly from your Mexican business site

Likewise, these treaties can help you to avoid production and shipping delays that can affect your production calendar and your bottom line.

Moving Your Clothing Manufacturing to Mexico

After reading the benefits of manufacturing in Mexico, you’re likely interested in exploring your company’s options for sourcing apparel and textiles in Mexico.

There are numerous ways to establish a business site in Mexico:

• Contract an existing factory to manufacture your clothing alongside other goods 
• Lease a retail space to create a local business site
• Buy commercial real estate and begin outfitting your own manufacturing facility
• Buy green space and build from the ground up

Whatever route you take, you’ll have to decide whether to establish a presence through your U.S. corporation or do business through a shelter company to avoid taking on liability in Mexico.

While transitioning your manufacturing to a new nation presents a learning curve, the long-term benefits of diversifying your supply chain and establishing a presence in Mexico will continue to pay off as it establishes its reputation as the best country for clothing manufacturers.

NAPS: Helping Clothing Manufacturers Thrive

NAPS’ connections in Mexico make it straightforward for U.S. businesses like yours to move all or part of their manufacturing process to Mexico.

From leading you through the aspects of the site selection process to offering shelter company services, our customized solutions are designed to streamline the process of nearshoring your clothing manufacturing needs. For advice on the manufacturing site selection process, check out our article!

Contact us to learn more about our services for apparel brands today.

 

Sources:

1. OEC. Mexico. https://oec.world/en/profile/country/mex/
2. Fibre 2 Fashion. Do Something Different, Do Something Ethical. https://www.fibre2fashion.com/industry-article/6737/doing-something-different
3. Quartz. In an age of super-fast fashion, Mexico and Turkey may be the new China.
4. https://qz.com/1426312/with-nearshoring-garment-production-may-move-from-china-to-mexico-and-turkey/
5. World Bank. Exports of Goods and Services – Mexico. https://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?locations=MX