The end of IMMEX (Manufacturing, Maquiladora, and Export Services) has the potential to create immense struggle for many apparel brands, especially when it comes to managing transportation needs. Dealing with those challenges can increase overall costs and lead to challenges in shipping and logistics that could significantly impact those brands’ ability to move their goods into the United States. Originally, the IMMEX program allowed goods to move through Mexico duty-free as long as they were intended to move into the U.S. Unfortunately, the end of that program creates significant challenges for companies trying to figure out their next steps as they move into 2025.
Unraveling the End of IMMEX
On December 19, 2024, Mexican President Claudia Sheinbaum enacted a decree terminating the IMMEX program for apparel imports. This termination went into effect the next day, December 20, 2024, leaving brands with little time to plan, prepare, and make other arrangements for the manufacture and transport of their apparel.
This abrupt policy change has created significant disruption in supply chains, particularly for US DTC apparel brands that utilized Mexican fulfillment centers to benefit from duty-free imports under the IMMEX program. The new decree imposes tariffs of up to 35% on finished apparel imports and 15% on textile inputs, which effectively eliminates the previous duty-free benefits brands could enjoy due to IMMEX.
The Basics of the IMMEX Program
The IMMEX program allowed companies to temporarily import goods into Mexico without paying duties, as long as those goods were later exported from the country. Many apparel brands took advantage of lower-cost importing through a 3PL with Mexican warehouses. Previously, brands could avoid customs duties on shipments with a value under $800 by moving them from China to Mexican warehouses. From there, they were then brought to the United States via truck. This significantly decreased the costs many of those companies would otherwise have had to pay in order to move their goods into the country.
The Implications for U.S. DTC Apparel Brands
Direct-to-consumer apparel brands may face a number of potential challenges because of the new requirements.
Supply Chain Disruptions
Brands that relied on Mexican warehouses for cost-effective fulfillment are now facing increased costs and logistical challenges. They may no longer have access to those solutions at all, which means that they may need to find new warehousing solutions.
Financial Impact
The introduction of tariffs erodes profit margins, making previous fulfillment strategies less viable. Some companies may have to raise costs, while others may need to look for more financially viable strategies for moving their goods into the country.
2 Strategies for Transitioning Fulfillment Operations
While the post-IMMEX requirements may create difficulty for some brands, there are strategies those companies can use to transition their fulfillment options to allow them to continue operating as effectively as possible.
1. Shift Fulfillment to the United States
For many brands, shifting fulfillment to the United States can provide the best option for managing those new needs. To accomplish that, brands will need to:
- Identify Suitable Fulfillment Partners: Research and partner with U.S.-based fulfillment centers experienced in apparel logistics.
- Assess Operational Costs: Conduct a cost analysis to understand the financial implications of relocating fulfillment operations domestically.
- Plan for Inventory Transfer: Develop a strategy for the seamless transfer of inventory from Mexican facilities to U.S. warehouses.
This strategy offers both benefits and factors that companies must take into consideration as they decide how they want to handle their changing fulfillment needs.
Benefits
Shifting fulfillment to the United States eliminates cross-border complexities and tariffs. Not only can that decrease costs in some areas compared to other options, it may allow brands to offer faster shipping times to U.S. customers.
Considerations
American warehouses often have higher labor and operational costs than Mexican warehouses. In some cases, this may significantly increase the company’s costs, which means an evaluation must take place before choosing this strategy.
2. Reassess Sourcing and Manufacturing Strategies
Rather than shifting operations to the United States immediately, many companies will need to look closer at their available options in other countries. They will need to:
- Evaluate the Current Supply Chain: Map out the existing supply chain to identify areas impacted by the IMMEX termination.
- Consider Nearshoring Alternatives: Explore manufacturing options in other countries with favorable trade agreements, such as those in Central America.
- Invest in Compliance: Stay updated on trade regulations to ensure all sourcing and manufacturing activities comply with current laws.
In many cases, other countries may offer more beneficial options that can help companies decrease costs and continue to benefit from available options.
Benefits
Importing raw materials for assembly in Mexico may still qualify for IMMEX-style trade provisions, which can potentially reduce costs. Furthermore, other countries may provide options that may decrease costs for companies.
Considerations
Companies will have to invest in manufacturing capabilities to transition operations to another country or import raw materials for assembly in Mexico. If Mexico makes another similar shift in the future, especially if assembly in Mexico no longer qualifies for those protections, it can lead to further increased costs. Furthermore, companies will need to ensure they are in full compliance with the new regulations.
Seamless Transitions
Immediate action is required for brands to adapt to the termination of the IMMEX program to mitigate disruptions and ensure that they are able to continue providing for their customers. DTC apparel brands do not have time to wait. Instead, they must quickly pivot and adapt to new strategies and requirements.
Long-Term Strategy
Developing a diversified and compliant fulfillment strategy is essential for resilience against future policy changes. Working with a 3PL who has experience in navigating these shifts and changes is one of the most effective ways to ensure that brands can continue to meet these challenges.
Do you want to learn more about available options? Are you looking for a 3PL provider who can help you navigate not only this disruption but potential future ones? Visit our apparel fulfillment services page or contact us to discuss the strategies and solutions that will best suit your brand’s needs.
