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Bonded Warehouses Key to Transport Infrastructure

Eduardo Vidales - Central Star Logistics (CSL)
CEO

STORY INLINE POST

Tue, 11/01/2016 - 15:48

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In a world of increasing connectivity and globalization, one of Mexico’s central selling points to international companies is its ability to manufacture low-cost quality merchandise on the doorstep of the world’s biggest market, the US. To complement this, Mexico needs to have an efficient, well-established logistics network to handle the sheer quantity of goods that pass through the country.

The federal government has set up a web of Strategic Bonded Warehouses (RFEs), which operate as free-trade zones where materials can be stored tax-free, exempt from Mexican import duties. These zones can be found throughout the country, strategically placed at airports and land junctions as well as sea ports. Given its proximity to NAFTA routes, the first RFE was set up in the state of San Luis Potosi in 2009 and is operated by Central Star Logistics (CSL). Citing the importance of RFEs to Mexico’s transport infrastructure sector, CSL CEO Eduardo Vidales is encouraged by the government’s commitment to develop more over the coming years.

“RFEs will promote Mexico as the leading destination for international companies, especially due to the country’s proximity to the US market,” says Vidales. “RFEs facilitate customs processes and promote simplicity for crossborder business.”

In May 2016 the government enacted a federal law to create four Special Economic Zones (ZEEs) to support the RFE program. The most significant ZEE will be at the Lazaro Cardenas port in Michoacan and will help international companies navigate Mexico’s complex web of customs regulations and tax duties. Vidales believes these zones can complement CSL’s work toward simplifying international trade processes through automation for companies that are new to doing business in Mexico.

“We understand the needs of the Mexican market and we have opened up more opportunities for US companies,” says Vidales. “They use our ports and unload at our warehouses, which lowers their freight and process costs.”

Around 60 percent of CSL’s clients are in the automotive industry, while it also works with a number of businesses in the electronics and textiles markets. Many of these clients are small and medium-sized enterprises (SMEs), which can use RFEs and ZEEs to help establish themselves in Mexico. For Vidales, SMEs represent the country’s “biggest neglected market” and CSL has been shaped specifically to support their development. The company does this by simplifying logistics to bring down fixed costs for delivering to and from the US, with a view to levelling the playing field when it comes to competing with more established industry names.

“We want SMEs to have the same opportunities as their larger competitors,” says Vidales. “Once we do this, the smaller companies will be able to compete in the market, which they are unable to do under current circumstances.”

However, Vidales acknowledges that support from CSL alone will not be enough to make a significant change to the outlook for SMEs here. As well as cooperation from all levels of government, which can contribute by promoting and facilitating infrastructure development including RFE projects, Vidales believes that the private sector must work in unison to improve the efficiency of the Mexican supply chain.

“We need alliances with major transportation companies from around the world,” says Vidales. “The more RFEs we have the better our industrial parks will be. The private sector holds the key to this process.”

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