What is a Maquila or a Maquiladora? Mexican Border Factories Employ Thousands and Account for a Great Share of Mexican Exports but At What Cost?

A quote in the previous LawPundit posting uses the term maquila (short for maquiladora).

Map of the maquiladora plants in Mexico from The Cutting Edge
The Wikipedia under maquiladora tell us that:

A maquiladora or maquila is a factory that imports materials and equipment on a duty-free and tariff-free basis for assembly or manufacturing and then re-exports the assembled product, usually back to the originating country. A maquila is also referred to as a “twin plant”, or “in-bond” industry. Nearly half a million Mexicans are employed in maquiladoras.

The term “maquiladora”, in the Spanish language, refers to the practice of millers charging a “maquila”, or “miller’s portion” for processing other people’s grain….

During the later half of the sixties, maquiladora industries rapidly expanded both geographically and economically and by 1985, had become Mexico’s second largest source of income from foreign exports, behind oil. Since 1973, maquiladoras have also accounted for nearly half of Mexico’s export assembly. Between 1995 and 2000, exports of assembled products in Mexico tripled, and the rate of the industry’s growth amounted to about one new factory per day. By the late twentieth century, the industry accounted for approximately 25 percent of Mexico’s gross domestic product, and 17 percent of total Mexican employment. However, profits generated from maquiladoras are typically sent back to the United States, or other investor-based countries, and therefore, maquiladoras do not promote direct economic development within Mexico.

Since globalization and physical restructuring have contributed to the competition and advent of low-cost offshore assembly in places like Taiwan, China, and countries in Central America, maquiladoras in Mexico have been on the decline since 2000: According to federal sources, approximately 529 maquiladoras shut down and investment in assembly plants decreased by 8.2 percent in 2002. Despite the decline, there still exist over 3,000 maquiladoras along the 2,000 mile-long United States–Mexico border, providing employment for approximately one million workers, and importing more than $51 billion in supplies into Mexico. As of 2006, maquiladoras still account for 45 percent of Mexico’s exports. Maquiladoras, in general, are best represented among operations that are particularly assembly intensive.“

We also found some legal analysis online of maquiladoras as well as related economic articles and materials, including several posters who regard maquiladoras as sweatshops:

  • Truett, Lila J. and Truett, Dale B., NAFTA and the Maquiladoras: Boon or Bane?. Contemporary Economic Policy, Vol. 25, No. 3, pp. 374-386, July 2007. Available at SSRN: http://ssrn.com/abstract=993979 or DOI: 10.1111/j.1465-7287.2006.00043.x

  • Covington M. Wall, Mexico Economic Crisis, Fiat Peso Currency Skating on Thin Ice Mexico Jun 02, 2009 – 03:28 AM

    GDP fell 8.2% in the first quarter of this year alone directly impacting the unemployment rate officially around 5.1% in the first quarter up from 3.7% a year ago. The hardest hit segments of the economy have been the auto and maquiladora industries. Domestic auto sales have contracted close to 25% and auto exports have fallen nearly 41%. Exports as a whole have fallen sharply, by some estimates around 45%, due to the severity of the economic crisis in the US which because of NAFTA is México’s largest trading partner. The US is also the destination of nearly 80% of goods traded internationally. In addition to oil exports the US has also been the primary destination for migrant labor receiving nearly 500,000 annually but off sharply this year along with remittances sent by migrants. Remittances alone, which amount to roughly 30% of GDP, make up a large part of direct foreign investment. Direct foreign investment in the 1Q of this year totaled 2.6 billion USD and is 36% lower by some estimates compared to 2008 figures which totaled 21 billion for the entire year. [emphasis added]

    Continued deterioration of macroeconomic conditions is causing officials to frantically try to find ways to bolster the economy in order to hedge off an economic melt down thus avoiding a repeat of the last great crisis in 1995.

  • Patrick J. Kelly, Mexico Maquiladoras and NAFTA (March 2001)
  • Editorial, Lucinda Vargas, Senior Economist, Maquilaportal.com, NAFTA, the U.S. Economy and Maquiladoras

  • Mexican Taxation of Maquiladoras, UnderstandMexico.com
  • Discover the Cost-Saving Benefits of Mexico Manufacturing with Maquiladoras, MadeInMexico.com
  • Gil Villagrán, MSW, Maquiladoras-NAFTA’s Sweatshops, (gvillagran [at] casa.sjsu.edu)
    Saturday May 2nd, 2009 12:41 PM

  • Mike Westfall, Maquiladoras–American Industry Creates Modern-Day Mexican Slaves, The Cutting Edge, The Edge of Labor, June 8th, 2009, who writes:

    NAFTA has been a disaster for the working people and the communities in which they live in all three nations. Today we clearly see that the results of NAFTA have led to a much weaker America with devastated and shuttered manufacturing communities. Mexican wages have dropped, and almost 20 million more Mexicans now live in poverty. American business leaders have been quick to seize upon the opportunity to take advantage of these desperate workers.

    It is common knowledge that many U.S. politicians get hefty campaign contributions from industry. The only NAFTA winners have been the companies and politicians.

  • Vic Kolenc, Hundreds hungry for NAFTA business, El Paso Times, 06/12/2009 12:00:00 AM MDT

  • Niñas de la maquila: malos tratos y abuso, Vanguardia.com.mx, por El Universal , 14-Junio-2009 (10:03 a.m.)

  • Maquila Solidarity Updates, Maquila Solidarity Network

  • Maquilaportal.com

Foxconn & Hon Hai Precision Industry : China’s Largest Exporter Opening Dell Assembly Plant in Mexico on the Border of the United States and Mexico

The future is always in the making and it behooves us to look carefully at international economic developments, especially when they take place on our own borders.

What company known to you is the manufacturer of, among other things, iPods, iPhones, Macbooks, Playstations, Wii’s, Xbox 360s, Nokia and Motorola cell phones, Kindles, and motherboards for Intel, Dell and HP?

You’ve heard of them, right? Foxconn is China’s biggest exporter, where it employs about a half a million people, and it is one of the world’s largest OEM manufacturers of electronics and computers. As we read at Philip Elmer-DeWitt’s Fortune Apple 2.0 blog:

Although it keeps a relatively low profile in the United States, Foxconn is one of the world’s largest manufacturers of electronics and computer components. It built many of the first generation iPhones, as well as MacBook Pros, MacBook Airs, iPod nanos and Mac Minis.

It also makes motherboards for Intel (INTC), Dell (DEL) and HP (HPQ), Playstations for Sony (SNE), Wii’s for Nintendo, Xbox 360s for Microsoft (MSFT), cell phones for Motorola (MOT) and Kindles for Amazon (AMZN).

Foxconn employs nearly half a million people and does most of its manufacturing in mainland China. It was China’s largest exporter in 2007.

Foxconn is the trade name of Taiwan-based and Hong Kong-centered Hon Hai Precision Industry Co. Ltd., a company founded by and still run by CEO Terry Guo (Terry Tai-Ming Gou, traditional Chinese: 郭台銘; pinyin: Guō Táimíng). The 2008 Fortune Global 500 ranked Hon Hai – with $51.828 billion in revenues – 132nd among all the firms of the world and 8th among electronics concerns. We became interested in this conglomerate because it is the OEM manufacturer of an ALDI camera that we own (see PremierImage.com.tw).

Foxconn is involved in an interesting and significant story just breaking on the border between the United States and Mexico.

It all began with golf.

Phyllis Eileen Banks writes about the still unincorporated community of Santa Teresa (near El Paso, Texas) in New Mexico as follows:

According to Roadside History of New Mexico by Francis L. and Roberta B. Fugate, “In the early 1970s, professional golfer Lee Trevino was one of the principal backers in the design and construction of a golf course and country club known as Santa Teresa.” It was originally planned with luxury homes and an airport for fly-in golfers. Later Trevino withdrew but growth continued.

Since then, Santa Teresa has been made a Port of Entry to Mexico, but you are going to have trouble finding that at Google Maps or Google Earth. The development is perhaps too new.

As written by Jose Z. Garcia of New Mexico State University in The Sunland Park-Santa Teresa Project: An Interview With Jerry Pacheco at the blog La Politica: New Mexico!, the area is booming:

The South Mesilla Valley is today, arguably, the biggest economic development project in New Mexico history, driven by two major factors: first, is the $5 billion expansion of El Paso’s Ft. Bliss, which is causing West El Paso to spill over into New Mexico between El Paso and Anthony, and, to a lesser extent into the Chaparral area. The second is the growth of Cd. Juarez on the West Side, between Anapra and the Santa Teresa border crossing, which promises to create all kinds of business synergies on the U.S. side.

In his analysis of developments, Garcia refers to:

Jerry Pacheco, executive director of the International Business Accelerator, a consulting firm for businesses considering locating in the Southern Dona Ana County region…. [who] points to three inter-related projects, begun within the past year, that are going to transform the Santa Teresa-Sunland Park region profoundly.

The first of these is Foxconn.

Garcia writes:

First, Foxconn, the largest manufacturer of electronic and computer equipment in the world, has just completed phase one of its assembly plant, located on the Mexican side of the border just yards away from the border and from the crossing at San Jeronimo-Santa Teresa. Foxconn is assembling desktop computers and servers for Dell at this facility–the largest maquila plant in Mexico….

By the end of the year there should be 5000 workers and depending on the state of the economy, thousands more to come, up to 30,000 workers according to current plans. With that many workers, West Juarez is assuredly going to go through a boom in low-cost housing, commercial development, and urban sprawl. On the U.S. side there will be a reciprocal demand for more upscale housing for managers, trucking facilities for the increased traffic at the port and more businesses serving the Juarez maquila sector, like Expeditors.

A key strategic reason for Foxconn to locate at San Jeronimo was the availability of ample space on both sides, very near the border crossing, and the presence of a user-friendly international border crossing. Expeditors International, a large logistic services company, has constructed a facility on the U.S. side of the fence, across from Foxconn, from which they will supply Foxconn with the inventory of parts needed to assemble Dell computers….

Read the rest of Garcia’s posting here

We find this business confluence of China, Mexico and the United States to be significant because it shows how the traditional political and commercial borders have become increasingly interconnected in our globalized modern world.

EU Election Results for the European Union Parliament : 27 Countries : 736 Members of Parliament (MEPs) : Representing 492 Million Citizens of Europe

The TouchTable : Like a Giant iPhone : A Very Serious High Tech Toy for Military and Law Enforcement : Also Useful for Firms & Private Households

Have you seen this? Fantastic.

The TouchTable®.

If you want an incredible modern high tech coffee table – a touch table is it. The cost is still quite high, but we definitely want one of these for Christmas. Just imagine keeping track of your client legal cases or your sales force or your cash flow or your product chain or your investments by use of one of these things. We can already see a touch table in every law firm and corporate board room in the country, although the high-end income households will surely be among the first to get these things as the “newest toy”. And we see a large market for this table among football coaches – for obvious reasons.

The above video
from Wired Science at PBS shows the TouchTable from Touch Table, Inc. The touch table is a very serious information-focused toy which is already used for military analysis, military intelligence and for law enforcement purposes. TouchTable is essentially a very large touch-screen system on a table-like horizontal surface, which allows one or multiple users to navigate large amounts of data and information via software applications that visualize and analyze selected data and information – and allow touch navigation within that data. The TouchTable is the fantastic prerequisite, but equally fantastic software is also required.

In the video, Touch Table CEO Rocky Roccanova shows Wired TV’s Ziya Tong how the TouchTable works and shows some stunning examples of its application to things like the question of whether Iran is building nuclear weapons, or how world air travel can be viewed in real time, or how city crime locations can be viewed and analyzed by police departments.

Owners of the table include such far off places as the City of Moscow.

For R&R (rest and relaxation), you can even convert TouchTable into a virtual pool table.

Here is what Touch Table Inc. writes about TouchTable TT45:

TouchTable TT45

The TouchTable TT45 is a small group collaboration system for visualization, navigation and analysis of data. Functioning as a mobile presentation and input device, the TT45 displays data on a touch-sensitive table surface. People gather around the table and manipulate this displayed information using simple hand gestures.

TouchTables aid in decision making by replacing the traditional classroom style lecture environment with a shared group experience. When gathered around the table, everyone in the group has equal access to the displayed information and menu system allowing control of the discussion to flow naturally. This shared experience increases each participants understanding, resulting in faster, more confident decision making.

Additional TouchTables can be networked to allow synchronized remote collaboration. This means that different groups can connect to the network and share data over long distances. Each device on the network displays the same information and is updated concurrently. Control of the displayed information can be handed off as needed and shared among groups as the discussion warrants. This shared virtual space allows all groups of users to contribute, regardless of their physical location.

Hat tip to Dennis B.

France Strikes Out on its Three Strikes Law Against Digital Piracy as the French Constitutional Council Affirms Individual Right to Internet Access

The Constitutional Council of France – a uniquely French legal body which is neither a court nor composed of judges – struck down the French Three Strikes Law against digital piracy as contrary to “French constitutional principles”. As Peter Sayer of IDG News Service notes:

France’s highest legal authority has ruled as unconstitutional a government plan to cut off, without trial, Internet users accused of copyright infringement.

The so-called “three strikes” law would have handed over the power to disconnect surfers to a newly created High Authority for the Distribution of Works and the Protection of Rights on the Internet (Hadopi). It was approved by the French Parliament in April but has not yet been signed into law.

Liberté, égalité, fraternité

The idea of “individual liberty” is one of the core principles of world democracy and is integrally tied to the French Revolution more than 200 years ago, so that we were surprised to see France pass a law by which Internet access could be denied to file-sharers by an administrative body.

As we wrote about the French “Three Strikes Law” at LawPundit in France Defies European Union and Passes Controversial Anti-Piracy Three Strikes and You’re Out Creation and Internet Law Against Illegal File-Sharing :

We presume that a compromise political and legal solution will be the recognition of Internet access as a fundamental right of EU citizens, provided that they do not engage in illegal activities via that very same Internet. We see no direct confrontation to be necessary here.

Eric Pfanner at the New York Times writes about the decision of the Constitutional Council:

The council said the proposal was contrary to French constitutional principles, like the presumption of innocence and freedom of speech. The latter right “implies today, considering the development of the Internet, and its importance for the participation in democratic life and the expression of ideas and opinions, the online public’s freedom to access these communication services,” the council said.

As written at CNet Digital Media News by Steven Musil:

The council said “free access to public communication services on line” was a human right that only a judge should have the power to disconnect.

Nate Anderson at ars technica goes into the legal details in his French court savages “three-strikes” law, tosses it out, pointing out that a critical flaw in the Three Strikes Law was the fact that the USER had to prove that he had not illegally engaged in file-sharing in order to retain his or her threatened cut-off from Internet access:

[B]ut the burden of proof was on the Internet user….

In its ruling [.pdf here (in French)], this was precisely the issue that the Council zeroed in upon, going all the way back to the French Revolution to stress the wrongheadedness of the HADOPI approach.

Moreover, whereas under section nine of the Declaration of 1789, every man is presumed innocent until has has been proven guilty, it follows that in principle the legislature does not establish a presumption of guilt in criminal matters,” wrote the Council. This basic principle applies “to any sanction in the nature of punishment, even if the legislature has left the decision to an authority that is nonjudicial in nature.”

The court also made a strong statement about freedom of speech: “Freedom of expression and communication is so valuable that its exercise is a prerequisite for democracy and one of the guarantees of respect for other rights and freedoms and attacks on the exercise of this freedom must be necessary, appropriate and proportionate to the aim pursued.

Andrew Orlowski at The Register concluded:

Hadopi (the acronym of the French government agency after whom the three strikes law was named) created a penalty of suspending an individual’s internet connection for two to twelve months if they repeatedly downloaded unlicensed copyright material from the internet.

The [Constitutional Council] found several parts of Hadopi unconstitutional, violating the citizen’s right to free speech, and the presumption of innocence….

Freedom of expression and communication is all the more valuable that its exercise is a prerequisite for democracy and one of the guarantees of respect for other rights and freedoms and that attacks on the exercise of this freedom must be necessary, appropriate and proportionate to the aim pursued,” they wrote.

The breadth of the finding effectively guts the law – so it’s back to square one for copyright enforcement in France.

Or is it?

IFPI counsel Shirla Perlmutter told the World Copyright Summit that the French Government would resubmit the law to Parliament, taking account of the [Council’s] objections.

“Our understanding is that a new version of the bill will maintain the same graduated response, but transfer powers executed by Hadopi to a special court….

That essentially takes the teeth out of the Three Strikes Law and is a political setback for the French President. As written by Jose Vilches at Techspot:

The decision is a setback for President Nicholas Sarkozy, who argued that the law was crucial to protecting artistic creation in the digital era, and a huge victory to everyone opposing it. With the uproar this so-called “three strikes” law has caused in France, and an earlier measure passed by the European Parliament prohibiting EU governments from cutting off a user’s Internet connection without a court order, it seems unlikely that other European countries will propose similar laws.

Deadline Alert : USA Importer Security Filing & Additional Carrier Requirements Interim Final Rule (ISF 10+2) to require Advance Cargo Info

Michael Laden writes at gtnews.com about the impending deadline for implementation of the Importer Security Filing Rule of US Customs & Border Protection (CBP):

We are nearing the half way mark of a one-year non-enforced phase-in of this rule and, unless otherwise delayed, on 26 January 2010 the CBP will begin full enforcement of this new requirement. If a company is not ready on this date, it might be a very painful and expensive experience. The most important take-away from this article is the heightened sense of urgency and anxiety about this looming deadline, especially if a company hasn’t filed its first ISF yet.

We recently registered at gtnews and just read the important May 19, 2009 article by Michael Laden of TRG Direct who writes in Importer Security Filing – Is Your Company Ready? that “[c]ompanies importing into the US must take stock of the new Importer Security Filing rule, which will incur steep penalties for non-compliance. (Bobsguide writes, by the way, about gtnews.com [free registration required] that “gtnews is the word’s largest network of corporate treasury professionals. It is an unrivalled resource for treasury practitioners and those who do business with them.“)

The impending rule discussed by Michael Laden is the Importer Security Filing and Additional Carrier Requirements Interim Final Rule, also known as the ISF 10+2 Rule because it requires 10 data elements from the importer and 2 from the carrier.

To help prevent terrorist weapons from being transported to the United States, vessel carriers bringing cargo to the United States are required to transmit certain information to Customs and Border Protection (CBP) about the cargo they are transporting prior to lading that cargo at foreign ports of entry. This interim final rule requires both importers and carriers to submit additional information pertaining to cargo to CBP before the cargo is brought into the United States by vessel. This information must be submitted to CBP by way of a CBP-approved electronic data interchange system. The required information is reasonably necessary to improve CBP’s ability to identify highrisk shipments so as to prevent smuggling and ensure cargo safety and security. These regulations specifically fulfill the requirements of section 203 of the Security and Accountability for Every (SAFE) Port Act of 2006 and section 343(a) of the Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002. DATES: Effective Date: This rule is effective on January 26, 2009.” [links added by LawPundit]

The 10 plus 2 “data elements” are found in the April 1, 2009 Testimony of Acting Commissioner Jayson P. Ahern, U.S. Customs and Border Protection, before the House Appropriations Committee, Subcommittee on Homeland Security, on Cargo and Container Security:

The CBP Importer Security Filing covers the following key areas:

  1. Ten unique data elements from importers not currently provided to CBP 24 hours prior to foreign loading of cargo,
    • Manufacturer (or supplier) name and address
    • Seller (or owner) name and address
    • Buyer (or owner) name and address
    • Ship to name and address
    • Container stuffing location
    • Consolidator (stuffer) name and address
    • Importer of record number/foreign trade zone applicant identification number
    • Consignee number(s)
    • Country of origin
    • Commodity Harmonized Tariff Schedule of the United States number
  2. Two additional data elements provided by the carriers, including the Vessel Stow Plan, which is currently utilized by the vessel industry to load and discharge containers, and Container Status Messaging, which is currently utilized by the vessel industry to track the location of containers and provide status notifications to shippers, consignees and other related parties.”

The time allotted for industry comment on the rule expired on June 1, 2009, and the one-year delay on enforcement of compliance ends on January 26, 2010, only about six months away, so time is getting short for importers to fully implement this act.

Ahern testified in detail about the rule as follows:

Advance Information

CBP has recognized Congress’ mandate that we collect more and improved advanced information for cargo shipments. CBP, in fact, requires advanced electronic cargo information as mandated in the Trade Act of 2002 (including the 24-Hour Rule for maritime cargo). Advanced cargo information on all inbound shipments for all modes of transportation is evaluated through the Automated Targeting System (ATS) before arrival in the United States.

The function of ATS is to provide information to support the decisions of CBP officers working in Advance Targeting Units (ATUs) at our ports of entry and CSI ports. The system provides a uniform review of cargo shipments, identifies the highest threat shipments, and presents data in a comprehensive, flexible format to address specific intelligence threats and trends. ATS uses a rules-based program to highlight potential risk, patterns, and targets. Through rules, ATS alerts the user to data that meets or exceeds certain predefined criteria. ATS uses national targeting rule sets to provide threshold targeting for national security risks for all modes: sea, truck, rail, and air. CBP is continually striving to improve the ATS system by convening regular “rules conferences”. The conferences are attended by our intelligence officers and representatives from various seaports and land border ports who update risk indicators and ensure that the most current intelligence and trends are factored into ATS.

CBP has been working with importers for several years to put in place a rule that would ensure that we had timely access to the information necessary to perform a proper analysis of the risk posed by particular shipments. After that effort began, Congress endorsed it– the SAFE Port Act mandated that CBP obtain additional advanced cargo information to enhance our ability to perform risk-based targeting prior to cargo being laden on a vessel overseas.

As many of you know, CBP announced an Interim Final Rule (IRF) in January 2009 that requires importers and carriers to electronically submit additional information on cargo before it is brought into the United States by vessel. Since then, CBP has received tens of thousands of Importer Security Filing (ISF) filings, hundreds of vessel stow plans and millions of container status messages that have already yielded some promising results.

The additional data elements that DHS is receiving under the importer security filing rule are critical to ensuring that we have the best information available about where a container originated, who filled it with goods, where this may have occurred, and what types of goods are being shipped.

The trade’s input during the consultative process as well as its participation in the Advance Trade Data Initiative was instrumental in the successful crafting of the rule. CBP made several significant changes to the proposed rule based on feedback received during its consultation with industry partners, the Departmental Advisory Committee on Commercial Operations (COAC), and other federal entities. These changes include a year-long delayed compliance period, considerable flexibilities associated with six of the data requirements, and a commitment to accept additional comments from industry until June 1, 2009 and then initiate a structured review to reexamine the rule’s impact on industry. Based upon this review, DHS will determine whether to eliminate, modify, or maintain these requirements.

LawPundit Posting "Who Killed the Electric Car" at the New York Times Headlines Around the Web

The June 8, 2009 LawPundit posting “Who Killed the Electric Car” was featured at the New York Times Headlines Around the Web in connection with the Wikipedia as follows: