In recent years, e-commerce has become a global phenomenon, allowing companies to expand their reach beyond national borders and tap into new markets. Direct to consumer sales via e-commerce channels are valued to be over $6.3 trillion in 2023, with an annual growth rate of 10.4%.
However, expanding internationally also presents unique challenges, including navigating complex regulations, customs, and taxes. For United States and global direct-to-consumer e-commerce brands looking to expand into Mexico, using an importer of record and merchant of record can be a game-changer, helping brands launch quickly and with lower shipping costs.
REQUIREMENTS TO IMPORT INTO MEXICO
Importing and selling into Mexico is not without its challenges. Mexico has strict regulations regarding the importation of goods, including restrictions on certain products and requirements for specific permits and certifications.
This would necessarily involve:
* Obtaining a tax identification number, known as Registro Federal de Contribuyentes (RFC)
* Registering your company with the Mexican Customs Agency
* Creating a local entity in Mexico
* Obtaining permits and certifications for cosmetic and food products through Mexican regulatory agencies such as COFEPRIS
For example, the Mexican government requires importers to obtain a tax ID number known as a Registro Federal de Contribuyentes (RFC) and register with the Mexican Customs Agency (Aduanas). This would necessarily imply having to set up a local entity in Mexico. In addition, certain products, such as food and cosmetics, require additional permits and certifications from Mexican regulatory agencies, such as the the COFEPRIS. Failure to comply with these regulations can result in costly fines and other penalties, including the seizure of the imported goods at customs.
Mexico has complex tax laws, including value-added tax (VAT) and customs duties, which can vary depending on the type of product and its country of origin. Using an importer of record (IOR) and a merchant of record (MOR) can be an effective strategy for global direct-to-consumer e-commerce brands looking to expand into Mexico.
What are IOR and MOR?
An IOR is an external service provider that acts as a legal registered importer for your products.
Benefits of using an IOR:
* Foreign e-commerce brands can rely on the expertise of these service providers.
* They ensure compliance with local regulations and tax laws in Mexico. This includes obtaining necessary permits and certifications, handling customs clearance, and paying all required taxes and duties.
An IOR is a third-party service provider that acts as the legal importer of record for your goods by assuming responsibility for the importation process, including compliance with local regulations, taxes, and customs clearance. By using an IOR, foreign e-commerce brands can rely on the expertise of these service providers to ensure compliance with local regulations and tax laws in Mexico. This includes obtaining the necessary permits and certifications, handling customs clearance, and paying all required taxes and duties.
MORs, on the other hand, provide a similar service for the sale of goods. An MOR is an external service provider that acts as the merchant of record for its sales transactions in a foreign market.
This includes:
* Collecting payments
* Processing refunds
* Ensuring compliance with local tax laws
An MOR is a third-party service provider that acts as the merchant of record for your sales transactions in a foreign market. This includes collecting payments, processing refunds, and ensuring compliance with local tax laws. In Mexico, the MOR collects and remits VAT and other taxes to the Mexican government.
Without these IOR and MOR services, a brand would have to navigate Mexico's complex legal and regulatory landscape, including obtaining necessary permits and licenses, complying with local tax laws, and navigating customs clearance procedures. These processes can be time-consuming and expensive, delaying the launch of a brand (taking between 12 to 18 months to launch) and potentially eating into its profits.
3 advantages of working with an IOR and MOR in your company:
- Compliance with Local Regulations:
IORs and MORs ensure that your company complies with local regulations and tax laws in the foreign market. This includes obtaining the necessary permits and certifications, managing customs clearance, and paying all required taxes and tariffs.
- Time and Cost Savings:
Without IOR and MOR services, navigating the complex legal and regulatory landscape of a foreign market can be time-consuming and expensive. Working with these providers can save your company both time and money by streamlining the process of launching and selling products in a new market.
- Expertise and Experience: I
OR and MOR providers have the expertise and experience needed to navigate the complexities of a foreign market. They can provide valuable guidance and support to your company, helping to ensure a successful expansion and growth in a new market.
Cubbo as an expansion partner
Cubbo through its IOR and MOR services that form the core of its International Expansion team, has helped leading global e-commerce brands overcome the logistical and regulatory hurdles of entering the Mexican market, allowing them to focus on what they do best- selling their products.
One of the primary benefits of using an IOR and MOR is that it can help US and European e-commerce brands launch in Mexico quickly. Without these services, a brand would need to navigate the complex legal and regulatory landscape of Mexico, including obtaining the necessary permits and licenses, complying with local tax laws, and navigating customs clearance procedures. These processes can be time-consuming and costly, delaying a brand's launch (it would take between 12-18 months to launch) and potentially eating into profits. By using an IOR and MOR, brands can bypass these challenges, allowing them to launch quickly and efficiently. Typically, brands that Cubbo works with can launch between 30-60 days, depending on the type of product being imported and regulatory requirements that must be met.
Another benefit of using an IOR and MOR is that it can lower shipping costs. Shipping products internationally can be expensive, with costs that can quickly add up for both the brand and the customer. By using an IOR and MOR, brands can take advantage of local shipping rates, as these services typically have established relationships with local carriers and logistics providers. This can help reduce shipping costs for both the brand and the customer, making products more accessible and affordable.
Additionally, using an IOR and MOR can help US e-commerce brands comply with local regulations and tax laws. Mexico has strict regulations regarding the importation of goods, including restrictions on certain products and requirements for specific permits and certifications. These regulations can be challenging for brands to navigate, particularly if they are not familiar with the local legal and regulatory landscape. By using an IOR and MOR, brands can rely on the expertise of these services to ensure compliance with local regulations and tax laws, reducing the risk of costly fines or other penalties.
Overall, using an IOR and MOR can be an excellent strategy for direct-to-consumer (D2C) e-commerce brands looking to expand into Mexico. By outsourcing the importation and sales processes to third-party service providers, brands can launch quickly, reduce shipping costs, comply with local regulations, and establish a local presence. This can help brands tap into new markets, reach new customers, and grow their business over the long term. Once your product has entered Mexico, Cubbo’s market leading fulfillment services can handle all aspects of fulfillment of your product inside the country.
If you're a US or global direct-to-consumer e-commerce brand looking to expand into Mexico, it's important to work with a reputable and experienced IOR and MOR provider. Cubbo has a deep understanding of the local market and regulatory landscape, as well as established relationships with local carriers, logistics providers, and other service providers. Cubbo’s International Expansion team can offer flexible and customizable solutions that meet your specific needs, all with the goal of helping your brand grow and succeed in the Mexican market over the long term.
