Page "Economy of Mexico" Paragraph 9

Contrary to popular belief, the maquiladora program was in place far before NAFTA, in some sense dating all the way back to 1965.

A maquiladora manufacturer operates by importing raw materials into Mexico either tariff free ( NAFTA ) or at a reduced rate on a temporary basis ( 18 months ) and then using Mexico's relatively less expensive labor costs to produce finished goods for export.

Prior to NAFTA maquiladora companies importing raw materials from anywhere in the world were given preferencial tariff rates by the Mexican government so long as the finished good was for export.

The US, prior to NAFTA, allowed Maquiladora manufactured goods to be imported into the US with the tariff rate only being applied to the value of non US raw materials used to produce the good, thus reducing the tariff relative to other countries.

NAFTA has eliminated all tariffs on goods between the two countries, but for the maquiladora industry significantly increased the tariff rates for goods sourced outside of NAFTA.