Possible changes in the Maquila Decree Héctor Silva Meeting - Breakfast November 18, 2009

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados. Various communications from CNIME, associations and firms. No official communication. The goal eliminate maquila benefits to former PITEX companies. 2

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados. 3 MAQUILA 100% - Foreign ownership M&E - Provided by contractor Inventory – Provided by contractor Control – Provided by contractor MAQUILA vs. PITEX (IN THE PAST) PITEX 51% - Mexican ownership M&E - Owned Inventory – Provided by contractor or owned Control – Not necessary provided by contractor

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados. TAX BENEFITS FOR MAQUILADORAS AND PITEX 4 VAT Customs Asset tax Fox tax reduction Calderon Flat Tax Safe Harbor compliance MAQUILADORA Yes PITEX Yes No

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados. THE IMMEX PROGRAM Income tax reduction Flat Tax reduction Safe Harbor option PE waiver Available to former PITEX companies provided that M&E is provided by the contractor. 5

CHANGES TO THE MAQULA DECREE THAT HAVE SURFACED MODIFICATION TO THE MAQUILA DEFINITION Exclude those that owned M&E prior to November Exclude those which inputs are sourced majority from Mexico. Exclude service maquiladoras (storage, distribution, design, call center) 6

VAT ONCHANGES FROM TEMPORARY TO DEFINITIVE IMPORT REGIME The authorities KEEP SENDING notices to pay the VAT withheld when buying from abroad while goods are in Mexico (in addition to the VAT paid at the switch to definitive import). 6

RECOMMENDATIONS 1.Changes in the definiton of Maquiladoras should not affect the typical maquiladora. 2.Those former PITEX companies should evaluate possible effects for US tax purposes. 3.Requesting most of the inputs from abroad is against the economic policies and development of suppliers. 4.Service maquiladoras were not using (they were supposed not to use) the tax benefits to maquiladoras. 5.For definitive imports make sure that title is transferred before the switch to definitive importation to avoid double VAT 6

©2009 Galaz, Yamazaki, Ruiz Urquiza, S.C. Todos los derechos reservados. Héctor Silva +52 (664)