©1997, Wayne Lundberg.

$4.5 billion Dollarsworth of components including capacitors, transformers, molded cases, investment castings, tools, dies, fixtures, molds, screw machine products, punch press parts, extrusions, resistors, PC boards and a thousand other components are coming into the Los Angeles harbor from all over the world and freighted to Tijuana, Mexicali, Ensenada and Tecate each year. Within a few years this $4.5 billion Dollar supply chain MUST originate in the U.S., Canada or Mexico.

        Today this endless stream of components, tooling and machines goes into the Maquiladoras across the border IN-BOND, no taxes, no import duties, no fees, no penalties. When it comes back into the U.S. the manufacturer pays a small value-added tax based on the labor costs for final assembly -- hardly anything. But gradually, year by year, this IN-BOND feature will disappear and the Sanyos, Matsuchitas, Plantronics, Kenworths, Fenders and others will have to pay a penalty duty on components not made in one of the three NAFTA countries. This means $4.5 Billion Dollars worth of components MUST SOON BE MADE BY U.S. FACTORIES!

       The opportunities for high-volume, low-cost manufacturers are unlimited. What has kept these U.S. shops out of the game is the $17+ per hour they must pay for second operations such as deburring, drilling, tapping and finishing. For example a U.S. Swiss Screw Machine shop can produce high-volume, low-cost parts as they drop from the machine into a bucket. But when a person has to pick them up, deburr, drill or tap these components by hand, the labor rates are so high that the per price unit cost is no longer competitive with foreign shops who may be making the parts on ordinary lathes.

The good news is that there are entrepreneurs on both sides of the border eager to fill the vacuum. For example, Victor Rubio in Tijuana is managing a fund capitalized by U.S. investors, Mexican investors and the Mexican government. Laws have been enacted, and funded, for the creation of Mexican sub-assembly or second-operations shops to fulfill the expected demand when the border slams shut on other than U.S., Canada or Mexico manufacturers. Technical schools, such as the CAST in Tijuana with their NC machine tools, CAD/CAM workstations, electronics and hydraulics control labs and experienced instructors, are ready to train the workers who will be running these intermediate factories. The pieces are coming together, what is needed are U.S. shops ready to accept the new challenge and do what it takes to get into this market.

There is no need to travel into Mexico to get this new business. Virtually all purchasing of raw materials and components is done on the U.S. side of the border with POs issued in English, payments made from U.S. Banks and terms and conditions based on U.S. business law. Components are shipped to a broker in the U.S. who handle all necessary paperwork.

A U.S. shop wanting to take advantage of this potential new business can do so with a near zero investment since most finishing tools are already in place and can easily be imported into the second operation shop in Mexico. If the U.S. shop does not want to set up a business operation in Mexico, there are enough investors willing to do so.

The Small Business Development and International Trade Center at Southwestern College in Chula Vista is actively pursuing clients on both sides of the border and their services and those of the many consultants working for them are at no charge to the clients. Your tax dollars at work!

If you are in any of the following businesses, you stand to profit from this law; extrusions, Swiss screw machine parts, Cone-O-matic production, punch-press, injection molded parts, powder metallurgy, turret lathe work, investment castings, forgings

Imagine a barrel full of screw machined parts being shipped across the border to a small facility with fifteen ladies sitting at well lighted, well tooled workstations, each carefully taking a single component, deburring it, setting it into a fixture and drilling a micro-hole, then tapping it, then placing it into a filmstrip so the end user will feed the component directly into an assembly. These ladies going home every Friday with $40 in their pockets from 48 hours of work

These are not sweat-shop operations. They are state-of-the-art with all the benefits of a first world. They have free medical, savings toward a home and retirement, pleasant working conditions, opportunities to learn and improve - to go to school. Many shops bring the school to the workplace where workers can get their Junior and High School diplomas. Some attend evening classes at the colleges and universities paid for by the employer.

NAFTA is offering everybody a true win-win-win situation. Consumers the world over are getting quality stuff at low prices. U.S. and Canadian companies are healthy and pay superb salaries to technical and administrative people. Unskilled labor is being rewarded south of the border. A third-world neighbor is creating it