Essay Sample on U.S. Company Compliance Issues in Mexico: Merits and Costs

Introduction

The memo communicates the possible compliance issues associated with elements of the U.S.'s ethics and laws which guide the decisions of a U.S.'s company seeking to start a business in Mexico. Core to this objective is the assessment of merits and costs linked to a decision of the U.S.'s based company to make a move and start a subsidiary company in Mexico. Ultimately, the memo examines the previous efforts by the domestic firms to ensure compliance with the U.S.'s laws that concern similar decisions.

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Critical Elements of the United States (U.S.) Law the Firm Should Consider

The Countering America's Adversaries through Sanction Act (CAATSA) is a key policy that prohibits American companies from setting up business or trading in certain countries. Under this law, the U.S. targets countries based on core aspects such as human rights violations, and the level of threats these nations pose to the U.S.'s security. North Korea, for instance, threatens the security of U.S., and it is on this basis that the Treasury Department's Office of Foreign Assets (OFAC), under section 301 of the law, considers it illegal for the U.S.'s based firms to operate in this country. Conversely, the listing of Iran as a state that supports acts of extremism explains the reason why the country is on the list of the sanctioned countries (Crittenden, 2015). For any entity which violates the CAATSA, the treasury department imposes a $1 million penalty or a 20-year prison sentence, and OFAC, therefore, has a legal mandate to seize the properties of any firm that violates this law.

The decision to move business in Mexico presents a number of legal implications for the company. For instance, the issue of immigration process and the acquisition of the work permit could be a challenge to the business as it seeks to operate abroad. Under Mexico's immigration law, foreigners seeking to work with foreign companies in Mexico should have valid paperwork documents to prove their legal stay. Besides, the issue of the minimum wage can pose a challenge to the company considering that the Mexican government may require the firm to pay more for labor (Crittenden, 2015). This problem becomes more prominent when the company has to sale goods and services based on the rates in the Mexican market.

Some of these legal implications can be of significant benefit to the business while it operates abroad. For instance, the firm could accrue the benefit of cheap labor costs given that Mexico's minimum wage is $5.10 day compared to America's $7.25 an hour (Fairris, Popli, & Zepeda, 2008). The low-labor cost is more noticeable with the company operating in Mexico rather than Japan because it is much easier to move goods and services to the U.S. market when the company is in the south American country than when it is in the Asian nation. This also raises the issue of custom delays which could occur with a U.S.'s firm in Japan as compared to when the same business is based in Mexico (Ferrera et al., 2014).

However, some of these legal issues could have negative implications on the firm. For example, the firm may grapple with the risk of exposure of its business secrets to rival firms. This risk considerably increases if the business hires the locals to fill sensitive positions such as the management. Additionally, the issue of quality can be a problem to the organization. Usually, this issue results when the company is unable to get employees with certain sets of skills suited for a particular organizational task. Still, heavy taxation by the government in Mexico can weigh heavily on the operation of the firm given that high taxes reduce revenue in the event revenue inflow does not change. Thus, it is imperative for the business to put to consideration these factors as it seeks to establish itself in a foreign market (Crittenden, 2015).

Ethical Implications

While moving abroad can be a good decision for the company, it can raise ethical issues in the U.S. as well as in Mexico. The U.S.'s public has often been skeptical of the idea of U.S.'s companies outsourcing for labor abroad. For individuals in the U.S., the outsourcing of the labor can be a subject of scrutiny of the company's practices, especially when the U.S. grapples with high rates of unemployment. For this reason, Americans may develop negative perception about the company, and this considerably affects the company's ratings in America. Since some officials in the foreign country may need bribes to help the business process documents such as business permits, the firm may face the challenge of deciding between acting ethically and breaching the U.S.'s laws that prohibit the U.S.'s firms from issuing or accepting bribes.

How Other Firms Ensured Compliance with Laws

Some U.S.'s companies which moved abroad continue to make progressive efforts to comply with the U.S.'s legal standards. Since the compliance laws continuously change from time to time, domestic companies have often focused on frequent review of the existing business policies. This has been significant in ensuring compliance in the sense that companies become aware of the regulatory policies, and update the same into their organizational policies. General Motors, for instance, continuously make changes to the company's policies to reflect the standards which the U.S. promotes. This mirrors in the firm's fair compensation of employees at all levels of the work occupation.

The Amazon is another company which has taken interest in the advancement of the compliance objectives. The Amazon-operated Amazon Web Services (AWS) integrates data-protection features that help improve the security of the clients' information. With the AWS Cloud Trail, for instance, the client is able to have their information encrypted and secured from intrusion. Such security measures reflect the U.S.'s laws such as Federal Trade Commission Act which requires businesses to protect their clients' data. Under this law, the Federal Trade Commission has a mandate to ensure the enforcement of the data privacy policies.

General Motors as well as Amazon previously faced accusations of not doing enough to ensure compliance. Owing to these allegations, the companies have made significant efforts to address the compliance problems. In the case of the General Motors, for instance, screens employees to determine if they are on the U.S.'s list of the sanction nations, and this is part of the firm's objective to adhere to the U.S.'s policies. In 2018, amazon had a case in which the company faced accusation that it sold a product to an Iranian national. To address this issue, the company created the position of the sanction compliance manager to oversee the activities focused on the prevention of the breach of these sanctions.

References

Crittenden, V. L. (2015). Proceedings of the 1992 Academy of Marketing Science (AMS) Annual Conference. Cham: Springer International Publishing.

Fairris, D., Popli, G., & Zepeda, E. (2008). Minimum wages and the wage structure in Mexico. Review of Social Economy, 66(2), 181-208.

Ferrera, G. R., Alexander, M. M., Wiggins, W. P., Kirschner, C., & Darrow, J. J. (2014). The legal and ethical environment of business: An integrated approach. New York : Wolters Kluwer Law & Business.

H.R. 3364. One Hundred Fifteenth Congress of the United States. Retrieved from https://www.treasury.gov/resource-center/sanctions/Programs/Documents/hr3364_pl115-44.pdf