Nearshoring’s hidden risk in the USMCA review: Why Chinese-linked manufacturing in Mexico now requires enhanced due diligence

When a factory in Mexico claims it is part of North American manufacturing, who is really behind it?  Where do the parts come from?  And how much risk sits below the surface? These questions increasingly matter because today’s regulatory scrutiny is likely to go beyond tariffs or customs classifications and delve deeper – into ownership structures, sourcing chains, intermediary relationships, and the positioning of Chinese-linked businesses within Mexico’s manufacturing base. While some of this has been discussed in trade and policy circles, less understood is what this means practically for companies, investors, and counterparties trying to assess risk before committing capital or entering into commercial relationships. 

A changing risk picture

The USMCA review is underway, and rules of origin are back in focus. These protective measures go to the heart of what counts as North American production:  who gets access to tariff benefits and how governments will respond if they believe companies are using Mexico to route Chinese goods – or Chinese-backed manufacturing – into the US market. 

Recent USTR guidance and Congressional pressure signal a shift: benefits must accrue to North American parties, not non-market economies skirting US trade laws. More questions will be asked. Structures that once looked commercially efficient may be viewed as politically exposed - this shift alone is enough to change the diligence conversation.

Why standard due diligence is no longer enough

Mexico’s role as a manufacturing base for the North American market has drawn increased interest from Chinese companies and investors seeking access to the US while reducing some of the costs and political risks of producing in China itself. The Brookings Institution recently noted that Chinese investment into Mexico has more than doubled since the USMCA came into effect. While not solely attributable to the agreement, that growth has fueled concerns that Mexico-based production may be used to preserve market access for Chinese-linked goods.

None of this is necessarily improper. However, in today’s tighter enforcement and more sensitive geopolitical environments, risk is elevated if corporate ownership is opaque, sourcing is hard to trace, or the manufacturing footprint does not match the company’s claims.

The limitations of standard due diligence stems from its focus on formal compliance rather than structural origin. Whilst this remains essential, routine screening of public records often misses the key question: is the Mexican operation truly a Mexican or North American manufacturing platform, or is it better understood as a Chinese-linked structure that could draw scrutiny as the policy environment changes?

For this reason, investors, lenders, counterparties and commercial partners must ask more practical questions. Looking beyond formal ownership to identify undisclosed Chinese dependencies, sourcing vulnerabilities, and latent trade exposures. In some cases, risks may arise simply because the company operates in a high scrutiny sector attracting more policy enforcement.

A deeper investigations lens is needed

In this environment, looking beyond registered shareholders and formal filings becomes critical. Beneficial owners, intermediate vehicles, financing arrangements, management influence, and links to a broader corporate group are all risk-relevant. Investigations should consider sourcing dependencies, logistics routes, key customers, local partners, and any public record that helps test whether the company’s operating model matches its public profile.

Local context is also crucial. In Mexico, relationships with customs brokers, industrial park developers, labor providers, local authorities, and politically exposed intermediaries can all impact risk in ways that may not surface from corporate records. In some cases, inquiries with local sources may be the only reliable way to determine whether a factory is truly independent or part of an arrangement drawing quiet concern.

While public records diligence still matters, it alone will not answer the harder questions coming into play. The gap often lies between what a company is formally required to disclose and what a prudent investor or counterparty would still need to know.

Looking ahead

As the USMCA review continues, what is missing in discussions of China’s role is a clearer view of how this growing policy, trade and political pressure changes the risk profile of real businesses on the ground and the decisions facing investors, counterparties and other stakeholders.

Nearshoring to Mexico is not going away, nor is Chinese commercial interest in Mexico. What is changing is the level of regulatory scrutiny and the cost of getting the diligence wrong. Companies looking at investments, partnerships, acquisitions, or supply chain relationships in this space will want to look beyond standard background checks and take a magnified view of the risk.

At Risk Advisory, we believe a deeper investigative lens is required to navigate this changing landscape. We move beyond registered shareholders to identify risks lying beneath the surface. We provide intelligence and analysis supporting legal and commercial decision-making. Contact us to discuss how we can support your firm in conducting the enhanced due diligence necessary to protect your capital and ensure long-term USMCA compliance.