PUERTO RICO: An Introduction to Corporate/Commercial
Reshoring Opportunities in Puerto Rico
Puerto Rico presents a strategic opportunity for companies seeking to relocate manufacturing operations to the United States in response to the new tariff regime implemented by the Trump administration. As a United States territory, Puerto Rico offers manufacturers full, tariff-free access to the United States market. This, combined with a long-standing legacy in manufacturing, under-utilised industrial capacity, a highly skilled workforce and competitive tax incentives, presents a compelling value proposition for companies considering relocating operations to the United States.
Federal Reshoring Policy
The COVID-19 pandemic exposed significant vulnerabilities in global supply chains, highlighting the risks of overreliance on foreign production. Combined with rising geopolitical tensions and shifting policy priorities, these factors have sparked a renewed interest in strengthening domestic manufacturing.
The Trump administration has made reshoring a central objective. A key component of the administration’s reshoring strategy is the imposition of tariffs that substantially increase the cost of importing strategically important goods, including pharmaceuticals, semiconductors, steel, aluminum and auto parts. The administration has also introduced other executive actions aimed at revitalising domestic manufacturing, including initiatives to streamline Food and Drug Administration (FDA) approvals for pharmaceutical production within the United States. Collectively, these measures create strong incentives for companies to relocate operations to the United States or its territories, including Puerto Rico, to avoid tariffs and strengthen supply chain resilience.
Puerto Rico’s History as a Manufacturing Hub
Puerto Rico has a long-standing history as a global manufacturing hub. The growth of Puerto Rico’s manufacturing sector can be traced back to Section 936 of the United States Internal Revenue Code, enacted as part of the Tax Reform Act of 1976. This provision offered special tax treatment to United States corporations operating in Puerto Rico by taxing them on their worldwide income like any other domestic corporation, while granting a full credit for federal taxes on business and qualified investment income earned in Puerto Rico. This credit effectively created a 100% federal tax exemption for income derived from Puerto Rico operations. These tax incentives attracted major pharmaceutical and chemical manufacturers to the island, and established a robust industrial base that generated tens of thousands of well-paid jobs and significantly strengthened the island’s economy.
Although federal legislation enacted in 1996 phased out Section 936’s tax incentives over a ten-year period, ending in 2006 (which resulted in a marked decline in manufacturing activity in Puerto Rico), the island has continued to maintain its status as a global manufacturing leader. Puerto Rico exported USD24.7 billion in goods in 2024, including USD20 billion in pharmaceutical products. Most of this output is shipped to the United States mainland, which also serves as the primary source of semi-finished goods that undergo further manufacturing on the island. Puerto Rico accounted for 17.6% of United States pharmaceutical exports in 2024, second only to Indiana, according to the United States Bureau of Labor Statistics (USBLS).
Over the years, the island’s manufacturing sector has evolved, with a growing focus on high-technology industries. Today, Puerto Rico’s manufacturing activity is mainly concentrated in sectors such as chemicals, biosciences, medical devices and pharmaceuticals, with a notable and expanding presence in the aerospace industry. Many large bioscience and medical devices companies – including Amgen, Abbvie, Baxter, Bristol-Myers Squibb, GlaxoSmithKline, Eli Lilly, Medtronic and Thermo Scientific – have operations in Puerto Rico.
Puerto Rico’s Strategic Advantages
Puerto Rico offers strategic benefits for companies seeking to reshore their operations to the United States, including as follows.
Tariff-free access to the United States
As a United States territory, Puerto Rico operates within the United States customs zone, exempting locally produced goods from import tariffs. Unlike foreign jurisdictions, Puerto Rico ensures seamless access to the United States market, with no customs duties, and adheres to United States regulations, including FDA oversight and intellectual property protections.
Skilled workforce
With approximately 80,000 manufacturing employees (according to the USBLS), the island boasts a robust talent pool, particularly in sectors such as pharmaceuticals and biotechnology. A significant portion of this workforce is bilingual (Spanish-English), providing a competitive edge for industries requiring technical training and global communication. While United States federal minimum wage laws apply in Puerto Rico, with the minimum wage currently at USD10.50 per hour, the average hourly wage in Puerto Rico is approximately USD17.98 – roughly 55% of the United States national average of USD32.66, according to the USBLS.
Strategic location
Puerto Rico’s strategic Caribbean location – approximately 1,000 miles south-east of Miami – positions it as a vital logistics hub for regional and international trade, making it an ideal base for manufacturing and distribution operations.
Industrial facilities
Following the reduction in manufacturing activity after the repeal of the Section 936 incentives, Puerto Rico now has an inventory of vacant industrial facilities that offer attractive opportunities for new manufacturing operations. These include existing manufacturing plants, warehouses and office spaces, some requiring significant restoration but offering solid infrastructure and below-market rates that can reduce start-up costs and accelerate operational timelines.
Competitive tax, development and employment incentives
Puerto Rico has developed a wide range of economic development initiatives, including competitive tax, development and employment incentives that cater to manufacturing and research and development activities. These incentives position Puerto Rico as a cost-competitive alternative to both the United States mainland and international locations.
Conclusion
With its unique combination of strategic advantages and a deep-rooted manufacturing legacy, Puerto Rico is well positioned to drive the next chapter of growth in domestic manufacturing. As momentum for reshoring accelerates, the island offers an attractive platform for companies seeking to relocate their manufacturing operations to the United States.